RAMESH J. MAHESHWARI, MUMBAI V. ITO 24(3)3), MUMBAI

ITA 2732/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55268 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 12-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 08-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR
• Keywords: Capital asset

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI T.R.SOOD (A. M) ITA NO.2732/MUM/2010(A.Y. 2006-07) MR.RAMESH J. MAHESHWARI, N 8/13 GANAPNATI NIWAS, BANGUR NAGAR, GOREGAON(W), MUMBAI 400 090 PAN: AACPM8191L (APPELLANT) VS. THE INCOME TAX OFFICER 24(3)(4) MUMBAI. APPELLANT BY : SHRI JAYESH DADIA RESPONDENT BY : SHRI C.G.K.NAIR DATE OF HEARING : 12/09/2011 DATE OF PRONOUNCEMENT : /09/2011 ORDER PER N.V.VASUDEVAN, J.M, THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORD ER DATED 22/1/2010 OF CIT(A)-34, MUMBAI RELATING TO ASSESSMENT YEAR 20 06-07. IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE ORDER OF THE CIT(A) , WHEREBY THE CIT(A) CONFIRMED THE ORDER OF THE AO IMPOSING PENALTY ON T HE ASSESSEE UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE FACTS AND CIRCUMSTANCES UNDER WHICH THE PENA LTY UNDER SECTION 271(1)(C) OF THE ACT WAS IMPOSED ON THE ASSESSEE BY THE ASSESSEE ARE AS FOLLOWS: THE ASSESSEE IS AN INDIVIDUAL. HE FILED A RETURN OF INCOME FOR ASSESSMENT YEAR 2006-07 DECLARING AN INCOME OF RS. 8,00,128/-. THE TOTAL INCOME INCLUDED INCOME OF RS. 6,15,382/- DECLARED U NDER THE HEAD SHORT ITA NO.2732/MUM/2010(A.Y. 2006-07) 2 TERM CAPITAL GAIN. THE COMPUTATION OF SHORT TERM C APITAL GAIN WAS AS FOLLOWS: COMPUTATION OF INCOM E CAPITAL GAIN (SHORT TERM) 1294257 LESS LOSS 262605 27 517 ---- ----- 290122 ---------- 1004135 LESS STT & EXPENSES 48054 ----------- 956081 LESS MANAGEMENT CHARGES BY EMKAY 340699 ----------- 615382 3. THE AO CALLED UPON THE ASSESSEE TO GIVE THE DET AILS OF THE STT AND OTHER EXPENSES AND MANAGEMENT CHARGES CLAIMED AS DEDUCTIO N BY THE ASSESSEE WHILE COMPUTING STCG. THE ASSESSEE BY ITS LETTER D ATED 11/9/2008 INFORMED THE AO AS FOLLOWS: SINCE PORTFOLIO MANAGEMENT SERVICES ARE HAVING S PECIALIZED AND PROFESSIONAL EXECUTIVES TO LOOK AFTER CLIENTS INTE REST AND ALSO HAVING WITH THEM A RESEARCH DEPARTMENT WHO ARE INVOLVED IN THOUGH RESEARCH OF VARIOUS COMPANIES AND THEN P.M.S. INVESTS CLIENT S MONEY IN THE COMPANIES WHERE THEY FIND FUTURE PROSPECTUS. THERE FORE, I INVESTED MY MAJOR AMOUNT THROUGH P.M.S AND THERE AFTER I PAID A FEE OF RS. 3,40,699/- TOWARDS THEIR MANAGEMENT CHARGES COPY OF DEBIT NOTE I ENCLOSED. STT & EXPENSES INCURRED BY ME ARE AS UNDER:- 1. MANAGEMENT CHARGES RS. 28 ,434/- 2. STT RS. 13235/- 3. SERVICE TAX RS. 3377/- 4. DEMATE CHARGES RS. 1380/- 5. OTHER CHARGES RS . 1628/- ---------------- TOTAL RS. 48054/- =========== ITA NO.2732/MUM/2010(A.Y. 2006-07) 3 IF YOUR GOOD SELF FEEL THAT ANY OF THE ABOVE EXPENS ES ARE NOT ALLOWABLE EARNING CAPITAL GAINS I OFFER THEM FOR TAXATION. 4. THE AO DISALLOWED THE CLAIM OF DEDUCTION OF TH E AFORESAID EXPENSES WHILE COMPUTING STCG FOR THE FOLLOWING REASONS. THE ASSESSE INDULGED ONLY IN INVESTMENT IN SHARES AND HAS GAINED THE SHORT TERM CAPITAL GAIN ON SUCH INVESTMENT, THE EX PENSES CLAIMED BY THE ASSESSEE AGAINST THE SHORT TERM CAPITAL GAIN IS NOT AN ALLOWABLE EXPENDITURE. FURTHER, AS THE ASSESSEE H AS NOT GIVEN ANY VALID EXPLANATION FOR CLAIM OF THESE EXPENSES AGAIN ST THE SHORT TERM CAPITAL GAIN, RS. 3,40,699/- MANAGEMENT CHARGES AND RS. 48,054/- OF STT & OTHER CHARGES ARE DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSE. 5. IN RESPECT OF THE AFORESAID ADDITION MADE IN TH E COURSE OF ASSESSMENT PROCEEDINGS, THE AO INITIATED PENALTY PROCEEDINGS A ND IMPOSED PENALTY ON THE ASSESSE, DISREGARDING THE EXPLANATION OF THE AS SESSEE THAT THE CLAIM MADE WAS BONAFIDE CLAIM AND THE SAME WAS WITHDRAWN IN THE COURSE OF ASSESSMENT PROCEEDINGS WHEN THE AO APPRISED THE ASS ESSEE REGARDING THE NON-DEDUCTIBILITY OF THE AFORESAID EXPENSES WHILE C OMPUTING STCG. THE AO HOWEVER WAS NOT SATISFIED WITH THE EXPLANATION AND HE HELD THAT THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF INCOME. 6. ON APPEAL BY THE ASSESSE, THE CIT(A) CONFIRMED T HE ORDER OF THE AO HOLDING THAT THE SURRENDER WAS NOT VOLUNTARY AND O NLY AFTER SPECIFIC QUERY WAS RAISED BY THE AO. AGGRIEVED BY THE ORDER OF TH E CIT(A) THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 7. WE HAVE HEARD THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE AND LD. D.R. IN OUR VIEW THIS IS NOT A FIT CASE FOR IM POSING PENALTY. AS WE HAVE ALREADY SEEN, THE NATURE OF EXPENSES CLAIMED BY THE ASSESSEE HAVE BEEN CLEARLY SET OUT IN THE COMPUTATION OF INCOME. AS F AR AS SECURITIES ITA NO.2732/MUM/2010(A.Y. 2006-07) 4 TRANSACTION TAX (STT) IS CONCERNED IT IS NOT ALLOWA BLE IN VIEW OF THE SPECIFIC PROVISIONS UNDER THE PROVISO TO SECTION 48 OF THE A CT. THE FACT THAT THE ASSESSEE MADE CLAIM FOR DEDUCTION OF THIS ITEM OF E XPENDITURE CANNOT BE THE BASIS TO HOLD THAT THE ASSESSEE FURNISHED INACCURAT E PARTICULARS OF INCOME. THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF CIT VS. RELIANCE PETRO PRODUCT, 322 ITR 158 (SC) SUPPORTS THE PLEA O F THE ASSESSEE IN THIS REGARD. AS FAR AS MANAGEMENT CHARGES ARE CONCERNED , THE FEES PAID TO PORTFOLIO MANAGEMENT SERVICES WHETHER THEY ARE DEDU CTIBLE OR NOT WHILE COMPUTING CAPITAL GAIN IS A DEBATABLE ISSUE. IN FA CT THERE ARE TWO CONFLICTING DECISIONS OF THE ITAT IN THIS REGARD. IN THE CASE OF MOTILAL KOTHARI VS. DCIT, 136 TTJ 188(BOM) IT HAS BEEN HELD THAT THE SAME ARE NOT DEDUCTIBLE. WHILE THE PUNE BENCH OF ITAT IN THE CASE OF KRA HOLDINGS AND TRADING PVT. LTD. VS. DCIT, ITA NO.500/PN/08 ORDER DATED 31/5/2011 HAS TA KEN THE VIEW THAT THE SAME ARE DEDUCTIBLE WHILE COMPUTING CAPITAL GAI N. THEREFORE, PENALTY CANNOT BE IMPOSED IN RESPECT OF SUCH CLAIM WHICH, A RE DEBATABLE IN NATURE. AS FAR AS SERVICE TAX, DEMAT CHARGES AND OTHER CHAR GES ARE CONCERNED WE ARE OF THE VIEW THAT IT CANNOT BE SAID THAT THESE ARE N OT EXPENSES INCURRED IN CONNECTION WITH TRANSFER OF THE CAPITAL ASSETS. WE ARE, THEREFORE, OF THE VIEW THAT IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CA SE PENALTY OUGHT NOT HAVE BEEN IMPOSED UNDER SECTION 271(1)(C) OF THE ACT AS IT CANNOT BE SAID THAT THE ASSESSEE CONCEALED PARTICULARS OF INCOME OR FURNISH ED INACCURATE PARTICULARS OF INCOME. WE, THEREFORE, DIRECT THAT THE PENALTY IMPOSED BE CANCELLED. APPEAL OF THE ASSESSEE IS ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON TH E 16 TH DAY OF SEPT., 2011. SD/- SD/- (T.R.SOOD ) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED. 16TH SEPT.2011 ITA NO.2732/MUM/2010(A.Y. 2006-07) 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3 . THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RD BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM. ITA NO.2732/MUM/2010(A.Y. 2006-07) 6 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 12/9/11 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 13/9/11 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER