M/s. Safety General Finance and Investments (India) Limited, CHENNAI V. DCIT, Coimbatore

ITA 1464/CHNY/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68915 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 09-12-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 13-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: V JAGADISAN
• Keywords: Reasonable cause; Speculation loss; Condonation of delay

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ITA NO.1464/MDS/2012 (ASSESSMENT YEAR: 2008-09) M/S. SAFETY GENERAL FINANCE & INVESTMENTS (INDIA) LTD. 49, N.H.ROAD, COIMBATORE-641 001. PAN: AADCS0589C VS. THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-I(3), COIMBATORE. (APPELLANT) (RESPONDENT) APPELLANT BY : MR. V.JAGADISAN, FCA RESPONDENT BY : MR. S.DAS GUPTA, JCIT DATE OF HEARING : 9 TH DECEMBER, 2013 DATE OF PRONOUNCEMENT : 31 ST DECEMBER, 2013 O R D E R PER CHALLA NAGENDRA PRASAD, JM : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, COIM BATORE DATED 21.07.2011 FOR THE ASSESSMENT YEAR 2008-09. 2. THERE IS A DELAY OF 285 DAYS IN FILING OF THIS A PPEAL. ASSESSEE FILED A PETITION ALONG WITH AFFIDAVIT EXPL AINING REASON THAT MOTHER OF THE CHAIRMAN/MANAGING DIRECTOR OF T HE COMPANY BECAME SERIOUSLY ILL FROM 1.8.2011 AND WAS TO BE ITA NO.1464/MDS/2012 2 ATTENDED BY HER SON ON A DAY TO DAY BASIS AND SHE U LTIMATELY DIED ON 14.12.2011. THEREAFTER, THE MANAGING DIRECT OR OF THE COMPANY WAS INVOLVED IN FAMILY SETTLEMENT BETWEEN T HE FAMILY MEMBERS. COPY OF MEDICAL REPORTS AND OTHER PAPERS R ELATED TO ILLNESS OF MRS. SARASWATHY AMMAL ARE ENCLOSED. A N AFFIDAVIT IN SUPPORT OF THE PETITION IS ENCLOSED. IN VIEW OF THE ABOVE, ASSESSEE PRAYS FOR CONDONATION OF DELAY IN FILING OF THE APPEAL. WE HAVE GONE THROUGH THE PETITION AND A FFIDAVIT FILED BEFORE THIS TRIBUNAL INCLUDING DEATH CERTIFI CATE, LAB REPORT ETC. AND FIND THAT THE ASSESSEE WAS PREVENTED WITH REASONABLE CAUSE IN FILING THE APPEAL IN TIME. THE REFORE, IN THE INTEREST OF JUSTICE, THE DELAY IS CONDONED AND THE APPEAL IS ADMITTED. 3. COMING TO THE MERITS OF THE APPEAL, THE ONLY ISS UE IN THE APPEAL OF THE ASSESSEE IS THAT COMMISSIONER OF INCO ME TAX (APPEALS) ERRED IN HOLDING THAT LOSS ON TRANSACTIO N OF PURCHASE AND SALE OF SHARES IS SPECULATION LOSS AN D NOT TRADING OR BUSINESS LOSS. THE ASSESSING OFFICER WH ILE COMPLETING THE ASSESSMENT NOTICED THAT THE ASSESSEE CLAIMED ITA NO.1464/MDS/2012 3 LOSS FROM TRADING ON SALE OF SHARES AND SECURITIE S. THE ASSESSEE ALSO RECEIVED INTEREST ON LOANS ADVANCED T O RELATED PARTIES WHERE DIRECTORS OF THE ASSESSEE COMPANY ARE INTERESTED. THEREFORE, THE ASSESSING OFFICER REQUI RED THE ASSESSEE TO EXPLAIN AS TO WHY THE PROVISIONS OF SEC TION 73(4) SHALL NOT APPLY FOR TREATING THE BUSINESS LOSS AS S PECULATION LOSS. THE ASSESSEE SUBMITTED THAT ITS MAIN BUSINESS WAS FINANCING AND MONEY LENDING AND THEREFORE PROVISIO NS OF SECTION 73(4) WILL NOT BE APPLICABLE TO THE ASSESSE E. HOWEVER, THE ASSESSING OFFICER OBSERVED THAT THOUGH ASSESSEE WAS REGISTERED AS NBFC IT HAS NOT DONE THE BUSINESS OF BANKING OR MONEY LENDING DURING THE YEA R. HE OBSERVED THAT DURING THE YEAR THERE IS NO RELATED ACTIVITY OF FINANCING AND NO MONEY GOT CIRCULATED BETWEEN THE PARTIES AND CAME BACK TO THE ASSESSEE PERIODICALLY. THE A SSESSING OFFICER OBSERVED THAT THREE ADVANCES GIVEN AS FOUND FROM THE BALANCE SHEET ARE ONLY TO RELATED COMPANIES AND THEREFORE HE WAS OF THE OPINION THAT THIS CAN ONLY BE TREATED AS INCOME FROM OTHER SOURCES AND CANNOT BE TREATED AS AN ACTI VITY OF FINANCING OR MONEY LENDING. THEREFORE ENTIRE LOSS C LAIMED BY ITA NO.1464/MDS/2012 4 THE ASSESSEE UNDER BUSINESS WAS TREATED AS SPECULAT ION LOSS BY THE ASSESSING OFFICER. ON APPEAL, THE COMMISSION ER OF INCOME TAX (APPEALS) CONFIRMED THE ASSESSMENT MADE BY THE ASSESSING OFFICER OBSERVING AS UNDER:- 5. I HAVE GONE THROUGH THE ACCOUNTS OF THE APPELLANT FOR THE 5 YEARS AND AS SEEN FROM THE DETAILS IN THE BALANCE SHEET, THE APPELLANT WAS NEVER INTO BUSINESS OF MONEY LENDING OR ADVANCING LOANS. THE AMOUNTS WERE ADVANCED TO SISTER CONCERNS/DIRECTORS OF THE COMPANY WHICH WERE SHOWN AS DEBTORS IN THE BALANCE SHEET. AS SEEN FROM THE DETAILS DURING THE YEAR THE APPELLANT COMPANY INCURRED A LOSS OF ` 67,83,614/-. DURING THE YEAR UNDER CONSIDERATION, THE INCOME FROM SHARE LOSS IS HIGHER WHEN COMPARED TO OTHER INCOME. THE APPELLANT DOES NOT COME UNDER THE EXCEPTIONS TO EXPLANATION TO SECTION 73. HENCE, THE LOSS FROM TRADING AND SALE OF SHARES AND SECURITIES WAS RIGHTLY TREATED AS SPECULATION LOSS BY THE ASSESSING OFFICER. THE GROUNDS OF APPEAL ARE DISMISSED. 4. THE COUNSEL FOR THE ASSESSEE REFERRING TO EXPLAN ATION TO SECTION 73 SUBMITS THAT ASSESSEES PRINCIPAL BUSINE SS IS OF GRANTING LOANS AND ADVANCES, THEREFORE, PROVISIONS OF SECTION 73(4) OF THE ACT HAVE NO APPLICATION. HE PLACES RE LIANCE ON VARIOUS DECISIONS AS UNDER:- 1. PCBL INDUSTRIES LTD. VS. CIT (337 ITR 536) ITA NO.1464/MDS/2012 5 2. DCIT VS. VENKATESWAR INVESTMENT & FINANCE LTD. ( 277 ITR (AT) 20) 3. CIT VS. DARSHAN SECURITIES (P) LTD. (341 ITR 55 6) 4. DCIT VS. JINDAL EXPORTS LTD. (287 ITR (AT) 172) HE SUBMITS THAT IN THE LIGHT OF THESE DECISIONS, A PPEAL OF THE ASSESSEE BE ALLOWED. 5. THE DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 6. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND THE CASE LAW RELIED ON. THE CALCUTTA SPECIAL BE NCH OF THIS TRIBUNAL IN THE CASE OF DCIT VS. VENKATESWAR INVEST MENT & FINANCE P.LTD. (SUPRA) WHILE DECIDING A SIMILAR IS SUE HELD THAT TO DECIDE WHETHER THE CASE OF AN ASSESSEE FALLS IN THE EXCEPTIONS PROVIDED IN EXPLANATION TO SECTION 73 O R NOT AND TO DECIDE WHETHER PRINCIPAL BUSINESS OF THE ASSESSE E WAS THAT OF GRANTING OF LOANS AND ADVANCES, THE DECISIVE FAC TOR IS NATURE OF ACTIVITIES OF THE ASSESSEE AND NOT THE AC TUAL INCOME FROM SUCH ACTIVITIES DURING A PARTICULAR YEAR. IT WAS OBSERVED ITA NO.1464/MDS/2012 6 THAT WHAT CONSTITUTES PRINCIPAL BUSINESS HAD BEEN D EFINED NOWHERE IN THE ACT, THEREFORE WHAT CONSTITUTES PRIN CIPAL BUSINESS WOULD DEPEND ON THE FACTS AND CIRCUMSTANCE S OF EACH CASE. THE MEMORANDUM & ARTICLES OF ASSOCIATIO N OF THE COMPANY, PAST HISTORY OF THE COMPANY, CURRENT DEPLO YMENT OF THE CAPITAL OF THE COMPANY, BREAK-UP OF THE INCOME EARNED DURING THE RELEVANT YEAR WOULD ALL HELP IN DETERMIN ING THE PRINCIPAL BUSINESS OF THE COMPANY. 7. IN THE CASE ON HAND, NEITHER THE ASSESSING OFFIC ER NOR THE COMMISSIONER OF INCOME TAX (APPEALS) HAS EXAMIN ED THE ISSUE IN APPEAL PROPERLY. NO ATTEMPT HAS BEEN MADE BY THE AUTHORITIES TO FIND OUT WHETHER THE PRINCIPAL BUSIN ESS OF THE ASSESSEE FALLS IN EXCEPTIONS PROVIDED UNDER SECTION 73(4) OF THE ACT. IN THE INTEREST OF JUSTICE, WE FIND THAT T HIS MATTER SHOULD GO BACK TO THE ASSESSING OFFICER FOR EXAMINI NG AFRESH KEEPING IN VIEW THE DECISIONS AND THE PRINCIPLES LA ID DOWN THEREIN. WE SET ASIDE THE IMPUGNED ORDER AND RESTOR E THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO EXAMINE THE ISSUE AFRESH AFTER EXAMINING THE FACTS OF THE CASE ITA NO.1464/MDS/2012 7 AND THE DECISIONS RELIED ON BY THE ASSESSEE AFTER P ROVIDING ADEQUATE OPPORTUNITY TO THE ASSESSEE AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW. 8. THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATIS TICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON TUESDAY, THE 31 ST DAY OF DECEMBER, 2013 AT CHENNAI. SD/- SD/- (A. MOHAN ALANKAMONY ) (CHALLA NAGENDRA PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI. DATED THE 31 ST DECEMBER, 2013. SOMU COPY TO: (1) APPELLANT MR. V.JAGADISAN, C.A. 245, TTK ROAD, RESIDE NCY APARTMENTS, ALWARPET, CHENNAI-18. (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F.