DCIT, Circle - 3, Kolkata, Kolkata V. M/s. India Forgings & Engineering Co. Pvt. Ltd., Kolkata

ITA 101/KOL/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70454 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2013
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 20-07-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 13-01-2011
• Court: TRIBUNAL
• Department Lawyers: R P NAG
• Keywords: Business income; Question of law; Benefit of exemption
• Section: 143(3); 14A; 260A; 10

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND . . . . ' '' ''# '#'# '#, $% ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI ABRAHAM P. GEORGE, AM] & & & & / I.T.A NO. 101/KOL/2011 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2006-07 DEPUTY COMMISSIONER OF INCOME-TAX, VS. M/S. INDIA FORGINGS & ENGINEERING CO. CIRCLE-3, KOLKATA. PVT. LTD. (PAN: AAACI5673C) (,- /APPELLANT ) (./,-/ RESPONDENT ) DATE OF HEARING: 28.11.2013 DATE OF PRONOUNCEMENT: 20.12.2013 FOR THE APPELLANT: SHRI R. P. NAG, SR. DR FOR THE RESPONDENT: SHRI SUBASH AGARWAL, ADVOCAT E $0 / ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-I, KOLKATA IN APPEAL NO. 403/CIT(A)-I/CIR-3/08-09 DATED 30.09.2010. ASSESSM ENT WAS FRAMED BY DCIT, CIRCLE-3, KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HE REINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2006-07 VIDE HIS ORDER DATED 31.12. 2008. 2. THE FIRST ISSUE IN THIS APPEAL OF REVENUE IS AGA INST THE ORDER OF CIT(A) TREATING THE SALE TRANSACTION OF SHARES AS CAPITAL GAINS AS AGAINST T HE ORDER OF AO ASSESSING THE SAME AS BUSINESS TRANSACTION. FOR THIS, REVENUE HAS RAISED FOLLOWIN G GROUND NO.1: 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN TREATING THE BUSINESS INCOME OF RS.29,13,139/- A S CAPITAL GAIN WITHOUT PROPER APPRECIATION OF THE OVERALL BUSINESS TRANSACTION OF THE ASSESSEE COMPANY. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS TREATED THE LONG TERM CAPITAL GAIN DECLARED BY ASSESSEE AT RS.29,13,139/- AS BUSI NESS INCOME. THE ASSESSEE HAS KEPT THESE SHARES AS INVESTMENT IN ITS ACCOUNT AND NOT AS STOC K IN TRADE AS PER BALANCE SHEET. WE FIND THAT THE CIT(A) DELETED THE ADDITION BY OBSERVING AS UND ER: TAKING INTO THE ACCOUNT THE CIRCUMSTANCES AND FACT S AS NARRATED, IT IS APPARENT THAT CAPITAL GAIN OF RS.29,13,139/- SHOULD NOT BE TREATE D AS BUSINESS INCOME AS THE MOTIVE OF THE APPELLANT COMPANY WAS FOR INVESTMENT WHICH HAS BEEN JUSTIFIED AND PROVED BY THE APPELLANT AND MOREOVER, THE AO HAD NOT BROUGHT ANYT HING IN RECORD TO PROVE THAT THE APPELLANT COMPANY HAD NO MOTIVE OF INVESTMENT. THE REFORE, I DELETE THE ADDITION. 2 ITA NO. 101/K/2011 INDIA FORGINGS & ENGINEERING CO. PVT. LTD., AY:200 6-07 4. BEFORE US ALSO ASSESSEE HAS DEMONSTRATED THAT TH E SHARES CONSTITUTE INVESTMENT IN ITS BOOKS OF ACCOUNT AND NOT STOCK IN TRADE. ONCE THIS IS THE POSITION, THE ISSUE IS COVERED BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT VS. BHAGWATI PRASAD AGARWAL DATED 29.04.2009 REPORTED IN (2009) TMI 34738, WHE REIN IT HAS BEEN HELD AS UNDER: THE ASSESSEE PRODUCED BEFORE THE COMMISSIONER OF I NCOME TAX (APPEAL) THE CONTRACT NOTES, DETAILS OF HIS DEMAT ACCOUNT AND, A LSO, PRODUCED DOCUMENTS SHOWNG THAT ALL PAYMENTS WERE RECEIVED BY THE ASSE SSEE THROUGH BANK. WE DO NOT, THEREFORE, THINK THAT THS APPEAL INVOLVES ANY SUBS TANTIAL QUESTION OF LAW REQURING INTERFERENCE BY THIS COURT UNDER SECTION 260A OF TH E LNCOME TAX ACT, 1961. THE APPEAL IS, THEREFORE, SUMMARILY DISMISSED. LN THE REMAND REPORT THE LD. AO HAS SIMPLY RELIED O N THE OBSERVATONS MADE IN THE IMPUGNED ASSESSMENT ORDER. THE ASSESSEE HAD RELIED ON VARIOUS DECISIONS OF ITAT AND ALSO THE DECSON OF HONBLE CALCUTTA HIGH COURT. HOWEVER, HE HAS NOT DEALT WITH THEM. LT IS SUBMITTED THAT THE DECSION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. BHAGWATI PRASAD AGARWAL REPO RTED IN 2009-TM-34378 IS A BINDING DECSON ON ALL THE AUTHORITIES BELOW IT. T HE HONBLE HIGH COURT HAS UPHELD THE DECISION OF THE ITAT IN THAT CASE BY PAS SNG THE ORDER AS STATED HEREUNDER: COMMISSIONER OF LNCOME TAX (APPEAL), INTER ALIA, DE LETING THE ADDITION OF RS.34,81,165/-, WHICH WAS TREATED AS INCOME FROM OT HER SOURCES BASED ON THE INFORMATION RECEIVED FROM THE CALCUTTA STOCK EX CHANGE. THE AMOUNT WAS CLAIMED BY THE ASSESSEE AS LONG TERM CAPITAL GA INS. LT IS SUBMITTED BY MR. PRTHU DUDHARIA, LEARNED ADVOCATE FOR THE REVEN UE THAT THE RECORDS FROM THE CALCUTTA STOCK EXCHANGE SHOWS THAT THE NAM E OF THE ASSESSEE IS NOT APPEARING IN RESPECT OF THE TRANSACTIONS-N-QUE STION. THE TRBUNAL FOUND THAT THE CHAN OF TRANSACTION ENTERED INTO BY THE ASSESSEE HAVE BEEN PROVED, ACCOUNTED FOR, DOCUMENTED AND SUPPORTED BY EVIDENCE. THE ASSESSEE PRODUCED BEFORE THE COMMISSIONER OF LNCOME TAX (APPEAL) THE CONTRACT NOTES, DETAILS OF HIS DEMAT ACCOUNT AND, A LSO, PRODUCED DOCUMENTS SHOWING THAT ALL PAYMENTS WERE RECEIVED B Y THE ASSESSEE THROUGH BANK. WE DO NOT , THEREFORE, THINK THAT TH IS APPEAL INVOLVES ANY SUBSTANTIAL QUESTION OF LAW REQUIRING INTERFERENCE BY THIS COURT UNDER SECTION 260A OF THE INCOME TAX ACT, 161. THE APPEA L IS, THEREFORE, SUMMARILY DISMISSED. THE FULL TEXT OF THE DECISION HAD ALREADY BEEN FURN ISHED ON THE LAST DATE OF HEARING. THE FACTS IN THE PRESENT CASE ARE SIMLLAR TO THE FA CTS BEFORE THE HONBLE CALCUTTA HIGH COURT. LN THIS CASE ALSO THE TRANSACTIONS ARE ALL SUPPORTED BY CONTRACT NOTES, DEMAT ACCOUNTS, CONFIRMATION FROM BROKERS AND ALL T RANSACTIONS SUPPORTED BY ACCOUNT PAYEE CHEQUES. ALL DOCUMENTARY EVIDENCES WE RE FURNISHED BEFORE THE LD. AO AND ALSO BEFORE YOUR HONOUR. LN VIEW OF THE AFORESAID FACTS AND EVIDENCES ON REC ORD, IT IS SUBMITTED THAT THE ASSESSING OFFICER IS NOT JUSTFIED IN TREATING THESE TRANSACTIONS AS NON GENUINE THEREBY DENYING THE BENEFIT OF EXEMPTION OF SEC. 10 (38) RELATING TO LONG TERM CAPITAL GAIN ON SHARES AND SECURTIES. VARIOUS TRIB UNALS THROUGHOUT THE COUNTRY HAVE TAKEN THE SAME VIEW. 3 ITA NO. 101/K/2011 INDIA FORGINGS & ENGINEERING CO. PVT. LTD., AY:200 6-07 AS THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE A SSESSEE AND AGAINST THE REVENUE, WE HAVE NO HESITATION IN CONFIRMING THE ORDER OF CIT(A). THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 5. THE NEXT ISSUE OF THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) IN DECIDING THE EXPENSES RELATED TO EXEMPTED INCOME AT 1% OF THE DI VIDEND INCOME IGNORING THE PROVISION OF RULE 8D OF THE I. T. RULES READ WITH SECTION 14A OF THE ACT. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.2: 2. THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED BY DECIDING THE EXPENSES RELATED TO EXEMPTED INCOME AT 1% OF THE DIVIDEND IGNORING THE PROVISION OF RULE 8D OF THE I. T. RULE S READ WITH SECTION 14A OF THE ACT WHEN AT THE TIME OF APPEAL ORDER THE SAME HAS ENACTED. 6. AT THE OUTSET, IT IS TO BE MENTIONED THAT THE RE LEVANT ASSESSMENT YEAR INVOLVED IS 2006-07 AND IT IS A FACT THAT RULE 8D WILL NOT APPLY TO THI S ASSESSMENT YEAR. HOWEVER, TRIBUNAL IS TAKING A CONSISTENT VIEW THAT 1% OF THE EXEMPTED INCOME SH OULD BE DISALLOWED. ACCORDINGLY, WE DIRECT THE AO TO RECOMPUTE THE DISALLOWANCE BY TAKI NG 1% OF THE EXEMPTED INCOME AND RESTRICT THE DISALLOWANCE TO THAT EXTENT. THIS GROUND OF RE VENUES APPEAL IS DISMISSED. 7. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. 8. ORDER IS PRONOUNCED IN THE OPEN COURT ON 20.12.2 013 SD/- SD/- . . . . ' '' ''# '#'# '# , $% , (ABRAHAM P. GEORGE) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 20TH DECEMBER, 2013 12 '3' 4 JD.(SR.P.S.) $0 5 . 6$ )7- COPY OF THE ORDER FORWARDED TO: 1 . ,- / APPELLANT DCIT, CIRCLE-3, KOLKATA. 2 ./,- / RESPONDENT M/S. INDIA FORGINGS & ENGINEERING CO . PVT. LTD., 19/1, CAMAC STREET, KOLKATA-700 017. 3 . 0' ( )/ THE CIT(A), KOLKATA 4. 5. 0' / CIT KOLKATA <= .' / DR, KOLKATA BENCHES, KOLKATA / ./ TRUE COPY, $0'>/ BY ORDER, ' /ASSTT. REGISTRAR .