KISAN RATILAL CHOKSEY SHARES & SECURITIES P.LTD, MUMBAI V. DCIT RG 4(3), MUMBAI

ITA 1099/MUM/2012

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0385 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 11-02-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 15-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANOJ KUMAR SINGH LD
• Assessee Lawyers: DINKLE HARIYA LD
• Keywords: Business income; Depreciation; Rule of consistency; Revenue expenditure

Judgement Text

ITA.NO.1099/MUM/2012 KISAN RATILAL CHOKSEY SHARES & SECURITIES PVT.LTD. ASSESSMENT YEAR-2008-09 IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI , , BEFORE SHRI MANOJ KUMAR AGGARWAL, AM AND SHRI RAVISH SOOD, JM I.T.A. NO.1099/MUM/2012 ( ASSESSMENT YEAR: 2008-09) KISAN RATILAL CHOKSEY SHARES & SECURITIES PRIVATE LIMITED 1102, STOCK EXCHANGE TOWERS DALAL STREET, FORT MUMBAI-400 001 VS. DEPUTY COMMISSIONER OF INCOME TAX RANGE 4(3) AAYKAR BHAVAN, M.K. ROAD NEW MARINE LINES MUMBAI-400 020 PAN/GIR NO. AAACK-4716-G ( APPELLANT ) : ( !' RESPONDENT ) ASSESSEE BY : DINKLE HARIYA, LD. AR REVENUE BY : MANOJ KUMAR SINGH, LD. SR. DR #$ DATE OF HEARING : 12/09/2018 %&'$ / DATE OF PRONOUNCEMENT : 19/09/2018 O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2008-09 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-8 [CIT(A)], MUMBAI, APPEAL NO.CIT(A)-8/CIR.4/267/2010-11 DATED 30/12/2011 BY RAISING FOLLOWING BROAD GROUNDS OF APPEAL: - ITA.NO.1099/MUM/2012 KISAN RATILAL CHOKSEY SHARES & SECURITIES PVT.LTD. ASSESSMENT YEAR-2008-09 2 1. CONSIDERING GAIN ON SALE OF SHARES AS BUSINESS T RADING ACTIVITY / SPECULATION BUSINESS INSTEAD OF SHORT TERM CAPITAL GAIN 2. DISALLOWANCE OF CLUB HOUSE EXPENSES OF RS.5,67,5 00/- 3. DISALLOWANCE OF WEB SITE DEVELOPMENT EXPENSES RS .6,00,000/-: THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. DEPUTY COMMISSIONER OF INCOME TAX-4(3), MUMBAI [AO] U/S 14 3(3) OF THE INCOME TAX ACT, 1961 ON 23/12/2010 WHEREIN THE INCO ME OF THE ASSESSEE HAS BEEN DETERMINED AT RS.375.48 LACS AFTE R CERTAIN ADDITIONS / DISALLOWANCES AS AGAINST RETURNED INCOME OF RS.35 1.48 LACS FILED BY THE ASSESSEE ON 29/09/2008. THE ASSESSEE BEING RESIDENT CORPORATE ENTITY REFLECTED INCOME UNDER THE HEAD BUSINESS INCOME AS WELL UNDER THE HEAD CAPITAL GAINS . 2. WE HAVE HEARD THE SUBMISSIONS MADE BY RESPECTIVE REPRESENTATIVES AND OUR ADJUDICATION ON THE ISSUES UNDER APPEAL IS GIVEN IN THE SUCCEEDING PARAGRAPHS. 3. THE FIRST ISSUE IS RELATED WITH TREATMENT OF SHORT TERM CAPITAL GAINS [STCG] EARNED BY THE ASSESSEE DURING THE IMPUGNED AY. DURI NG ASSESSMENT PROCEEDINGS, IT WAS NOTED THAT THE ASSES SEE REFLECTED STCG ON SALE OF SHARES FOR RS. 54.37 LAKHS AND ACCORDING LY THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF THE SALE AND PURCHA SE OF THE SHARES ALONG WITH THE VALUE AND DATES OF TRANSACTIONS. UPON PERU SAL OF THESE DETAILS, LD. AO NOTED THAT THE TRANSACTIONS WERE SUBSTANTIAL IN NATURE AND OF HIGH-FREQUENCY AND IN FEW CASES THERE WAS NO DELIVE RY OF SHARES. THEREFORE, A PART OF THESE TRANSACTIONS GIVING RISE TO INCOME OF RS.20.40 LACS, IN THE OPINION OF LD. AO, WAS SPECULATIVE IN NATURE AND THEREFORE, ASSESSABLE AS BUSINESS INCOME INSTEAD OF STCG AS REFLECTED BY THE ASSESSEE IN THE RETURN OF INCOME. THE STAND OF LD. AO, UPON ITA.NO.1099/MUM/2012 KISAN RATILAL CHOKSEY SHARES & SECURITIES PVT.LTD. ASSESSMENT YEAR-2008-09 3 CONFIRMATION BY LD. FIRST APPELLATE AUTHORITY, IS U NDER APPEAL BEFORE US. THE LD. AR HAS PLACED RELIANCE ON THE STAND OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR EARLIER YEARS, WHICH WE HAV E PERUSED. WE FIND THAT SIMILAR TREATMENT AS GIVEN BY LD. AO IN AY 200 4-05 HAS BEEN NEGATED BY TRIBUNAL VIDE ITA NO.2138/M/2011 ORDER DATED 03/11/2017 ON THE RULE OF CONSISTENCY. AT THE SAME TIME, THE T RIBUNAL IN AY 2007-08 VIDE ITA NO.3325/MUM/2011 ORDER DATED 05/06/2015 CONFIRMED THE STAND OF LOWER AUTHORITIES IN TREATING THE SAME AS BUSINESS INCOME SINCE THE TRANSACTIONS BEING CARRIED OUT BY THE ASSESSEE IN THAT AY WERE INTRA- DAY IN NATURE. THEREFORE, BY APPLYING THE COMBINED RATI O OF THESE ORDERS, WE DIRECT LD. AO TO SEGREGATE THE INTRA-DAY / WITHOUT DELIVERY TRANSACTIONS / TRANSACTIONS OF VERY SHORT DURATION IN NATURE (UP-TO 30 DAYS) OUT OF RS.20.40 LACS AND TREAT THE SAME AS BUSINESS INCOME WHEREAS THE REST OF THE TRANSACTIONS OUT OF RS.20.4 0 LACS SHALL BE ACCEPTED AS STCG. IN THIS REGARD, THE ASSESSEE IS DIRECTED TO PROVIDE NECESSARY DETAILS TO LD. AO. THIS GROUND STAND PART LY ALLOWED. 4. THE SECOND ISSUE IS RELATED WITH AGGREGATE CLUB-HOUSE EXPENSES OF RS. 5.67 LACS PAID BY ASSESSEE COMPRISING OF MEMBER SHIP FEES OF RS.4.50 LACS TO AN ENTITY NAMELY AAKASH LAVLESH LEISURE PRIVATE LIMITED AND ANOTHER RS. 1.17 LACS PAID TO SURAT CRICKET ASSOCIATION. BOTH THE SUBSCRIPTIONS / MEMBERSHIP HAVE BEEN TAKEN IN THE N AME OF THE DIRECTOR OF THE ASSESSEE. THE SAME GOT DISALLOWED SINCE THE IMPUGNED EXPENDITURE, IN THE OPINION OF LD. AO, WAS PERSONAL IN NATURE AND NOT INCURRED FOR BUSINESS OF THE ASSESSEE WHICH WAS SHARE-BROKING AND INVESTMENTS . THE LD. CIT(A) HAS CONFIRMED THE STAND OF LD. AO BY RELYING UPON THE JUDGMENT OF HONBLE KERALA HIGH CO URT RENDERED IN ITA.NO.1099/MUM/2012 KISAN RATILAL CHOKSEY SHARES & SECURITIES PVT.LTD. ASSESSMENT YEAR-2008-09 4 FRAMATONE CONNECTOR OEN LTD. ON THE PREMISE THAT THE IMPUGNED EXPENDITURE WAS ONE TIME EXPENDITURE AND BROUGHT IN TO EXISTENCE ASSET OR ADVANTAGE OF ENDURING IN NATURE AND THEREFORE, T HE SAME COULD NOT BE ALLOWED TO THE ASSESSEE. AS RIGHTLY POINTED OUT BY THE ASSESSEE, WE FIND THAT LD CIT(A) HAS PROCEEDED ON WRONG ASSUMPTION OF FACTS SINCE THE EXPENDITURE WAS DISALLOWED SINCE THE SAME, IN THE O PINION OF LD. AO, WAS PERSONAL IN NATURE. THE LD. AR HAS SUBMITTED TH AT THE EXPENDITURE WAS INCURRED FOR THE BUSINESS PURPOSES AND THEREFOR E, ALLOWABLE U/S 37(1). THE LD. DR HAS SUBMITTED THAT COMPLETE ONUS TO SUBSTANTIATE THE SAME WAS ON ASSESSEE. UPON CAREFUL CONSIDERATION OF FACTUAL MATRIX, WE DEEM IT FIT TO RESTORE THE MATTER BACK TO THE FILE OF LD. AO WITH A VIEW TO PROVIDE ANOTHER OPPORTUNITY TO THE ASSESSEE TO SUBS TANTIATE THE ADMISSIBILITY OF THE IMPUGNED EXPENDITURE AT THE TH RESHOLD OF SECTION 37(1). THIS GROUND STAND ALLOWED FOR STATISTICAL PU RPOSES. 5. THE LAST ISSUE PERTAINS TO DISALLOWANCE OF SOFTWARE EXPENSES OF RS.6 LACS STATED TO BE PAID BY THE ASSESSEE TO AN E NTITY NAMELY ACCORD FINTECH AND CLAIMED AS REVENUE EXPENDITURE. THE SAME HAS BE EN DISALLOWED AS REVENUE EXPENDITURE BY LD. AO BUT THE DEPRECIATION AGAINST THE SAME @12.5% [FOR HALF YEAR] HAS BEEN AL LOWED AND ACCORDINGLY, THE ADDITION OF BALANCE AMOUNT OF RS.5 .25 LACS HAS BEEN MADE IN THE HANDS OF THE ASSESSEE. UPON PERUSAL OF COPY OF INVOICE ISSUED BY PAYEE AS PLACED ON RECORD, WE FIND THAT T HE EXPENDITURE HAS BEEN INCURRED FOR WEBSITE DEVELOPMENT, WEB CONTENT, WEB TRACKER ETC. THE NATURE OF THE STATED EXPENDITURE, IN OUR OPINIO N, HAS NOT RESULTED INTO ENLARGEMENT OF PROFIT MAKING APPARATUS FOR THE ASSE SSEE AND NO NEW ASSET HAS COME INTO EXISTENCE RATHER THE EXPENDITUR E WAS MORE TOWARDS ITA.NO.1099/MUM/2012 KISAN RATILAL CHOKSEY SHARES & SECURITIES PVT.LTD. ASSESSMENT YEAR-2008-09 5 ENABLING THE ASSESSEE TO RUN THE BUSINESS SMOOTHLY AND EFFICIENTLY. THE NATURE OF PAYMENT IS NOT UNDER DISPUTE SINCE LD. AO HAS ALREADY ALLOWED THE DEPRECIATION AGAINST THE SAME. THEREFORE, WE HO LD THAT THE IMPUGNED EXPENDITURE WAS REVENUE IN NATURE AND ALLOWABLE IN FULL TO THE ASSESSEE. THE DEPRECATION OF RS.0.75 LACS AS ALLOWED BY LD. A O STAND REVERSED. THIS GROUND STAND ALLOWED. 6. RESULTANTLY, THE APPEAL STAND PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH SEPTEMBER, 2018. SD/- SD/- (RAVISH SOOD) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER (# MUMBAI; DATED 19.08.2018 SR.PS:-THIRUMALESH ! COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. ) / THE CIT(A) 4. ) / CIT CONCERNED 5. *+!$, , ' (# / DR, ITAT, MUMBAI 6. +-./# GUARD FILE ' / BY ORDER, # '$% (DY./ASSTT.REGISTRAR) (# / ITAT, MUMBAI