JAYANTHA FOUNDATIONS (P) LIMITED, CHENNAI V. DCIT CORPORATE CIRCLE 2 (2), CHENNAI

ITA 1581/CHNY/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2538 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 10-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: A KANAGARAJ
• Keywords: Business expenditure; Corroborative evidences; Capital Gains

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: CHENNAI , # , ' BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR , ACCOUNTANT MEMBER ./ ITA NO.1581/CHNY/2018 /ASSESSMENT YEAR: 2012-13 M/S.JAYANTHA FOUNDATIONS (P) LTD., NO.588, SCHOOL ROAD, ANNA NAGAR (WEST EXTN.), CHENNAI-600 101. V . THE DY. COMMISSIONER OF INCOME TAX, CORPORATE CIRLCE-2(2), CHENNAI-34. [PAN: AABCJ 5958 N ] ( ) /APPELLANT) ( *+) /RESPONDENT) ) , / APPELLANT BY : MR.A.KANAGARAJ, FCA *+) , /RESPONDENT BY : MR.AR.V.SREENIVASAN, JCIT , /DATE OF HEARING : 17.03.2020 , /DATE OF PRONOUNCEMENT : 17.03.2020 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER: THIS APPEAL FILED BY ASSESSEE IS DIRECTED AGAINST APPELLATE ORDER DATED 09.02.2018 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-13, CHENNAI (HEREINAFTER CALLED THE CIT( A)), IN ITA NO.79/CIT(A)-13/2012-13 FOR ASSESSMENT YEAR (AY) 20 12-13, THE APPELLATE PROCEEDINGS BEFORE LEARNED CIT(A) HAD ARI SEN FROM ASSESSMENT ORDER DATED 20.03.2015 PASSED BY LEARNED ASSESSIN G OFFICER (HEREINAFTER CALLED THE AO) U/S.143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED THE ACT). ITA NO.1581/CHNY/2018 :- 2 -: 2. THE GROUNDS OF APPEAL RAISED BY ASSESSEE IN MEM O OF APPEAL FILED WITH INCOME-TAX APPELLATE TRIBUNAL, CHENNAI (HEREIN AFTER CALLED THE TRIBUNAL) READ AS UNDER:- 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX(A)13 IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE AND AGAINST NATURAL JUSTI CE. 2. THE CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE O RDER OF THE ASSESSING OFFICER ASSESSING THE TOTAL INCOME OF THE APPELLANT COMPANY AT RS.3,01,46 ,067 AS AGAINST RS.2,78,60,010 RETURNED BY THE APPELLANT. 3. THE CIT(A) HAS ERRED IN CONFIRMING THE DISALLOW ANCE OF LOSS OF RS.21,70,387 INCURRED BY THE APPELLANT IN SILVER TRADING STATING THAT THE AP PELLANT WAS REQUIRED TO PRODUCE THE BOOKS OF ACCOUNT BEFORE HIM TO PROVE THE SILVER TRANSACTI ON WHICH HE HAS NEVER ASKED FOR. HE HAS IGNORED THE FACT THAT FULL DETAILS OF SILVER TRANSA CTION WAS GIVEN IN THE WRITTEN SUBMISSION BEFORE HIM AND ALSO THE FACT THAT THE ASSESSMENT WA S MADE U/S.143(3) AFTER SCRUTINY AND THE BOOKS OF ACCOUNTS WERE PRODUCED BEFORE THE ASSE SSING OFFICER WITH SUPPORTING EVIDENCE FOR LOSS INCURRED IN SILVER TRADING. 4. THE CIT(A) IS NOT JUSTIFIED IN NOT ACCEPTING TH E PLEA OF THE APPELLANT THAT THE SILVER TRADING TRANSACTION ENTERED BY THE APPELLANT IS 'AD VENTURE IN THE NATURE OF TRADE.' AND HENCE ALLOWABLE AS BUSINESS LOSS. 5. THE CIT(A) IS NOT JUSTIFIED IN NOT CONSIDERING THE ALTERNATE PLEA OF THE APPELLANT THAT THE LOSS INCURRED IN SILVER TRADING SHOULD BE ALLOWED A S CAPITAL LOSS AND SHOULD BE ALLOWED TO BE CARRIED OVER FOR FUTURE ADJUSTMENT. 6. THE CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF LOCKER RENT OF RS.9970, IGNORING THE FACT THE LOCKER WAS HIRED FOR BUSINESS PURPOSE OF THE APPELLANT TO KEEP THE PROPERTY DOCUMENTS AND OTHER VALUABLES OF THE COMPA NY. 7. FOR THESE AND OTHER REASONS THAT MAY BE ADDUCE D AT THE TIME OF HEARING, IT IS PRAYED THAT JUSTICE MAY BE RENDERED TO THE APPELLANT BY DE LETING THE ADDITIONS MADE BY THE ASSESSING OFFICER. 3. BRIEFLY TATED FACTS OF THE CASE ARE THAT THE ASS ESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF BUILDING PROMOTERS AND INVOLVED IN CONSTRUCTION OF RESIDENTIAL FLATS. THE ASSESSEE HAD MADE INVESTMENT IN SILVER TO THE TUNE OF 142.811 KGS OF SILVER BARS AT A COST OF RS. 1 CR. ON 27.04.2011 WHICH WAS SOLD ON 16.02.2012 FO R A VALUE OF RS. 78,21,613/- , WHICH LED TO LOSS OF RS. 21,70,387/-. THE ASSESSEE CLAIMED SAID LOSS AS BUSINESS / TRADING LOSS ON THE GROUND S THAT IT IS AN ADVENTURE IN THE NATURE OF TRADE. THIS CONTENTION OF THE ASS ESSEE WAS NOT SUPPORTED ITA NO.1581/CHNY/2018 :- 3 -: BY MAIN OBJECT CLAUSE OF THE ASSESSEE AND THE ACTIV ITIES CARRIED OUT BY THE ASSESSEE OF BEING BUILDING PROMOTERS, WHILE THE ASS ESSEE CLAIMED THAT ITS OBJECTS AS PER OTHER OBJECT CLAUSE IN MEMORANDUM OF ASSOCIATION ARE TO TRADE IN SILVER AND HENCE THE AFORESAID LOSS BE ALL OWED AS CAPITAL LOSS. BOTH THE AUTHORITIES BELOW REJECTED THE CONTENTION OF THE ASSESSEE AND HAVE COME TO THE CONCLUSION THAT THESE ARE PERSONAL LOSS AND CANNOT BE ALLOWED AS DEDUCTION. THE ASSESSEE ALSO CLAIMED AS ALTERNATIVE PLEA THAT THE SAID LOSS MAY BE ALLOWED AS CAPITAL LOSS WHICH PLEA WAS ALSO REJECTED BY AUTHORITIES THERE IS ANOTHER DISALLOWANCE TO THE TUNE OF RS. 9,970/- TOWARDS LOCKER RENT AS BUSINESS EXPENSES WHICH WAS ALSO DISALLOWED BY THE AUTHORITIES BELOW ALTHOUGH THE ASSESSEE STATED THAT THE SAID LOCKER WAS MAINTAINED FOR KEEPING THE PROPERTY DOCUMENTS A ND VALUABLES . THUS, BOTH THE AUTHORITIES VIZ. AO AS WELL LEARNED CIT(A) DISMISSED THE CLAIM OF THE ASSESSEE FOR BOTH THE DEDUCTIONS. 4.AGGRIVED BY DISMISSAL OF THE APPEAL BY LEARNED CI T(A),THE ASSESSEE IS NOW IN APPEAL BEFORE TRIBUNAL. WE HAVE HEARD BOTH T HE PARTIES WHO HAVE MADE ELABORATE ARGUMENTS. 5. WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. WE HAVE OBSERVED THAT THE ASSESSEE IS A PRI VATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF PROMOTERS AND CONSTRUCTI ON OF RESIDENTIAL FLATS. THE ASSESSEE HAS STATED TO HAVE INVESTED RS. 1 CR. IN 142.811 KGS OF SILVER BARS ON 27.04.2011 OUT OF SURPLUS FUNDS WHICH WAS SOLD BY ASSESSEE ON ITA NO.1581/CHNY/2018 :- 4 -: 16.02.2012 FOR RS. 78,21,613/- , LEADING TO LOSS OF RS. 21,70,387/-. THE ASSESSEE CLAIMED SAID LOSS TO BE BUSINESS LOSS OR I N ALTERNATIVE, WITHOUT PREJUDICE , TO BE ALLOWED AS CAPITAL LOSS BUT IT WA S HELD TO BE PERSONAL LOSS BY BOTH THE AUTHORITIES BELOW AND DEDUCTION WAS DE NIED TO THE ASSESSEE. WE HAVE OBSERVED THAT THE ASSESSEE HAS ITS OWN CAPI TAL AND RESERVES TO THE TUNE OF RS. 2,15,25,724/- AS ON 31.03.2012, WHICH WAS EARLIER T O THE TUNE OF RS. 26,76,154/- AS ON 31.03.2011. AS PER AUDITED FINAN CIAL STATEMENTS FILED BY THE ASSESSEE FOR THE YEAR ENDED 31.03.2012, THERE IS A PROFIT AFTER-TAX OF RS. 1,88,49,570/- DURING THE YEAR UNDER CONSIDERATION. WE HAVE ALSO OBSERVED THAT THIS IS A SOLITARY TRANS ACTION UNDER TAKEN BY THE ASSESSEE IN INVESTING IN SILVER BARS AND THE AS SESSEE HAS NEITHER INVESTED IN SILVER BARS PRIOR TO THIS SOLITARY TRAN SACTION NOR INVESTED LATER IN SILVER BARS POST COMPLETION OF THIS TRANSACTION OF SALE OF SILVER BAR ON 16.02.2020. IN OUR CONSIDERED VIEW, BASED UPON ENT IRE MATERIAL ON RECORD, SAID INVESTMENT MADE BY THE ASSESSEE IS NOT A BUSINESS TRANSACTION BUT RATHER IT IS AN INVESTMENT MADE BY ASSESSEE TO EARN CAPITAL GAINS AND THE SAME IS TO BE CONSIDERED FOR TAXATION UNDER THE HEAD CAPITAL GAINS. WE HAVE ALSO OBSERVED THAT THE ASS ESSEE IS A COMPANY AND NOT AN INDIVIDUAL AND THERE IS NO QUESTION OF A NY PERSONAL LOSS IN THE CASE OF THE COMPANY AS IT COULD NOT BEEN SHOWN THAT THIS TRANSACTION IS FOR THE BENEFIT OF THE DIRECTORS OR THE SHAREHOLDERS AN D HENCE WE HELD IT TO BE CAPITAL INVESTMENT, INCOME AND LOSS ARE TO BE BROUG HT TO TAX UNDER THE ITA NO.1581/CHNY/2018 :- 5 -: HEAD CAPITAL GAINS. SO FAR AS LOCKER RENT IS CON CERNED, THE ASSESSEE IS A CORPORATE ENTITY AND IT IS CLAIMED THAT THE DOCUMEN TS AND OTHER VALUABLES WERE KEPT IN THE LOCKER FOR SAFE CUSTODY. WE ACCEP T THE CONTENTION OF THE ASSESSEE AS THE ASSESSEE IS IN BUSINESS OF BUILDERS AND DEALING WITH VALUABLE PROPERTY DOCUMENTS WHICH NEEDS SAFE KEEPIN G AND WE ALSO ACCEPT THE SAME KEEPING IN VIEW SMALLNESS OF THE AM OUNT.WE ORDER ACCORDINGLY. 6. IN THE RESULT, THE APPEAL FILED BY ASSESSEE IN I TA NO.1581/CHNY/2018 FOR AY: 2012-13 IS PARTLY ALLOWE D AS INDICATED ABOVE. ORDER PRONOUNCED ON THE 17 TH DAY OF MARCH, 2020 IN CHENNAI. SD/- SD/- ( ) (GEORGE MATHAN) /JUDICIAL MEMBER ( # ) ( RAMIT KOCHAR ) /ACCOUNTANT MEMBER /CHENNAI, 1 /DATED: 17 TH MARCH, 2020. TLN , *#2 32 /COPY TO: 1. ) /APPELLANT 4. 4 /CIT 2. *+) /RESPONDENT 5. 2 * /DR 3. 4 ( ) /CIT(A) 6. /GF