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TMI Blog2018 (1) TMI 731X X X X Extracts X X X X X X X X Extracts X X X X ..... stments which has given rise to the exempted income should be taken into consideration while computing u/s 8D(2)(ii) 8D(2)(iii) of the Rules. The AO is directed accordingly to compute the disallowance under section 14A read with Rule 8D. - ITA No. 265/Kol/2016 - - - Dated:- 12-1-2018 - Shri A. T. Varkey, JM And Dr. A .L. Saini, AM Assessee by : Shri Subash Agarwal, Advocate Respondent by : None ORDER Per Dr. Arjun Lal Saini, AM The captioned appeal filed by the assessee, pertaining to assessment year 2009-10, is directed against the order passed by the ld. Commissioner of Income Tax (Appeals) 2, Kolkata, in Appeal No.987/CIT(A)-2/C-5/14-15 dated 14.12.2015, which in turn arises out of an order passed by the AO u/s.143(3) of the Income Tax Act 1961 (hereinafter referred to as the Act ) dated 28.03.2011. 2. The assessee has raised the following grounds of appeal: 1. That the order of the ld. Commissioner of Income Tax is bad in law and on facts of the case. 2. That the ld. Commissioner of Income Tax(Appeals) erred in upholding the disallowance of Sub-brokerage payments to sub-brokers on the transactions related to shares and securities inspit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 10,67,725/- u/s 40(a)(ia) of the Act. 3.2. Aggrieved by the addition made by the Assessing Officer u/s 40(a)(ia) of the Act at ₹ 10,67,725/-, the assessee filed an appeal before the ld. CIT(A) who has confirmed the addition made by the Assessing Officer. During the appellate proceedings, the assessee submitted before the ld. CIT(A) that the assessee is in the business of dealing in shares and securities. The assessee is a member of National Stock Exchange. The assessee has paid sub-brokerage of ₹ 10,67,725/- to its sub-brokers for carrying on share business in its name. The assessee submitted before the CIT(A) that TDS is not deductible on brokerage of securities as per Section 194H, which reads as follows: Commission or Brokerage includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered ( not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities . Therefore, assessee submitted before the CIT(A) that based on the definition of comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , TDS should not be deducted and the assessee is not liable to deduct TDS. Hence, the addition made by the Assessing Officer should be deleted. 3.4. On the other hand, ld DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. 3.5. We have given a careful consideration to the rival submissions, and perused the materials available on record, we note that brokerage/commission paid in connection with the securities was not liable for deduction of tax at source, as mentioned in explanation 1 of section 194H of the Act, which is given below for ready reference: Commission or Brokerage includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered ( not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities . During the assessment proceedings and as well as in appellate proceedings, the assessee had submitted that TDS was not deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a motive to earn profit and loss and not a meagre sum of tax free dividends. The company has been consistently following the same practice and has never claimed income by way of capital gains. The assessee relied on the judgment of Hon ble Kerala High Court in the case of CIT vs. Smt. Leena Ramchandran wherein it was held that in case the interest or expense is related to purchase of shares to be dealt as business expenditure, the interest is allowable u/s 36 and as such Rule 8D is not applicable in the assessee s case under consideration. However, the ld. CIT(A) rejected the contention of the assessee and held that the assessee`s own auditor computed this disallowance u/s 14A in his Tax Audit Report after considering the income and expenditure and quantum of inventories vis-a-vis investments. The assertion of the counsel of the assessee was that the assessee company had held shares as stock-in- trade and not investments,was not correct and misleading as the balance sheet shows investments in shares at ₹ 140.07 lakhs against last year s investment of ₹ 2.42 lakhs only. The ld. CIT(A) also held that the case laws referred by assessee are distinguishable on facts. The ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 017, wherein it was held that since the assessee does not have any investment and all the shares are held as stock-in trade as were evident from the order of lower authorities. The Hon ble Calcutta High Court also held that the exempt income claimed treated to be business income and the shares held by the assessee having been treated as stock-in-trade. 4.6 On perusal of the Balance Sheet of the assessee, we not that assessee has shown investment under the head Investments Vide Schedule-E, for A.Y.2007-08 at ₹ 2,42,725/- and for A.Y.2008-09 at ₹ 1,40,07,725/-. We are of the view that for such investments which were held by the assessee under the head Investments , (Not by way of stock-in trade), the assessee is not entitled to take the benefit of the judgment of Hon ble Calcutta High Court in the case of CIT vs. M/s G.K.K Capital Markets (P) Ltd.(supra), because the shares/securities are held by the assessee as an Investments . That is, in order to take the benefit of the said judgment, the assessee should keep the shares and securities as stock in trade and in that situation the rule 8D of the Rules would not be applicable to the assessee. The assessee submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X
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