KIFS Securities Ltd.,, Ahmedabad v. The Jt.CIT, Range- 3,, Ahmedabad

KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 1 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH AHMEDABAD BEFORE HON'BLE JUSTICE P.P.BHATT PRESIDENT AND HON'BLE MANISH BORAD ACCOUNTANT MEMBER ITA NO 643/AHD/2014 & ITA NO 2717/AHD/2014 ASSESSMENT YEARS 2010-11 & 2011-12 PAN : AAACK6128Q KIFS SECURITIES LTD V/S JCIT RANGE-3 B-81 PARISHEEMA COMPLEX AHMEDABAD C.G. ROAD AHMEDABAD (APPELLANT) (RESPONDENT) ITA NO 932/AHD/2014 ASSESSMENT YEAR 2010-11 PAN AAACK6128Q DCIT CIRCLE-3 V/S KHANDWALA I NTEGRATED AHMEDABAD FINANCIAL SERVICES P.LTD B-81 PARISHEEMA COMPLEX C.G. ROAD AHMEDABAD (REVENUE) (RESPONDENT) ITA NO. 2882/AHD/2014 ASSESSMENT YEAR 2011-12 ACIT CIRCLE-3 V/S KIFS SECURI TIES LTD AHMEDABAD B-81 PARI SHEEMA COMPLEX C.G. ROAD AHMEDABAD (REVENUE) (RESPONDENT) KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 2 ITA NO 786/AHD/2016 ASSESSMENT YEAR 2012-13 KIFS SECURITIES LTD V/S ACIT CIRCLE 1(3) B-81 PARISHEEMA COMPLEX AHMEDABAD C.G. ROAD AHMEDABAD (APPELLANT) (RESPONDENT) ITA NO 914/AHD/2016 ASSESSMENT YEAR 2012-13 DCIT CIRCLE 1(3) V/S KIFS SECURIT IES LTD AHMEDABAD B-81 PARI SHEEMA COMPLEX C.G. ROAD AHMEDABAD (REVENUE) (RESPONDENT) ITA NO 63 & 1885/AHD/2017 ASSESSMENT YEAR 2013-14 & 2014-15 KIFS SECURITIES LTD V/S ACIT CIRCLE 1(3) B-81 PARISHEEMA COMPLEX AHMEDABAD C.G. ROAD AHMEDABAD (APPELLANT) (RESPONDENT) REVENUE BY SHRI T. SHANKAR SR. DR ASSESSEE BY SHRI M.K. PATEL AR DATE OF HEARING 0 3 .1 0 .201 9 DATE OF PRONOUNCEMENT 29 . 1 1 .2019 KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 3 O R D E R PER MANISH BORAD. THE ABOVE CAPTIONED APPEALS FILED AT THE INSTANCE O F ASSESSEE PERTAINING TO ASSESSMENT YEARS 2010-11 2011-12 & 2 012-13 2013- 14 & 2014-15 AND THE CROSS APPEALS FILED BY THE RE VENUE PERTAINING TO ASSESSMENT YEARS 2010-11 2011-12 & 2012-13 ARE D IRECTED AGAINST THE ORDERS OF LD. COMMISSIONER OF INCOME TA X (APPEALS)-VI & CIT(APPEALS)-10 (IN SHORT LD.CIT(A)] AHMEDABAD D ATED 28.1.2014 13.08 2014 1.02.2016 26.10.2016 & 30.06.2017 RESP ECTIVELY WHICH ARE ARISING OUT OF THE ORDER U/S 143(3) DATED 31.03.2013 26.02.2014 25.03.2015 01.03.2016 28.12.2016 28.0 3.2013 RESPECTIVELY FRAMED BY JCIT RANGE-3 ACIT CIRCLE- 3 ACIT CIRCLE 1(3) DCIT CIRCLE 1(3) & JCIT CIRCLE-3 AHMEDABAD. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER; I ITA NO 643/AHD/2014 ASSESSMENT YEAR 2010-11 1. THE LD. CIT(A) HAS ERRED IN LAW AND IN FACT IN CONF IRMING DISALLOWANCE MADE BY THE AO OF RS. 69 777 BEING UNPAID EMPLOYEES CONTRIBUTION TO PF AND RS. 35 413/- BEING UNPAID EMPLOYEES CONTRIBUTIO N TO ESI ON THE ALLEGED KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 4 GROUND THAT THE PROVISIONS OF SECTION 43B ARE NOT A TTRACTED. IT IS THEREFORE PRAYED THAT THE ADDITIONS SO MADE MAY KINDLY BE DEL ETED. 2. THE LD. CIT(A) HAS ERRED IN LAW AND IN FACT IN CONF IRMING DISALLOWANCE MADE U/S. 14A R.W.R. 8D BY AO TO THE EXTENT OF RS.3 5 12 759/- OUT OF TOTAL DISALLOWANCE OF RS. 45 91 759/- ON THE ALLEGED GROU ND OF EXPENSES IN THE NATURE OF ADMINISTRATIVE EXPENSES FOR THE EARNING O F EXEMPT INCOME. IT IS THEREFORE PRAYED THAT THE ADDITIONS SO MADE MAY KIN DLY BE DELETED. 3. THE LD. CIT(A) HAS ERRED IN LAW AND IN FACT IN REST RICTING DEPRECIATION ON SOFTWARE @ 25% AS AGAINST 60% CLAIMED BY THE APPELL ANT. IT IS THEREFORE PRAYED THAT AO MAY KINDLY BE DIRECTED TO ALLOW DEPR ECIATION @ 60% ON COMPUTER SOFTWARE AND DISALLOWANCE SO MADE MAY KIND LY BE DELETED. 4. THE LD. CIT(A) HAS ERRED IN LAW AND IN FACT IN DIRE CTING TO TREAT THE TRANSACTION IN SHARES AND SECURITIES AS BUSINESS TR ANSACTIONS IF THE SHARES ARE SOLD WITHIN 30 DAYS OF PURCHASE EVEN-THOUGH THE SUCH TRANSACTIONS ARE RELATES TO THE INVESTMENT PORTFOLIOS OF THE APPELLA NTS. IT IS THEREFORE PRAYED THAT THE AO. MAY BE DIRECTED TO TREAT THE GAIN ON S HARES AS SHORT-TERM CAPITAL GAIN AND TO TAX AT THE RATE PRESCRIBED U/S. 111A OF THE ACT. YOUR APPELLANT CRAVES LIBERTY TO ADD TO ALTER TO MODIFY TO AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL AT THE TIME OF ON OR B EFORE THE HEARING OF APPEAL. ITA. NO 2717/AHD/2014 ASSESSMENT YEAR 2011-12 1. THE LD. CIT(A) HAS ERRED IN LAW AND IN FACT IN CONF IRMING DISALLOWANCE MADE BY THE AO OF RS. 132 396/- BEING UNPAID EMPLOY EES CONTRIBUTION TO ESI AS PER HONBLE GUJARAT HIGH COURT IN THE CASE O F CIT VS. GUJARAT STATE TRANSPORT CORPORATION IN TAX APPEAL NO.637 OF 2013. WHEREAS THE SAID ISSUE IS DECIDED BY GUJARAT HIGH COURT AND OTHER HI GH COURTS THAT IF THE KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 5 PAYMENT IS MADE WITHIN THE PROVISIONS OF SECTION 43 B THE SAME IS ALLOWABLE. IT IS THEREFORE PRAYED THAT THE ADDITION S SO MADE MAY KINDLY BE DELETED. 2.THE LD. CIT(A) HAS ERRED IN LAW AND IN FACT IN CO NFIRMING DISALLOWANCE MADE U/S. 14A R.W.R. 8D(2)(III) BY AO TO THE EXTENT OF RS.35 19 740/- (RS.45 62 870/- LESS: RS.10 43 130/- OFFERED BY AP PELLANT) OUT OF TOTAL DISALLOWANCE OF RS. 35 19 740/- ON THE ALLEGED GROU ND OF EXPENSES IN THE NATURE OF ADMINISTRATIVE EXPENSES FOR THE EARNING O F EXEMPT INCOME. WHEREAS THE APPELLANT FURNISHED THAT INVESTMENT IN SUBSIDIARY COMPANIES AND PARTNERSHIP FIRMS ARE IN THE NATURE OF BUSINESS ARRANGEMENT/STRATEGIES AND FOR THE PURPOSE OF COMMERCIAL EXPEDIENCY. IT I S THEREFORE PRAYED THAT THE ADDITIONS SO MADE MAY KINDLY BE DELETED. 3.THE LD. CIT(A) HAS ERRED IN LAW AND IN FACT IN RE STRICTING DEPRECIATION ON SOFTWARE @ 25% AS AGAINST 60% CLAIMED BY THE APPELL ANT. IT IS THEREFORE PRAYED THAT AO MAY KINDLY BE DIRECTED TO ALLOW DEPR ECIATION @ 60% ON COMPUTER SOFTWARE AND DISALLOWANCE SO MADE MAY KIND LY BE DELETED. 4.THE LD. CIT(A) HAS ERRED IN LAW AND IN FACT IN DI RECTING TO TREAT THE TRANSACTION IN SHARES AND SECURITIES AS BUSINESS TR ANSACTIONS IF THE SHARES ARE SOLD WITHIN 30 DAYS OF PURCHASE EVEN-THOUGH THE SUCH TRANSACTIONS ARE RELATES TO THE INVESTMENT PORTFOLIOS OF THE APPELLA NTS. IT IS THEREFORE PRAYED THAT THE AO. MAY BE DIRECTED TO TREAT THE GAIN ON S HARES AS SHORT-TERM CAPITAL GAIN AND TO TAX AT THE RATE PRESCRIBED U/S. 111A OF THE ACT. YOUR APPELLANT CRAVES LIBERTY TO ADD TO ALTER TO MODIFY TO AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL AT THE TIME OF ON OR B EFORE THE HEARING OF APPEAL. KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 6 3. REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL; ITA NO.932/AHD/2014 ASSESSMENT YEAR 2010-11 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS BY ALLOWIN G DEPRECIATION OF RS. 12.72 LACS AND INSURANCE EXPENSES OF RS.1.50 L ACS PERTAINING TO CARS WHICH WERE NOT OWNED BY THE ASSESSEE AND NO EVIDENCE OF E XCLUSIVE USAGE FOR THE PURPOSE OF BUSINESS WAS PRODUCED. THE PROVISIONS OF SECTIONS 32(1) AND 36(1)(I) WERE THUS NOT SATISFIED. ' 2. THE CIT(A) HAS OVERLOOKED THE FINDINGS/REASONING IN THE ASSESSMENT ORDER AND DELETED THE ADDITION MAINLY ON THE GROUND THAT FUNDS FOR THE PURCHASE OF CARS WERE PROVIDED BY THE ASSESSEE. THE CIT(A) H AS FAILED TO APPRECIATE THE FACT THAT DOMINION OVER THE CARS WAS NOT WITH T HE ASSESSEE AND PAYMENT OF LEGITIMATE RTO TAXES WAS AVOIDED. 3. THE CIT(A) HAS ERRED IN LAW AND ON FACTS BY DELETIN G THE DISALLOWANCE OF RS.10.78 !LACS U/S 14A R. W.R 8D(2)(II) DESPITE THE FACT THAT THE ASSE SSEE HAD M ADE SUBSTANTIAL INVESTMENTS WHICH EARNED EXEMPT INC OME AND HAD ALSO CLAIMED INTEREST EXPENSES OF RS.3. 79 CRORES DURING THE YEAR. THE AO HAD ONLY DISALLOWED PROPORTIONATE INTEREST EXPENSES UND ER RULE 8D(2)(II). 4. THE CIT(A) HAS ERRED IN LAW AND ON FACTS BY CONSIDE RING THE OUTSTANDING PAYMENT TOWARDS PURCHASE OF SHARES ON BEHALF OF CLI ENTS AS BAD DEBT U/S 36(1)(VII). THE CIT(A) HAS NOT APPRECIATED THE FACT THAT THE PROVISIONS OF SECTION 36(2) ARE NOT SATISFIED SINCE THE SAID AMOUNT OF RS.42.20 L ACS WAS NEVER ACCOUNTED FOR AS INCOME BY THE ASSESSEE. 5. THE CIT(A) HAS ERRED IN LAW AND ON FACTS BY DELETIN G THE ADDITION TO THE EXTENT OF RS. 7.89 LACS U/S 40(A)(IA) DESPITE THE FACT THAT THE ASSESSEE HAD NOT DEDUCTED TDS AS PER SECTION 194ION V-SAT/LEASE LINE CHARGES WHICH WERE IN THE NATURE OF RENT. 6. THE CIT(A) HAS ERRED IN LAW AND ON FACTS BY DELETIN G THE ADDITION OF KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 7 RS.52.16 LACS U/S 40(A)(IA) DESPITE THE FACT THAT THE ASSESSEE HAD NO T DEDUCTED TDS AS PER SECTION 194H ON PAYMENT IN THE NATURE OF SUB BROKERAGE/COMMISSION. 7. THE CIT(A) HAS ERRED IN LAW AND ON FACTS BY DIRECT ING TO TREAT PROFIT FROM SALE OF SHARES HELD ONLY UP TO 30 DAYS AS BUSINESS INCOME AND THE BALANCE AS CAPITAL GAINS DISREGARDING THE FINDINGS IN THE A SSESSMENT ORDER WHICH REVEALS THAT THE PROFIT WAS EARNED FROM SYSTEMATIC BUSINESS ACTIVITY WITH SUBSTANTIAL TURNOVER. 8. THE CIT(A) HAS ERRED IN LAW AND ON FACTS BY DELETIN G THE ADDITION OF RS.45.91 LACS U/S 14A TO BOOK PROFIT DESPITE THE FACT THAT THE SAME I S REQUIRED TO BE ADDED TO BOOK PROFIT AS PER EXPLANAT ION 1 CLAUSE (F) TO SECTION 115JB(2) OF THE ACT. 9. THE CIT(A) HAS ERRED IN LAW AND ON FACTS BY DELETIN G THE ADDITION OF RS.1.11 CRORES TO BOOK PROFIT DESPITE THE FACT THAT THE SAME REPRESENTED OMITTED INCOME WHICH WAS NOT INCLUDED IN THE P&L AC COUNT AND CONSIDERED AS BUSINESS INCOME. ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER TO THE EXTENT MENTIONED ABOVE SINCE THE ASSESSEE HAS FAILED TO DI SCLOSE HIS TRUE INCOME/BOOK PROFIT. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED TO THE ABOVE EXTENT. THE APPELLANT CRAVES TO LEAVE TO AMEND OR ALTER ANY G ROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ITANO.2882/AHD/2014 ASSESSMENT YEAR 2011-12 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS BY ALLO WING DEPRECIATION OF RS. 13.18 LACS AND INSURANCE EXPENSES OF RS.0.70 LACS P ERTAINING TO CARS WHICH KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 8 WERE NOT OWNED BY THE ASSESSEE AND NO EVIDENCE OF E XCLUSIVE USAGE FOR THE PURPOSE OF BUSINESS WAS PRODUCED. THE PROVISIONS OF SECTIONS 32(1) AND 36(1)(I) WERE THUS NOT SATISFIED. THE CIT(A) HAS OV ERLOOKED THE FINDINGS/REASONING IN THE ASSESSMENT ORDER AND DELE TED THE ADDITION MAINLY ON THE GROUND THAT FUNDS FOR THE PURCHASE OF CARS W ERE PROVIDED BY THE ASSESSEE. THE CIT(A) HAS FAILED TO APPRECIATE THE F ACT THAT DOMINION OVER THE CARS WAS NOT WITH THE ASSESSEE AND PAYMENT OF LEGIT IMATE RTO TAXES WAS AVOIDED. 2.THE CIT(A) HAS ERRED IN LAW AND ON FACTS BY DELET ING THE DISALLOWANCE OF RS.10.96 IACS U/S 14A R.W.R 8D(2)(II) DESPITE THE FACT THAT THE ASSES SEE HAD MADE SUBSTANTIAL INVESTMENTS WHICH EARNED EXEMPT IN COME AND HAD ALSO CLAIMED INTEREST EXPENSES OF RS.5.11 CRORES DURING THE YEAR. THE AO HAD ONLY DISALLOWED PROPORTIONATE INTEREST EXPENSES UND ER RULE 8D(2)(II). 3.THE CIT(A) HAS ERRED IN LAW AND ON FACTS BY CONSI DERING THE OUTSTANDING PAYMENT TOWARDS PURCHASE OF SHARES ON BEHALF OF CLI ENTS AS BAD DEBT U/S 36(1) (VII). THE CIT(A) HAS NOT APPRECIATED THE FACT THAT THE PR OVISIONS OF SECTION 36(2) ARE NOT SATISFIED SINCE THE SAID AMOU NT OF RS. 1. 58 CRORES WAS NEVER ACCOUNTED FOR AS INCOME BY THE ASSESSEE. 4.THE CIT(A) HAS ERRED IN LAW AND ON FACTS BY DELET ING THE ADDITION TO THE EXTENT OF RS.2.68 LACS U/S 40(A)(IA) DESPITE THE FACT THAT THE ASSESSEE HAD NOT DEDUCTED TDS AS PER SECTION 1941 ON LEASE LINE CHARGES WHICH WERE IN THE NATURE OF RENT. 5.THE CIT(A) HAS ERRED IN LAW AND ON FACTS BY DELET ING THE ADDITION OF RS.B2.11 LACS U/S 40(A)(IA) DESPITE THE FACT THAT THE ASSESSEE HAD NO T DEDUCTED TDS AS PER SECTION 194H ON PAYMENT IN THE NATURE OF SUB- BROKERAGE FOR IPO. 6.THE CIT(A) HAS ERRED IN LAW AND ON FACTS BY DIREC TING TO TREAT PROFIT FROM KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 9 SALE OF SHARES HELD ONLY UP TO 30 DAYS AS BUSINESS INCOME AND THE BALANCE AS CAPITAL GAINS DISREGARDING THE FINDINGS IN THE A SSESSMENT ORDER WHICH REVEALS THAT THE PROFIT WAS EARNED FROM SYSTEMATIC BUSINESS ACTIVITY WITH SUBSTANTIAL TURNOVER . 7. THE CIT(A) HAS ERRED IN LAW AND ON FACTS BY DELETING THE ADDITION OF RS.45.59 LACS ULS 14A TO BOOK PROFIT DESPITE THE FACT THAT THE SAME IS REQUIRED TO BE ADDED TO BOOK PROFIT AS PER EXPLANAT ION 1 CLAUSE (F) TO SECTION 115JB(2) OF THE ACT. ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER TO THE EXTENT MENTIONED ABOVE SINCE THE ASSESSEE HAS FAILED TO DI SCLOSE HIS TRUE INCOME/BOOK PROFIT. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED TO THE ABOVE EXTENT. THE APPELLANT CRAVES TO LEAVE TO AMEND OR ALTER ANY G ROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 4. ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPE AL; ITA. NO 786/AHD/2016 ASSESSMENT YEAR 2012-13 1. THE LD. CIT(A) HAS ERRED IN LAW AND IN FACT IN CONF IRMING DISALLOWANCE MADE BY THE AO OF RS. 26 323/- BEING UNPAID EMPLOYE ES CONTRIBUTION TO ESI AS PER HONBLE GUJARAT HIGH COURT IN THE CASE O F CIT VS. GUJARAT STATE TRANSPORT CORPORATION IN TAX APPEAL NO.637 OF 2013. WHEREAS THE SAID ISSUE IS DECIDED BY GUJARAT HIGH COURT AND OTHER HI GH COURTS THAT IF THE PAYMENT IS MADE WITHIN THE PROVISIONS OF SECTION 43 B THE SAME IS ALLOWABLE. IT IS THEREFORE PRAYED THAT THE ADDITION S SO MADE MAY KINDLY BE DELETED. KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 10 2.THE LD. CIT(A) HAS ERRED IN LAW AND IN FACT IN CO NFIRMING DISALLOWANCE MADE U/S. 14A R.W.R. 8D(2)(III) BY AO TO THE EXTENT OF RS.55 40 921/- (RS.65 40 921/- LESS: RS.12 00 000/- OFFERED BY AP PELLANT) OUT OF TOTAL DISALLOWANCE OF RS. 90 60 923/- ON THE ALLEGED GROU ND OF EXPENSES IN THE NATURE OF ADMINISTRATIVE EXPENSES FOR THE EARNING O F EXEMPT INCOME. WHEREAS THE APPELLANT FURNISHED THAT INVESTMENT IN SUBSIDIARY COMPANIES AND PARTNERSHIP FIRMS ARE IN THE NATURE OF BUSINESS ARRANGEMENT/STRATEGIES AND FOR THE PURPOSE OF COMMERCIAL EXPEDIENCY. IT I S THEREFORE PRAYED THAT THE ADDITIONS SO MADE MAY KINDLY BE DELETED. 3.THE LD. CIT(A) HAS ERRED IN LAW AND IN FACT IN RE STRICTING DEPRECIATION ON SOFTWARE @ 25% AS AGAINST 60% CLAIMED BY THE APPELL ANT. IT IS THEREFORE PRAYED THAT AO MAY KINDLY BE DIRECTED TO ALLOW DEPR ECIATION @ 60% ON COMPUTER SOFTWARE AND DISALLOWANCE SO MADE MAY KIND LY BE DELETED. YOUR APPELLANT CRAVES LIBERTY TO ADD TO ALTER TO MODIFY TO AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL AT THE TIME OF ON OR B EFORE THE HEARING OF APPEAL. ITA. NO 63/AHD/2017 ASSESSMENT YEAR 2013-14 1. THE LD. CIT(A) HAS ERRED IN LAW AND IN FACT IN CONF IRMING DISALLOWANCE MADE BY THE AO OF RS. 18 497/- BEING UNPAID EMPLOYE ES CONTRIBUTION TO ESI AS PER HONBLE GUJARAT HIGH COURT IN THE CASE O F CIT VS. GUJARAT STATE TRANSPORT CORPORATION IN TAX APPEAL NO.637 OF 2013. WHEREAS THE SAID ISSUE IS DECIDED BY GUJARAT HIGH COURT AND OTHER HI GH COURTS THAT IF THE PAYMENT IS MADE WITHIN THE PROVISIONS OF SECTION 43 B THE SAME IS ALLOWABLE. IT IS THEREFORE PRAYED THAT THE ADDITION S SO MADE MAY KINDLY BE DELETED. 2.THE LD. CIT(A) HAS ERRED IN LAW AND IN FACT IN RE STRICTING DEPRECIATION ON KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 11 SOFTWARE @ 25% AS AGAINST 60% CLAIMED BY THE APPELL ANT. IT IS THEREFORE PRAYED THAT AO MAY KINDLY BE DIRECTED TO ALLOW DEPR ECIATION @ 60% ON COMPUTER SOFTWARE AND DISALLOWANCE SO MADE MAY KIND LY BE DELETED. YOUR APPELLANT CRAVES LIBERTY TO ADD TO ALTER TO MODIFY TO AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL AT THE TIME OF ON OR B EFORE THE HEARING OF APPEAL. ITA. NO 1885/AHD/2017 ASSESSMENT YEAR 2014-15 1. THE LD. CIT(A) HAS ERRED IN LAW AND IN FACT IN CONF IRMING DISALLOWANCE MADE BY THE AO ON ACCOUNT OF LATE PAYMENT TO EMPLOY EES CONTRIBUTION TO ESI U/S 36(1)(VA) OF RS.10 785/- AS PER HONBLE GUJ ARAT HIGH COURT IN THE CASE OF CIT VS. GUJARAT STATE TRANSPORT CORPORATION IN TAX APPEAL NO.637 OF 2013. WHEREAS THE SAID ISSUE IS DECIDED BY GUJARA T HIGH COURT AND OTHER HIGH COURTS THAT IF THE PAYMENT IS MADE WITHIN THE PROVISIONS OF SECTION 43B THE SAME IS ALLOWABLE. IT IS THEREFORE PRAYED THAT THE ADDITIONS SO MADE MAY KINDLY BE DELETED. 2.THE LD. CIT(A) HAS ERRED IN LAW AND IN FACT IN RE STRICTING DEPRECIATION ON SOFTWARE @ 25% AS AGAINST 60% CLAIMED BY THE APPELL ANT. IT IS THEREFORE PRAYED THAT AO MAY KINDLY BE DIRECTED TO ALLOW DEPR ECIATION @ 60% ON COMPUTER SOFTWARE AND DISALLOWANCE SO MADE MAY KIND LY BE DELETED. YOUR APPELLANT CRAVES LIBERTY TO ADD TO ALTER TO MODIFY TO AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL AT THE TIME OF ON OR B EFORE THE HEARING OF APPEAL. 5. REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL; ITA NO.914/AHD/2016 ASSESSMENT YEAR 2012-13 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION OF KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 12 RS.14 52 432/- MADE BY AO ON ACCOUNT OF DEPRECIATIO N ON MOTOR CAR OF RS.13 23 317/- AND INSURANCE ON MOTOR CAR OF RS.1 2 9 115/- AS THE ASSESSEE HAS VIOLATED THE CONDITION LAID DOWN U/S 3 2 OF THE ACT THE AO HAS RIGHTLY DISALLOWED THE CLAIM OF DEPRECIATION AS THE PURPOSE OF ALLOWANCE OF DEPRECIATION UNDER SECTION 32 OF THE ACT THE TWIN CONDITION OF OWNERSHIP AND THE ASSETS USED FOR THE PURPOSE OF ASSESSEES B USINESS MUST BE SATISFIED. 2.THE CIT(A) HAS ERRED IN LAW AND ON FACTS BY DELET ING THE ADDITION OF RS.35 20 002/- MADE BY AO U/S 14A R.W.R 8D( OF THE ACT ON ACCOUNT OF INTEREST EXPENSE AS THE APPELLANT IS HAVING HUGE I NTEREST INCOME AND BORROWED FUNDS ARE USED FOR BROKING BUSINESS. 3.THE CIT(A) HAS ERRED IN LAW AND ON FACT IN DELETI NG THE ADDITION OF RS.1 19 85 613/- MADE BY AO ON ACCOUNT OF BAD DEBT S. THE AO HAS RIGHTLY DISALLOWED RS.1 19 85 613/- SINCE THE CONDITION LA ID DOWN IN SECTION 36(2) OF THE I.T. ACT 1961 IS NOT SATISFIED BY THE ASSES SEE. . 4.THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELET ING THE ADDITION OF RS.5 41 251/- MADE BY A.O U/S 40(A)(IA) OF THE ACT ON ACCOUNT OF LEASE LINE CHARGES OF RS.5 41 251/- PAID TO BSNL. THE AO HAS RIGHTLY DISALLOWED RS.5 41 251/- SINCE THE ASSESSEE HAS VIOLATED THE CONDITION LAID DOWN IN SECTION 194I R.W.S. 40(A)(IA) OF THE I.T. ACT 1961. 5.THE CIT(A) HAS ERRED IN LAW AND ON FACTS BY DELET ING THE ADDITION OF RS.66 24 640/- MADE BY AO ON ACCOUNT OF STCG OF RS. 56 86 282/- ON SHARES AS BUSINESS INCOME AND LTCG OF RS.9 38 358/- ON SHARES AS BUSINESS INCOME WITHOUT APPRECIATING THE DECISION O F HONBLE SUPREME COURT IN THE CASE OF KARAM CHAND THAPAR AND BROTHRS P LTD . VS CIT 83 ITR 899 AS THE TRANSACTION DOES NOT FULFIL THE CONDITIONS O F SHORT TERM OR LONG TERM CAPITAL GAINS. KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 13 ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER TO THE EXTENT MENTIONED ABOVE SINCE THE ASSESSEE HAS FAILED TO DI SCLOSE HIS TRUE INCOME/BOOK PROFIT. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED TO THE ABOVE EXTENT. THE APPELLANT CRAVES TO LEAVE TO AMEND OR ALTER ANY G ROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 6. AS THE ISSUES RAISED IN THESE APPEALS ARE COMMON THESE WERE HEARD TOGETHER AND BEING DISPOSED OFF BY THIS COMMO N ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. THE ASSESSEE AND REVENUE ARE IN CROSS APPEAL FOR ASSESSMENT YEARS 2010-11 2011-12 2012-13 AND ASSESSEE IS ALSO IN APPEAL FOR ASSESSMENT YEARS 201 3-14 AND 2014- 15 RAISING RESPECTIVE GROUNDS MENTIONED IN THE EARL IER PARAS. 7. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY DERIVES INCOME FROM BROKERAGE BUSINESS OF SHARES AN D SECURITIES WITH NSE OF INDIA INCOME FROM DEPOSITORY SERVICES (NSDL) AND INCOME FROM ARBITRAGE IN SHARES & SECURITIES AND F& O. THE APPELLANT COMPANY HAS FILED ITS RETURN OF INCOME AU /S 139(1) OF THE ACT. ASSESSMENTS COMPLETED U/S 143(3) OF THE ACT B Y LD. A.O AFTER MAKING VARIOUS ADDITIONS/DISALLOWANCES TO THE TOTA L INCOME DECLARED KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 14 BY THE APPELLANT. AGGRIEVED ASSESSEE PREFERRED APPE AL BEFORE LD. CIT(A) AND PARTLY SUCCEEDED. 8. FIRST COMMON ISSUE RAISED SOLELY BY THE ASSESSEE RELATES TO DISALLOWANCE U/S 43B OF THE ACT FOR DELAY IN DEPOSI TING THE EMPLOYEES CONTRIBUTION TO PF AND ESI AT RS.1 05 190/- RS.1 3 2 396/- RS.26 323/- RS.18 497/- AND RS.10 785/- RESPECTIVE LY. LD. CIT(A) CONFIRMED THE DISALLOWANCE FOLLOWING THE JUDGMENT O F JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V/S GUJARAT STATE ROAD TRANSPORT CORPORATION 366 ITR 170 (GUJ.). ASSESSEE HAS CHALLENGED THE DISALLOWANCE FOR ALL THE FIVE ASSESSMENT YEARS BEFO RE US. 9. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE FAIRL Y CONCEDED THAT THE COMMON ISSUE RELATING TO DISALLOWANCE U/S 43B F OR DELAY IN DEPOSITING EMPLOYEES PROVIDENT FUND IS SQUARELY CO VERED AGAINST THE ASSESSEE BY THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V/S GUJARAT STATE ROAD TRANSPORT CORPORATION (S UPRA). 10. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE VEHE MENTLY ARGUED SUPPORTING THE ORDERS OF BOTH THE LOWER AUTHORITIES . KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 15 11. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. ASSESSEES FIRST COMMON GRIEVANCE RAIS ING GROUND NO.1 OF THE APPEAL FOR ASSESSMENT YEAR 2010-11 TO 2014-1 5 CHALLENGES THE FINDING OF LD. CIT(A) CONFIRMING THE DISALLOWANCE U /S 43B OF THE ACT FOR DELAY IN DEPOSIT OF EMPLOYEES PROVIDENT FUND. LD. COUNSEL FOR THE ASSESSEE FAIRLY ACCEPTED THAT THIS ISSUE STANDS SQU ARELY COVERED AGAINST THE ASSESSEE BY THE JUDGMENT OF HON'BLE JUR ISDICTIONAL HIGH COURT IN THE CASE OF CIT V/S GUJARAT STATE ROAD TRANSPORT CORPORATION (SUPRA) W HEREIN HON'BLE COURT HELD AS UNDER; . '8.00. LN VIEW OF THE ABOVE AND FOR THE REASONS STA TED ABOVE AND CONSIDERING SECTION 36(1)(VA) OF THE INCOME TAX ACT 1961 READ WITH SUB-CLAUSE (X) OF CLAUSE 24 OF SECTION 2 IT IS HELD THAT WITH RESPECT TO THE SUM RECEIVED BY THE ASSESSEE FROM ANY OF HIS EMPLOYEES TO WHICH PROVISIONS OF SUB-CLAUSE (X) OF CLAUSE (24) OF SECTION (2) APPLIES THE ASSESSEE SHALL BE ENTITLED TO DEDUCTIO N IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 WITH RESPECT TO SUCH SUM CREDITED BY THE ASSESSEE TO THE EMPLOYEES' ACCOUNT IN THE RELEVANT FUND OR FUNDS ON OR BEFORE THE 'DUE DATE' MENTIONED IN EXPLANATION TO SECTION 36(J) (VA). CONSEQUENTLY IT IS HELD THA T THE LEARNED TRIBUNAL HAS ERRED IN DELETING RESPECTIVE DISALLOWA NCES BEING EMPLOYEES' CONTRIBUTION TO P F ACCOUNT/ESI ACCOUNT MADE BY THE AO AS AS SUCH SUCH SUMS WERE NOT CREDITED BY THE RES PECTIVE ASSESSEE TO THE EMPLOYEES' ACCOUNTS IN THE RELEVANT FUND OR FUNDS KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 16 (IN THE PRESENT CASE PROVIDENT FUND AND/OR ESI FUND ON OR BEFORE THE DUE DATE AS PER THE EXPLANATION TO SECTION 36(1 )(VA) OF THE ACT I.E. DATE BY WHICH THE CONCERNED ASSESSEE WAS REQUI RED AS AN EMPLOYER TO CREDIT EMPLOYEES' CONTRIBUTION TO THE E MPLOYEES' ACCOUNT IN THE PROVIDENT FUND UNDER THE PROVIDENT FUND ACT AND/OR IN THE ESI FUND UNDER THE ESI ACT. CONSEQUENTLY ALL THESE APPEALS ARE ALLOWED AND THE IMPUGNED JUDGMENT AND ORDERS PASSED BY THE TRIBUNAL IN DELETING THE DISALLOWANCES MADE BY THE AO ARE HEREBY QUASHED AND SET ASIDE AND THE DISALLOWANCES OF THE RESPECTIVE SUMS WITH RESPECT TO THE PROVIDENT FUND/ESI AND MADE BY THE AO IS HEREBY RESTORED. THE QUESTION RAISED IN PRESENT APPEAL ARE ANSWERED IN FAVOUR OF THE REVENUE. WITH THIS ALL THESE APPEALS ARE ALLOWED. ' 12. WE THEREFORE IN THE GIVEN FACTS AND CIRCUMST ANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE JUDGMENT OF JURISDIC TIONAL HIGH COURT IN THE CASE OF CIT VS. GUJARAT STATE ROAD TRANSPORT CORPORATION (SUPRA) CONFIRM THE FINDING OF LD. CIT(A). IN THE RESULT T HE GROUNDNO.1 OF THE ASSESSEES APPEAL COMMONLY RAISE D FOR ASSESSMENT YEARS 2010-11 TO 2014-15 IS DISMISSED. 13. NOW WE TAKE UP NEXT COMMON ISSUE RELATING TO DISALLOWANCE MADE U/S 14A OF THE ACT FOR ASSESSMENT YEARS 2010-1 1 TO 2012-13 FOR ALL THESE THREE ASSESSMENT YEARS LD. A.O APPLIE D THE METHOD KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 17 PROVIDED IN RULE 8D OF INCOME TAX RULES AND COMPUTE D THE DISALLOWANCE U/S 14A OF THE ACT ON TWO COUNTS NAMEL Y DISALLOWANCE OF INTEREST UNDER RULE 8D(2)(II) AND DISALLOWANCE T OWARDS ADMINISTRATIVE EXPENSES UNDER RULE 8D(2)(II). ASSE SSEE CHALLENGED THE DISALLOWANCE U/S 14A BEFORE LD. CIT(A) AND PART LY SUCCEEDED. LD. CIT(A) DELETED THE INTEREST DISALLOWANCE MADE UNDER RULE 8D(2)(II) OF I.T. RULES OBSERVING THAT THE ASSESSEE HAD EARNED N ET INTEREST INCOME DURING THE YEAR AND ALSO HAD SUFFICIENT INTEREST FR EE FUNDS TO MAKE INVESTMENTS. LD. CIT(A) PLACED RELIANCE ON VARIOUS JUDGMENTS TO DELETE THE DISALLOWANCE U/S 14A OF THE ACT FOR THE INTEREST COMPONENT. HOWEVER LD. CIT(A) CONFIRMED THE DISALL OWANCE U/S 14A FOR THE ADMINISTRATIVE EXPENSES CALCULATED @0.5% OF AVERAGE INVESTMENTS. 14. NOW BOTH THE ASSESSEE AND REVENUE ARE IN APPEAL AGAINST THE FINDING OF THE LD. CIT(A) RELATING TO DISALLOWANCE U/S 14A OF THE ACT. 15. AS REGARDS DISALLOWANCE OF PROPORTIONATE INTERE ST UNDER RULE 8D(2)(II) OF THE I.T. RULES DELETED BY LD. CIT(A) A T RS.10.78 LACS RS.10.96 LACS AND RS. 35.20 LACS FOR ASSESSMENT YEA R 2010-11 TO 2012-13 RESPECTIVELY LD. DEPARTMENTAL REPRESENTATI VE VEHEMENTLY KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 18 ARGUED SUPPORTING THE ORDERS OF BOTH THE LOWER AUTH ORITIES. 16. PER CONTRA LD. COUNSEL FOR THE ASSESSEE RELIED ON THE FINDING OF LD. CIT(A) AND ALSO REFERRED PAPER BOOK TO EXPLAIN THAT DURING ALL THE THREE YEARS GROSS INTEREST INCOME IS MORE THAN THE INTEREST EXPENDITURE AND THE INTEREST FREE FUNDS AVAILABLE W ITH THE ASSESSEE COMPRISING OF CAPITAL AND RESERVE AND SURPLUS ARE S UFFICIENT TO COVER THE INVESTMENTS MADE FOR FETCHING EXEMPT INCOME. R ELIANCE PLACED ON FOLLOWING JUDGMENTS; (I) ITO V/S KARNAVATI PETROCHEM ITA NO.2228/AHD/20 12 (II) CIT V/S HERO CYCLES LTD. ITA NO.331/2009 (P&H ) (III) DCIT V/S MAHARASHTRA SEAMLESS LTD ITA NO.4063/DEL/2006. (IV) DCIT V/S AMIGO SECURITIES ITA NO.1448/AHD/2010 17. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. THE ISSUE FOR ADJUDICATION BEFORE US REL ATES TO DISALLOWANCE U/S 14A FOR THE PROPORTIONATE INTEREST COMPUTED UNDER RULE 8D(2)(II) OF THE I.T. RULES. INTEREST DISALLO WANCE OF RS.10.78 LACS RS.10.96 LACS AND RS.35.20 LACS FOR ASSESSMEN T YEARS 2010-11 TO 2012-13 RESPECTIVELY LD. CIT(A) DELETED THE ADD ITION ON FINDING THAT THE APPELLANT HAD NET INTEREST INCOME DURING T HE YEAR. THE FACTS KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 19 AND FIGURES FOR ASSESSMENT YEARS 2010-11 TO 2012-13 ARE SIMILAR. THE INTEREST INCOME RECEIVED DURING THE YEAR IS MOR E THAN THE INTEREST PAID BY THE ASSESSEE FOR ALL THE THREE ASS ESSMENT YEARS. FURTHER FROM PERUSAL OF THE AUDITED FINANCIAL STATE MENTS IT EMERGES THAT THE INTEREST FREE FUNDS AVAILABLE WITH THE ASS ESSEE IN THE FORM OF SHARE CAPITAL AND ACCUMULATED RESERVE AND SURPLUS I S MUCH MORE THAN THE ALLEGED INVESTMENTS. IN THESE GIVEN FACTS WE OBSERVE THAT LD. CIT(A) HAS RIGHTLY DELETED THE IMPUGNED DISALLO WANCE FOR INTEREST UNDER RULE 8(2)(II) OF THE I.T RULES FOLLOWING THE DECISION OF COORDINATE BENCH AHMEDABAD IN THE CASE OF ITO V/S KARNAVATI PETROCHEM PVT. LTD OBSERVING AS FOLLOWS; 6.4. I HAVE CONSIDERED THE FACTS OF THE MATTER. IN THE IMMEDIATELY PRECEDING A.Y. 2009-10 THE DISALLOWANCE U/S.14A WAS UPHELD B Y MY PREDECESSOR. HOWEVER DURING THE COURSE OF THE PRESENT APPELLATE PROCEEDINGS REGARDING THE DISALLOWANCE MADE UNDER RULE-8D(2)(II) THE ID. A.R. RELIED ON THE AHMEDABAD TRIBUNAL DECISION DTD. 05.07.2013 IN THE CASE OF ITO VS. KARNAVATI PETROCHEM PVT. LTD. IN ITA NO.2228/AHD/20 12. IN THE SAID DECISION IT WAS HELD AS UNDER:- '7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT CIT(A) WHILE GRANTING RELIEF T O THE ASSESSEE HAS GIVEN A FINDING THAT NO NEXUS HAS BEEN ESTABLISHED BY THE A . O. WITH THE AMOUNT INCURRED BY THE ASSESSEE FOR EARNING THE TAX FREE I NCOME. HE HAS FURTHER NOTED THAT IN THE ASSESSEE'S CASE THE INTEREST INCO ME WAS MORE THAN INTEREST KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 20 EXPENSE AND THUS THE ASSESSEE WAS HAVING NET POSITI VE INTEREST INCOME AND THEREFORE THE SAME CANNOT BE CONSIDERED FOR DISALLO WANCE AND FOR WHICH HE PLACED RELIANCE ON THE DECISION OF KOLKATTA TRIBUNA L IN THE CASE OF TRADING APARTMENT LIMITED AND THE DECISION OF TRIBUNAL IN T HE CASE MORGAN STANLEY INDIA SECURITIES PRIVATE LIMITED. HE HOWEVER CONSID ERED THE ADMINISTRATIVE EXPENSES TO BE 0.5 OF THE AVERAGE INVESTMENTS AND D ISALLOWED THE SAME. 8. BEFORE US THE REVENUE COULD NOT BRING ANY MATERI AL ON RECORD TO CONTROVERT THE FINDINGS OF CIT(A). WE THEREFORE FIN D NO REASON TO INTERFERE THE ORDER OF CIT(A). THUS THIS GROUND OF THE REVENUE IS DISMISSED. ' IN THE INSTANT CASE THE TOTAL INTEREST EXPENDITURE CLAIMED WAS RS.3 79 05 391/-. OUT OF THE SAID AMOUNT A.O. CONS IDERED INTEREST OF RS.56 12 695/- FOR WORKING OUT THE DISALLOWANCE UND ER RULE-8D(2)(II). OUT OF THE SAID AMOUNT RS.29 70 835/- WAS PAID TO BANKS A GAINST O.D. AND RS.26 41 860/- WAS PAID ON UNSECURED LOANS. AS AGAI NST THIS APPELLANT EARNED INTEREST INCOME OF RS.14 45 40 211/- FROM BA NKS ON FDRS AND MARGIN MONEY. IN OTHER WORDS APPELLANT HAD NET INT EREST INCOME OF OVER RS.IO.66 CRORES. KEEPING IN VIEW THIS FACTS AND IN THE LIGHT OF THE ABOVE QUOTED DECISION I AM OF THE VIEW THAT DISALLOWANCE OF INTEREST UNDER 8D(2)(II) IS NOT SUSTAINABLE. IT IS DELETED. 18. FURTHER HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V/S HERO CYCLES LTD ITA NO.331/2009 ORDER DATED 4.11.2009 AFTER CONSIDERING THE FACTS THAT THE ASSESSEE HAD E ARNED NET INTEREST INCOME DURING THE YEAR HELD THAT THE DISALLOWANCE U /S 14A OF THE ACT IS UNCALLED FOR OBSERVING AS FOLLOWS; KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 21 4. IN VIEW OF FINDING REPRODUCED ABOVE IT IS CLEA R THAT THE EXPENDITURE ON INCOME FROM INTEREST AND THE INVESTMENT IN THE SHARE AND FUNDS WERE OUT OF THE DIVIDEND PROCEEDS. IN VIEW OF THIS FINDING OF FACT DISALLOWANCE UNDER SECTION 14A WAS NOT SUSTAINABLE. WHETHER IN A GIVEN SITUATION ANY EXPENDITURE WAS INCURRED WHICH WAS TO BE DISALLOWED IS A QUESTION OF FACT. THE CONTENTION OF THE REVENUE THAT DIRECTLY OR INDI RECTLY SOME EXPENDITURE IS ALWAYS INCURRED WHICH MUST BE DISALLOWED UNDER SECT ION 14A AND THE IMPACT OF EXPENDITURE SO INCURRED CANNOT BE ALLOWED TO BE SET OFF AGAINST THE BUSINESS INCOME WHICH MAY NULLIFY THE MANDATE OF SE CTION 14A CANNOT BE ACCEPTED. DISALLOWANCE UNDER SECTION 14A REQUIRES FINDING OF INCURRING OF EXPENDITURE WHERE IT IS FOUND THAT FOR EARNING EXEM PTED INCOME NO EXPENDITURE HAS BEEN INCURRED DISALLOWANCE UNDER S ECTION 14A CANNOT STAND. IN THE PRESENT CASE FINDING ON THIS ASPECT AGAINST THE REVENUE IS NOT SHOWN TO BE PERVERSE. CONSEQUENTLY DISALLOWANCE IS NOT PERMISSIBLE. WE HAVE TAKEN THIS VIEW EARLIER ALSO IN ITA NO. 504 OF 2008 (COMMISSIONER OF INCOME TAX CHANDIGARH II VS. M/S WINSOME TEXTILE IN DUSTRIES LIMITED CHANDIGARH) DECIDED ON 25.8.2009 WHEREIN IT WAS O BSERVED AS UNDER:- '6. CONTENTION RAISED ON BEHALF OF THE REVENUE IS T HAT EVEN IF THE ASSESSEE HAD MADE INVESTMENT IN SHARES OUT OF ITS OWN FUNDS THE ASSESSEE HAD TAKEN LOANS ON WHICH INTEREST WAS PAID AND ALL THE MONEY AVAILABLE WITH THE ASSESSEE WAS IN COMMON KIT TY AS HELD BY THIS COURT IN CIT V. ABHISHEK INDUSTRIES LIMITED (2006) 286 ITR 1 AND THEREFORE DISALLOWANCE UNDER SECTION 14A WAS JUSTIFIED. 7. WE DO NOT FIND ANY MERIT IN THIS SUBMISSION. JUD GMENT OF THIS COURT IN ABHISHEK INDUSTRIES (SUPRA) WAS ON THE ISSUE OF ALLOWABILITY OF INTEREST PAID ON LOANS GIVEN TO SISTER CONCERNS WI THOUT INTEREST. IT WAS HELD THAT DEDUCTION FOR INTEREST WAS PERMISSIBLE WH EN LOAN WAS TAKEN FOR BUSINESS PURPOSE AND NOT FOR DIVERTING THE SAME TO SISTER CONCERN WITHOUT HAVING NEXUS WITH THE BUSINESS. OBSERVATION S MADE THEREIN KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 22 HAVE TO BE READ IN THAT CONTEXT. IN THE PRESENT CAS E ADMITTEDLY THE ASSESSEE DID NOT MAKE ANY CLAIM FOR EXEMPTION. IN S UCH A SITUATION SECTION 14A COULD HAVE NO APPLICATION.' 5. IN VIEW OF THE ABOVE WE ARE OF THE OPINION THA T NO SUBSTANTIAL QUESTION OF LAW ARISE. 6. THE APPEAL IS DISMISSED. 19. THE CO-ORDINATE BENCH IN THE CASE OF DCIT VS. A MIGO SECURITIES PVT. LTD ITA NOS.1532 & 1533/AHD/2009 ALSO HELD IN FAVOUR OF THE ASSESSEE THAT DISALLOWANCE U/S 14A OF THE ACT IS NO T FOR THE INTEREST EXPENDITURE IF THE ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS TO COVER UP THE ALLEGED INVESTMENTS. RELEVANT EXTRACT OF TH E DECISION OF THE TRIBUNAL IS REPRODUCED BELOW; '6. IN THE LIGHT OF THE ABOVE DISCUSSION WE ARE OF THE VIEW THAT SINCE THE ASSESSEE HAS DEMONSTRATED THAT THERE WAS SUFFICIENT RESERVES SHARE CAPITAL AND INTEREST-FREE ADVANCES STATED TO BE TO THE TUNE OF RS.1988.26 LA CS IN A.Y. 2005-06 AND RS.1827.39 LACS FOR A. Y. 2006-07 THEN THE DECISION OF THE CIT VS. RELIANCE UTILITIES AND POWER LTD. 313 ITR 340 (BOM.) IS TO BE APPLIED ON THESE FACTS. RESULTANTLY WE HEREBY CONF IRM THE FINDINGS OF THE LD.CIT(A) AND DISMISS THESE GROUNDS OF THE REVENUE [OR BOTH THE YEARS. ' 20. WE THEREFORE RESPECTFULLY FOLLOWING THE ABOVE J UDGMENTS AND IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE ARE O F THE CONSIDERED VIEW THAT SINCE THE ASSESSEE HAD EARNED NET INTERES T INCOME DURING KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 23 THE YEAR AND ALSO POSSESS SUFFICIENT INTEREST FREE FUNDS TO COVER UP THE ALLEGED INVESTMENTS LD. CIT(A) HAS RIGHTLY DEL ETED THE PROPORTIONATE INTEREST DISALLOWANCE MADE BY THE LD. A.O APPLYING RULE 8D(2)(II) OF THE I.T. RULES. ACCORDINGLY THIS COMMON ISSUE RAISED BY THE REVENUE IN GROUND NO.2 FOR ASSESSMENT YEARS 2010-11 TO 2012-13 STANDS DISMISSED. 21. NOW WE TAKE UP THE ISSUE RELATING TO ADMINISTR ATIVE EXPENSE DISALLOWANCE RAISED BY THE ASSESSEE CHALLENGING THE FINDING OF LD. CIT(A) CONFIRMING THE ADMINISTRATIVE EXPENSES DISAL LOWED U/S 14A OF THE ACT WHICH WAS COMPUTED BY LD. A.O @0.5% OF THE AVERAGE INVESTMENTS. LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT THE ALLEGED DISALLOWANCE IS ON HIGHER SIDE SINCE THE AMOUNT OF INVESTMENT ON WHICH 0.5% ADMINISTRATIVE EXPENSES HAS BEEN DISALLO WED ALSO INCLUDES INVESTMENTS MADE IN THE PARTNERSHIP FIRM A ND THE INCOME FROM SUCH PARTNERSHIP FIRMS HAVE ALSO BEEN SUBJECTE D TO TAX. HE ALSO SUBMITTED THAT THE INVESTMENT IN SHARES ARE TO WARDS QUOTED AND UNQUOTED SHARES. UNQUOTED SHARES ARE INVESTMENT IN SUBSIDIARY/GROUP COMPANIES. INVESTMENT IN EQUITY S HARES ALSO INCLUDES THE OLD INVESTMENTS WHICH HAS BEEN BROUGHT FORWARDED AND KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 24 NO ADMINISTRATIVE EXPENSES IS INCURRED ON SUCH INVE STMENTS. 22. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE VEHE MENTLY ARGUED SUPPORTING THE ORDERS OF LOWER AUTHORITIES. 23. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. ASSESSEES COMMON GRIEVANCE IN GROUND NO .2 FOR ASSESSMENT YEAR 2010-11 & 2012-13 CHALLENGES THE FI NDING OF LD. CIT(A) CONFIRMING THE ADDITION FOR ADMINISTRATIVE E XPENSES DISALLOWED U/S 14A OF THE ACT COMPUTED @0.5% OF AVERAGE INVEST MENTS. 24. WE OBSERVE THAT FOR ASSESSMENT YEAR 2010-11 ASS ESSEE HAS NOT OFFERED ANY AMOUNT SUO MOTO AS DISALLOWANCE FOR ADMINISTRATIVE EXPENSES U/S 14A OF THE ACT. HOWEVER FOR ASSESSMEN T YEARS 2011- 12 AND 2012-13 ASSESSEE HAS SUO MOTO DISALLOWED FOR RS.11 00 000/- AND RS.12 00 000/- RESPECTIVELY TOWARDS ADMINISTRAT IVE EXPENSES DISALLOWANCE UNDER RULE 8D(2)(II) OF THE I.T RULES. 25. IT WAS CONTENDED BEFORE US THAT THE INVESTMENT ON WHICH 0.5% ADMINISTRATIVE EXPENSES DISALLOWANCE HAS BEEN COMPU TED MAJORLY INCLUDES THE INVESTMENT IN THE PARTNERSHIP FIRM BY THE ASSESSEE INVESTMENT IN UNQUOTED SHARES AND ALSO BROUGHT FORW ARDED KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 25 INVESTMENTS IN QUOTED SHARES. PERUSAL OF THE BALAN CE SHEET ALSO SHOWS THAT ASSESSEE HAS NOT CARRIED OUT MAJOR RESHU FFLE IN ITS INVESTMENT PORTFOLIO AND MOST OF THE INVESTMENTS AR E BROUGHT FORWARDED. ASSESSEE IS ALSO ENGAGED IN THE BUSINES S OF BROKERAGE FROM SHARES AND SECURITIES TRADING THROUGH NATIONAL STOCK EXCHANGE AND OTHER DEPOSITORY SERVICES. LD. A.O HAS ALSO NO T POINTED OUT ANY SPECIFIC INSTANCE ABOUT ANY PARTICULAR ADMINISTRATI VE EXPENSES INCURRED SPECIFICALLY FOR MANAGING THE INVESTMENT P ORTFOLIO. 26. WE ARE ALSO AWARE THE FACT THAT RULE 8D(2)(III) OF THE I.T. RULES HAS BEEN SPECIALLY ENACTED TO COMPUTE THE ADMINISTR ATIVE DISALLOWANCE SINCE IT IS PRACTICALLY NOT POSSIBLE T O BIFURCATE THE ADMINISTRATIVE EXPENSES SPECIFICALLY INCURRED FOR M ANAGING THE INVESTMENT PORTFOLIOS. BUT CERTAINLY ASSESSEE SHOUL D NOT BE BURDENED WITH ABNORMAL DISALLOWANCE OF ADMINISTRATIVE EXPENS ES JUST BECAUSE OF APPLICATION OF RULE 8D AND SHOULD BE CONSIDERED WITH REFERENCE TO THE INVESTMENT PORTFOLIO OF THE ASSESSEE UNLESS UNT IL LD. A.O MAKES PROPER SATISFACTION WITH EVIDENCE AND FACTUAL FINDI NG. 27. WE THEREFORE IN THE GIVEN FACTS AND CIRCUMSTANC ES OF THE CASE AND CONSIDERING THE INVESTMENT PORTFOLIO OF THE ASS ESSEE AND BEING KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 26 FAIR TO BOTH THE PARTIES SUSTAINED THE DISALLOWANC E OF ADMINISTRATIVE EXPENSES UNDER RULE 8D(2)(III) OF I.T. RULES TO EXT ENT OF RS.15 00 000/- RS.17 00 000/- AND RS.20 00 000/- F OR ASSESSMENT YEARS 2010-11 2011-12 AND 2012-13 RESPECTIVELY. T HESE RESPECTIVE GROUNDS NO.2 OF THE ASSESSEES APPEAL ARE PARTLY AL LOWED. 28. NOW WE TAKE UP GROUND NO.3 OF THE ASSESSEES AP PEAL FOR ASSESSMENT YEARS 2010-11 TO 2014-15 CHALLENGING THE FINDING OF LD. CIT(A) CONFIRMING THE ACTION OF LD. A.O RESTRICTIN G DEPRECIATION ON SOFTWARE LICENSE TO 25% AS AGAINST 60% CHARGED BY T HE ASSESSEE THEREBY DISALLOWING CLAIM OF RS.3 93 758/- RS.5 23 586/- RS.5 81 571/- RS.16 08 014/- AND RS.27 22 702/- RE SPECTIVELY. 29. BRIEF FACTS OF THIS GROUND IS THAT DURING THE A SSESSMENT PROCEEDINGS LD. A.O ALLOWED DEPRECIATION ON COMPUTE R SOFTWARE CLAIMED @25% AS AGAINST 60% CLAIMED BY THE ASSESSEE . AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) BUT COU LD NOT SUCCEED. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 30. LD. COUNSEL FOR THE ASSESSEE STATED THAT THE AS SESSEE HAS CLAIMED DEPRECIATION ON COMPUTER SOFTWARE @60% SINC E SOFTWARE IS KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 27 AN INTEGRAL PART OF COMPUTER SYSTEM AND USED IN THE BROKING BUSINESS. TRADING ACTIVITY IS DONE THROUGH SOFTWARE PROVIDED BY STOCK EXCHANGE. HE FURTHER STATED THAT THE ISSUE STANDS S QUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH IN FAVOUR OF THE ASSESSEE IN THE CASE OF ACIT V/S ZYDUS INFRASTRUCTURE PVT. LTD ITA NO.1464/AHD/2012 ORDER DATED 21.7.2016. 31. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE VEHE MENTLY ARGUED SUPPORTED THE ORDERS OF BOTH THE LOWER AUTHORITIES. 32. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. THROUGH COMMON GROUND NO.3 IN RESPECTIV E APPEALS FOR THE ASSESSMENT YEARS 2010-11 TO 2014-15 ASSESSEE HA S CHALLENGES THE ORDERS OF LOWER AUTHORITIES RESTRICTING THE DEP RECIATION ON SOFTWARE LICENSE @25% AS AGAINST 60% ALLOWABLE TO T HE ASSESSEE. 33. WE FIND THAT SIMILAR TYPE OF CASE WAS ADJUDICAT ED BY HON'BLE I.T.A.T. AHMEDABAD IN THE CASE OF ACIT V/S ZYDUS INFRASTRUCTURE PVT. LTD ITA NO.1464/AHD/2012 ORDER DATED 21.7.2016 WHEREIN IT WAS HELD AS UNDER; KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 28 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL ON RECORD. THE ISSUE RAISED IN THIS GROUND BY REVENUE IS AGAINST THE ACTION OF LD. CIT(A) FOR DISALLOWING DEPRECIATION ON SOFTWARE @ 60% IN PLACE OF 25% WHICH ARE APPLICABLE FOR INTANGIBLE ASSET. WE OBSER VE THAT LD. ASSESSING OFFICER HAS TREATED THE EXPENDITURE OF RS.91 999/- TOWARDS PURCHASE OF SOFTWARE LICENSE AS CAPITAL ASSET UNDER THE BLOCK O F INTANGIBLE ASSETS ELIGIBLE FOR DEPRECIATION @ 25% WHEREAS LD. CIT(A) HAS ALSO TREATED THE EXPENDITURE OF RS.91 999/- AS CAPITAL EXPENDITURE BUT HAS CATEG ORIZED IT ALONG WITH COMPUTERS AND DIRECTED THE ASSESSING OFFICER TO ALL OW DEPRECIATION @ 60% BY OBSERVING AS UNDER :- 4.3 DECISION: I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND T HE SUBMISSIONS GIVEN BY THE APPELLANT. THE APPELLANT HAS SUBMITTED THAT SINCE THE SOFTWARE INVOLVES RAPID OBSOLESCENCE THE CLAIM OF REVENUE E XPENDITURE-SHOULD BE ALLOWED. I AM NOT INCLINED TO AGREE WITH THE SUBMIS SION OF THE APPELLANT. THE APPELLANT HAS BOUGHT SOFTWARE LICENSES WHICH ARE VA LID FOR LONG TERM AND THE EXPENDITURE INCURRED THEREON IS THEREFORE NOT IN THE NATURE OF ASST. YEAR 2009-10 REVENUE. THEREFORE; THE PLEA OF THE APPELLA NT THAT EXPENDITURE IS IN THE NATURE OF REVENUE IS DISMISSED. HOWEVER THE TREATMENT OF THE SOFTWARE BY THE A. O. AS INTANGIBLE ASSET AND ALLOWING INTEREST @ 25% IS NOT JUSTIFIED AS THE COM PUTER SOFTWARE HAS BEEN GROUPED AS ELIGIBLE TO RATE OF DEPRECIATION @ 60% A ND THEREFORE A. O. SHOULD HAVE ALLOWED THE DEPRECIATION @ 60% IN PLACE OF 25% AT/OWED BY HIM. THE APPELLANT HAS ALSO DISPUTED THE FINDING OF THE A O . THAT THE SOFTWARE WERE USED FOR LESS THAN 180 DAYS. THE A. O. IS DIRECTED TO VERIFY THE CLAIM FROM THE FACTS AVAILABLE ON RECORD AND ALLOW THE DEPRECI ATION ACCORDINGLY AS PER THE PROVISIONS OF THE ACT THE GROUNDS OF APPEAL AR E ACCORDINGLY PARTLY ALLOWED. KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 29 34. IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CAS E AND RESPECTFULLY FOLLOWING THE DECISION OF I.T.A.T. AH EMDABAD IN THE CASE ACIT V/S ZYDUS INFRASTRUCTURE PVT. LTD (SUPRA) WE DELETE THE DISALLOWANCE OF RS.3 93 758/- RS.5 23 586/- RS.5 81 571/- RS.16 08 014/- AND RS.27 22 702/- FOR ASSESSMENT YE ARS 2010-11 TO 2014-15 RESPECTIVELY. IN THE RESULT THE GROUND NO.3 RAISED BY THE ASSESSEE FOR ASSESSMENT YEAR 2010-11 TO 2014-15 STA NDS ALLOWED. 35. NOW WE TAKE UP ISSUE RELATING TO GAIN/ LOSS FRO M TRANSACTIONS OF SALE OF SHARES AND SECURITIES. THIS ISSUE RELATES TO ASSESSMENT YEAR 2010-11 2011-12 AND 2012-13. ASSESSEE WHO IS A SH ARE BROKING HOUSE IS ALSO ENGAGED IN SHARE TRADING OF EQUITY SH ARES AND FUTURE OPTIONS AND DERIVATIVES ALSO MAKES INVESTMENT IN EQ UITY SHARES WITH AN OBJECT TO HOLD FOR A LONG PERIOD. THE GAIN/LOSS FROM SALE OF THE EQUITY SHARES HELD UNDER THE HEAD INVESTMENTS HAS BEEN SHOWN BY THE ASSESSEE AS LONG TERM CAPITAL GAIN/SHORT TERM C APITAL GAIN AS PER THE PERIOD OF HOLDING. 36. LD. A.O ON OBSERVING THE ALLEGED TRANSACTIONS R ELATES TO HUGE QUANTITY OF SHARES TRANSACTED MANY TIMES DURING THE YEAR AND ALSO LOOKING TO THE FACTS THAT ASSESSEE IS ITSELF ENGAGE D IN TRADING OF KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 30 SHARES CONSISTENTLY HELD THAT SUCH GAIN SHOULD BE T AXED AS BUSINESS INCOME AND NOT AS LONG TERM/SHORT TERM CAPITAL GAIN CLAIMED BY THE ASSESSEE. AGAINST THE ACTION OF THE LD. A.O TR EATING THE GAIN FROM SALE OF EQUITY SHARES AS BUSINESS INCOME ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A). FOR ASSESSMENT YEAR 2010-11 AND 2011-12 LD. CIT(A) PARTLY ALLOWED ASSESSEES CLAIM ALLOWING THE BENEFIT OF EXEMPTION FOR LONG TERM CAPITAL GAIN BUT AS REGARDS THE SHORT TERM CAPITAL GAIN DIRECTION WAS GIVEN TO BIFURCATE THE S HORT TERM CAPITAL GAIN INTO TWO CATEGORIES SO AS TO CALCULATE THE CAP ITAL GAIN AS PER THE PERIOD OF HOLDING. IN THESE CASES WHERE THE PERIOD OF HOLDING WAS MORE THAN 30 DAYS BUT LESS THAN ONE YEAR CLAIM OF S HORT TERM CAPITAL GAIN TO BE ALLOWED AND FOR REMAINING WHERE THE PERIOD OF HOLDING WAS LESS THAN 30 DAYS THE GAIN/LOSS WAS DI RECTED TO BE TREATED AS BUSINESS GAIN/LOSS. HOWEVER FOR ASSESSME NT YEAR 2012-13 LD. CIT(A) FOLLOWING THE DECISION OF CO-ORDINATE BE NCH IN THE CASE OF KALPESH SHAH V/S ACIT ITA NO. 2818/AHD/2011 DATED 3 1.10.12 GIVE AWAY THE PROCEDURE OF CALCULATING THE GAIN CONSIDER ING THE PERIOD OF 30 DAYS THUS ALLOWING THE APPEAL OF THE ASSESSEE AN D ACCEPTING THE CLAIM OF LONG TERM AND SHORT TERM CAPITAL GAIN SHOW N BY THE ASSESSEE FROM SALE OF SHARES HELD UNDER THE INVEST MENT HEAD. KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 31 37. NOW THE ASSESSEE AND REVENUE ARE IN CROSS APPEA L FOR ASSESSMENT YEAR 2010-11 & 2011-12 AND REVENUE IS IN APPEAL FOR ASSESSMENT YEAR 2012-13. 38. LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED FOR ALL THE THREE YEARS SINCE THE FACTS REMAIN THE SAME AND SUBMITTED THAT THE APPELLANT C OMPANY IS IN THE BUSINESS OF SHARE BROKING FAR CLIENTS. THE COMPANY HAS ALSO INVESTED IN EQUITY SH ARES ON LONG TERM BASIS AND EARNED LONG-TERM CAPITAL GAIN/LOSS AND SHORT- TERM CAPITAL GAIN/LOSS. IT IS SUBMITTED THAT THE A PPELLANT IS A BROKER OF SHARES &- SECURITIES WHERE TILT: THE COMPANY PROVIDES PLATFORM TO CLIENTS / INVESTORS TO PURCHASE AND SALE SHARES ONLINE BUT THE DECISION OF PURCHASE AND SALE IS TAKEN BY THE CLIENTS. WHEREAS THE CAPITAL GAIN IS PART OF ITS I NVESTMENTS WHICH IS PURELY DIFFERENT FROM BROKING ACTIVITY. IT IS SUBMITTED THAT THE APPELLANT IS A BROKER OF SHARES & SECURITIES WHERE THE COMPANY PROVIDES PLATFORM TO CLIENTS /INVESTORS TO PURCHASE AND SALE SHARES ON-LINE BUT THE DECISION OF PURCHAS E AND SALE IS TAKEN BY THE CLIENTS. WHEREAS; THE CAPITAL GAIN IS PART OF ITS INVESTMENTS WHICH IS PURELY DIFFERENT FROM BROKING ACTIVITY. IT KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 32 IS FURTHER SUBMITTED THAT THE COMPANY HAS TREATED S HARES AS INVESTMENT THE FUNDS ARE COMPANY'S OWN FUNDS THE INVESTMENT ARE IN THE NATURE OF LONG TERM INVESTMEN T DELIVERIES ARE TAKEN FOR ALL SUCH INVESTMENTS. THUS THE SHARE S ARE INVESTMENT OF THE COMPANY. IN THIS REGARD THE APPELLANT COMPANY RELIES ON FOLLOWING CASES WHERE THE HON'BL E COURTS AND TRIBUNALS DECIDED THAT THE GAIN FROM INVESTMENT IN SHARES IS TO BE TREATED AS CAPITAL GAIN AND NOT AS BUSINES S INCOME. (I) CIT VS GOPAL PUROHIT (SC) SLP NO. CC 1680212010 DATED 15- 11-2010. (II) J M SHARE & STOCK BROKERS LTD V. JT. CIT SPECIAL RANGE-22 MUMBAI IN ITA NO. 2801/MUM/2000 (III) HIMENSHU J SHAH & OTHERS V ACIT CC 2(3) AHMEDABAD IN ITA NO. 2875. 2878 2879 2800/AHD /2008 (IV) NAGINDAS P. SHETH (HUF) VS. ACIT ITA NO. 961/!MUM/2010 (IT AT MUMBAI BENCH 'G') (V) CIT VS NIRAJ AMIDHAR SURTI 347 ITR 149 (GU) HC) (VI) CLT-11 VS. VAIBHAV J SHAH H UF - TAX APPEAL NO 77 & 78 OF KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 33 2010 ORDER DATED 27-06-2012 (GUJ HC) IN VIEW OF THE ABOVE FA CTS. SUBMISSIONS. EXPLANATIONS AND DECISIONS OF HON'BLE COURTS AND TRIBUNALS IT IS PRAYED THAT THE APPELLANT COMPANY HAS MADE INVESTMENT AND THE ACTIVITY MAY KINDLY BE TREATED AS INVESTMENT AND NOT BUSINESS. SURPLUS/DEFICIT ON SHARES INVESTMENT MAY KINDLY BE TREATED AS LONG-TERM/SHORT TERM CAPITAL GAIN/LOSS AND THE DECI SION OF AO TO TREAT THE SAME AS BUSINESS INCOME MAY KINDLY BE CAN CELLED. 39. LD. COUNSEL FOR THE ASSESSEE ALSO REFERRED TO T HE CIRCULAR NO.6/2016 DATED 29.02.2016 ISSUED BY CENTRAL BOARD OF DIRECT TAXES WHICH RELATES TO THE ISSUE OF TAXABILITY OF S URPLUS ON SALE OF SHARES AND SECURITIES CAPITAL GAINS OR BUSINESS I NCOME INSTRUCTIONS IN ORDER TO REDUCE LITIGATION. REFERR ING TO THE CIRCULAR IT WAS SUBMITTED THAT THE ASSESSEE HAS BEEN CONSISTENT LY SHOWING THE SHORT TERM AND LONG TERM CAPITAL GAIN FROM SALE OF SHARES HOLD FOR LONG TERM PURPOSES. 40. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE VEHE MENTLY ARGUED SUPPORTING THE ORDERS OF LD. A.O FOR RESPECTIVE YEA RS WHEREIN THE LD. KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 34 A.O HAS REFERRED TO VARIOUS JUDGMENTS IN ORDER TO P ROVE THAT THE ALLEGED GAIN OF LONG TERM AND SHORT TERM CAPITAL GA IN IS ACTUALLY THE BUSINESS INCOME OF THE ASSESSEE SINCE THEY WERE ENTERED AS AN ADVENTURE TO TRADE. 41. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US AND ALSO CAREFULLY GONE THROUGH THE JUDGM ENTS RELIED AND REFERRED BY BOTH THE PARTIES. THE ISSUE RELATES TO TREATMENT OF GAIN/LOSS FROM SALE OF SHARES. THE ASSESSEE COMPAN Y DERIVES INCOME FROM BROKERAGE BUSINESS OF SHARES AND SECURI TIES. IT ALSO PROVIDES DEPOSITORY SERVICES. TRADING OF SHARES IS ALSO CARRIED OUT IN EQUITY SHARES DERIVATIVES AND FUTURE OPTIONS. ASS ESSEE HAS DULY DISCLOSED THE INCOME FROM TRADING OF SHARES WITH SP ECIFIC DETAILS OF OPENING STOCK PURCHASE SALES AND CLOSING STOCK. IN VENTORY OF EQUITY SHARES I.E. STOCK IN TRADE IS VALUED AT COST OR MA RKET PRICE WHICHEVER IS LESS. THERE IS NO DISPUTE TO SUCH DISCLOSED IN COME. BONE OF CONTENTION RELATES TO CAPITAL GAIN. ASSESSEE HAS S HOWN SHORT TERM CAPITAL AND LONG TERM CAPITAL GAIN ON SALE OF EQUIT Y SHARES AND HAS CLAIMED THE BENEFIT OF EXEMPTION FOR LONG TERM CAPI TAL GAIN AND SPECIAL TAX RATE OF 15% FOR SHORT TERM CAPITAL GAIN . LD. A.O HAS KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 35 TREATED THE ALLEGED GAIN CLAIMED BY THE ASSESSEE AS LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAIN AS BUSINES S INCOME. REFERENCE HAS BEEN MADE BY THE LD.A.O TO VARIOUS JU DGMENTS AND SIMILARLY ASSESSEE HAS ALSO TAKEN SHELTER OF VARIO US JUDGMENTS. CENTRAL BOARD OF DIRECT TAXES HAVE ALSO ISSUED VARI OUS CIRCULARS IN THIS REGARD FIRSTLY ON 31.8.89 AND THEREAFTER ON 1 5.6.2007 & VIDE CIRCULAR NO.6/2016 DATED29.2.2016 IN ORDER TO DEAL WITH THE TAXABILITY OF SURPLUS ON SALE OF SHARES AND SECURI TIES; SUB: ISSUE OF TAXABILITY OF SURPLUS ON SALE OF SHAR ES AND SECURITIES - CAPITAL GAINS OR BUSINESS INCOME - INSTRUCTIONS IN ORDER TO REDUCE LITIGATION - REG.- SUB-SECTION (14) OF SECTION 2 OF THE INCOME-TAX ACT 1961 ('ACT') DEFINES THE TERM 'CAPITAL ASSET' TO INCLUDE PROPERTY OF ANY KIND HELD BY AN ASSESSEE WHETHER OR NOT CONNECTED WITH HIS BUSINESS OR PROFE SSION BUT DOES NOT INCLUDE ANY STOCK-IN-TRADE OR PERSONAL ASSETS SUBJE CT TO CERTAIN EXCEPTIONS. AS REGARDS SHARES AND OTHER SECURITIES THE SAME CA N BE HELD EITHER AS CAPITAL ASSETS OR STOCK-IN-TRADE/ TRADING ASSETS OR BOTH. DETERMINATION OF THE CHARACTER OF A PARTICULAR INVESTMENT IN SHARES OR O THER SECURITIES WHETHER THE SAME IS IN THE NATURE OF A CAPITAL ASSET OR STO CK-IN-TRADE IS ESSENTIALLY A FACT-SPECIFIC DETERMINATION AND HAS LED TO A LOT OT UNCERTAINTY AND LITIGATION IN THE PAST. 2. OVER THE YEARS THE COURTS HAVE LAID DOWN DIFFER ENT PARAMETERS TO DISTINGUISH THE SHARES HELD AS INVESTMENTS FROM THE SHARES HELD AS STOCK-IN- TRADE. THE CENTRAL BOARD OF DIRECT TAXES ('CBDT) HA S ALSO THROUGH INSTRUCTION NO. 1827 DATED AUGUST 31 1989 AND CIR CULAR NO.4 OF 2007 KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 36 DATED JUNE 15 2007 SUMMARIZED THE SAID PRINCIPLES FOR GUIDANCE OF THE FIELD FORMATIONS . 3. DISPUTES HOWEVER CONTINUE TO EXIST ON THE APPL ICATION OF THESE PRINCIPLES TO THE FACTS OF AN INDIVIDUAL CASE SINCE THE TAXPAY ERS FIND IT DIFFICULT TO PROVE THE INTENTION IN ACQUIRING SUCH SHARES/SECURITIES. IN THIS BACKGROUND WHILE RECOGNIZING THAT NO UNIVERSAL PRINCIPAL IN ABSOLUTE TERMS CAN BE LAID DOWN TO DECIDE THE CHARACTER OF INCOME FROM SALE OF SHARES AND SECURITIES (I.E. WHETHER THE SAME IS IN THE NATURE OF CAPITAL GAIN O R BUSINESS INCOME) CBDT REALIZING THAT MAJOR PART OF SHARES/SECURITIES TRAN SACTIONS TAKES PLACE IN RESPECT OF THE LISTED ONES AND WITH A VIEW TO REDUC E LITIGATION AND UNCERTAINTY IN THE MATTER IN PARTIAL MODIFICATION TO THE AFORESAID CIRCULARS FURTHER INSTRUCTS THAT THE ASSESSING OFFICERS IN HO LDING WHETHER THE SURPLUS GENERATED FROM SALE OF LISTED SHARES OR OTHER SECUR ITIES WOULD BE TREATED AS CAPITAL GAIN OR BUSINESS INCOME SHALL TAKE INTO AC COUNT THE FOLLOWING A) WHERE THE ASSESSEE ITSELF IRRESPECTIVE OF THE P ERIOD OF HOLDING THE LISTED SHARES AND SECURITIES OPTS TO TREAT THEM AS STOCK-IN-TRADE THE INCOME ARISING FROM TRANSFER OF SUCH SHARES/SECURIT IES WOULD BE TREATED AS ITS BUSINESS INCOME B) IN RESPECT OF LI STED SHARES AND SECURITIES HELD FOR A PERIOD OF MORE THAN 12 MONTHS IMMEDIATELY PRECEDING THE DATE OF ITS TRANSFER IF THE ASSESSEE DESIRES TO TREAT THE INCOME ARISING FROM THE TRANSFER THEREOF AS CAPITAL GAIN THE SAME SHALL NOT BE PUT TO DISPUTE BY THE ASSESSING OFFICE R. HOWEVER THIS STAND ONCE TAKEN BY THE ASSESSEE IN A PARTICULAR A SSESSMENT YEAR SHALL REMAIN APPLICABLE IN SUBSEQUENT ASSESSMENT YE ARS ALSO AND THE TAXPAYERS SHALL NOT BE ALLOWED TO ADOPT A DIFFERENT /CONTRARY STAND IN THIS REGARD IN SUBSEQUENT YEARS; C) IN ALL OTHER CASES THE NATURE OF TRANSACTION (I .E. WHETHER THE SAME IS IN THE NATURE OF CAPITAL GAIN OR BUSINESS INCOME ) SHALL CONTINUE TO BE KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 37 DECIDED KEEPING IN VIEW THE AFORESAID CIRCULARS ISS UED BY THE CBDT. 4. IT IS HOWEVER CLARIFIED THAT THE ABOVE SHALL N OT APPLY IN RESPECT OF SUCH TRANSACTIONS IN SHARES/SECURITIES WHERE THE GE NUINENESS OF THE TRANSACTION ITSELF IS QUESTIONABLE SUCH AS BOGUS C LAIMS OF LONG TERM CAPITAL GAIN / SHORT TERM CAPITAL LOSS OR ANY OTHER SHAM TRANSACTIONS. 5. IT IS REITERATED THAT THE ABOVE PRINCIPLES HAVE BEEN FORMULATED WITH T HE SALE OBJECTIVE OF REDUCING LITIGATION AND MAIN TAINING CONSISTENCY IN APPROACH ON THE ISSUE OF TREATMENT OF INCOME DER IVED FROM TRANSFER OF SHARES AND SECURITIES. ALL THE RELEVANT PROVISIO NS OF THE ACT SHALL CONTINUE TO APPLY ON THE TRANSACTIONS INVOLVING TRA NSFER OF SHARES AND SECURITIES. 42. THE ABOVE CIRCULAR HAS BEEN PREPARED KEEPING IN MIND VARIOUS JUDGMENTS RELATING TO THIS ISSUE BOTH FAVOURING THE ASSESSEE AS WELL AS REVENUE. FURTHER WE OBSERVE THAT LD. CIT(A) ALL OWED THE ASSESSEES CLAIM EXCEPT FOR TREATING THE GAIN/LOSS FROM ITS EQUITY SHARES/SECURITIES HELD FOR 30 DAYS OR LOSS AS BUSIN ESS INCOME. THIS FINDING WAS ALSO REVERSED IN ASSESSMENT YEAR 2012-1 3 WHEN LD. CIT(A) ACCEPTED THE ENTIRE CLAIM OF LONG TERM CAPIT AL GAIN AND SHORT TERM CAPITAL GAIN OFFERED BY THE ASSESSEE IN VIEW O F THE FACT THAT NO SUCH PROVISIONS IN THE ACT IS AVAILABLE FOR COMPUTI NG THE GAIN FOR SHARES HELD FOR 30 DAYS OR LESS AS BUSINESS INCOME. LD. CIT(A) ALLOWED THE ASSESSEES CLAIM FOR ASSESSMENT YEAR201 2-13 OBSERVED KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 38 AS FOLLOWS; 10.3. THE CONTENTIONS OF THE LEARNED A.R ARE THAT THE APPELLANT COMPANY IS A BROKER OF SHARES AND SECURITIES ON BEHALF OF CLIENTS APART FROM THE SAID BUSINESS IT MADE ITS OWN INVESTMENT OUR OF OWN FUN DS IN SHARES/SECURITIES DURING THE YEAR THE LONG TERM CAPITAL GAIN OF' RS. 938 358/- WAS EARNED ON THE SHARES AND THE SHORT TERM CAPITA! GAIN OF RS. 56 86 282/- WAS EARNED ON THE SHARES AND THEREFORE IN THE LIGHT OF THE DECISIONS RELIED UPON TREATING THE CAPITAL GAINS AS BUSINESS INCOME WAS NOT WARRAN TED. 10.4. I HAVE CONSIDERED THE FACTS OF THE MATTER. AP ART FROM THE STOCK BRAKING BUSINESS APPELLANT EARNED INCOME ON THE P URCHASE AND SALE OF SHARES/SECURITIES AS INVESTMENT AND INTERES T INCOME. 10.5 APPELLANT IS HAVING INTEREST INCOME OF RS. 14.69 CRORES AS AGAINST INTEREST EXPENDITURE OF RS. 8.06 CRORES WHICH SHOW S THAT BORROWED FUNDS WERE NOT UTILIZED FOR PURCHASE OF SHARES/SECU RITIES. ALSO APPELLANT HAS SHOWN INVESTMENT ACTIVITY SEPARATELY IN THE BOOKS OF ACCOUNTS. 10.6 DURING THE HEARING THE APPELLANT WAS ASKED TO SHOW HOW THE ASSESSEE HAS TREATED SIMILAR TRANSACTION IN SUBSEQU ENT FEAR THE APPELLANT HELD COPIES OF COMPUTATION OF TOTAL INCOM E FOR SUBSEQUENT YEAR WHICH SHOWS THAT IN THESE FEARS ALSO APPELLAN T HAS SHOWN SHORT TERM CAPITAL GAIN FROM SALE OF SHARES HELD FOR LESS THAN 12 MONTHS. 10.7 FURTHER LOSS OF SALE OF SHARES IN EARLIER YEAR AS SHORT TERM CAPITA/LOSS AND SAME WAS CARRIED FORWARD TO THE NEX T FEAR INSTEAD OF TREATING THE SAME AS BUSINESS LOSS. THUS INTENSION OF APPELLANT IS CLEAR THAT SHARES ACQUIRED FOR INVESTMENT ARE SHOWN IN BO OKS AS 'INVESTMENT ' AND SHARES ACQUIRED FOR TRADE ARE SHOWN AS TRADE. KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 39 1 0.8 IN APPELLANTS OWN CASE FOR AY 2011-12 DATED 13-08-2014IN APPEAL NO.CIT(/!)- VI/JT.CIT/R.3/214/ 2013-14 .MY PREDECESSOR DIRECTED A.O TO ASSESS THE GAIN ON SHARES HELD UP TO 30 DAYS AS BUSINESS INCOME AND TO ASSESS THE BALANCE GAIN AS S HORT TERM CAPITAL GAIN] LONG TERM CAPITAL GAIN KEEPING VIEW DECISION OF AHMEDABAD TRIBUNAL IN CASE OF SHRI SUGHAMHAND C.SHAH VS. ACI T CIRCLE-3 SURAT IN ITA NOS. 3554/AHD/2008 FOR A. Y 2005-06 AND 1932 /AHD/2009 FOR .-4. Y 2006-0.7 10 .9 WHEREAS JURISDICTIONAL TRIBUNAL IN CASE OF KAPLE SH C SHAH VS. ACIT IN ITA NO. 2818/AHD/2011 FOR AY 2008-09 VIDE O RDER DATED 3 1 - 10.-2012 HAS TAKEN CONTRARY VIEW AND DISTINGUISHED OWN ORDER IN CASE OF S/SHRI SUGHAMCHAND C SHAH (SUPRA) AND HELD THAT : .. THE INTENSION OF TILE ASSESSEE IS' CLEAR THAT HE HAS TREATED INVESTMENT I N SHARES AS 'INVESTMENT' AND NOT FOR THE PURPOSE OF TRADE. THE REVENUE BROUGHT ANY MATERIAL TO SHOW THAT ASSESSEE HAS INVESTED IS SHARE FOR 'TRADE. WE FURTHER F IND THAT REVENUE HAS NOT TILED ANY APPEAL AGAINST THE ORDER OF LD. CIT(A) TREATING THE INVESTMENT OF ASSESSEE IN SHARE S FOR MORE THAN 30 DAYS AND LESS THAN 12 MONTHS AS INVESTMENT OF ASSESSEE IN SHARES FOR MORE THAN 30 DAYS AND LESS T HAT 12 MONTHS AS INVESTMENT IN SHORT-TERM ASSETS. THERE IS NO PROVISION UNDER THE ACT TO INDICATE THAT THE HOLDIN G PERIOD OF 30 DAYS IS RELEVANT TO DECIDE WHETHER ANY TRANSACTI ON MADE FOR INVESTMENT OR FOR TRADE . THEREFORE WE HAVE NO HESITATION IN HOLDING THAT LD. CIT(A) WAS NOT JUSTIFIED IN TRE ATING THE SURPLUS ARISING OUT OF SALE OF SHARES HELD FOR THE PERIOD OF LESS THAN 30 DAYS AS BUSINESS INCOME INSTEAD OF SHORT TERM CAPITAL GAIN SHOWN BY ASSESSEE. KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 40 10.9 UNDER THE ABOVE FACT CIRCUMSTANCES AND JURISD ICTIONAL TRIBUNAL DECISION IN CASE OF SHRI KALPESH C SHAH (SUPRA) IT IS HELD THAT THERE IS NO PROVISION UNDER THE ACT TO INDICATE THAT THE HOLDIN G PERIOD OF SHARES LESS THAN 30 DAYS IS RELEVANT TO DECIDE TRANSACTION MADE ' IN NATURE OF TRADE AND NOT AS INVESTMENT ACTIVITY. THEREFORE I AM INCLINED TO ACCEPT THE CONTENTION OF APPELLANT AND DIRECT THE AO TO TREAT SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN ON SHARES / SECURITY AS INVESTMENT ACTIVITY. I ALSO DIRECT AO TO ALLOW SET OFF OF BROUGHT FORWARD SHORT TERM CAPITAL LOSS OF AY 201'1-12 FROM SHORT TERM CAPITAL GAIN OF CURRENT YEAR THESE GROUN DS OF APPEAL ARE ALLOWED 43. WE FIND THAT THE ISSUE RELATING TO TAXABILITY O F SURPLUS ON SHARES AND SECURITIES DEPENDS ON VARIOUS FACTS AND CIRCUMS TANCES. IN THE INSTANT CASE THE ASSESSEE IS ITSELF INTO THE SHARE TRADING BUSINESS BROKING HOUSE DEPOSITORY SERVICES ETC. FROM PERUS AL OF THE BALANCE SHEETS WE FIND THAT THE EQUITY SHARES HELD BY THE A SSESSEE ARE CATEGORIZED INTO TWO PARTS. UNDER THE HEAD INVEST MENTS THE EQUITY SHARES FOR VARIOUS COMPANIES ARE SHOWN AT COST PRI CE WHEREAS UNDER THE HEAD INVENTORIES THE EQUITY SHARES HELD B Y THE ASSESSEE AS STOCK IN TRADE VALUED AT COST OR MARKET PRICE WHI CHEVER IS LESS. SO THE TREATMENT OF SHARES HELD BY THE ASSESSEE HAS BE EN CLEARLY DIFFERENTIATED IN THE BOOKS OF ACCOUNTS. 44. ON TEST CHECK BASIS WE VERIFIED THE TRANSACTION S OF LONG TERM CAPITAL GAIN AND FOUND THAT THE EQUITY SHARES SOLD BY THE ASSESSEE KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 41 WERE APPEARING IN THE LIST OF INVESTMENT ATTACHE D WITH THE AUDITED FINANCIAL STATEMENTS OF PRECEDING YEARS. WE ALSO FI ND THAT THE SHORT TERM CAPITAL GAIN OF FEW SCRIP WERE ALSO BROUGHT FO RWARDED FROM LAST YEAR. SO FOR THE PURPOSE OF VERIFYING THAT WHETHER THE EQUITY SHARES IS HOLD FOR INVESTMENT PURPOSE IT IS NOT SO DIFFICU LT FOR THE LONG TERM CAPITAL GAIN SINCE THE NAMES CAN EASILY BE VERIFIE D FROM THE LIST OF INVESTMENTS OF PRECEDING FINANCIAL YEAR. 45. AS FAR AS THE SHORT TERM CAPITAL GAIN IT MAY B E DIFFICULT AT SOME POINT OF TIME BECAUSE THE EQUITY SHARES IF PUR CHASED DURING THE YEAR THEN THEY WILL NOT APPEAR IN THE LAST YEAR BAL ANCE SHEET. REVENUE AUTHORITIES CAN EASILY QUESTION THE TAXABIL ITY OF SUCH TRANSACTION BECAUSE THE ASSESSEE MAY BE DEALING IN THE SIMILAR SCRIP FOR TRADING PURPOSE AND SIMULTANEOUSLY FOR INVESTME NT PURPOSES. SO THERE REMAINS THIN LINE BUT THEN SUCH THIN LINE HAS TO BE CHECKED BY THE REVENUE AUTHORITIES FROM NECESSARY DETAILS INCL UDING CONTRACT NOTE SEPARATE DEMAT ACCOUNT STATEMENTS. FROM PERU SAL OF THE RECORD WE FIND THAT NO SUCH EFFORT HAS BEEN MADE BY THE REVENUE AUTHORITIES AND ONLY GENERAL REMARK HAS BEEN GIVEN THAT SINCE THE ASSESSEE IN THE BUSINESS OF SHARE TRADING AND FREQU ENT TRANSACTIONS KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 42 HAVE TAKEN PLACE IT SHOULD BE TREATED AS BUSINESS I NCOME. CERTAINLY THIS COULD NOT BE A BENCH MARK TO BIFURCATE THE TRA NSACTION BEING HELD FOR LONG TERM PURPOSES AS INVESTOR OR AS A TRA DER. 46. IN THE CASE OF ASSESSEE THIS CLAIM HAS BEEN CON SISTENTLY MADE FOR SO MANY YEARS. TRANSACTIONS HAVE BEEN SEPARATE LY ACCOUNTED FOR IN THE BOOKS. EQUITY SHARES PURCHASED FOR LONG TER M PURPOSES ARE HELD AS INVESTMENT VALUED AT COST PRICE AND EQUIT Y SHARES HELD AS STOCK IN TRADE ARE SHOWN UNDER THE HEAD INVENTORIES VALUED AT COST OR MARKET PRICE WHICHEVER IS LESS. GAIN/LOSS AS I T IS INCURRED HAS BEEN DISCLOSED IN THE FINANCIAL STATEMENTS AND COMP UTATION OF INCOME. SINCE NO ADVERSE MATERIAL IS BROUGHT ON REC ORD BY THE REVENUE AUTHORITIES IN ANY OF THE YEARS UNDER DISPU TE WE ARE OF THE CONSIDERED VIEW THAT THE CLAIM OF THE ASSESSEE OF S HOWING THE GAIN FROM SALE OF EQUITY SHARES UNDER THE HEAD LONG TERM AND SHORT TERM CAPITAL GAIN NEEDS TO BE ACCEPTED. WE ACCORDINGLY ORDER SO AND ALLOW THE RESPECTIVE GROUND NO.4 OF THE ASSESSEES APPEAL FOR ASSESSMENT YEARS 2010-11AND 2011-12 AND DISMISS GRO UND NO.7 & 5 OF REVENUE FOR ASSESSMENT YEARS 2010-11 2011-1 2 AND 2012-13 RESPECTIVELY. KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 43 47. NOW WE TAKE UP THE ISSUE RAISED IN REVENUES AP PEAL FOR ASSESSMENT YEAR 2010-1 2011-12 AND 2012-13 RELATIN G TO DISALLOWANCE OF DEPRECIATION AND INSURANCE OF MOTOR CARS IN THE NAME OF DIRECTORS. 48. BRIEF FACTS RELATING TO THIS ARE THAT DEPRECIAT ION AND INSURANCE ON MOTOR CAR IS CLAIMED IN THE BOOKS OF ACCOUNTS. MOTOR CARS WERE IN THE NAME OF DIRECTORS. FUNDS WERE PROVIDED BY THE COMPANY. MOTOR CARS WERE USED FOR ASSESSEES BUSINESS PURPOSES. L D. A.O DISALLOWED THE DEPRECIATION SINCE THE CAR WERE IN THE NAME OF THE COMPANY. LD. CIT(A) ALLOWED THE CLAIM. NOW REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 49. LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY ARGU ED SUPPORTED THE ORDER OF LD. A.O. 50. PER CONTRA LD. COUNSEL FOR THE ASSESSEE RELYING ON THE FINDING OF LD. CIT(A) ALSO SUBMITTED THAT THE FUNDS WERE PROVI DED BY THE COMPANY AND THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CAS E OF MYSORE MINERALS LTD. V/S CIT 239 ITR 775 AS WELL AS THE JUDGMENT OF KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 44 JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V/S ARAVALI FINLEASE LTD. (2012) 341 ITR 282 (GUJ). 51. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. REVENUES GRIEVANCE IS AGAINST THE FIND ING OF LD. CIT(A) ALLOWING THE DEPRECIATION AND INSURANCE ON THE MOTO R CARS REGISTERED IN THE NAME OF THE DIRECTORS. IT IS NOT IN DISPUTE THAT THE CARS ON WHICH THE DEPRECIATION HAS BEEN CLAIMED AND INSURAN CE EXPENSES ARE IN THE NAME OF DIRECTORS. IT IS ALSO NOT DISPUTED THAT THE FUNDS TO PURCHASE THE CAR HAVE BEEN PROVIDED BY THE ASSESSEE COMPANY AND THE CARS HAVE BEEN USED FOR THE BUSINESS PURPOSES O F THE COMPANY. WHETHER IN THE GIVEN FACTS THE ASSESSEE IS ELIGIBLE TO CLAIM THE DEPRECIATION?. WE FIND THAT LD. CIT(A) ALLOWED THE ASSESSEES CLAIM OBSERVING AS FOLLOWS; 3.3. HAVING CONSIDERED THE FACTS OF THE CASE I AM INCLINED TO ACCEPT THE CONTENTIONS OF THE LD. A.R. AS ADMITTED BY THE A.O HIMSELF THE FUNDS FOR PURCHASE OF THE CARS WERE PROVIDED BY THE APPELLANT . THE HON'BLE SUPREME COURT IN THE CASE OF MYSORE MINERALS LTD. VS. C.LT. 239 ITR 775 (SC) HAS HELD THAT THE SECTION 32 OF THE LT. ACT 1961 CONF ERS A BENEFIT OF THE ASSESSEE. THE PROVISION SHOULD BE SO INTERPRETED AN D THE WORDS USED THEREIN SHOULD BE ASSIGNED SUCH MEANING AS WOULD EN ABLE THE ASSESSEE TO SECURE THE BENEFIT INTENDED TO BE GIVEN BY THE LEGI SLATURE TO THE ASSESSEE. IT WAS FURTHER HELD BY THE HON 'BLE SUPREME COURT THAT THE TERM OWNED AS KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 45 OCCURRING IN SECTION 32(1) OF THE INCOME-TAX ACT MU ST BE ASSIGNED A WIDER MEANING. THE HON'BLE SUPREME COURT HAS HELD AS UNDE R: 'IT IS WELL-SETTLED THAT THERE CANNOT BE TWO OWNERS OF THE PROPERTY SIMULTANEOUSLY AND IN THE SAME SENSE OF THE TERM. T HE INTENTION OF THE LEGISLATURE IN ENACTING SECTION 32 OF THE ACT W OULD BE BEST FULFILLED BY ALLOWING DEDUCTION IN RESPECT OF DEPRECIATION TO THE PERSON IN WHOM FOR THE TIME BEING VESTS THE DOMINION OVER THE BUILDING AND WHO IS ENTITLED TO USE IT IN HIS OWN RIGHT AND IS USING THE SAME FOR THE PURPOSES OF HIS BUSINESS OR PROFESSION. ASSIGNING A NY DIFFERENT MEANING WOULD NOT SUBSERVE THE LEGISLATIVE INTENT. ' FURTHER THE AHMEDABAD LT.A.T IN THE CASE OF AMBUJA SYNTHETICS MILLS PVT.LTD. VS. THE DY. C.LT. RANGE-L AHMEDABAD ON SIMILAR FACTS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING 'IT IS NOT DISPUTED THAT FUNDS FOR PURCHASES OF THE CAR WERE PROVIDED BY THE ASSESSEE COMPANY WHICH IS ALSO REFLECTED IN THE ACCOUNTS OF THE ASSESSEE COMPANY. IN OUR OPINION WHEN THE CAR IS ACTUALLY USED FOR THE PURPOSE OF BUSINESS OF THE COMPANY DEPRECIA TION THEREON CANNOT BE DENIED. ' AS REGARDS THE A.O'S OBSERVATION THAT THE APPELLANT FAILED TO ESTABLISH THAT THE VEHICLES WERE USED BY THE COMPANY IT IS SEEN T HAT THERE ARE VARIOUS JUDICIAL PRONOUNCEMENTS TO THE EFFECT THAT USE MEAN S KEPT READY FOR USE AND NOT ACTUALLY USE. THE CASE LAWS CITED AT 123 ITR 40 4 (DELHI) 170 TAXMAN 407 (MP) 187 TAXMAN 442 (MAD) 201 TAXMAN 666 (P & H) 198 TAXMAN 470 & 199 TAXMAN 273 ARE IN FAVOUR OF THE APPELLANT. MOREOVER NO MATERIAL HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE VEHICLE EXPENSES CLAIMED WERE NOT GENUINE. HAVING CONSIDERE D THE FACTS OF THE MATTER AND THE CASE LAWS ON THE ISSUE IMPUGNED DISA LLOWANCE OF KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 46 DEPRECIATION ON CAR AND THE INSURANCE PREMIUM IS DE LETED. THIS GROUND OF APPEAL IS ALLOWED. 52. WE FURTHER OBSERVED THAT THE CO-ORDINATE BENCH AHMEDABAD IN THE CASE OF SWAGAT INFRASTRUCTURE LTD VS. JCIT (201 3) 37 TAXMANN.COM 83 (AHD. TRIB.) ALSO TOOK SIMILAR VIEW FAVOURING THE ASSESSEE BY FOLLOWING THE JUDGMENT OF APEX COURT IN THE CASE OF MYSORE MINERALS LTD VS. CIT 239 ITR (SUPRA) OBSERVED AS UNDER; '8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. BEFORE LD. CIT(A) THE CONTENTI ON OF ASSESSEE WAS ALSO THAT SUCH EXPENDITURE WAS ALLOWED IN EARLI ER YEAR: THE FACTUM THAT SUCH EXPENDITURE WAS ALLOWED IN EARLIER YEAR IS NOT CONTRADICTED BY THE REVENUE. AS PER THE SECTION 32(1) OF THE ACT DEPRECIATION IS ALLOWABLE IF THE MACHINERY IS OWNED WHOLLY AND PARTLY BY THE ASSESSEE HOWEVER THE HON'BLE SUPREM E COURT HAS FURTHER ENLARGED THIS SCOPE OF WORD 'OWN' IN ITS JU DGMENT RENDERED IN THE CASE OF MYSORE MINERALS LTD. (SUPRA) WHEREI N THE HON'BLE APEX COURT HAS HELD THAT THE PROVISIONS SHOULD BE SO INTERPRETED AND THE WORDS USED THEREIN SHOULD BE ASSIGNED SUCH MEANING AS WOULD ENABLE THE ASSESSEE TO SECURE THE BENEFIT INT ENDED TO BE GIVEN BY THE LEGISLATURE TO THE ASSESSEE. IT HAS BE EN HELD THAT THE TERMS 'OWNED' 'OWNERSHIP' AND 'OWN' ARE GENERIC TER MS. THEY HAVE WIDE AND ALSO NARROW CONNOTATION. THE MEANING WOULD DEPEND ON THE CONTEXT IN WHICH THE TERM ARE USED. IN THE PRES ENT CASE THE ASSESSEE HAS MADE SUBMISSION THAT THE CARS WERE PUR CHASED IN THE KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 47 NAME OF THE DIRECTOR AND SUCH CARS ARE UTILIZED FOR THE PURPOSES OF ITS BUSINESS. THEREFORE THE ASSESSEE IS ENTITLED FO R DEPRECIATION AND THE INTEREST EXPENDITURE. WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE WOULD BE ENTITLED FOR THE ALLOWANCE DEPREC IATION AS WELL AS INTEREST EXPENDITURE IF THE ASSESSEE IS ABLE TO PROVE THAT THE VEHICLES WERE UNDER THE DOMINION CONTROL OF THE ASS ESSEE-COMPANY AND WERE UTILIZED FOR ITS BUSINESS PURPOSE. THE CON TENTION OF THE ASSESSEE IS THAT THE VEHICLES WERE UTILIZED FOR BUS INESS PURPOSE AND THE ASSESSEE-COMPANY HAS SHOWN IT IN BLOCK OF ASSET S. WE FIND THAT THIS CONTENTION OF THE ASSESSEE IS NOT CONSIDERED B Y THE AUTHORITIES BELOW IN THE LIGHT OF THE RATIO LAID BY HON'BLE SUP REME COURT RENDERED IN THE CASE OF MYSORE MINERALS LTD. (SUPRA ). RESPECTFULLY FOLLOWING THE RATIO LAID BY THE HON'BLE SUPREME COU RT IN THE CASE OF MYSORE MINERALS LTD. (SUPRA) WE ALLOW THIS GROUND O F ASSESSEE'S APPEAL AND DIRECT THE ASSESSING OFFICER TO DELETE T HE ADDITION. THIS GROUND OF ASSESSEE'S APPEAL IS ALLOWED. ' 53. WE THEREFORE IN THE GIVEN FACTS AND CIRCUMSTANC ES OF THE CASE AND RESPECTFULLY FOLLOWING THE JUDGMENTS REFERRED F IND NO INCONSISTENCY IN THE FINDING OF LD. CIT(A) ALLOWING THE CLAIM OF DEPRECIATION AND INSURANCE EXPENSES ON MOTOR CARS H ELD IN THE NAME OF DIRECTORS. ACCORDINGLY GROUND NO.1 RAISED BY THE REVENUE IN APPEALS FOR ASSESSMENT YEAR 2010-11 2011-12 AND 2 012-13 STANDS DISMISSED. KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 48 54. NOW WE TAKE UP THE ISSUE RAISED IN REVENUES AP PEAL CHALLENGES THE LD. CIT(A) FINDING DELETING THE DISALLOWANCE OF BAD DEBT (TRADING LOSS) AT RS.42.20 LACS RS.1.58 LACS AND RS.1 19 85 613/- FOR ASSESSMENT YEARS 2010-11 TO 2012-13 RESPECTIVELY. 55. BRIEF FACTS RELATING TO THIS ISSUE ARE THAT DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEARS 2010-11 TO 2012-13 LD. A.O OBSERVED THAT THE ASSESSEE HAS CLAIMED BAD DEBTS REPRESENTING THE PRINCIPLE AMOUNT OF COST OF SHARES /STOCK TRANSACTION ON EACH DEFAULTING CLIENTS. IT WAS CONT ENDED BY THE ASSESSEE THAT THE ALLEGED BAD DEBTOR IF NOT ALLOWAB LE AS BAD DEBTS U/S 36(2)(VII) OF THE ACT THE SAID AMOUNT MAY BE A LLOWED AS TRADING LOSS. HOWEVER LD. A.O WAS NOT SATISFIED AND DENIED THE BENEFIT U/S 36(2) AND ALSO DID NOT ALLOWED IT AS A BUSINESS LOS S. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND SUC CEEDED. NOW THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 56. LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY ARGU ED SUPPORTING THE ORDER OF LD. A.O. KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 49 57. PER CONTRA LD. COUNSEL FOR THE ASSESSEE RELYING ON THE FINDING OF LD. CIT(A) ALSO SUBMITTED THAT THE ISSUE IS SQUAREL Y COVERED AGAINST THE REVENUE BY THE DECISION OF CO-ORDINATE BENCH IN ASSESSEES OWN CASE VIDE ITA NO.1577/AHD/2012 ORDER DATED 22.01.20 16. 58. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. REVENUE IS AGGRIEVED WITH THE FINDING O F LD. CIT(A) DELETING THE DISALLOWANCE OF BAD DEBTS CLAIMED BY T HE ASSESSEE ALLOWING IT AS TRADING LOSS. WE OBSERVE THAT LD. C IT(A) ALLOWED THE ASSESSEES CLAIM RELYING ON THE DECISION OF CO-ORDI NATE BENCH RENDERED IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10 VIDE ITA NO.1577/AHD/2012 ORDER DATED 22.01.2016 OBSERVI NG AS FOLLOWS; GROUND NO. 2 RELATES TO THE DELETION OF THE ADDITI ON OF RS. 2 09 83 221/- ON ACCOUNT OF BAD DEBTS. ASSESSEE WAS ASKED TO JUSTIFY ITS CLAIM. ASSESSEE FILED NECESSARY DETAILS . THE DETAILS/EXPLANATION FILED BY THE ASSESSEE DID NOT F IND FAVOUR WITH THE A.O WHO WAS OF THE FIRM T BELIEF THAT CONDITION LAID DOWN U/S 36(2) OF THE ACT HAS NOT BEEN SPECIFIED. 9. ASSESSEE CARRIED THE MATTER BEFORE THE ID. CIT( A) AND REITERATED ITS CLAIM OF BAD DEBT. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS AND DRAWING SUPPORT FROM THE DECISION OF HON'BLE DE LHI HIGH COURT IN THE CASE OF BONANZA PORTFOLIO LTD. 320 ITR 178 A ND ALSO RELYING UPON THE DECISION OF THE TRIBUNAL AHMEDABAD BENCH IN THE CASE KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 50 RAMESHCHANDRA D. CHOKSHI IN ITA NO. 1015/AHD/08 TH E ID. CIT(A) DELETED THE ADDITIONS. 10. AGGRIEVED BY THIS THE REVENUE IS BEFORE US. THE D.R. COULD NOT BRING ANY DISTINGUISHING DECISION IN FAVOUR OF THE REVENUE. WE FIND THAT AN IDENTICAL ISSUE WAS CONSIDERED BY THE TRIBU NAL IN ASSESSEE'S OWN CASE IN A.Y. 2008-09. IN ITA NOS. 2754 & 2884/AHD/2011 THE RELEVANT FINDINGS OF THE TRIBUNAL ARE GIVEN ON PARA 4 OF ITS ORDER. 11. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH WE CONFIRMED THE FINDINGS OF THE ID. CIT(A). THIS GROU ND IS ALSO DISMISSED. 59. WE THEREFORE IN THE GIVEN FACTS AND CIRCUMSTA NCES OF THE CASE AND RESPECTFULLY FOLLOWING THE DECISION OF THE CO-O RDINATE BENCH AND ALSO OBSERVING THAT FACTS ARE SIMILAR TO THOSE FOR ASSESSMENT YEARS 2010-11 2011-12 AND 2012-13 FIND NO REASON TO INTE RFERE IN THE FINDING OF LD. CIT(A) DELETING THE DISALLOWANCE OF BAD DEBTS (TREATING LOSS) AT RS. RS.42.20 LACS RS.1.58 LACS AND RS.1 19 85 613/-. GROUND NO.3 OF THE REVENUES APPEAL FOR ASSESSMENT YEARS 2010-11 TO 2012-13 STANDS DISMISSED. 60. NOW WE TAKE UP REVENUES NEXT GRIEVANCE RAISE D FOR ASSESSMENT YEARS 2010-11 2011-12 AND 2012-13 CHALLENGING THE FINDING OF LD. CIT(A) DELETING THE ADDITION MADE U/S 40(A)(IA) OF THE ACT MADE ON PAYMENT OF V-SAT CHARGES/ LEASE LINE CHARGES/NSDL C HARGES AT RS. KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 51 7.89 RS.2.68 LACS AND RS.5.41 LACS RESPECTIVELY. 61. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE SU BMITTED THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY T HE DECISION OF THE CO-ORDINATE TRIBUNAL IN ASSESSEES OWN CASE FOR ASS ESSMENT YEAR 2009-10 VIDE ITA NO.1577/AHD/2012 ORDER DATED 22.01 .2016. 62. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE VE HEMENTLY ARGUED SUPPORTING THE ORDER OF LD. A.O BUT COULD NOT CONTR OVERT THE SUBMISSION MADE BY THE LD. COUNSEL FOR THE ASSESSEE . 63. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED T HE RECORDS PLACED BEFORE US. REVENUE HAS CHALLENGED THE DELETION OF DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT FOR NON DEDUCTION/SHORT DE DUCTION OF TAX AT SOURCE ON THE PAYMENT OF V-SAT CHARGES/ LEASE LINE CHARGES/NSDL CHARGES. WE FIND THAT SIMILAR ISSUE WAS ADJUDICATE D BY THE CO- ORDINATE BENCH IN ASSESSEES OWN CASE FOR ASSESSMEN T YEAR 2009-10 AND HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY T HE TRIBUNAL OBSERVING AS FOLLOWS:- 5. THE FIRST GROUND RELATES TO THE DELETION OF THE ADD ITION MADE ON PROPORTIONATE BASIS U/S 40(A)(IA) OF THE ACT. A PERUSAL OF THE KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 52 ASSESSMENT ORDER SHOW THAT THIS ADDITION HAS BEEN M ADE ON ACCOUNT OF VSAT EXPENSES AND LEASE LINE CHARGES INCURRED BY TH E ASSESSEE DURING THE YEAR ON WHICH TDS WAS MADE AS PER THE PROVISION S OF SECTION 194C AND 194J OF THE ACT. THE A.O WAS OF THE FIRM BELIEF THAT THE RELEVANT PROVISION APPLICABLE ON THE PAYMENTS MADE BY THE AS SESSEE ATTRACT SECTION 1941 OF THE ACT. THE A.O ACCORDINGLY DISALL OWED RS. 7 49 455/- BEING VSAT CHARGES AND RS. 72 500/- BEING LEASE LIN E EXPENSES. ASSESSE-E CARRIED THE MATTER BEFORE THE ID. CIT(A) AND THE ID. CIT(A) GAVE PARTIAL RELIEF TO THE ASSESSEE. DIRECTING THE A.O T O GIVE PROPORTIONATE BENEFIT OF THE TDS ALREADY DEDUCTED AND PAID IN TIM E AND DISALLOWED THE BALANCE AMOUNT. 6.REVENUE IS BEFORE US AGAINST THIS DIRECTION OF TH E ID. CIT(A) AND THE ASSESSEE IS ALSO IN APPEAL VIDE ITA NO. 1569/AHD/2012. WE FIND THAT AN IDENTICAL ISSUE WAS CONSIDERED BY THE TRIBUNAL I N ASSESSEE'S OWN CASE IN A.Y. 2008-09 VIDE ORDER DATED 04.09.2015 IN ITA NO. 2754 & 2884/AHD/2011. THE FINDINGS OF THE TRIBUNAL CAN BE FOUND AT PARA 3 OF ITS ORDER. WHEREIN IT HAS FOLLOWED THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF PRAYAS ENG INEERING LTD. IN TAX APPEAL NO. 1237 OF 2014 DATED 17.11.2014 AND ALSO R ELIED UPON THE DECISION OF THE HON'BLE HIGH COURT OF CALCUTTA IN T HE CASE OF S.K. TEKRIWAL 361 ITR 432. 7.RESPECTFULLY FOLLOWING THE DECISION OF THE CO-OR DINATE BENCH WE SET ASIDE THE FINDINGS OF THE ID. CIT(A) AND DIRECT THE AO TO DELETE THE IMPUGNED DISALLOWANCE. FIRST GROUND OF REVENUE'S AP PEAL IS DISMISSED AND THAT OF ASSESSEE'S APPEAL IS ALLOWED. KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 53 64. IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CAS E AND RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH WE CONFIRM THE FINDINGS OF LD. CIT(A). IN THE RESULT THE GROUNDS NO. 5 & 4 RAISED BY THE REVENUE FOR ASSESSMENT YEARS 2010-1 1 2011-12 AND 2012-13 IS DISMISSED. 65. NOW WE TAKE UP COMMON ISSUE RAISED IN REVENUES APPEAL CHALLENGING THE DELETION OF DISALLOWANCE U/S 40(A) (IA) OF THE ACT ON SUB-BROKERAGE/COMMISSION AT RS.52.16 LACS RS.82.11 LACS FOR ASSESSMENT YEARS 2010-11 & 2011-12 RESPECTIVELY. 66. BRIEF FACTS OF THE CASE ARE THAT SUB-BROKERAGE/ COMMISSION FOR IPO WAS PAID BY THE ASSESSEE WITHOUT DEDUCTION OF T AX AT SOURCE U/S 194H OF THE ACT. LD. A.O. WAS OF THE VIEW THAT INIT IAL PUBLIC OFFER (IPO) CANNOT BE REGARDED AS TRANSACTION IN SECURITI ES AND THE APPLICATION MADE FOR IPO CANNOT BE REGARDED AS SECU RITIES WITHIN THE MEANING OF SECTION 2(H) OF SECURITIES CONTRACT (REG ULATION) ACT 1956 TILL THE SHARES ARE ALLOTTED AND DELIVERED TO THE P ERSON AND ACCORDINGLY MADE DISALLOWANCE U/S 40(A)(IA) AT RS.5 2.16 LACS AND RS.82.11 LACS FOR ASSESSMENT YEAR 2010-11 AND2012-1 3RESPECTIVELY. ASSESSEE SUCCEEDED IN APPEAL BEFORE LD. CIT(A). NO W REVENUE IS IN KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 54 APPEAL BEFORE THE TRIBUNAL. 67. LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY ARGU ED SUPPORTING THE ORDERS OF LD. A.O. 68. PER CONTRA LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION OF CO-ORDINATE BENCH DELHI IN THE CASE OF ITO V/S MITTAL INVESTMENT & CO (2013)33 TAXMANN.COM 52 (DEL.TRIB.) AND ALSO ON THE FINDING OF LD. CIT(A). 69. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. REVENUE IS AGGRIEVED WITH THE FINDING OF LD. CIT(A) DELETING THE DISALLOWANCE MADE U/S 40(A)(AI) OF THE ACT FOR NON DEDUCTION OF TAX AT SOURCE U/S 194H ON THE PAYMENT OF SUB- BROKERAGE/COMMISSION ON THE IPO. WE OBSERVE THAT LD . CIT(A) DELETED THE DISALLOWANCE GIVING FOLLOWING FINDINGS: - 10.4. I HAVE CONSIDERED THE FACTS OF THE MATTER. S ECTION 194H DEALS WITH DEDUCTION OF TAX ON COMMISSION OR BROKERAGE. CLAUSE (I) OF THE EXPLANATION BELOW THE SECTION DEFINES COMMISSION OR BROKERAGE. ACCORDING TO THE SAID CLAUSE ANY PAYMENT IN RELATION TO ANY TRANSACTION R ELATING TO SECURITIES IS EXCLUDED FOR THE PURPOSES OF THE SAID SECTION. CLAU SE (III) OF THE EXPLANATION STATES THAT THE EXPRESSION 'SECURITIES' SHALL HAVE THE MEANING ASSIGNED TO IT IN CLAUSE (H) OF SECTION 2 OF THE SECURITIES CONTRA CTS (REGULATION) ACT 1956. IN ACCORDANCE WITH THE SAID ACT SHARES ARE ALSO SEC URITIES. EVEN ACCEPTING KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 55 THE OBSERVATION OF THE A.O. THAT THE SHARES BECOME SECURITIES ONLY ON ALLOTMENT AND NOT AT THE TIME OF MAKING APPLICATION IT CANNOT BE SAID THAT THE SUB-BROKERAGE PAID WAS NOT IN RELATION TO THE S HARES. THE RECEIPT AS WELL AS PAYMENT OF BROKERAGE IN CONNECTION WITH THE IPO TAKES PLACE ONLY AFTER THE ALLOTMENT OF THE SHARES. THE QUANTIFICATION OF THE BROKERAGE IS ALSO WITH REFERENCE TO THE ACTUAL ALLOTMENT OF SHARES AND TAK ES PLACE AFTER THE ALLOCATION OF SHARES. AS SEEN FROM THE CHART SUBMIT TED BY THE A.R. IT IS SEEN THAT BROKERAGE WAS RECEIVED BY THE APPELLANT FROM T HREE WEEKS TO 9 MONTHS AFTER THE IPO ALLOTMENT DATE AND THE BROKERAGE RECE IVED WAS RANGING BETWEEN 0.075 AND 0.60. THEREFORE I AM NOT IN AGRE EMENT WITH THE FINDING OF THE A.O. THAT THE PAYMENT OF SUB-BROKERAGE WAS N OT IN CONNECTION WITH THE SECURITIES. I AM OF THE VIEW THAT APPELLANT WAS NOT LIABLE TO DEDUCT TAX ON THE IMPUGNED SUM AND THEREFORE THE PROVISIONS OF SE CTION 40(A)(IA) ARE NOT ATTRACTED. IMPUGNED DISALLOWANCE IS DELETED. THIS G ROUND OF APPEAL IS ALLOWED. 70. WE ALSO FIND THAT SIMILAR ISSUE CAME UP BEFORE THE CO-ORDINATE BENCH DELHI IN THE CASE OF ITO V/S MITTAL INVESTMENT & CO APPEAL NO.1951 (DELHI) OF 2012 ORDER DATED 7.12.2012 (2013 ) 33 TAXMANN.COM 52 (DELHI-TRIB.) WHEREIN THE TRIBUNAL OBSERVED AS UNDER:- 12. LD. COUNSEL REITERATED THE SUBMISSIONS MADE BEF ORE LD. CIT(A) AND SUBMITTED THAT IN VIEW OF THE PROVISIONS OF EXPLANA TION (I) TO SECTION 194H READ WITH SECTION 2(H) OF THE SECURITIES CONTRACTS (REGULATION) ACT 1956 NO TDS WAS REQUIRED TO BE MADE ON SERVICES RE LATED TO SECURITY TRANSACTION. IN THIS REGARD LD. COUNSEL ALSO REFER RED TO PAGE 106 OF PAPER BOOK TO DEMONSTRATE THAT HDFC WAS ALSO NOT DEDUCTIN G TDS IN RESPECT OF KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 56 COMMISSION PAID RELATING TO MUTUAL FUNDS. IN THE AL TERNATIVE LD. COUNSEL RELIED ON THE DECISION OF SPL. BENCH IN THE CASE OF MERILYN SHIPPING & TRANSPORTERS VS. ADDL. CIT 136 ITD 23 (SB) AND SUB MITTED THAT IN VIEW OF THE MAJORITY VIEW OF SPL. BENCH SINCE NOTHING WAS PAYABLE AT THE YEAR END THEREFORE NO TDS WAS REQUIRED TO BE MADE. 13. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORD OF THE CASE. 14. THE ONLY POINT ON WHICH LD. CIT(A)'S ORDER HAS BEEN ASSAILED IS THAT THE TDS WAS NOT MADE IN TERMS OF SECTION 194H . SECTION 194H DEALS WITH PROVISIONS RELATING TO TDS ON COMMISSION OR BROKERA GE. COMMISSION OR BROKERAGE HAS BEEN DEFINED IN EXPLANATION (I) AS UN DER: - 'EXPLANATION (I) 'COMMISSION OR BROKERAGE' INCLUDES ANY PAYMENT RECEIVED OR RECEIVABLE DIRECTLY OR INDIRECTLY BY A PERSON ACT ING ON BEHALF OF ANOTHER PERSON FOR SERVICES RENDERED (NOT BEING PROFESSIONA L SERVICES) OR FOR ANY SERVICES IN THE COURSE OF BUYING OR SELLING OF GOOD S OR IN RELATION TO ANY TRANSACTION RELATING TO ANY ASSET VALUATION ARTICL E OR THING NOT BEING SECURITIES;' 15. A BARE PERUSAL OF THE ABOVE EXPLANATION CLEARLY SHOWS THAT IF THE COMMISSION OR BROKERAGE HAS BEEN PAID BY A PERSON A CTING ON BEHALF OF ANOTHER PERSON FOR SERVICES RENDERED IN CONNECTION WITH SECURITIES THEN THE SAID COMMISSION OR BROKERAGE IS OUTSIDE THE PURVIEW OF SECTION 194H . CLAUSE (H) OF SUB-SECTION (2) OF THE SECURITIES CONTRACT ACT READS AS UNDER: - 'CLAUSE (H) OF SECTION 2 OF THE SECURITIES CONTRACTS (REGULATION) ACT 1956 (42 OF 1956) DEFINES SECURITIES AS UNDER: (H) 'SECURITIES' INCLUDE - (I) SHARES SCRIPTS STOCKS BONDS DEBENTURES DEB ENTURE STOCK OR OTHER MARKETABLE SECURITIES OF A LIKE NATURE IN OR OF ANY INCORPORATED COMPANY OR OTHER BODY CORPORATE; KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 57 (IA) DERIVATIVE; (IB) UNITS OR ANY OTHER INSTRUMENT ISSUED BY ANY CO LLECTIVE INVESTMENT SCHEME TO THE INVESTORS IN SUCH SCHEMES; (IC) SECURITY RECEIPT AS DEFINED IN CLAUSE (ZG) OF SECTION 2 OF THE SECURITIZATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT 2002; (ID) UNITS OR ANY OTHER SUCH INSTRUMENT ISSUED TO T HE INVESTORS UNDER ANY MUTUAL FUND SCHEME; (IE) ANY CERTIFICATE OR INSTRUMENT (BY WHATEVER NAM E CALLED) ISSUED TO AN INVESTOR BY ANY ISSUER BEING A SPECIAL PURPOSE DIST INCT ENTITY WHICH POSSESSES ANY DEBT OR RECEIVABLE INCLUDING MORTGAG E DEBT ASSIGNED TO SUCH ENTITY AND ACKNOWLEDGING BENEFICIAL INTEREST OF SU CH INVESTOR IN SUCH DEBT OR RECEIVABLE INCLUDING MORTGAGE DEBT AS THE CASE MAY BE; (II) GOVERNMENT SECURITIES; (IIA) SUCH OTHER INSTRUMENTS AS MAY BE DECLARED BY THE CENTRAL GOVERNMENT TO BE SECURITIES; AND (III) RIGHTS OR INTEREST IN SECURITIES;' 16. THUS IT IS EVIDENT THAT MUTUAL FUNDS ARE OUTSI DE THE AMBIT OF THE TERM 'SECURITIES'. IN THE PRESENT CASE ADMITTEDLY THE A SSESSEE WAS AGENT OF POST OFFICE SCHEMES PPF RBI BONDS LIC MUTUAL FUNDS E TC. AND THEREFORE THE COMMISSION PAID BY IT TO OTHER PERSONS WHOSE SERVIC ES WERE TAKEN FOR EARNING COMMISSION WAS ALSO OUTSIDE THE PURVIEW OF PROVISIONS OF SECTION 194H . THE DEFINITION USES THE TERM 'IN RELATION TO' WHI CH CLEARLY IMPLIES THAT WHENEVER ANY COMMISSION OR BROKERAGE IS PAID IN REL ATION TO SECURITIES THEN IT WOULD BE OUTSIDE THE AMBIT OF SECTION 194H . ADMITTEDLY THE ASSESSEE HAD PAID SUB-BROKERAGE IN RELATION TO SECURITIES (MUTUA L FUND) AND THEREFORE IT WAS OUTSIDE THE AMBIT OF SECTION 194H . WE THEREFORE DO NOT FIND ANY REASON WITH THE ORDER OF LD. CIT(A). 17. IN THE RESULT THE DEPARTMENT'S APPEAL IS DISMI SSED. KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 58 71. WE FIND THAT THE ISSUE IS SQUARELY COVERED IN A SSESSEES FAVOUR BY THE DECISION OF THE CO-ORDINATE BENCH REFERRED HERE IN ABOVE. LD. DEPARTMENTAL REPRESENTATIVE FAILED TO BRING ANY CON TRARY JUDGMENT IN FAVOUR OF THE REVENUE. WE THEREFORE RESPECTFULL Y FOLLOWING THE DECISION OF CO-ORDINATE BENCH IN THE CASE OF ITO V/S MITTAL INVESTMENT & CO (SUPRA) FIND NO INFIRMITY IN THE FINDING OF LD. CIT(A). ACCORDINGLY GROUND NO. 6& 5 OF REVENUES APPEAL FOR ASSESSMENT YEAR 2010-11 & 2011-12 RESPECTIVELY STANDS DISMISSE D. 72. NOW WE TAKE UP NEXT COMMON ISSUE FOR ASSESSMENT YEAR 2010- 11 & 2011-12 RAISED AT THE INSTANCE OF THE REVENUE CHALLENGING THE FINDING OF LD. CIT(A) DELETING THE ADDITION TO BOOK PROFIT U/S 115JB OF THE ACT AT RS.45.91 LACS & RS.45.59 LACS RESPECTI VELY. 73. BRIEF FACTS RELATING TO THIS GROUND ARE THAT T HE LD. A.O ADDED DISALLOWANCE MADE U/S 14A OF THE ACT TO THE BOOK PR OFIT FOR THE PURPOSE OF COMPUTING TAX U/S 115JB OF THE ACT. IT WAS CONTENDED BY THE ASSESSEE THAT DISALLOWANCE U/S 14A OF THE ACT C ANNOT BE ADDED TO BOOK PROFITS SINCE CLAUSE(F) OF EXPLANATION (1) OF SECTION 115JB HAS NO APPLICATION. WHEN THE MATTER CAME UP BEFORE LD. CIT(A) ASSESSEE SUCCEEDED. NOW REVENUE IS IN APPEAL BEFORE THE TRI BUNAL RAISING KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 59 COMMON ISSUE FOR ASSESSMENT YEAR 2010-11 AND 2011-1 2. 74. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE ISSUE STANDS SQUARELY COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF CO-ORDINATE BENCH AHMEDABAD IN THE CASE OF DCIT V/ S TORRENT CABLE LIMITED ITA NO.2584/AHD/2012 ORDER DATED 11.6 .2018. RELIANCE WAS ALSO PLACED ON THE DECISION OF SPECIAL BENCH DELHI TRIBUNAL IN THE CASE OF ACIT V/S VINEET INVESTMENT PVT. LTD & ANR. 165 ITD 27 (DELHI). 75. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE VEH EMENTLY ARGUED SUPPORTING THE ORDER OF LD. A.O. 76. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. REVENUE HAS CHALLENGED THE FINDING OF LD . CIT(A) DELETING OF DISALLOWANCE MADE U/S 14A TO BOOK PROFIT U/S 115 JB OF THE ACT FOR ASSESSMENT YEAR 2010-11 AND 2011-12 AT RS.45.91 LAC S AND RS.45.59 LACS. WE OBSERVE THAT THE ISSUED RAISED B EFORE US IS SQUARELY COVERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE AHMEDABAD BENCH IN THE CASE OF DCIT V/S TORRENT CABLE LIMITED (SUPRA) WHICH HAS FOLLOWED JU DGMENT OF SPECIAL KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 60 BENCH IN THE CASE OF ACIT V/S VINEET INVESTMENT (P) LTD AS WELL AS ARVIND LTD V/S DCIT ITA NO.1816/AHD/2011 OBSERVING AS FOLLOWS; 3. WHEN THE MATTER WAS CALLED FOR HEARING THE LEAR NED AR FOR THE ASSESSEE POINTED OUT IN THE REVENUES APPEAL THAT GROUND NO. 1 RELATES TO ADJUSTMENT ON ACCOUNT OF DISALLOWANCES MADE U/S 14A (UNDER THE NORMAL PROVISIONS OF THE ACT) FOR THE PURPOSE OF SPECIAL PROVISIONS OF S ECTION 115JB OF THE ACT CONCERNING TAXABILITY ON THE BASIS OF BOOK PROFITS. THE LEARNED AR POINTED OUT THAT THE ISSUE IS NO LONGER RES INTEGRA AND IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE SPECIAL BENCH IN TH E CASE OF ACIT & ANR. VS. VINEET INVESTMENT PVT. LTD & ANR. 165 ITD 27 (DELHI )(SB). 3.1 WE FIND THAT THE ISSUE IS SQUARELY COVERED IN F AVOUR OF THE ASSESSEE. OUR VIEW IS SUPPORTED BY THE DECISION OF THE CO-ORDINAT E BENCH OF TRIBUNAL IN CASE OF ARVIND LTD. VS. DCIT IN ITA NO.1816/AHD/2011 WHERE THE DECISIONS OF THE HON'BLE GUJARAT HIGH COURT AND DELHI HIGH CO URT WERE ALSO REFERRED FOR DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE. T HE RELEVANT OPERATIVE PARA OF THE DECISION OF THE CO-ORDINATE BENCH IN ARVIND LTD. (SUPRA) IS REPRODUCED HEREUNDER: '6. WE NOTICE THAT ISSUE IS EVOLVED AND DEVELOPED B Y CERTAIN JUDICIAL PRECEDENTS. WE FIND AT THE FIRST INSTANCE THAT THE IDENTICAL ISSUE CAME UP FOR CONSIDERATION BEFORE THE HON'BLE GUJARAT HIG H COURT IN THE CASE OF ALEMBIC LTD. (SUPRA) WHERE THE SUBSTANTIAL QUEST ION OF LAW ON THE POINT AS TO WHETHER ADJUSTMENT MADE ON ACCOUNT OF D ISALLOWANCE UNDER S.14A OF THE CAN BE SIMILARLY MADE FOR THE PU RPOSES OF COMPUTATION OF 'BOOK PROFIT' UNDER S.115JB OF THE A CT WAS ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. WE ALSO TAKE NOTE OF DECISION OF THE SPECIAL BENCH RENDERED IN ACIT VS. VIREET INVESTMENT PVT.LTD . & ANR. 165 ITD 27 (DELHI)[SB] WHERE IT WAS HELD THAT THE AO WAS NOT ENTITLED TO TINKER WITH BOOK PR OFITS CONTEMPLATED KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 61 UNDER S.115JB TOWARDS DISALLOWANCE MADE UNDER S.14 A OF THE ACT . WE SIMILARLY FIND THAT JUDGEMENT OF HON'BLE BOMBAY HIGH COURT IN CIT VS. BENGAL FINANCE AND INVESTMENTS PVT. LTD . IN ITA NO.337 OF 2013 ORDER DATED 10/02/2015 ALSO COMPLEMENTS THE ISSUE. THUS SEEN ON THE ANVIL OF THE JUDICIAL FIAT AVAILABLE SQUARELY O N THE ISSUE WE ARE DISPOSED TO ASSIGN MERITS TO THE CONTENTIONS ON BEH ALF OF THE ASSESSEE. AT THIS JUNCTURE WE PAUSE TO NOTE THE CONCERN OF R EVENUE SEEKING TO PLEAD POSSIBLE REDUNDANCY OF CLAUSE(F) TO EXPLANATI ON TO S.115JB IN THE EVENT OF DISAGREEMENT WITH THE ACTION OF AO. WE ARE ALIVE TO SUCH CONCERNS. HOWEVER AS NOTED WE ARE GOVERNED BY THE SUPERIOR WISDOM AVAILABLE IN THIS REGARD. HENCE REMEDY TO R EVENUE IF ANY PERHAPS LIES ELSEWHERE. ACCORDINGLY RESPECTFULLY F OLLOWING THE DECISIONS GOVERNING THE FIELD WE DIRECT THE AO TO DELETE THE ADJUSTMENTS MADE ON ACCOUNT OF ESTIMATED DISALLOWAN CE DETERMINED UNDER S.14 A OF THE ACT WHILE COMPUTING 'BOOK PROFIT' UNDER S.115JB OF THE ACT.' 3.2 IN VIEW OF THE AFORESAID DISCUSSION GROUND NO. 1 OF THE REVENUE'S APPEAL IS DISMISSED. 77. WE OBSERVE THAT LD. DEPARTMENTAL REPRESENTATIVE COULD NOT BRING ON RECORD ANY CONTRARY JUDGMENT TO THE JUDGME NTS REFERRED AND RELIED BY LD. COUNSEL FOR THE ASSESSEE WHICH IN OUR CONSIDERED VIEW ARE SQUARELY APPLICABLE IN FAVOUR OF THE ASSESSEE A ND THUS ARE INCLINED TO MAKE NO INTERFERENCE IN THE FINDING OF LD. CIT(A) AND THE SAME STANDS CONFIRMED. GROUND NO.8 & 7 RAISED IN RE VENUES APPEAL FOR ASSESSMENT YEAR 2010-11 & 2011-12 STANDS DISMIS SED. KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 62 78. NOW WE TAKE UP GROUND NO.9 OF REVENUES APPE AL CHALLENGING THE ON DELETION OF THE ADDITION TO BOOK PROFIT AT R S.1.11 CRORES FOR ASSESSMENT YEAR 2010-11. 79. BRIEF FACTS RELATING TO THIS ISSUE ARE THAT THE ASSESSEE WHILE PREPARING THE COMPUTATION OF INCOME DID NOT INCLUDE SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN FROM SALE O F SHARES OF ADANI ENTERPRISES HOWEVER THE SAME WERE DULY INCOR PORATED IN THE INCOME SHOWN IN THE PROFIT & LOSS ACCOUNT. LD. A.O WAS OF THE VIEW THAT THE ALLEGED AMOUNT OF CAPITAL GAIN NEEDS TO B E ADDED TO THE BOOK PROFIT WHEREAS THE ASSESSEES CONTENTION WAS T HAT THE AMOUNTS ALREADY STANDS INCLUDED IN THE BOOK PROFIT. WHEN TH E MATTER CAME UP BEFORE LD. CIT(A) DIRECTIONS WERE GIVEN TO THE LD. A.O TO VERIFY THE CLAIM OF THE ASSESSEE. NOW THE REVENUE IS IN APPEA L BEFORE THE TRIBUNAL. 80. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. THE ISSUE RELATES TO THE DELETION OF AD DITION OF RS.1.11 CRORES TO THE BOOK PROFIT OF THE SHORT TERM AND LON G TERM CAPITAL GAINS EARNED FROM SALE OF SHARES OF ADANI ENTERPRIS ES. ASSESSEE HAS CLAIMED THAT THE IMPUGNED AMOUNT OF CAPITAL GAIN FO RMS PART OF THE KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 63 INCOME SHOWN IN THE PROFIT & LOSS ACCOUNT PREPARED AS PER THE COMPANIES ACTS. LD. CIT(A) HAS DIRECTED THE LD. A. O TO VERIFY THE CLAIM. WE FAIL TO FIND ANY ERROR IN THE FINDING OF LD. CIT(A) SINCE THE ASSESSEES CLAIM NEEDS TO BE VERIFIED BEFORE MAKING ANY ADDITION TO THE BOOK PROFIT. WE ACCORDINGLY RESTORE THIS ISSUE TO THE FILE OF LD. A.O WHO SHALL VERIFY THE CONTENTIONS OF THE ASSESSEE TH AT THE ALLEGED GAIN OF RS. 1.11 CRORES FORMS PART OF THE INCOME SHOWN I N THE PROFIT & LOSS ACCOUNT. ASSESSEE IS DIRECTED TO MAKE NECESSA RY SUBMISSION BEFORE THE LD. A.O WITH THE LEDGER ACCOUNT OF THE C APITAL GAIN ACCOUNT FOR SALE OF SHARES IN ORDER TO SATISFY THE LD. A.O. NEEDLESS TO MENTION THAT PROPER OPPORTUNITY OF BEING HEARD SHOULD BE GI VEN TO THE ASSESSEE. IN THE RESULT GROUND NO.9 OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. 81. IN THE RESULT APPEAL OF THE ASSESSEES APPEAL F OR ASSESSMENT YEARS 2010-11 TO 2014-15 ARE PARTLY ALLOWED AND TH AT OF THE REVENUE FOR ASSESSMENT YEAR 2010-11 IS PARTLY ALLOWED FOR S TATISTICAL PURPOSE AND FOR ASSESSMENT YEARS 2010-11 2011-12 2012-13 AND 2013-14 ARE DISMISSED. KIFS SECURITIES LTD & KHANDWALA INTEGRATED FINANCI AL SERVICES P. LTD ITA NOS.643 2717 2882/AHD/14 786 914/AHD/16 63 1885/AHD/17 & 932/A HD/2014 64 THE ORDER PRONOUNCED IN THE OPEN COURT ON 29.11.20 19. SD/- SD/- ( P.P. BHATT) (MANISH BORAD) PRESIDENT ACCOUNTANT MEMBER / DATED : 29 TH NOVEMBER 2019 /DEV COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR ITAT AHMEDABAD/GUARD FILE. BY ORDER ASSTT.REGISTRAR I.T.A.T. AHMEDABAD