Gwalior Webbing Co. Pvt. Ltd., Kolkata V. ACIT, Circle - 6, Kolkata, Kolkata

ITA 114/KOL/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9348 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2011
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2001-2002
• Appeal Filed On: 29-01-2009
• Court: TRIBUNAL
• Department Lawyers: S S KUMAR
• Assessee Lawyers: J P KHAITAN
• Keywords: Business expenditure; Earning of tax free income; Speculation loss
• Section: 14A; 43(5); 10

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA () BEFORE . . . . . . . . , , , , , !'# !'# !'# !'# /AND . .. . . .. .' '' ' , $ ) [BEFORE HONBLE SRI D. K. TYAGI, JM & HONBLE SRI C . D. RAO, AM] #% #% #% #% / I.T.A NO. 114/KOL/2009 &' '() &' '() &' '() &' '()/ // / ASSESSMENT YEAR : 2001-02 & #% #% #% #% / I.T.A NO. 1137/KOL/2008 &' '() &' '() &' '() &' '()/ // / ASSESSMENT YEAR : 2004-05 & #% #% #% #% / I.T.A NO. 1138/KOL/2008 &' '() &' '() &' '() &' '()/ // / ASSESSMENT YEAR : 2005-06 GWALIOR WEBBING CO. PVT. LTD. -VS- ASSISTANT COM MISSIONER OF INCOME-TAX, (PA NO.AABCG 1807 D) CIRCLE-6, KOLKATA. ( +, /APPELLANT ) (-+,/ RESPONDENT ) FOR THE APPELLANT : SRI J. P. KHAITAN FOR THE RESPONDENT : SRI S. S. KUMAR . / ORDER PER D. K. TYAGI, JM ( . . . . . . . . , , , , ) ALL THESE APPEALS FILED BY THE ASSESSEE ARE DIRECTE D AGAINST THE SEPARATE ORDERS PASSED BY THE LD. CIT(A), KOLKATA DATED 14.11.2008 FOR ASSESSMENT YEAR 2001-02 AND DATED 29.4.2008 FOR ASSESSMENT YEARS 2004-05 & 2005 -06 RESPECTIVELY. SINCE MOST OF THE ISSUES ARE COMMON AND FACTS ARE IDENTICAL, WE D ISPOSE OF ALL THE APPEALS BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE TAKE UP THE ITA NO. 114/KOL/2009. THE A SSESSEE HAS RAISED THE FOLLOWING GROUNDS : 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LEARNED CIT (APPEALS) WAS NOT JUSTIFIED, IN TREATING LOSS ON VALUATION O F SHARES AS SPECULATION LOSS AND NOT THE BUSINESS LOSS FOR THE YEAR. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (APPEALS) ERRED IN NOT HOLDING THAT EXPLANATION TO SECTION 7 3 OF I.T. ACT DO NOT APPLY IN THE PRESENT CASE AS THE ASSESSING OFFICER HAS IGNORED THE INTENTION OF THE INSERTION OF THE EXPLANATION AS EXPLAINED IN THE BOARDS CIRCUL AR NO.204 DT. 24.07.1976. 2 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND WITHOUT PREJUDICE TO ABOVE, THE LEARNED CIT (APPEALS) FAILED TO APPRECI ATE THE FACT THAT THE LOSS OCCURRED ON VALUATION OF SHARES IS BUSINESS LOSS O F THE APPELLANT FOR THE YEAR AND IN THE EVENT OF ANY INCREASE THE VALUATION OF THE SHARES, SUCH GAIN IS TREATED ASBUSINESS PROFIT FOR THAT YEAR AS PER CONSISTENT POLICY OF THE COMPANY. 4. FOR THAT FURTHER AND IN ANY EVENT AND WITHOUT PR EJUDICE TO THE AFORESAID, IN THE EVENT OF IT BEING HOLD THAT THE LOSS IN SHARE TRAD ING BUSINESS IS SPECULATIVE LOSS, A DIRECTION BE MADE UPON THE ASSESSING OFFICER TO ADJUST SUCH LOSS AGAINST THE PROFITS OF THE SAID BUSINESS IN THE SUBSEQUENT YEA R/S. 5. THAT ON THE FACTS AND CIRCUMSTANCES THE CASE, TH E LEARNED CIT (APPEALS) ERRED IN NOT HOLDING THAT NO PART OF ADMINISTRATIVE EXPE NSES ARE TO BE ALLOCATED AGAINST EARNING DIVIDEND INCOME. 6. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (APPEALS) ERRED IN NOT HOLDING THAT THE ASSESSING OFFICER HA S APPORTIONED THE ADMINISTRATIVE EXPENSES AGAINST DIVIDEND INCOME IN AN ARBITRARY A ND UNJUSTIFIABLE MANNER INSPITE OF THE FACT THAT THERE IS NO DIRECT RELATI ONSHIP OF SUCH EXPENSES WITH EARNING OF SUCH INCOME. 7. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (APPEALS) ERRED IN ALLOCATING 25% OF ADMINISTRATIVE EXPENSES AS ATTRIBUTABLE TO EARNING DIVIDEND INCOME FOR THE YEAR WHICH SEEMS TO BE HIG HER. 8. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (APPEALS) ERRED IN NOT HOLDING THAT FOREIGN TRAVEL EXPENSES PERTAINING TO WIFE OF THE PRESIDENT OF THE COMPANY IS FOR BUSINESS PURPOSE A ND IS THEREFORE AN ALLOWABLE BUSINESS EXPENDITURE. 2. GROUND NOS. 1 TO 4 ARE IN RESPECT OF APPLICABILI TY OF EXPLANATION TO SECTION 73 OF THE I. T. ACT. WHILE TREATING THE ASSESSEES LOSS IN SHARE VALUATION OF RS.68,87,522/- AS SPECULATION LOSS AND DISALLOWED AS A BUSINESS LOSS THE ASSESSING OFFICER HAS OBSERVED AS UNDER : IT IS NOTED IN SCHEDULE 8 OF SCHEDULES ANNEXED TO AND FORMING PART OF BALANCE SHEET THAT WHILE THE OPENING STOCK OF SHARES AND SECURIT IES IS RS 3,12,40,189/-, THE CLOSING STOCK IS RS 2,43,52,667/-. THEREBY, THERE IS A LOS S OF RS 68,87,522/- IN STOCKS OF SHARES. DETAILS WERE ASKED FOR OF THE SAME AND WER E DULY GIVEN. IT WAS ALSO SPECIFICALLY QUERIED AS TO THE APPLICABILITY OF EX PLANATION TO SECTION 73 FOR THE ASSESS COMPANY. IN RESPONSE, A WRITTEN SUBMISSION WAS GIVEN WHICH CAN BE SUMMARISED AS FOLLOWS I) COMPANY HAS BEEN PURSUING BUSINESS OF GRANTING OF LOANS AND ADVANCES AND HOLDING OF AND TRADING IN SHARES AND SECURITIES. 3 (II) DURING THE RELEVANT YEAR, UNITS OF MUTUAL FUN D WERE PURCHASED, UNITS OF MUTUAL FUND CANNOT BE CLASSIFIED AS SHARES OF OTHER COMPANIES AND COMPANY DID NOT ENTER INTO TRADING ACTIVITY IN SHARES EXCEPT A SOLITARY PURCH ASE OF RS. 98,800/- AND ONLY TRADING ACTIVITY WAS IN MUTUAL FUNDS. (III) EXPLANATION TO SECTION 73 IS A DEEMING FICTI ON PROVIDING FOR THE BUSINESS OF PURCHASE AND SALE OF SHARES BE DEEMED AS SPECULATI ON BUSINESS IMPLYING THAT LOSSES FROM SHARE DEALINGS BE SET OFF ONLY AGAINST PROFIT S OR GAINS OF SPECULATION BUSINESS. (IV) COMPANY HAS DIVIDEND INCOME WHICH ALTHOUGH TA X FREE IN THE YEAR UNDER CONSIDERATION WOULD HAVE BEEN CONSIDERED AS INCOME FROM OTHER SOURCES, IF TAKEN INTO ACCOUNT AND WOULD HAVE CONSTITUTED A SIGNIFICANT P ORTION OF TOTAL INCOME. (V) CONDITION PRECEDENT TO APPLICABILITY I.E PURCH ASE AND SALE OF SHARES WAS NOT FULFILLED. THE SUBMISSION GIVEN WAS CAREFULLY CONSIDERED BUT IS HOWEVER NOT ACCEPTABLE FOR REASONS GIVEN IN DETAIL HEREAFTER. (I) IT IS NOTED IN APPLICATION OF FUNDS DETAILS IN BALANCE SHEET THAT WHILE OPENING STOCK OF SHARES AND SECURITIES IS RS. 3,12,40,189/- AND THE CLOSING STOCK IS RS.2,43,52,667/-, IN COMPARISON FOR LOANS, DEPOSIT S AND ADVANCES THE COMPARATIVE FIGURES ARE RS 12,07,189/- AND RS 26,96,620/- AS O N 31.3.2001 AND 31.3.2000 RESPECTIVELY. THEREFORE THE MAIN BUSINESS CAN BE S AID TO BE TRADING IN SHARES AND SECURITIES. (2) THE ASSESSEE COMPANY HAS ITSELF IN ITS PROFIT AND LOSS ACCOUNT DECLARED A LOSS OF RS.68,87,522/- IN DECREASE IN STOCKS. IN ITS BALAN CE SHEET ALSO AS MENTIONED EARLIER, SUCH LOSS HAS BEEN DECLARED. THE BUSINESS OF THE ASSESSEE COMPANY IS DEFINITELY TRADING IN SHARES AND SECURITIES WHICH IS NOT IN DISPUTE AND HAS IN FACT BEEN STATED IN ITS WRITTEN SUBMISSION. THE HONBLE JURI SDICTIONAL HIGH COURT OF CALCUTTA IN THE CASE OF CIT VS SUN DISTRIBUTERS AND MINING (19 93 ) REPORTED IN 68 TAMAN 223 CAL HAS HELD THAT APPLICATION OF EXPLANATION TO SE CTION 73 CANNOT BE DENIED MERELY ON THE GROUND THAT THERE WAS NO PURCHASE OF SHARES BY ASSESSEE DURING RELEVANT ASSESSMENT YEAR AS SECTION 73 ONLY REQUIR ES THAT THERE WILL BE BUSINESS OF PURCHASE AND SALE OF SHARES BUT IT DOES NOT REQUIR E THAT BOTH PURCHASE AND SALE OF SHARES WOULD TAKE PLACE IN THE SAME YEAR. THE HON BLE COURT HELD THAT WHAT WOULD BE RELEVANT IS WHETHER BUSINESS OF THE COMPANY CONSIS TS OF PURCHASE AND SALE OF SHARES. THIS DECISION IS SQUARELY APPLICABLE IN TH E ASSESSEES CASE. (3) THE INTERPRETATION OF THE ASSESSEE COMPANY AT (III) ABOVE IS PARTLY ACCEPTED IN THE SENSE THAT SPECULATION LOSS WILL BE ALLOWED TO BE CARRIED FORWARD TO BE SET OFF AGAINST PROFITS AND GAINS OF SPECULATION BUSINESS (IF ANY). (4) THE ASSESSEE HAS ALSO SUBMITTED THAT DIVIDEND INCOME IF IT WOULD HAVE BEEN TAXABLE WOULD HAVE CONSTITUTED SIGNIFICANT PORTIO N OF TOTAL INCOME BUT THE FACT REMAINS THAT DIVIDEND INCOME IS TAX FREE AND MORE IMPORTANT SECTION 73 SPECIFICALLY SPEAKS OF CHARGEABLE INCOME. FOR REASONS EXPLAINED ABOVE, ASSESSEES LOSS IN SH ARE VALUATION OF RS.68,87,522/- IS TREATED AS SPECULATION LOSS AND DISALLOWED AS A BU SINESS LOSS. IT IS ALLOWED TO BE CARRIED FORWARD AS SPECULATION LOSS. 4 IN APPEAL, THE LD. CIT(A) CONFIRMED THIS ACTION OF THE ASSESSING OFFICER. BEING FURTHER AGGRIEVED, THE ASSESSEE IS NOW IN APPEAL BEFORE US. 3. AT THE TIME OF HEARING BEFORE US THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SAME SUBMISSIONS AS SUBMITTED BEFORE THE LD. CIT(A) AND FURTHER SUBMITTED THAT THE EXPLANATION TO SECTION 73 IS A DEEMING PROVISION AN D WAS INTRODUCED FOR THE REASONS CONTEMPORANEOUSLY EXPLAINED IN A CIRCULAR HEARING N O. 204 DATED JULY 24, 1976 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES. THE SAID EXPL ANATION IS A PROVISION AGAINST TAX AVOIDANCE TO CURB THE DEVICE RESORTED TO BY BUSINES S HOUSES CONTROLLING GROUPS OF COMPANIES TO MANIPULATE THE SHARE DEALINGS IN SUCH MANNER SO AS TO REDUCE THE TAXABLE INCOME OF SUCH COMPANIES WHICH ARE UNDER THEIR CONT ROL. BY REASON OF THE EXPLANATION, THE LOSS WHICH ARISES IN SUCH TRANSACTIONS IS DEEME D TO BE SPECULATIVE AND IS TO BE SET OFF ONLY AGAINST PROFITS OF SPECULATION BUSINESS AND IS NOT TO BE ADJUSTED AGAINST THE NORMAL BUSINESS PROFITS. THE EXPLANATION IS REQUIRED TO BE CONSTRUED AND APPLIED HAVING REGARD TO THE SAID OBJECT AND PURPOSE IN VIEW OF THE PRINC IPLES LAID DOWN BY THE HONBLE SUPREME COURT IN K.P. VARGHESE VERSUS ITO (1981) 13 1 TTR 597. THIS WAS ALSO THE VIEW TAKEN BY THE DELHI BENCH OF THE ITAT IN AMAN P ORTFOLIO (P) LIMITED- VERSUS- DCIT (2005) 92 LTD 324. HE ALSO CONTENDED THAT IN THE INSTANT CASE, EXCEPT FOR THE SOLITARY PURCHASE, THERE WAS NO SHARE DEALING AT ALL DURING THE PREVIOUS YEA R AND THE ENTIRE LOSS AROSE BECAUSE OF FALL IN THE MARKET VALUE OF THE SHARES HELD OVER FR OM EARLIER YEARS. 95% OF THE ASSESSEES SHARE HOLDING WAS IN QUOTED COMPANIES WHOSE SHARES WERE ACTIVELY TRADED ON THE PREMIER STOCK EXCHANGES OF THE COUNTRY. THAT APART, THE ASSESSEE HAD NO TAXABLE INCOME DURING THE PREVIOUS YEAR WHICH COULD HE REDUCED BY THE LOSS ON ACCOUNT OF VALUATION OF THE SHARES. EVEN AFTER TREATING THE LOSS ON ACCOUNT OF SHARE VALUATION AS A SPECULATION LOSS THE ASSESSING OFFICER HAS COMPUTED BUSINESS LO SS OF RS. 20,87,460/-. HE FURTHER SUBMITTED THAT IN VIEW OF THE PRINCIPLE S LAID DOWN BY THE DELHI BENCH OF ITAT IN AMAN PORTFOLIOS CASE (SUPRA), THE EXPLA NATION TO SECTION 73 CANNOT BE INVOKED IN THE FACTS AND CIRCUMSTANCES OF THE INSTA NT CASE AND THE LOSS ON ACCOUNT OF VALUATION OF THE STOCK- IN-TRADE AT COST OR MARKET VALUE WHICHEVER IS LOWER CANNOT HE TREATED AS A SPECULATION LOSS. HE FURTHER SUBMITTED THAT IN ANY EVENT AND WITHOUT PREJUDICE TO THE AFORESAID THE DIVIDEND INCOME OF THE ASSESSEE OF RS. 84,75,445/- (OR EVEN THE LOWER FIGURE OF 5 RS.76,95,881/- WRONGLY COMPUTED BY THE ASSESSING OF FICER AND SUBJECT MATTER OF GROUNDS 5 AND 6) IS HIGHER THAN THE LOSS OF RS.68, 87,522/-. THE EXPLANATION TO SECTION 73 IS NOT APPLICABLE WHERE THE GROSS TOTAL INCOME C ONSISTS MAINLY OF INCOME WHICH IS CHARGEABLE, INTER ALIA, UNDER THE HEAD INCOME FROM OTHER SOURCES. THE ASSESSING OFFICER PROCEEDED ON THE BASIS THAT SINCE DIVIDEND INCOME WAS TAX FREE, THE SAME WAS REQUIRED TO BE IGNORED FOR THE PURPOSES OF THE EXPL ANATION. IT WAS ALSO SUBMITTED THAT THE SAID APPROACH IS ERRONEOUS. SIMPLY BECAUSE EXEMPTIO N WAS GRANTED IN RESPECT OF DIVIDEND INCOME ON WHICH TAX WAS PAID BY THE DISTRI BUTING COMPANY, IT DID NOT CEASE TO BE CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SOU RCES. ALL THAT THE EXPLANATION TO SECTION 73 REQUIRES IS THAT THE INCOME MUST THE CHA RACTER OF INCOME CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AND IT DOES NOT FU RTHER STIPULATE THAT TAX SHOULD BE PAID ON SUCH INCOME OR THAT IT SHOULD BE CHARGED TO TAX UNDER THAT HEAD. IN UNION OF INDIA. VERSUS- AZADI BACHAO ANDOLAN (2003) 263 ITR 706 (SC), IT WAS HELD BY THE HONBLE SUPREME COURT THAT MERELY BECAUSE EXEMPTION HAD BEEN GRANTED IN RESPECT OF TAXABILITY OF A PARTICULAR SOURCE OF INCOME, IT CAN NOT HE POSTULATED THAT. THE ENTITY IS NOT, LIABLE TO TAX. IN OTHER WORDS, NOTWITHSTANDING THA T NO TAX IS PAID BECAUSE OF EXEMPTION, THE INCOME DOES NOT CEASE TO BE CHARGEABLE UNDER TH E HEAD INCOME FROM OTHER SOURCES. IN THE CIRCUMSTANCES AND IN ANY VIEW OF T HE MATTER, THE DIVIDEND INCOME BEING GREATER THAN THE LOSS ON ACCOUNT. OF SHARE VALUATIO N, THE EXPLANATION TO SECTION 73 HAS NO APPLICATION. IT WAS FURTHER SUBMITTED THAT ACCORDING TO SECTION 10, INCOME FALLING WITHIN ANY OF ITS CLAUSES SHALL NOT BE INCLUDED IN COMPUTING T HE TOTAL INCOME. SECTION 10 DOES NOT REFER TO GROSS TOTAL INCOME, IT WAS ALSO SUBMITTE D THAT DIVIDEND INCOME FORMS PART OF THE GROSS TOTAL INCOME BUT BY REASON OF SECTION 1 0(33), IT IS NOT TO BE INCLUDED IN THE TOTAL INCOME. ACCORDINGLY, BEFORE ARRIVING AT THE TOTAL INCOME FROM THE GROSS TOTAL INCOME, THE DIVIDEND INCOME IS REQUIRED TO BE DEDU CTED SO THAT THE TOTAL INCOME DOES NOT INCLUDE THE DIVIDEND INCOME. FOR THE REASONS ME NTIONED IN THE ASSESSEES PREVIOUS NOTE, IT WAS ALSO SUBMITTED THAT DIVIDEND INCOME BE ING INCOME CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AND FORMING PART OF THE GROSS TOTAL INCOME CANNOT BE IGNORED FOR THE PURPOSE OF CONSIDERING THE APPLICAB ILITY OF THE EXPLANATION TO SECTION 73. IN THE ASSESSEES CASE, THE DIVIDEND INCOME BE ING GREATER THAN THE LOSS ON ACCOUNT OF SHARE VALUATION, THE EXPLANATION TO SECTION 73 HAS NO APPLICATION. 6 IT WAS ALSO SUBMITTED THAT ANY OTHER VIEW WOULD LE AD TO AN ANOMALOUS SITUATION. IT WOULD MEAN THAT THE YEARS IN WHICH DIVIDEND INCO ME IS NOT TO BE INCLUDED IN THE TOTAL INCOME BECAUSE OF THE PROVISIONS CONTAINED IN SECTI ON 10, ANY LOSS IN THE PURCHASE OR SALE OF SHARES WOULD BECOME SPECULATION LOSS AND IN THE YEARS IN WHICH DIVIDEND INCOME IS TO BE INCLUDED IN THE TOTAL INCOME, SUCH LOSS WO ULD NOT BE SPECULATION LOSS. IT IS SUBMITTED THAT THE LOSS IN PURCHASE AND SALE OF SHA RES CANNOT BE DIFFERENTLY TREATED DEPENDING UPON THE TAXATION OR OTHERWISE OF THE DIV IDEND INCOME. IT IS SUBMITTED THAT THE EXPLANATION TO SECTION 73 SHOULD BE CONSTRUCTED IN THE LIGHT OF ITS OBJECT AND PURPOSE AS LAID DOWN IN THE DECISION OF THE DELHI BENCH OF THE HONBLE TRIBUNAL IN AMAN PORTFOLIO (P) LID. VS. DEPUTY COMMISSIONER OF INCOM E TAX (2005) 92 ITD 324. ACCORDINGLY, IN THE INSTANT CASE, THE LOSS ON ACCOU NT OF VALUATION OF STOCK- IN TRADE AT COST OR MARKET VALUE WHICHEVER IS LOWER CANNOT BE T REATED AS A SPECULATION LOSS. THE ASSESSEE ALSO TOOK AN ALTERNATIVE GROUND BEFOR E US THAT IF IT IS HELD THAT LOSS IN SHARE TRADING BUSINESS IS SPECULATION LOSS, A DIREC TION BE GIVEN TO THE ASSESSING OFFICER TO ADJUST SUCH LOSS AGAINST THE PROFITS OF THIS BUS INESS IN SUBSEQUENT YEARS. FOR THIS PROPOSITION, HE PLACED RELIANCE ON A DECISION IN TH E CASE OF CIT VS. LOKMAT NEWSPAPERS P. LTD. 322 ITR 43(MUM). 4. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE R OF THE ASSESSING OFFICER. 5. AFTER HEARING THE RIVAL SUBMISSIONS AND PERUSING THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE LD. CIT(A) ON THE SUBMISSIONS OF T HE ASSESSEE ASKED FOR REMAND REPORT AND AFTER TAKING INTO CONSIDERATION THE REMAND REPO RT AND ALSO THE ASSESSEES SUBMISSIONS ON THE SAID REPORT HAS CONFIRMED THE AD DITION BY OBSERVING AS UNDER : 7.I . I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER, THE REMAND REPORT OF THE A.O. AND ALSO THE WRITTEN SUBMISSIONS OF THE LD. A.R. II. AS PER EXPLANATION TO SECTION 73, WHERE ANY P ART. OF THE BUSINESS OF A COMPANY (OTHER THAN A COMPANY MENTIONED HEREINAFTER) CONSI STS IN THE PURCHASE AND SALE OF SHARES OF OTHER COMPANIES, SUCH COMPANY SHALL FOR THE PURPOSES OF SECTION 73 HE DEEMED TO BE CARRYING ON A SPECULATION BUSINESS TO THE EXTENT TO WHICH THE BUSINESS CONSISTS OF THE PURCHASE AND SALE OF SUCH SHARES. HOWEVER THE ABOVE DEEMING PROVISION IS NOT APPLICA BLE TO: A. A COMPANY WHOSE GROSS TOTAL INCOME CONSISTS MA INLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS INTEREST ON SECURITI ES 1NCOME FROM HOUSE PROPERTY, CAPITAL GAINS AND INCOME FROM OTHER SOURCES. 7 B. A COMPANY THE PRINCIPAL BUSINESS OF WHICH IS T HE BUSINESS OF BANKING OR THE GRANTING OF LOANS AND ADVANCE. III. AS SEEN FROM THE BALANCE SHEET OF THE APPELLA NT COMPANY IT CAN HE SAID THAT THE PRINCIPAL BUSINESS OF THE COMPANY IS TRADING IN SH ARES AND SECURITIES. ALTHOUGH DURING THE YEAR THE COMPANY DID NOT ENTER INTO ANY TRADIN G ACTIVITY IN THE SHARES EXCEPT FOR SOLITARY PURCHASE AMOUNTING TO RS. 98,800, THE MAI N BUSINESS IS TRADING IN SHARES AND SECURITIES. EXPLANATION TO SECTION 73 STARTS WITH WHERE THE BUSINESS OF A COMPANY, AND PRIMARILY EMPHASIZES ON THE BUSINESS OF THE COMPAN Y. WHAT IS TO BE SEEN HERE IS WHETHER THE BUSINESS OF THE COMPANY CONSISTS OF PU RCHASE AND SALE OF SHARES AND IT IS NOT RELEVANT WHETHER DURING THE YEAR TRANSACTIONS WERE DONE IN PURCHASE AND SALE OF SHARES. THE DECISION OF HONBLE JURISDICTIONAL HIG H COURT OF KOLKATA IN THE CASE OF CIT VS SUN DISTRIBUTORS AND MINING CO. LTD. (1993) 68 TAXMAN 223(CAL) IS SQUARELY APPLICABLE IN THIS CASE. IN THIS JUDGEMENT IT WAS HELD THAT THE EXPLANATION DOES NOT REQUIRE THAT BOTH SALE AND PURCHASE OF THE SHARES SHOULD TAKE PLACE IN ONE AND SAME YEAR. IT MAY BE THAT IN A PARTICULAR YEAR SHARES W ERE ONLY SOLD AND IN A PARTICULAR YEAR SHARES WERE ONLY PURCHASED. WHAT IS TO BE SEEN IS WHETHER THE BUSINESS OF THE COMPANY CONSISTS OF PURCHASE AND SALE OF SHARES. THE NATUR E OF ASSESSEES BUSINESS IN GENERAL, THE PURPOSE BEHIND THE PARTICULAR TRANSACTION THE EFFECT OF THE TRANSACTION, ETC. ARE ALL TO BE CONSIDERED. THE PRINCIPAL BUSINESS CAN BE DETER MINED IF ONE LOOKS AT THE AMOUNT OF INVESTMENT MADE AND NOT LOOKING AT THE PROFIT EARN ED OR LOSS SUFFERED IN THIS YEAR OR THAT YEAR. ACCORDING TO THE APPLICATION OF FINDS THE MA IN BUSINESS CAN HE SAID TO BE TRADING IN SHARES AND SECURITIES. IV. IN ORDER TO ASCERTAIN WHETHER AN ASSESSEE WOULD BE ENTITLED TO THE BENEFIT OF THE EXPLANATION TO SECTION73, IT IS TO BE EXAMINED FI RST WHETHER THE ASSESSEE COMES WITHIN THE EXCEPTION PROVIDED IN THE SAID EXPLANATION. [I T IS TO BE FOUND OUT AS TO HOW IT STANDS BEFORE THE BENEFIT OF EXPLANATION TO SECTION 73 IS ALLOWED]. THE EXPRESSION ... GROSS TOTAL INCOME CONSISTS MAINLY OF INCOME ... CHARGEA BLE UNDER THE HEADS . USED IN THE EXPLANATION IS CLEAR AND UNAMBIGUOUS. IT GIVES OUT THE INTENT OF THE LEGISLATURE. V. AS CAN HE READ FROM THE EXPLANATION TO SECTION 73 OTHER THAN A COMPANY WHOSE GROSS TOTAL INCOME CONSISTS MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS . . GROSS TOTAL INCOME AS DEFINED UNDER DEFINITION U /S 80B(5) MEANS THE TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT, BEFORE MAKING ANY DEDUCTIONS UNDER CHAPTER VT-A. VI. CHAPTER VI-A DEALS WITH DEDUCTIONS TO HE MADE IN COMPUTING TOTAL INCOME. ACCORDING TO SECTION 10 OF INCOME TAX ACT INCOME F ALLING WITH IN ANY OF ITS CLAUSES SHALL NOT BE INCLUDED IN COMPUTING THE TOTAL INCO ME. DIVIDEND INCOME DOES NOT FORM PART OF THE GROSS TOTAL INCOME BY VIRTUE OF THE D EFINITION U/S 80B(5). DIVIDEND INCOME U/S. 10(33) OF THE IT ACT IS INCOME, WHICH DOES NO T FORM PART OF TOTAL INCOME. IN THIS VIEW OF THE MATTER, IT MUST BE HELD THAT THE ASSES SEE FOR THE YEAR UNDER REFERENCE CANNOT BE SAID TO BE A COMPANY WHOSE GROSS TOTAL INCOME CONSISTS MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS INTEREST ON SECURITIES , INCOME FROM HOUSE PROPERTY, CAPITAL GAINS AND INCOME FROM OTHER SOURCES. IN M Y CONSIDERED OPINION, THE APPELLANT DOES NOT, FALL IN ANY OF THE EXCEPTED CATEGORIES O F COMPANIES SPECIFIED IN THE EXPLANATION TO SECTION 73, AS SUCH THE EXPLANATION TO SECTION 73 IS CLEARLY APPLICABLE. ACCORDINGLY, IN THE INSTANT CASE, THE LOSS ON AMOU NT OF VALUATION OF THE STOCK IN TRADE IN RIGHTLY TREATED AS SPECULATION LOSS BY THE ASSESSI NG OFFICER. HENCE THE APPEAL OF THE ASSESSEE ON THIS GROUND IS DISMISSED. 8 SINCE THE ABOVE FINDING OF THE LD. CIT(A) REMAINED UNCONTROVERTED AT THE TIME OF HEARING BEFORE US, WE DO NOT FIND ANY INFIRMITY IN HIS ORDER AND THE SAME IS HEREBY UPHELD. AS FAR AS ALTERNATIVE GROUND IS CONCERNED, THE HON BLE MUMBAI HIGH COURT ON THE SAME FACTS IN THE CASE OF CIT VS. LOKMAT NEWSPA PERS P. LTD. REPORTED IN 322 ITR 43 HAS HELD AS UNDER : LOSS CARRY FORWARD AND SET OFF SPECULATION BUSI NESS DEEMING PROVISION THAT WHERE ANY PART OF COMPANYS BUSINESS CONSISTS OF P URCHASE AND SALE OF SHARES, COMPANY DEEMED TO CARRY ON SPECULATION BUSINESS SCOPE OF APPLIES WHETHER LOSS OR PROFIT ARISES FROM SUCH TRANSACTION DEFINITION OF SPEC ULATIVE TRANSACTION IN SECTION 43(5) NOT TO BE READ INTO DEEMING PROVISION IN EXPLANATI ON TO SECTION 73 PROFITS FROM PURCHASE AND SALE OF SHARES BY ACTUAL DELIVERY N OT TO BE EXCLUDED FOR DEEMING FICTION COMPANY ENTITLED TO SET OF PROFITS FROM SUCH TRA NSACTIONS AGAINST SPECULATION LOSS BROUGHT FORWARD FROM EARLIER YEARS INCOME TAX AC T, 1961, SS.43(5), 73, EXPLN. RESPECTFULLY FOLLOWING THE SAME, WE DIRECT THE ASS ESSING OFFICER TO ADJUST SUCH LOSS AGAINST THE PROFITS OF THE SAID BUSINESS IN SU BSEQUENT YEARS. THESE GROUNDS OF APPEAL OF THE ASSESSEE ARE PARTLY ALLOWED 7. GROUND NOS. 5 TO 7 OF THE APPEAL ARE RELATED TO DISALLOWANCE U/S. 14A OF THE I. T. ACT. BRIEFLY STATED FACTS AS OBSERVED BY THE ASSESS ING OFFICER ARE THAT THE ASSESSEE RECEIVED DIVIDEND OF RS.84,75,445/- WHICH WAS CLAIM ED TO BE EXEMPT U/S. 10(33) OF THE I. T. ACT. HOWEVER, THE ASSESSEE HAS NOT DEDUCTED ANY AMOUNT FOR EARNING THE SAID INCOME. THE ASSESSING OFFICER, THEREFORE, ISSUED N OTICE TO ASSESSEE AS TO EXPENSES RELATED TO EARNING OF DIVIDEND INCOME AND WHY PROPO RTIONATELY EXPENSES SHOULD NOT BE DISALLOWED KEEPING IN VIEW THE PROVISIONS SECTION 1 4A OF THE I. T. ACT. IN REPLY, THE ASSESSEE SUBMITTED THAT ASSESSEE COMPANY WAS IN TH E BUSINESS OF GIVING LOANS AND ADVANCES AND HOLDING OF AND TRADING IN SHARES AND S ECURITIES AND HAS NOT INCURRED ANY ADDITIONAL EXPENSES FOR EARNING OF DIVIDEND INCOME AND THAT EXPENSES WERE FOR RUNNING THE CORPORATE STRUCTURE AND RUNNING DAY TO DAY BUSI NESS. VARIOUS JUDICIAL PRONOUNCEMENTS WERE ALSO CITED TO STATE THAT THE JU DICIAL VIEW WAS THAT NO INDIRECT EXPENSES CAN BE ALLOCATED FOR EARNING THE DIVIDEND INCOME. CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER NOTED THAT THOUGH VARIOUS JUDICIAL DECISIONS HAVE BEEN CITED, THESE ARE DISTINGUISHABL E IN FACTS AND CIRCUMSTANCES AND MOREOVER SECTION 13A HAS BEEN INTRODUCED BY THE FIN ANCE ACT, 2001 AND THEREFORE, THE JUDICIAL PRONOUNCEMENTS CITED ARE NOT APPLICABLE. PERUSING THE ACCOUNTS OF THE ASSESSEE, 9 THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS D EBITED A SUM OF RS.1,78,130/-, RS.28,111/-, RS.1,69,887/-, RS.7,64,743/- ON ACCOUN T OF POSTAGE AND TELEGRAM EXPENSES, PRINTING AND STATIONERY EXPENSES, GENERAL CHARGES A ND SALARIES AND BONUS RESPECTIVELY. HE, THEREFORE, HELD THAT TOTAL EXPENSES WERE RS.11, 40,871/- WHICH CANNOT BE DENIED AND CAN DEFINITELY BE SAID TO HAVE A LINKAGE WITH EARNI NG OF DIVIDEND INCOME OF RS.84,75,445/-. ACCORDINGLY, THE PROVISIONS OF SEC TION 14A WERE INVOKED READ WITH SECTION 10(33) OF THE ACT AND A PROPORTIONATE AMOUN T AS WORKED OUT I.E. RS.7,79,564/- WAS DISALLOWED AS EXPENSES INCURRED IN EARNING OF D IVIDEND INCOME. IN APPEAL, THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO RS.2,85,220/- , WHICH IS 25% OF EXPENSES OF RS.11,40,871/- AS WORKED OUT BY THE ASSESSING OFFIC ER. AGGRIEVED BY THE SAID ORDER, NOW THE ASSESSEE IS IN APPEAL BEFORE US. 8. AT THE TIME OF HEARING BEFORE US, THE LD. COUNSE L FOR THE ASSESSEE WHILE REITERATING HIS SAME SUBMISSIONS AS SUBMITTED BEFOR E THE LOWER AUTHORITIES FURTHER SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSIN ESS OF GIVING LOANS AND ADVANCES AND HOLDING OF AND TRADING IN SHARES AND SECURITIES. T HE DIVIDEND OF RS.84,75,445/- HAS BEEN EARNED ON SHARES AND SECURITIES HELD BY IT. NO ADD ITIONAL EXPENSES HAVE BEEN INCURRED FOR EARNING/ENCASHING SUCH DIVIDEND. HE ALSO CONTE NDED THAT WHILE COMPUTING THE TOTAL INCOME FOR THE YEAR, THE ASSESSING OFFICER HAS IN A MECHANICAL WAY AND WITHOUT APPRECIATING THE FACT OF THE CASE ALLOCATED PROPORT IONATE EXPENSES OUT OF POSTAGE & TELEGRAM, PRINTING & STATIONERY, GENERAL CHARGE AND SALARIES AND BONUS AGAINST DIVIDEND INCOME FOR THE YEAR AND DISALLOWED A SUM O F RS.7,79,564/- FROM CLAIM OF TOTAL ADMINISTRATIVE EXPENSES OF THE COMPANY WHICH THE AP PELLANT DENIES TO HAVE TO ALL INCURRED FOR EARNING DIVIDEND INCOME OF RS.84,75,4 45/-. THE ASSESSING OFFICER SHOULD HAVE CONSIDERED THAT EXPENSES SUCH AS POSTAGE & TEL EGRAM, PRINTING & STATIONERY ETC. ARE NOT REQUIRED TO BE INCURRED FOR EARNING DIVIDEN D INCOME. HE ALSO CONTENDED THAT THE ASSESSING OFFICER HAS NOT IDENTIFIED ANY PARTICULAR EXPENDITURE RELATABLE TO EARNING OF DIVIDEND INCOME AND IN A VERY GENERALIZED MANNER H AS DISALLOWED BUSINESS EXPENDITURE ON AN IRRATIONAL AND AD-HOC BASIS. THE ASSESSING O FFICER HAS, THEREFORE, NOT COMPLIED WITH THE REQUIREMENTS OF SEC. 14A WHICH STATES THAT EXPENDITURE INCURRED BY THE ASSESEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF T HE TOTAL INCOME UNDER THE ACT SHALL NOT BE ALLOWED AS DEDUCTION. A STATEMENT SHOWING E XPENSES FOR MAINTAINING INVESTMENT AND SHARE PORT FOLIO WAS FILED DURING THE COURSE OF HEARING, ACCORDING TO WHICH A SUM OF 10 RS.1,39,554/- CAN BE CONSIDERED TO HAVE BEEN SPENT FOR EARNING EXEMPT INCOME. HENCE, IT WAS URGED BEFORE THE BENCH IF ANY DISALLOWANCE I S TO BE MADE U/S. 14A, IT SHOULD BE RESTRICTED TO RS.1,39,554/-. 9. ON THE OTHER HAND, THE LD. DR HEAVILY PLACED REL IANCE ON THE ORDER OF THE LD. CIT(A) AND URGED BEFORE THE BENCH TO CONFIRM THE SA ME. 10. AFTER HEARING THE RIVAL SUBMISSIONS AND PERUSI NG THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE ASSESSI NG OFFICER ASKED THE ASSESSEE TO QUANTIFY THE EXPENSES INCURRED BY I T TO EARN EXEMPT INCOME. AS NO DETAILS IN THIS RESPECT WERE FILED, HE DISALLOWE D PROPORTIONATE EXPENDITURE AMOUNTING TO RS.7,79,564/-. BEFORE LD. CIT(A) ALSO NO DETAILS IN THIS RESPECT WERE FILED. HE, HOWEVER, TAKING INTO CONSIDERATION THE SUBMISSIONS OF THE ASSESSEE RESTRICTED THIS ADDITION TO 25% OF THE EXPENSES, TH US CONFIRMING THE ADDITION OF RS.2,85,220/-. BEFORE US THE ASSESSEE FILED A STATE MENT SHOWING EXPENSES FOR MAINTAINING INVESTMENT AND SHARE PORT FOLIO ACCORDI NG TO WHICH A SUM OF RS.1,39,554/- CAN BE CONSIDERED TO HAVE BEEN INCURR ED FOR EARNING THE EXEMPT INCOME. KEEPING IN VIEW THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT ENDS OF JUSTI CE WILL BE MET IF THIS DISALLOWANCE IS RESTRICTED TO RS.2,00,000/-. WE HO LD ACCORDINGLY. THESE GROUNDS OF APPEAL OF THE ASSESSEE ARE ALLOWED IN PART. 11. GROUND NO. 8 IS IN RESPECT OF PART DISALLOWANCE TOWARDS FOREIGN TRAVEL EXPENSES. BRIEFLY STATED FACTS OF THE CASE AS OBSE RVED BY THE ASSESSING OFFICER ARE THAT THE ASSESSING OFFICER DISALLOWED 50% OF FO REIGN TRAVEL EXPENSES CLAIM OF RS.3,90,551/- I.E. RS.1,95,276/- AS THE EXPENDITURE RELATING TO FOREIGN TRAVEL OF PRESIDENTS WIFE WAS FOR NON-BUSINESS PURPOSES. IN APPEAL, THE LD. CIT(A) CONFIRMED THIS ACTION OF THE ASSESSING OFFICER. BE ING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 12. AT THE TIME OF HEARING BEFORE US, THE LD. COUNS EL FOR THE ASSESSEE WHILE REITERATING HIS SAME SUBMISSIONS AS SUBMITTED BEFOR E THE LOWER AUTHORITIES FURTHER SUBMITTED THAT A SUM OF RS.3,90,551/- WAS INCURRED ON FOREIGN TOUR OF PRESIDENT OF THE COMPANY AND HIS WIFE WHO ACCOMPANIED HIM TO ASS IST IN BUSINESS WHICH HAVE SOME SOCIAL ASPECTS ALSO. THE REVENUE AUTHORITIES H AVE WRONGLY DISALLOWED HALF OF THE FOREIGN TRAVEL EXPENSES I.E. RS.1,95,276/- R ELATING TO WIFE OF THE PRESIDENT 11 OF THE COMPANY ON THE PLEA OF NON BUSINESS PURPOSE S. HE, THEREFORE, URGED BEFORE THE BENCH TO DELETE THE ADDITION SO SUSTAINE D BY THE LD. CIT(A) IN THIS REGARD. 13. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORD ERS OF THE LOWER AUTHORITIES. 14. AFTER HEARING THE RIVAL SUBMISSIONS AND PERUSIN G THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE ASSESSING OFFICER DISALLOW ED 50% OF FOREIGN TRAVEL EXPENSES CLAIM OF RS.3,90,551/- I.E. RS.1,95,276/- AS THE EXPENDITURE IS RELATING TO FOREIGN TRAVEL OF PRESIDENTS WIFE WAS FOR NON-BUSI NESS PURPOSES. THE LD. CIT(A) WHILE CONFIRMING THE ACTION OF THE ASSESSING OFFICE R HAS HELD AS UNDER : 9. DURING THE YEAR UNDER REFERENCE A SUM OF RS.3,90 ,551/- WAS INCURRED ON FOREIGN TOUR OF PRESIDENT OF THE COMPANY AND HIS W IFE WHO ACCOMPANIED HIM TO USA, UK AND HONG KONG. THE ASSESSING OFFICER HEL D THAT EXPENDITURE RELATING TO FOREIGN TRAVEL OF PRESIDENTS WIFE WAS FOR NON BUSINESS PURPOSE AND THEREFORE DISALLOWED HALF OF THE TOTAL EXPENSE AMOUNTING TO RS.1,95,276/-. APPELLANT RELIED ON THE DECISION OF THE DELHI BENCH OF THE HONBLE TRIBUNAL IN ITO VS. J. K. SYNTHETICS LTD. 18 ITD 490. 10. THE EXPENSES ON FOREIGN TRAVEL OF A SPOUSE CAN NOT BE ALLOWED UNLESS THE SPOUSE CONTRIBUTES TO THE BUSINESS OF THE APPELLA NT AS THE INCOME OF THE ASSESSEE IS NOT MEANT TO BE FRITTERED AWAY FOR PLEASURE. N O MATERIAL/EVIDENCE WAS PRODUCED BY THE APPELLANT TO ESTABLISH THAT THE EX PENDITURE INCURRED ON THE FOREIGN TOUR OF THE WIFE OF PRESIDENT OF THE COMPA NY WAS FOR THE COMPANYS BUSINESS PURPOSES. HENCE NO INTERFERENCE IS CALLE D FOR IN THE DISALLOWANCE OF EXPENDITURE ON FOREIGN TRAVEL OF SPOUSE OF PRESIDE NT OF THE COMPANY. THE GROUND OF APPEAL ON THIS ISSUE IS DISMISSED. SINCE BEFORE US ALSO THE ASSESSEE HAS FAILED TO EST ABLISH THAT EXPENDITURE INCURRED ON FOREIGN TOUR OF THE WIFE OF THE PRESIDENT WAS FO R COMPANYS BUSINESS PURPOSES, WE ARE NOT INCLINED TO INTERFERE WITH TH E ORDER PASSED BY THE LD. CIT(A) AND THE SAME IS HEREBY UPHELD. THIS GROUND O F APPEAL OF THE ASSESSEE IS ALSO DISMISSED. 15. NOW, WE ARE COMING TO ITA NOS. 1137 AND 1138/KO L/2008. THE SOLE COMMON ISSUE INVOLVED IN THESE APPEALS IS IN RESPEC T OF DISALLOWANCE U/S. 14A OF THE I. T. ACT. BRIEF FACTS OF THE CASE ARE THAT TH E ASSESSING OFFICER ON ESTIMATE BASIS DISALLOWED 5% OF THE DIVIDEND EARNED FOR EACH OF TH E ASSESSMENT YEARS UNDER APPEAL AS EXPENSES INCURRED FOR EARNING DIVIDEND INCOME U/S. 14A OF THE I. T. ACT, WHICH COMES TO RS.7,23,707/- FOR ASSESSMENT YEAR 2004-05 AND RS.6, 24,307/- FOR AY 2005-06. IN APPEAL, THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO RS.1,50,000/- FOR EACH ASSESSMENT 12 YEARS UNDER APPEAL AS EXPENSES ATTRIBUTABLE TO EARN ING DIVIDEND INCOME. AGGRIEVED BY THE SAID ORDERS, THE ASSESSEE IS IN APPEALS BEFORE US. 16. AT THE TIME OF HEARING BEFORE US THE LD. COUNSE L FOR THE ASSESSEE REITERATED THE SAME SUBMISSIONS AS SUBMITTED BEFORE US WHILE ARGUI NG THE ISSUE FOR ASSESSMENT YEAR 2001-02 AND URGED BEFORE THE BENCH TO DELETE THE AD DITIONS SO SUSTAINED BY THE LD. CIT(A). 17. ON THE OTHER HAND, THE LD. DR PLACED HEAVY RELI ANCE ON THE ORDER OF THE LD. CIT(A). 18. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE LD. CIT(A) WHILE RESTRICTING THE DISA LLOWANCE TO RS.1,50,000/- FOR ASSESSMENT YEAR 2004-05 HAS OBSERVED AS UNDER : I HAVE CONSIDERED THE SUBMISSION OF A/R OF THE APPE LLANT AND ALSO GONE THROUGH THE ASSESSMENT ORDER. THE EXEMPTED INCOME AS PER PROVI SIONS OF THE ACT ARE NOT AUTOMATICALLY EARNED BUT THE ORGANIZATION HAVE TO INCUR CERTAIN EXPENSES REGARDING THE VARIOUS STAFF MANAGEMENT, REMUNERATION, COST OF ST ATIONERY, BANK CHARGES ETC. AND THEREFORE IT CANT BE SAID THAT NO EXPENDITURE WAS INCURRED. THERE IS MERIT IN A.OS CONTENTION THAT SOME EXPENDITURE MUST HAVE BEEN IN CURRED FOR EARNING DIVIDEND INCOME AT THE SAME TIME THERE IS CONSIDERABLE FORCE IN TH E APPELLANTS SUBMISSION THAT SECTION 14A DOES NOT PERMIT A.O. TO MAKE DISALLOWANCE ACC ORDING TO HIS OWN DISCRETION. THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE IT WOULD BE PROPER AND REASONABLE TO RESTRICT THE DISALLOWANCE U/S. 14A A T RS.1,50,000/-. THUS APPELLANT GETS RELIEF OF RS.5,73,707/-. LIKE WISE, THE LD. CIT(A) FOR ASSESSMENT YEAR 2005- 06 HAS ALSO RESTRICTED THE SIMILAR DISALLOWANCE AND GAVE RELIEF TO THE ASSESSE E OF RS.4,74,307/-. SINCE THE ASSESSEE DID NOT BRING OUT ANY COGENT EV IDENCE/MATERIAL TO CONTROVERT THE ABOVE FINDINGS OF THE LD. CIT(A) AT THE TIME OF HEARING BEFORE US, WE ARE NOT INCLINED TO INTERFERE WITH HIS ORDER AND THE SAME IS HEREBY UPHELD. THE GROUND OF APPEALS OF THE ASSESSEE FOR BOTH THE YEAR S UNDER APPEALS ARE DISMISSED. 19. IN THE RESULT, ITA NO. 114/KOL/2009 IS ALLOWED IN PART AND ITA NOS. 1137 & 1138/KOL/2008 ARE DISMISSED. 20. ORDER IS PRONOUNCED IN THE OPEN COURT ON 21.02. 2011 SD/- SD/- . . ' , $ . . , (C. D. RAO) (D. K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER ( $ $ $ $) )) ) DATED : 21 ST FEBRUARY, 2011 13 '/0 &12 3' JD.(SR.P.S.) . 4 -5 65(7- COPY OF THE ORDER FORWARDED TO: 1 . +, / APPELLANT GWALIOR WEBBING CO. PVT. LTD., 9/1, R. N. MUKHERJEE ROAD, BIRLA BUILDING, 4 TH FLOOR, KOLKATA-700 001. 2 -+, / RESPONDENT, ACIT, CIRCLE-6, KOLKATA. . 3 . .& / THE CIT(A), KOLKATA 4. .& ( )/ CIT, KOLKATA. 5 . '= -& / DR, KOLKATA BENCHES, KOLKATA 5 -/ TRUE COPY, .&>/ BY ORDER, ? #2 /ASSTT. REGISTRAR .