Kautilya Finsecurities Limited, Ahmedabad V. The ACIT.,Cent,Circle-1(1), Ahmedabad

ITA 3221/AHD/2008

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57229 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-01-2012
• Assessment Year: 2000-2001
• Appeal Filed On: 16-09-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: S N SOPARKAR
• Keywords: Business income; Cost of acquisition

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD , . .!'#$, % & BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ./ I.T.A. NO.3221/AHD/2008 ( ( ) ( ) ( ) ( ) / / / / ASSESSMENT YEAR : 2000-01) KAUTILYA FINSECURITIES LTD. A/59, 4 TH FLOOR NOBLES BLDG OPP.NEHRU BRIDGE ASHRAM ROAD,AHMEDABAD ( ( ( ( / VS. THE ASST.CIT CENTRAL CIRCLE-1(1) AHMEDABAD * % ./+, ./ PAN/GIR NO. : AAACK 6268 P ( *- / // / APPELLANT ) .. ( ./*- / RESPONDENT ) *- 0 / APPELLANT BY : SHRI S.N. SOPARKAR, A.R. ./*- 1 0 / RESPONDENT BY : SHRI C.K.MISHRA, SR. D.R. (2 1 3% / / / / DATE OF HEARING : 05/01/2012 4') 1 3% / DATE OF PRONOUNCEMENT : 29/02/2012 5 / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WH ICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-II, AHMEDABAD DATED 18/08/2008 AND THE GROUNDS RAISED AS FOLLOWS:- (1) THE LEARNED THE COMMISSIONER OF INCOME TAX (AP PEALS) II AHMEDABAD HAS ERRED BOTH IN LAW AND ON FACTS ON THE CASE IN PASSING AN APPELLATE ORDER DTD. 18.08.2008 FOR A.Y. 2000.01 ITA NO.3221/AHD /2008 KAUTILYA FINSECURITIES LTD. VS. ASST.CIT ASST.YEAR 2000-01 - 2 - (2) THE LEARNED THE C.I.T.(A) HAS ERRED IN CONFIRM ING THE REOPENING THE ASSESSMENT PROCEEDING U/S.147 OF THE I.T. ACT. (3) THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ALLOCATION MADE BY THE ASSESSING OFFICER THAT OF COST OF DEBEN TURE, BY ALLOCATING TOTAL COST TO PRINCIPAL STRIP AS WELL AS INTEREST COUPON STRIP. (4) THE LEARNED CIT(A) HAS ERRED IN NOT ENTERTAINI NG GROUNDS RELATING TO PENALTY PROCEEDINGS U/S.271(1)(C) OF TH E I.T. ACT. (5) YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER, AME ND, DELETE ALL OR ANY OF THE GROUNDS OF APPEAL BEFORE THE APPEAL IS F INALLY HEARD AND DECIDED. 2. AT THE OUTSET, LD.AR HAS MADE A STATEMENT THAT G ROUND NOS.1, 2, 4 AND 5 ARE GENERAL IN NATURE AND THEREFORE NEED NO A DJUDICATION, HENCE, WE HEREBY DISMISS BEING NOT CONTESTED. ONLY GROUND AR GUED BEFORE US IS GROUND NO.3, DECIDED HEREINBELOW. 2.1. FACTS IN BRIEF AS EMERGED FROM THE CORRESPOND ING ASSESSMENT ORDER PASSED U/S.147 OF THE ACT DATED 24/3/2006 WER E THAT THE ASSESSEE- COMPANY IS AN INVESTMENT COMPANY DEALING IN PURCHAS E AND SALE OF SHARES AND SECURITIES. IT WAS NOTICED THAT A BUSIN ESS LOSS OF RS.11,78,000/- ON SALE OF NON CONVERTIBLE DEBENTURE OF TATA FINANCE LTD. WAS CLAIMED. THE ASSESSEE HAS PURCHASED ONE NON CONVERTIBLE DEBENTURE OF TATA FINANCE LTD. OF RS.25 LACS. THIS DEBENTURE CONSISTED OF A DETACHABLE PRINCIPAL STRIP AND 4 INTEREST COUP ON STRIP NAMED AS PART- B, C, D & E. THE ASSESSEE SOLD PRINCIPAL COUPON ST RIP AT RS.12.5 LACS ON 29-3-2000 TO M/S.SHREE DEVELOPERS LTD. AND CLAIMED A LOSS OF RS.12.5 ITA NO.3221/AHD /2008 KAUTILYA FINSECURITIES LTD. VS. ASST.CIT ASST.YEAR 2000-01 - 3 - LACS. NO COST WAS APPORTIONED TO THE INTEREST COUP ON STRIPS. THE OBSERVATION OF THE AO WAS THAT THE SAID LOSS HAD BE EN INCORRECTLY BOOKED. ACCORDING TO AO, EACH STRIP, I.E. PRINCIPA L AS WELL AS INTEREST COUPON STRIPS, BEARS SOME PURCHASE COST AND THE SAM E COULD NOT BE CONSIDERED TO BE NIL. IT HAS ALSO BEEN OBSERVED BY THE AO THAT THE ASSESSEE HAS REDUCED ITS PROFIT OF THIS YEAR, AND T HEREFORE REDUCED THE TAX LIABILITY BY NOT APPORTIONING THE COST TO EVERY STR IP WITH THE CONTENTION THAT THE ASSESSEE HAS NOT MADE ANY INVESTMENT AND I T IS MERE DEALER IN SECURITIES AND OFFERS THE INCOME ARISING FROM THE S AME AS BUSINESS INCOME. BUT THIS CONTENTION OF THE ASSESSEE IS NOT TENABLE SINCE THE NATURE OF THE BUSINESS DOES NOT MAKE ANY DIFFERENCE AS FAR AS THE CORRECT COST OF THE PURCHASED GOODS IS CONCERNED. IN THIS PARTICULAR CASE THE ASSESSEE HAS PURCHASED THE PRINCIPAL COUPON STRIP A ND THE INTEREST COUPON STRIPS PART-B, C, D & E ALL AT THE CONSIDERATION OF RS.25 LACS BUT IT HAS CONSIDERED THAT THE COST OF RS.25 LACS PERTAINS TO ONLY THE PRINCIPAL STRIP. THIS IS NOT CORRECT APPROACH THEREFORE THE ASSESSEE WAS DUTY BOUND TO APPORTION THE COST OF RS.25 LACS AMONG ALL OF THE S TRIPS. THE ASSESSEE CANNOT REDUCE ITS INCOME OF A PARTICULAR YEAR BY AR TIFICIALLY INFLATING THE PURCHASE CONSIDERATION OF A PARTICULAR STOCK, WHATE VER BE THE NATURE OF ITS BUSINESS. THAT IS IRRESPECTIVE OF THE FACT THAT TH E ASSESSEE IS DEALING IN THE PURCHASE AND SALES OF THE SECURITIES OR INVESTS IN THE SAME, THE ASSESSEE CANNOT TAKE A PLEA THAT DUE TO BEING ENGAGED IN THE BUSINESS OF TRADING OF SECURITIES, IT CANNOT ALLOCATE THE RIGHT COST AMO NG THE VARIOUS STOCKS. THE AO HAS THEREAFTER WORKED OUT THE BREAK-UP OF TH E PRINCIPLE AND INTEREST COUPON STRIPS. BASED UPON THE MATURITY VA LUES, THE AO HAS WORKED OUT THE PRESENT VALUE AS UNDER: ITA NO.3221/AHD /2008 KAUTILYA FINSECURITIES LTD. VS. ASST.CIT ASST.YEAR 2000-01 - 4 - (RS.IN LACS) NATURE OF INSTRUMENT FACE VALUE PRESENT VALUE PART A PRINCIPAL 25.00 13.22 PART B INT.COUPON 4.05 3.48 PART C INT.COUPON 3.24 2.46 PART D INT.COUPON 3.24 2.18 PART E INT.COUPON 3.25 1.94 PART F INT.COUPON 3.24 1.72 25.00 THE ASSESSEE HAD SOLD THE PRINCIPLE COUPON STRIP AT A CONSIDERATION OF RS.12.5 LACS AND THE ENTIRE AMOUNT WAS CLAIMED AS A LOSS. AS PER AO, THE ACTUAL COST WOULD HAVE BEEN R S.12.5 LACS RS.13.22 LACS, I.E. RS.0.72 LACS. THE AO HAS THER EFORE HELD THAT THE BALANCE IS, I.E. RS.12.5 LACS RS.0.72 LACS = RS.1 1.78 LACS WHICH WAS DISALLOWED. THE SAID DISALLOWANCE WAS CONTESTED. 3. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APP ELLATE AUTHORITY, LD.CIT(A) HAS MADE FOLLOWING CRYPTIC FINDINGS:- 3.1. I HAVE CONSIDERED THE FACTS AND SUBMISSIONS O F THE CASE. I DO NOT AGREE WITH THE APPELLANTS VIEW. WHEN THE A PPELLANT SPENT RS.25 LACS, HE OBTAINED PRINCIPAL COUPON STRIP AS W ELL AS INTEREST STRIP COUPON AND THE COST SHOULD BE APPORTIONED AMO UNT ALL THE STRIPS. FURTHER IN THE NEXT YEAR, WHEN THE APPELLA NT SHOWED INCOME FROM INTEREST COUPON, THE ASSESSING OFFICER HAS ALREADY GIVEN BENEFIT OF THE APPORTIONED COST AGAINST THIS INCOME TO THE APPELLANT. HENCE, THE ACTION OF THE ASSESSING OFFI CER IS JUSTIFIED AND THE CONFIRMED. THE GROUND OF APPEAL IS REJECTE D. ITA NO.3221/AHD /2008 KAUTILYA FINSECURITIES LTD. VS. ASST.CIT ASST.YEAR 2000-01 - 5 - 4. FROM THE SIDE OF THE ASSESSEE, LD.AR MR.S.N.SOPA RKAR AND FROM THE SIDE OF THE REVENUE, LD.SR.DR MR.C.K.MISHRA APP EARED. LD.AR HAS CITED THESE TWO DECISIONS:- (I) ITA NO.1621/AHD/2007 FOR A.Y. 2002-03 IN THE CA SE OF NAMAN ASSOCIATES VS. THE DCIT ORDER DATED 4.4.2008 (ITAT AHMEDABAD BENCH (SMC). (II) ITA NO.948/AHD/2009 FOR A.Y. 2004-05 IN THE CASE OF THE DCIT VS. PUNITABEN K.PATEL ORDER DATED 12.6.2009 (I TAT AHMEDABAD BENCH C). LD.SR.DR MR.C.K.MISHRA HAS PLEADED THAT IN THE NEX T YEAR THE APPELLANT HAD SHOWED INCOME FROM INTEREST COUPON AN D AS PER THE ADMITTED FACTUAL POSITION, THE AO HAD ALREADY GIVEN THE BENEFIT OF SAID APPORTIONED COST. IF THE ASSESSEE WANTS TO REVISE THE CLAIM BY ASSERTING TO ALLOW FOR THE YEAR UNDER CONSIDERATION, THEN HE SHOULD WITHDRAW FROM THE NEXT YEAR. 5. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES IN THE LIGHT OF THE FACTUAL DISCUSSION MADE HEREINABOVE, AT THE OUTSET, WE ARE OF THE VIEW THAT THE ISSUE SETTLED THROUGH THE ABOVE CITED ORD ERS OF THE TRIBUNAL SHALL NOT BE SQUARELY APPLICABLE ON THE FACTS AND CIRCUMS TANCES OF THE PRESENT APPEAL BEFORE US PRIMARILY BECAUSE OF THE REASON TH AT THE SAID APPORTIONED COST WAS ALREADY ALLOWED IN THE SUBSEQUENT YEAR. NATURALLY THE IMPUGNED CLAIM CANNOT BE ALLOWED IN TWO ASSESSMENT YEARS. ON THE BASIS OF THE DISCUSSION MADE HEREINABOVE AND AFTER ASCERTAINING THE ITA NO.3221/AHD /2008 KAUTILYA FINSECURITIES LTD. VS. ASST.CIT ASST.YEAR 2000-01 - 6 - CORRECTNESS OF THE FIGURES OF THE TRANSACTION ENTER ED INTO, WE DEEM IT PROPER TO AFFIRM THE FINDINGS OF THE CIT(A). GROU ND IS DISMISSED. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. SD/- SD/- ( . .!'#$ ) ( ) % ( A.K. GARODIA ) ( M UKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 29/ 02 /2012 63..(, .(../ T.C. NAIR, SR. PS 5 1 .7 8 7) 5 1 .7 8 7) 5 1 .7 8 7) 5 1 .7 8 7)/ COPY OF THE ORDER FORWARDED TO : 1. *- / THE APPELLANT 2. ./*- / THE RESPONDENT. 3. 9 / CONCERNED CIT 4. 9() / THE CIT(A)- 5. 7 >> >/ // / + + + + ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION.. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S 29.2.12 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 29.2.12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER