ITO, Ward - 44(4), Kolkata, Kolkata V. Shri Daulal Kothari, Kolkata

ITA 1159/KOL/2011

• Counselvise Citation: 115923514 RSA 2011
• Duration Of Justice: 3 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 08-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Earning of tax free income; Question of law
• Section: 14A

Judgement Text

I.T.A. NO . 1 159 / KOL ./20 1 1 ASSESSMENT YEAR: 200 7 - 20 0 8 & C.O. NO. 56 /KOL/201 1 (ARISING OUT OF I.T.A. NO . 1 159 /KOL./201 1 ) ASSESSMENT YEAR: 200 7 - 200 8 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI P.K. BANSAL, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER I.T.A. NO. 1 159 /KOL./201 1 ASSESSMENT YEAR: 200 7 - 200 8 INCOME TAX OFFICER , ............................... .. ...........................APPELLANT WARD - 44(4), KOLKATA, 3, GOVT. PLACE (WEST), GROUND FLOOR, KOLKATA - 700 001 - VS. - SHRI DAULAL KOTHARI,.......................... ................................RESPONDENT 4, BYSACK STREET, KOLKATA - 700 007 [PAN : AIYPK 2 894 C] & C.O. NO. 56 /KOL/201 1 (ARISING OUT OF I.T.A. NO. 1 159 /KOL./201 1 ) ASSESSMENT YEAR: 200 7 - 200 8 SHRI DAULAL KOTHARI,......................... .............................CROSS OBJECTOR 4, BYSACK STREET, KOLKATA - 700 007 [PAN : AIYPK 2894 C] - VS. - INCOME TAX OFFICER , .......................... ...................... ... .......RESPONDENT WARD - 44(4), KOLKATA, 3, GOVT. PLACE (WEST), GROUND FLOOR, KOLKATA - 700 001 APPEARANCES BY: SHRI AMITABHA CHOUDHURY , SR. D.R., FOR THE DEPARTMENT SHRI S.L. K OCHAR & SHRI ANIL KOCHAR, ADVOCATES , FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : JULY 0 9 , 2015 DATE OF PRONOUNCING THE ORDER : JULY 27 , 2015 O R D E R PER P.K. BANSAL: I.T.A. NO . 1 159 / KOL ./20 1 1 ASSESSMENT YEAR: 200 7 - 20 0 8 & C.O. NO. 56 /KOL/201 1 (ARISING OUT OF I.T.A. NO . 1 159 /KOL./201 1 ) ASSESSMENT YEAR: 200 7 - 200 8 PAGE 2 OF 7 THE APPEAL AS WELL AS THE CROSS OBJECTION HAVE ARISEN OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - XXX, KOLKATA DATED 16.06.2011 FOR THE ASSESSMENT YEAR 2007 - 08. 2. THE APPEAL IS TIME BARRED BY 04 DAYS. THE DEPARTMENT HAS FILED A CONDONATION PETITION DATED 08.09.2011 TO CONDONE THE DELAY. WE AFTER HEARING THE LD . D.R. AND ON THE BASIS OF THE APPLICATION DATED 08.09.2011 CONDONE THE DELAY AND THE APPEAL IS ADMITTED. 3. THE ONLY ISSUE INVOLVED IN THE APPEAL FILED BY THE REVENUE RELATES TO SHARE S HELD BY THE ASSESSEE AS INVESTMENT AND TREATING THE GAIN FROM SHARE T RANSACTIONS AS BUSINESS INCOME OR CAPITAL GAIN. 4. AFTER HEARING THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERING THE SAME, WE NOTED THAT THE ISSUE INVOLVED IS DULY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE HON BLE CALCUTTA HIGH COURT IN G.A. NO. 2489 OF 2014 IN ITAT NO. 113 OF 2014, IN WHICH THE HON BLE CALCUTTA HIGH COURT IN THE CASE OF ASSESSEE S WIFE VIDE ORDER DATED 01.09.2014 TOOK THE VIEW ON THE SIMILAR ISSUE IN THE ASSESSMENT YEAR 2007 - 08 THAT THE INCOME WILL BE ASSESSABLE NOT AS BUSINE SS INCOME BUT AS CAPITAL GAIN. THE RELEVANT FINDINGS OF THE HON BLE CALCUTTA HIGH COURT ARE REPRODUCED AS UNDER: - WE FIND THAT THE TRIBUNAL WHILE NEGATING THE CONCLUSION OF THE REVENUE HAD REFERRED TO THE ORDER OF THE CIT(A). THE RELEVANT PORTION OF THE O RDER PASSED BY THE CIT(A) IS AS UNDER: - 5. THE CONTENTIONS OF THE APPELLANT AS SUMMED UP ABOVE HAVE BEEN CONSIDERED IN THE CONTEXT OF THE FINDINGS ARRIVED AT BY THE ASSESSING OFFICER IN HIS ORDER WHILE TREATING THE INCOME FROM SHARE TRANSACTIONS AS APPELL NAT S BUSINESS INCOME. IT IS SEEN THAT THE APPELLANT HAS CONSISTENTLY BEEN SHOWING HER SHARES AS INVESTMENTS AND THE SAME HAS BEEN ACCEPTED AS SUCH BY THE DEPARTMENT IN EARLIER YEARS AND THE ASSESSING OFFICER HAS NOT BROUGHT IN ANY FRESH EVIDENCE IN HIS AS SESSMENT I.T.A. NO . 1 159 / KOL ./20 1 1 ASSESSMENT YEAR: 200 7 - 20 0 8 & C.O. NO. 56 /KOL/201 1 (ARISING OUT OF I.T.A. NO . 1 159 /KOL./201 1 ) ASSESSMENT YEAR: 200 7 - 200 8 PAGE 3 OF 7 ORDER FOR THE PRESENT YEAR TO THE CONTRARY. HE HAS SIMPLY REFERRED TO THE MAGNITUDE OF SHARE TRANSACTION AND COME TO HIS OWN CONCLUSIONS ABOUT THE INTENTIONS OF THE APPELLANT. THE DETAILED EVIDENCES AND WRITE UP GIVEN BY THE APPELLANT IN SUPPORT H ER ARGUMENTS, SUBSTANTIATE HER CLAIM OF BEING AN INVESTOR. IT IS AL S O CLEAR T HAT THE ASSERTION THAT SHE IS AN INVESTOR CAN ONLY BE CHALLENGED ON THE BASIS OF HER OWN RECORDS AND TRANSACTIONS WHICH COULD INDICATE THAT IT IS ACTUALLY DOING TRADING BUSINESS. THIS IS NOT THERE IN THE APPELLANT'S CASE AND THE A.O. HAS FAILED TO DO SO OTHER THAN MAKING A LONGWINDING ANALYSIS OF THE GUIDELINES 'LAID OUT IN CBDT CIRCULAR NO.4/2007. THE RELIANCE OF ASSESSING OFFICER ON THE DECISION OF ITO VS. LILY EXPORTS P VT. LTD. OF HON'BLE I.T.A.T. 'A' - BENCH, KOLKATA IS BASED ON DIFFERENT FACTS AND CANNOT BE APPLIED IN THE APPELLANT'S CASE. IN THE AFOREMENTIONED CASE THE HON'BLE I.T.A.T. HAS REFERRED TO SEVERAL F ACTORS WHILE HOLDING THAT THE INCOME WAS NORMAL BUS INE SS PROFIT REFE RRING TO SHORT PERIOD OF RETENTION AND OTHER FACTORS WHICH ARE MISSING IN THE CASE OF APPELLANT. ON THE OTHER HAND, THE DECISIONS IN THE CASE OF M/S. ASTRIX ENTERPRISES AND M/S. ETERNA STEEL & INVESTMENT PVT. LTD. SUPRA ARE SQUARELY APPLICABLE IN THE APPEL LANT'S CASE. IT MAY ALSO BE MENTIONED THAT THE MATTER HAD BEEN CONSIDERED IN APPEAL IN HER OWN CASE FOR AY 1992 - 93, AND DECIDED IN HER FAVO U R BY THE CIT(A)XXVI, KOLKATA IN HIS ORDER DATED 27 - 02 - 2002. CONSIDERING THE ABOVE, THE CONTENTION OF THE APPELLANT I S ACCEPTED AND THE INCOME FROM SHARE TRANSACTIONS OF RS. 43,59,492/ - IS TO BE TREATED AS OFFERED BY APPELLANT IN ITS LONG TERM CAPITAL GAIN AND INCOME - TAX RETURN AS RS.18,39,391/ - AS SHORT TERM CAPITAL GAINS.' THE QUESTIONS RAISED DO NOT INCLUDE A CHALLE NGE ON PERVERSITY. THE FINDINGS OF THE COMMISSIONER OF APP EALS IS ON FACTS CONCURRED BY THE TRIBUNAL. WE FIND, T HEREF O RE, NO SUBSTANTIAL QUESTION OF LAW ARISES. ACCORDINGLY, THE APPLICATION AND THE APPEAL ARE DISMISSED. I.T.A. NO . 1 159 / KOL ./20 1 1 ASSESSMENT YEAR: 200 7 - 20 0 8 & C.O. NO. 56 /KOL/201 1 (ARISING OUT OF I.T.A. NO . 1 159 /KOL./201 1 ) ASSESSMENT YEAR: 200 7 - 200 8 PAGE 4 OF 7 URGENT CERTIFIED PHOTOCOPY OF THIS ORDER BE SUPPLIED TO THE PARTIES, IF APPLIED FOR, UPON COMPLIANCE OF ALL REQUISITE FORMALITIES . RESPECTFULLY FOLLOWING THE AFORESAID ORDER DATED 01.09.2014 OF THE HON BLE CALCUTTA HIGH COURT, IN OUR OPINION, NO INTERFERENCE IS CALLED FOR IN THE ORD ER OF THE CIT(APPEALS) ALLOWING RELIEF TO THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO ASSESS THE INCOME FROM PURCHASE AND SALE OF SHARES UNDER THE HEAD LONG TERM CAPITAL GAIN . 5. COMING TO THE C .O. OF THE ASSESSEE, GROUND NO. 4 OF THE CROSS OBJECTI ON WAS NOT PRESSED BY THE LD. COUNSEL OF THE ASSESSEE, THEREFORE, THE SAME IS DISMISSED AS NOT PRESSED. THE FOLLOWING GROUNDS SURVIVE IN THE C.O.: - (1) FOR THAT THE CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF RS.21,000/ - PERTAINING TO SALARY ON THE ALLEGED GROUNDS. (2) FOR THAT THE CIT(A) OUGHT TO HAVE ALLOWED THE CLAIM PERTAINING TO EXPENSES OF RS.1,500/ - BEING THE CONSULTATION FEES FOR INCOME TAX MATTERS. (3) FOR THAT THE CIT(A) ERRED IN MARSHALLING RELEVANT FACTS OF THE CASE OF THE APPELLANT, WHO HAD EA RNED DIVIDEND INCOME OF RS.6,81,596/ - , AND THAT THERE WERE NO EXPENSES INCURRED AND/OR CLAIMED FOR EARNING OF EXEMPT INCOME AND HENCE THERE WAS NO GROUND TO APPLY PROVISIONS OF SECTION 14A. 6. GROUND NO. 1 RELATES TO THE CLAIM OF DEDUCTION BY THE ASSESSEE IN RESPECT OF THE SALARY AMOUNTING TO RS.21,000/ - . 7. THE ASSESSE IS A PROPRIETOR OF M/S. JANARDAN HOSIERY MILLS WHERE THE ASSESSEE HAS INCURRED THE EXPENDITURE TOWARDS THE SALARY. THE SAID SALARY WAS DISALLOWED BY THE ASSESSING OFFICER. WHEN THE MATTER WENT BEFORE THE CIT(APPEALS), THE CIT(APPEALS) ALSO CO NFIRMED THE ORDER OF THE ASSESSING OFFICER. I.T.A. NO . 1 159 / KOL ./20 1 1 ASSESSMENT YEAR: 200 7 - 20 0 8 & C.O. NO. 56 /KOL/201 1 (ARISING OUT OF I.T.A. NO . 1 159 /KOL./201 1 ) ASSESSMENT YEAR: 200 7 - 200 8 PAGE 5 OF 7 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. WE NOTED THAT THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS DEBITED TOWARDS SAL ARY A SUM OF RS.1,06,339/ - IN THE PROFIT & LOSS A/C. OF ITS PROPRIETARY CONCERN M/S. JANARDAN HOSIERY MILLS AND IN ADDITION TO THIS, THE SALARY OF RS.21,000/ - WAS CLAIMED IN THE COMPUTATION OF INCOME UNDER THE HEAD PROFIT & GAINS FROM BUSINESS BUT THE A SSESSEE HAS NOT ADDUCED ANY EVIDENCE AND EXPLAIN HOW THE SALARY HAS BEEN CLAIMED. BEFORE US, THE ASSESSEE CONTENDED THAT THE SALARY HAS BEEN INCURRED FOR THE PURPOSE OF BUSINESS. THE CIT(APPEALS) HAS SIMPLY REJECTED THE SUBMISSION OF THE ASSESSEE. WE FIND FROM THE ORDER OF CIT(APPEALS) THAT THE CIT(APPEALS) WITHOUT DISCUSSING THE SUBMISSION S MADE BY THE ASSESSEE JUST STRICTLY CONFIRMED THE ORDER OF THE ASSESSING OFFICER DISALLOWING THE SALARY. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(APPEALS) AND DELET E THE DISALLOWANCE IN RESPECT OF THE SALARY. 9. THE SECOND GROUND RELATES TO THE DISALLOWANCE OF RS.1,500/ - TOWARDS THE CONSULTANCY FEES IN RESPECT OF INCOME - TAX MATTERS. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. THE ASS ESSEE IS A PROPRIETOR OF PROPRIETORSHIP CONCERN M/S. JANARDAN HOSIERY MILLS AND IS ALSO CARRYING ON THE BUSINESS. THEREFORE, THE ASSESSEE, IN OUR OPINION, IS REQUIRED CONSULTANCY FROM TIME TO TIME IN RESPECT OF ITS BUSINESS. THE EXPENSES INCURRED BY THE AS SESSEE TOWARDS INCOME - TAX CONSULTANCY ARE FOR THE PURPOSE OF BUSINESS. WE ACCORDINGLY DELETE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. THUS THIS GROUND IS ALLOWED. 11. THE THIRD GROUND RELATES TO THE DISALLOWANCE MADE BY APPLYING THE PROVISIONS OF S ECTION 14A AS WELL AS RULE 8D. I.T.A. NO . 1 159 / KOL ./20 1 1 ASSESSMENT YEAR: 200 7 - 20 0 8 & C.O. NO. 56 /KOL/201 1 (ARISING OUT OF I.T.A. NO . 1 159 /KOL./201 1 ) ASSESSMENT YEAR: 200 7 - 200 8 PAGE 6 OF 7 1 2 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. WE NOTED THAT THE ASSESSING OFFICER HAD DISALLOWED THE EXPENDITURE BY INVOKING RULE 8D READ WITH SECTION 14A OF THE INCOME TAX ACT. WE NOTED THAT RUL E 8D HAS BEEN INSERTED BY THE INCOME TAX (5 TH AMENDMENT) RULES, 2008 W.E.F. 24 TH MARCH, 2008. HON BLE MUMBAI HIGH COURT IN THE CAS E OF GODREJ & BOYCE MFG. CO. LTD. VS. - DCIT REPORTED IN 328 ITR 81 (MUM.) HAS CLEARLY HELD THAT RULE 8D IS NOT RETROSPECTIVE BUT PROSPECTIVE. THE IMPUGNED ASSESSMENT IS THE ASSESSMENT YEAR 2007 - 08 WHILE RULE 8D HAS BEEN INSERTED W.E.F. 24 TH MARCH, 2008. THEREFORE, THE ASSESSING OFFICER, IN OUR OPINION, IS NOT CORRECT IN LAW IN ALLOWING THE DISALLOWANCE BY APPLYING RULE 8D. WE FU RTHER NOTED THAT THE HON BLE KOLKATA TRIBUNAL IN THE CASE OF SANJIV JAJODIA VS. - DCIT IN ITA NO. 1509/KOL/2010 HAS TAKEN THE VIEW THAT THE DISALLOWANCE UNDER SECTION 14A OUT OF THE EXPENSES SHOULD BE RESTRICTED ONLY TO 1% OF THE DIVIDEND INCOME. RESPECTFU LLY FOLLOWING THE DECISION OF THE HON BLE KOLKATA TRIBUNAL IN THE CASE OF SANJIV JAJODIA VS. - DCIT IN ITA NO. 1509/KOL/2010, WE SET ASIDE THE ORDER OF CIT(APPEALS) AND DIRECT THE ASSESSING OFFICER TO DISALLOW 1% OF THE DIVIDEND INCOME UNDER SECTION 14A OF THE INCOME TAX ACT, 1961. 1 3 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE STAND S DISMISSED WHILE ALL THE CROSS OBJECTION FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON JULY 27 , 2015. SD/ - SD/ - MAHAVIR SINGH P.K. BANSAL (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, THE 27 TH DAY OF JULY, 2015 COPIES TO :(1) INCOME TAX OFFICER, WARD - 44(4), KOLKATA, 3, GOVT. PLACE (WEST), GROUND FLOOR, KOLKATA - 700 001 I.T.A. NO . 1 159 / KOL ./20 1 1 ASSESSMENT YEAR: 200 7 - 20 0 8 & C.O. NO. 56 /KOL/201 1 (ARISING OUT OF I.T.A. NO . 1 159 /KOL./201 1 ) ASSESSMENT YEAR: 200 7 - 200 8 PAGE 7 OF 7 (2) SHRI DAULAL KOTHARI, 4, BYSACK STREET, KOLKATA - 700 007 ( 3 ) COMMISSIONER OF INCOME - TAX (APPEALS) ( 4 ) COMMISSIONER OF INCOME TAX ( 5 ) THE DEPARTMENTAL REPRESENTATIVE ( 6 ) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.