ITO, Ward - 10(2), Kolkata, Kolkata V. M/s. Jaqua Industries & Sales Co. Pvt. Ltd., Kolkata

ITA 1430/KOL/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74956 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 21-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANU BISWAS
• Assessee Lawyers: S M SURANA
• Keywords: Business income; Notional interest

Judgement Text

I.T.A. NO.: 1430/KOL./2011 AS SESSMENT YEAR : 2008-09 PAGE 1 TO 8 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA B BENCH, KOLKATA CORAM : SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI ABRAHAM P. GEORGE (ACCOUNTANT MEMBER) I.T.A. NO.: 1430/KOL./ 2011 ASSESSMENT YEAR : 2008-2009 INCOME TAX OFFICER,...........................,.... ...........APPELLANT WARD-10(2), KOLKATA, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 -VS.- M/S. JAQUA INDUSTRIES AND SALES CO. PVT. LTD.,..... .............RESPONDENT 1 ST FLOOR, 114/5, HAZRA ROAD, KOLKATA-700 026 [PAN : AABCJ 4383 K] APPEARANCES BY: SMT. RANU BISWAS, JCIT, SR. D.R., FOR THE DEPARTMEN T SHRI S. M. SURANA, ADVOCATE, FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : DECEMBER 18, 2013 DATE OF PRONOUNCING THE ORDER : JANUARY 8 TH , 2014 O R D E R PER ABRAHAM P. GEROGE: 1. THIS APPEAL FILED BY THE REVENUE IS AGAINST AN O RDER DATED 01.07.2011 OF COMMISSIONER OF INCOME TAX (APPEALS)- XII, KOLKATA FOR THE ASSESSMENT YEAR 2008-09. IT HAS RAISED TWO GROUNDS. GROUND NO. 1 IS REPRODUCED HEREUNDER :- WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) IS CORRECT IN HOLDING THAT THE SHO RT TERM CAPITAL GAIN OF RS.9,51,49,483/- & LONG TERM CAPITA L GAIN OF RS.90,84,575/- AS BUSINESS INCOME WITHOUT APPRECIATING THE BOARDS CIRCULAR 4/2007. 2. FACTS APROPOS ARE THAT ASSESSEE HAD FILED ITS RE TURN FOR THE IMPUGNED ASSESSMENT YEAR DECLARING INCOME OF RS.9,8 7,03,252/-. THE INCOME DECLARED, INTER ALIA, INCLUDED INCOME FROM H OUSE PROPERTY RS.67,831/-, INCOME FROM SHORT-TERM CAPITAL GAIN RS .9,51,49,483/-, LONG- TERM CAPITAL GAIN RS.90,84,575/-, BUSINESS INCOME O F RS.34,85,938/- AND I.T.A. NO.: 1430/KOL./2011 AS SESSMENT YEAR : 2008-09 PAGE 1 TO 8 2 INTEREST & DIVIDEND INCOME OF RS.9,11,206/-. DURING THE COURSE OF ASSESSMENT, ASSESSING OFFICER NOTICED THAT ASSESSEE HAD SUBSTANTIAL CAPITAL GAINS FROM SALE OF SHARES AND ASKED THE ASS ESSEE TO EXPLAIN AS TO WHY SUCH GAINS OUGHT NOT TO BE CONSIDERED UNDER THE HEAD INCOME FROM BUSINESS/PROFESSION IN VIEW OF LARGE NUMBER OF TRA NSACTIONS INVOLVED. REPLY OF THE ASSESSEE WAS THAT EQUITY SHARES WERE H ELD AS INVESTMENTS AND SHOWN SO IN ITS BALANCE-SHEETS, CONSISTENTLY. T HE MOTIVE OF THE ASSESSEE WAS ONLY TO HOLD SHARES AS INVESTMENTS AND NOT AS STOCK IN TRADE. JUST BECAUSE SOME OF THE SHARES WERE SOLD FEW MONTH S OF PURCHASE WOULD NOT CONVERT IT TO A TRADING ACTIVITY. AS PER THE AS SESSEE INVESTMENTS WERE ALL IN GROUP COMPANIES AND SUCH INVESTMENTS WERE NO T FOR THE PURPOSE OF TRADING. 3. ASSESSING OFFICER, HOWEVER, WAS NOT IMPRESSED BY THE ABOVE REPLY GIVEN BY THE ASSESSEE. ACCORDING TO HIM, IN THE TAX AUDIT REPORT, TAX AUDITOR HAD CLASSIFIED ASSESSEE AS AN INVESTMENT AN D FINANCE COMPANY. HOWEVER, ASSESSEE IN ITS SUBMISSION DATED 16.07.201 0 STATED THAT IT WAS DEALING IN REAL ESTATE, THOUGH LATER ON 10.12.2010, IT CLARIFIED THAT THIS WAS A MISTAKE. ASSESSING OFFICER WAS OF THE OPINION THAT THE ASSESSEE WAS CONFUSED REGARDING THE ACTUAL NATURE OF ITS BUSINES S. FURTHER AS PER THE ASSESSING OFFICER INCOME RECEIVED BY THE ASSESSEE O N ACCOUNT OF SHARE TRANSACTIONS FORMED 95% OF ITS TOTAL INCOME. INCOME RECEIVED FROM GRANTING LOANS AND ADVANCES WAS ONLY 3.5% OF ITS TO TAL INCOME. ASSESSING OFFICER ALSO NOTED THAT THE FUNDS DEPLOYED IN SHARE S CAME TO RS.2,11,58,090/- AS ON 31.03.2008 AGAINST TOTAL FUN D OF RS.15,80,84,740/- AVAILABLE TO THE ASSESSEE. LOANS GIVEN TO VARIOUS P ARTIES HAD EARNED INTEREST OF RS.38,52,780/- ONLY. SUCH LOANS WERE GI VEN TO RELATED PARTIES AND THAT TOO AT A LOW INTEREST RATE OF 4%. THUS AS PER THE ASSESSING OFFICER, ASSESSEE WAS NOT ENGAGED IN A BUSINESS OF GRANTING LOANS AND ADVANCES DURING THE RELEVANT PREVIOUS YEAR BUT WAS ONLY DOING BUYING AND SELLING OF SHARES. AS PER ASSESSING OFFICER, MO TIVE OF THE ASSESSEE HAD TO BE BACKED UP BY A CONDUCT CORROBORATING SUCH THE MOTIVE. ASSESSING OFFICER THEREAFTER RELYING ON CIRCULAR NO. 4 OF 200 7 ISSUED BY CBDT CAME I.T.A. NO.: 1430/KOL./2011 AS SESSMENT YEAR : 2008-09 PAGE 1 TO 8 3 TO A CONCLUSION THAT TRANSACTIONS IN SHARES DONE BY THE ASSESSEE, WERE ADVENTURES IN THE NATURE OF BUSINESS. JUST BECAUSE SHARES WERE DISCLOSED IN THE BALANCE-SHEET AS INVESTMENT WOULD NOT, IN HI S OPINION BE CONCLUSIVE IN DETERMINING THE NATURE OF TRANSACTION . THEREAFTER RELYING ON THE DECISIONS OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS.- SREE KRISHNA PROPERTIES LTD., [205 ITR 208], MUMBAI HIGH COURT DECISION IN THE CASE OF FORT PROPERTIES PVT. LTD. [208 ITR 2 32], HONBLE APEX COURT DECISION IN THE CASE OF SUTLEZ COTTON MILLS LTD. V S.- CIT [161 ITR 1] AND CERTAIN OTHER DECISIONS, HE CAME TO A CONCLUSION TH AT ASSESSEE WAS ONLY ENGAGED IN THE BUSINESS OF TRADING IN SHARES. HE TH EREFORE REJECTED ITS CLAIM THAT SURPLUS ARISING SHOULD BE TREATED AS CAP ITAL GAINS. HE CONSIDERED THE SURPLUS UNDER THE HEAD INCOME FROM BUSINESS. 4. ASSAILING THE ABOVE ASSESSEE MOVED IN AP PEAL BE FORE THE CIT(APPEALS). AS PER THE ASSESSEE IT HAD ALL ALONG HELD THE SHARES AS INVESTMENTS. JUST BECAUSE ITS AUTHORIZED REPRESENT ATIVE MENTIONED IT TO BE DOING A BUSINESS OF REAL ESTATE, WOULD NOT CHANG E THE ACTUAL NATURE OF ITS BUSINESS SINCE THE AUDIT REPORT IN FORM 3CD CLE ARLY MENTIONED ITS BUSINESS AS INVESTING AND FINANCING. AGAIN AS PER T HE ASSESSEE RESULTS AND WORKING OF PRECEDING YEARS ALSO WERE ALSO VITAL FOR DETERMINING THE PURPOSE OF HOLDING SHARES. DURING FINANCIAL YEAR 20 06-07 THERE WERE NO CAPITAL GAINS OR ANY GAINS FROM SALE OF SHARES. ASS ESSEE HAD ONLY INVESTMENT IN SHARES. THERE WAS ALSO NO SHARE TRADI NG INCOME DURING THAT FINANCIAL YEAR. AS PER THE ASSESSEE IT HAD A TOTAL CAPITAL OF RS.20,01,67,870/- AGAINST WHICH OPENING INVESTMENT IN SHARES CAME TO RS.2,55,62,816/- ONLY. ITS OBJECT CLAUSE IN MEMORA NDUM OF ASSOCIATION CLEARLY SHOWED THAT IT WAS NOT IN THE LINE OF TRADI NG IN SHARES. FURTHER AS PER THE ASSESSEE THERE WAS INCOME ON ACCOUNT OF SAL E OF SHARES ONLY IN THE RELEVANT PREVIOUS YEAR. SIMILAR INCOME WAS NOT THER E EITHER IN THE ASSESSMENT YEAR 2007-08 OR 2009-10. THEREFORE, AS P ER THE ASSESSEE IT WAS NOT REGULARLY DEALING IN SHARES. AS FOR RELIANC E PLACED ON CBDT CIRCULAR NO. 4 OF 2007, ARGUMENT OF THE ASSESSEE WA S THAT EVEN APPLYING I.T.A. NO.: 1430/KOL./2011 AS SESSMENT YEAR : 2008-09 PAGE 1 TO 8 4 THE PRINCIPLES MENTIONED THEREIN, IT COULD NOT BE C ONSIDERED AS A TRADER IN SHARES. LD. CIT(APPEALS) WAS APPRECIATIVE OF THE AB OVE CONTENTIONS. ACCORDING TO HIM, MAJOR PART OF THE INVESTMENTS IN SHARES WERE HELD BY THE ASSESSEE IN A GROUP COMPANY NAMELY M/S. KALPANA INDUSTRIES LTD. FURTHER AS PER LD. CIT(APPEALS) WHOLE OF ASSESSEES CAPITAL HAD COME FROM INTEREST FREE FUNDS. HE WAS, THEREFORE, OF THE OPIN ION THAT THE INCOME ON SALE OF SHARES COULD NOT BE CONSIDERED AS BUSINESS INCOME. 5. NOW BEFORE US, LD. DR STRONGLY ASSAILING THE ORD ER OF LD. CIT(APPEALS) SUBMITTED THAT THE ASSESSEE WAS ENGAGE D IN TRADING IN SHARES THROUGHOUT THE RELEVANT PREVIOUS YEAR. ACCOR DING TO HIM, IT HAD HELD THE SHARES ONLY FOR A VERY SHORT PERIOD AND SH ARES NUMBERING 11,28,720 WERE PURCHASED DURING THE RELEVANT PREVIO US YEAR AND SOLD DURING THE RELEVANT PREVIOUS YEAR, RESULTING IN THE ALLEGED SHORT-TERM CAPITAL GAINS OF RS.95,229,461.74. FREQUENCY OF TRA DING HAS BEEN BROUGHT OUT BY THE ASSESSING OFFICER AT PAGE 7 OF THE ASSES SMENT ORDER. THE PERIOD OF HOLDING SHOWN IN CERTAIN CASES WAS AS LITTLE AS 5 DAYS. EVEN THE SURPLUS CLAIMED AS LONG-TERM CAPITAL GAINS, WERE OF SHARES ACQUIRED IN THE IMMEDIATELY PRECEDING YEAR. THERE WAS THIS A SYSTEM ATIC ACTIVITY INDULGED BY THE ASSESSEE FOR MAKING PROFIT FROM SHARE TRADIN G. SUBSTANTIAL MAGNITUDE CLEARLY SHOWED THE INTENTION OF THE ASSES SEE. THE INTENTION WAS NOT TO DERIVE INCOME BY WAY OF DIVIDEND NOR CRE ATION OF ANY INVESTMENT. EVEN APPLYING THE YARDSTICK SET OUT BY CBDT IN CIRCULAR NO. 4, IT WAS CLEAR THAT ASSESSEE WAS ENGAGED IN THE BUSIN ESS OF SHARE TRADING. ASSESSEE COULD NOT JUSTIFY ITS DECLARED MOTIVE THA T THE SHARES WERE HELD AS INVESTMENT. AS PER THE LD. D.R., THE COURSE OF C ONDUCT, ON THE OTHER HAND, SHOWED THAT ASSESSEE WAS INDULGING IN PURE TR ADING OF SHARES. JUST BECAUSE IN THE EARLIER YEAR, SHARES WERE ACCEPTED A S INVESTMENTS WOULD NOT MEAN THAT FOR THE IMPUGNED ASSESSMENT YEAR THE SAME SHOULD BE ADOPTED. THEREFORE, ACCORDING TO THE LD. D.R., INCO ME ARISING OUT OF SALE OF SHARES WAS TO BE ASSESSED ONLY UNDER THE HEAD OF BU SINESS INCOME. I.T.A. NO.: 1430/KOL./2011 AS SESSMENT YEAR : 2008-09 PAGE 1 TO 8 5 6. PER CONTRA, LD. AR SUBMITTED THAT COPY OF THE AU DITED ACCOUNTS FOR PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2007-08, 2009-10 AND 2010-11 PLACED AT PAGES 1-9, 28-36 AND 18-27 OF THE PAPER B OOK RESPECTIVELY CLEARLY SHOWED THAT ASSESSEE HAD NO INTENTION OF TR ADING IN SHARES. ACCORDING TO HIM, MEMORANDUM OF ASSOCIATION OF THE ASSESSEE CLEARLY PROVED THAT ITS MAIN OBJECT WAS NOT TRADING IN SHA RES. ACCORDING TO THE LD. AR THE OBJECT OF HOLDING SHARES AS INVESTMENT W AS TO HAVE A GRIP OVER THE GROUP COMPANY. THEREFORE, ACCORDING TO A.R., LD . CIT(APPEALS) WAS JUSTIFIED IN DIRECTING THE AO TO CONSIDER THE SURPL US ARISING ON SALE OF SHARES UNDER THE HEAD CAPITAL GAINS. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF AUTHORITIES BELOW. SHARE CAPITAL WITH RESERVE AND S URPLUS OF THE ASSESSEE AS ON 31.03.2008 STOOD AT RS.21,04,76,870.38 VIDE A UDITED BALANCE-SHEET AT PAGE 12 OF THE PAPER BOOK. AGAINST THIS, ITS IN VESTMENT CAME TO RS.2,11,58,090.47, WHEREAS LOANS AND ADVANCES WERE TO THE TUNE OF RS.17,08,87,261.89. AS ON 31.03.2007 THESE FIGURES WERE RS.11,13,06,258.79, RS.2,55,62,816.36 AND RS.7,91,8 8,116.40 RESPECTIVELY. WHAT IS CLEAR FROM THE ABOVE IS THAT THE LOANS AND ADVANCES WHICH STOOD AT RS.7,91,88,116.40 AS ON 31.03.2007 INCREASED TO RS.17,08,87,261.89 BY THE END OF THE YEAR. AS AGAINST THIS, ITS INVESTME NT OF RS.2,55,62,816.36 HAD COME DOWN TO RS.2,11,58,090.47. VIEWED FROM ANY ANGLE, LOANS AND ADVANCES GIVEN BY THE ASSESSEE-COMPANY WERE SUBSTAN TIALLY HIGHER THAN ITS INVESTMENTS. WE CAN THEREFORE SAFELY SAY THAT A SSESSEE WAS MORE ENGAGED IN THE BUSINESS OF GIVING LOANS AND ADVANCE S. MEMORANDUM OF ASSOCIATION OF THE COMPANY PLACED AT PAGES 41-53 OF THE PAPER BOOK SHOWS THAT ITS MAIN OBJECT WAS MANUFACTURING AND DE ALING IN PLASTIC AND SYNTHETIC RAW MATERIALS AS ALSO MANUFACTURING AND F ABRICATION OF RUBBER AND RUBBER PRODUCTS. DURING THE RELEVANT PREVIOUS YEAR, ASSESSEE HAD NOT DONE ANY TRANSACTIONS OF THIS NATURE. BY VIRTUE OF ITS ANCILLIARY OBJECT 8 WHICH SAY THAT IT CAN INVEST AND DEAL WITH SURPLUS MONEY NOT IMMEDIATELY REQUIRED FROM TIME TO TIME AS DETERMINED BY ITS DIR ECTORS, IT COULD HAVE I.T.A. NO.: 1430/KOL./2011 AS SESSMENT YEAR : 2008-09 PAGE 1 TO 8 6 INVESTED ITS SURPLUS IN SHARES AND ALSO GIVEN LOAN S AND ADVANCES. AS PER THE AUDITED BALANCE-SHEET AS ON 31.03.2007, A COPY OF WHICH IS PLACED AT PAGE 7 OF THE PAPER BOOK, ASSESSEE DID NOT HOLD ANY SHARES AS STOCK IN TRADE. IT HELD ITS SHARES UNDER INVESTMENT PORTFOL IO ONLY. 8. NOW COMING TO THE SHARES PURCHASED AND SOLD BY T HE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR, LIST THEREOF HAS BEEN REPRODUCED BY THE ASSESSING OFFICER AT PAGES 7 & 8 OF HIS ORDER. EXCEPT FOR 2000 SHARES IN NMDC LTD., 95,699 IN NICCO CORPORATION LIMITED A ND 100 SHARES IN CIPLA LIMITED, TOTALLING TO 97,799, ALL OTHER SHARE S OUT OF TOTAL 11,26,720 PURCHASED AND SOLD WERE THAT OF M/S. KALPANA INDUST RIES LTD. IN OTHER WORDS 91.33% OF THE TOTAL SHARES PURCHASED WERE OF M/S. KALPANA INDUSTRIES. THERE IS NO DISPUTE THAT M/S. KALPANA I NDUSTRIES LTD. WAS A GROUP COMPANY OF THE ASSESSEE. THUS MAJOR PART OF T HE SHARES HELD WAS OF A GROUP COMPANY. ASSESSEE WAS CONSISTENTLY SHOWING THIS AS AN INVESTMENT. NEITHER IN THE PRECEDING PREVIOUS YEAR NOR IN THE SUCCEEDING PREVIOUS YEAR, ASSESSEE HAD INDULGED IN AN ACTIVITY RESULTING IN A SURPLUS OR LOSS ON SALE OF SHARES. AUDITED PROFIT & LOSS A/ C. OF THE ASSESSEE AS YEAR ENDED 31.03.2009 PLACED AT PAGE 31 OF THE PAPE R BOOK SHOWED THAT THERE WAS NO INCOME WHATSOEVER FROM SALE OF SHARES EITHER UNDER THE HEAD INCOME FROM CAPITAL GAINS OR OTHERWISE. SIMI LARLY, THE AUDITED PROFIT AND LOSS A/C. FOR THE YEAR AS ON 31.3.2007 P LACED AT PAPER BOOK PAGE NO. 6, CLEARLY SHOW THAT IT HAD NO INCOME FROM SALE OF SHARES. THUS IN OUR OPINION, ASSESSING OFFICER WENT OFF TANGENT IN CONSIDERING THE TRANSACTIONS OF THE IMPUGNED ASSESSMENT YEAR IN AN ISOLATED FASHION, IGNORING THE RESULTS FOR THE IMMEDIATELY PRECEDING YEAR AS WELL AS THE SUCCEEDING YEAR. IN OUR OPINION ASSESSEE WAS ABLE T O DEMONSTRATE ITS INTENTION OF HOLDING THE SHARES AS INVESTMENT. ONCE SUCH INTENTION IS DEMONSTRATED THE SALE WOULD RESULT IN CAPITAL GAINS AND NOT BUSINESS INCOME. NO DOUBT, HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SREE KRISHNA PROPERTIES LTD.(SUPRA) HAD HELD THAT DESCRI PTION OF SHARES AS STOCK-IN-TRADE IN THE BALANCE-SHEET WAS NOT DECISIV E. HOWEVER, HERE NOT I.T.A. NO.: 1430/KOL./2011 AS SESSMENT YEAR : 2008-09 PAGE 1 TO 8 7 ONLY DESCRIPTION BUT THE INTENTION TO HOLD THE SHAR ES AS INVESTMENT, WAS CLEAR FROM THE ACTIVITIES UNDERTAKEN BY THE ASSESSE E IN THE PRECEDING AS WELL AS SUCCEEDING PERIOD. WE ARE, THEREFORE, OF TH E OPINION THAT LD. CIT(APPEALS) WAS JUSTIFIED IN HOLDING THE SURPLUS A RISING OUT OF SALE OF SHARES AS CAPITAL GAINS. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD. CIT(APPEALS). GROUND NO. 1 OF REVENUE STANDS DISMISSED. 9. GROUND NO. 2 OF THE REVENUE IS REPRODUCED HEREUN DER :- LD. CIT(A) HAS ERRED IN DELETING ADDITION OF RS.77,05,507/- ON ACCOUNT OF NOTIONAL INTEREST ON L OAN GIVEN TO RELATED CONCERNS WITHOUT APPRECIATING THE FACTS OF THE CASE. 10. FACTS APROPOS OF THE CASE ARE THAT ASSESSEE HAD GIVEN LOANS OF RS.15.45 CRORES TO M/S. KALPANA INDUSTRIES LTD., IT S SISTER CONCERN. IT HAD CHARGED INTEREST @ 4% PER ANNUM ON SUCH LOAN. INTER EST RECEIVED CAME TO RS.38,52,780/-. AS PER ASSESSING OFFICER, THE MARKE T RATE FOR COMMERCIAL LENDING WAS 12-13%. THERE WAS NO EVIDENCE FURNISHED BY THE ASSESSEE TO SHOW THAT CONCESSIONAL RATE OF INTEREST WOULD RESUL T IN ANY ADVANTAGE TO IT. HE, THEREFORE, HELD THAT SECTION 92(1) OF THE A CT COULD BE APPLIED AND NOTIONAL INTEREST ON SUCH LOAN COULD BE ADDED. HE C ONSIDERED INTEREST RATE OF 12% AS THE RIGHT ONE AND MADE AN ADDITION OF RS. 77,05,560/- FOR INTEREST UNDERCHARGED. 11. IN ITS APPEAL BEFORE THE LD. CIT(APPEALS), ARG UMENT OF THE ASSESSEE WAS THAT NO ADDITION FOR NOTIONAL INTEREST WAS TO B E MADE. LD. CIT(APPEALS) WAS APPRECIATIVE OF THE ABOVE CONTENTI ON. ACCORDING TO HIM, ASSESSEE HAD NOT RECEIVED ANY INTEREST FROM M/S. KA LPANA INDUSTRIES LTD. IN EXCESS OF WHAT WAS CLAIMED BY IT AND SECTION 92( 1) COULD NOT BE APPLIED. 12. NOW BEFORE US, LD. DR STRONGLY ASSAILING THE OR DER OF LD. CIT(APPEALS) SUBMITTED THAT THE ASSESSEE COULD NOT SHOW THE PURPOSE OF I.T.A. NO.: 1430/KOL./2011 AS SESSMENT YEAR : 2008-09 PAGE 1 TO 8 8 GIVING LOANS TO M/S. KALPANA INDUSTRIES LTD. AND TH E BUSINESS PURPOSE BEHIND SUCH LOANS. 13. PER CONTRA, LD. AR STRONGLY SUPPORTED THE ORDER OF LD CIT(APPEALS). 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THERE IS NO FINDING BY THE ASS ESSING OFFICER THAT LOAN GIVEN BY THE ASSESSEE TO M/S. KALPANA INDUSTRIES LT D. CAME OUT OF ANY INTEREST BEARING FUND. ASSESSEE HAD SUBSTANTIAL OWN FUNDS WITH IT. ADMITTEDLY LOAN WAS GIVEN TO A SISTER CONCERN. ASSE SSEE HAD ALSO RECEIVED INTEREST @ 4% FOR IT. FASTENING OF A NOTIONAL INTER EST RATE ON THE ASSESSEE, WHEN OWN FUNDS WERE GIVEN AS LOAN WAS NOT APPROPRIA TE. IN OUR OPINION, ONLY REAL INCOME CAN BE TAXED AND NOT ANY NOTIONAL INCOME. IN ANY CASE, BEING A SISTER CONCERN ASSESSEE WOULD HAVE HAD ITS INTEREST THEREIN FOR GIVING SUBSTANTIAL LOANS. SECTION 92(1) AS RIGHTLY POINTED OUT BY LD. CIT(APPEALS) COULD BE APPLIED ONLY FOR INTERNATIONA L TRANSACTIONS. WE ARE, THEREFORE, OF THE OPINION THAT LD. CIT(APPEALS) WAS JUSTIFIED IN DELETING THIS ADDITION. GROUND NO. 2 OF REVENUE STANDS DISMI SSED. 15. IN THE RESULT, APPEAL FILED BY REVENUE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH DAY OF JANUARY, 2014. SD/- SD/- MAHAVIR SINGH ABRAHAM P. GEORGE (JUDICIAL MEMBER) (ACC OUNTANT MEMBER) KOLKATA, THE 8 TH DAY OF JANUARY, 2014 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.