DCIT, Cricle-3(1),, v. Consortium Securities Pvt. Ltd.,,

ITA 684/DEL/2005 | 2001-2002
Pronouncement Date: 23-04-2010 | Result: Partly Allowed

Appeal Details

RSA Number 68420114 RSA 2005
Bench Delhi
Appeal Number ITA 684/DEL/2005
Duration Of Justice 5 year(s) 2 month(s) 12 day(s)
Appellant DCIT, Cricle-3(1),,
Respondent Consortium Securities Pvt. Ltd.,,
Appeal Type Income Tax Appeal
Pronouncement Date 23-04-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted E
Tribunal Order Date 23-04-2010
Date Of Final Hearing 25-01-2010
Next Hearing Date 25-01-2010
Assessment Year 2001-2002
Appeal Filed On 11-02-2005
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH : E NEW DELHI) BEFORE MS. SUSHMA CHOWLA JUDICIAL MEMBER AND SHRI K.D. RANJAN ACCOUNTANT MEMBER ITA NO.75/DEL./2005 (ASSESSMENT YEAR : 2001-02) M/S CONSORTIUM SECURITIES (P.) LTD. VS. ACIT CIR CLE 3(1) 36 SANT NAGAR EAST OF KAILASH NEW DELHI. NEW DELHI. (PAN/GIR NO.AAACC3251C) AND ITA NO.684/DEL./2005 (ASSESSMENT YEAR : 2001-02) AFCIT CIRCLE 3(1) VS. M/S CONSORTIUM SECURITIES (P.) LTD. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VED JAIN / MS. RANO JAIN ARS REVENUE BY : SHRI RAJIV MEHROTRA CIT (DR) O R D E R PER K. D. RANAJAN AM THESE APPEALS BY THE ASSESSEE AND REVENUE ARISE OUT OF THE ORDER OF CIT(A)-IV NEW DELHI. THESE APPEALS WERE HEARD TOGETHER AND F OR THE SAKE OF CONVENIENCE ARE DISPOSED OF BY THIS COMMON ORDER. 2. THE FIRST ISSUE FOR CONSIDERATION WHICH IS COMMO N IN BOTH THE APPEALS RELATES TO SUSTAINING THE DISALLOWANCE OF BAD DEBTS WRITTEN OFF DURING THE YEAR CONSIDERATION. THE RELEVANT GROUND IN ASSESSEE'S APPEAL IS REPRODUCED AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD.CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN SUSTAINING THE DISALLOWANCE OF A SUM OF RS.2 58761 OUT OF THE TOTAL DISALLOWANCE OF RS.4 71 67 416/- M ADE BY THE AO ON ACCOUNT OF AMOUNT WRITTEN OFF DURING THE YEAR DESPI TE THE FACT THAT THE AMOUNT REPRESENTS THE LOSS INCURRED DURING THE COUR SE OF BUSINESS AND AS ITA NO.75/DEL./2005 & ITA NO 684/DEL./2005 (AY : 2001-02) 2 SUCH WAS ALLOWABLE UNDER THE ACT WHILE COMPUTING PR OFIT AND GAINS OF BUSINESS OR PROFESSION. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE DURI NG THE YEAR CONSIDERATION HAD WRITTEN OFF THE DEBTS OF RS.4 71 67 416/- WHICH IN CLUDED AN AMOUNT OF RS.4 63 96 608/- DUE FROM M/S PANTHER FINCAP & MANAGEMENT SERVICES L TD. A COMPANY BELONGING TO KETAN PAREKH GROUP. THE AMOUNT DUE WAS ON ACCOUNT OF DIFFERENCE IN THE VALUES BETWEEN THE PURCHASE AND SALE PRICES OF THE SHARES PERTAINING TO SETTLEMENT NUMBERS 20110 20112 & 20113 WHICH RESULTED IN DEBIT BALANC E OF RS.4 63 96 608/-. THE ASSESSEE COMPANY INITIATED CRIMINAL PROCEEDINGS U/S 138 OF N EGOTIABLE INSTRUMENT ACT 1981 AGAINST M/S PANTHERS FINCAP & MANAGEMENT SERVICES L TD. THE PROCEEDINGS INITIATED BY THE ASSESSEE WERE CONTINUING AND NO RECOVERY WAS MA DE TILL THE DATE OF ASSESSMENT. AS REGARDS THE BALANCE AMOUNT WRITTEN OFF THE ASSESSE E SUBMITTED THAT THOSE AMOUNTS RELATED TO DEBIT BALANCES AGAINST 10 MAIN PARTIES. IT WAS EXPLAINED THAT THE ASSESSEE HAD PURCHASED SHARES ON BEHALF OF THOSE PARTIES FOR WHI CH AS PER THE ASSESSEES CLAIM NO PAYMENT WERE MADE TO IT. IT WAS SUBMITTED THAT THE ASSESSEE EFFECTED THE SHARE TRANSACTIONS ON BEHALF OF ITS CLIENTS WHICH RESULTE D IN DEBIT BALANCES IN THEIR NAMES. THE ASSESSEE WAS SUPPOSED TO RECEIVE BROKERAGE OF THOSE PURCHASES AND SALES WHICH WOULD HAVE BEEN A REVENUE RECEIPT HENCE TAXABLE. BUT S INCE NO PAYMENTS WERE RECEIVED FROM THOSE PARTIES FOR SHARE TRANSACTIONS BROKERAGE HAV E ALSO NOT BEEN RECEIVED FROM THOSE PARTIES IN RESPECT OF SUCH PURCHASES. THE ASSESSEE HAD NOT OFFERED BROKERAGE ACCRUED ON THOSE TRANSACTIONS FOR THE PURPOSES OF TAXATION. T HE DEBIT BALANCES AGAINST THE PARTIES REPRESENTED THE AMOUNT DUE TO THE ASSESSEE. IT WAS FURTHER EXPLAINED THAT CREDIT FACILITIES WERE ALLOWED BY THE ASSESSEE TO ITS CLIENTS. HOWEVE R THE AO WAS OF THE VIEW THAT THE CREDIT FACILITIES ALLOWED BY THE ASSESSEE TO ITS CL IENTS WERE CAPITAL IN NATURE. THUS THE AMOUNTS FROM THE CUSTOMERS TO THE ASSESSEE DUE TO N ON-PAYMENT OF ADVANCES/LOANS/CAPITAL WERE NOT ALLOWABLE AS THE CO NDITIONS OF ALLOWABILITY OF BAD DEBTS WERE NOT FULFILLED. THE AO FURTHER NOTED THAT THE ASSESSEE WAS NOT IN THE BUSINESS OF BANKING OR MONEY LENDING AND THEREFORE THE AMOUNT CLAIMED AS BAD DEBTS WOULD NOT PARTAKE THE CHARACTER OF REVENUE RECEIPT WHICH COUL D BE ALLOWED AS BAD DEBT WHEN THE SAME BECAME BAD. THE AO ACCORDINGLY DISALLOWED THE AMOUNT OF RS.4 71 67 416/-. ITA NO.75/DEL./2005 & ITA NO 684/DEL./2005 (AY : 2001-02) 3 4. BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE AO HAD DISALLOWED THE AMOUNT TREATING THE SAME AS CAPITAL RECEIPT. THE AO HAD N OT DISPUTED THE FACTS OF THE CASE. THE ASSESSEE WAS IN THE BUSINESS OF SHARE BROKING AND W AS A REGISTERED MEMBER OF NSE. AS PER THE BYELAWS OF STOCK EXCHANGE ON PURCHASE AND SALE OF SHARES ON BEHALF OF ITS CLIENTS THE ASSESSEE GOT BROKERAGE. THE ASSESSEE FURNISHED THE COMPLETE DETAILS OF THE PARTIES ON WHOSE BEHALF THE PURCHASES AND SALES OF SHARE WERE CARRIED OUT. ALL THOSE PARTIES WERE HAVING RUNNING ACCOUNT WITH THE ASSESSEE. VARIOUS PURCHASES AND SALES WERE AFFECTED ON BEHALF OF CLIENTS FROM TIME TO TIME AND PAYMENTS WE RE RECEIVED FROM THEM. AT ONE PARTICULAR POINT OF TIME THE CLIENT DEFAULTED AND DEBIT BALANCES IN THE ACCOUNT COULD NOT BE RECOVERED. ACCORDINGLY IT WAS PLEADED THAT THE LOSS SUFFERED BY THE ASSESSEE WAS BUSINESS LOSS. THE AO HAD DISALLOWED THE CLAIM OF THE ASSESSEE U/S 36(2) ON THE GROUND THAT THE AMOUNT WRITTEN OFF WERE NOT TAKEN AS INCOM E WHILE COMPUTING THE TOTAL INCOME OF THE ASSESSEE. ACCORDING TO ASSESSEE THIS CONTENTION OF THE AO WAS TOTALLY WRONG. THE ASSESSEE WAS MAKING PURCHASES AND SALES ON BEHALF O F CLIENTS AND WAS TO RECEIVE THE BROKERAGE AT THE OCCURRENCE OF THE TRANSACTION. IT WAS FURTHER SUBMITTED THAT AS PER THE RULES OF STOCK EXCHANGE SALE/PURCHASE COULD BE MAD E ONLY BY A REGISTERED BROKER AND NOT BY ANYBODY ELSE. THE STOCK EXCHANGE DEBITS AND CRE DITS THE ACCOUNT OF BROKER ONLY AND NOT OF THE CLIENT AS THERE IS NOTHING PRIVITY OF CO NTRACT BETWEEN THE CLIENT AND THE STOCK EXCHANGE. THE PRIVITY OF CONTRACT IS BETWEEN THE B ROKER AND THE STOCK EXCHANGE. FURTHER AS PER THE STOCK EXCHANGE THE PURCHASES AND SALES O N BEHALF OF CLIENTS IS THE TURNOVER OF THE BROKER. THEREFORE THE CONDITION OF SECTION 36 (2) HAS BEEN SATISFIED AND DEDUCTION IS ALLOWABLE U/S 36(1)(VII) OF THE ACT. IT WAS ALSO S UBMITTED THAT EVEN OTHERWISE THE LOSS SUFFERED BY THE ASSESSEE IS ALLOWABLE AS DEDUCTION AS THE LOSS HAS OCCURRED DURING THE COURSE OF SHARE TRADING BUSINESS. 5. THE CIT(A) CONSIDERED THE SUBMISSIONS MADE BY TH E ASSESSEE. THE CIT(A) NOTED THAT AO HAD ADMITTED THE FACTS THAT DEBTS WERE IN R ESPECT OF DIFFERENT CLIENTS AND AS SUCH THERE WAS NO DISPUTE REGARDING THE NATURE OF DEBTS AND THE FACT THAT THOSE HAVE ARISEN IN THE COURSE OF BUSINESS. THE GENUINENESS OF THE CLA IM WAS NOT DISPUTED BY THE AO WHEN HE HIMSELF HAD ADMITTED THAT THE AMOUNTS OUTSTANDIN G WERE WRITTEN OFF IN RESPECT OF CLIENTS OF THE ASSESSEE. THE CIT(A) HAS ALSO NOTED THAT ASSESSEE WAS A REGISTERED BROKER ITA NO.75/DEL./2005 & ITA NO 684/DEL./2005 (AY : 2001-02) 4 WHO MADE PURCHASES FOR ITS CLIENTS AND ACCOUNTED F OR THE DIFFERENCE IN THE PURCHASES AND SALES AS BROKERAGE INCOME IN ITS ACCOUNT. THE SYS TEM OF ACCOUNTING WOULD NOT HAVE AFFECTED THE NATURE OF DEBT. PROFIT AND LOSS OF TH E BUSINESS HAS TO BE COMPUTED AFTER DEDUCTING ALL THE EXPENDITURE INCURRED IN EARNING O F INCOME. ACCORDINGLY IF THE ASSESSEE COMPANY HAD SHOWN BROKERAGE INCOME IN ITS P&L A/C THIS WOULD NOT MEAN THAT SALE PROCEEDS HAVE NOT BEEN INCLUDED IN THE PROFIT WHILE COMPUTING ITS INCOME. ACCORDINGLY THE CIT(A) HELD THAT AO WAS NOT JUSTIFIED IN HOLDI NG THAT THE DEBTS DID NOT QUALIFY THE CONDITIONS SPECIFIED U/S 36(2) OF THE ACT. THE CIT (A) FURTHER NOTED THE STOCK EXCHANGE CONSIDERS ALL THE TRANSACTION AS TURNOVER OF THE BR OKER. THEREFORE THE CONDITIONS OF SECTION 36(2)(I) WAS SATISFIED. HENCE THE AMOUNT W AS ALLOWABLE AS DEDUCTION U/S 36(1)(VII) OF THE ACT. THE CIT(A) THEREFORE ALLO WED A SUM OF RS.4 69 08 655/- OUT OF TOTAL DEBT OF RS.4 71 67 416/-. AS REGARDS BALANCE AMOUNT OF RS.2 58 761/- THE CIT(A) WAS OF THE VIEW THAT THIS AMOUNT WAS NOT ON ACCOUNT OF BAD DELIVERY OF SHARES EXCESS BROKERAGE REFUNDED BY THE ASSESSEE STAFF ADVANCE N OT RECOVERED OR MISCELLANEOUS AMOUNT WRITTEN OFF. SINCE THIS AMOUNT DID NOT REPRESENT B AD DEBT AND THEREFORE THE AMOUNTS OF RS.2 58 761/- WAS NOT ELIGIBLE FOR DEDUCTION U/S 36 (2) OF THE ACT. 6. THE ASSESSEE IS AGGRIEVED BY THE SUSTENANCE OF A DDITION OF RS.2 58 761/- AND REVENUE IS AGGRIEVED BY THE DELETION OF ADDITION OF RS.4 69 08 655/- 7. BEFORE US LD.AR OF THE ASSESSEE SUBMITTED THAT THE AMOUNT OF RS.2 58 761/- IS ALLOWABLE AS BAD DEBT IN VIEW OF DECISION OF HONBL E JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. D.B. (INDIA) SECURITIES 318 ITR 26. IT WAS ALSO SUBMITTED THAT EVEN IF IT IS HELD THAT THE SAME IS NOT ALLOWABLE AS BAD DEBT TH E SAME STILL BE ALLOWABLE AS LOSS ARISING IN COURSE OF BUSINESS. IT HAS BEEN FURTHER SUBMITT ED THAT AS PER DECISION OF ITAT IN THE CASE OF MATCHLESS SECURITIES PVT. LTD. IN ITA NO.40 69/DEL./2004 DATED 28.09.2007 EVEN IF A DEDUCTION ON ACCOUNT OF BAD DEBT WAS NOT PERMISSI BLE U/S 36 OR IF THE EXPENDITURE WAS NOT ALLOWABLE U/S 37 THE CLAIM OF BUSINESS LOSS WA S ALLOWABLE U/S 28 OF THE ACT. LD.AR OF THE ASSESSEE ALSO SUBMITTED THAT AS PER THE DECI SION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. BONANZA PORTFOLIO LTD. 226 CTR 468 (DEL.) AMOUNT ACTUALLY WRITTEN OFF AS BAD DEBT CANNOT BE DISALLOWED. HE ALSO PLACED R ELIANCE ON THE FOLLOWING DECISIONS: ITA NO.75/DEL./2005 & ITA NO 684/DEL./2005 (AY : 2001-02) 5 (1) CIT VS. AUTOMETER LTD. 292 ITR 354(DEL.) (2) CIT VS. MORGAN SECURITIES & CREDITS P. LTD. 21 0 ITR 336(DEL.) (3) MATCHLESS SECURITIES LTD. (ITA NO.4069/DEL./200 4) HE ALSO CONTENDED THAT LOSS OCCURRED IN NORMAL COUR SE OF BUSINESS IS ALLOWABLE AS BUSINESS LOSS. HE PLACED RELIANCE ON THE DECISION O F HONBLE SUPREME COURT IN THE CASE OF BADRIDAG DAGGA VS. CIT 34 ITR 10(SC) AND CIT VS. A BDUL RAZAK & CO. 136 ITR 805 AND MATCHLESS SECURITIES (P) LTD. (SUPRA). 8. ON THE OTHER HAND LD. SR. DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. 10. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM OF T HE ASSESSEE ON THE GROUND THAT CONDITIONS FOR WRITING OFF THE BAD DEBTS ENUMERATED IN SECTION 36(2) WERE NOT SATISFIED AS THE ASSESSEE WAS NOT ENGAGED IN THE BUSINESS OF BAN KING OR MONEY LENDING. HOWEVER THE LD. CIT (A) HAS HELD THAT THE CONDITIONS OF SECTION 36(2) WERE SATISFIED. IT IS UNDISPUTED FACT THAT THE ASSESSEE HAD SUFFERED LOSS ON ACCOUNT OF SHARE TRADING ON BEHALF OF OTHERS. IT IS ALSO A FACT THAT BROKERAGE INCOME ON TRANSACTION S WHICH HAS BEEN CLAIMED AS BAD DEBT HAS NOT BEEN ACCOUNTED FOR. THEREFORE THE PROFIT ELEMENT IN RESPECT OF DEBTS WRITTEN OFF HAS NOT ENTERED INTO COMPUTATION OF TOTAL INCOME AN D ACCORDINGLY THE CONDITION SPECIFIED IN SECTION 36(2) HAS NOT BEEN SATISFIED. HOWEVER THE ASSESSEE HAD RAISED A CLAIM BEFORE THE LD. CIT (A) THAT THE LOSS SUFFERED BY THE ASSES SEE WAS BUSINESS LOSS. THE ASSESSING OFFICER HAS NOT EXAMINED THE CASE OF THE ASSESSEE U NDER SECTION 28 OF THE ACT. THE LD. CIT (A) HAS ALSO NOT DISCUSSED AND DECIDED THE CLAI M OF ASSESSEE AS BUSINESS LOSS. THEREFORE IN OUR CONSIDERED OPINION THE MATTER RE QUIRES A FRESH LOOK AS TO WHETHER THE AMOUNT OF RS.4 71 67 460/- REPRESENTS A BUSINESS LO SS IN THE HANDS OF THE ASSESSEE. WE THEREFORE SET ASIDE THE ISSUE TO THE FILE OF THE A O WITH THE DIRECTIONS TO EXAMINE THE ENTIRE CLAIM OF THE ASSESSEE AS TO WHETHER THE AMOUNT REPR ESENTS THE BUSINESS LOSS INCURRED BY THE ASSESSEE IN ORDINARY COURSE OF BUSINESS ACTIVIT IES. THE AO WILL PROVIDE THE ASSESSEE NECESSARY OPPORTUNITY OF BEING HEARD. ITA NO.75/DEL./2005 & ITA NO 684/DEL./2005 (AY : 2001-02) 6 11. THE NEXT ISSUE FOR CONSIDERATION IN ASSESSES A PPEAL RELATES TO LOSS OCCURRED ON ACCOUNT OF TRADING ERRORS IN EXECUTING THE SHARE BR OKING BUSINESS ON BEHALF OF CLIENTS. THE FACTS OF THE CASE IN BRIEF ARE THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE SUFFERED LOSS OF RS.6 23 691/- ON ACCOUNT OF TRADING ERRORS. THE ASSESSEES ARGUMENT BEFORE CIT(A) WAS THAT THOSE TRANSACTIONS WERE CARRIED OUT ON BEHALF OF THE CLIENTS AND AS SUCH THE SAME DID NOT REPRESENT THE LOSS ARISING FROM SA LE/ AND PURCHASE OF SHARES ON HIS OWN ACCOUNT. THE LOSS WAS INCURRED IN THE NORMAL COURS E OF BUSINESS. THEREFORE ASSESSEE WAS FORCED TO SQUARE UP THE RESULTANT LOSS AS BUSIN ESS LOSS. THIS CONTENTION OF THE ASSESSEE WAS REJECTED BY THE CIT(A) ON THE GROUND T HAT THE CONTENTION RAISED BY THE ASSESSEE WAS NOT SUBSTANTIATED BY FILING NECESSARY EVIDENCES. ACCORDINGLY IT COULD NOT BE ACCEPTED THAT THIS LOSS OF RS 6 23 691/- WAS BUSINE SS LOSS AND NOT THE LOSS ON SALE/PURCHASE OF SHARES. HE ACCORDINGLY UPHELD TH E VIEW OF THE AO THAT THE LOSS ARISING FROM BUSINESS OF SALE/PURCHASE OF SHARES WAS COVERE D BY EXPLANATION TO SECTION 73 OF THE ACT AND HENCE THE ADDITION ON ACCOUNT OF LOSS OF RS .6 23 691/- WAS UPHELD. 12. BEFORE US LD.AR OF THE ASSESSEE SUBMITTED THAT LOSS OF RS.6 23 691/- HAS BEEN INCURRED ON ACCOUNT OF TRANSACTIONS CARRIED OUT ON BEHALF OF CLIENTS ONLY AND THEREFORE LOSS INCURRED IS IN THE NORMAL COURSE OF BUSINESS. HE ALSO SUBMITTED THAT SOMETIMES WHILE EXECUTING THE ORDERS ON BEHALF OF CLIENTS AS OCCUR S WHICH IS TO BE BORNE BY THE ASSESSEE. IT WAS ALSO SUBMITTED THAT ALL DETAILS REGARDING LO SSES OF RS.6 23 691/- WERE FILED. THEREFORE PROVISIONS OF EXPLANATION TO SECTION 73 ARE NOT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. HE PLACED RELIANCE ON THE DECISIO NS OF ITAT IN THE CASE OF PARKER SECURITIES LTD. 8 SOT 257(AHM.) AND THE DECISION O F MATCHLESS SECURITIES PVT. LTD. ITA NO.4069/DEL./2004. ON THE OTHER HAND LD.SR.DR SUP PORTED THE ORDER OF THE CIT(A). 13. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE DETAILS FILED IN THE PAPER BOOK PLACED AT PAGES 148-155 WE FIND THAT THE LOSS OF RS.6 23 691/- REPRESENT THE DIFFERENCE BETWEEN THE SALE PRICE AND PURCHASE PRICE OF THE SHARES OF DIFFERENT COMPANIES. THE CONTENTION OF T HE ASSESSEE IS THAT THE TRANSACTIONS HAVE BEEN CARRIED OUT ON BEHALF OF CLIENTS. FROM T HE DETAILS PLACED ON RECORD IT IS NOT KNOWN ON WHOSE BEHALF SHARES WERE PURCHASED. IN FA CT THE DIFFERENCE BETWEEN PURCHASE ITA NO.75/DEL./2005 & ITA NO 684/DEL./2005 (AY : 2001-02) 7 AND SALE PRICE REPRESENT THE LOSS OCCURRED BY THE ASSESSEE. IN THE ABSENCE OF THE NAMES OF THE CLIENTS THESE TRANSACTIONS HAVE TO BE TREATED AS TRANSACTIONS IN SHARES CARRIED ON BY THE ASSESSEE ON ITS OWN ACCOUNT. UNDER EXPLANATION TO SECTION 73 WHERE ANY PART OF BUSINESS OF A COMPANY OTHER THAN A COMPANY WHOSE GROSS TOTAL INCOME CONSISTS MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEAD INTEREST ON SECU RITIES INCOME FORM HOUSE PROPERTY CAPITAL GAINS AND INCOME FORM OTHER SOURCES OR A CO MPANY THE PRINCIPAL BUSINESS OF WHICH IS THE BUSINESS OF THE BANKING OR GRANTING OF LOANS AND ADVANCES CONSISTS IN THE PURCHASE AND SALE OF SHARES OF THE OTHER COMPANIES SUCH COMPANY SHALL FOR THE PURPOSE OF SECTION 73 BE DEEMED TO BE CARRYING ON SPECULAT ION BUSINESS TO THE EXTENT TO WHICH THE BUSINESS CONSISTS OF THE PURCHASE AND SALE OF SUCH SHARES. IN THE INSTANT CASE THE ASSESSEE COMPANY HAS TRADED IN SHARES OF OTHER COMPANIES. T HERE IS NOTHING ON RECORD TO SUGGEST THAT TRADING IN SHARES WAS CARRIED ON BY THE ASSESS EE ON BEHALF OF ITS CLIENTS. THE CIT(A) HAS RECORDING A FINDING THAT ASSESSEE HAD NOT SUBST ANTIATED THE CONTENTION BY FILING NECESSARY EVIDENCES THAT LOSS WAS INCURRED IN THE N ORMAL COURSE OF BUSINESS WHILE EXECUTING THE ORDERS ON BEHALF OF THE CLIENTS OR TH E LOSS HAS INCURRED DUE TO SOME COMMUNICATION OR TECHNICAL PROBLEMS AROSE OR REFUS AL OF PURCHASE AND SALE OF SHARES BY THE CLIENTS. IN THE ABSENCE OF ANY MATERIAL HAVE B EEN BROUGHT ON RECORD IN OUR CONSIDERED OPINION THE CIT(A) WAS JUSTIFIED IN REJECTING THE CONTENTION OF THE ASSESSEE THAT LOSS WAS INCURRED ON BEHALF OF ITS CLIENTS. AS REGARDS THE DECISION OF AHMEDABAD BENCH IN THE CASE OF PARKER SECURITIES LTD. VS. DCIT (SUPRA) IT WILL NOT BE APPLICABLE TO THE FACTS OF THE CASE AS THE ASSESSEE HAD NOT PROVED WITH NECESSARY EVIDENCE THAT THE LOSS HAS BEEN INCURRED IN SHARE TRANSACTIONS CARRIED OUT ON BEHAL F OF THE CLIENTS OR THE CLIENTS FOR DISOWNING THE TRANSACTIONS. NOTHING HAS BEEN BROUG HT ON RECORD THAT TRANSACTIONS ENTERED INTO BY THE ASSESSEE WERE UNDER COMPULSION. IN THE ABSENCE OF ANY EVIDENCE IT CANNOT BE HELD THAT LOSS HAS BEEN INCURRED ON BEHALF OF ITS C LIENTS. SIMILARLY THE DECISION IN THE CASE OF MATCHLESS SECURITIES PVT. LTD. IS ALSO NOT APPLI CABLE AS ASSESSEE HAS NOT BEEN ABLE TO PROVE HIS CONTENTION WITH NECESSARY EVIDENCES. HEN CE THIS DECISION IS ALSO NOT RELEVANT TO THE FACTS OF THE CASE. ACCORDINGLY GROUND RAIS ED BY THE ASSESSEE IS DISMISSED. 14. GROUND NOS. 2(II) 2(III) 2(IV) 4 6 & 7 RAIS ED BY THE ASSESSEE IN THIS APPEAL ARE NOT PRESSED AND ARE DISMISSED AS SUCH. ITA NO.75/DEL./2005 & ITA NO 684/DEL./2005 (AY : 2001-02) 8 15. THE NEXT ISSUE FOR CONSIDERATION RELATES TO SUS TAINING THE ADDITION OF RS.8 47 250/- ON ACCOUNT OF FOREIGN TRAVELING EXPENSES. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSEE CLAIMED AN EXPENDITURE OF RS.16 29 324/- O N ACCOUNT OF FOREIGN TRAVEL UNDERTAKEN BY VARIOUS PERSONS. THE ASSESSEE COMPAN Y WAS REQUIRED TO FURNISH BILLS AND VOUCHERS OF ALL THE EXPENSES INCURRED ON FOREIGN TR AVEL. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD SUBMITTED AIR TICKETS BILLS OF V ISA EXPENSES AND DOCUMENTS PERTAINING TO FOREIGN CURRENCY. HOWEVER NO BILLS/VOUCHERS WERE SUBMITTED SUPPORTING THE FOREIGN EXCHANGE EXPENSES INCURRED ABROAD ON FOREIGN TOUR. IN THE ABSENCE OF BILLS THE AO WAS OF THE VIEW THAT 40% OF TOTAL EXPENDITURE OF RS .16 29 324/- WAS NOT ALLOWABLE ON ACCOUNT FOREIGN EXCHANGE. HE ALSO FURTHER DISALLOW ED 20% OF BALANCE EXPENSES BEING PERSONAL IN NATURE. 16. ON APPEAL BEFORE THE CIT(A) IT WAS SUBMITTED T HAT ASSESSEE HAD FILED THE EVIDENCES FOR PURCHASE OF AIR TICKET AND FOREIGN CU RRENCY FOR THE VISITS OF ITS EMPLOYEES ABROAD. THE VISIT WAS MADE FOR THE PURPOSE OF BUSI NESS OF THE ASSESSEE COMPANY AND THE EMPLOYEES HAD ALSO TRAVELED ABROAD. THEREFORE THE EXPENDITURE INCURRED ON EMPLOYEES COULD BY NO STRETCH OF IMAGINATION BE CONSIDERED AS PERSONAL EXPENDITURE. THE CIT(A) HOWEVER OBSERVED THAT ASSESSEE DID NOT PRODUCE BIL LS/VOUCHERS SUPPORTING THE FOREIGN EXCHANGE INCURRED ABROAD. THEREFORE IT COULD NOT BE VERIFIED WHETHER ALL THE EXPENSES HAVE BEEN INCURRED FOR THE PURPOSE OF ASSESSEE BUSI NESS. TWO EMPLOYEES OF THE ASSESSEE WHO TRAVELED ABROAD WERE NOT ORDINARY EMPLOYEES. T HEY WERE THE CHAIRMAN SHRI P.S. KALRA AND EXECUTIVE DIRECTOR SHRI GULBIR SINGH BAW EJA. THE ASSESSEE HAD NOT FILED ANY EVIDENCE OF THE EXACT BUSINESS TRANSACTED BY THEM O N VISIT ABROAD. IN VIEW OF THIS AND IN VIEW OF THE EXPENDITURE OF THE BUSINESS EXPENSES IN CURRED IN EARLIER YEARS DISALLOWANCE MADE BY THE AO WAS HELD TO BE FAIR. 17. BEFORE US LD.AR OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD FILED NECESSARY EVIDENCES IN RESPECT OF FOREIGN TRAVEL CONDUCTED BY THE EXECUTIVES OF THE ASSESSEE. THE VISA WAS ISSUED FOR THE PURPOSE OF BUSINESS OF THE COMPANY AND THEREFORE THE EXPENDITURE INCURRED WAS FOR THE PURPOSE OF BUSINES S. THE ASSESSEE HAS INCURRED EXPENDITURE FOR THE PURPOSE OF BUSINESS AND THEREF ORE THE DISALLOWANCE OF 40% OF ITA NO.75/DEL./2005 & ITA NO 684/DEL./2005 (AY : 2001-02) 9 EXPENDITURE COULD NOT BE MADE. AT THE SAME TIME T HE ASSESSEE BEING AN ARTIFICIAL JURIDICAL PERSON DISALLOWANCE COULD NOT BE MADE ON ACCOUNT OF PERSONAL EXPENSES. IT HAS ALSO BEEN SUBMITTED THAT NO AD HOC DISALLOWANCE CAN BE MADE IN RESPECT OF FOREIGN TRAVEL EXPENSES. ON THE OTHER AND LD. SR. DR SUPPORTED TH E ORDER OF AUTHORITIES BELOW. 18. WE HAVE HEARD BOTH THE PARTIES AND HAVE GONE TH ROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE DETAILS FILED IT IS SEEN THAT TH E ASSESSEE HAD FILED DETAILS OF AIR TICKETS VISA EXPENSES AND FOREIGN CURRENCY PURCHASED BUT A S TO HOW THE FOREIGN CURRENCY WAS UTILIZED NO EVIDENCE HAS BEEN FILLED. THE ASSESSE E HAD NOT FURNISHED ANY EVIDENCE BEFORE THE AO AND ALSO BEFORE THE CIT(A). HOWEVER THE FO REIGN TRAVEL UNDERTAKEN BY THE EMPLOYEES OF THE ASSESSEE HAS NOT BEEN DOUBTED AND HAS BEEN UNDERTAKEN FOR THE PURPOSE OF BUSINESS. IN OUR CONSIDERED OPINION THE ASSESSE E WAS REQUIRED TO GIVE THE DETAILS OF EXPENSES INCURRED IN FOREIGN COUNTRY OUT OF FOREIGN EXCHANGE PURCHASED BY THE PERSONS WHO TRAVELED ABROAD. SINCE THE DETAILS HAVE NOT BEE N FURNISHED AND AO HAD MADE DISALLOWANCE ON ESTIMATE BASIS THE MATTER REQUIRES A FRESH LOOK. WE THEREFORE SET ASIDE THE ISSUE TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE THE ISSUE IN DETAIL ABOUT THE EXPENDITURE INCURRED ON FOREIGN TRAVEL EXPENSES IN FOREIGN CURRENCY PURCHASED BY THE CHAIRMAN AND EXECUTIVE DIRECTOR OF THE COMPANY. TH E ASSESSEE WILL FURNISH NECESSARY EVIDENCE TO SUPPORT THE EXPENDITURE INCURRED IN FOR EIGN CURRENCY BY IT. THE AO IS DIRECTED ACCORDINGLY. 19. NOW WE TAKE UP THE REVENUES APPEAL IN WHICH T HE NEXT ISSUE FOR CONSIDERATION RELATES TO DELETING THE ADDITION OF RS.69 84 872 ON ACCOUNT OF SALE OF UNITS OF MUTUAL FUND. THE AO DISALLOWED THE LOSS BY APPLYING THE PROVISIO NS OF SECTION EXPLANATION TO SECTION 73 OF THE ACT. ON APPEAL BEFORE THE CIT(A) IT WAS PLEADED BY THE ASSESSEE THAT LOSS INCURRED ON PURCHASE AND SALE OF UNITS OF MUTUAL FU NDS WAS NOT COVERED BY PROVISIONS OF EXPLANATION TO SECTION 73 OF THE ACT. THE CIT(A) R ELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. APOLLO TYRES P VT. LTD. 255 ITR 273 HELD THAT THE LOSS SUFFERED BY THE ASSESSEE ON PURCHASE AND SALE OF UNITS OF UTI WILL NOT BE COVERED BY EXPLANATION TO SECTION 73 OF THE ACT. HE ACCORDING LY DELETED THE ADDITION. ITA NO.75/DEL./2005 & ITA NO 684/DEL./2005 (AY : 2001-02) 10 20. BEFORE US THE LD.SR.DR SUPPORTED THE ORDER OF T HE AO. ON THE OTHER HAND LD.AR OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). 21. WE HAVE HEARD BOTH THE PARTIES AND GONE THOUGH THE MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE THAT ASSESSEE HAS SUFFERED A LO SS OF RS.69 84 872/- ON ACCOUNT OF PURCHASE AND SALE OF UNITS OF UTI. HONBLE SUPREME COURT IN THE CASE OF APOLLO TYRES LTD.(SUPRA) HAS HELD THAT UNITS OF UTI CANNOT BE TR EATED AS DEEMED SHARES. SINCE THE UNITS OF UTI ARE NOT SHARES THE LOSS SUFFERED BY THE ASS ESSEE ON TRADING IN UNITS OF UTI CANNOT BE TREATED TO BE A SPECULATION LOSS WITHIN THE MEAN ING OF PROVISIONS OF EXPLANATION TO SECTION 73 OF THE ACT. ACCORDINGLY IN OUR CONSIDE RED OPINION CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION. 22. THE NEXT ISSUE FOR CONSIDERATION RELATES TO APP ORTIONING OF THE OVERHEAD EXPENDITURE TOWARDS THE ACTIVITY OF TRADING IN SHAR ES AND FOR EARNING DIVIDEND INCOMES. THE RELEVANT GROUND NOS.3 & 4 ARE REPRODUCED AS UND ER: 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.28 71 825/- MADE ON ACC OUNT OF APPORTIONMENT OVERHEAD EXPENSES TO THE SHARE TRADING BUSINESS. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.15 78 726/- MADE ON ACC OUNT OF APPORTIONMENT OVERHEAD EXPENSES TOWARDS EARNING DIVIDEND INCOME. 23. BRIEF FACTS OF THE CASE ARE THAT THE AO WHILE C OMPUTING THE INCOME NOTED THAT ASSESSEE HAD NOT BIFURCATED THE INCIDENTAL COST FOR TRADING ACTIVITIES IN SHARES. WHEN BROKERAGE OF SHARE TRADING HAD BEEN HELD TO BE DIFF ERENT BUSINESS NAMELY NON-SPECULATIVE AND SPECULATIVE IT WAS IMPERATIVE TO BIFURCATE THE ESTABLISHMENT EXPENSES BETWEEN TWO BUSINESSES IN ORDER TO REACH AT THE CORRECT INCOME. THE AO WORKED ESTABLISHMENT EXPENDITURE INCURRED FOR THE PURPOSES OF BUSINESS AT RS.1 04 94 518/-. HE BIFURCATED THE 10% OF THIS AMOUNT TOWARDS SHARE TRADING AMOUNTING TO RS 10 49 452/-. FURTHER RS 1 00 000/- WAS ASSIGNED TO SHARE TRADING BUSINESS F ROM THE EXPENSES OTHER THAN INTEREST WHICH WERE NOT INCLUDED IN RS1 04 94 518/- BUT THEI R UTILIZATION IN SHARE TRADING BUSINESS COULD NOT BE DENIED. IN ADDITION TO ABOVE THE ASSE SSEE INCURRED 1 88 31 801/-UNDER THE ITA NO.75/DEL./2005 & ITA NO 684/DEL./2005 (AY : 2001-02) 11 HEAD INTEREST. THE AO ASKED THE ASSESSEE TO FILE D ETAILS IN RESPECT OF INTEREST OF RS.1 88 31 801/- TO BE ALLOCATED BETWEEN THE TWO AC TIVITIES BUT THE ASSESSEE COULD NOT GIVE ANY DETAILS. THE AO WORKED OUT THE GROSS PURC HASE OF SHARES IN SHARE TRADING BUSINESS OF RS.20.45 CRORES. HE WAS OF THE OPINION THAT INVESTMENT IN SHARE TRADING COULD NOT BE DENIED FROM BORROWED CAPITAL WHICH WAS INTEREST BEARING. THE AO TAKING THE SAME RATIO AS IN THE CASE OF ESTABLISHMENT EXPE NSES AND ON SAME LOGIC 10% OF INTEREST PAID I.E. RS.1 88 31 801 AMOUNTING TO RS.18 83 180 /- WAS APPORTIONED TOWARDS SHARE TRADING. THUS THE TOTAL EXPENDITURE OF RS.30 32 1 80/-(10 49 452+1 00 000+18 83 180) WAS APPORTIONED TO SPECULATIVE SHARE TRADING BUSINE SS AND ACCORDINGLY DISALLOWED THE SAME. 24. ON APPEAL IT WAS SUBMITTED THAT ASSESSEE HAD M AINTAINED COMPLETE BOOKS OF ACCOUNT AND ALL INFORMATION WAS AVAILABLE THAT THE ASSESSMENT HAS BEEN COMPLETED IN GREAT HASTE WITHOUT ADHERING TO THE PRINCIPLE OF NA TURAL JUSTICE. NO JUSTIFICATION HAS BEEN GIVEN AS TO WHY AO HAS APPLIED THE RATIO FOR DISALL OWING THE EXPENSES TOWARDS SPECULATIVE BUSINESS. THE ASSESSEE WAS ENGAGED IN THE SHARE BROKING BUSINESS AND HAD MADE A TOTAL TURNOVER OF RS.11 315/- CRORES DURING THE YEAR. ALL EXPENDITURE HAVE BEEN INCURRED ONLY FOR THE PURPOSE OF SHARE BROKING BUSI NESS AND THE ACTIVITIES STAFF TELEPHONE STATIONERY HAVE BEEN UTILIZED FOR SHARE BROKING BU SINESS. THE BUSINESS OF SALE PURCHASE OF UNITS SHARES OF PNB GILTS LTD. CONSTITUTE A VER Y SMALL PART OF BUSINESS ACTIVITIES AND DOES NOT REQUIRE EXPENDITURE OF THE MAGNITUDE OF SH ARE BROKING. THE INTEREST PAID BY THE ASSESSEE IS ONLY FOR THE PURPOSE OF MAKING AN FDR W HICH WAS REQUIRED FOR SHARE BROKING BUSINESS WHICH IS STATUTORY REQUIREMENT OF SEBI. T HE ASSESSEE BEING A BROKER IS REQUIRED TO MAINTAIN A MARGIN WITH THE SEBI FOR CARRYING OUT TRANSACTIONS ON BEHALF OF CLIENTS. ACCORDINGLY FROM TIME TO TIME MONEY HAS TO BE BORRO WED FOR MAKING OUT FDRS. AS SUCH THE ENTIRE INTEREST EXPENDITURE IS FOR THE PURPOSE OF SHARE BROKING BUSINESS ONLY. THE ASSESSEE ON ITS PART HAS WORKED OUT THE EXPENDITURE WHICH AT BEST CAN BE ALLOCATED FOR THE VARIOUS ACTIVITIES. DETAILS OF THE SAME ARE AVAILA BLE ON PAGE 145 OF THE PAPER BOOK. ON THE BASIS OF ABOVE IT WAS SUBMITTED THAT THE DISAL LOWANCE MADE BY THE AO WAS NOT JUSTIFIED. ITA NO.75/DEL./2005 & ITA NO 684/DEL./2005 (AY : 2001-02) 12 25. THE CIT(A) EXAMINED THE MATTER IN DETAIL AND AF TER GOING THROUGH THE DETAILS FILED HE WORKED OUT RS.1 80 854/- TO BE ATTRIBUTABLE TO T HE UNITS WHICH WERE NOT SHARES AND THEREFORE THE AMOUNT OF RS.1 80 854/- WAS NOT DISA LLOWABLE. THE CIT(A) HOWEVER DETERMINED THE DISALLOWANCE TO BE MADE AT RS.1 60 3 55/- AS AGAINST RS.30 32 180/- AS UNDER: 5.2.4 I HAVE CONSIDERED THE SUBMISSION MADE BEFORE ME AND PERUSED THE MATERIAL. THE AO HAS APPORTIONED A SUM OF RS.30 32 180 AS EXPENDITURE TOWARDS SHARE TRADING BUSINESS WHICH HE HAS HELD TO BE SPEC ULATIVE. THIS FIGURE OF RS.30 32 180 HAS BEEN WORKED OUT BY THE AO BY APPLY ING A RATE OF 10% OF THE ADMINISTRATIVE AS WELL AS INTEREST EXPENDITURE. AS HELD BY ME ABOVE THAT OUT OF THE TOTAL TRADING LOSS IN SHARES WORKED OUT TO RS.81 30 883 A SUM OF RS.69 84 872 IS NOT SPECULATIVE. ACCORDINGLY THE APPORTIONMENT OF THE EXPENSES HAS TO BE IN RESPECT OF THE BALANCE LOSS OF RS.11 46 011 ONLY W HICH I HAVE HELD TO BE SPECULATIVE AS PER EXPLANATION TO SECTION 73. BY A PPLYING THE FORMULA ADOPTED BY THE AO OF PROPORTIONATE ALLOCATION IN THE RATIO OF SPECULATIVE LOSS TO BROKERAGE INCOME THIS FIGURE OF RS.30 32 180 WILL GET REDUCE D TO RS.4 27 372. HOWEVER AFTER CONSIDERING THE ARGUMENTS OF THE AR AND THE F ACTS PLACED BEFORE ME I AM OF THE OPINION THAT THE ALLOCATION OF THE EXPENDITURE IN THE ABOVE MANNER IS NOT JUSTIFIED. THE EXPENDITURE HAS TO BE ALLOCATED TAK ING INTO CONSIDERATION THE ACTUAL FACTS AND THE QUANTUM OF THE WORK INVOLVED. THE AS SESSEE ITSELF HAS WORKED OUT A SUM OF RS.16 614 - RS.32 419 = RS.49 033 AS ADMINI STRATIVE EXPENDITURE WHICH CAN BE ALLOCATED TOWARDS THE TRADING ACTIVITY IN RE SPECT OF SALE/PURCHASE OF SHARES AS WELL AS UNITS. FURTHER THE ASSESSEE HAS ALSO WO RKED OUT A SUM OF RS.2 19 473 AS THE INTEREST EXPENDITURE OF THE ABOVE ACTIVITY. THIS WORKING HAS BEEN DONE TAKING INTO CONSIDERATION THE AVERAGE EXPENDITURE P ER DAY AND THE NUMBER OF TRANSACTIONS PER DAY. THE INTEREST EXPENDITURE HAS BEEN WORKED OUT ON THE BASIS OF ACTUAL UTILIZATION OF BORROWED FUNDS IN RESPECT OF THE ABOVE ACTIVITY. THE AO ADMITTEDLY HAS NOT GIVEN ANY BASIS FOR APPLYING THE RATE OF 10%. THE WRITTEN SUBMISSION OF THE ASSESSEE WAS ALSO FORWARDED TO TH E AO ALONG WITH THE ABOVE CALCULATIONS. IN THE REMAND REPORT ALSO THE AO HA S NOT STATED THE BASIS AS WELL AS HIS OBJECTIONS TO THE CALCULATION SUBMITTED BY THE ASSESSEE. NOW THE ISSUE IS WHETHER THE METHOD ADOPTED BY THE ASSESSEE CAN BE A CCEPTED. IN THE WORKING ON PAGE 145 AND 157 OF THE PAPER BOO K (COPY ENCLOSED AS ANNEXURE-A TO THIS ORDER) THE APPELLANT WHILE WORK ING OUT THE ALLOCATED RS.16 614 OUT OF ADMINISTRATIVE EXPENSES HAS NOT T AKEN INTO ACCOUNT THE LOSSES ON ACCOUNT OF TRADING ERRORS AND ON ACCOUNT OF OPENING STOCK OF SHARES (DETAILS IN PARA. 5.1.3 ABOVE). SUCH ADDITIONAL ALLOCATION WOU LD COME TO RS.72 703 FOR 365 DAYS. THEREFORE THE EXPENDITURE ALLOCABLE TO SHAR E TRADING BUSINESS WOULD WORK TO RS.16 614 + 72 703 + 32 419 + 2 19 473 = RS.3 41 209 OUT OF WHICH RS.4 315 + 50 + 1 03 562 + 29 589 + 39 906 + 3 432 = RS.1 80 854 WOULD BE ATTRIBUTABLE TO UNITS WHICH ARE NOT SHARES AND THUS WOULD NOT BE ATTRIBUTABLE TO SPECULATIVE ITA NO.75/DEL./2005 & ITA NO 684/DEL./2005 (AY : 2001-02) 13 BUSINESS. THUS EXPENDITURE ALLOCATED TO THE TRADIN G IN SHARES (WHICH IS SPECULATIVE BUSINESS) WOULD BE RS.3 41 209 1 80 8 54 = RS.1 60 355 INSTEAD OF RS.30 32 180 APPORTIONED BY THE A.O. THIS GROUND IS DISPOSED OF ACCORDINGLY. 26. BEFORE US SR.DR SUPPORTED THE ORDER OF AO. ON THE OTHER HAND LD.AR OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). IT HAS BEE N SUBMITTED THAT THE CIT(A) HAS RIGHTLY WORKED OUT APPORTIONMENT OF DISALLOWABLE EXPENSES A ND HENCE REQUIRE NO INTERFERENCE. 27. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE ORDER OF CIT(A) WE FIND THAT HE HAS EXAMI NED THE MATTER AFTER GOING THROUGH THE RELEVANT MATERIAL. IN OUR CONSIDERED OPINION THE APPORTIONMENT OF ADMINISTRATIVE AND INTEREST EXPENDITURE IN RESPECT OF THE SHARE TRADIN G BUSINESS IS JUSTIFIED AND HENCE NO INTERFERENCE IS CALLED FOR. 28. THE LAST ISSUE FOR CONSIDERATION RELATES TO DEL ETING THE ADDITION OF RS.15 78 726/- ON ACCOUNT OF APPORTIONMENT OF OVERHEAD EXPENSES TO WARDS EARNING THE DIVIDEND INCOME. THE ASSESSING OFFICER DISALLOWED THE AMOUNT OF RS.1 7 59 880/- BY DISALLOWING EXPENSES ON THE GROUND THE SAME HAVE BEEN INCURRED ON EARNIN G DIVIDEND INCOME. THE LD. CIT (APPEALS) NOTED THAT THE DIVIDEND INCOME WAS PRIMAR ILY FROM KMMF UNITS [RS.55 98 164/- OUT OF TOTAL DIVIDEND INCOME OF RS. 58 57 269/-]. THE LD. CIT (APPEALS) WORKED OUT ADMINISTRATIVE AND INTEREST CHARGED EXPE NSES ATTRIBUTABLE TO TRADING IN UNITS AT RS.1 80 854/- AS WORKED OUT IN PARA 5.2.4 OF HIS OR DER REPRODUCED AS ABOVE. HE ALSO NOTED THAT THE ACTIVITY OF TRADING IN UNITS AND EARNING D IVIDEND FROM UNIT WAS ONE AND THE SAME ACTIVITY. THEREFORE EXPENSES ATTRIBUTABLE TO EARN ING OF DIVIDEND FROM THE UNITS WERE AT RS.1 80 854/-. HE ACCORDINGLY REDUCED THE DISALLOW ANCE TO RS.1 80 854/- AS AGAINST RS.17 59 780/- MADE BY THE ASSESSING OFFICER. CONS EQUENTLY THE LD. CIT (A) ALLOWED A RELIEF OF RS.15 78 726/- WHICH IS BEING AGITATED BY THE ASSESSEE. 29. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THE LD. CIT (APPEALS) IN PARA 5.2.4 REPRODUCED ABOV E HAS WORKED OUT THE EXPENSES ATTRIBUTABLE TO UNITS AT RS.1 80 854/-. BEFORE US THE LD. SR. DR COULD NOT ADVANCE ANY ARGUMENTS IN SUPPORT OF HIS CONTENTION THAT ALLOCAT ION MADE BY THE LD. CIT (A) WAS NOT ITA NO.75/DEL./2005 & ITA NO 684/DEL./2005 (AY : 2001-02) 14 CORRECT. IN THE ABSENCE OF ANY SUCH MATERIAL HAVIN G BROUGHT ON RECORD IN OUR CONSIDERED OPINION THE LD. CIT (A) WAS JUSTIFIED IN ESTIMATIN G THE EXPENSES ATTRIBUTABLE TO UNITS AT RS.1 80 8564/-. HENCE THE LD. CIT (A) HAS RIGHTLY ALLOWED THE RELIEF TO THE ASSESSEE TO THE EXTENT OF RS.15 78 726/-. 30. IN THE RESULT BOTH THE APPEALS FILED BY THE AS SESSEE AND THE REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON : 23.04.2010. SD/- SD/- (SHUSHMA CHOWLA) ( K. D. RANJAN ) JUDICIAL MEMBER ACCOUNTA NT MEMBER DATED: APRIL 23 2010 . *SKB* COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A)-IV NEW DELHI. 5. THE DR ITAT LOKNAYAK BHAWAN KHAN MARKET NEW DELHI. AR / ITAT ITA NO.75/DEL./2005 & ITA NO 684/DEL./2005 (AY : 2001-02) 15