The ACIT, Circle-3, Ahmedabad V. Khandwala Integrated Financial Services Pvt. Ltd, Ahmedabad

ITA 1577/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9690 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 22-01-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 17-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DINESH SINGH
• Keywords: Capital asset; Bad and doubtful debts
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH (BEFORE SHRI S.K. YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) ITA. NO: 1577 & 1569/AHD/2012 (ASSESSMENT YEAR: 2009-10) ASSTT. COMMISSIONER OF INCOME TAX, CRICLE-3, AHMEDABAD V/S KHANDWALA INTEGRATED FINANCIAL SERVICES PRIVATE LTD. B-81, PARISEEMA COMPLEX, C.G. ROAD, ELLISBRIDGE, AHMEDABAD (APPELLANT) (RESPONDENT) KHANDWALA INTEGRATED FINANCIAL SERVICES PRIVATE LTD. B-81, PARISEEMA COMPLEX, C.G. ROAD, ELLISBRIDGE, AHMEDABAD V/S THE JT. COMMISSIONER OF INCOME TAX, RANGE-3, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAACK6128Q APPELLANT BY : SHRI TUSHAR HEMANI, A.R. RESPONDENT BY : SHRI DINESH SINGH, SR. D.R. . ( )/ ORDER DATE OF HEARING : 22-01-2016 DATE OF PRONOUNCEMENT : 22 -01-2016 ITA NOS. 157 7 & 1569/AHD/2012 . A.Y. 2009-20 10 2 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. ITA NOS. 1577/AHD/2012 & 1569/AHD/2012 ARE CROSS AP PEALS BY THE REVENUE AND THE ASSESSEE AGAINST THE VERY SAME ORDE R OF THE LD. CIT(A)-6, AHMEDABAD DATED 22.05.2012 PERTAINING TO A.Y. 2009-2010. 2. BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE DISP OSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3. ITA NO. 1577/AHD/2012 REVENUES APPEAL. THE GROUNDS OF REVENUE READ AS UNDER:- 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N DELETING THE ADDITION MADE ON PROPORTIONATE AMOUNT OF TDS U/S. 194C READ WITH SEC TION 40(A)(IA). 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N DELETING THE ADDITION OF RS. 2,09,83,221/- TOWARDS BAD DEBTS DESPITE THE FACT TH AT THE CONDITION LAID DOWN U/S. 36(2) OF THE ACT ARE NOT SATISFIED IN THIS CASE. 3. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N DELETING THE ADDITION OF RS. 89,67,780/- DESPITE THE FACT THAT CONVERSION STOCK IN TRADE INTO INVESTMENT HAS RESULTED IN INDIRECT TRANSFER OF SHARES. 4. AT THE VERY OUTSET, THE COUNSEL FOR THE ASSESSEE ST ATED THAT THE FIRST 2 GROUNDS TAKEN BY THE REVENUE HAVE BEEN DECIDED AGAI NST THE REVENUE AND IN FAVOUR OF THE ASSESSEE BY THE CO-ORDINATE BE NCH IN ASSESSEES OWN CASE IN A.Y. 2008-09 QUA ITA NO. 2754 & 2884/AH D/2011. THE COUNSEL FURNISHED THE COPY OF THE ORDER OF THE TRIB UNAL. THE D.R. COULD NOT BRING ANY DISTINGUISHING DECISION IN FAVOUR OF THE REVENUE. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHO RITIES BELOW. WE HAVE ALSO CONSIDERED THE DECISION OF THE TRIBUNAL I N ASSESSEES OWN CASE (SUPRA). ITA NOS. 157 7 & 1569/AHD/2012 . A.Y. 2009-20 10 3 5. THE FIRST GROUND RELATES TO THE DELETION OF THE ADD ITION MADE ON PROPORTIONATE BASIS U/S. 40(A)(IA) OF THE ACT. A PE RUSAL OF THE ASSESSMENT ORDER SHOW THAT THIS ADDITION HAS BEEN M ADE ON ACCOUNT OF VSAT EXPENSES AND LEASE LINE CHARGES INCURRED BY TH E ASSESSEE DURING THE YEAR ON WHICH TDS WAS MADE AS PER THE PROVISION S OF SECTION 194C AND 194J OF THE ACT. THE A.O WAS OF THE FIRM B ELIEF THAT THE RELEVANT PROVISION APPLICABLE ON THE PAYMENTS MADE BY THE ASSESSEE ATTRACT SECTION 194I OF THE ACT. THE A.O ACCORDINGL Y DISALLOWED RS. 7,49,455/- BEING VSAT CHARGES AND RS. 72,500/- BEIN G LEASE LINE EXPENSES. ASSESSEE CARRIED THE MATTER BEFORE THE LD . CIT(A) AND THE LD. CIT(A) GAVE PARTIAL RELIEF TO THE ASSESSEE. DIR ECTING THE A.O TO GIVE PROPORTIONATE BENEFIT OF THE TDS ALREADY DEDUCTED A ND PAID IN TIME AND DISALLOWED THE BALANCE AMOUNT. 6. REVENUE IS BEFORE US AGAINST THIS DIRECTION OF THE LD. CIT(A) AND THE ASSESSEE IS ALSO IN APPEAL VIDE ITA NO. 1569/AHD/20 12. WE FIND THAT AN IDENTICAL ISSUE WAS CONSIDERED BY THE TRIBUNAL I N ASSESSEES OWN CASE IN A.Y. 2008-09 VIDE ORDER DATED 04.09.2015 IN ITA NO. 2754 & 2884/AHD/2011. THE FINDINGS OF THE TRIBUNAL CAN BE FOUND AT PARA 3 OF ITS ORDER. WHEREIN IT HAS FOLLOWED THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PRAYAS ENG INEERING LTD. IN TAX APPEAL NO. 1237 OF 2014 DATED 17.11.2014 AND ALSO R ELIED UPON THE DECISION OF THE HONBLE HIGH COURT OF CALCUTTA IN T HE CASE OF S.K. TEKRIWAL 361 ITR 432. 7. RESPECTFULLY, FOLLOWING THE DECISION OF THE CO-ORDI NATE BENCH, WE SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE AO TO DELETE THE IMPUGNED DISALLOWANCE. FIRST GROUND OF REVENUES AP PEAL IS DISMISSED AND THAT OF ASSESSEES APPEAL IS ALLOWED. ITA NOS. 157 7 & 1569/AHD/2012 . A.Y. 2009-20 10 4 8. GROUND NO. 2 RELATES TO THE DELETION OF THE ADD ITION OF RS. 2,09,83,221/- ON ACCOUNT OF BAD DEBTS. ASSESSEE WAS ASKED TO JUSTIFY ITS CLAIM. ASSESSEE FILED NECESSARY DETAILS. THE DE TAILS/EXPLANATION FILED BY THE ASSESSEE DID NOT FIND FAVOUR WITH THE A.O WH O WAS OF THE FIRM BELIEF THAT CONDITION LAID DOWN U/S. 36(2) OF THE A CT HAS NOT BEEN SPECIFIED. 9. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT (A) AND REITERATED ITS CLAIM OF BAD DEBT. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS AND DRAWING SUPPORT FROM THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF BONANZA PORTFOLIO LTD. 320 ITR 178 AND ALSO RELYING UPON THE DECISION OF THE TRIBUNAL, AHMEDABAD BENCH IN THE CA SE RAMESHCHANDRA D. CHOKSHI IN ITA NO. 1015/AHD/08, TH E LD. CIT(A) DELETED THE ADDITIONS. 10. AGGRIEVED BY THIS THE REVENUE IS BEFORE US. THE D.R . COULD NOT BRING ANY DISTINGUISHING DECISION IN FAVOUR OF THE REVENUE. WE FIND THAT AN IDENTICAL ISSUE WAS CONSIDERED BY THE TRIBU NAL IN ASSESSEES OWN CASE IN A.Y. 2008-09. IN ITA NOS. 2754 & 2884/A HD/2011, THE RELEVANT FINDINGS OF THE TRIBUNAL ARE GIVEN ON PARA 4 OF ITS ORDER. 11. RESPECTFULLY, FOLLOWING THE DECISION OF THE CO-ORDI NATE BENCH, WE CONFIRMED THE FINDINGS OF THE LD. CIT(A). THIS GROU ND IS ALSO DISMISSED. 12. THE 3 RD GROUND RELATES TO THE DELETION OF THE ADDITION OF RS. 89,67,780/-. THE A.O HAS CONSIDERED THIS ISSUE AT P ARA 4 OF HIS ORDER ON PAGE 13 WHEREIN WHILE SCRUTINIZING THE RETURN OF INCOME. HE FOUND THAT THE ASSESSEE HAS CONVERTED 435586 NUMBERS OF E QUITY SHARES OF VARIOUS COMPANIES AMOUNTING TO RS. 8,62,96,435/- FR OM STOCK IN TRADE TO INVESTMENT AT COST. THE A.O ASKED FOR THE JUSTIF ICATION FOR ITA NOS. 157 7 & 1569/AHD/2012 . A.Y. 2009-20 10 5 CONVERSION OF SHARES FROM STOCK IN TRADE TO INVESTM ENT. ASSESSEE FILED A DETAILED REPLY JUSTIFYING ITS CONVERSION OF STOCK FROM STOCK IN TRADE TO CAPITAL ASSETS. IT WAS STRONGLY CONTENDED THAT THE SHARES HAVE NOT BEEN SOLD. THE CONVERSION IS ONLY A BOOK ENTRY AND NO PROFIT CAN BE SAID TO HAVE ARISEN AND IT WAS FURTHER EXPLAINED TH AT PROFIT IF ANY WOULD ARISE ONLY WHEN THE SHARE ARE SOLD. THE EXPLANATION OF THE ASSESSEE DID NOT FIND FAVOUR WITH THE A.O. THE A.O WAS OF TH E OPINION THAT THE CONVERSION SHOULD HAVE BEEN AT THE FAIR MARKET VALU E. ACCORDINGLY, THE A.O TOOK THE MARKET VALUE OF THE SHARES CONVERTED F ROM STOCK IN TRADE TO INVESTMENT AND COMPUTED THE SAME AT RS. 89,67,78 0/- AND ADDED THE SAME TO THE RETURN OF INCOME OF THE ASSESSEE. A SSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) AND REITERATED WHAT HA S BEEN CONTENDED BEFORE THE A.O. STRONG RELIANCE WAS PLACED ON THE D ECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SIR KIKABHAI P REMCHAND 24 ITR 506. RELIANCE WAS ALSO PLACED ON THE DECISION OF TH E CO-ORDINATE BENCH IN THE CASE OF DR. PRANNATH NAGPAL RETINA FOUNDATIO N IN ITA NO. 537/AHD/2006. AFTER CONSIDERING THE FACTS AND THE S UBMISSIONS AND DRAWING SUPPORT FROM THE DECISION OF THE HONBLE SU PREME COURT, CALCUTTA HIGH COURT AND CO-ORDINATE BENCHES OF THE TRIBUNAL. THE LD. CIT(A) WAS CONVINCED THAT IN THE ABSENCE OF ANY SAL E OF SHARE, NO PROFIT IS EARNED BY THE ASSESSEE. THE LD. CIT(A) AC CORDINGLY DELETED THE ADDITIONS MADE BY THE A.O. 13. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. THE D. R. COULD NOT ADD ANYTHING NEW TO WHAT HAS ALREADY BEEN STATED BY THE A.O IN HIS ASSESSMENT ORDER. PER CONTRA, THE COUNSEL FOR THE A SSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. ITA NOS. 157 7 & 1569/AHD/2012 . A.Y. 2009-20 10 6 14. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. WE FIND THAT THE FIRST APPELLATE AUTHORITY HAS GIVEN A WELL REASONED AND RESEARCHED ORDER BY RELYING UPO N THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SIR KIKABH AI PREMCHAND (SUPRA). WE ALSO FIND THAT RELIANCE ON THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF DHANUKA & SONS 1 24 ITR 24 IS WELL FOUNDED. THEREFORE NO INTERFERENCE IS CALLED FOR. G ROUND NO. 3 IS ACCORDINGLY DISMISSED. 15. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED AND THAT OF THE ASSESSEE IS ALLOWED AS PER ARE FINDINGS GIVEN AT PARA 7 OF THIS ORDER. ORDER PRONOUNCED IN OPEN COURT ON 22 - 01 - 201 6. SD/- SD/- (S. K. YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AH MEDABAD