DCIT,Circle-1, Kolkata, Kolkata V. M/s. Ashika Stock Broking Ltd, Kolkata

ITA 1060/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75059 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2014
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 16-07-2012
• Court: TRIBUNAL
• Department Lawyers: NIRANJA SATPATI
• Assessee Lawyers: S M SURANA; SUNIL SU
• Keywords: Capital asset; Depreciation; Business expenditure; Revenue expenditure
• Section: 143(3)

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. 1060/KOL/2012 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2009-10 DEPUTY COMMISSIONER OF INCOME-TAX, VS. M/S. ASHIK A STOCK BROKING LTD. CIRCLE-1, KOLKATA. (PAN: AACCA7156Q) (,- /APPELLANT ) (./,-/ RESPONDENT ) DATE OF HEARING: 06.02.2014 DATE OF PRONOUNCEMENT: 13.02.2014 FOR THE APPELLANT: SHRI NIRANJA SATPATI, JCIT, SR. DR FOR THE RESPONDENT: S/SHRI S. M. SURANA, ADVOCAT E & SUNIL SURANA, C.A $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. 785/CIT(A)-1/C-1/11-12 DATED 25.04.2012. ASSESSMEN T WAS FRAMED BY ADDL.CIT, RANGE-1, KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HE REINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2009-10 VIDE HIS ORDER DATED 15.12. 2011. 2. THE FIRST ISSUE IN THIS APPEAL OF REVENUE IS AGA INST THE ORDER OF CIT(A) IN DELETING THE ADDITION MADE BY AO ON ACCOUNT OF SECURITY DEPOSIT FORFEITURE CLAIMED BY ASSESSEE AS EXPENSES. FOR THIS, REVENU HAS RAISED FOLLOWING GROUND NO.1: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.17,39,338/- MADE BY THE AO BEING SECURITY DEPOSIT FORFEITED BY THE LANDLORDS. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BRIEFLY STATED FACTS ARE THAT THE AO NOTICED FROM T HE ACCOUNTS OF THE ASSESSEE THAT IT HAS CLAIMED DEDUCTION OF FORFEITURE OF SECURITY DEPOSIT AT RS.1 7,39,338/- AS A REVENUE EXPENDITURE PAID TO LANDLORDS FOR TAKING OFFICE ON RENT AT VARIOUS PLAC ES IN INDIA. THE ASSESSEE IS IN THE BUSINESS OF SHARE BROKING AND ITS GROSS RECEIPTS ARE IN THE AVE RAGE OF RS.50 CR. OR MORE. IT HAS OPENED VARIOUS BRANCHES IN INDIA AND CARRIED ON THE BUSINE SS IN MANY PLACES AND ALSO HIRED OFFICE PREMISES ON LEAVE AND LICENCE BASIS. BECAUSE OF EC ONOMIC SLOW DOWN THE SHARE BROKING BUSINESS SUFFERED HEAVILY AND IT HAS TO CLOSE MANY OF THE BRANCHES BECAUSE OF LOSSES. THE DECISION TO CLOSE THE BRANCHES WAS A BUSINESS DECIS ION. WHEN THESE OFFICES WERE TAKEN ON RENT 2 ITA NO.1060/K/2012 ASHIKA STOCK BROKING LTD. , AY:2009-10 FOR CARRYING ON THE BUSINESS THERE WERE AGREEMENTS WITH THE LANDLORDS AND ASSESSEE HAS ALSO MADE SECURITY DEPOSITS TO CONTINUE WITH THE BUSINES S FOR A SPECIFIED PERIOD. AS THE BRANCHES WERE CLOSED DOWN THE SECURITY DEPOSITS WERE FORFEIT ED BY THE LANDLORDS. AS THE SECURITY DEPOSIT WAS FORFEITED THE ASSESSEE CLAIMED THE SAME AS EXPE NSES. THE AO WAS NOT CONVINCED AND DISALLOWED THE SAME AS CAPITAL EXPENSES. AGGRIEVED , ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING AS UNDER: IN THE SECOND GROUND THE APPELLANT HAS DISPUTED TH E ADDITION OF RS.17,39,338/-. I FIND THAT THE SECURITY DEPOSIT WAS PAID TO LANDLORDS FOR OBTAINING TENANCY OF THE OFFICES ON RENT WHERE THE APPELLANT DID CARRY ON BUSINESS OF SHARE BROKING WHICH IS NOT DISPUTED. THE AO HAS ALSO FOUND THAT THE TENANTED PREMISES WERE O N LEAVE AND LICENCE AGREEMENT BASIS. THE APPELLANT DURING THE YEAR, BECAUSE OF ECONOMIC SLOWDOWN CLOSED DOWN SUCH BRANCHES AND VACATED THE TENANTED PREMISES. WHEN T HESE OFFICES WERE CLOSED DOWN THE LAND LORDS FORFEITED THE SECURITY DEPOSIT WHICH IS ALSO NOT DISPUTED. WHEN THE DEPOSIT WAS MADE IT WAS A SECURITY DEPOSIT AND NOT ANY CONSIDER ATION FOR ACQUISITION OF TENANCY RIGHTS. NO CAPITAL ASSET HAVE BEEN ACQUIRED BCAUSE OF THE FORFEITURE OF THE SECURITY DEPOSIT. A TENANCY CREATED AS LEAVE AND LICENCE AG REEMENT CAN IN NO CIRCUMSTANCES BE TREATED AS CAPITAL ASSET. THE LOSS BY WAY OF FORFE ITURE IS A BUSINESS LOSS AS HAS BEEN HELD IN THE CASE OF CIT VS. KISHANGARH MADIRA SANGHA REP ORTED IN 167 ITR PAGE 393 (RAJ) AND THACKER HKP & CO. REPORTED IN 134 ITR PAGE 21 ( MP). IN VIEW OF THE ABOVE THE DISALLOWANCE MADE BY THE AO IS DELETED. AGGRIEVED, NOW REVENUE CAME IN APPEAL BEFORE US. 4. WE FIND THAT FACTUALLY THERE IS NO DISPUTE THAT THE ASSESSEE HAS NOT TAKEN ON RENT THE OFFICE PREMISES FOR CARRYING ON THE BUSINESS. IT I S ALSO A FACT THAT THERE WERE AGREEMENTS WITH THE LANDLORDS WITH THAT OF THE ASSESSEE. QUA THESE AGREEMENTS THE ASSESSEE ALSO MADE SECURITY DEPOSITS TO CONTINUE WITH THE BUSINESS FOR A SPECIF IED PERIOD . DUE TO SLOW DOWN IN THE BUSINESS ITS BRANCHES WERE CLOSED DOWN IN BETWEEN THE PERIOD OF THE SECURITY DEPOSIT AND THE SAME WAS FORFEITED BY THE LANDLORDS. THESE FACTS ARE NOT DI SPUTED AND ONCE THIS IS A FACT THAT THE ASSESSEE HAS CLAIMED THE FORFEITURE OF SECURITIES AS REVENUE EXPENSES, WHETHER THE SAME IS ALLOWABLE OR NOT. THIS HAS BEEN ANSWERED BY RAJASTHAN HIGH COUR T IN THE CASE OF CIT VS. KISHANGARH MADIRA SANGHA (1987) 167 ITR 393 (RAJ,), WHEREIN I T HAS BEEN HELD AS UNDER: NONE HAS APPEARED ON BEHALF OF THE ASSESSEE TO OPP OSE THIS REFERENCE. ONE OF THE CONDITIONS NECESSARY FOR MAKING SUCH ALLOWANCE IS T HAT IT SHOULD HAVE BEEN AN EXPENDITURE INCURRED IN THE PARTICULAR ACCOUNTING YEAR IN WHICH THE DEDUCTION IS CLAIMED. THE EXPENDITURE INCURRED BY THE ASSESSEE DURING THE REL EVANT PERIOD WAS ONLY TO THE EXTENT OF RS. 50,772 ON ACCOUNT OF THE FORFEITURE OF THE SECU RITY AMOUNT. IT IS, THEREFORE, OBVIOUS THAT THE ASSESSEE CAN BE GIVEN BENEFIT OF DEDUCTION AS B USINESS EXPENDITURE ONLY OF THE AMOUNT OF RS. 50,772 AND NOT MORE. THE TRIBUNAL WAS NOT, T HEREFORE, JUSTIFIED IN ALLOWING THE DEDUCTION IN EXCESS OF RS. 50,772. CONSEQUENTLY, TH E REFERENCE IS ANSWERED PARTIALLY IN FAVOUR OF THE REVENUE AS UNDER: 'THE TRIBUNAL WAS NOT JUSTIFIED IN ALLOWING DEDUCTI ONS BUSINESS EXPENDITURE OF THE AMOUNT IN EXCESS OF RS. 50,772 WHILE COMPUTING ASSE SSEE'S TOTAL INCOME DURING THE RELEVANT ASSESSMENT YEAR.' 3 ITA NO.1060/K/2012 ASHIKA STOCK BROKING LTD. , AY:2009-10 SINCE CIT(A) HAS DELETED THE DISALLOWANCE MADE BY A O BY FOLLOWING THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF KISHANGARH MADI RA SANGHA, CITED SUPRA, WE FIND NO INFIRMITY IN HIS ORDER AND THE SAME IS UPHELD. THI S ISSUE OF REVENUES APPEAL IS DISMISSED. 5. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) DELETING THE DISALLOWANCE OF DEPRECIATION ON MOTOR CAR. FOR THI S, REVENUE HAS RAISED FOLLOWING GROUND NO.2: THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.2,38,78/- ON ACCOUNT OF DEPRECIA TION ON MOTOR CAR. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE AO DISALLOWED THE DEPRECIATION ONL Y ON THE BASIS THAT THE ASSESSEE HAS PURCHASED CAR PRIOR TO 30.03.2009 AND IT WAS REGIST ERED ONLY ON 30.03.2009. AS THE ASSESEE COULD NOT EXPLAIN AS TO WHETHER THE SAID CAR WAS AC TUALLY PUT TO USE IN THE YEAR UNDER CONSIDERATION THE DEPRECIATION CLAIMED BY THE ASSES SEE WAS DISALLOWED. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALLOWED THE CLA IM OF THE ASSESSEE BY OBSERVING AS UNDER: THE THIRD GROUND OF APPEAL RELATES TO THE DISALLOW ANCE OF DEPRECIATION ON THE MOTOR CAR. THERE IS NO DISPUTE THAT THE CAR WAS DULY REGISTERE D ON 30.3.09 AND THEREFORE IT CANNOT BE SAID THAT IT WAS NOT USED FOR BUSINESS PURPOSES. F ROM THE DELIVERY NOTE OF THE CAR IT WAS EVIDENT THAT THE CAR WAS TAKEN DELIVLERY ON 30.3.20 09. CONSEQUENTLY IT CANNOT BE SAID THAT THE CAR WAS NOT AT ALL USED. IN VIEW OF THE A BOVE THE AO IS DIRECTED TO ALLOW THE DEPRECIATION ON CAR. AGGRIEVED, REVENUE CAME IN APPEAL BEFORE US. 7. WE FIND THAT THE ASSESSEE HAS TAKEN DELIVERY OF THE CAR ON 30.03.2009 AND ALSO GOT IT REGISTERED AND ONCE THIS IS THE POSITION, THE DEPRE CIATION CANNOT BE DISALLOWED. THERE IS NO OCCASION TO DOUBT THAT THE ASSESSEE HAS NOT USED TH E CAR FOR ITS BUSINESS PURPOSES. WE CONFIRM THE ORDER OF CIT(A) AND THIS ISSUE OF REVENUES APP EAL IS DISMISSED. 8. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) DELETING THE DISALLOANCE OF DELAYED PAYMENT OF EMPLOYEES CONTRB UTION TO ESI. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.3: THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.19,536/- READ WITH SECTION 2(24) (X) FOR DELAYED PAYMENT OF EMPLOYEES CONTRIBUTION TO ESI. 9. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE AO HAS DISALLOWED A SUM OF RS.19,5 36/- BEING DELAYED PAYMENT CLAIMED BY THE ASSESSEE AS EXPENSES ON ACCOUNT OF EMPLOYEES C ONTRIBUTION TO ESI. WE FIND THAT THE ISSUE 4 ITA NO.1060/K/2012 ASHIKA STOCK BROKING LTD. , AY:2009-10 IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AS TH E ASSESSEE HAS PAID BEFORE THE DATE OF FILING THE RETURN U/S. 139(1) OF THE ACT, BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. M/S. VIJAY SHREE LIMITED VIDE ITAT NO. 245 OF 2011 IN GA NO.2607 OF 2011 DATED 7 TH SEPTEMBER, 2011. THEREFORE, THIS GROUND OF APPEAL OF REVENUE IS ALSO DISMISSED. 10. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. 11. ORDER IS PRONOUNCED IN THE OPEN COURT ON 13 TH FEB., 2014 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- DCIT, CIRCLE-1, KOLKATA. 2 ./,- / RESPONDENT M/S. ASHIKA STOCK BROKING LTD., 7 TH FLOOR, TRINITY, 226/1, A.J.C. BOSE ROAD, KOLKATA-700 020 3 . 0' ( )/ THE CIT(A), KOLKATA 4. 5. 0' / CIT KOLKATA <= .' / DR, KOLKATA BENCHES, KOLKATA / ./ TRUE COPY, $0'>/ BY ORDER, ' /ASSTT. REGISTRAR .