Shri Bharat Hari Singhania (ind.), Kolkata V. DCIT, Central Circle - VI, Kolkata, Kolkata

ITA 163/KOL/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70384 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2013
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 01-02-2012
• Court: TRIBUNAL
• Department Lawyers: NIRANJAN SATPATI
• Assessee Lawyers: S K LAHIRI
• Keywords: Capital asset; Cost of acquisition
• Section: 143(3)

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND ! ' ! ! ' ! ! ' ! ! ' ! , ) [BEFORE SHRI PRAMOD KUMAR, AM & SHRI MAHAVIR SINGH, JM] # # # # /I.T.A NO. 163/KOL/2012 '$% &' '$% &' '$% &' '$% &'/ // / ASSESSMENT YEAR: 2008-09 SHRI BHARAT HARI SINGHANIA (IND,) VS. DEPUTY COM MISSIONER OF INCOME-TAX, (PAN: AJWPS3245G) CENTRAL CIRCLE-VI, KOLKATA. ()* /APPELLANT ) (+)*/ RESPONDENT ) DATE OF HEARING: 27.08.2013 DATE OF PRONOUNCEMENT: 27.08.2013 FOR THE APPELLANT: SHRI S. K. LAHIRI FOR THE RESPONDENT: SHRI NIRANJAN SATPATI, SR. D R , / ORDER PER MAHAVIR SINGH, JM/ ! ' ! ! ' ! ! ' ! ! ' ! , : THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A), CENTRAL-1, KOLKATA IN APPEAL NO.341/ CIT(A),C-1/CC-VI/10-11 DATED 15.11.2011. AS SESSMENT WAS FRAMED BY DCIT, CC- VI, KOLKATA U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2008-09 VIDE HIS ORDER DATED 31.12. 2010. 2. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS AG AINST THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE OF INTEREST. FOR THIS, ASSESSEE HAS R AISED FOLLOWING GROUND NO.1: 1. THAT CONSIDERING THE FACTS AND THE CIRCUMSTANCE S OF THE CASE, THE LD. CIT(A) WAS UNJUSTIFIED IN RESTRICTING THE DISALLOWANCE OF CLAI M OF INTEREST OF THE APPELLANT MADE BY THE LD. AO TO RS.1,00,000/- IN PLACE OF DELETING THE EN TIRE DISALLOWANCE OF INTEREST OF RS.2,35,116/- MADE BY THE LD. AO. 3. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE STAT ED THAT THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF THIS COORDINATE BENCH IN ASSESSEES OWN CASE FOR AY 2007-08, WHEREIN VIDE PARA 3 IT IS HELD AS UNDER: 3. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUG H THE FACTS AND CIRCUMSTANCES OF THE CASE. BRIEF FACTS ARE THAT THE ASSESSEE BOR ROWED CAPITAL FROM ONE JUGILAL KAMALPAT LAKSHMIPAT A FAMILY BANKER AND THE OPENING BALANCE OF THE SAME WAS AT RS.84,42,378/-, ON WHICH ASSESSEE HAS PAID INTRERES T OF RS.7,59,142/-. ACCORDING TO AO, THIS AMOUNT WAS INVESTED IN BOOKING OF FLAT IN THE SOCIETY M/S. ROCK WOOD PROPERTIES (P) LTD. AT DELHI FOR AN AMOUNT OF RS.1,85,14,000/- FOR THE PERIOD FROM APRIL, 2004 TO MARCH, 2006. BEFORE THE AO AS WELL AS CIT(A) IT WA S EXPLAINED BY ASSESSEE THAT IT HAS ITS OWN CAPITAL AVAILABLE ATRS.4.24 CR. AS WELL AS ASSESSEES INCOME EARNED DURING THE YEAR AT RS.1 CR. ACCORDING TO AO, THE ASSESSEE HA S MADE INVESTMENT OF RS.4.44 CR. BUT IT IS CLEAR FROM ASSESSMENT ORDER AND ORDER OF CIT(A) THAT THIS IS AN OPENING BALANCE RELATING TO EARLIER YEARS BORROWED FROM J. K. LAKSH MIPAT AND THE BALANCE WAS RS. 84,42,378/-. THIS OPENING BALANCE HAS ACCRUED INTE REST OF RS.7,59,142/- WHICH WAS DEBITED BY ASSESSEE. THE AO WAS NOT CONVINCED WITH THE EXPLANATION OF ASSESSEE THAT IT 2 ITA NO. 163/K/2012 SHRI BHARAT HARI SINGHANIA (IND .) A. Y 2008-09 HAD AVAILABLE FUND OF RS. 1 CR. AND OWN CAPITAL OF RS.4.24 CR. AND HE MADE DISALLOWANCE. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO PARTLY ALLOWED THE CLAIM OF ASSESSEE AND DISALLOWANCE WAS CONFIRMED TO THE EXTE NT OF RS.5 LACS BY GIVING FOLLOWING FINDING IN PARA 3.1 AS UNDER: 3.1. I HAVE CAREFULLY CONSIDDERED THE SUBMISSION O F THE LD. A.R. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS DECLARED INCOME UNDER THE HEAD SALARY, CAPITAL GAIN AND INCOME FROM OTHER SOURCES. THE ASSESEE IS HAVING A MIXED FUND, WHICH HAS MAINLY BEEN INVESTED IN MUTUA L FUND, SHARES, IMMOVABLE PROPERTY, JEWELLERY, AND VARIOUS INVESTME NT SCHEMES OF KOTAL AND ICICI. THE PART OF THE ASSESSEES FUND HAS ALSO BE EN DEPOSITED IN POST OFFICE SAVING SCHEME AND GROUP COMPANIES ON WHICH INTEREST INCOME OF RS.4,46,224/- HAS BEEN DECLARED. SINCE NO SEPARATE ACCOUNTS FOR DIFFERENT ACTIVITIES HAS BEEN MAINTAINED, IT IS NOT POSSIBLE TO SPECIFY ANY DIRECT LINKAGE OF UTILIZATION OF THE LOAN FUND. HENCE CONSIDERING ABOVE AND THE FACT THAT EXEMPT DIVIDEND INCOME OF RS.21,06,248/- HAS BEEN E ARNED AND NEW INVESTMENT OF RS.1,85,14,000/- HAS BEEN MADE IN THE HOUSE PROPERTY WITH M/S. ROCK WOOD PROPERTIES (P) LTD. FURTHER THE INV ESTMENT ON THE INTEREST INCOME CHARGEABLE TO OTHER SOURCES IS ONLY ABOUT 10% OF THE TOTAL IN INVESTMENTS, IT IS NOT JUSTIFIED TO CLAIM THE TOTAL INTEREST EXPENDITURE OF RS.7,59,142/- UNDER THE HEAD OTHER SOURCES. ONLY THOSE EXPENDITURE WHICH HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING SUCH INCOME IS ALLOWABLE UNDER SECTION 57 O F THE ACT. HENCE TAKING ALL THE FACTORS INTO CONSIDERATION, THE DISALLOWANC E ON ACCOUNT OF INTEREST MADE BY THE AO IS RESTRICTED TO RS.5,00,000/-. THE APPELLANT WILL GET NECESSARY RELIEF ACCORDINGLY. ACCORDINGLY THE GROU ND NO. 1 IS PARTLY ALLOWED. WE FIND THAT THE ASSESSEES OWN CAPITAL OF RS.4.24 CR. AND RS.1 CR PROFIT DURING THE YEAR IS ENOUGH TO MAKE THIS INVESTMENT BUT THIS WAS INVE STED IN EARLIER YEARS AND NO DISALLOWANCE OF ANY SORT WAS MADE BY THE REVENUE IN THOSE YEARS. ALL ALONG IN ALL THE YEARS THE INTEREST WAS ALLOWED AS EXPENDITURE. EVE N OTHERWISE THIS HAS NO CO-RELATION WITH THE INVESTMENT IN THE FLAT AS CLAIMED BY REVEN UE. IN SUCH CIRCUMSTANCES, WE HAVE NO HESITATION IN ALLOWING THE CLAIM OF THE ASSESSEE IN ITS ENTIRETY AND THIS ISSUE OF ASSESSEES GROUND IS ALLOWED AND REVENUES GROUND O F APPEAL IS DISMISSED. 4. THE FACTS BEING EXACTLY IDENTICAL AND EVEN REVEN UE HAS CONCEDED THE POSITION THAT THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE. TAKING CON SISTENT VIEW, WE DECIDE THIS ISSUE IN FAVOUR OF ASSESSEE AND THIS GROUND OF APPEAL OF ASSESSEE IS A LLOWED. 5. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AGA INST THE ORDER OF CIT(A) IN CONFIRMING THE DISALLOWANCE OF EXPENDITURE CLAIMED UNDER THE HEAD MANAGEMENT FEE AND CUSTODY CHARGES. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NO.2: 2. THAT THE LD. CIT(A) WAS UNJUSTIFIED IN DIRECTIN G THE LD. AO TO RECALCULATE THE SHORT TERM CAPITAL GAIN OFFERED BY THE APPELLANT AFTER DI SALLOWING THE EXPENDITURE CLAIMED UNDER THE HEAD MANAGEMENT FEES AND CUSTODY CHARG ES. 2.1. THAT THE LD. CIT(A) WAS UNJUSTIFIED IN NOT CO NSIDERING THE APPELLANTS SUBMISSION IN RESPECT OF DECISION BY THE HONBLE ITAT, PUNE, IN T HE CASE OF KRA HOLDING & TRADING (P) LTD. AND ARA TRADING & INVESTMENTS (P) LTD. ON THE ISSUE OF ALLOWABILITY OF FEES PAIDN TO PORTFOLIO MANAGERS IN COMPUTATION OF CAPIT AL GAIN U/S. 48 OF THE I. T. ACT, 1961. 3 ITA NO. 163/K/2012 SHRI BHARAT HARI SINGHANIA (IND .) A. Y 2008-09 6. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE FAIR LY CONCEDED THAT THIS ISSUE IS ALSO COVERED AGAINST THE ASSESSEE IN ASSESSEES OWN CASE FOR AY 2007-08, WHEREIN VIDE PARA 5 IT IS HELD AS UNDER: 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF REVENUE AND AGAINST THE ASSESSEE VIDE THE COORDINATE BENCH DECISION IN THE CASE OF SHRI RAGHUPATI SINGHANIA, CO NO. 165/K/2010 IN ITA NO. 1761/K/2010, AY 2007-08 D ATED 27 TH MAY, 2011, WHEREIN THE TRIBUNAL HAS HELD AS UNDER: 7. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESS EE HAS CLAIMED MANAGEMENT FEE AND OTHER EXPENSES PAID TO PMFS AND ALSO CLAIME D CUSTODY FEE FOR DEMAT CHARGES. NOW THE CLAIM OF THE ASSESSEE IS THAT THE SE EXPENSES ARE ADMISSIBLE DEDUCTION U/S. 48 OF THE ACT. FOR THIS LD. COUNSEL FOR THE ASSESSEE HAS MADE ARGUMENTS AS UNDER: AS PER PROVISION OF SECTION 48, THE INCOME CHARGEA BLE UNDER THE HEAD CAPITAL GAIN SHALL BE COMPUTED BY DEDUCTING FROM THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET THE FOLLOWING AMOUNT, NAMELY: I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONN ECTION WITH SUCH TRANSFER, II) THE COST OF ACQUISITION OF THE ASSET AND THE COST O F IMPROVEMENT THERETO. AS REGARDS TO CUSTODY FEE FOR DEMAT CHARGES THE LD. COUNSEL ARGUED THAT THIS DEMAT CHARGES ARE PAID FOR CUSTODY OF SHARES AND SECURITI ES AFTER PURCHASE AND TILL THE DATE OF SALE/TRANSFER. HE STATED THAT DEMAT ACCOUNT IS NOW STATUTORILY COMPULSORY TO MAINTAIN AND WITHOUT THAT NO TRANSACTION IN STOCK EXCHANGES CAN BE CARRIED OUT. HE ALSO STATED THAT WITHOUT KEEPING THE SHARES AND SECURITIES IN THE DE MAT ACCOUNT, THE SAME CANNOT BE PURCHASED OR SOLD AND IN SUCH CIRCUMSTANCES THESE E XPENSES ARE ALLOWABLE AS DEDUCTION UNDER CLAUSE (I) AND (II) OF SECTION 48 OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION IN THE CASE OF DAMODAR G. NAGALIA VS. ACIT (2007)12 SOT 599 (MUM), WHEREIN THE ASSESSEE OWNED A FLAT IN A HOUSING COOP ERATIVE SOCIETY. HE PAID RS.4 LAKHS TO THE HOUSING COOPERATIVE SOCIETY TO OBTAIN NO OBJECT ION CERTIFICATE (NOC) FROM THE SOCIETY AND CLAIMED THE SAME AS A DEDUCTION IN COMP UTING CAPITAL GAIN ON THE SALE OF THE FLAT. IN THE ASSESSMENT IT WAS DISALLOWED AS DEDUC TION. THE ITAT HELD THAT THE OBTAINING OF THE NOC FROM THE HOUSING COOPERATIVE SOCIETY WAS NE CESSARY FOR THE PURPOSE OF SALE OF THE FLAT. THEREFORE, IT WAS AN ALLOWABLE DEDUCTION U/S. 48 OF THE I. T. ACT IN COMPUTING CAPITAL GAIN. 8. NOW WE HAVE TO EXAMINE THE PROVISION OF SECTION 48 AND THE RELEVANT PROVISIONS READS AS UNDER: ( MODE OF COMPUTATION) 48. THE INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAIN S SHALL BE COMPUTED, BY DEDUCTING FROM THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET THE FOLLOWING AMOUNTS , NAMELY I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN C ONNECTION WITH SUCH TRANSFER, II) THE COST OF ACQUISITION OF THE ASSET AND THE CO ST OF ANY IMPROVEMENT THEREOF; WHAT CAN BE DEDUCTED UNDER SECTION 48(1)(A)(I) AND (II) IS EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER CONTEMP LATED BY SECTION 45. IN COMPUTING 4 ITA NO. 163/K/2012 SHRI BHARAT HARI SINGHANIA (IND .) A. Y 2008-09 CAPITAL GAINS, EXPENDITURE INCURRED WHOLLY AND EXCL USIVELY IN CONNECTION WITH THE TRANSFER OF A CAPITAL ASSET HAS TO BE DEDUCTED UNDER SECTION 48(1)(A)(I)&(II). THE WORDS IN CONNECTION WITH SUCH TRANSFER OCCURRING IN THAT SE CTION MEAN INTRINSICALLY RELATED TO THE TRANSFER. THERE IS NO WARRANT FOR IMPORTING A RESTR ICTION THAT, TO QUALIFY FOR DEDUCTION, THE EXPENDITURE MUST NECESSARILY HAVE BEEN INCURRED PRI OR TO THE PASSING OF TITLE. IT IS IMMATERIAL WHETHER THE ELIGIBLE EXPENDITURE WAS INC URRED PRIOR OR SUBSEQUENT TO THE PASSING OF TITLE. BUT IN THE PRESENT CASE BEFORE US , THE EXPENDITURE IN THE NATURE OF MANAGEMENT FEE AND OTHER EXPENSES PAID TO PMFS AND CUSTODY FEE PAID FOR MAINTAINING DEMAT ARE NOT IN RELATION TO TRANSFER OF SHARE RATH ER IT IS PAID FOR PRESERVATION OF ASSETS I.E. THE SHARES AND SECURITIES. MAINTAINING DEMAT ACCOU NT IS STATUTORILY COMPULSORY BUT CUSTODY FEE PAID ARE FOR TAKING CARE OF THE PORT FOLIO BY T HE COMPANY FOR MAINTAINING DEMAT ACCOUNT. SIMILARLY, THE MANAGEMENT FEE AND OTHER E XPENSES PAID TO PMFS ARE ALSO IN THE NATURE OF ADVISORY EXPENSES AND CANNOT BE DEDUCTED FROM THE CAPITAL GAINS UNDER SECTION 48 OF THE ACT. ACCORDINGLY, WE CONFIRM THE ORDER O F CIT(A) AND C.OS OF THE ASSESSEE ARE DISMISSED. SINCE THIS ISSUE IS COVERED BY THE DECISION CITED S UPRA, WE ACCORDINGLY DISMISS THIS GROUND OF APPEAL OF ASSESSEE. 7. SINCE THE ISSUE IS SQUARELY COVERED AGAINST THE ASSESSEE, WE DISMISS THIS GROUND OF APPEAL OF ASSESSEE. 8. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED IN PART. 9. ORDER IS PRONOUNCED IN THE OPEN COURT . SD/- SD/- , ! ' ! ! ' ! ! ' ! ! ' ! , (PRAMOD KUMAR) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( - - - -) )) ) DATED : 27 TH AUGUST, 2013 ./ '$01 '2 JD.(SR.P.S.) , 3 ''4 54&6- COPY OF THE ORDER FORWARDED TO: 1 . )* / APPELLANT SHRI BHARAT HARI SINGHANIA (IND.), 7, C OUNCIL HOUSE STREET, KOLKATA-700 001. 2 +)* / RESPONDENT DCIT, CENTRAL CIRCLE-VI, KOLKATA. 3 . ',$ ( )/ THE CIT(A) , KOLKATA 4. ',$ CIT, KOLKATA 5 . ='> '$ / DR, KOLKATA BENCHES, KOLKATA +4 '/ TRUE COPY, ,$/ BY ORDER, ! 1 /ASSTT. REGISTRAR .