ITO, Ward - 31(4), Kolkata, Kolkata V. Shyama Devi Dalmia, Kolkata

ITA 1588/KOL/2010

• Counselvise Citation: 158823514 RSA 2010
• Duration Of Justice: 3 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 09-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARIDAS SAHA
• Assessee Lawyers: S K TULSIYAN

Judgement Text

I.T.A. NO.: 1588/KOL./20 10 ASSESSMENT YEAR : 2006-200 7 PAGE 1 TO 6 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA C BENCH, KOLKATA CORAM : SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI ABRAHAM P. GEORGE (ACCOUNTANT ME MBER) I.T.A. NO.: 1588/KOL./ 2010 ASSESSMENT YEAR : 2006-2007 INCOME TAX OFFICER,................................ ...............APPELLANT WARD-31(4), KOLKATA, 10B, MIDDLETON ROW, 4 TH FLOOR, KOLKATA-700 071 -VS.- SHYAMA DEVI DALMIA, 5, A.J.C. BOSE ROAD, KOLKATA-700 020 [PAN : AGBPO 5911 E] APPEARANCES BY: SHRI HARIDAS SAHA, JCIT, SR. D.R, FOR THE DEPARTMEN T SHRI S.K. TULSIYAN, FCA, FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : APRIL 23, 2014 DATE OF PRONOUNCING THE ORDER : APRIL 24, 2014 O R D E R PER ABRAHAM P. GEROGE : 1. IN THIS APPEAL FILED BY THE REVENUE, DIRECTED AG AINST AN ORDER DATED 11.05.2010 OF LD. COMMISSIONER OF INCOME TAX (APPEA LS)-XIX, KOLKATA, THROUGH THE REVISED GROUNDS OF APPEAL FILED, TWO MA IN GRIEVANCES HAVE BEEN RAISED. 2. FIRST GRIEVANCE OF THE REVENUE IS THAT LD. CIT(A PPEALS) ALLOWED CARRIED FORWARD OF SHORT-TERM CAPITAL LOSS, THOUGH ASSESSEE HAD NOT CLAIMED ANY SUCH LOSS IN THE RETURN OF INCOME. SECO ND GRIEVANCE IS THAT LD. CIT(APPEALS) ALLOWED THE CLAIM OF INTEREST PAYMENT OF RS.14,89,071, AGAINST AN INTEREST RECEIPT OF RS.38,81,885/-, THOU GH THE ASSESSEE FAILED TO ESTABLISH THE NEXUS. I.T.A. NO.: 1588/KOL./20 10 ASSESSMENT YEAR : 2006-200 7 PAGE 1 TO 6 2 3. VIS-A-VIS THE FIRST ISSUE, AGAINST INTEREST RECE IPT SHOWN UNDER THE HEAD INCOME FROM OTHER SOURCES, ASSESSEE HAD ADJU STED LOSS INCURRED ON SURRENDER OF UNIT LINKED INSURANCE PRODUCTS. THE LO SS ADJUSTMENT WAS OF RS.25,88,437/-. AS PER THE ASSESSING OFFICER, ASSES SEE HIMSELF HAD ADMITTED THAT THE CLAIM WAS WRONGLY MADE. SUCH ADJU STMENT OF LOSS WAS, THEREFORE, DISALLOWED BY THE ASSESSING OFFICER. 4. IN HER APPEAL BEFORE THE LD. CIT(APPEALS), CONTE NTION OF THE ASSESSEE WAS THAT INVESTMENTS WERE OF SINGLE PREMIU M EQUITY LINKED INSURANCE POLICIES, WHICH WERE SURRENDERED IN THE S AME YEAR ITSELF RESULTING IN A LOSS OF RS.25,88,837/-. SUCH SINGLE PREMIUM EQUITY LINKED INSURANCE POLICIES WERE TAKEN OUT BY THE ASSESSEE W ITH A VIEW TO MAKE GAINS, AND THESE WERE INVESTED BY THE FUND MANAGERS IN MUTUAL FUNDS. SINCE ASSESSEE LACKED THE EXPERTISE AND SKILL REQUI RED TO MAKE SUCH INVESTMENT IN MUTUAL FUNDS, SHE HAD DONE IT THROUGH M/S. BAJAJ ALLIANZ. THEREFORE, ACCORDING TO THE ASSESSEE, THE LOSS ON S URRENDER THOUGH NOT ADJUSTABLE AGAINST THE INTEREST INCOME UNDER THE HE AD INCOME FROM OTHER SOURCES, IT SHOULD BE ALLOWED AS SHORT-TERM CAPITA L LOSS ENTITLED TO CARRY FORWARD BENEFITS MENTIONED IN SECTION 74(2) OF THE ACT. 5. LD. CIT(APPEALS) WAS APPRECIATIVE OF THE ABOVE C ONTENTION AND ALLOWED THE CLAIM. ACCORDING TO HIM, THE PREMIUM PA ID DID NOT EXCEED 20% OF THE ACTUAL CAPITAL SUM MENTIONED IN THE EQUI TY LINKED INSURANCE POLICY AND, THEREFORE, SECTION 10(10D)(C) DID NOT A PPLY. AS PER THE LD. CIT(APPEALS), LOSS INCURRED ON SURRENDER OF ULIP WA S NOTHING BUT A CAPITAL LOSS. HE, THEREFORE, ALLOWED THE CLAIM OF C ARRY FORWARD. 6. NOW BEFORE US, LD. DEPARTMENTAL REPRESENTATIVE S TRONGLY ASSAILING THE ORDER OF LD. CIT(APPEALS) SUBMITTED THAT ASSESS EE HAS NOT MADE ANY SUCH CLAIM IN THE RETURN. ASSESSEE HAD ONLY MADE AD JUSTMENT OF THE LOSS AGAINST THE INTEREST EARNED BY IT. ASSESSEE HAD ALS O ADMITTED THAT THIS WAS INCORRECTLY DONE. THEREFORE, AS PER LD. D.R. SUCH C LAIM COULD NOT BE I.T.A. NO.: 1588/KOL./20 10 ASSESSMENT YEAR : 2006-200 7 PAGE 1 TO 6 3 ALLOWED. RELIANCE WAS PLACED ON THE DECISION OF HON BLE APEX COURT IN THE CASE OF GOETZE (INDIA) LTD. -VS.- CIT (284 ITR 323) . 7. PER CONTRA, LD. A.R. SUPPORTED THE ORDER OF LD. CIT(APPEALS). 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT DISPUTED BY THE REVE NUE THAT THE LOSS AROSE TO THE ASSESSEE ON ACCOUNT OF SURRENDER OF SINGLE P REMIUM EQUITY LINKED INSURANCE POLICIES, WHICH WERE USED FOR MAKING INVE STMENTS IN MUTUAL FUND. REVENUE HAS ALSO NOT DISPUTED THE CLAIM OF AS SESSEE THAT RESULTING LOSS ON ACCOUNT OF SUCH SURRENDER OF SINGLE PREMIUM INSURANCE POLICY COULD BE TREATED AS SHORT-TERM CAPITAL LOSS. ITS O NLY GRIEVANCE IS THAT ASSESSEE HAD NOT MADE SUCH A CLAIM BEFORE THE LD. C IT(APPEALS). IT IS TRUE THAT ASSESSEE HAD NOT MADE THE CLAIM IN HER RETURN OF INCOME. HOWEVER, IT IS ALSO A FACT THAT ASSESSEE HAD ENDEAVOURED TO SET OFF THE LOSS AGAINST HER INTEREST INCOME, WHICH WAS NOT ALLOWED BY THE ASSES SING OFFICER. HENCE, IT IS NOT THAT THERE WAS NO CLAIM OF LOSS AT ALL. THE CLAIM WAS THERE BUT MADE UNDER A WRONG HEAD. DECISION OF THE HONBLE APEX CO URT IN THE CASE OF GOETZE (INDIA) LTD. (SUPRA) DOES NOT IN ANY WAY DIL UTE THE POWER OF APPELLATE COMMISSIONER IN GRANTING RELIEF TO AN ASS ESSEE, WHICH IS OTHERWISE LEGITIMATELY DUE TO IT. WE ARE, THEREFORE , OF THE VIEW THAT LD. CIT(APPEALS) ACTED WELL WITHIN HIS POWERS, WHEN HE DIRECTED THE ASSESSING OFFICER TO ALLOW THE CARRY FORWARD OF SHO RT-TERM CAPITAL LOSS OF RS.25,88,437/-. GROUNDS 1 & 2 OF THE REVENUE STAND DISMISSED. 9. VIS-A-VIS THE SECOND ISSUE REGARDING DISALLOWANC E OF INTEREST, ASSESSING OFFICER WAS OF THE OPINION THAT THE LOANS OF RS.7,21,23,844/- TAKEN BY THE ASSESSEE FROM M/S. KARUR VYSYA BANK LT D. WERE INVESTED BY THE ASSESSEE WITH M/S. BIHARJI TRADE & SERVICES (P) LTD. AND M/S. STAR IRON WORKS LTD. AS PER THE ASSESSING OFFICER THE SU M INVESTED IN THE FORMER WAS RS.5,65,95,747/-, WHEREAS THE SUM INVEST ED IN THE LATTER WAS RS.1,40,27,304/-. ASSESSEE HAD EARNED INTEREST ON F IXED DEPOSITS I.T.A. NO.: 1588/KOL./20 10 ASSESSMENT YEAR : 2006-200 7 PAGE 1 TO 6 4 RS.38,81,885/-. ON THE LOANS TAKEN FROM M/S. KARUR VYSYA BANK LTD. INTEREST PAID BY THE ASSESSEE WAS RS.14,89,071.08. ASSESSING OFFICER WAS OF THE OPINION THAT ASSESSEE HAD ADVANCED INTEREST- FREE LOANS OUT OF LOANS TAKEN ON INTEREST FROM BANK. AS PER THE ASSESSING O FFICER, SUCH LOANS WERE TAKEN ON THE SECURITY OF FIXED DEPOSITS. SINCE LOANS WERE NOT DEPLOYED FOR INVESTMENTS EARNING INTEREST, AS PER T HE ASSESSING OFFICER, THE INTEREST PAID ON SUCH LOANS COULD NOT BE ALLOWE D AS A DEDUCTION AGAINST THE INTEREST RECEIPT. HE THUS DISALLOWED TH E CLAIM OF INTEREST OF RS.14,89,071.08. 10. ASSESSEE IN HER APPEAL BEFORE THE LD. CIT(APPEA LS) ARGUED THAT THE ASSESSING OFFICER FELL IN ERROR FACTUALLY. ACCORDIN G TO THE ASSESSEE IT HAD FIRST RAISED THE LOANS FROM M/S. KARUR VYSYA BANK L TD. THE FIXED DEPOSITS WERE MADE OUT OF SUCH LOANS. THEREFORE, AS PER THE ASSESSEE THE NEXUS BETWEEN THE FIXED DEPOSITS AND LOANS STOOD ESTABLIS HED. FURTHER AS PER THE ASSESSEE SHE WAS HAVING A CAPITAL OF RS.2,09,71 ,622/- AND INTEREST- FREE LOANS OF RS.4,48,55,040/- RECEIVED FROM HER HU SBAND. 11. LD. CIT(APPEALS) WAS APPRECIATIVE OF THE ABOVE CONTENTIONS. ACCORDING TO HIM, ASSESSEE WAS HAVING SUFFICIENT IN TEREST-FREE LOANS FOR GIVING THE ADVANCES TO TWO CONCERNS. FURTHER, ACCOR DING TO HIM, ASSESSEE COULD ESTABLISH THE NEXUS BETWEEN THE BANK LOAN AND DEPOSITS. THEREFORE, HE HELD THAT INTEREST PAID COULD BE CLAIMED AS A DE DUCTION FROM THE INTEREST RECEIVED ON FIXED DEPOSITS. 12. NOW BEFORE US, LD. D.R. STRONGLY ASSAILING THE ORDER OF LD. CIT(APPEALS) SUBMITTED THAT ASSESSEE COULD NOT PROV E THE NEXUS BETWEEN THE DEPOSITS AND THE LOANS. LD. CIT(APPEALS) HAD AL LOWED THE CLAIM WITHOUT PROPERLY APPRECIATING THE FACTS. IT WAS THE ONUS OF THE ASSESSEE TO PROVE THE NEXUS. THEREFORE, ACCORDING TO HIM, LD. C IT(APPEALS) FELL IN ERROR IN GIVING SUCH ALLOWANCE. I.T.A. NO.: 1588/KOL./20 10 ASSESSMENT YEAR : 2006-200 7 PAGE 1 TO 6 5 13. PER CONTRA, LD. A.R. SUPPORTED THE ORDER OF AUT HORITIES BELOW AND ALSO RELIED ON THE DECISION OF THE HONBLE APEX COU RT IN THE CASE OF MUNJAL SALES CORPORATION VS.- CIT & ANOTHER [2008] 298 IT R 298 (SC) AND THAT OF HONBLE MUMBAI HIGH COURT IN THE CASE OF CIT V S.- RELIANCE UTILITIES & POWER LTD. [2009] 313 ITR 340 (BOM). 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. LD. CIT(APPEALS) HAS GIVEN A C LEAR FINDING THAT ASSESSEE HAD PRODUCED THE BANK STATEMENT OF M/S. KA RUR VYSYA BANK LTD. DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE HIM. AFTER PERUSING SUCH BANK STA TEMENT, LD. CIT(APPEALS) HAS ALSO GIVEN A FINDING THAT THE FIXE D DEPOSITS ON WHICH INTEREST WAS EARNED, WERE MADE OUT OF LOANS TAKEN F ROM THE BANK. SUBMISSION OF LD. D.R. THAT THE FIXED DEPOSITS WERE MADE ON DATES PRIOR TO RAISING OF THE LOANS HAS NOT BEEN PROVED OR SUBS TANTIATED BY HIM. ONCE FIXED DEPOSITS WERE MADE OUT OF LOANS TAKEN FROM TH E BANK, IN OUR OPINION, THE NEXUS STOOD WHEN ESTABLISHED. EVEN OTH ERWISE, ASSESSEE WAS HAVING SUFFICIENT OWN FUNDS WITH HER FOR GIVING INT EREST-FREE ADVANCES. HONBLE MUMBAI HIGH COURT IN THE CASE OF CIT VS.- RELIANCE UTILITIES AND POWER LTD. (SUPRA) AT PARA 10 OF ITS ORDER HAD HELD AS UNDER :- IF THERE BE INTEREST-FREE FUNDS AVAILABLE TO AN AS SESSEE SUFFICIENT TO MEET ITS INVESTMENTS AND AT THE SAME TIME THE AS SESSEE HAD RAISED A LOAN IT CAN BE PRESUMED THAT THE INVESTMEN TS WERE FROM THE INTEREST-FREE FUNDS AVAILABLE. IN OUR OPINION, THE SUPREME COURT IN EAST INDIA PHARMACEUTICAL WORKS LTD. (SUPR A) HAD THE OCCASION TO CONSIDER THE DECISION OF THE CALCUTTA H IGH COURT IN WOOLCOMBERS OF INDIA LTD. (SUPRA) WHERE A SIMILAR I SSUE HAD ARISEN. BEFORE THE SUPREME COURT IT WAS ARGUED THAT IT SHOULD HAVE BEEN PRESUMED THAT IN ESSENCE AND TRUE CHARACT ER THE TAXES WERE PAID OUT OF THE PROFITS OF THE RELEVANT YEAR A ND NOT OUT OF THE OVERDRAFT ACCOUNT FOR THE RUNNING OF THE BUSINE SS AND IN THESE CIRCUMSTANCES THE APPELLANT WAS ENTITLED TO CLAIM T HE DEDUCTIONS. THE SUPREME COURT NOTED THAT THE ARGUMENT HAD CONSI DERABLE FORCE, BUT CONSIDERING THE FACT THAT THE CONTENTION HAD NOT BEEN ADVANCED EARLIER IT DID NOT REQUIRE TO BE ANSWERED. IT THEN NOTED THAT IN WOOLCOMBERS CASE (SUPRA) THE CALCUTTA HIGH COURT HAD COME TO THE CONCLUSION THAT THE PROFITS WERE SUFFIC IENT TO MEET THE ADVANCE TAX LIABILITY AND THE PROFITS WERE DEPO SITED IN THE I.T.A. NO.: 1588/KOL./20 10 ASSESSMENT YEAR : 2006-200 7 PAGE 1 TO 6 6 OVERDRAFT ACCOUNT OF THE ASSESSEE AND IN SUCH A CAS E IT SHOULD BE PRESUMED THAT THE TAXES WERE PAID OUT OF THE PROFIT S OF THE YEAR AND NOT OUT OF THE OVERDRAFT ACCOUNT FOR THE RUNNIN G OF THE BUSINESS. IT NOTED THAT TO RAISE THE PRESUMPTION, T HERE WAS SUFFICIENT MATERIAL AND THE ASSESSEE HAD URGED THE CONTENTION BEFORE THE HIGH COURT. THE PRINCIPLE THEREFORE, WOU LD BE THAT IF THERE ARE FUNDS AVAILABLE BOTH INTEREST-FREE AND OV ERDRAFT AND/OR LOANS TAKEN, THEN A PRESUMPTION WOULD ARISE THAT IN VESTMENTS WOULD BE OUT OF THE INTEREST-FREE FUND GENERATED OR AVAILABLE WITH THE COMPANY, IF THE INTEREST-FREE FUNDS WERE SUFFIC IENT TO MEET THE INVESTMENTS. IN THIS CASE THIS PRESUMPTION IS ESTAB LISHED CONSIDERING THE FINDING OF FACT BOTH BY THE CIT(A) AND TRIBUNAL. WE ARE, THEREFORE, OF THE OPINION THAT LD. CIT(APPE ALS) WAS JUSTIFIED IN ALLOWING THE INTEREST PAID ON LOANS TO BE DEDUCTED FROM THE INTEREST EARNED. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD. CIT(APPEALS). GROUNDS 3 AND 4 OF THE REVENUE ARE AL SO DISMISSED. 15. IN THE RESULT, APPEAL OF THE REVENUE STANDS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH DAY OF APRIL, 2014. SD/- SD/- MAHAVIR SINGH ABRAHAM P. GEORGE (JUDICIAL MEMBER) (ACC OUNTANT MEMBER) KOLKATA, THE 24 TH DAY OF APRIL, 2014 COPIES TO : (1) INCOME TAX OFFICER, WARD-31(4), KOLKATA, 10B, MIDDLETON ROW, 4 TH FLOOR, KOLKATA-700 071 (2) SHYAMA DEVI DALMIA, 5, A.J.C. BOSE ROAD, KOLKATA-700 020 (3) CIT(APPEALS) (4) CIT (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.