M/s. New Era Impex (India) Pvt. Ltd, New Delhi V. ACIT, New Delhi

ITA 3878/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3900 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 13-05-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 14-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H K LAL
• Assessee Lawyers: ANIL KR
• Keywords: Business income; Depreciation; Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F NEW DELHI) BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI K. G. BANSAL, ACCOUNTANT MEMBER I.T.A. NO. 3878/D/09 ASSESSMENT YEAR : 2005-06 M/S NEW ERA IMPEX (I) PVT. LTD., VS. ASSTT. C.I.T., 75-E, HIMALAYA HOUSE, 23-K.G., CIRCLE 13(1), MARG, NEW DELHI NEW DELHI PAN NO.AAACN 2476J (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI U.N. MARWAH & ANIL KR, CA RESPONDENT BY : SHRI H.K. LAL, SR. DR ORDER PER K.G. BANSAL: AM: THIS APPEAL OF THE ASSESSEE EMANATES FROM THE ORDER OF CIT(A)-XVI, NEW DELHI, PASSED ON 17.07.2009, IN APP EAL NO.80/2008-09, PERTAINING TO ASSESSMENT YEAR 2005- 06. THE ASSESSEE HAS TAKEN UP THREE GROUNDS IN THE APPEAL. THE MAIN GROUND NO.1 IS THAT ON THE FACTS AND IN THE CIRCUMS TANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DISALLOWING A SUM OF RS.14,77,470/-, REPRESENTING LOSS FROM BUSINESS OR PROFESSION, CLAIMED IN THE RETURN OF INCOME. IN THE ALTERNATIV E, IT IS MENTIONED IN GROUND NOS.2 & 3 THAT THE LEARNED CIT( A) ERRED IN NOT ALLOCATING ANY EXPENDITURE TOWARDS SHARE-TRADIN G ACTIVITY, ALTHOUGH A SUM OF RS.7,38,408/- WAS SO ALLOCATED FO R ASSESSMENT YEARS 2002-03 AND 2003-04. 2 2. THE FACTS OF THE CASE HAVE BEEN SUMMARIZED BY TH E LEARNED CIT(A) ON PAGE 2 OF HIS ORDER. THESE FACTS HAVE NO T BEEN DISPUTED BEFORE US. THEREFORE, THE FACTS ARE REPRO DUCED BELOW FOR THE SAKE OF READY REFERENCE:- THE APPELLANT COMPANY IS RECEIVING HOUSE PROPERTY INCOME FROM THE PROPERTY SITUATED AT D-183, OKHLA INDUSTRIAL AREA, PHASE-I, NEW DELHI AND D-26, DEFEN CE COLONY, NEW DELHI. IT IS ALSO CLAIMED TO BE ENGAGE D IN THE BUSINESS OF SHARE TRADING AND REAL ESTATE DEVELOPMENT. DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT HAS DECLARED HOUSE PROPERTY INCOME OF RS.71,06,956/- FROM THE PROPERTY AT OKHLA INDUSTRIA L AREA, AFTER CLAIMING STATUTORY DEDUCTIONS U/S 24 OF THE A CT. HOWEVER, THIS INCOME INCLUDES THE INCOME RECEIVED O N ACCOUNT OF MAINTENANCE SERVICE CHARGES FROM M/S BHA RTI CELLULAR LTD. OF RS.37,11,168/- @RS.18 PER SQ. FEET , WHICH THE APPELLANT HAS TREATED AS PART OF HOUSE PROPERTY INCOME. HOWEVER, THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HAS TREATED THE SAID INCOME AS INC OME FROM OTHER SOURCES. THE APPELLANT HAS ALSO RECEIVE D RENTAL INCOME OF RS.1,50,655/- FROM THE PROPERTY AT DEFENCE COLONY. BESIDES THE APPELLANT HAS CLAIMED BUSINESS LOSS OF RS.14,77,470/-, WHICH HAS BEEN ADJ USTED AGAINST INCOME FROM HOUSE PROPERTY. AS THERE WAS N O BUSINESS ACTIVITY DURING THE YEAR, THIS LOSS WAS DI SALLOWED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. 3. GROUND NO.1 IS THAT THE LEARNED CIT(A) ERRED IN NOT ALLOWING THE LOSS OF RS.14,77,470/- UNDER THE BUSINESS HEAD. TH E LOSS IS STATED TO BE IN RESPECT OF BUSINESS INCOME ON ACCOU NT OF DEALING IN REAL ESTATE AND SHARES. ON THE BASIS OF THE ORDER OF THE CIT(A), WHICH HAS BEEN ACCEPTED BY BOTH THE PAR TIES, IT CAN BE VERY WELL CONCLUDED THAT THE ASSESSEE HAS NOT CA RRIED OUT 3 THE BUSINESS OF DEALING IN REAL ESTATE. THE REASON BEING THAT THE WHOLE OF THE INCOME FROM THE PROPERTIES HELD BY THE ASSESSEE HAS BEEN TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IN VIEW THEREOF, THERE IS NO QUESTION O F COMPUTING BUSINESS LOSS AS PER ACCOUNTS OF THE ASSESSEE IN RE SPECT OF AFORESAID TWO DISTINCT LINES OF BUSINESS. 3.1 ACCORDINGLY, GROUND NO.1 IS DISMISSED. 4. COMING TO THE ALTERNATIVE STAND OF THE ASSESSEE REGARDING ALLOWANCE OF EXPENDITURE IN COMPUTING BUSINESS INCO ME FROM SHARE TRADING ACTIVITY, MENTIONED IN GROUND NOS.2 & 3, IT IS SEEN THAT THE ASSESSEE HAS UNDERTAKEN FOLLOWING TRANSACT IONS IN SHARES OF SISTER CONCERNS IN THIS AND IMMEDIATELY P RECEDING THREE YEARS:- A.Y. PURCHASEOF SHARES SCRIPT QTY. AMOUNT (RS.) SALE OF SHARES SCRIPT QTY. AMT.(RS.) 2002- 03 BHARTI TELEVENTURE LTD. 200000 9,000,000.00 NIL NIL - 2003- 04 BHARTI TELEVENTURE LTD. 80000 1,972,108.33 BHARTI TELEVENTURE LTD. 280000 8,456,881.86 2004- 05 BHARTI TELEVENTURE LTD. 60000 4,271,760.12 BHARTI TELEVENTURE LTD. 60000 5,466,864.87 2005- 06 BHARTI HEALTH CARE LTD. 147802 11,493,304.05 NIL NIL - 4.1 THE ISSUE REGARDING ALLOWANCE OF EXPENDITURE AG AINST SHARE TRADING OPERATIONS CAME UP BEFORE THE TRIBUNAL IN T HE APPEALS FOR ASSESSMENT YEAR 2002-03 AND 2003-04 IN I.T.A. NOS.4173 4 & 4174/D/06 DATED 12.09.2008, A COPY OF WHICH HAS B EEN PLACED IN THE PAPER BOOK ON PAGES 23 TO 29. PARAGR APH 4 OF THAT ORDER DEALS WITH THIS ISSUE FOR ASSESSMENT YEA R 2002-03. IN THE ORDER, THE APPEAL OF THE REVENUE REGARDING N ON-ALLOWANCE OF THE EXPENDITURE WAS DISMISSED AS UNDER:- IN REGARD TO DEDUCTION OF EXPENSES OF RS.14,73,730 /- AGAINST SHARE TRADING OPERATIONS, IT IS MENTIONED I N THE APPELLATE ORDER THAT THE ASSESSEE WAS REQUIRED TO F URNISH SEGREGATION OF EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT UNDER THREE HEADS BEING AGAINST REAL ESTATE BUSINESS, SHARE TRADING OPERATIONS AND COMMON EXPENSES. THE DETAILS WERE FURNISHED AND IT WAS FO UND THAT EXPENDITURE OF RS.14,73,730/- WAS INCURRED TOW ARDS SHARE TRADING OPERATIONS. THEREFORE, THESE EXPENSE S WERE ALLOWED TO BE DEDUCTED AGAINST THIS BUSINESS. THE EXPENSES WERE IN RESPECT OF SALARIES, REPAIRS AND MAINTENANCE, SECURITY CHARGES, ELECTRICITY AND WATE R AND INTEREST ON BORROWINGS. DEPRECIATION WAS DEDUCTIB LE TO BE ALLOWED IN RESPECT OF THAT PORTION OF THE BUILDI NG, WHICH WAS OCCUPIED FOR THE BUSINESS. THE LEARNED CIT(A) DID NOT ALLOW COMMON EXPENSES AGAINST THIS INCOME, WHIC H WERE QUANTIFIED AT RS.5,52,086/-. THE LEARNED DR W AS NOT ABLE TO POINT OUT ANY ERROR IN THIS PART OF THE ORDER ALSO EITHER IN RESPECT OF QUANTIFICATION OF THE EXPENDIT URE OR ITS DEDUCTIBILITY. THE ORDER IS OTHERWISE CORRECT ON T HE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, FOR THE REASO NS THAT EXPENSES INCURRED IN THIS BUSINESS WILL HAVE TO BE DEDUCTED FOR COMPUTING THE INCOME. THUS, THIS GROU ND IS ALSO DISMISSED. 4.2 THUS, THE EXPENDITURE QUANTIFIED AT RS.5,52,086 /-, WAS ALLOWED IN COMPUTING INCOME IN RESPECT OF THIS ACTIVITY. T HE ASSESSEE HAS NOT FURNISHED THE DETAILS OF EXPENSES, WHICH CA N BE ALLOCATED TO THIS ACTIVITY. THE LEARNED CIT(A) DIS MISSED THIS GROUND BY MENTIONING THAT THE ASSESSEE HAS UNDE RTAKEN 5 ONLY ONE TRANSACTION OF PURCHASE OF 1,41,802 SHARES OF BHARTI HEALTH CARE LIMITED, A RELATED CONCERN. SUCH A TRA NSACTION CANNOT BE EQUATED WITH THE ACTIVITY OF BUSINESS. T HIS FINDING IS CONTRARY TO THE ORDER OF THE TRIBUNAL, REFERRED TO ABOVE. THEREFORE, RELYING ON THE ORDER OF THE TRIBUNAL, IT IS HELD THAT THE EXPENSES RELATED TO THIS ACTIVITY WILL HAVE TO BE C OMPUTED FOR DETERMINING THE LOSS TO BE ALLOWED TO THE ASSESSEE. SINCE SUCH EXPENSES HAVE NOT BEEN DETERMINED BY ANY OF THE LOW ER AUTHORITIES, THE MATTER IS RESTORED TO THE FILE OF THE ASSESSING OFFICER TO DETERMINE THE EXPENSES AND ALLOW THE SAM E AGAINST SHARE PURCHASE ETC. ACTIVITY. THEREFORE, THE MATTE R IS RESTORED TO THE FILE OF THE ASSESSING OFFICER TO DETERMINE T HE LOSS AFTER GIVING A REASONABLE OPPORTUNITY OF BEING HEARD TO T HE ASSESSEE. 5. IN RESULT, GROUND NOS.2 & 3 ARE TREATED AS ALLOW ED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSE. THIS ORDER WAS PRONOUNCED IN OPEN COURT ON 04.06.20 10. SD/- SD/- ( C.L. SETHI ) ( K.G. BANSA L ) JUDICIAL MEMBER ACCOUNTANT ME MBER DT.04.06.2010. NS 6 COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. THE CIT 4. THE CIT (A), NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY BY ORDER (ITAT, NEW DELHI).