B. GOPIRAM & CO. (P) LTD., Kolkata V. I.T.O.,W d-5(3), Kol, Kolkata

ITA 2035/KOL/2009

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70402 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 11-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 01-12-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K K DAS SRDR
• Assessee Lawyers: SUBASH AGARWAL
• Keywords: Business income; Earning of tax free income; Bad and doubtful debts
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI, R.S. SYAL, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER ITA NO. 2035 / KOL / 2009 & ITA NO.124/KOL/2010 ASSESSMENT YEAR :2006-07 B GOPIRAM &CO.(P) LTD. 4, SYNAGOGUE STREET, 5 TH FLOOR, KOLKATA 700001 [ PAN NO.AABCB 0697 G ] INCOME TAX OFFICER, WARD- 5(3), P-7, CHOWRIGHEE SQUARE, AYAKAR BHAVA, 8 TH FLOOR, KOLKATA 700 069 V/S . V/S . INCOME TAX OFFICER WARD-5(3), AAYAKAR BHAWAN,P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069 M/S B. GOPIRAM & CO. PVT. LTD., 4, SYNAGOGUE STREET, 5 TH FLOOR, KOLKATA 700 001 /APPELLANT .. / RESPONDENT /BY ASSESSEE SHRI SUBASH AGARWAL, AR /BY REVENUE SHRI K.K. DAS, SR-DR /DATE OF HEARING 18-11-2013 /DATE OF PRONOUNCEMENT 19-11-2013 / // / O R D E R PER R.S. SYAL, ACCOUNTANT MEMBER:- THESE TWO CROSS-APPEALS ONE BY THE ASSESSEE AND THE OTHER BY THE REVENUE ARISE OUT OF THE ORDER PASSED BY COMMISSION ER OF INCOME-TAX (APPEALS) ON 05-10-2009 IN RELATION TO THE ASSESSME NT YEAR 2006-07. ITA NO.2035KOL/2009 & 124/KOL/2010 A.Y. 200 6-07 B GOPIRAM & CO. (P) LTD. V. ITO WD-5(3) KOL PAGE 2 2. THE ONLY GROUND TAKEN BY THE ASSESSEE IN ITS APP EAL IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF RS.15 LAKH CLAIMED BY THE ASSESSEE AS `BAD DEBTS WRITTEN OFF. BRIEFLY STATED THE FACTS OF TH IS GROUND ARE THAT THE ASSESSEE WROTE OFF A SUM OF RS.15 LAKH IN ITS PROFIT AND LOS S ACCOUNT. ON BEING CALLED UPON TO SUBSTANTIATE THE DEDUCTION, THE ASSESSEE S TATED THAT IT HAD ADVANCED A SUM OF RS.37.50 LAKH TO M/S. ZEAL ENTREPRENEURS P VT. LTD. (HEREINAFTER CALLED M/S. ZEPL) ON 28-02-1995 FOR PURCHASE OF A PIECE OF LAND. THE TRANSACTION DID NOT FRUCTIFY AND THE SAID COMPANY INITIALLY RETURNE D A SUM OF RS.10 LAKH TO THE ASSESSEE AND PURSUANT TO THE JUDGMENT OF THE HONBL E CALCUTTA HIGH COURT, THERE WAS A SETTLEMENT DATED 20-08-2005 VIDE WHICH THE ASSESSEE RECEIVED A SUM OF RS.12.50 LAKH IN FULL AND FINAL SETTLEMENT O F ITS CLAIM. THE UNRECOVERED SUM OF RS.15 LAKH WAS WRITTEN OFF AS BAD DEBT. THE ASSESSEE FURTHER STATED THAT THIS ADVANCE WAS GIVEN IN NORMAL COURSE OF ITS BUSINESS AND HENCE NON- RECOVERY OF THE SAID AMOUNT CONSTITUTED BAD DEBT DE DUCTIBLE UNDER THE LAW. THE ASSESSEE FURTHER EXPLAINED THAT THE COMPANY TOO K A DECISION IN THE YEAR 1994 FOR ENTERING INTO THE REAL ESTATE BUSINESS AN D WITH THIS END IN MIND A SUM OF RS.37.50 LAKH WAS ADVANCED TO M/S. ZEPL. THE ASSESSEE EXPLAINED THAT AMOUNT WAS SHOWN AS ADVANCE IN THE ACCOUNTS PENDING EXECUTION OF THE AGREEMENT. IT WAS ALSO EXPLAINED THAT THE COMPA NY MADE ADVANCES TO OTHER BUILDERS AND DEVELOPERS FROM-TIME-TO-TIME AS UNDER:- ITA NO.2035KOL/2009 & 124/KOL/2010 A.Y. 200 6-07 B GOPIRAM & CO. (P) LTD. V. ITO WD-5(3) KOL PAGE 3 NAME DATE AMOUNT I) SEAL ENTERPRENEURS PVT. LTD. 02.03.1995 37,50,0 00/- II) BHAVNANI DEVELOPERS 07.01.1997 25,00,000/- III) DEEPTI PROMOTERS PVT LTD. 15.01.1997 5,00,0 00/- IV) GOURISUT DEVELOPERS PVT LTD. 20.01.1997 3,00 ,000/- V) SHRUTI ESTATE PVT LTD. 25.07.11996 10,00,000/- VI) PRASAD MADHUKAR SONABANE 20.09.1996 4,50,000- 3. IN ORDER TO PROVE THE ENTERING OF THE ASSES SEE INTO THE BUSINESS OF REAL ESTATE, IT WAS DEMONSTRATED THAT ITS MEMORANDUM OF ASSOCIATION ALSO CONTAINED AN OBJECT CLAUSE IN THIS REGARD. THE ASSE SSING OFFICER OBSERVED THAT THE ASSESSEE WAS EARLIER ENGAGED IN THE TRADING OF SUITING & SHIRTING AND THEREAFTER, IT STARTED TRADING IN SHARES AND SECURI TIES. ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE WAS NOT ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF LAND. UNCONVINCED WITH THE ASSESSEE'S S UBMISSIONS, HE CAME TO HOLD THAT THE SAID AMOUNT OF RS.15 LAKH WAS NOT BAD DEBT AS THE SAME WAS NOT INCIDENTAL TO THE ASSESSEE'S BUSINESS. NO RELIEF WA S ALLOWED IN THE FIRST APPEAL. 4. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED T HE RELEVANT MATERIAL ON RECORD. IT IS OBVIOUS FROM THE FACT RECORDED ABO VE, THAT THE ASSESSEE ADVANCED A SUM OF RS.37.50 LAKH TO M/S ZEPL ON 28-0 2-1995. ON A SPECIFIC QUERY FROM THE BENCH, THE LD. AR STATED THAT THE L ITIGATION STARTED WITH PARTY IN THE CALENDAR YEAR 2003 AND IT WAS PURSUANT TO SETTL EMENT WITH M/S. ZEPL THAT THE ENTIRE AMOUNT WAS RECEIVED EXCEPT FOR A SUM OF RS.15 LAKH WHICH WAS NOT RECOVERED. THE CONTENTION OF THE LD. DR THAT THIS A MOUNT IS NOT A BAD DEBT IS ITA NO.2035KOL/2009 & 124/KOL/2010 A.Y. 200 6-07 B GOPIRAM & CO. (P) LTD. V. ITO WD-5(3) KOL PAGE 4 VIVID FROM THE LANGUAGE OF SECTIONS 36(1)(VIII) R.W .S. 36(2) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT), W HICH PROVIDE THAT NO DEDUCTION SHALL BE ALLOWED AS BAD DEBT UNLESS SUCH DEBT OR PA RT THEREOF WAS TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE FO R THE CURRENT OR THE EARLIER YEAR. OBVIOUSLY, THIS CONDITION IS NOT SATISFIED I NASMUCH AS THE ASSESSEE NEVER EARNED ANY INCOME ON ACCOUNT OF TRANSACTION O F MAKING ADVANCE TO M/S. ZEPL. IN THAT VIEW OF THE MATTER, THE LOSS FROM SUC H TRANSACTION CANNOT BE CHARACTERIZED AS `BAD DEBT. 5. THE LD. AR CONTENDED THAT THE AMOUNT SHOUL D BE CONSIDERED AS `BUSINESS LOSS DEDUCTIBLE U/S.28 OF THE ACT. THE M ERE FACT THAT THE ASSESSEE KEPT ON CLAIMING BEFORE THE AUTHORITIES BELOW THAT IT WAS A CASE OF BAD DEBT, WOULD NOT PRECLUDE IT FROM THE CONTENDING THAT THE AMOUNT SHOULD BE CONSIDERED AS BUSINESS LOSS AND HENCE DEDUCTIBLE, IF IT IS ACTUALLY SO. THERE IS AN ESSENTIAL DIFFERENCE IN THE BASIC SCHEME FOR GRANTING DEDUCTION TOWARDS `BAD DEBTS AND BUSINESS LOSS. WHEREAS, `BAD DEBT BECOMES DEDUCTIBLE ON A MERE WRITE OFF, THE AMOUNT OF BUSINESS LOSS CAN BE CLAIMED AS DEDUCTION IF SUCH LOSS IS PROVED TO HAVE BEEN INCURRED IN THE CA RRYING ON OF THE BUSINESS OR IS INCIDENTAL TO SUCH BUSINESS. WHERE, THE AMOUN T WAS ADVANCED ON ACCOUNT OF A TRANSACTION OF CAPITAL NATURE, THE IRR ECOVERABILITY OF SUCH AMOUNT WOULD NOT ENTITLE THE ASSESSEE TO ANY DEDUCTION AS THE CONDITION OF SUFFERING SUCH LOSS DURING THE COURSE OF BUSINESS WOULD BE WA NTING. 6. ADVERTING TO THE FACTS OF THE INSTANT CAS E, WE FIND THAT THE ASSESSSEE ITA NO.2035KOL/2009 & 124/KOL/2010 A.Y. 200 6-07 B GOPIRAM & CO. (P) LTD. V. ITO WD-5(3) KOL PAGE 5 CLAIMED BEFORE THE AUTHORITIES BELOW THAT THE DEDUC TION SHOULD BE GRANTED BECAUSE SUCH LOSS WAS INCIDENTAL TO BUSINESS. IN ORDER TO BRING A CASE WITHIN THE PURVIEW OF DEDUCTIBILITY, THE ASSESSEE MUST DEMONSTRATE THAT IT WAS ACTUALLY ENGAGED IN THE `BUSINESS OF REAL ESTATE, FROM WHICH SUCH A LOSS WAS INCURRED. ORDINARILY `BUSINESS REFERS TO A SERIES OF TRANSACTIONS DONE WITH THE OBJECT OF EARNING PROFIT ON REGULAR BASIS. WE ARE A LSO AGREEABLE WITH THE CONTENTION OF THE LD. AR THAT A SINGLE BUSINESS TRA NSACTION CAN BE CONSIDERED AS ADVENTURE IN THE NATURE OF TRADE. HOWEVER, IT IS OF UTMOST IMPORTANCE THAT THE FACTS MUST PROVE THAT SUCH AN ISOLATED TRANSACT ION WAS, IN FACT, ENTERED INTO WITH THE OBJECT OF DOING BUSINESS. IN SO FA R AS THE FACTS OF THE PRESENT CASE ARE CONCERNED, WE ARE FULLY CONVINCED THAT THE ASSESSEE MISERABLY FAILED TO PROVE THAT THE PRESENT TRANSACTION WAS IN THE NA TURE OF A `BUSINESS TRANSACTION. IT IS SO FOR THE REASON THAT THE AMOU NT OF RS.37.50 LAKH GIVEN AS ADVANCE WAS NEVER GIVEN WITH THE INTENTION OF DOING ANY BUSINESS IN REAL ESTATE. THE ASSESSEE NEVER INTENDED TO CARRY ON S UCH BUSINESS OF REAL ESTATE AS IS REVEALED FROM PAGE-13 OF THE PAPER BOOK WHICH IS LATER OF M/S. ZEPL TO THE ASSESSEE DATED 10-05-2000 READING THAT: IT WAS AGREED THAT YOU WOULD NOT PURCHASE THE LAND AND THE LAND WOULD BE DEVELOP ED BY OUR COMPANY AND OUR COMPANY WILL REFUND THE SUM OF RS.37.50 LAKH TO YOU. THESE FACTS AMPLY PROVE THAT THE ASSESSEE NEVER INTENDED TO CARRY ON SUCH A BUSINESS. ON A PERTINENT QUERY, THE LD AR ADMITTED THAT THERE WAS NO OTHER TRANSACTION OF PURCHASE OR SALE BY THE ASSESSSEE OF ANY REAL ESTA TE. EVEN THE ADVANCES MADE BY THE ASSESSEE TO SIX PARTIES, TABULATED ABOV E WERE ALSO ADMITTED TO ITA NO.2035KOL/2009 & 124/KOL/2010 A.Y. 200 6-07 B GOPIRAM & CO. (P) LTD. V. ITO WD-5(3) KOL PAGE 6 HAVE BEEN RECEIVED BACK WITHOUT ANY ACTUAL TRANSACT ION OF PURCHASE OR SALE OF PROPERTY. WHEN WE CONSIDER THE FACTS OF THE CASE IN TOTALITY, IT BECOMES PATENT THAT THE ASSESSSEE NEVER INTENDED TO ENTER INTO ANY BUSINESS IN REAL ESTATE. THIS SOLITARY TRANSACTION OF PAYING RS.37.50 LAKH T O M/S.ZEPL WAS WITH THE OBJECT OR MAKING AN INVESTMENT AND THE NON-RECEIP T OF REFUND OF RS.15 LAKH OUT OF SUCH TRANSACTION CANNOT BE CHARACTERIZED AS ANYTHING BUT A LOSS OF CAPITAL NATURE. THE CONTENTION OF THE LD. AR THAT THE MEMORANDUM OF ASSOCIATION PROVIDED FOR DOING THE REAL ESTATE BUSI NESS IS THOUGH A RELEVANT FACTOR BUT NOT DECISIVE. THE HONBLE SUPREME COURT IN BENGAL & ASSAM INVESTORS LTD. VS. CIT (1966) 59 ITR 547 (SC) HAS HELD THAT THE OBJECT CLAUSE IN M/A IS NOT DECISIVE BECAUSE QUESTION IS NOT WHAT BUSINESS COMPANY PROFESSES TO CARRY ON BUT WHAT BUSINESS IT ACTUALLY CARRIES ON. SIMILAR VIEW HAS BEEN EXPRESSED BY THE HONBLE JURISDICTIONAL HI GH COURT IN CIT VS. J.K. EASTERN INDUSTRIES (P) LTD. (1965) 55 ITR 376 (CAL) . AS SUCH, WE DO NOT FIND ANY WEIGHT IN THE SUBMISSION OF THE LD. AR THAT SIN CE THE MEMORANDUM OF ASSOCIATION PROVIDES FOR DOING REAL ESTATE BUSINESS , IT SHOULD BE DEEMED TO HAVE BEEN CARRIED ON. IN THAT VIEW OF THE MATTER, W E ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE HAS FAILED TO MAKE OUT A SUCCESSFUL CASE THAT THE LOSS OF RS.15 LAKH WAS BUSINESS LOSS. THE VIEW TA KEN BY THE AUTHORITIES BELOW IN THIS REGARD IS UPHELD. 7. FIRST GROUND OF THE REVENUES APPEAL IS AGAINST THE TREATMENT OF RS.9,22,445/- AS LONG TERM CAPITAL GAINS (LTCG FOR SHORT) INSTEAD OF `BUSINESS PROFIT. THE FACTS OF THIS GROUND ARE TH AT THE ASSESSSEE SHOWED ITA NO.2035KOL/2009 & 124/KOL/2010 A.Y. 200 6-07 B GOPIRAM & CO. (P) LTD. V. ITO WD-5(3) KOL PAGE 7 LTCG OF RS.9,22,445/- ON THE SALE OF SHARES OF IND O GULF FERTILIZERS LTD. (IGFL FOR SHORT) WHICH WERE DISCLOSED AS STOCK-IN -TRADE IN THE EARLIER YEARS. ON BEING CALLED UPON TO EXPLAIN AS TO HOW THIS INCO ME COULD BE CONSIDERED AS LTCG WHEN THE ASSESSEE HAD SHOWN THE SHARES OF IGFL AS STOCK-IN-TRADE IN EARLIER YEARS, THE ASSESSEE STATED THAT SUCH SHARES WERE ACQUIRED AS INVESTMENT BUT WERE INADVERTENTLY MARKED AS STO CK-IN-TRADE IN ITS ACCOUNT. THIS MISTAKE WAS REALIZED AND THE ASSESSEE PASSED A BOARD RESOLUTION ON 01- 04-2005 RECTIFYING THE HITHERTO MISTAKE BY CONVERTI NG IT INTO INVESTMENT. NOT CONVINCED WITH THE ASSESSEE'S SUBMISSIONS, THE ASSE SSING OFFICER TREATED THIS AMOUNT AS BUSINESS INCOME AS AGAINST THE ASSESSEE 'S CLAIM OF `CAPITAL GAINS. THE LD. CIT(A) GOT CONVINCED WITH THE ASSES SEE'S SUBMISSIONS AND RESTORED THE ASSESSEE'S POINT OF VIEW. 8. AFTER CONSIDERING THE RIVAL CONTENTIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT THE SHARES OF IGFL WERE ACQUIRED DURING THE FINANCIAL YEAR 2003-04. SUCH SHARES WERE RETAIN ED AS SUCH ONLY THROUGHOUT THE PERIOD BEFORE THEIR SALE IN TWO LOTS IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. IT SHOW S THAT SUCH SHARES WERE HELD BY THE ASSESSEE FOR A PERIOD OF MORE THAN TWO YEARS AND FURTHER NO OTHER TRANSACTIONS OF PURCHASE AND SALE OF THESE SHARES W AS UNDERTAKEN BY THE ASSESSEE DURING SUCH PERIOD. THOUGH INADVERTENTLY T HESE SHARES WERE DISCLOSED AS STOCK-IN-TRADE BUT THESE WERE ACTUAL LY HELD AS INVESTMENT THROUGHOUT THE PERIOD AS IS EVIDENT FROM THE FACT T HAT THE ASSESSEE CONTINUED TO VALUE SUCH SHARES AT COST PRICE IN THE RESPECTIV E BALANCE-SHEETS FROM THE ITA NO.2035KOL/2009 & 124/KOL/2010 A.Y. 200 6-07 B GOPIRAM & CO. (P) LTD. V. ITO WD-5(3) KOL PAGE 8 DATE OF PURCHASE. IF THESE SHARES HAD BEEN TREATED AS STOCK-IN-TRADE, THEN THESE WOULD HAVE BEEN VALUED AT `COST OR MARKET PRI CE, WHICHEVER IS LESS. THE FACT THAT THE MISTAKE IN DISCLOSING THESE SHARE S AS STOCK-IN-TRADE WAS RECTIFIED BY WAY OF THE BOARDS RESOLUTION ALSO SUB STANTIATES THE CLAIM THAT THESE SHARES WERE IN FACT HELD AS INVESTMENT. IT IS A SETTLED LEGAL POSITION THAT NOMENCLATURE OF A TRANSACTION IS NOT RELEVANT. IT I S THE REAL CHARACTER OF THE TRANSACTION WHICH IS LOOKED INTO. WHEN WE CONSIDER THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE, MORE SPECIF ICALLY THE PERIOD OF HOLDING OF MORE THAN TWO YEARS AND THE VALUATION OF SUCH SH ARES AT COST PRICE IN THE EARLIER BALANCE-SHEET, THERE REMAINS NO DOUBT IN OU R MINDS THAT THESE SHARES WERE IN FACT HELD AS INVESTMENT. ONCE THE SHARES ARE HELD AS `INVESTMENT, ANY PROFIT OR LOSS FROM THEIR TRANSFER HAS TO BE CO NSIDERED UNDER THE HEAD `CAPITAL GAINS AND NOT AS `BUSINESS INCOME. WE, THEREFORE, APPROVE THE VIEW TAKEN BY THE LD. CIT(A) ON THIS ISSUE. THIS GR OUND IS NOT ALLOWED. 9. THE ONLY OTHER GROUND IN THE REVENUES APPEAL IS AGAINST THE DELETION OF ADDITION OF RS.15,000/- MADE BY THE AO U/S 14A O F THE ACT. THE FACTS OF THIS GROUND ARE THAT ASSESSEE EARNED CERTAIN EXEMPT DIVI DEND INCOME. NO AMOUNT WAS SHOWN AS DISALLOWABLE U/S. 14A OF THE ACT. THE ASSESSING OFFICER DISALLOWED A SUM OF RS.15,000/- ON ESTIMATE BASIS W HICH ADDITION WAS DELETED IN THE FIRST APPEAL. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PE RUSED THE RELEVANT MATERIAL ON RECORD. THE LD. COUNSEL ARGUED AT THE VERY OUTS ET THAT NO DISALLOWANCE U/S ITA NO.2035KOL/2009 & 124/KOL/2010 A.Y. 200 6-07 B GOPIRAM & CO. (P) LTD. V. ITO WD-5(3) KOL PAGE 9 14A WAS WARRANTED AS THE SHARES WERE HELD AS `STOCK IN TRADE AND NOT `INVESTMENT. WE DO NOT FIND ANY FORCE IN THE SUBMI SSION ADVANCED ON BEHALF OF THE ASSESSEE. THE HONBLE JURISDICTIONAL HIGH CO URT IN DHANUKA & SONS VS. CIT (2011) 339 ITR 319 (CAL) HAS DECIDED THIS I SSUE IN FAVOUR OF THE REVENUE, WHICH IS APPARENT FROM QUESTION (II) BEFOR E THE HONBLE HIGH COURT AS EXTRACTED IN THE BEGINNING OF THE JUDGMENT, WHIC H HAS BEEN ANSWERED AGAINST THE ASSESSEE BY HOLDING THAT DISALLOWANCE U /S 14A IS ATTRACTED EVEN WHEN THE SECURITIES FETCHING EXEMPT INCOME ARE HELD AS STOCK IN TRADE. SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE KERALA HIGH COUR T IN CIT VS. CATHOLIC SYRIAN BANK LTD. (2011) 237 CTR (KER) 164 AND ALSO KNOWN AS CIT VS. DHANLAKSHMY BANK LTD . (2012) 344 ITR 259 (KER). IN THIS BATCH OF CASES, IT HAS BEEN MENTIONED AT THE BEGINNING OF THE JUDGMEN T THAT THE SECURITIES WERE HELD BY THESE BANKS AS `BUSINESS ASSET (NOT `INVES TMENT). AFTER CONSIDERING THE JUDGMENT OF THE HONBLE SUPREME COURT IN CIT VS. WALFORT SHARE & STOCK BROKERS (P) LTD . (2010) 326 ITR 1 (SC), THE HONBLE HIGH COURT SUS TAINED THE DISALLOWANCE OF THE EXPENSES. SIMILAR VIEW WAS EX PRESSED BY THE SPECIAL BENCH OF THE TRIBUNAL IN ITO VS. DAGA CAPITAL MANAGEMENT PVT. LTD (2008) 119 TTJ (SB)(MUM) 289. IN VIEW OF THE ABOVE POSITI ON EMANATING FROM VARIOUS JUDGMENTS AS DISCUSSED ABOVE, INCLUDING THA T OF THE HONBLE JURISDICTIONAL HIGH COURT, WE FIND NO FORCE IN THE CONTENTION URGED ON BEHALF OF THE ASSESSEE THAT NO DISALLOWANCE OF EXPENSES U/S 1 4A CAN BE MADE WHEN THE SHARES ARE HELD AS STOCK IN TRADE. 11. NOW WE COME TO THE QUESTION OF QUAN TUM OF DISALLOWANCE. THE ITA NO.2035KOL/2009 & 124/KOL/2010 A.Y. 200 6-07 B GOPIRAM & CO. (P) LTD. V. ITO WD-5(3) KOL PAGE 10 ASSESSMENT YEAR UNDER CONSIDERATION IS 2006-07. RU LE 8D OF THE IT RULE, 1962 IS APPLICABLE FROM AY 2008-09 AS HAS BEEN HELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. DCIT (2010) 328 ITR 81 (BOM) AND HONBLE DELHI HIGH COURT IN THE CASE OF MAXOPP INVESTMENT LTD. VS. CIT (2012) 347 ITR 272 (DEL). IN VIEW OF THESE JUDGMENTS, IT IS CLEAR THAT THE DISALLOWANCE U/S. 1 4A OF THE ACT CAN BE MADE ON REASONABLE BASIS IN THE YEARS ANTERIOR TO AY 200 8-09. AS WE ARE DEALING WITH THE AY 2006-07 THE DISALLOWANCE IS REQUIRED TO BE MADE U/S. 14A OF THE ACT ON SOME REASONABLE BASIS. BOTH THE SIDES ARE IN AGREEMENT THAT THE KOLKATA BENCH OF THE TRIBUNAL HAS SUSTAINED ADDITIO N IN SEVERAL CASES U/S. 14A AT THE RATE OF 1% OF THE EXEMPT INCOME IN THE YEARS PRIOR TO THE A.Y. 2008-09. RESPECTFULLY FOLLOWING SUCH PRECEDENTS, WE ALSO DIRECT TO SUSTAIN THE DISALLOWANCE U/S 14A OF THE ACT ON THIS LEVEL. THIS GROUND IS PARTLY ALLOWED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMIS SED AND THAT OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- GEORGE MATHAN) (R.S. SYAL) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP #- 19/11/2013 . . . . /. /. /. /. / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. 3 / CONCERNED CIT ITA NO.2035KOL/2009 & 124/KOL/2010 A.Y. 200 6-07 B GOPIRAM & CO. (P) LTD. V. ITO WD-5(3) KOL PAGE 11 4. 3- / CIT (A) 5. . , , / DR, ITAT, KOLKATA 6. ; / GUARD FILE. BY ORDER/ , /TRUE COPY/ / , STRENGTHEN PREPARATION & DELIVERY O F ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 18/11 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE NO 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 19/11 4) DATE OF CORRECTION 19/11 5) DATE OF FURTHER CORRECTION - - 6) DATE OF INITIAL SIGN BY MEMBERS 19/11 7) ORDER UPLOADED ON 19/11 8) ORIGINAL DICTATION PAD-PART HAS BEEN ENCLOSED IN THE FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 19/11 10) FILE SEND TO HEAD CLERK *