M/s. Dewsoft Overseas Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 1446/DEL/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7047 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-01-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 11-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: TAPAS RAM MISHRA
• Keywords: Business income; Depreciation; Earning of tax free income; Rule 8D
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 271(1)(c); 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 234B; 14A; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SHRI J. S. REDDY, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER APPELLANT BY : SH. TAPAS RAM MISHRA, SH. SHASHANK SHARMA, ADVS. RESPONDENT BY : SH. ANIL KUMAR SHARMA, SR. DR. DATE OF HEARING : 05.01.2017 DATE OF PRONOUNCEMENT: 09.01.2017 ORDER PER BEENA A. PILLAI, JM: 1. T HE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST ORDER DATED 11.01.2013 PASSED BY LD. CIT (A ) 13 FOR ASSESSMENT YEAR 2009-10 ON THE FOLLOWING GROUND OF APPEAL: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS WRONG, PERVERSE, ILLEGAL, AGAINST THE STATUTORY PROVISIONS AND LIABLE TO BE S ET ASIDE. I.T.A. NO. 1446/DEL/2013 (ASSESSMENT YEAR 2009-10) DEWSOFT OVERSEAS PVT. LTD. 101, GAGANDEEP BUILDING RAJENDRA PLACE, NEW DELHI GIR/PAN : AABCD3196J (APPELLANT) VS. A CIT RANGE- 10 NEW DELHI. (RESPONDENT) ITA NO. 1446/DEL/2013 (AY 2009-10) PAGE 2 OF 7 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE LD. ASSESSING OFFICER IN TREATING THE INVESTMENT IN SHARES MADE BY THE APPELLANT AS STOCK-IN-TRADE. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE LD. ASSESSING OFFICER ASSESSING THE LOSS OF RS. 2,32,39,872/- CLAIMED AS SHORT TERM CAPITAL LOSS AND RS. 1,49,58,2807- CLAIMED AS LONG TERM CAPITAL LOSS UNDER HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE LD. ASSESSING OFFICER MAKING THE DISALLOWANCE OF RS. 4,68,503/- UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D OF THE INCOME TAX RULES, 1962. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE LD. ASSESSING OFFICER LEVYING INTEREST UNDER SECTION 234B OF THE INCOME TAX ACT, 1961. 6. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE LD. ASSESSING OFFICER INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 . ITA NO. 1446/DEL/2013 (AY 2009-10) PAGE 3 OF 7 THE APPELLANT CRAVES LEAVE TO ADD, ALTER, VARY, OMIT, SUBSTITUTE OR AMEND THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEFORE OR AT THE TIME OF HEARIN G OF THE APPEAL. 2. BRIEF FACTS OF THE CASE ARE AS UNDER: ASSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.12,55,84,310/- ON 30.09.2009 AND THE R ETURN WAS PROCESSED UNDER SECTION 143 (1) OF THE ACT. NOT ICES UNDER SECTION 143 (2) ALONGWITH QUESTIONNAIRE UNDER SECTI ON 142 (1) OF THE ACT WAS ISSUED TO THE ASSESSEE. IN RESPONSE TO THESE NOTICES REPRESENTATIVES OF ASSESSEE APPEARED FOR TH E ASSESSMENT PROCEEDINGS. 3. THE LD. AO OBSERVED THAT ASSESSEE IS A PRIVATE LIM ITED COMPANY ENGAGED IN THE BUSINESS OF PROVIDING ONLINE EDUCATION. IN ORDER TO FULLY UTILISE ITS SURPLUS FU NDS THE ASSESSEE HAD ENTERED INTO A DISCRETIONARY PORTFOLIO MANAGEMENT SERVICE AGREEMENT WITH RELEGATED SECURIT IES LTD., IN JUNE 2006, AND THE ASSESSEE HANDED OVER IT S SURPLUS FUNDS TO THE PORTFOLIO MANAGER. THE ASSESSEE DECLAR ED SHORT TERM CAPITAL LOSS AND LONG TERM CAPITAL LOSS FOR FR EQUENT TRANSACTIONS IN SHARES WHICH WERE NOT CLAIMED BY TH E ASSESSEE DURING THE YEAR. AFTER GOING THROUGH THE SUBMISSIONS MADE BY THE ASSESSEE LD. AO TREATED THE SALE AND PURCHASE OF SHARES AS TRADING ACTIVITY IN SHARE S DONE IN PRECEDING ASSESSMENT YEARS. LD. AO ALSO DISALLOWED AN EXPENSES OF RS. 4,68,503/- AND TOWARDS EXPENSES REL ATING TO ITA NO. 1446/DEL/2013 (AY 2009-10) PAGE 4 OF 7 THE EARNING OF EXEMPT INCOME. AGGRIEVED BY THE ASSE SSMENT ORDER PASSED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHO UPHELD THE FINDINGS OF LD. AO. AGGRIEVED BY THE ORDER PASSED BY LD. CIT (A) ASSESSEE IS IN APPEAL BEFORE US. 4. GROUND NO. 1 RAISED BY THE ASSESSEES GENERAL IN NATURE, GROUND NO. 2 AND 3 RELATES TO THE ISSUE OF TREATING THE INVESTMENT IN SHARES MADE BY THE ASSESSEE AS ST OCK IN TRADE AND GROUND NO. 4 RELATES TO THE DISALLOWANCE MADE UNDER SECTION 14 A READ WITH RULE 8D. GROUND NO. 2 AND 3 5. AT THE OUTSET IT HAS BEEN SUBMITTED BY LD. AR THAT THE ISSUE STANDS COVERED BY THE ORDER OF THIS TRIBUNAL FOR ASSESSMENT YEAR 2008-09, A COPY OF WHICH HAS BEEN P LACED IN THE PAPER BOOK WHILE ONE AT PAGES 107-117. LD. DR SUBMITTED THAT THE ISSUE NOW STANDS SQUARELY COVERE D BY THE ORDER OF THIS TRIBUNAL FOR THE PRECEDING ASSESSMENT YEAR. 6. WE HAVE PERUSED THE RECORDS PLACED BEFORE US IN TH E LIGHT OF THE SUBMISSIONS ADVANCED BY BOTH THE SIDES . 7. IT IS OBSERVED THAT COORDINATE BENCH OF THIS TRIBU NAL FOR ASSESSMENT YEAR 2008-09 IN ITA NO. 1835/DEL/2012 IN ASSESSEES OWN CASE VIDE ORDER DATED 20.01.2016, HA S DEALT WITH THIS ISSUE ON IDENTICAL FACTS IN PARA 7 WHICH HAS BEEN REPRODUCED HEREINBELOW: 7. WE HAVE PERUSED ALL THE RECORDS AND HEARD BOTH THE PARTIES. AS RELATES TO GROUND NO. 1 OF THE ITA NO. 1446/DEL/2013 (AY 2009-10) PAGE 5 OF 7 REVENUE THE CIT(A) HAS RIGHTLY HELD THAT THE TRANSACTION OF SHARES CARRIED, OUT BY THE ASSESSEE DURING THE YEAR SHOULD BE TREATED AS INVESTMENTS AND THE SHORT TERM CAPITAL GAIN ON SALE OF SUCH SHARES SHALL BE ASSESSED UNDER THE HEAD CAPITAL GAI N AND NOT AS BUSINESS INCOME. THE REASON BEING THAT THE ASSESSEE'S BUSINESS WAS NOT THAT OF SHARE TRANSACTION BUT OF PROVIDING ONLINE AND REAL TIME EDUCATION TO RETAIL AND INSTITUTIONAL PLANS ON A VARIETY OF PROGRAMMES AND SUBJECT. IN FACT IN EARLIER YEAR ALSO THE CIT(A) HAS HELD THE SAME. THEREFORE, GROUND NO. 1 OF THE REVENUE IS DISMISSED. AS RELATES TO GROUND NO. 2 OF THE APPEAL OF THE REVENUE, THE DEPRECIATION HAS BEEN RI GHTLY ALLOWED BY THE CIT(A) ON THE BASIS OF DECISION IN T HE CASE OF M/S. DATACRAFT INDIA LIMITED VS. DCIT PASSED BY THE SPECIAL BENCH ITAT MUMBAI AND ALSO DELHI HIGH COURT'S DECIS ION IN CASE OF CIT VS. BSES RAJDHANI POWER LTD. WHEREIN IT WAS HELD THAT COMPUTER ACCESSORIES AND PERIPHERALS SUCH AS P RINTERS, SCANNERS AND SERVER ETC. FORM AN INTEGRAL PART OF T HE COMPUTER SYSTEM AND ARE THEREFORE, ENTITLED TO DEPRECIATION @ 60%. THE ISSUE IS COVERED DISCUSSED THEREIN IS IN FAVOUR OF THE ASSESSEE THEREFORE, THIS GROUND OF THE REVENUE IS DISMISSED. 8. IT HAS BEEN SUBMITTED BY LD. AO THAT THERE IS NO C HANGE IN THE FACTUAL POSITION IN THE ACTIVITY CARRIED ON BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION VIZ-A-VIZ ASSESSMENT YEAR 2008-09. IN SUCH CIRCUMSTANCES RESP ECTFULLY FOLLOWING THE DECISION IN ASSESSEES OWN CASE FOR I MMEDIATELY PRECEDING ASSESSMENT YEAR WE ARE INCLINED TO ALLOW THESE GROUNDS OF APPEAL RAISED BY THE ASSESSEE. ITA NO. 1446/DEL/2013 (AY 2009-10) PAGE 6 OF 7 GROUND NO. 4 9. LD. AR SUBMITTED THAT THERE HAS BEEN NO EXPENSES T HAT HAS BEEN INCURRED BY ASSESSEE FOR EARNING EXEMPT IN COME FOR THE YEAR UNDER CONSIDERATION AND ASSESSING OFFICER HAS WRONGLY CALCULATED THE DISALLOWANCE BY INVOKING SEC TION 14A READ WITH RULE 8D. 10. ON THE CONTRARY THE LD. DR SUBMITTED THAT ASSESSEE HAS EARNED DIVIDEND INCOME WHICH IS EXEMPT AND WILL NOT FORM PART OF THE TOTAL INCOME FOR THE YEAR UNDER CONSIDE RATION. HE FURTHER SUBMITTED THAT ASSESSMENT YEAR UNDER CONSID ERATION IS 2009-10 AND ASSESSING OFFICER WAS INCUMBENT TO C ALCULATE THE DISALLOWANCE UNDER RULE 8D. FURTHER, HE ARGUED THAT ASSESSEE HAD MADE ANY SUO MOTO DISALLOWANCE FOR THE YEAR UNDER CONSIDERATION. HE THUS RELIED UPON THE ORDERS PASSED BY THE AUTHORITIES BELOW. 11. WE HAVE PERUSED THE RECORDS PLACED BEFORE US IN TH E LIGHT OF THE SUBMISSIONS ADVANCED BY BOTH THE PARTI ES. 12. IT IS OBSERVED THAT ASSESSEE HAD EARNED EXEMPT INC OME DURING THE YEAR UNDER CONSIDERATION AND ASSESSING O FFICER HAS ADDED 0.5% OF SUCH INVESTMENT AS EXPENSES RELATING TO ADMINISTRATION AS PROVIDED BY RULE 8D (2) (III) OF THE RULES 1962. CONSIDERING THE ASSESSMENT YEAR INVOLVED, WE AGREE WITH THE PLEA ADVANCED BY THE LD. DR THAT THE ASSES SING OFFICER WAS DUTY BOUND TO CALCULATE THE DISALLOWANC E BY APPLYING RULE 8D. WE DO NOT AGREE WITH THE ARGUMENT S ITA NO. 1446/DEL/2013 (AY 2009-10) PAGE 7 OF 7 ADVANCED BY THE ASSESSEE THAT NO EXPENDITURE CAN BE ATTRIBUTED TO THE EARNING OF THE TAX FREE INCOME. T HUS, WE DO NOT FIND ANY INFIRMITY WITH THE FINDINGS OF THE LD. CIT (A) AND THE SAME IS UPHELD. THE RESULT THE GROUND RAISED BY THE ASSESSEE STANDS DISMISSED. GROUND NO. 5 13. THIS GROUND PERTAINS TO THE INTEREST CHARGEABLE UN DER SECTION 234B OF THE ACT. AS THIS IS CONSEQUENTIAL I N NATURE WE ARE NOT INCLINED TO ADJUDICATE THIS ISSUE. GROUND NO. 6 14. THIS GROUND PERTAINS TO INITIATION OF PENALTY PROC EEDINGS WHICH IS PREMATURE AND THEREFORE IS DISMISSED. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE STAN DS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09 TH JANUARY, 2017. SD/- SD/- (J. S.REDDY) (BEENA A. PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 09.01.2017 @M!T