Spark Finwiz Limited, Kolkata V. ACIT, Circle - 3, Kolkata, Kolkata

ITA 12/KOL/2012

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8071 (ITAT-KOLKATA)
• Duration Of Justice: 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 04-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M TIWARY PER PRAMOD KUM
• Assessee Lawyers: R K SAHA
• Keywords: Depreciation; Earning of tax free income; Speculation loss
• Section: 14A; 115JB; 43(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA [BEFORE SHRI PRAMOD KUMAR, A.M. & SHRI MAHAVIR SIN GH, J.M. ] I.T.A. NO.1741/KOL/2011 ASSESSMENT YEAR :2006-07 A.C.I.T., CIRCLE-3, KOLKATA -V S- M/S. SPARK FINWIZ LTD. 16, TARA CHAND DUTTA STRE ET, KOLKATA 700 079 (PAN:AABCS 9044A) ( APPELLANT ) ( RESPONDENT ) I.T.A. NO.12/KOL/2012 ASSESSMENT YEAR :2006-07 M/S. SPARK FINWIZ LTD. -VS- A.C.I.T., C IRCLE-3, KOLKATA 16, TARA CHAND DUTTA STREET, KOLKATA 700 079 ( APPELLANT ) ( RESPONDENT ) DATE OF CONCLUDING THE HEARING : 16.10.2012 DATE OF PRONOUNCING THE ORDER : 19.10.2012 APPEARANCES : FOR THE APPELLANT : SHRI R.K.S AHA : FOR THE RESPONDENT : SHRI M.TIWARY O R D E R PER PRAMOD KUMAR 1. THESE CROSS APPEALS CHALLENGE CORRECTNESS OF CIT (A)S ORDER DATED 30 TH SEPTEMBER, 2011, IN THE MATTER OF ASSESSMENT U/S.14 3(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2005-06. 2. IN ITA NO.12/KOL/12, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCES:- 1.(A) THAT ON THE FACTS & IN THE CIRCUMSTANCES OF T HE CASE, LD. CIT(A) IS WRONG AND UNJUSTIFIED THAT PROVISIONS OF SECTION 14 A OF IT ACT 1961 ARE APPLICABLE WITHOUT A SPEAKING ORDER ON FOLLOWING DE CISIONS RELIED UPON: (I) K. J. ARORA-VS. - DCIT (2009) 180 TAXMAN 131 ( DEL) (MAG) (II) DLF LTD. VS. CIT (2009) 27 S0T22 (DEL) 2 ITA NOS.1741/KOL /2011 & 12/K/12 M/S.SPARK FINWIZ LTD. ASSESSMENT YEAR: 2006-07 (B) THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) IS WRONG IN HOLDING THAT PROVISIONS OF SECTION 14A OF IT ACT, 1961 ARE APPLICABLE IN TERMS OF RATIO OF JUDGMENT OF KOLKATA HIGH COURT IN THE CASE OF ISG TRADERS LTD. ITA NO.264 OF 20032011 T10L 621 HC KOL IT. C ) THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, THE ACTION OF LD. CIT(A) TO SUSTAIN ADDITION U/S.14A OF IT ACT, 1961 AS INDICATED IN THE ORDER IS ERRONEOUS AND NOT SUSTAINABLE IN LAW. 2. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, LD. CIT (A) IS WRONG AND UNJUSTIFIED IN UPHOLDING THE ACTION OF THE ASSE SSING OFFICER WHO ENHANCED THE BOOK PROFIT U/S.115JB OF IT ACT, 1961 ON ACCOUNT OF DISALLOWANCE U/S. 14A OF IT ACT. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, A DDUCE OR AMEND ANY GROUND OR GROUNDS ON OR BEFORE THE DATE OF HEARING OF THE APPEAL. 3. SO FAR AS FIRST GROUND OF APPEAL IS CONCERNED, T HE MATERIAL FACTS ARE LIKE THIS. THE ASSESSEE IS SAID TO BE A NON BANKING FINANCIAL COMPANY (NBFC) ENGAGED IN THE BUSINESS OF DEALING IN FINANCIAL INVESTMENT AS WELL AS LOANS AND ADVANCES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT WHILE ASSESSEE HAD EARNED TAX EXEMPT DIVIDEND INCOME OF RS.45,26,5 48/-, THE ASSESSEE HAD NOT OFFERED ANY DISALLOWANCE OF EXPENSES UNDER SECTION 14A OF THE ACT. IT WAS IN THIS BACKDROP THAT THE ASSESSING OFFICER REQUIRED THE AS SESSEE TO SHOW CAUSE AS TO WHY FIFTY PERCENT OF THE EXPENSES INCURRED BY THE ASSES SEE NOT BE DISALLOWED U/S.14A OF THE ACT. IN THE ABSENCE OF ANY REPLY TO THIS SHOW C AUSE NOTICE, THE ASSESSING OFFICER PROCEEDED TO DISALLOW FIFTY PERCENT OF THE EXPENSES INCURRED, WHICH WORKED OUT TO RS.17,16,917/-. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT COMPLETE SUCCESS. LEARNED CIT(A) REMANDED THE MATTER TO THE FILE OF THE CIT(A) AND OBSERVED AS FOLLOWS: 7.3 THUS THE A.O. HAS RIGHTLY INVOKED THE PROVISION S OF SECTION 14A OF THE IT ACT. BUT THE BASIS OF THE DISALLOWANCES HAS NOT BEEN WORKED OUT PROPERLY BY THE A.O. THE A.O. IS DIRECTED TO DISALLOW THE E XPENSES AS CLAIMED IN THE P/L ACCOUNT PROPORTIONATELY AS PER THE PROVISIONS OF THE ACT AFTER VERIFYING 3 ITA NOS.1741/KOL /2011 & 12/K/12 M/S.SPARK FINWIZ LTD. ASSESSMENT YEAR: 2006-07 THE VARIOUS EXPENSES CLAIMED IN THE P/L ACCOUNT HA VING NEXUS TO EARN THE EXEMPT INCOME. 4. THE ASSESSEE IS NOT SATISFIED AND IS IN APPEAL B EFORE US. 5. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PE RUSED THE MATERIAL ON RECORD, WE AGREE WITH THE LEARNED COUNSEL THAT IN V IEW OF LIMITATIONS ON HIS POWERS U/S.251, IT IS NO LONGER TO A CIT(A) TO REMIT THE M ATTER TO THE FILE OF THE ASSESSING OFFICER WITH OR WITHOUT ANY DIRECTIONS; HE OUGHT TO HAVE DECIDED THE MATTER ON MERITS AT HIS LEVEL. WE HAVE ALSO NOTED THAT THE EX PENSES INCURRED BY THE ASSESSEE, DETAILS OF WHICH ARE PLACED AT PAGE 6 OF CIT(A)S O RDER, CONSIST ONLY OF KEYMAN INSURANCE (RS.30,00,000) CAR RUNNING EXPENSES (RS.3 0,550/-), LEGAL PROFESSIONAL EXPENSES (RS.24,900/-), AUDIT FEES (RS.17,166/-) AN D PRELIMINARY EXPS. WRITTEN OFF (RS.8,052/-) AND DEPRECIATION ALLOWANCE (RS.3,1 7,929/-). NONE OF THESE EXPENSES HAVE ANY NEXUS WITH EARNING OF DIVIDEND IN COME, AND THE ASSESSMENT YEAR BEFORE US IS AN ASSESSMENT PRIOR TO INSERTION OF RULE 8D. ON THESE FACTS, THEREFORE, THE DISALLOWANCE IS UNCALLED FOR PARTICU LARLY AS THE ASSESSING OFFICER HAS NOT DEMONSTRATED ANY NEXUS, BEFORE INVOKING SECTION 14A, BETWEEN DIVIDEND INCOME AND EXPENDITURE INCURRED. WE, THEREFORE, UPH OLD THE GRIEVANCE OF THE ASSESSEE AND DELETE THE IMPUGNED DISALLOWANCE OF RS .17,16,917/-. THE ASSESSEE GETS THE RELIEF ACCORDINGLY. 6. SO FAR AS GROUND NO.2 IS CONCERNED, LEARNED REPR ESENTATIVES FAIRLY AGREE THAT THE ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY CHANDIGARH BENCH DECISION IN THE CASE OF ACIT-VS- SPRAY ENGINEERING DEVICES LTD. (53 SOT 70) LAND THAT THE ASSESSMENT YEAR BEFORE US IS BEFORE THE RELEVANT CU RATIVE AMENDMENT IN SECTION 115JB WAS MADE. RESPECTFULLY FOLLOWING THE ESTEEMED VIEWS OF COORDINATE BENCH IN SPRAY ENGINEERING (SUPRA), WE UPHOLD THE GRIEVAN CE OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO DELETE ADJUSTMENT OF DISAL LOWANCE U/S 14A FROM COMPUTATION OF BOOK PROFIT U/S 115JB AS WELL. IN AN Y CASE, AS DISALLOWANCE U/S 14A 4 ITA NOS.1741/KOL /2011 & 12/K/12 M/S.SPARK FINWIZ LTD. ASSESSMENT YEAR: 2006-07 ITSELF STANDS DELETED ON MERITS, THIS ASPECT OF THE MATTER IS NOW SOMEWHAT ACADEMIC. 7. THE APPEAL OF THE ASSESSEE IS THUS ALLOWED IN TH E TERMS INDICATED ABOVE. 8. IN REVENUES APPEAL I.E. 1741/KOL/2011, THE GRIE VANCE RAISED BY THE APPELLANT IS AS FOLLOWS:- 1) THAT THE LD. CIT(A) HAS ERRED IN DELETING THE A DDITION OF RS.13,54,234/- MADE BY THE A.O. ON THE GROUND OF SPECULATION LOSS, WITHOUT CONSIDERING THE PROVISION OF SEC. 43(5)(D) OF THE ACT, 1961 WHICH D EFINES THE ELIGIBLE TRANSACTION FOR TRADING IN DERIVATIVES. 2) THAT THE LEAVE TO ADD, ALTER OR MODIFY ANY GRO UND AS MAY ARISE IN THE COURSE OF APPELLATE PROCEEDINGS, BE GRANTED. 9. BRIEFLY, THE RELEVANT FACTS ARE AS FOLLOWS. DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS INCURRED A LOSS OF RS.13,54,234/- IN RESPECT OF DERIVATIVE TRANSACTION ON THE NATIONAL STOCK EXCHANGE OF INDIA LTD. TILL 25.1.2006, AND AS NOTIFICATION U /S 43(5) IN RESPECT OF NSE WAS EFFECTIVE FROM 25.1.2006, THE LOSSES SO INCURRED AR E REQUIRED TO BE TREATED AS SPECULATION LOSSES. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) WHO, FOLLOWING DECISION OF THE COORDINATE BE NCH IN THE CASE OF VINOD KUMAR RAMPURA VS ITO (ITA NO.1902/KOL/2009), HELD T HAT EVEN THOUGH NOTIFICATION WAS DATED 25.1.2006, IT IS TO BE TREAT ED AS EFFECTIVE FOR THE ENTIRE ASSESSMENT YEAR. AGGRIEVED BY THE RELIEF SO GRANTED , ASSESSING OFFICER IS IN APPEAL BEFORE US. 10. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING P ERUSED THE MATERIAL ON RECORD, WE ARE INCLINED TO CONFIRM THE STAND OF THE CIT(A) AS IT IS CONSISTENT WITH THE STAND BEING TAKEN BY COORDINATE BENCHES OF THIS TRIBUNAL, INCLUDING IN THE CASE OF ACIT VS HIREN JASWANT RAI SHAH (141 TTJ 851), WH EREIN IT IS, INTER ALIA , HELD THAT IF TRANSACTIONS ARE CARRIED OUT THROUGH STOCK EXCHANGES FROM 1.4.2005 TO 25.1.2006, WHICH ARE RECOGNIZED BY CBDT NOTIFICATIO N ON 25.1.2006, WOULD BE 5 ITA NOS.1741/KOL /2011 & 12/K/12 M/S.SPARK FINWIZ LTD. ASSESSMENT YEAR: 2006-07 ELIGIBLE FOR BEING TREATED AS NON SPECULATIVE WITHI N THE MEANING OF CLAUSE (D) OF PROVISO TO SECTION 43(5). WE ARE IN RESPECTFUL AGR EEMENT WITH THE VIEWS SO EXPRESSED BY CO-ORDINATE BENCHES. THE STAND OF THE CIT(A) THUS DOES NOT CALL FOR ANY INTERFERENCE. 11. IN THE RESULT, APPEAL OF THE ASSESSING OFFICER IS DISMISSED. TO SUM UP, WHILE APPEAL OF THE ASSESSEE IS ALLOWED, APPEAL OF THE AS SESSING OFFICER IS DISMISSED. PRONOUNCED IN THE OPEN COURT TODAY ON 19 TH DAY OF OCTOBER, 2012. SD/- SD/- (MAHAVIR SINGH) (PRAMOD KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER COPY OF THE ORDER FORWARDED TO: 1. M/S. SPARK FINWIZ LTD., 16, TARA CHAND DUTTA STREET , KOLKATA 700 079 2 A.C.I.T.,CIRCLE-3, KOLKATA 3. THE CIT(A), KOLKATA 4. CIT, KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, ASSTT. REGISTRAR , ITAT, KOLKATA TALUKDAR(SR.P.S.) 6 ITA NOS.1741/KOL /2011 & 12/K/12 M/S.SPARK FINWIZ LTD. ASSESSMENT YEAR: 2006-07