DCIT, Circle - 1(1), Kolkata, Kolkata V. M/s. Chartered Finance & Leasing Ltd., Kolkata

ITA 2068/KOL/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9318 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 18-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C J SINGH
• Assessee Lawyers: S K TULSIYAN
• Keywords: Capital asset; Business income; Rule of consistency; Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

1 ITA NO. 2068/KOL/2017 M/S. CHARTERED FINAN CE & LEASING LTD., AY- 2010-11 , A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA ( ) . . , . . ! , ' #$ ) [BEFORE SHRI P.M. JAGTAP, VICE PRESIDENT & SHRI A. T. VARKEY, JM] I.T.A. NO. 2068/KOL/2017 ASSESSMENT YEAR: 2010-11 DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1(1), KOLKATA. VS. M/S. CHARTERED FINANCE & LEASING LTD. (PAN: AABCC0777C) APPELLANT RESPONDENT DATE OF HEARING 10.01.2019 DATE OF PRONOUNCEMENT 03.04.2019 FOR THE APPELLANT SHRI C. J. SINGH, ADDL. CIT, SR. DR FOR THE RESPONDENT SHRI S. K. TULSIYAN, ADVOCATE ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-11, KOLKATA DATED 07.07.2017 FOR AY 2010-01. 2. THE FIRST GROUND OF APPEAL OF REVENUE IS AGAINST THE ACTION OF LD. CIT(A) IN RESTRICTING THE DISALLOWANCE MADE BY THE AO INVOKIN G SECTION 14A OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) READ WI TH RULE 8D OF THE INCOME-TAX RULES, 1962 (HEREINAFTER REFERRED TO AS THE RULES). 3. BRIEF FACTS OF THE CASE ARE THAT THE AO NOTED TH AT THE ASSESSEE HAD EARNED DIVIDEND INCOME OF RS.39,40,246/- WHICH WAS CLAIMED AS EXEMP T. THE AO NOTED THAT THE ASSESSEE HAS SUO MOTU ONLY DISALLOWED A SUM OF RS.2,56,237/- AND CLAIMED THAT IT HAS NOT INCURRED ANY EXPENDITURE FOR EARNING DIVIDEND. HOWEVER, THE AO DID NOT AGREE WITH THE CONTENTION OF THE ASSESSEE AND HE WAS OF THE OPINION THAT RULE 8D OF THE RULES HAS TO BE APPLIED AND THEREAFTER HE MADE DISALLOWANCE @ 0.5% OF THE AVERA GE VALUE OF INVESTMENT AT RS.13,37,387/-. HOWEVER, THE AO RESTRICTED THE DIS ALLOWANCE TO THE EXTENT OF ADMINISTRATIVE EXPENSES DEBITED TO THE P&L ACCOUNT AT RS.6,75,682/ -. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO WAS PLEASED TO RESTRICT THE DISALLOWANCE AT RS.3,19,918/-. AGGRIEVED, THE REVENUE IS BEFORE US. 2 ITA NO. 2068/KOL/2017 M/S. CHARTERED FINAN CE & LEASING LTD., AY- 2010-11 4. WE HAVE HEARD RIVAL SUBMISSIONS AND CAREFULLY GO NE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THE FACTS NOTED BY THE AO ARE NOT REPEATED FOR THE SAKE OF BREVITY. WE NOTE THAT THE AO HAS NOT MADE ANY DISA LLOWANCE ON THE INTEREST COMPONENT UNDER RULE 8D(2)(II) SINCE THERE WAS NO PAYMENT OF INTEREST AND THE ASSESSEE HAS MADE THE INVESTMENT OUT OF ITS SELF FUNDS. WE NOTE THAT TH E AO HAD RESTRICTED THE DISALLOWANCE TO THE EXTENT OF ADMINISTRATIVE EXPENSES DEBITED TO THE P& L ACCOUNT WHICH IS ERRONEOUS. IT IS A COMMON KNOWLEDGE THAT ADMINISTRATIVE EXPENSES ARE A LSO FOR RUNNING OF THE DAY-TO-DAY ACTIVITIES OF THE COMPANY AND CANNOT BE ONLY FOR EA RNING THE EXEMPT INCOME, WHICH IS ONLY A PART OF THE ACTIVITY OF THE ASSESSEE COMPANY AND WE NOTE THAT THE LD. CIT(A) HAS TAKEN NOTE OF THE BREAK-UP OF ADMINISTRATIVE EXPENSES GIVEN AT PAGE 3 OF LD. CIT(A)S ORDER VIZ. LEGAL AND PROFESSIONAL EXPENSES AND AUDITOR FEES, TRAVELL ING EXPENSES ETC., THEREFORE, WE FIND THE ORDER OF THE LD. CIT(A) IN RESTRICTING THE DISALLOW ANCE TO RS.3,19,918/- IN PLACE OF THE AOS ORDER OF DISALLOWANCE OF RS.6,75,682/- TO BE REASON ABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND, THEREFORE, WE REFRAIN FROM INTERFERING WI TH THE ORDER OF THE LD. CIT(A) AND DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 5. GROUND NO. 2 OF THE REVENUE IS AGAINST THE ACTI ON OF THE LD. CIT(A) IN REJECTING THE TREATMENT BY THE AO OF INCOME OF RS.1,98,24,199/- A S BUSINESS INCOME INSTEAD OF CAPITAL GAIN AS CLAIMED BY THE ASSESSEE. 6. BRIEF FACTS OF THE CASE ARE THAT THE AO NOTED FR OM A PERUSAL OF THE COMPUTATION OF INCOME THAT ASSESSEE HAD SHOWN SHORT TERM CAPITAL G AIN ARISING OUT BUYING AND SELLING OF SHARES TO THE TUNE OF RS.1,98,24,199/-. SO, THE AO ASKED THE ASSESSEE TO FURNISH THE DETAILS OF THE PURCHASE AND SALE OF SHARES WHICH RESULTED I N THE GAIN. PURSUANT TO THE QUERY, THE ASSESSEE FURNISHED STATEMENT SHOWING DETAILS OF PUR CHASE AND SALES OF SHARES. AFTER THE EXAMINATION OF THE DETAILS, ACCORDING TO AO, SINCE THE SHARES WERE HELD FOR A SHORT PERIOD AND CONSIDERING THE VOLUME, FREQUENCY AND REGULARIT Y SUGGESTED THE TRANSACTIONS WERE IN THE NATURE OF BUSINESS. EVEN THOUGH THE ASSESSEE BROUG HT TO THE NOTICE OF THE AO THAT THE ASSESSEE HAS ALL ALONG IN THE PAST TREATED IT AS IN VESTMENT IN SHARES AS CAPITAL ASSET AND THE PROFIT/LOSS ON SALE OF SUCH SHARES WERE TREATED UND ER THE HEAD CAPITAL GAINS AND IN THE PREVIOUS ASSESSMENT YEARS THE ABOVE POSITION WAS CO NSISTENTLY ACCEPTED BY THE DEPARTMENT. 3 ITA NO. 2068/KOL/2017 M/S. CHARTERED FINAN CE & LEASING LTD., AY- 2010-11 IT WAS BROUGHT TO THE NOTICE OF THE AO THAT THESE S HARES WERE NEVER HELD AS STOCK IN TRADE AND THE INVESTMENTS WERE ALWAYS VALUED AT COST AND THAT THE ASSESSEE DID MAKE PAYMENT OF STT AND DID NOT CLAIM ANY REBATE U/S. 88E OF THE ACT BE CAUSE THE ASSESSEE IS NOT A TRADER AND THAT THE ASSESSEE HAD USED ONLY ITS OWN CAPITAL AND RESE RVE FUNDS TO ACQUIRE THE SHARES AND HAS EARNED REASONABLE DIVIDEND ON SUCH INVESTMENT. THE SE CONTENTIONS OF THE ASSESSEE WERE NOT ACCEPTED BY THE AO AND HE HELD THAT THE ENTIRE GAIN AS BUSINESS INCOME AND SO ACCORDING TO HIM, THIS AMOUNT IS LIABLE TO BE TAXED @ 30%. AGGR IEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO WAS PLEASED TO DELETE THE ADDITION AND ALLOWED THE CLAIM OF THE ASSESSEE THAT THE SAID GAIN IS THE SHORT TERM CAPIT AL GAIN OF THE ASSESSEE. AGGRIEVED, THE REVENUE IS BEFORE US. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THE FACTS NARRATED ABOVE ARE NOT REPEATED FO R THE SAKE OF BREVITY. ON APPEAL, WE NOTE THAT THE LD. CIT(A) TOOK NOTE OF THE FACT THAT THE ASSESSEE WAS INVESTING IN SHARES AS AN INVESTOR ONLY AND THIS FACT HAS BEEN CONSISTENTLY U PHELD BY THE AO DURING SCRUTINY ASSESSMENTS CARRIED OUT IN AYS 2005-06 AND 2006-07 AND THEREAFTER IN AYS 2012-13, 2013- 14 AND 2014-15. THEREFORE, ACCORDING TO LD. CIT(A), WHEN THE RULE OF CONSISTENCY AS APPLIED, THE ASSESSEES CLAIM OF SHORT TERM CAPITAL GAIN SHOULD HAVE BEEN ACCEPTED AND THERE WAS NO NECESSITY TO DEPART FROM THE EARLIER CONSIST ENT STAND TAKEN BY THE AO DURING SCRUTINY PROCEEDINGS FOR THE EARLIER ASSESSMENT YEARS CITED ABOVE; AND THE LD. CIT(A) OBSERVED THAT THE CBDT VIDE CIRCULAR NO. 6/2016 DATED 29.02.2016 HAS BEEN CATEGORICALLY MADE IT CLEAR THAT IN RESPECT OF LISTED SHARES AND SECURITIES HEL D FOR A PERIOD OF MORE THAN 12 MONTHS IMMEDIATELY PRECEDING THE DATE OF ITS TRANSFER, IF THE ASSESSEE DESIRES TO TREAT THE INCOME ARISING FROM THE TRANSFER THEREOF AS CAPITAL GAIN, THE SAME SHALL NOT BE PUT TO DISPUTE BY THE AO. HOWEVER, THIS STAND ONCE TAKEN BY THE ASSESSEE IN A PARTICULAR ASSESSMENT YEAR, SHALL REMAIN APPLICABLE IN SUBSEQUENT ASSESSMENT YEARS AL SO AND THE TAX PAYERS SHALL NOT BE ALLOWED TO ADOPT A DIFFERENT/CONTRARY STAND IN THIS REGARD IN SUBSEQUENT YEARS. WE NOTE THAT THE ASSESSEES CONSISTENT STAND WAS THAT OF AN INVE STOR IN SHARES AND SO, WHEN THE SHARE SHOWN AS INVESTMENT WAS SOLD IT IS BOOKED AS THE GA IN OR LOSS AS CAPITAL GAIN/LOSS. WE NOTE THAT FOR THIS YEAR THE ASSESSEE HAS DEALT WITH ONLY TWO SHARES VIZ., GRAPHITE INDIA LTD. AND STRIDES ARCOLAB LTD. GRAPHITE INDIA LTD.S SHARE W AS ACQUIRED BY A SCHEME OF DE-MERGER OF 4 ITA NO. 2068/KOL/2017 M/S. CHARTERED FINAN CE & LEASING LTD., AY- 2010-11 M/S. GKW LTD. APPROVED BY HONBLE HIGH COURT, WHI CH FACTS HAVE BEEN MENTIONED IN THE INVESTMENT SCHEDULE BEFORE 31.03.2007; AND STRIDES ARCOLAB LTD. SHARES HAVE BEEN ACQUIRED DURING FY 2008-09. SO IN THE LIGHT OF THE AFORESAID FACTS, AND TAKING NOTE THAT THE DEPARTMENT HAS ACCEPTED THE STAND OF THE ASSESSEE A S AN INVESTOR IN THE EARLIER ASSESSMENT YEARS, APPLYING THE RULE OF CONSISTENCY ALSO WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE, SO WE ARE NOT INCLINED TO INTERFERE WITH T HE ORDER OF THE LD. CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. 8. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 3RD APRIL , 2019 SD/- SD/- (P. M. JAGTAP) (ABY. T. VARKEY) VICE PRESIDENT JUDICIAL MEMBER DATED : 3RD APRIL, 2019 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT DCIT, CIRCLE-1(1), KOLKATA. 2 RESPONDENT M/S. CHARTERED FINANCE & LEASING L TD., 2B, GRANT LANE, 2 ND FLOOR, ROOM NO. 74, KOLKATA-700 012. 3. 4. CIT(A)-11, KOLKATA (SENT THROUGH E-MAIL) CIT- , KOLKATA. 5. DR, ITAT, KOLKATA. (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR