ITO 6(1)(3), MUMBAI V. AMINOGAR PROPERTIES & CHEMICALS P. LTD, MUMBAI

ITA 3804/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8604 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 10-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: CULLA MUMBAI PAN AAACA A
• Keywords: Business income; Depreciation; Speculation loss; Unabsorbed depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI I.P.BANSAL,JUDICIAL MEMBER & SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO.3804/MUM/2011(A.Y. 2006-07) THE INCOME TAX OFFICER 6(1)(3), O/O. I.T.O 6(1)(3), ROOM NO.508, 5 TH FLOOR, AAYKAR BHAVAN, MK MARG, MUMBAI - 400 020. (APPELLANT) VS. M/S. AMINOGAR PROPERTIES & CHEMICALS PVT. LTD., VEENA KILLEDAR INDUSTRIAL ESTATE, 7 TH FLOOR, BYCULLA, MUMBAI - 400 011. PAN: AAACA 5130A (RESPONDENT) APPELLANT BY : SHRI MANOJ KUMAR RESPONDENT BY : NONE DATE OF HEARING : 03/10/2012 DATE OF PRONOUNCEMENT : 1 0/10/2012 ORDER PER I.P.BANSAL, J.M THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DIR ECTED AGAINST THE ORDER DATED 23/2/2011 PASSED BY LD. CIT(A)-14, MUMBAI FOR THE ASSESSMENT YEAR 2006-07. THE GROUNDS OF APPEAL READ AS UNDER: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW T HE SET OFF OF BROUGHT FORWARD BUSINESS LOSSES / DEPRECIATION OF EARLIER YEARS AGA INST THE NORMAL INCOME WITHOUT APPRECIATING THE FACTS THAT LOSSES AS DETER MINED IN EARLIER YEARS WERE SPECULATIVE IN NATURE AND FURTHER THAT AS PER SUB-S ECTION (1) TO SECTION 73 OF THE IT ACT,1961, ANY LOSS COMPUTED IN RESPECT OF A SPECULATION BUSINESS CARRIED ON BY THE ASSESSEE, SHALL NOT BE SET OFF EX CEPT AGAINST PROFIT AND GAINS, IF ANY, OF ANOTHER SPECULATION BUSINESS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE ON ACCOUNT OF REVENUE EXPENSES OF RS.10,21,237/- INCURRED IN THE ORDINARY COURSE OF B USINESS, TO RS.2,77,998/- WITHOUT APPRECIATING THE FACTS THAT SUCH EXPENSES A RE NOT AT ALL SECURITIES THROUGH BROKERS. ITA NO.3804/MUM/2011(A.Y. 2006-07) 2 2. THIS APPEAL WAS EARLIER FIXED ON 6/6/2012 WHEN I T WAS ADJOURNED AT THE REQUEST OF LD. AR OF THE ASSESSEE TO 3/10/2012. DATE WAS DULY NOTED BY LD. AR. HOWEVER, ON THE FIXED DATE OF HEARING NONE WAS PRESENT ON BEHALF OF THE ASSESSEE. WE THEREFORE, PROCEED TO DECIDE THE DEPARTMENTAL APPEAL EX- PARTE QUA THE ASSESSEE AFTER HEARING LD. DR. 3. APROPOS GROUND NO.1, A SUM OF RS.1,22,681/- WAS SHOWN AS SPECULATION INCOME BY THE ASSESSEE AND DURING THE C OURSE OF ASSESSMENT PROCEEDINGS IT WAS SUBMITTED THAT THE SAME IS NOT SPECULATION INCOME BUT IT IS AN INCOME EARNED FROM PURCHASE AND SALE OF SHARE S IN THE ORDINARY COURSE OF BUSINESS, THEREFORE, IT IS BUSINESS INCOME. THE AO HAS ACCEPTED SUCH CLAIM OF ASSESSEE AND HAS ASSESSED SUCH AMOUNT AS N ORMAL BUSINESS INCOME OF THE ASSESSEE AND DENIED THE BENEFIT OF BROUGHT F ORWARD SPECULATIVE LOSS AS WAS ELIGIBLE TO THE ASSESSEE IN CASE THE SAME IS AS SESSED AS SPECULATION INCOME. 4. BEFORE LD. CIT(A) IT WAS CLAIMED THAT IN VIEW OF SUFFICIENT BROUGHT FORWARD BUSINESS LOSS AND UNABSORBED DEPRECIATION THE CLAIM OF THE ASSESSEE FOR SET OFF OF THE AFORESAID INCOME EITHER AGAINST BROUGHT FORWARD SPECULATION LOSS OR AGAINST BROUGHT FORWARD BUSIN ESS LOSS SHOULD HAVE BEEN ACCEPTED. IT WAS SUBMITTED THAT BROUGHT FORWARD LOSSES OF THE BUSINESS AS DETERMINED IN THE EARLIER YEARS ARE TO THE TUNE OF RS. 1,21,72,775/- AND BROUGHT FORWARD UNABSORBED DEPRECIATION WAS TO THE TUNE OF RS.23,53,457/-. THESE FACTS WERE STATED IN RESPECT OF GROUND TAKEN BEFORE LD. CIT(A) REGARDING DENIAL OF FULL BENEFIT OF BROUGHT FORWAR D LOSSES. LD. CIT(A) HELD THAT THE ASSESSEE IS ENTITLED TO GET SET OFF OF RS. 1,22,681/- ASSESSED BY THE AO AS BUSINESS INCOME AGAINST THE BROUGHT FORWARD B USINESS LOSSES. THE REVENUE IS AGGRIEVED, HENCE HAS FILED AFOREMENTIONE D GROUND. 5. WE HAVE HEARD LD. DR AND WE HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AS WELL AS ORDER PASSED BY LD. CIT (A). ON THE ISSUE OF ITA NO.3804/MUM/2011(A.Y. 2006-07) 3 BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION LD. CIT(A) HAS DIRECTED THE AO TO ALLOW SET OFF OF THE SAME TO THE EXTENT O F POSITIVE INCOME OF THE YEAR UNDER CONSIDERATION AS FINALLY DETERMINED. IN THIS VIEW OF THE SITUATION WE FIND NO INFIRMITY IN THE ORDER PASSED BY LD. CIT(A ) VIDE WHICH IT HAS BEEN HELD THAT ASSESSEE IS ENTITLED TO HAVE THE BENEFIT OF SET OFF OF INCOME OF RS.1,22,681/- ARISING OUT OF ACTIVITY OF SALE AND P URCHASE OF SHARES WHICH HAS BEEN TREATED TO BE BUSINESS INCOME BY THE AO TH OUGH ON SUBMISSION OF THE ASSESSEE. WE FIND NO INFIRMITY IN THIS SUBMISS IONS OF THE ASSESSEE AND WE DECLINE TO INTERFERE . GROUND NO.1 OF THE REVEN UE IS DISMISSED. 6. APROPOS GROUND NO.2, THIS ISSUE HAS BEEN DISCUSS ED BY AO IN PARA -9 OF THE ASSESSMENT ORDER. THE AO FOUND THAT ASSESSE E IS ENGAGED IN THE BUSINESS OF TRADING IN SHARES AND SECURITIES WHICH ARE BEING CARRIED OUT THROUGH TWO MEMBERS OF STOCK EXCHANGE AND HE NOTED THAT ASSESSEE HAS INCURRED HUGE EXPENSES IN THE SHAPE OF SALARY, WAGE S AND BONUS; WORK AND STAFF WELFARE EXPENSES; TRAVELLING AND CONVEYANCE; MISCELLANEOUS EXPENSES; BUSINESS PROMOTION AND RENT AND SOCIETY CHARGES. ACCORDING TO AO ALL THESE EXPENSES ARE IN THE NATURE OF PERSONAL EXPENS ES IN ORDER TO REDUCE TAXABLE INCOME. HE FOUND THAT ASSESSEE HAS PAID FB T ON 20% OF THE EXPENDITURE RELATING TO BUSINESS PROMOTION; EMPLOYE ES WELFARE; CONVEYANCE AND REPAIR AND MAINTENANCE OF MOTOR CAR. EXCLUDING SAID 20%, BALANCE 80% OF THESE ITEMS WHICH HAS BEEN COMPUTED AT RS.10,21, 237/- WAS DISALLOWED. 7. BEFORE LD. CIT(A) IT WAS SUBMITTED THAT ALL THES E EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE ASSESSEE DID NOT GAIN ANY PERSONAL BENEFIT BY INCURRING SUCH EXPENDITURE. THESE EXPENSES ARE NECESSARY TO MAINTAIN CORPORATE ENTIT Y OF THE ASSESSEE AS WELL AS FOR CARRYING ON THE BUSINESS ACTIVITY OF THE AS SESSEE. IT WAS ALSO SUBMITTED THAT ON ALL THESE EXPENSES ASSESSEE HAS PAID FRINGE BENEFIT TAX. IT WAS SUBMITTED THAT ALL THESE EXPENSES HAVE BEEN ALLOWED TO THE ASSESSEE IN ALL THE PAST ASSESSMENT YEARS AND THERE IS NO CH ANGE IN FACTS AND ITA NO.3804/MUM/2011(A.Y. 2006-07) 4 CIRCUMSTANCES OF THE CASE. THE ASSESSEE ALSO FILED COPIES OF ASSESSMENT ORDERS OF PAST AND SUBSEQUENT YEARS TO SUBSTANTIATE SUCH CONTENTION. CONSIDERING THESE SUBMISSIONS OF THE ASSESSEE LD. C IT(A) HAS ARRIVED AT THE CONCLUSION THAT DETAILS OF ALL THESE EXPENSES WERE FURNISHED BY THE ASSESSEE BEFORE AO AND PERUSAL OF SAID DETAILS HAVE REVEALED THAT ASSESSEE HAS CLAIMED FOREIGN TRAVEL EXPENSES OF RS.2,77,998/- AN D ASSESSEE HAS FAILED TO EXPLAIN THE PURPOSE OF FOREIGN VISITS CONNECTED TO ITS BUSINESS HENCE, HE RESTRICTED THE DISALLOWANCE ONLY TO THAT EXTENT I. E. FOR A SUM OF RS.2,77,998/- AND HAS GRANTED RELIEF TO THE ASSESSE E FOR A SUM OF RS.7,49,239/-. THE DEPARTMENT IS AGGRIEVED AND HA S RAISED GROUND NO.2. 8. WE HAVE HEARD LD. DR WHO RELIED UPON THE ORDER P ASSED BY AO AND WE HAVE ALSO CAREFULLY GONE THROUGH ASSESSMENT ORDER A S WELL AS ORDER PASSED BY LD. CIT(A). THE ASSESSEE HAS PAID FBT ON THESE EXPENSES. THESE EXPENSES HAVE BEEN TREATED BY AO AS PERSONAL EXPEND ITURE. THE ASSESSEE IS A CORPORATE ENTITY AND EXPENSES ARE IN THE NATURE O F SALARY, WAGES AND BONUS; WORK AND STAFF WELFARE; TRAVELLING AND CONVE YANCE; MISCELLANEOUS EXPENSES; BUSINESS PROMOTION EXPENSES AND RENT AND SOCIETY CHARGES. ALL THESE EXPENSES ARE NECESSARY FOR THE PURPOSE OF BUS INESS. THE AO HAS ALSO ASSESSED THE BUSINESS INCOME IN THE HANDS OF THE AS SESSEE AND HAS ADMITTED THAT ASSESSEE IS ENGAGED IN THE ACTIVITY OF TRADING IN SHARES. IN THIS VIEW OF THE SITUATION, IT CANNOT BE SAID THAT THESE EXPENDI TURE WERE IN THE NATURE OF PERSONAL EXPENSES. HOWEVER, THE ASSESSEE COULD NOT PROVE THE INCURRENCE OF FOREIGN TRAVEL EXPENSES TO BE FOR THE PURPOSE OF BU SINESS, TO WHICH EXTENT LD. ITA NO.3804/MUM/2011(A.Y. 2006-07) 5 CIT(A) HAS UPHELD THE DISALLOWANCE. THEREFORE, WE FIND NO INFIRMITY IN THE RELIEF GRANTED BY LD. CIT(A). WE DECLINE TO INTERF ERE. HENCE, THIS GROUND OF THE REVENUE IS ALSO DISMISSED. 9. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON THE 10 TH DAY OF OCT., 2012 SD/- SD/- (RAJENDRA ) (I.P.BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 10 TH OCT., 2012. COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.R A BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM.