DCIT, Circle-4(2), Kolkata, Kolkata V. M/S. Turner Morrison Ltd., Kolkata

ITA 29/KOL/2015

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7522 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 22-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 09-01-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Assessee Lawyers: D K KOTHARI
• Keywords: Capital asset; Business income; Business expenditure; Set aside
• Section: 143(3); 11

Judgement Text

I.T.A. NO 29/KOL/2015 ASSESS MENT YEAR: 2010-2011 & C.O . NO. 119/KOL/2017 (IN I TA NO. 29/KOL/2015) ASSES SMENT YEAR: 2010-2011 M/S. TURNER MORRISON LIMITED PAGE 1 OF 12 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, VICE-PRESIDENT (KZ) & SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 29/KOL/2015 ASSESSMENT YEAR: 2010-2011 DEPUTY COMMISSIONER OF INCOME TAX,................. .......................APPELLANT CIRCLE-4(2), KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 -VS.- M/S. TURNER MORRISON LIMITED,...................... .............................RESPONDENT 6, LYONS RANGE, 1 ST FLOOR, KOLKATA-700 001 [PAN: AAACT9790M] & C.O. NO. 119/KOL/2017 (ARISING OUT OF I.T.A. NO. 29/KOL/2015) ASSESSMENT YEAR: 2010-2011 M/S. TURNER MORRISON LIMITED,...................... .............................CROSS OBJECTOR 6, LYONS RANGE, 1 ST FLOOR, KOLKATA-700 001 [PAN: AAACT9790M] -VS.- DEPUTY COMMISSIONER OF INCOME TAX,................. .........................RESPONDENT CIRCLE-4(2), KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 APPEARANCES BY: SHRI A.K. NAYAK, CIT, D.R. , FOR THE DEPARTMENT SHRI D.K. KOTHARI, C.A, FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : JUNE 20, 2019 DATE OF PRONOUNCING THE ORDER : JULY 26, 2019 I.T.A. NO 29/KOL/2015 ASSESS MENT YEAR: 2010-2011 & C.O . NO. 119/KOL/2017 (IN I TA NO. 29/KOL/2015) ASSES SMENT YEAR: 2010-2011 M/S. TURNER MORRISON LIMITED PAGE 2 OF 12 O R D E R PER SHRI P.M. JAGTAP, VICE-PRESIDENT (KZ) :- THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-VI, KOLKATA DA TED 25.09.2014 AND THE SAME IS BEING DISPOSED OF ALONG WITH THE CROSS OBJECTION FILED BY THE ASSESSEE BEING C.O. NO. 119/KOL/2017 . 2. AT THE OUTSET, IT IS NOTED THAT THERE IS A DELAY OF 960 DAYS ON THE PART OF THE ASSESSEE-COMPANY IN FILING ITS CROSS OB JECTION. IN THIS REGARD, A PETITION HAS BEEN FILED BY THE ASSESSEE SEEKING C ONDONATION OF THE SAID DELAY AND KEEPING IN VIEW THE REASONS GIVEN THEREIN , WHICH ARE DULY SUPPORTED BY THE AFFIDAVIT FILED BY THE ASSESSEE AF FIRMING THE RELEVANT FACTS ON OATH, WE ARE SATISFIED THAT THERE WAS A SU FFICIENT CAUSE FOR THE DELAY ON THE PART OF THE ASSESSEE-COMPANY IN FILING ITS CROSS OBJECTION BEFORE THE TRIBUNAL. EVEN THE LD. D.R. HAS NOT RAIS ED ANY OBJECTION IN THIS REGARD. THE DELAY ON THE PART OF THE ASSESSEE IN FI LING THE CROSS OBJECTION IS ACCORDINGLY CONDONED. 3. GROUND NO. 1 RAISED BY THE REVENUE IN ITS APPEAL AS WELL AS THE GROUNDS BY THE ASSESSEE-COMPANY IN ITS C.O. INVOLVE A COMMON ISSUE RELATING TO THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF VARIOUS EXPENSES. 4. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH IS ENGAGED IN THE BUSINESS OF LETTING OUT OF PROPERTY, FINANCING AND INVESTMENT & TRADING IN SHARES. THE RETURN OF INCOME FOR THE YEA R UNDER CONSIDERATION WAS FILED BY IT ON 23.09.2010 DECLARING TOTAL INCOM E OF NIL. THE ASSESSEE-COMPANY DURING THE YEAR UNDER CONSIDERATIO N HAD DERIVED INCOME FROM HOUSE PROPERTY SITUATED AT KOLKATA AND MUMBAI AMOUNTING I.T.A. NO 29/KOL/2015 ASSESS MENT YEAR: 2010-2011 & C.O . NO. 119/KOL/2017 (IN I TA NO. 29/KOL/2015) ASSES SMENT YEAR: 2010-2011 M/S. TURNER MORRISON LIMITED PAGE 3 OF 12 TO RS.5,52,56,125/- AND HAD ADJUSTED THE SAME AGAIN ST THE BUSINESS LOSS OF RS.4,51,99,148/- CLAIMED TO BE INCURRED DURING T HE YEAR UNDER CONSIDERATION. AS NOTED BY THE ASSESSING OFFICER, S ERVICE CHARGES OF RS.86,76,000/- RECEIVED BY THE ASSESSEE FROM THE TE NANTS OF KOLKATA AND MUMBAI PROPERTIES WERE DECLARED AS ITS BUSINESS INC OME BY THE ASSESSEE- COMPANY AND THE EXPENSES UNDER VARIOUS HEADS AGGREG ATING TO RS.2,79,28,000/- WERE CLAIMED AS BUSINESS EXPENSES. SINCE THE ASSESSEE COULD NOT FURNISH THE COPIES OF RELEVANT AGREEMENTS OR ANY OTHER DOCUMENTS TO ESTABLISH THE NATURE OF SERVICES PROVI DED SO AS TO ESTABLISH IT AS A BUSINESS ACTIVITY AND ALSO FAILED TO PROVE THE GENUINENESS OF THE EXPENSES CLAIMED, THE ASSESSING OFFICER ASSESSED TH E INCOME OF THE ASSESSEE FROM THE SERVICE CHARGES UNDER THE HEAD I NCOME FROM HOUSE PROPERTY. AS REGARDS THE EXPENSES CLAIMED BY THE A SSESSEE UNDER THE VARIOUS HEADS AS BUSINESS EXPENSES, THE ASSESSING O FFICER MADE A DISALLOWANCE OF RS.1,11,71,200/- BEING 40% OF THE T OTAL EXPENSES CLAIMED BY THE ASSESSEE AS THE ASSESSEE FAILED TO PRODUCE T HE RELEVANT DETAILS AND DOCUMENTS FOR VERIFICATION BEFORE THE ASSESSING OFF ICER. 5. THE ACTION OF THE ASSESSING OFFICER IN TREATING THE SERVICE CHARGES AS INCOME FROM HOUSE PROPERTY AND DISALLOWING ITS C LAIM FOR VARIOUS EXPENSES TO THE EXTENT OF 40% WAS CHALLENGED BY THE ASSESSEE IN THE APPEAL FILED BEFORE THE LD. CIT(APPEALS) AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE, THE LD. CIT(APPEA LS) HELD THAT THE SERVICE CHARGES RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WERE CHARGEABLE TO TAX AS BUSINESS IN COME AND ALSO DELETED THE DISALLOWANCE OF 40% MADE BY THE ASSESSING OFFIC ER OUT OF VARIOUS EXPENSES FOR THE FOLLOWING REASONS GIVEN IN PARAGRA PH NO. 3.2 OF HIS IMPUGNED ORDER:- 3.2. IT IS SEEN, THAT IN THE ORDER DATED 30.12.20 11 PASSED U/S 143(3) FOR THE IMMEDIATELY PRECEDING YEAR, I.E. A.Y. 2009-10, THE ASSESSING OFFICER HAD TREATED SERVICE CHARGES AS I.T.A. NO 29/KOL/2015 ASSESS MENT YEAR: 2010-2011 & C.O . NO. 119/KOL/2017 (IN I TA NO. 29/KOL/2015) ASSES SMENT YEAR: 2010-2011 M/S. TURNER MORRISON LIMITED PAGE 4 OF 12 'INCOME FROM HOUSE PROPERTY' AND HAD DISALLOWED ALL THE EXPENSES CLAIMED. THE APPEAL NO. 258/CIT(A)-VI/CIRC LE- 6/2011-12 AGAINST THE ASSESSMENT ORDER WAS DECIDED BY ME PREDECESSOR VIDE HIS ORDER DATED 16.11.2012 . IN TH IS ORDER, HE DIRECTED THAT THE SERVICE CHARGES WERE TO BE TAX ED AS BUSINESS INCOME. REGARDING EXPENSES, HE HELD THAT T HE EXPENDITURE ON POWER & FUEL, RATES & TAXES, INSURAN CE, LEGAL AND PROFESSIONAL CHARGES, REPAIRS AND MAINTENANCE A ND OFFICE MAINTENANCE WERE ESSENTIAL FOR RUNNING OF TH E COMPANY AND WEE HENCE ALLOWABLE AS DEDUCTION. HOWEV ER, HE OBSERVED THAT OTHER EXPENSES WERE NOT COMMENSURATE WITH BUSINESS OF THE COMPANY. AFTER CONSIDERING FACTS AN D CIRCUMSTANCES, HE DIRECTED THAT 40% OF PERSONNEL EX PENSES, TRAVELLING & CONVEYANCE EXPENSES, VEHICLE MAINTENAN CE, COMMUNICATION EXPENSES AND MISCELLANEOUS EXPENSES M AY BE TREATED AS PERTAINING TO 'INCOME FROM HOUSE PROPERT Y' AND HENCE WERE NOT ALLOWABLE AS BUSINESS EXPENDITURE. I N THE ASSESSMENT FOR THE YEAR UNDER PRESENT APPEAL, THE A SSESSING OFFICER HAS DISALLOWED 40% OUT OF PERSONNEL EXPENSE S, TRAVELLING & CONVEYANCE, VEHICLE MAINTENANCE, COMMUNICATION EXPENSES, LEGAL & PROFESSIONAL FEES, OFFICE MAINTENANCE FEES AND MISCELLANEOUS EXPENSES. AS DIS CUSSED EARLIER, IN THE APPELLATE ORDER FOR IMMEDIATELY PRE CEDING YEAR, MY PREDECESSOR HAD CONFIRMED SUCH DISALLOWANC E IN RESPECT OF PERSONNEL EXPENSES, TRAVELLING & CONVEYA NCE, VEHICLE MAINTENANCE, COMMUNICATION EXPENSES AND MISCELLANEOUS EXPENSES, BUT ALLOWED EXPENDITURE, IN TER ALIA, UNDER THE HEADS OF 'LEGAL AND PROFESSIONAL EXPENSES ' AND 'OFFICE MAINTENANCE' FULLY, AS THE SAME WERE CONSID ERED ESSENTIAL FOR RUNNING OF THE COMPANY. THE MATERIAL FACTS IN THE YEAR UNDER CONSIDERATION ARE PRACTICALLY SAME. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF M Y LD. PREDECESSOR, DISALLOWANCE OF 40% OUT OF LEGAL AND PROFESSIONAL EXPENSES AND OFFICE MAINTENANCE EXPENS ES IS DELETED. 6. AGGRIEVED BY THE RELIEF GIVEN BY THE LD. CIT(APP EALS) ON THIS ISSUE, THE REVENUE HAS FILED AN APPEAL BEFORE THE TRIBUNAL WHILE THE ASSESSEE HAS ALSO FILED CROSS OBJECTION RAISING THE FOLLOWIN G GROUNDS:- GROUND 1 IN REVENUES APPEAL : THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) ERRED ON FACTS AS WELL AS IN LAW IN HOLDING THAT PROFESSIONAL AND LEGAL CHARGES AND OFFICE EXPENSES WERE BUSINESS EXPENSES, IGNORING THE FACTS THAT THERE WA S NO AGREEMENT OF DOCUMENTARY EVIDENCE FURNISHED BY THE ASSESSEE IN REGARDS TO SERVICE CHARGES RECEIVED FRO M THE I.T.A. NO 29/KOL/2015 ASSESS MENT YEAR: 2010-2011 & C.O . NO. 119/KOL/2017 (IN I TA NO. 29/KOL/2015) ASSES SMENT YEAR: 2010-2011 M/S. TURNER MORRISON LIMITED PAGE 5 OF 12 TENANTS AT KOLKATA AND MUMBAI TO PROVE THIS AS BUSI NESS INCOME AGAINST WHICH EXPENSES UNDER THE ABOVE HEADS WERE CHARGED. GROUNDS 1 & 2 IN ASSESSEES CROSS OBJECTION (1) BECAUSE THAT THE ID. COMMISSIONER OF INCOME (A PPEALS) OUGHT TO HAVE ADJUDICATED ON THE ENTIRE ESTIMATED DISALLOWANCE UNDER THE READ, 'BUSINESS INCOME'. AS MADE BY THE ID. DCIT, CIRCLE-6(1), IN HIS ORDER U/S 143(3) DATED 22 ND MARCH 2013 OF RS.1,11,71,200/-. (2) BECAUSE THAT THE ID. COMMISSIONER OF INCOME (AP PEALS) OUGHT TO HAVE FOLLOWED THE PRINCIPLE AS LAID DOWN B Y THE CENTRAL BOARD OF DIRECT TAXES (CBDT) IN THEIR CIRCU LAR NO 14 (XL-35) DATED 11 TH APRIL, 1955. WHICH IS BINDING UPON THE DEPARTMENT, AND OUGHT TO HAVE ADJUDICATED ON THE EN TIRE ISSUE ARISING OUT OF THE ASSESSMENT ORDER U/S 143(3 ) DATED 22 ND MARCH 2013, WITH REGARD TO THE ENTIRE ESTIMATED DISALLOWANCE AS MADE BY HIM IN HIS ORDER. 7. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS AGREED BY THE LD. REPRESENTATIVES OF BOTH THE SIDES, THE ISSUE INVOLV ED IN GROUND NO. 1 OF THE REVENUES APPEAL AND GROUNDS NO. 1 & 2 OF THE A SSESSEES CROSS OBJECTION IS SQUARELY COVERED BY THE ORDER OF THE T RIBUNAL DATED SEPTEMBER 12, 2018 PASSED IN ASSESSEES OWN CASE FO R THE IMMEDIATELY PRECEDING YEAR, I.E. A.Y. 2009-10 IN ITA NOS. 297 & 161/KOL/2013, WHEREIN A SIMILAR ISSUE WAS DECIDED BY THE TRIBUNAL VIDE PARAGRAPHS NO. 10 TO 12 AS UNDER:- 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND A LSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IN OUR OPINION, THE FIRST AND FOREMOST ISSUE THAT IS REQUI RED TO BE CONSIDERED AND DECIDED IN THE PRESENT CONTEXT IS RE GARDING THE HEAD OF INCOME UNDER WHICH THE SERVICE AND MAIN TENANCE CHARGES RECEIVED BY THE ASSESSEE ARE CHARGEABLE TO TAX. THE ASSESSING OFFICER HELD THE SAID RECEIPTS AS INCOME FROM HOUSE PROPERTY WHILE THE LD. CIT(APPEALS) TREATED THE SAM E AS BUSINESS INCOME AS CLAIMED BY THE ASSESSEE. IT IS O BSERVED THAT THE TOTAL SERVICE AND MAINTENANCE CHARGES OF RS.90,38,482/- WERE RECEIVED BY THE ASSESSEE DURING THE YEAR I.T.A. NO 29/KOL/2015 ASSESS MENT YEAR: 2010-2011 & C.O . NO. 119/KOL/2017 (IN I TA NO. 29/KOL/2015) ASSES SMENT YEAR: 2010-2011 M/S. TURNER MORRISON LIMITED PAGE 6 OF 12 UNDER CONSIDERATION AND THE DETAILS OF THE SAME ARE GIVEN AT PAGE NO. 223 OF THE ASSESSEES PAPER BOOK. 11. A PERUSAL OF THE ABOVE DETAILS CLEARLY SHOWS TH AT OUT OF RS.90,38,482/- RECEIVED BY THE ASSESSEE TOWARDS SERVICE AND MAINTENANCE CHARGES, A SUM OF RS.71,25,442/- WA S RECEIVED ON ACCOUNT OF RECOVERY OF ELECTRIC CHARGES . THIS AMOUNT, WHICH CONSTITUTES ABOUT 80% OF THE TOTAL SE RVICE AND MAINTENANCE CHARGES, APPEARS TO BE RECOVERY MAD E BY THE ASSESSEE FROM THE TENANTS TOWARDS COMMON ELECTR IC CHARGES AND WE ARE UNABLE TO UNDERSTAND WHAT EXACTL Y ARE THE SERVICES THAT ARE REQUIRED TO BE RENDERED TO CO LLECT THE COMMON ELECTRICITY CHARGES FROM THE TENANTS THAT CA N BE TERMED AS AN INDEPENDENT BUSINESS ACTIVITY OF THE A SSESSEE. EVEN THE EXACT NATURE OF THE BALANCE AMOUNT RECEIVE D BY THE ASSESSEE ON ACCOUNT OF SERVICE AND MAINTENANCE CHAR GES IS NOT VERY CLEAR FROM THE DETAILS FURNISHED BY THE AS SESSEE AND IF QUANTUM OF SUCH AMOUNT IS COMPARED, VIS-A-VIS TH E SUBSTANTIAL RENTAL INCOME RECEIVED BY THE ASSESSEE, IT DOES NOT APPEAR THAT THE SERVICE AND MAINTENANCE CHARGES WERE GENERATED BY THE ASSESSEE FROM ANY BUSINESS ACTIVIT Y CARRIED ON INDEPENDENTLY. WE, THEREFORE, FIND MERIT IN THE CONTENTION OF THE LD. D.R. THAT THE SERVICE AND MAINTENANCE CH ARGES RECEIVED BY THE ASSESSEE WERE ONLY INCIDENTAL TO RE NTAL INCOME AND SINCE THE SAID ACTIVITY WAS ANCILLARY TO THE MAIN ACTIVITY OF LETTING OUT THE PROPERTIES, THE SERVICE AND MAINTENANCE CHARGES WERE CHARGEABLE TO TAX AS INCOM E FROM HOUSE PROPERTY AS RIGHTLY HELD BY THE ASSESSING OFF ICER. 12. AS REGARDS THE ALTERNATIVE CLAIM OF THE LD. COU NSEL FOR THE ASSESSEE THAT THE ASSESSEE-COMPANY WAS ENGAGED IN OTHER BUSINESS ACTIVITIES DURING THE EARLIER YEARS AND TH ERE WAS ONLY TEMPORARILY SUSPENSION OF THE SAID ACTIVITIES DURING THE YEAR UNDER CONSIDERATION DUE TO LULL IN THE BUSINES S, WE FIND THAT THIS ASPECT HAS NOT BEEN SPECIFICALLY CONSIDER ED EITHER BY THE ASSESSING OFFICER OR EVEN BY THE LD. CIT(APP EALS). EVEN THE CLAIM OF THE LD. COUNSEL FOR THE ASSESSEE OF A COMPOSITE NATURE OF BUSINESS ACTIVITIES CARRIED ON BY THE ASS ESSEE BY RELYING ON THE DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF VEECUMSEES (SUPRA) AS WELL AS THAT OF THE H ONBLE CALCUTTA HIGH COURT IN THE CASE OF LAKSHMI NARYAN B OARD MILLS PVT. LTD. (SUPRA), WE FIND THAT THE SAME HAS NOT BEEN CONSIDERED OR EXAMINED EITHER BY THE ASSESSING OFFI CER OR BY THE LD. CIT(APPEALS). WE, THEREFORE, CONSIDER IT FA IR AND PROPER AND IN THE INTEREST OF JUSTICE TO SEND THIS MATTER TO THE FILE OF THE ASSESSING OFFICER FOR CONSIDERING T HE SAME AFRESH. SINCE THE ISSUE RELATING TO THE CLAIM OF TH E ASSESSEE FOR VARIOUS BUSINESS EXPENSES IS CONSEQUENTIAL TO T HIS ISSUE, WE RESTORE THE ISSUE ALSO TO THE FILE OF THE ASSESS ING OFFICER I.T.A. NO 29/KOL/2015 ASSESS MENT YEAR: 2010-2011 & C.O . NO. 119/KOL/2017 (IN I TA NO. 29/KOL/2015) ASSES SMENT YEAR: 2010-2011 M/S. TURNER MORRISON LIMITED PAGE 7 OF 12 FOR DECIDING THE SAME AFRESH. WE MAY, HOWEVER, OBSE RVE FOR THE SAKE OF CLARITY THAT EVEN IF THE CLAIM OF THE A SSESSEE FOR TEMPORARY SUSPENSION OF THE BUSINESS DUE TO LULL IS FOUND TO BE NOT ACCEPTABLE, THE EXPENSES INCURRED BY THE ASS ESSEE FOR CONTINUING AND MAINTAINING ITS CORPORATE STATUS ARE REQUIRED TO BE ALLOWED AS DEDUCTION UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION AS HELD BY THE HONBLE C ALCUTTA HIGH COURT IN THE CASE OF LAKSHMI NARYAN BOARD MILL S PVT. LTD. (SUPRA). WE ACCORDINGLY ALLOW GROUND NO. 1 OF THE REVENUES APPEAL WHILE GROUND NO. 2 OF THE REVENUE S APPEAL AND GROUNDS NO. 1 & 2 OF THE ASSESSEES APPEAL ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 8. AS THE ISSUE INVOLVED IN THE YEAR UNDER CONSIDER ATION AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THAT A.Y. 2009-10, WE RESPECTFULLY FOLLOW THE ORDER OF THE TRIBUNAL FOR A .Y. 2009-10 AND RESTORE THE ORDER OF THE ASSESSING OFFICER TREATING THE INC OME RECEIVED BY THE ASSESSEE BY WAY OF SERVICE CHARGES AS INCOME FROM H OUSE PROPERTY. WE ALSO RESTORE THE ISSUE RELATING THE ALLOWABILITY OF VARIOUS EXPENSES CLAIMED BY THE ASSESSEE TO THE FILE OF THE ASSESSIN G OFFICER FOR DECIDING THE SAME AFRESH AS PER THE SAME DIRECTION AS GIVEN BY THE TRIBUNAL FOR A.Y. 2009-10. GROUND NO. 1 OF THE REVENUES APPEAL AS WELL AS THE GROUNDS NO. 1 & 2 OF THE ASSESSEES CROSS OBJECTION ARE ACC ORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 9. IN GROUND NO. 2, THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT(APPEALS) IN ALLOWING THE CLAIM OF THE ASSESSEE FOR LONG-TERM CAPITAL LOSS OF RS.7,25,08,426/-. 10. DURING THE YEAR UNDER CONSIDERATION, THE SUBSID IARY OF THE ASSESSEE- COMPANY NAMELY M/S. SHALIMAR SINGAPORE PTE LIMITED (IN SHORT SSPL) WAS LIQUIDATED VIDE AN ORDER DATED 06.11.2009. ON T HE LIQUIDATION, THE ASSESSEE-COMPANY RECEIVED A SUM OF RS.1,23,22,005/- ONLY AGAINST AN INVESTMENT OF RS.6,67,10,007/- MADE IN THE SHARES O F SSPL. AFTER REDUCING THE INDEXED COST OF SSPL SHARES COMPUTED AT RS.8,48 ,30,431/- FROM THE I.T.A. NO 29/KOL/2015 ASSESS MENT YEAR: 2010-2011 & C.O . NO. 119/KOL/2017 (IN I TA NO. 29/KOL/2015) ASSES SMENT YEAR: 2010-2011 M/S. TURNER MORRISON LIMITED PAGE 8 OF 12 AMOUNT OF RS.1,23,22,005/- RECEIVED ON LIQUIDATION, A LOSS OF RS.7,25,08,426/- WAS CLAIMED BY THE ASSESSEE UNDER THE HEAD LONG-TERM CAPITAL GAIN. IN THE ASSESSMENT COMPLETED UNDER SE CTION 143(3), THE CLAIM OF THE ASSESSEE FOR THE SAID LOSS WAS DISALLO WED BY THE ASSESSING OFFICER FOR THE FOLLOWING REASONS:- (I) THAT AFTER LIQUIDATION NO MONEY HAS BEEN TRANS FERRED TO THE 'A'. (II) THAT THE 'A' IS UNABLE TO FURNISH THE NAME AND ADDRESS OF THE PERSON FROM WHOM THE 'A' HAS RECEIVED RS.1,23,22,00 5/-. (III) THAT AS PER BALANCE SHEET AS ON 30.04.09 AND REPORT OF PUBLIC ACCOUNTANT, SINGAPORE DATED 14.05.09, AS PRODUCED B Y THE 'A', DUE TO ADVERSE ECONOMIC CONDITION, THE SUBSIDIARY CEASE D ITS OPERATION DURING THE PERIOD. THE COMPANY HAS ARRANGED FOR THE NET ASSETS OF THE SUBSIDIARY TO BE SOLD TO A 3RD PARTY FOR S$5,59 ,553 AND THE LOAN OF S$21,26,384 FROM THE SUBSIDIARY TO BE RECOVERED FROM THE PURCHASER. THE TOTAL PROCEEDS RECOVERED HERE SUBSEQ UENT TO THE PERIOD END UTILISED TO SETTLE THE BANK LOAN AND OTH ER LIABILITIES. IN VIEW OF ABOVE THE 'A' IS UNABLE TO FURNISH DETAILS (I) FROM WHOM AND (II) FOR WHAT AMOUNT IT HAS RECEIVED AFTER SETTLEME NT OF BANK LOAN & OTHER LIABILITIES AS 'HOLDING CEREMONY' AFTER LIQ UIDATION & CO. (IV) THAT THE 'A' IS UNABLE TO ESTABLISH THE FACT H OW TRANSFER TOOK PLACE AND WHO WAS THE TRANSFEROR FOR THE APPLICABIL ITY OF PROVISION TO SEC. 48 OF I.T. ACT. 11. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ITS CLAIM FOR LONG-TERM CAPITAL LOSS ARISING FROM THE E XTINGUISHMENT OF ITS INTEREST IN THE SHARES OF SSPL ON LIQUIDATION WAS C HALLENGED BY THE ASSESSEE IN THE APPEAL FILED BEFORE THE LD. CIT(APP EALS) AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD, THE LD. CIT(APPEALS) DELETED T HE SAID DISALLOWANCE FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO. 4. 2 AND 4.3 OF HIS IMPUGNED ORDER:- 4.2. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE. THE APPELLANT WAS HAVING A SUBSIDIARY AT SINGAPORE CALL ED SHALIMAR SINGAPURE PTE LTD. AS PER THE BALANCE SHEE T OF THE APPELLANT AS ON 31.03.2009, IT WAS HOLDING 15 LAKH SHARES OF THE SUBSIDIARY WHICH WERE VALUED AT RS.667.1 LAKHS. THE SAID INVESTMENT STOOD TOTALLY LIQUIDATED AS ON 31.3.2010 . AS PER I.T.A. NO 29/KOL/2015 ASSESS MENT YEAR: 2010-2011 & C.O . NO. 119/KOL/2017 (IN I TA NO. 29/KOL/2015) ASSES SMENT YEAR: 2010-2011 M/S. TURNER MORRISON LIMITED PAGE 9 OF 12 'NOTES ON ACCOUNTS', SSPL WAS LIQUIDATED VIDE ORDER DATED 6.11.2009 AND AN AMOUNT OF RS. 1,23,22,005/- WAS RE CEIVED AS THE FULL AND FINAL STATEMENT. THE APPELLANT HAS ALS O PRODUCED DOCUMENTARY EVIDENCE TO ESTABLISH THAT SSPL WAS LIQ UIDATED AND ITS NAME WAS STRUCK OFF FROM THE RESISTER OF 'A CCOUNTING AND CORPORATE REGULATORY AUTHORITY, SINGAPORE' ON 6 .11.2009. IT IS TRUE, THAT THE AMOUNT OF RS.1,23,22,005/- WAS RECEIVED BY THE APPELLANT PRIOR TO THE FINAL LIQUIDATION. HOWEV ER, IT HAS BEEN CLARIFIED THAT THE AMOUNT WAS RECEIVED FROM SS PL AS INTERIM PAYMENT TOWARDS REFUND OF INVESTMENT, WHICH WAS TREATED BY THE APPELLANT AS ADVANCE. AFTER FINAL LI QUIDATION OF THE COMPANY, NO FURTHER AMOUNT WAS RECEIVED BY THE APPELLANT AND A SUM OF RS.1,23,22,005/- BECAME THE FULL AND F INAL SETTLEMENT FOR THE SHARES OF SSPL. THE ASSESSING OF FICER HAS EXPRESSED THE DOUBT AS TO HOW THE TRANSACTION CAN B E CALLED A TRANSFER AND IT WAS ALSO NOT CLEAR AS TO WHO WAS TH E TRANSFEROR/TRANSFEREE. IN THIS REGARD IT HAS TO BE NOTED THAT AS PER SECTION 2(47) OF THE ACT,' TRANSFER' INCLUDES EXTINGUISHMENT OF ANY RIGHT IN AN ASSET AS WELL AS RELINQUISHMENT OF THE ASSETS. SINCE SSPL CEASED TO EXIST AS A COMPANY AND ITS NAME WAS STUCK OFF, IT IS CLEAR THA T THE ASSET IN FORM OF SHARE OF SSPL HELD BY THE APPELLANT WAS EXTINGUISHED. THIS AMOUNTS TO TRANSFER OF ASSET IN TERMS OF SECTION 2(47). HENCE, THE AMOUNT RECEIVED FROM SSPL IN RESPECT OF REFUND OF INVESTMENT IN SHARES IS IN NAT URE OF CONSIDERATION FOR TRANSFER OF ASSETS. 4.3. IT IS CLEAR FROM THE FOREGOING DISCUSSION, THA T THE APPELLANT WAS HAVING CAPITAL ASSETS IN FORM OF SHAR ES OF SSPL, WHICH WERE TRANSFERRED BY WAY OF EXTINGUISHMENT AND THE APPELLANT RECEIVED CONSIDERATION FOR THE TRANSFER. IT IS UNDISPUTED, THAT SSPL WAS LIQUIDATED BY WAY OF STRI KING OF ITS NAME ON 6.11.2009 AND THE APPELLANT'S INVESTMENT IN SHARES GOT LIQUIDATED. THERE IS ALSO NO DISPUTE OVER THE A MOUNTS AND DATES REGARDING COST AND CONSIDERATION RECEIVED. IT IS ALSO NOTICED THAT THE DEPARTMENT HAS ACCEPTED GENUINENES S OF SIMILAR TRANSACTION IN THE CASE OF A SUBSIDIARY OF THE APPELLANT COMPANY, VIZ. M/S STP LTD., WHICH WAS ALSO HOLDING SHARES IN SSPL, ASSESSMENT FOR WHICH WAS COMPLETED U/S 143(3) VIDE ORDER DATED 16.3.2013. CONSIDERING ALL THESE FACTS, THE LOSS OF RS.7,25,08,426/- CLAIMED BY THE APPELLANT IN RESPEC T OF INVESTMENT IN SHARES OF SSPL HAS TO BE TREATED AS G ENUINE. THE DISALLOWANCE OF THE SAME IS ACCORDINGLY DELETED. 12. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IN SUPPORT O F THE REVENUES CASE ON I.T.A. NO 29/KOL/2015 ASSESS MENT YEAR: 2010-2011 & C.O . NO. 119/KOL/2017 (IN I TA NO. 29/KOL/2015) ASSES SMENT YEAR: 2010-2011 M/S. TURNER MORRISON LIMITED PAGE 10 OF 12 THIS ISSUE, THE LD. D.R. HAS RELIED ON THE PROVISIO NS OF SECTION 46 OF THE ACT, WHICH READ AS UNDER:- 46. (1) NOTWITHSTANDING ANYTHING CONTAINED IN SECT ION 45, WHERE THE ASSETS OF A COMPANY ARE DISTRIBUTED T O ITS SHAREHOLDERS ON ITS LIQUIDATION, SUCH DISTRIBUTION SHALL NOT BE REGARDED AS A TRANSFER BY THE COMPANY FOR TH E PURPOSES OF SECTION 45. (2) WHERE A SHAREHOLDER ON THE LIQUIDATION OF A COMPANY RECEIVES ANY MONEY OR OTHER ASSETS FROM THE COMPANY, HE SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD CAPITAL GAINS IN RESPECT OF THE MONEY S O RECEIVED OR THE MARKET VALUE OF THE OTHER ASSETS ON THE DATE OF DISTRIBUTION, AS REDUCED BY THE AMOUNT ASSE SSED AS DIVIDEND WITHIN THE MEANING OF SUB-CLAUSE (C) OF CLAUSE (22) OF SECTION 2 AND THE SUM SO ARRIVED AT SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION FOR THE PURPOSES OF SECTION 48. 13. RELYING ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS.- JAYKRISHNA HARIBALLAV DAS [112 TA XMANN 683], THE LD. D.R. HAS CONTENDED THAT THE PROVISIONS OF SUB-SECTI ON (2) OF SECTION 46 ARE CLEARLY APPLICABLE TO THE FACTS OF THE PRESENT CASE AND NEITHER THE ASSESSING OFFICER NOR THE LD. CIT(APPEALS) HAVING C ONSIDERING THE ISSUE IN THE LIGHT OF THE SAID PROVISIONS, THE MATTER MAY BE SENT BACK TO THE ASSESSING OFFICER FOR DECIDING THE SAME AFRESH. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS CONTENDED THAT THE RE BEING NO DISTRIBUTION OF ASSETS BY THE COMPANY IN LIQUIDATIO N IN THE PRESENT CASE AND THE ASSESSEE HAVING RECEIVED A CONSIDERATION FO R EXTINGUISHMENT OF ITS INTEREST IN THE SHARES OF THE COMPANY, SECTION 46 HAS NO APPLICATION. WE ARE UNABLE TO ACCEPT THIS CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. IN OUR OPINION, THE ASSESSEE-COMPANY HAVI NG RECEIVED MONEY AS SHAREHOLDER ON THE LIQUIDATION OF A COMPANY, SUB-SE CTION (2) OF SECTION 46 IS CLEARLY APPLICABLE AND THE CAPITAL GAIN OR LO SS IS REQUIRED TO BE COMPUTED BY APPLYING THE SAID PROVISION. I.T.A. NO 29/KOL/2015 ASSESS MENT YEAR: 2010-2011 & C.O . NO. 119/KOL/2017 (IN I TA NO. 29/KOL/2015) ASSES SMENT YEAR: 2010-2011 M/S. TURNER MORRISON LIMITED PAGE 11 OF 12 14. THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO RAISE D ANOTHER CONTENTION THAT THE MONEY WAS ACTUALLY RECEIVED BY THE ASSESSE E ON 14.05.2008 AND THE CAPITAL GAIN OR LOSS, IF ANY, ARISING TO THE AS SESSEE WAS REQUIRED TO BE COMPUTED AS PER THE PROVISIONS OF SUB-SECTION (2) O F SECTION 46 IN A.Y. 2009-10 AND NOT IN THE YEAR UNDER CONSIDERATION, I. E. A.Y. 2010-11. WE DO NOT FIND MERIT IN THIS CONTENTION OF THE LD. COUNSE L FOR THE ASSESSEE KEEPING IN VIEW THE RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS.- JAYKRISHNA HARIBALLAV DAS (SU PRA) CITED BY THE LD. D.R. IN THE SAID CASE, IT WAS HELD BY THE HONBLE G UJARAT HIGH COURT THAT THE WORDS ON LIQUIDATION USED IN SECTION 46 MUST NECESSARILY REFER TO THE DATE ON WHICH THE COMPANY IS WOUND UP OR THE WI NDING UP PROCESS IS COMPLETE. EXPLAINING FURTHER, IT WAS OBSERVED THAT THE HONBLE GUJARAT HIGH COURT THAT UNTIL THE COMPANY IS FINALLY WOUND UP, THE RIGHT OF SHAREHOLDERS OR MEMBERS TO RECEIVE THE SURPLUS, IF ANY, REMAINS INTACT, WHICH IS THE ONLY RIGHT THAT SURVIVES IN A SHAREHOL DER OF A COMPANY IN LIQUIDATION AND IT COMES TO AN END OR GETS EXTINGUI SHED ONLY ON COMPLETION OF WINDING UP. IN THE PRESENT CASE, SSPL WAS LIQUIDATED VIDE ORDER DATED 06.11.2009 AND THE ORDER FOR STRIKE OFF (LIQUIDATION) OF SSPL HAVING BEEN PASSED ON 09.11.2009, WE ARE OF THE VIE W THAT THE CAPITAL GAIN OR LOSS ARISING FROM RECEIPT OF MONEY BY THE A SSESESE-COMPANY AS A SHAREHOLDER ON THE LIQUIDATION OF A COMPANY WAS CHA RGEABLE TO TAX AS PER SECTION 46(2) IN THE YEAR UNDER CONSIDERATION, I.E. A.Y. 2010-11. WE, THEREFORE, SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE ASS ESSING OFFICER TO RE- COMPUTE THE CAPITAL GAIN/LOSS CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE-COMPANY AS PER THE PROVISIONS OF SECTION 4 6(2). GROUND NO. 2 OF THE REVENUES APPEAL THUS IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NO 29/KOL/2015 ASSESS MENT YEAR: 2010-2011 & C.O . NO. 119/KOL/2017 (IN I TA NO. 29/KOL/2015) ASSES SMENT YEAR: 2010-2011 M/S. TURNER MORRISON LIMITED PAGE 12 OF 12 15. IN THE RESULT, THE APPEAL OF THE REVENUE AND CR OSS OBJECTION OF THE ASSESSEE BOTH ARE TREATED AS ALLOWED FOR STATIS TICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON JULY 26, 2019 . SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER VICE-PRESIDENT (KZ) KOLKATA, THE 26 TH DAY OF JULY, 2019 COPIES TO : (1) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-10(2), KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 (2) M/S. TURNER MORRISON LIMITED, 6, LYONS RANGE, 1 ST FLOOR, KOLKATA-700 001 (3) COMMISSIONER OF INCOME TAX (APPEALS)-VI, KOLK ATA, (4) COMMISSIONER OF INCOME TAX- , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.