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TMI Blog2018 (5) TMI 795X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses, security charges, printing and stationery, staff welfare, flowers and plants, AGM expenses, Board meeting expenses, miscellaneous expenses, rent paid, subscription to club, Interest on purchase of car, legal expenses etc. Hence it is seen that as per the nature of expenses involved in that case, the expenses were in relation to the fulfilling the requirements of company law to have directors and to have AGM, Board meeting and to maintain the office etc. which are necessary for fulfilling the legal requirements of a company under the Companies Act. Hence we hold that this Tribunal order is also not applicable in the present case because the assessee in the present case is not a company and therefore, there is no such legal compulsion to incur the expenses which are claimed in the present case. Hence we find that the claim of assessee for allowing deduction of expenses against income from other sources is not allowable because the assessee has not established that the expenses are allowable u/s. 57(iii) of IT Act. - Decided against assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 57. 2. Without prejudice to the foregoing contentions even assuming but without admitting that the action of the learned Commissioner of Income Tax (Appeals) upholding the disallowance of a sum of ₹ 33,20,460/- to be in order, he ought to have either considered an appropriate sum as cost of acquisition of securities for the purposes of computation of capital gains in the event of sale or as expenditure incurred wholly and exclusively in connection with the transfer of securities during the year thereby entitling the assessee relief under section 48 of the Income Tax Act, 1961. The assessee also wishes to state that the expenses claimed are clearly outgoings and in the most unlikely event of your honor not considering the claim as above the said amount have to be capitalized on the various investments that he is holding so that the necessary claim can be made when the said investment are transferred and tax liability arises in accordance with the scheme of the Act. Your appellant seeks leave to add to, to amend any of the foregoing grounds as and when considered necessary/at the time of hearing." 3. It was submitted by ld. AR of assessee that written submissions m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the same for all such expenses incurred to earn the income from other sources earned during the year but no such details were furnished by the assessee and therefore, the disallowance made by the AO is justified. He strongly supported the order of CIT(A). 4. In the rejoinder it was submitted by ld. AR of the assessee that even if it is held that deduction is not allowable against income from other sources, it should be held that such expenses should be allowed against income from capital gain in the present year or later year. 5. We have considered the rival submissions. First of all, we reproduce written submissions by assessee before CIT (A) which are available on pages 1 to 7 of paper book. The same read as under. "In connection with the above subject and- as instructed by the assessee. we would like to submit the following: Grounds of appeal 1: On the facts and circumstances of the case, there is no justification for the Assessing Officer to adopt the income returned read with intimation under section 143(1) at ₹ 1,36.66.473/- as against a sum of ₹ 1,19,54,560/- returned by the assessee. No reasons have been adduced for the differential amount of ₹ 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the assessee and monitor the investment in risk (in the form of securities and mutual funds both domestic and foreign) and no risk investments (in the form of Government bonds) respectively. They also help the assessee in analysing various investment options available and to guide and select the right investment based on assessee needs. They provide periodical reports on the performance of various portfolio investments. Overall they form an integral part of the investment function of the assessee. 2. The chartered accountants hired by the assessee assist them in maintaining the books of accounts up to date apart from providing monthly MIS on performance of various investment portfolios, developing charts and tables depicting the historical and current position of the funds, provide a basis to the assessee to take decisions whether to retain an investment or exit from the same. Additionally, they also help the assessee in completing various documentation requirements like filing KYC forms, preparing documents for making new investments, timely follow up with portfolio managers for portfolio reports, tracking of dates of payment of interest and capital for fixed income instru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome from Other Sources to arrive at the taxable value of Income from Other Sources. We would like to draw your attention to below case laws in this regard: a) It is settled position of law that in computation of the income all expenses incurred have to be allowed. The apex court in the case of Rajendra moody 1 I 5 1TR 519 has held that it is not necessary for an assessee to have income in order to claim expenses. When the entire expense can be allowed even without any income it is pertinent to claim expenses when we have claimed are all attributable to the earning of the income. In fact we have already) provided the detailed explanation in this regard b) The principle of matching concept has been enunciated by the apex court in the case of J.K. Industries 297 ITR 176 where in it has been held the revenues for the period have to be matched with the costs or expenses of that period. Thus all expenses attributable to income have to be given deduction. We have ourselves applied section 14 A of the act and have removed expenses on account of exempt income. Though the same is not required for purpose of section 57 we have applied in order to err in favour of the revenue. c) We al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income. The AO's argument that application of rule 8D is purely his prerogative and cannot be done by the assessee is at best technical. If this were to be the case, there would have been no question of a chartered accountant certifying the amount disallowable in terms of section 14A for assesses to whom tax audit is applicable (clause 21h of form 3CD). The AO cannot object to a statutory formula provided in the Income Tax Rules to compute the quantum of expenses attributable to exempt income. The assessee accepts that it has incurred certain expenditure to earn both taxable and non-taxable income. We submit the AO cannot take a stand that no expenditure is required to manage a portfolio of nearly ₹ 70 crores and earn income therefrom. Once there is expenditure incurred to earn both taxable and non-taxable income and has a direct or indirect connection to the same, the only course of action to the Assessing Officer (AO) is to apply rule 8D (Which rule has already been applied by the assessee). No other disallowance is warranted. Without prejudice to the foregoing contentions even assuming but without admitting that the action of the Assessing Officer in disallowing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year 2012-13 on receipt basis in terms of the method of accounting regularly followed by the assessee. Since the relevant income covered by these TDS certificates have been offered to tax during the year, credit for the same ought to have been allowed by the Assessing Officer. A rectification application has been filed before the AO in this respect." 6. We also reproduce para 6.2 of order of CIT (A) as per which the issue in dispute was decided by him. The same is as under. "6.2 In this regard it is also relevant to note that deduction of expenditure incurred for earning any income offered to tax as 'income from other sources' is governed by the specific provisions under Sec.57 of the Act, which provides that in respect of dividend and interest on securities the appellant may claim any reasonable sum paid by way of commission or remuneration to a banker or any other person for the purpose of realizing such dividend or interest income. Therefore it is very much evident that Sec.57 provides for deduction of specific expenses such as commission or remuneration paid for realizing the income, provided there is a direct linkage between the expenditure incurred with the earni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds, other than dividends referred to in section 115-0, or interest on securities, any reasonable sum paid by way of commission or remuneration to banker or any other person for the purpose of realising such dividend or interest on behalf of the assessee;(1a);(ii);(iia) (iii) any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income;" (b) Sec.57(iii) is specifically allows the deduction of expenditure only when it is proved that amount is spent for exclusive purpose of making or earning interest and dividend admitted by the assessee. Several opportunities are given to the AR to produce the details of expenses exclusively incurred for the purpose of earning taxable interest and dividend. But he failed to produce evidences and reiterates that the method of computation made by the assessee is correct. Since the claim is not made as per the law, the entire amount of expenses claimed u/s 57 of the Act is disallowed and added to the income from other sources." 8. As per the provisions of section 57(iii) of IT Act, any expenditure not being in the nature of capital expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. Before us also, the assessee has made general arguments and has submitted general details but no specific details were furnished before us also. Hence, we hold that no deduction is allowable u/s 57 (iii). 10. Now we examine the applicability of two judgments on which reliance have been placed by ld. AR of assessee. First judgment is the judgment of Hon'ble Apex Court rendered in the case of CIT Vs. Rajendra Prasad Moody (supra). In our considered opinion, this judgment does not help assessee in the absence in the absence of any details as required u/s. 57(iii) of IT Act because the disallowance was not made by the AO and confirmed by CIT (A) by holding that since no income is earned in the present year, deduction is not allowable in respect of this expenditure which are spent for earning some income taxable under the head "Income from other Sources" but income could not be earned in the present year. The reason for disallowance made by the AO and confirmed by CIT(A) is this that the assessee has not furnished necessary details and hence, this judgment renders no help to the assessee in the present case. 11. Reliance has been placed by ld. AR of assessee on the Tribunal ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at case are noted by the Tribunal in the form of a table and from the same, it is seen that the expenses claimed in that case were regarding the personal expenses of Directors, travelling expenses of others, Motor car expenses, security charges, printing and stationery, staff welfare, flowers and plants, AGM expenses, Board meeting expenses, miscellaneous expenses, rent paid, subscription to club, Interest on purchase of car, legal expenses etc. Hence it is seen that as per the nature of expenses involved in that case, the expenses were in relation to the fulfilling the requirements of company law to have directors and to have AGM, Board meeting and to maintain the office etc. which are necessary for fulfilling the legal requirements of a company under the Companies Act. Hence we hold that this Tribunal order is also not applicable in the present case because the assessee in the present case is not a company and therefore, there is no such legal compulsion to incur the expenses which are claimed in the present case. Hence we find that the claim of assessee for allowing deduction of expenses against income from other sources is not allowable because the assessee has not established ..... X X X X Extracts X X X X X X X X Extracts X X X X
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