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TMI Blog2021 (10) TMI 869X X X X Extracts X X X X X X X X Extracts X X X X ..... the circumstances of the case and in law, the learned Commissioner of Income-Tax(Appeals) erred in confirming the disallowance of proportionate interest u/r 8D(2)(ii) [ i.e. Rs. 2,20,1 12 (3,58,615 - 1,38,503)] attributable to earning of tax free income without appreciating that the investments in shares and units of mutual funds have been made out of own funds and free reserves and no borrowed funds have been used for investments, and as such doing so is wrong and contrary to the facts of the case, the provisions of Income Tax Act, 1961 and the Rules made thereunder. 1(c). On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-Tax(Appeals) erred in confirming an amount of Rs. 3,58,615/- as against Rs. 6 1,601 /- by holding that even stock-in-trade have to be considered for disallowance and the reasons assigned for doing so are wrong and contrary to the facts of the case, the provisions of Income Tax Act, 1961 and the Rules made thereunder. 2(a). On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-Tax (Appeals) erred in confirming the disallowance of amount of Rs. 26,938/- paid on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 1,34,306/- in the case of Kiran N Shukla was on account of the opening balance appearing in the books of accounts of remiser as on 1.4.2007 which was inadvertently considered by the remiser while responding to notice u/s 133(6) of the Income Tax Act, 1961. 4(c). Without prejudice to above the learned Commissioner of Income-Tax (Appeals) erred in appreciating that the amount claimed by appellant as expenses in the books of accounts are less than what has been reported by the remisers in response to notice u/s 133(6) of the Income Tax Act, 1961 and hence there can be no disallowance on these items. 5. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-Tax (Appeals) erred in confirming the reduction of rebate u/s 88E to Rs. 23,33,544/- as against Rs. 31,39,647/- claimed by the appellant and the reasons assigned for doing so are wrong and contrary to the provisions of the Income tax Act, 1961 and the Rules made thereunder. 6. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-Tax (Appeals) erred in enhancing the total income of the appellant by disallowing an amount of Rs. 3,12,178 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us. ISSUE No.1 4. Under this issue the assessee has challenged the disallowance in view of the provisions u/s 14A r.w. Rule 8D of the Rule. It is also argued by Ld. Representative of the assessee is that its own funds is more than the investments, therefore, there should not be interest disallowance in accordance with law and in support of these contentions the Ld. Representative of the assessee has placed reliance upon the decision in the case of CIT Vs. Reliance Utilities and Power Ltd. (2009) 313 ITR 340 and Maruti Udyog Ltd. Vs. Dy. CIT (92 ITD 119) . However, on the other hand, the Ld. Representative of the Department has strongly relied upon the order passed by the CIT(A) in question. The copy of balance-sheet dated 31.03.2008 is on the file which lies at page no. 46 of the paper book. The balance-sheet speaks that the assessee was having its share capital in sum of Rs. 9,580,080.00 and reserve and surplus in sum of Rs. 42,167,466.71/-. The investment has been shown in sum of Rs. 5,129,890.00. The trading stock has also been shown in sum of Rs. 25,670,681.32/-. All these figures speaks that the own funds of the assessee is more than the investment. No interest disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the earlier paras, and there is no dispute on facts. The controversy before me is whether the cost of shares allotted to members of BSE pursuant to its corporatisation/ demutualisation should be computed as per Section 50 or 55(2)(ab) of the Act in a situation where the assessee had already claimed depreciation on the BSE membership card and whether the indexation benefit will be available to the assessee from the date of acquisition of BSE membership card or from the date of allotment of shares in BSE Ltd. To recapitulate, and as discussed in earlier part of the order, the assessee acquired BSE membership card for Rs. 94.50 Lakhs on which it claimed depreciation. Subsequently, pursuant to its corporatisation/ de-mutualisation, assessee was allotted shares in BSE Ltd and trading rights in BSE Ltd. From the date of allotment of shares in BSE Ltd., assessee stopped claiming any depreciation on the shares allotted to it. Section 55(2)(ab) of the Act was inserted by the Finance Act 2001 with effect from 1-4-2002 to provide that the cost of equity shares allotted to a shareholder of the recognized stock exchange pursuant to the Scheme of Corporatization and Demutualization shall be the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 50 of the Act, twin conditions need to be satisfied; namely, the capital asset must be an asset forming part of block of assets; and, depreciation must have been allowed on the said assets under the Act. 26. I shall now test whether the above twin conditions are fulfilled in the present case or not. Firstly, I shall make it clear that the asset which is being transferred and on which capital gains is being computed is the share of BSE Ltd. Neither the Assessing Officer nor the learned Accountant Member has given a finding that the shares of BSE Ltd. was ever forming part of block of assets of the assessee company. Thus, it is undisputed fact that the asset in question, i.e. share of BSE Ltd. never entered the block of assets of the assessee company. Once that is so, the question of depreciation having been allowed on the said shares, in the context of Section 50 of the Act, does not arise. Nevertheless, even Section 32 of the Act, which provides for claim of depreciation, does not have any category to allow depreciation on the shares. As such, even otherwise, the shares which are transferred by the assessee is not at all a depreciable asset and thus, the question of claiming d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The provisions of Section 55(2)(ab) of the Act were subsequently brought into statute book and specifically provides for cost of acquisition of the shares allotted to the members of the BSE pursuant to the Corporatization and Demutualization. Thus, Section 55(2)(ab) of the Act is a specific provisions dealing with the present situation. It is well-settled law that a specific provision shall prevail over the general provision. Therefore, I find that provisions of Section 55(2)(ab) of the Act, being specific in nature, shall prevail over Section 50 of the Act, which is general in nature. It is also pertinent to note that provisions of Section 50 of the Act are in the statute book from the date of enactment of the Act, whereas provisions of Section 55(2)(ab) of the Act were subsequently brought into the statute book. When the amendments are made in the statute or new law is brought in, it is to be understood that the legislature was well versed with the prevailing law and sections and the amendments brought in by the legislature are after considering the effect of the prevailing section or law. In other words, while inserting the provisions of Section 55(2)(ab) of the Act, Section 50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of double deduction by the Assessing Officer. The matter travelled upto the Hon'ble Supreme Court in the case of Rajasthan and Gujarati Charitable Foundation (supra) and the Trust's claim of both application of income and depreciation was upheld by the Hon'ble Supreme Court, though it had imprints of a double deduction. It also pertinent to refer to the decision of the Hon'ble Bombay High Court in the case of A.L.A. Chemicals (P.) Ltd. (supra) wherein the facts were that the assessee-company claimed deduction under Section 35 of the Act in respect of capital expenditure incurred on scientific research and development in the preceding two assessment years, which was allowed. The Assessing Officer excluded the amount of aforesaid expenditure from the capital computation for the purposes of deduction under Section 80J of the Act. On appeal, the AAC, however, allowed this amount to be included in the capital computation for the purpose of Section 80J of the Act. The Tribunal confirmed this decision. On Revenue's appeal to Hon'ble High Court, the High Court discussed the applicability of the decision of the Hon'ble Supreme Court in the case of Escorts Ltd. (supra). The relevant part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as, assets in the present case. In the case of such assets, we have to take into account the actual cost of such assets to the assessee. Since the assets are acquired by the assessee by purchase, the actual cost would certainly include at least the price of those assets to the assessee, though it may also include something more as we have pointed out earlier. This section also includes in addition assets which may be acquired by an assessee otherwise than by purchase which are not entitled to depreciation. These may be assets which may be gifted to the assessee. Their actual cost to the assessee is nil. Yet, their value is also required to be taken into account under clause (iii) of section 80J(1A)(II). In their case, the value of the assets when they become assets of the business, has to be taken into account. Therefore, the question whether the assessee has expended any amount for the acquisition of those assets or whether he has been reimbursed in respect of such expenditure indirectly by reason of any tax benefit which he may have got or whether the assets are gifted to the assessee, is not strictly relevant for the purpose of section 80J except to the extent so specified. What ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asset became property of the newly constituted firm, which was the assessee therein. Applying the same analogy, it is quite pertinent to find herein that the asset, which is the subjectmatter of consideration, has not suffered depreciation and therefore Section 50 of the Act cannot be applied. The claim of depreciation on the old asset is of no relevance to address the present controversy. In fact, at this stage, I may refer to the observation of the learned Accountant Member at para 7.6 of his order. As per the learned Accountant Member, adoption of Section 55(2)(ab) of the Act in the present case "would lead to allowing claim of double deduction on the same asset". In my considered opinion, the misconception about the "same asset" leads to an anomalous interpretation. As my discussion in the earlier part of this order show, the subject matter of consideration, i.e. share of BSE Ltd., has not been subject to allowance of any depreciation. Thus, in my view, the view canvassed by the learned Judicial Member is apt under the facts and circumstances of the case. 31. As regards the reliance of the learned DR on the decision of the Hon'ble Supreme Court in the case of J. K. Synthetic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the said book is reproduced hereunder: "We now turn to the wider question whether a precedent is deprived of its authoritative force by the fact that it was not argued or not fully argued, by the losing party. If one looks at this question merely with the eye of common sense, the answer to it is clear. One of the chief reasons for the doctrine of precedents that a matter has once been fully argued anddecided should not be allowed to be reopened. Where a judgment is given without the losing party having been represented there is no assurance that all the relevant consideration have been brought to the notice of the court, and consequently the decision ought not to be regarded as possessing absolute authority, even if it does not fall within the sub silentio rule." (underlined for emphasis by me) Due to the above reason, I am not inclined to follow the ratio laid down in the said decision. Further, I find that in the concluding para of the said decision, the Bench has partially applied Section 55(2)(ab) of the Act and held that cost of trading rights will be NIL as per Section 55(2)(ab) of the Act, whereas for cost of shares, it applied Section 50 of the Act. I find that such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as held that the period of holding of shares of BSE Ltd. shall be reckoned from the date of original membership of BSE and not from date of allotment of shares in BSE Ltd. Now it is clear that for computing the capital gain, indexation is liable to be considered from the date of original membership of BSE and not from the date of allotment of shares in BSE Ltd. By honoring the decision of Hon'ble ITAT Mumbai Tribunal (supra), we set aside the finding of the CIT(A) on this issue and allow the claim of the assessee and direct the AO to reckon the capital gain accordingly. ISSUE No. 4 7. Under this issue the assessee has challenged the disallowance of sub-brokerage paid to various parties of Rs. 1,40,611/- being the difference between amount accounted for by appellant in its books of account and the amount accounted for by the recipients in connection with sub-brokerage. The Ld. Representative of the assessee has argued that in connection with the addition of Rs. 1,34,306/-, the ledger speaks about the opening balance of Rs. 1,34,305.74 shown at page 59 of the paper book, therefore, the said disallowance is unwarranted. It is also argued that the disallowance in sum of Rs. 6305/- wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said working nowhere demonstrate about the bad debts expenses, therefore, in the said circumstances, we set aside the finding of the CIT(A) in question and restore the issue before the AO to recalculate the claim of the assessee by considering the bad debts expenses of Rs. 876,079/- and Telephone Expense of Rs. 669,353/- in accordance with law. Needless to say that an opportunity of being heard is liable to be given to the assessee. Accordingly, this issue is restored to the file of AO. ISSUE No. 6 9. Under this issue the assessee has challenged the disallowance of amount paid as transaction charges of Rs. 3,12,178/- to Stock Exchange on the ground of that the assessee has failed to deduct the tax at source u/s 194J of the I. T. Act, 1961 and by invoking the provision of Section 40(a)(ia) of the Act. The CIT(A) disallowed the claim of the assessee on the basis of the decision in the case of CIT Vs. Kotak Securities Ltd. (Civil Appeal No.3140 of 2016 Bombay High Court. Subsequently, the matter went into the Hon'ble Supreme Court of India wherein the Hon'ble Supreme Court of India has reversed the judgment and held that the such charges are nothing but payment made for faciliti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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