Pinnacle Brocom P.Ltd, Mumbai vs Assessee

सव ौी जोगींि िसंह, याियक सदःय एवं नरे ि कुमार #ब$लै&या, लेखा सदःय के सम(

BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND

SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER

आयकर अपील सं./I.T.A. No. 6247/Mum/2012 िनधा रण वष / Assessment Year : 2009-10 (िनधा M/s. Pinnacle Brocom Pvt. बनाम The ACIT 10(3), बनाम/ Ltd., Mumbai Vs. 205/206 Marathon Maxima, LBS Road, Mulund (W), Mumbai-400 080 ःथायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AADCP 8584C (अपीलाथ, /Appellant) .. (ू.यथ, / Respondent) अपीलाथ, ओर से/ Appellant by: Shri Mehul Shah

ू.यथ, क0 ओर से/Respondent by: Shri J. Premanand

सुनवाई क0 तार2ख / Date of Hearing :28.01.2015 घोषणा क0 तार2ख /Date of Pronouncement :28.01.2015

आदे श / O R D E R

PER N.K. BILLAIYA, AM:

This appeal by the assessee is preferred against the order of the Ld. CIT(A)-22, Mumbai dt. 6.8.2012 pertaining to assessment year 2009-

10.

2. The assessee has raised 4 substantive grounds of appeal. Ground No. 1 is against the disallowance made u/s. 14A of the Act r.w. Rule 8D.

2 ITA No. 6247/M/2012 3. The assessee is a member of Multi Commodity Exchange. During the year under consideration income from operations were shown at Rs. 3,25,65,994/- on which net profit is computed at Rs. 39,01,789/-. During the course of the assessment proceedings, the Assessing Officer noticed that the assessee has shown dividend income of Rs. 11,565/-. The assessee was asked to explain why disallowance u/s. 14A r.w.Rule 8D should not be made. The assessee filed a detailed reply claiming that it has not incurred any expenditure on earning the said dividend income, further, it has not invested any borrowed funds.

3.1. The submissions of the assessee did not find any favour with the AO who proceeded by applying Rule 8D and computed the disallowance u/s. 14A at Rs. 1,42,894/-. While computing such disallowance, the AO considered the interest on borrowed funds at Rs. 31,09,479/-. Proceeding further, the AO noticed that the assessee has debited its profit and loss account by sum of Rs. 5.05 lakhs, which was one time admission fee paid to M/s. National Spot Exchange Ltd for membership. The assessee was asked to explain why the said payment should not be treated as capital expenditure. The assessee explained that the said payment was made as non-refundable one-time membership fee to M/s. National Spot Exchange Ltd and, hence, claimed as business expenditure. The AO dismissed the claim of the assessee and treated the said expenditure as capital in nature.

4. Aggrieved by these disallowances, the assessee carried the matter before the Ld. CIT(A) but without any success.

5. Before us, the Ld. Counsel for the assessee stated that on a dividend income of Rs. 11,565/-, the AO has disallowed Rs. 1,42,894/-

3 ITA No. 6247/M/2012 which in itself is illogical and erroneous. The Ld. Counsel further pointed out that the assessee was having sufficient own funds for making the investment therefore, there is no question of considering the interest for the purpose of disallowance u/s. 14A of the Act.

6. The Ld. Departmental Representative strongly relied upon the findings of the AO and the Ld. CIT(A).

7. We have carefully perused the orders of the authorities below and the relevant documentary evidences brought on record before us. It is an undisputed fact that the assessee is having own funds at Rs. 1.16 crores and the investment is only Rs. 30.44 lakhs. Thus it can be safely concluded that the investments have come out of own funds. Even the Hon'ble Jurisdictional High Court of Bombay has held in the case of Reliance Utilities and Power Ltd. 313 ITR 340 that where both own funds and loan funds are utilized by the assessee, the presumption is that the investments have come from the own funds. However, at the same time, we cannot deny that no expenditures have been incurred for earning the dividend income. Considering the facts of the case in totality and in the interest of justice and fair play, we direct the AO to restrict the disallowance to Rs. 11,565/- being the amount of dividend received during the year and delete the balance amount. The assessee gets part relief for ground No. 1.

8. Ground No. 2 & 3 are inter-linked. The assessee claimed Rs. 5.05 lakhs being membership fee paid to the M/s. National Spot Exchange Ltd as business expenditure. The Revenue authorities have treated the same as capital expenditure as they were of the opinion that by paying this one- time membership fee, the assessee would be deriving enduring benefit.

4 ITA No. 6247/M/2012 Further, by paying this membership fee, the assessee is entitled to trade in the M/s. National Spot Exchange Ltd. Therefore, the said membership fee is nothing but a capital expenditure.

9. Before us, the Ld. Counsel for the assessee relied upon several judicial decisions. In alternative, the assessee claimed that if the said expenditure is treated as capital expenditure, then depreciation on the same should be allowed. For this proposition, the assessee relied upon the decision of the Hon'ble Supreme Court in the case of Techno Shares & Stocks Ltd. & Ors Vs CIT 327 ITR 323.

10. We have carefully gone through the orders of the authorities below and the decisions relied upon by the assessee. We find force in the claim of the alternative plea of the assessee. In the decisions of the Hon'ble Supreme Court in the case of Techno Shares & Stocks Ltd.,(supra), the Stock Exchange Membership Card has been treated as a capital expenditure on which the Hon'ble Apex Court has allowed depreciation. This decision directly go to the root of the fact in issues in hand before us. The decision relied upon by the assessee for the claims of revenue expenditure do not hold any good. The decision of the Hon'ble Supreme Court treating the Stock Exchange Membership fee as a capital expenditure set at rest the entire controversy upholding the expenditure of Rs. 5.05 lakhs as a capital expenditure, we restore this issue to the file of the AO to decide the claim of depreciation in the light of the decision of the Hon'ble Supreme Court in the case of Techno Shares & Stocks Ltd. (supra). The AO is directed to allow depreciation as per provisions of law. Ground No. 2 is dismissed and ground No. 3 is allowed for statistical purpose.

5 ITA No. 6247/M/2012 11. With ground No. 4, the assessee has claimed that the AO has not given credit of the TDS. We find that the Ld. CIT(A) has directed the AO to allow credit of TDS after due verification as per law. We, therefore, do not find any reason to interfere with the findings of the Ld. CIT(A). Ground No. 4 is accordingly dismissed.

12. In the result, the appeal filed by the assessee is partly allowed for statistical purpose.

Order pronounced in the open court at the time of hearing on 28th January, 2014

Sd/- Sd/-

(JOGINDER SINGH ) (N.K. BILLAIYA) याियक सदःय/JUDICIAL MEMBER लेखा सदःय / ACCOUNTANT MEMBER

मुंबई Mumbai; 5दनांक Dated : 28th January, 2014

व.िन.स./ RJ , Sr. PS

आदे श क0 ूितिल#प अमे#षत/Copy षत of the Order forwarded to :

1. अपीलाथ, / The Appellant

2. ू.यथ, / The Respondent.

3. आयकर आयु7(अपील) / The CIT(A)-

4. आयकर आयु7 / CIT

5. #वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai

6. गाड फाईल / Guard file.

आदे शानुसार/ ार BY ORDER, स.या#पत ूित //True Copy// उप/सहायक उप सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अिधकरण मुंबई / ITAT, Mumbai