Sri BLC (P)Ltd, Kolkata V. ACIT, Cir-3, Kolkata, Kolkata

CO 76/KOL/2012

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9428 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 13-02-2014
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 13-08-2012
• Court: TRIBUNAL
• Department Lawyers: D S DAMLE
• Assessee Lawyers: NIRANJAN SATPATI
• Keywords: Capital asset; Business income
• Section: 143(3); 14A

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE , /AND . . . . ' '' ''# '#'# '#, $% ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI ABRAHAM P. GEORGE, AM] & & & & / I.T.A NO. 1054/KOL/2012 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2006-07 ASSISTANT COMMISSIONER OF INCOME-TAX, VS. M/S. SR I B L C PVT. LTD. CIRCLE-3, KOLKATA (PAN: AAECS8437J) (,- /APPELLANT ) (./,-/ RESPONDENT ) & C.O. NO. 76/KOL/2012 IN & & & & / I.T.A NO. 1054/KOL/2012 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2006-07 M/S. SRI B L C PVT. LTD. VS. ASSISTANT COMMISSIO NER OF INCOME-TAX, CIRCLE-3, KOLKATA (,- /APPELLANT ) (./,-/ RESPONDENT ) DATE OF HEARING: 06.02.2014 DATE OF PRONOUNCEMENT: 13.02.2014 FOR THE APPELLANT: SHRI NIRANJAN SATPATI, JCIT, SR. DR FOR THE RESPONDENT: SHRI D. S. DAMLE, FCA $0 / ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY REVENUE AND CROSS OBJECTION BY ASSES SEE ARE ARISING OUT OF ORDER OF CIT(A)-I, KOLKATA IN APPEAL NO. 398/CIT(A)-1/C-3/08 -09 DATED 09.04.2012. ASSESSMENT WAS FRAMED BY DCIT, CIRCLE-3, KOLKATA U/S. 143(3) OF TH E INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2006- 07 VIDE HIS ORDER DATED 31.12.2008. 2. FIRST WE TAKE UP REVENUES APPEAL. THE ONLY ISS UE IN THIS APPEAL OF REVENUE IS WHETHER THE PROFIT ARISEN OUT OF SALE OF SHARES IS TO BE AS SESSED AS SHORT TERM CAPITAL GAIN OR LONG TERM CAPITAL GAIN, AS THE ASSESSEE HAS NOT HELD THE CAPI TAL ASSET FOR MORE THAN TWELVE MONTHS. FOR THIS, REVENUE HAS RAISED FOLLOWING THREE GROUNDS: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.22,56,027/- AS SHORT TERM CAPITAL G AIN MADE BY THE ASSESSING OFFICER 2 ITA NO.1054/K/2012 & CO 76/K/2012 SRI BLC PVT. LTD. , AY:2006-07 WITHOUT APPRECIATING THE FACT THAT THE CASE OF THE ASSESSEE FALLS UNDER PROVISION OF SEC. 2(42A) OF THE ACT AND SPIRIT THEREOF FOR WHICH SHO RT TERM CAPITAL ASSET MEANS A CAPITAL ASSET HELD BY AN ASSESSEE FOR NOT MORE THAN TWELVE MONTHS IMMEDIATELY PRECEDING THE DATE OF TRANSFER. 2. THAT THE CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF RS.22,56,027/- WITHOUT APPRECIATING THE FACTS THAT THE ASSESSEE HAS PRESEN TED STCG IN THE GARB OF LONG TERM CAPITAL GAIN. 3. THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN FINDING ANALOGY BETWEEN SEC. 2(42A) AND 94(7) OF THE ACT AND ERRED IN COMPUTING THE PERIOD OF HOL DING TO TREAT A CAPITAL ASSET AS LTCG. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE AO HAS ASSESSED THE INCOME OF THE ASSESSEE UNDER THE HEAD SHORT TERM CAPITAL GAINS AT RS.22,56,027/- ARISING FROM SALE OF SHARES AS AGAINST THE CLAIM OF THE ASSESSEE THAT THE SAME WAS LONG TERM CAPITAL GAINS. THE AO WAS OF THE VIEW THAT THE ASSETS HELD BY THE ASSESSEE WERE NOT MORE THAN 12 MONTHS. HE RECORDED THE FOLLOWING FACTS: DURING THE COURSE OF ASSESSMENT THE ASSESSEE WAS A SKED TO FURNISH DATE-WISE AND SCRIPT- WISE DETAILS OF CAPITAL GAINS. PERUSAL OF SUCH BRE AK UP INDICATED THAT 201 UNITS OF FRANKLIN INDIA FLEXI CAP FUND (G) WERE PURCHASED ON 02.03.05 AND WERE SOLD ON 03.03.06. AGAIN, 101 UNITS OF RELIANCE EQUITY OPPO RTUNITY FUND (G) WERE PURCHASED ON 29.03.05 AND WERE SOLD ON 30.03.06. RESULTING PROF ITS OF RS.14,35,116/- & RS.8,20,911/- RESPECTIVELY WERE DISCLOSED BY THE ASSESSEE AS LONG TERM CAPITAL GAINS. APPARENTLY, THE PERIOD OF HOLDING BARELY COVERED 365 DAYS. THEREFO RE, IT WAS IMPERATIVE TO EXAMINE SECTION 2(42A) OF THE ACT. SECTION CLEARLY STATES, SHORT TERM CAPITAL ASSET MEANS A CAPITAL ASSET HELD BY AN ASSESSEE FOR NOT MORE THAN TWLEVE MONTHS IMMEDIATELY PRECEDING THE DATE OF ITS TRANSFER. CLEARLY, THE SECTION IN TENDS TO EXCLUDE THE DATE OF SALE. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO TREATED THE PROFIT ARISING FROM SALE OF SHARES AS LTCG BY OBSERVING IN PARA 15 AS UNDER: 15. HOWEVER, ON PLAIN READING OF PROVISION OF SEC. 2(42A) AS ALSO U/S 2(29A), I FIND THAT THERE IS NOTHING IN THE LANGUAGE EMPLOYED BY THE ST ATUTE WHICH REQUIRES EXCLUSION OF THE DATE OF PURCHASE IN COMPUTING THE PERIOD OF HOLDING OF THE CAPITAL ASSET. IN MY CONSIDERED OPINION THE PERIOD OF HOLDING MUST NECESSARILY INCL UDE THE DATE OF PURCHASE OF THE CAPITAL ASSET AS WEIL. IF THE PERIOD OF HOLDING IN THE PRES ENT CASE IS CALCULATED TAKING INTO CONSIDERATION THE DATE OF PURCHASE THEN IT WAS QUIT E EVIDENT THAT ON A DATE PRECEDING THE DATE OF TRANSFER; THE APPELLANT HELD THE UNITS FOR PERIOD OF 12 MONTHS AND 1 DAY AND THEREFORE IN BOTH THE CASES CAPITAL ASSETS IN QUEST ION WERE LONG TERM CAPITAL ASSETS AND CONSEQUENTLY THE GAN WAS LONG TERM CAPITAL GAINS. THE SAME THEREFORE QUALIFIED FOR EXEMPTION U/S 10(38) OF THE INCOME TAX ACT. I ALSO NOTE THAT ON SOMEWHAT ANALOGOUS FACTS; MY PREDECESSOR IN THE CASE OF M/S RUNIT INVE STMENT COMPANY LTD IN APPEAL NO. 577/CIT(A)-I/09-10 DATED 30.09.2010 ALLOWED SIMILAR CLAIM OF THE ASSESSEE. FOR THE REASONS SET OUT IN THE FOREGOING, THREFORE, I DIREC T THE AO TO ASSESS RS.22,56,027/- AS INCOME FROM LONG TERM CAPITAL GAINS AND ALLOW ITS E XEMPTION U/S. 10(38) OF THE INCOME TAX ACT. 3 ITA NO.1054/K/2012 & CO 76/K/2012 SRI BLC PVT. LTD. , AY:2006-07 AGGRIEVED, NOW REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. FROM THE BARE READING OF THE ASSESSMENT ORDER IT IS CLEAR THAT THE ASSESSEE HAS HELD THE ASSETS I.E. SHARES FOR MORE THAN TWELVE MONTHS, MAY BE EVEN FOR ONE DAY. IF THIS IS THE FACTUAL POSITION, THERE IS NO NEED TO INTERFERE IN THE ORDER OF CIT(A ) AND WE CONFIRM THE SAME. THIS GROUND OF APPEAL OF REVENUE IS DISMISSED. 5. COMING TO THE CROSS OBJECTION OF THE ASSESSEE. THE ASSESSEE HAS RAISED THE ONLY ISSUE OF DISALLOWANCE OF EXPENSES BY INVOKING THE PROVISI ONS OF SECTION 14A OF THE ACT. FOR THIS, ASSESSEE HAS RAISED FOLLOWING THREE GROUNDS: 1. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT (A) OUGHT TO HAVE DIRECTED THE AO TO DELETE THE ADDITIONAL DISALLOWAN CE OF RS.9,09,010/- MADE U/S 14A OF THE INCOME TAX ACT ONCE HE AGREED WITH THE CONTENTI ON OF THE ASSESSEE THAT THE AMOUNT DISALLOWABLE U/S 14A COULD NOT EXCEED RS.6,76,883/- . 2. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE ASSESSEE HAVING DISALLOWED THE EXPENSES OF RS.6,76,683/- U/S 14A IN ARRIVING AT THE RETURNED BUSINESS INCOME AND SINCE THE AO STARTED HIS COMPUTATION OF INCOME WITH REFERENCE TO THE INCOME RETURNED, THE DISALLOWANCE OF RS.9,09,010/- ADDITIO NALLY MADE BY THE AO U/S 14A OF THE LNCOME TAX ACT SHOULD HAVE BEEN FULLY DELETED IN FU LL BY THE CIT (A). 3. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE AO BE DIRECTED TO DELETE THE DISALLOWANCE U/S 14A BY THE SUM OF RS.9,09,010/ - SINCE THE LOSS RETURNED BY THE APPELLANT WAS ARRIVED AT AFTER MAKING THE DISALLOWA NCE OF RS.6,76,683/- U/S 14A. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE HAS EARN ED TAX FREE INCOME I.E. EXEMPTED INCOME AT RS.85,65,604/- IN THE FORM OF DIVIDEND AND LTCG. T HIS ASSESSMENT YEAR IS 2006-07 AND RULE 8D OF THE I. T. RULES, 1962 WILL NOT APPLY. ACCORD ING TO AO, THE ASSESSEE HAS SUO MOTU DISALLOWED A SUM OF RS.6,76,683/- WHILE COMPUTING T HE INCOME UNDER SECTION 14A OF THE ACT FOR EARNING THE EXEMPTED INCOME. ACCORDING TO AO, IT HAS EXPENDED A SUM OF RS.15,15,013/-. THESE EXPENSES ARE GENERAL IN NATURE AND HENCE HE A TTRIBUTED THE ENTIRE EXPENSES TO THE EXEMPTED INCOME THEREBY FURTHER DISALLOANCE OF RS.9 ,09,010/-. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO RESTRICTED THE DISALLOWAN CE FURTHER AT RS.6,76,683/-. AS THE ISSUE IS COVERED, THAT U/S. 14A OF THE ACT ONLY 1% DISALLOWA NCE IS TO BE RESTRICTED BUT HERE, THE ASSESSEE ITSELF HAS DISALLOWED A SUM OF RS.6,76,683/- AS AGA INST THE EXEMPTED INCOME OF RS.85,65,604/-, WHICH IS MORE THAN 1%. WE DIRECT THE AO NOT TO DIS ALLOW EXCEPT THE DISALLOWANCE AS ASSESSEE 4 ITA NO.1054/K/2012 & CO 76/K/2012 SRI BLC PVT. LTD. , AY:2006-07 ITSELF MADE IN THE RETURN OF INCOME. THE ENTIRE AD DITION MADE BY AO IS DELETED. ASSESSEES CROSS OBJECTION IS ALLOWED. 7. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED AN D CROSS OBJECTION OF ASSESSEE IS ALLOWED. 8. ORDER IS PRONOUNCED IN THE OPEN COURT ON 13.02.2 014 SD/- SD/- . . . . ' '' ''# '#'# '# , $% , (ABRAHAM P. GEORGE) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13TH FEBRUARY, 2014 12 '3' 4 JD.(SR.P.S.) $0 5 . 6$ )7- COPY OF THE ORDER FORWARDED TO: 1 . ,- / APPELLANT- ACIT, CIRCLE-3, KOLKATA. 2 ./,- / RESPONDENT M/S. SRI BLC PVT. LTD., 85, PRINCE A NWAR SHAH ROAD, KOLKATA-700 003. 3 . 0' ( )/ THE CIT(A), KOLKATA 4. 5. 0' / CIT KOLKATA <= .' / DR, KOLKATA BENCHES, KOLKATA / ./ TRUE COPY, $0'>/ BY ORDER, ' /ASSTT. REGISTRAR .