Suresh Chand Agarwal, Mathura V. ACIT, Mathura

CO 25/AGR/2009

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 5850 (ITAT-AGRA)
• Duration Of Justice: 1 year(s) 7 month(s) 24 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 06-04-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 06-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 12-08-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: APPLICATION REJECTED
• Keywords: Business income; Transactions in derivatives; Earning of tax free income; Proportionate interest; Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE SHRI P.K. BANSAL, ACCOUNTANT MEMBER AND SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 191/AGRA/2009 ASSTT. YEAR : 2005-06 A.C.I.T.-3, MATHURA. VS. SHRI SURESH CHAND AGA RWAL, 143, SEWA KUNJ, VRINDABAN, MATHURA. (PAN : AEHPA 7462 D) C.O. NO. 25/AGRA/2009 (IN ITA NO. 191/AGRA/2009) ASSTT. YEAR : 2005-06 SHRI SURESH CHAND AGARWAL, VS. A.C.I.T.-3, MATH URA. 143, SEWA KUNJ, VRINDABAN, MATHURA. (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI VINOD KUMAR, JR. D.R. FOR ASSESSEE : APPLICATION REJECTED. ORDER PER P.K. BANSAL, A.M. : THE APPEAL AND THE CROSS OBJECTION ARE FILED AGAI NST THE ORDER OF CIT(A) DATED 18.02.2009. IN THE APPEAL FILED BY THE REVENUE, THE ONLY GROUND RELATES TO THE DELETION OF ADDITION OF RS.10,07,330/- MADE ON ACCOUNT OF TREATMENT OF P ROFIT ON SALE OF SHARES AS BUSINESS PROFIT AS AGAINST THE CAPITAL GAIN DECLARED BY THE ASSESSEE. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE THOUGH T HE ADJOURNMENT WAS SOUGHT BY THE ASSESSEE VIDE HIS APPLICATION EARLIER ON 11.01.2011 AND THE CASE WAS ADJOURNED ON THE REQUEST OF THE LEARNED COUNSEL FOR 06.04.2011. HENCE, THE ADJO URNMENT APPLICATION FILED ON BEHALF OF THE 2 ASSESSEE WAS DISMISSED FOR WANT OF PLAUSIBLE REASON S. WE, THEREFORE, DECIDED TO DISPOSE OF THE APPEAL AND THE CROSS OBJECTION AFTER HEARING THE LE ARNED DEPARTMENTAL REPRESENTATIVE. 3. THE BRIEF FACTS OF THE ISSUE INVOLVED IN APPEAL OF REVENUE ARE THAT THE ASSESSING OFFICER TREATED THE FOLLOWING AMOUNTS AS SHARE TRADING INCO ME TAXABLE UNDER THE HEAD BUSINESS : I) LONG TERM CAPITAL GAINS ON SALE OF SHARES RS.1 ,71,530/- BEFORE 01.10.2004 II) SHORT TERM CAPITAL GAINS ON SALE OF SHARES RS .1,63,441/- AFTER 30.09.2004 III) LONG TERM CAPITAL GAINS ON SALE OF SHARES RS .4,36,896/- AFTER 01.10.2004 IV) SHARE TRADING PROFIT RS.22,994/- RS.10,07,330/- 4. WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT( A) DIRECTED THE ASSESSING OFFICER NOT TO TREAT THE SUM OF RS.9,84,337/- UNDER THE HEAD I NCOME FROM BUSINESS AND TO TREAT RS.1,71,530/- AS LONG-TERM CAPITAL GAINS ON THE SALE OF SHARES BE FORE 01.10.2004, RS.4,36,896/- AS LONG TERM CAPITAL GAIN ON SALE OF SHARES AFTER 01.10.2004 AND RS.1,63,441/- AS SHORT-TERM CAPITAL GAIN ON SALE OF SHARES. 5. AFTER HEARING THE LEARNED DR, WE NOTED THAT THE TAX EFFECT IN THIS APPEAL IS LES THAN RS.2,00,000/- AND THE SAME IS IN CONTRAVENTION OF C .B.D.T. INSTRUCTION NO.5 OF 2008 DATED 15.05.2008 WHICH FINDS STATUTORY FORCE UNDER THE PR OVISIONS OF SECTION 268A OF THE INCOME-TAX ACT, 1961. THE CLAUSE NO.3 OF THE SAID C.B.D.T. INS TRUCTION HAS MADE IT CLEAR THAT APPEAL BEFORE THE TRIBUNAL BY THE REVENUE WILL HENCEFORTH BE FILE D WHERE TAX EFFECT EXCEEDS RS.2 LACS. THE PRESENT APPEAL, HAVING BEEN FILED IN CONTRAVENTION OF THE SAID INSTRUCTION, IS, THEREFORE, FOUND NOT 3 MAINTAINABLE. IN THE FACTS AND CIRCUMSTANCES OF TH E CASE, THE APPEAL FILED BY THE REVENUE IS LIABLE TO BE DISMISSED AS NOT MAINTAINABLE. AS A RE SULT, APPEAL FILED BY THE REVENUE IS DISMISSED. 6. AS REGARDS THE CROSS OBJECTION FILED BY ASSESSEE , THE FIRST GROUND IS SUPPORTIVE OF THE ORDER OF CIT(A) ON THE ISSUE RAISED BY REVENUE IN ITS APP EAL. WE HAVE ALREADY DISMISSED THE APPEAL OF THE REVENUE, THEREFORE, THIS GROUND BECOMES INFRUCT UOUS AND DISMISSED AS SUCH. 7. GROUND NO. 2 RELATES TO DISALLOWANCE OF RS.1,07, 375/- U/S. 40(A)(IA). THE ASSESSING OFFICER NOTED FROM THE PROFIT AND LOSS ACCOUNT THAT THE ASSESSEE HAS DEBITED A SUM OF RS.1,07,375/- AS INTEREST TO THE CREDITORS. SINCE T HE ASSESSEE HAS NOT DEDUCTED ANY TAX AT SOURCE, THEREFORE, THE ASSESSING OFFICER DISALLOWED THE SAM E U/S. 40(A)(IA). WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT(A) CONFIRMED THE ORDER OF ASSES SING OFFICER BY OBSERVING AS UNDER :- I HAVE CONSIDERED THE RIVAL CONTENTIONS AND FIND T HAT SECTION 40(A)(IA) STIPULATES AS UNDER: SEC.40. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTIONS 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUS INESS OR PROFESSION (A)(IA) ANY INTEREST, COMMISSION OR BROKERAGE, REN T, ROYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SER VICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK INCLUDING SUPPLY OF LABOUR FOR CARRYIN G OUT ANY WORK, ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SU CH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION HAS NOT BEEN PAID.. IN THE LIGHT OF THE PROVISIONS OF THE ABOVE SECTION , IT IS SEEN THAT A. FORTIS SECURITIES HAS CHARGED RS.1,07,375.35 ON DEL AYED PAYMENT ON SPECULATION AND F & O TRANSACTIONS. SUCH CHARGES ARE UNDOUBTEDLY IN THE NATURE OF INTEREST A ND HENCE, LIABLE FOR TDS AS PER SECTION 40(A)(IA) READ WITH SECTION 194 (CHAPTER XVIII OF THE ACT. 4 B. TAX SHOULD HAVE BEEN DEDUCTED AT SOURCE BY THE APPE LLANT AS HE IS AN INDIVIDUAL WHOSE CASE FALLS WITHIN SECT ION 44AB OF THE ACT AS THE TURNOVER OF HIS BUSINESS OF BIRIS AND MATCH-BOXES IS RS.3,32,79,649/- IN ADDITION TO THE TURNOVER OF SPECULATION AND F&O BUSINESS. HENCE, THE AO WAS JUSTIFIED IN INVOKING SECTION 40( A)(IA) OF THE ACT AND ACCORDINGLY, ADDING RS.1,07,375/- TO THE APPELLANT S BUSINESS INCOME. THE ADDITION OF RS.1,07,375/- IS HEREBY CONFIRMED. 8. WE HAVE HEARD THE LEARNED DR AND HAVE CAREFULLY CONSIDERED HIS SUBMISSIONS ALONGWITH THE FACTS ON RECORD BEFORE THE AUTHORITIES BELOW. T HE CIT(A) HAS GIVEN FINDING OF FACT THAT FORTIS SECURITIES HAVE TAKEN OF RS.1,07,375/- ON DELAYED P AYMENT ON SPECULATION AND F&O TRANSACTIONS. SUCH CHARGES ARE UNDISPUTEDLY, IN THE NATURE OF INT EREST. THE INTEREST IS DEFINED U/S. 2(28A) WHICH MEANS INTEREST PAYABLE IN ANY MANNER IN RESPECT OF ANY MONEYS BORROWED OR DEBT INCURRED (INCLUDING A DEPOSIT, CLAIM OR OTHER SIMILAR RIGHT OR OBLIGATION) AND INCLUDES ANY SERVICE, FEE OR OTHER CHARGE IN RESPECT OF THE MONEYS BORROWED OR D EBT INCURRED OR IN RESPECT OF ANY CREDIT FACILITY WHICH HAS NOT BEEN UTILIZED. FORTIS SECURI TY HAS CHARGED THE SUM TOWARDS THE DEBT INCURRED BY THE ASSESSEE FOR WHICH THE PAYMENT WAS MADE LATE. THIS CLEARLY FALLS WITHIN THE DEFINITION OF THE INTEREST. THEREFORE, IN OUR OPINI ON, THE ASSESSEE WAS UNDER AN OBLIGATION TO DEDUCT TAX AT SOURCE IN ACCORDANCE WITH THE PROVISI ONS OF SECTION 194 WHICH THE ASSESSEE FAILED TO DO. THEREFORE, IN OUR OPINION, NO INTERFERENCE IS C ALLED FOR IN THE ORDER OF THE CIT(A) CONFIRMING THE ACTION OF THE ASSESSING OFFICER AND DISALLOWING THE SUM OF RS.1,07,375/- U/S. 40(A)(IA). THUS, THIS GROUND STANDS DISMISSED. 9. GROUND NO. 3 RELATES TO THE DISALLOWANCE OF INTE REST PAID TO THE BANK AMOUNTING TO RS.10,900/-. THE FACTS RELATING TO THIS GROUND ARE THAT THE ASSESSING OFFICER NOTED THAT THE 5 ASSESSEE WAS HAVING BUSINESS ASSETS IN THE BALANCE SHEET TO THE EXTENT OF RS.26,00,000/-, OUT OF WHICH RS.23.96 LAKH CAME FROM CAPITAL, CREDITORS, A ND OTHER LIABILITIES. THEREFORE, HE TOOK THE VIEW THAT OUT OF THE BANK LOAN OF RS.55,00,000/-, O NLY RS.2,00,000/- WAS USED FOR BUSINESS AND REST WAS USED IN INVESTMENT AND DEPOSITS OF RS.53.2 5 LAKH YIELDING NIL / EXEMPT INCOME. THEREFORE, HE DISALLOWED THE PROPORTIONATE INTEREST ON BANK LOAN AMOUNTING TO RS.10,900/-. 10. WHEN THE MATTER WENT BEFORE THE CIT(A), THE ASS ESSEE SUBMITTED THAT THE ASSESSEES CAPITAL WITH M/S. B.S. & CO. WAS RS. 35,18,084/- AS ON 01.04.2004 AND FOR THE PERIOD ENDING 31.03.2005 IT WAS RS.2,03,179/-. THUS, THE REDUCTIO N IN THE CAPITAL WAS INVESTED IN THE SHARES. THE BANK LOAN HAS NOT BEEN INVESTED. EVEN THE LIABI LITIES OF THE SHARE BROKER WERE OUTSTANDING. THE CIT(A) AFTER VERIFYING SCHEDULE F OF THE BALANC E SHEET CONSISTING OF THE DETAILS OF INVESTMENT AND DEPOSITS, NOTED THAT THE ASSESSEE HAS NOT UTILI ZED THE OD FOR THE BUSINESS PURPOSES. THEREFORE, HE UPHELD THE DISALLOWANCE. 11. WE HAVE HEARD THE LEARNED DR. WE FIND THAT THE CIT(A) AFTER APPRECIATING THE EVIDENCE HAS GIVEN HIS FINDING OF FACT. NO CONTRARY EVIDENCE WAS BROUGHT TO OUR KNOWLEDGE OR FILED BEFORE US, WHICH MAY COMPEL US TO TAKE A VIEW AGAINST THE ORDER OF CIT(A). WE, THEREFORE, CONFIRM THE ORDER OF THE CIT(A). THUS, THIS GROUND OF CROSS OBJ ECTION STANDS DISMISSED. 12. GROUND NO.4 RELATES TO THE 10% DISALLOWANCE OUT OF TELEPHONE AND VEHICLE EXPENSES. THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF RS.50,00 0/- OUT OF TELEPHONE EXPENSES OF RS.78,763/- AND VEHICLE EXPENSES OF RS.2,26,570/- K EEPING IN VIEW THE ELEMENT PERSONAL USER. THE CIT(A) RESTRICTED THE DISALLOWANCE TO 10% KEEPI NG IN VIEW THE DISALLOWANCE OF SUCH 6 EXPENSES IN THE ASSESSMENT YEAR 2002-03 AND TAKING INTO ACCOUNT THE ELEMENT OF PERSONAL USER. BEFORE US ALSO, THERE IS NO EVIDENCE ON RECORD TO R EFUTE THE POSSIBILITY OF PERSONAL USER OF TELEPHONE AND CAR. WE, THEREFORE, FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS COUNT AND THIS GROUND OF CROSS OBJECTION STANDS DISMISSED. 13. IN THE RESULT, THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 06.04.2011. SD/- SD/- (H.S. SIDHU) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 6 TH APRIL, 2011 *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. 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