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TMI Blog2019 (7) TMI 1860X X X X Extracts X X X X X X X X Extracts X X X X ..... se. The second major head of expenses is Salary and bonus - the narrations given in the ledger account, the name of the employees is given and, there is no such detail as to what work is entrusted to these employees and whether the work entrusted to these employees is regarding earning of income taxable under the head Income from other sources . Hence, this expenditure on Salaries and bonus is not correlated by assessee with earning of income taxable under the head Income from other sources and therefore, this expenditure of Salaries and bonus is also not allowable u/s. 57(iii) of the IT Act. Professional charges - only detail available is this as to whom it was paid and for which period. There is no such detail available as to whether such professional charges is in respect of earning of income taxable under the head Income from other sources and therefore, even after considering the additional evidence, these expenses of Professional charges also cannot be held to be allowable u/s. 57(iii). Hence, it is held that these three expenses i.e. PMS charges, Salaries and bonus and Professional charges are not allowable u/s. 57(iii) of the IT Act and the remaining expenses is very small ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of Income shown under the head Income from Other Sources. In view of above grounds, the assessee believes that the expenses, claimed under Section 57 as a deduction from the total income is fully justifiable and learned Commissioner of Income Tax (Appeals) has erred in disallowing the said claim under 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 to be in order, The learned commissioner 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 inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case for Assessment Year 2012-13 and therefore, respectfully following the same, the issue in the present year should also be decided against the assessee on same line. 4. We have considered the rival submissions. We find that as per the assessment order, it is noted by the AO that the assessee is having investment of ₹ 40,73,02,270/- as on 01.04.2013 and ₹ 52,91,94,474/- as on 31.03.2014 and he worked out the average investment of ₹ 46,82,48,372/- and held that 0.5% of such average investment is to be disallowed u/s. 14A. We also find that the balance sheet of the assessee as on 31.03.2014 is available on page no. 20 of the paper book and as per the same, there is investment in Indian Securities of ₹ 54,16,19,374/- and investment in Foreign Securities of ₹ 13,19,01,518/- and as per the assessment order, the AO has considered the investment as on 31.03.2014 as ₹ 52,91,94,474/-. Hence it is seen that only investment in Indian Securities has been considered by the AO for the purpose of making disallowance u/s. 14A and he has not considered the investment in foreign securities for the purpose of disallowance u/s. 14A of the IT Act. Now we reproduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant substantiated the allowability of expenses claimed under section 57 by furnishing a detailed breakup of the total expenses and explaining the nature of each expense. Ledger extracts of the expenses and other documents were not sought from the assessee and accordingly the same were not filed. 4. The assessment was completed by the Assessing Officer on December 29, 2016 by disallowing an aggregate amount of ₹ 18,60,702/- under section 57. 5. The order referred to in paragraph 4 above was confirmed by the Commissioner of Income Tax (Appeals) II vide his order dated January 16, 2019. 6. Identical break up of expenses and an explanation of the nature of each expenses had been filed in the assessment year 2014-15 in support of a similar claim for allowance of expenses. 7. For the assessment year 2012-13 referred to in paragraph 4 above, the honorable Income Tax Appellate Tribunal, A bench, Bangalore (ITA 1991/Bang/2016 dated April 20, 2018) vide paragraph 9 observed that the assessee had made general arguments and had submitted general details but no specific details were filed before them. Again in paragraph 10 of the said order, there was a reference to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. As per the Portfolio Management Services Agreement available on pages 150 to 181 of the paper book, it is noted in para 5.2 of this agreement that such investment can be equity, stock and preference share of Indian companies, debentures, bonds and secured premium notes, including tax exempt bonds of Indian companies and corporations, Government securities and trustee securities, units and other instruments of mutual funds, Bank deposits, commercial papers, trade bill, treasury bills, certificate of deposit and usance bills, options, futures, swaps and such other derivatives as may be permitted from time to time and Warrants of both listed and unlisted securities etc. There is no mention about any investment in foreign securities in this PMS agreement. This is also seen that as per the balance sheet, the investment in Indian companies is only about securities and not any bank deposit, income of which is taxable. Hence on the entire investment of the assessee through PMS, the only income which can be earned is dividend income or capital gain and none of these two incomes is taxable under the head 'Income from other sources' and therefore, such expenses is not allowable u/s. 57(iii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the head 'income from other sources' is allowable. In addition to that, in respect of income excluding exempt income being 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 is allowable as per clause (i) of section 57. Apart from these two clauses i.e. clause (i) & (iii), other clauses of section 57 are not applicable in the present case. The assessee's claim is this that as per section 14A of IT Act, ½% of the investments has to be disallowed and the balance has to be allowed and the assessee computed the disallowance in that manner and claimed balance amount as deduction. In this regard, we observe that section 14A comes into picture in respect of those expenses which are otherwise allowable and therefore, the assessee has to first establish this that the expenses claimed by the assessee is allowable under any provisions of the law. For that, the assessee has to show that the claim of the assessee is allowable u/s. 57 of IT Act because the expenses are incurred in earning of income from other sources. As per the details of the e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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