Smt. Vinita Singhania, Kolkata V. DCIT, Central Circle - VI, Kolkata, Kolkata

ITA 275/KOL/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3197 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2013
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 20-02-2012
• Court: TRIBUNAL
• Department Lawyers: K N JANA SR DR
• Assessee Lawyers: S K LAHIRI
• Keywords: Capital asset; Cost of acquisition
• Section: 143(3); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI N.S.SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.275/KOL/2012 ASSESSMENT YEAR:2008-09 SMT. VINITA SINGHANIA 7, COUNCIL HOUSE STREET, KOLKATA 700 001 [ PAN NO.AJWPS 3242 B ] / V/S . DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-VI, 18, RABINDRA SARANI, KOLKATA 700 001 /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI S.K. LAHIRI, AR /BY RESPONDENT SHRI K.N. JANA, SR-DR /DATE OF HEARING 10-06-2013 /DATE OF PRONOUNCEMENT 21-06-2013 /O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS APPEAL FILED BY ASSESSEE IS ARISING OUT OF OR DER OF COMMISSIONER OF INCOME-TAX (APPEALS)-CENTRAL-I, KOLKATA (CIT(A) F OR SHORT) IN APPEAL NO.338/CC- VI/CIT(A).C-I/10-11 DATED 18-11-2011. THE ASSESSMEN T WAS FRAMED BY DCIT, CENTRAL CIRCLE-VI, KOLKATA U/S.143(3) OF THE INCOME -TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 31-1 2-2010 FOR ASSESSMENT YEAR (AY) 2008-09. 2. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS AG AINST THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE OF INTEREST PAID TO THE CITI BANK AT RS.4.50 LAKH. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NO.1:- ITA NO. 275/KOL/2012 A.Y. 2008-09 SMT. VINITA SINGHANIA V. DCIT, CC-VI, KOL PAGE 2 1.00 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, CONSIDERING THE SUBMISSION MADE BEFORE HIM, THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) WAS UNJUSTIFIED IN NOT DELETIN G THE ADDITION OF THE CLAIM OF INTEREST OF RS.7,60,923/- PAID TO CITI BAN K INSTEAD OF RESTRICTING THE ADDITION TO RS.4,50,000/-. 1.01 THAT THE LD. COMMISSIONER OF INCOME-TAX (APPEA LS) FAILED TO APPRECIATE THAT SUCH INTEREST PAID ON THE LOAN FROM CITI BANK HAD BEEN ALLOWED IN FULL IN THE ASSESSMENT OF THE APPELLANT FOR THE ASST. YEARS 2004-05, 2005-06 AND 2006-07 MADE U/S. 143(3) OF TH E INCOME-TAX ACT 1961. 3. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. AT THE OUTSET, IT IS NOTICED THAT THE TRI BUNAL A BENCH IN AY 2007-08 THAT THE IMMEDIATELY PRECEDING AY IN ITA NO. 1761/KOL/2010 DATED 27-05-2011 HAS ALLOWED THE CLAIM OF ASSESSEE RELYING ON THE ASSESS MENT ORDERS OF 2004-05 AND 2005- 06, WHEREIN NO DISALLOWANCE OF INTEREST ON FUND BOR ROWED FROM CITI BANK BY HOLDING THE SAME AS BONA FIDE LOAN. THE TRIBUNAL A BENCH IN ITA NO.1837/KOL/20 10 DATED 29-02-2012 IN PARA-9 RECORDED AS UNDER:- 9. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CARE FUL PERUSED OF THE MATERIAL AVAILABLE ON RECORD, REGARDING DISALLOWANCE OF INTE REST, IT IS OBSERVED THAT ASSESSING OFFICER FOR THE AY 2004-05 & 2005-06 CONSEQUENTLY H ELD INTEREST ON FUNDS BORROWED FROM CITI BANK IS A BONA FIDE CLAIM AND NO DISALLOW ANCE HAS BEEN MADE. RELEVANT OBSERVATIONS OF THE ASSESSING OFFICER FOR THE AY 20 04-05 AT PAGE 96 ARE AS UNDER:- PAGE 96 OF THE PAPER BOOK ON EXAMINATION FROM THE DETAILS OF ACCOUNT FILED BY THE ASSESSEE IT IS FOUND THAT AN AMOUNT OF RS.75,00,000/- WAS BORROWED AS OVERDRAFT FROM THE CITIBANK AND WAS DEPOSITED IN SAVINGS ACCOUNT OF CE NTRAL BANK OF INDIA. IT APPEARS FROM THE ACCOUNT OF CENTRAL BANK OF INDIA T HAT ALMOST ALL THE RECEIPTS AND PAYMENTS OF THE ASSESSEE ARE MADE FROM THE ACCO UNT OF CENTRAL BANK OF INDIA. DURING THE YEAR UNDER ASSESSMENT, THE BORROW ED AMOUNT WAS UTILIZED FOR THE PURPOSE OF INVESTMENT IN SHARES AND SECURITIES AND MUTUAL FUND DEPOSITS AND HAS EARNED SHORT-TERM CAPITAL GAIN OF RS.7,18,1 27/- AND INTEREST THEREFROM. AS THE OVERDRAFT AMOUNT OF RS.75,00,000/- WAS UTILI ZED DURING THE YEAR UNDER ASSESSMENT FOR THE PURPOSE OF EARNING INCOME WHICH IS OFFERED IN THE COMPUTATION OF TOTAL INCOME FILED ALONG WITH THE RE TURN OF INCOME. HENCE, THE CLAIM OF INTEREST PAYMENT TO CITIBANK OF RS.5,84,93 1/- ON OVERDRAFT AMOUNT IS BONAFIDE AND AS SUCH THE CLAIM OF THE ASSESSEE IS A LLOWED IN COMPUTING THE TOTAL INCOME. 9.1 SIMILARLY, FOR THE AY 2005-06 THE RELEVANT OBSE RVATIONS OF THE ASSESSING OFFICER AT PAGES 98-99 ARE AS UNDER:- ON EXAMINATION FROM THE DETAILS OF ACCOUNT FILED B Y THE ASSESSEE IT IS FOUND THAT AN AMOUNT OF RS.75,00,000/- WAS BORROWED AS OV ERDRAFT FROM THE CITYBANK ITA NO. 275/KOL/2012 A.Y. 2008-09 SMT. VINITA SINGHANIA V. DCIT, CC-VI, KOL PAGE 3 IN EARLIER YEAR. ON EXAMINATION OF THE PAPERS AND D ETAILS FILED ALONG WITH RETURN AND THOSE FILED IN COURSE OF ASSESSMENT PROC EEDINGS FOR THE ASST. YEAR UNDER CONSIDERATION THE ASSESSEE EARNED SHORT-TERM CAPITAL GAIN OF RS.5,42,004/- AND INTEREST INCOME OF RS.2,23,807/- THEREFROM. THE TOTAL OVERDRAFT AMOUNT WAS UTILIZED DURING THE YEAR UNDER ASSESSMENT FOR THE PURPOSE OF EARNING INCOME WHICH IS OFFERED IN THE C OMPUTATION OF TOTAL INCOME FILED ALONG WITH THE RETURN OF INCOME. THE S IMILAR CLAIM WAS MADE IN EARLIER ASSESSMENT YEAR 2004-05 WHICH WAS ALLOWED A FTER CONSIDERING THE FACTS OF THE CASE. ON CONSIDERING THE ABOVE FACTS, THE CL AIM OF INTEREST PAYMENT TO CITIBANK OF RS.5,96,155/- ON OVERDRAFT AMOUNT IS BO NAFIDE AND AS SUCH THE CLAIM OF THE ASSESSEE IS ALLOWED IN COMPUTING THE T OTAL INCOME. 9.2 KEEPING IN VIEW OF THE ABOVE AND IN THE LIGHT O F RATIO LAID DOWN IN THE CASE OF CIT VS. SRIDEV ENTERPRISE [CITED SUPRA] BY THE HONBLE KARNATAKA HIGH COURT, WE FIND NO JUSTIFICATION ON THE PART OF THE REVENUE TO DISALLO W OF THE SAID LOAN OF CITIBANK. THEREFORE, WE SET ASIDE THE ORDERS OF THE REVENUE A UTHORITIES ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.6,64 ,378/-. THE LD. COUNSEL FOR THE ASSESSEE BEFORE US CONTENDE D THAT THE FACTS ARE EXACTLY IDENTICAL AND LOAN OF CITI BANK ON WHICH INTEREST C LAIMED BY ASSESSEE IS THE SAME. ON QUERY FROM THE BENCH, LD. SR-DR COULD NOT POINT OUT ANY NEW FACT OR ANY DIFFERENCE IN FACTS AS STATED BY LD. COUNSEL FOR THE ASSESSEE. SINCE THE LOAN BORROWED FROM THE CITI BANK IS SAME, AS IN EARLIER YEAR I.E., AYS 200 4-05 AND 2005-06 AND 2007-08, WE FIND NO REASON TO TAKE DIFFERENT WHAT WAS TAKEN BY HONBLE BENCH (SUPRA) DATED 20- 02-2012. HENCE, THIS ISSUE OF ASSESSEES APPEAL IS ALLOWED. 4. THE SECOND ISSUE IN THIS APPEAL OF ASSESSEE IS A GAINST THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE OF INTEREST OF PORTFOLI O MANAGERS CLAIMED UNDER THE HEAD MANAGEMENT FEES AND CUSTODY CHARGES. FOR THIS, ASSESSEE HAS RAISED FOLLOWING TWO EFFECTIVE GROUNDS:- 2.00 THAT THE LD. COMMISSIONER OF INCOME-TAX (APPE ALS) WAS UNJUSTIFIED IN DIRECTING THE LD. ASSESSING OFFICER TO RECALCULATE THE SHORT TERM CAPITAL GAINS DECLARED BY THE APPELLANT AS RECEIVED THROUGH THE PORTFOLIO MANAGER S AFTER DISALLOWING THE EXPENDITURE CLAIMED UNDER THE HEAD MANAGEMENT FEES AND CUSTO DY CHARGES. 2.01 THAT THE LD. COMMISSIONER OF INCOME-TAX (APPE ALS) WAS UNJUSTIFIED IN NOT CONSIDERING THE APPELLANTS SUBMISSION IN RESPECT O F THE DECISION BY THE HONBLE ITAT, PUNE, IN THE CASE OF KRA HOLDING & TRADING (P) LTD. , AND ARA TRADING & INVESTMENTS (P) LTD. ON THE ISSUE OF ALLOWABILITY OF FEES PAID TO PORTFOLIO MANAGERS IN COMPUTATION OF CAPITAL GAIN U/S.48 OF THE IT ALLOWABILITY OF FE ES PAID TO PORTFOLIO MANAGERS IN COMPUTATION O CAPITAL GAIN US. 48 OF THE IT ACT, 19 61. ITA NO. 275/KOL/2012 A.Y. 2008-09 SMT. VINITA SINGHANIA V. DCIT, CC-VI, KOL PAGE 4 5. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE BEFO RE US, IN ALL FAIRNESS, DREW OUR ATTENTION TO TRIBUNALS ORDER IN ASSESSEES SISTER CONCERN NAMELY, SHRI RAGHUPATI SINGHANIA & SHRI VIKRAMPATI SINGHANIA IN ITA NO.1761-1763/KOL/2010 DATED 27-05- 2011, WHEREIN TRIBUNAL HAS CONFIRMED VIDE PARA-8, W HICH READS AS UNDER:- 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 G AINS: 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)(II) IS EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER CONTEMP LATED BY SECTION 45. IN COMPUTING 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 SECTION MEAN INTRINSICALLY RELA TED TO THE TRANSFER. THERE IS NO WARRANT FOR IMPORTING A R ESTRICTION THAT, TO QUALIFY FOR DEDUCTION, THE EXPENDITURE MUST NECESSARILY HAVE BEEN INCURRED PRIOR 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 A CCOUNT IS STATUTORILY COMPULSORY BUTT CUSTODY FEE PAID ARE FOR TAKING CARE OF THE PORT FO LIO BY THE COMPANY FOR MAINTAINING DEMAT ACCOUNT. SIMILARLY, THE MANAGEMENT FEE AND OT HER EXPENSES PAID TO PMFS ARE ALSO IN THE NATURE OF ADVISORY EXPENSES AND CANNOT BE DE DUCTED FROM THE CAPITAL GAINS UNDER SECTION 48 OF THE ACT. ACCORDINGLY, WE CONFIRM THE ORDER OF CIT(A) AND COS OF THE ASSESSEE ARE DISMISSED. LD. COUNSEL FOR THE ASSESSEE FAIRLY STATED THAT THE RE IS NO FACTUAL DIFFERENCE IN THE ASSESSEES CASE WHAT WAS BEFORE OTHER FAMILY MEMBER S CASE AS CITED (SUPRA). LD. COUNSEL FOR THE ASSESSEE ADMITTED THAT THE FACTS AR E AGAINST HIM AND ISSUE IS COVERED. WE HAVE NO HESITATION IN CONFIRMING THE SAME. THIS ISSUE OF ASSESSEES APPEAL IS DISMISSED. 6. NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS REGARDI NG NON-ALLOWANCE OF CREDIT FOR TDS. ITA NO. 275/KOL/2012 A.Y. 2008-09 SMT. VINITA SINGHANIA V. DCIT, CC-VI, KOL PAGE 5 7. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE FAIR LY STATED THAT HE IS NOT INTERESTED IN PRESSING THIS ISSUE AS THE REVENUE HAS ALREADY A CCEPTED THE CLAIM OF ASSESSEE ON ASSESSEES APPLICATION FOR RECTIFICATION U/S. 154 O F THE ACT. SINCE THE REVENUE HAS ALLOWED THE CREDIT FOR TDS, WE ALLOW PERMISSION FOR WITHDRAWAL OF THIS GROUND. HENCE, SAME IS DISMISSED AS WITHDRAWN. 8. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED AS INDICATED ABOVE. 9. ORDER IS PRONOUNCED IN THE OPEN COURT ON 21 ST JUNE, 2013 SD/- SD/- (N.S.SAINI) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER *DKP DATE: 21ST JUNE, 2013 !'# - ITA NO. 275/KOL/2012 A.Y. 2008-09 SMT. VINITA SINGHANIA V. DCIT, CC-VI, KOL PAGE 6 %%& %%& %%& %%& '& '& '& '& / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. ''%( ) / CONCERNED CIT 4. ) - / CIT (A) 5. &*+ %%%( , %( / DR, ITAT, KOLKATA 6. +,- ./ / GUARD FILE. BY ORD ER/ , 0/2 '3 %(,