ACIT, New Delhi V. M/s. Dewsoft Overseas Pvt. Ltd., New Delhi

ITA 3945/DEL/2010

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7203 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 14-12-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 23-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AND CROSS OB JECTION IS FILED
• Assessee Lawyers: AGAINST
• Keywords: Capital asset; Business income
• Section: 14A

Judgement Text

1 ITA NO.3945/DEL/10 AND CO.NO. 332/DEL/10 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE , JUDICIAL MEMBER I.T.A .NO.-3945/DEL /2010 (A.Y 2007-08) ACIT CIRCLE 10(1), NEW DELHI (APPELLANT) VS DEWSOFT OVERSEAS PVT. LTD. 101, GAGANDEEP BUILDING, 12, RAJENDRA PLACE, NEW DELHI AABCD3196J (RESPONDENT) C.O NO. 33 2/DEL/2010 (A.Y 2007-08) DEWSOFT OVERSEAS PVT. LTD. 101, GAGANDEEP BUILDING, 12, RAJENDRA PLACE, NEW DELHI AABCD3196J (APPELLANT) VS ACIT CIRCLE 10(1), NEW DELHI (RESPONDENT) ORDER PER SUCHITRA KAMBLE, JM THE APPEAL IS FILED BY THE REVENUE AND THE CROSS OB JECTION IS FILED BY THE ASSESSEE AGAINST THE ORDER DATED 14/06 /2010 PASSED BY LD. CIT (A) XII, NEW DELHI FOR THE ASSESSMENT YEAR 2007-08. APPELLANT BY SH. NEEHAR RANJAN PANDEY, SR. DR RESPONDENT BY SH. TAPAS MISHRA, ADV DATE OF HEARING 14.12.2015 DATE OF PRONOUNCEMENT 28.01.2016 2 ITA NO.3945/DEL/10 AND CO.NO. 332/DEL/10 2. THE GROUNDS OF APPEAL ARE AS FOLLOWS:- (IN ITA NO. 3945) 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER OF THE LD. CIT(A) IS WRONG, PERVERSE, ILLEGAL AND AGAINST THE PROVISIONS OF LAW WHICH IS LIABLE TO BE SET ASIDE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE A.O TO TREAT RS.43,54,361/- AS SHORT TERM CAPITAL GAIN TAXABLE U /S 111A INSTEAD OF BUSINESS INCOME. 3. THE APPELLANT CRAVES TO LEAVE, TO ADD, ALTER OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARIN G. 2.1 THE GROUNDS OF CROSS OBJECTION ARE AS FOLLOWS:- (IN C.O NO. 332) 1. THAT THE LD. A.O HAD ERRED ON THE FACTS AND IN LAW IN ASSESSING THE GAINS OF RS.43,54,361/- ARISING ON SA LE OF SHORT TERM CAPITAL ASSETS BEING INVESTMENT IN EQUIT Y SHARES AS PROFITS AND GAINS OF BUSINESS OR PROFESSION. THE SAME HAS ALREADY BEEN TREATED AS SHORT TERM CAPITAL GAIN BY THE LD. CIT (A) IN HIS ORDER DATED 14/6/2010. 2. THAT THE LEARNED A.O AND LD. CIT(A) BOTH HAD ERR ED ON FACTS AND IN LAW, IN MAKING DISALLOWANCE OF A SUM O F RS.1,44,078/- (RS.ONE LAKHS FORTY FOUR THOUSANDS SEVENTY EIGHT ONLY) U/S14A TOWARDS EXPENSES IN EARN ING EXEMPTED INCOME BY IGNORING THE FACTUAL POSITION. 3. THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF PROVIDING ONLINE AND REAL TIME EDUCATION TO RETAIL AND INSTITUTIONAL PLANS ON A VARIETY OF PROGRAMMES AND SUBJECTS INCLU DING COMPUTERS, MANAGEMENT, LANGUAGES, PERSONALITY DEVEL OPMENT ETC. COPY OF PROFIT AND LOSS ACCOUNT, BALANCE-SHEET AND AUDIT REPORT U/S 44B OF THE INCOME TAX ACT 1961 WAS FURNISHED BY THE ASSESSEE, 3 ITA NO.3945/DEL/10 AND CO.NO. 332/DEL/10 DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE A SSESSEE DEBITED A SUM OF RS.19,69,195/- IN THE PROFIT AND LOSS ACCO UNT UNDER THE HEAD LEGAL AND PROFESSIONAL CHARGES. THE ASSESSEE VIDE LETTER DATED 5/10/2009 SUBMITTED A LIST OF PERSONS TO WHOM SUCH PAYMENTS WERE MADE AND TDS MADE THEREUPON. THIS LETTER WAS SUBMITTED TO THE ASSESSING OFFICER. THE ASSESSING OFFICER OBSER VED THAT NO TDS WAS MADE ON PAYMENT OF SUCH CHARGES AGGREGATING TO RS.58,700/- TO SHRI GAURAV MEHRA. THE ASSESSEE FURNISHED THE C OPIES OF BILLS RAISED TO SHRI GAURAV MEHRA. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE HAS MADE THE PAYMENTS TO SHRI GAURAV MEHRA WITHOUT DEDUCTING TAX AT SOURCE IN VIOLATION OF PROVISIONS OF SECTION 194J OF THE INCOME TAX ACT. THUS, THE AGGR EGATE PAYMENT OF RS.58,700/- MADE TO SHRI GAURAV MEHRA WAS DISALL OWED U/S 40(A) (IA) AND ADDED TO THE TOTAL INCOME OF THE ASS ESSEE. THE ASSESSING OFFICER ALSO MADE AN ADDITION IN RESPECT OF SHORT TERM CAPITAL GAIN FOR RS.43,54,361/- TAXABLE U/S 111A IN STEAD OF BUSINESS INCOME. THE ASSESSING OFFICER HELD THAT THE ALLEGED SHORT TERM CAPITAL GAIN OF RS.43,54,361/- EARNED ON ENTIR E SALE AND PURCHASE OF SHARES HAS TO BE TREATED AS BUSINESS IN COME AND REJECTED THE SPECIAL TAX TREATMENT AS PER SECTION 111A AND DENIED EXEMPTION U/S10(38) SINCE IT WAS ITS BUSINESS. 4. THE CIT(A) HELD THAT THE TRANSACTION OF SHARES C ARRIED OUT BY THE ASSESSEE DURING THE YEAR SHOULD BE TREATED AS I NVESTMENTS AND THE SHORT TERM CAPITAL GAIN ON SALE OF SUCH SHARES SHALL BE ASSESSED UNDER THE HEAD CAPITAL GAIN AND NOT AS BUSINESS INC OME. 4 ITA NO.3945/DEL/10 AND CO.NO. 332/DEL/10 ACCORDINGLY, THE CIT(A) DIRECTED THE ASSESSING OFFI CER TO TREAT RS.43,54,361/- AS SHORT TERM CAPITAL GAIN TAXABLE U /S 111A AT 10%. THUS ALLOWED THE APPEAL OF THE ASSESSEE. 5. THE LD. DR SUBMITTED THAT THE ASSESSING OFFICER HAS RIGHTLY HELD THE SAID INCOME AS BUSINESS INCOME AS THE ENTI RE SALE AND PURCHASE OF SHARES WAS RELATED TO THE INVESTMENT OF THE BUSINESS AND THUS COULD NOT BE TREATED AS SHORT TERM CAPITAL GAIN BUT IT IS A PART OF BUSINESS INCOME OF THE ASSESSEE. 6. THE LD. AR REFUTED THE SAME. THE LD. AR FURTHER SUBMITTED THAT THE CIT(A) HAS RIGHTLY HELD GAINS ARISING ON S ALE OF SHORT TERM CAPITAL ASSETS BEING INVESTMENT IN EQUITY SHARES AS PROFIT AND GAINS OF BUSINESS OR PROFESSION. THE LD. AR SUBMIT TED THAT THE ASSESSING OFFICER HAS NOT INVOKED RULE 8D AND, THER EFORE, SECTION 14A WILL NOT COME INTO PICTURE. 7. WE HAVE PERUSED ALL THE RECORDS AND HEARD BOTH T HE PARTIES. AS RELATES TO GROUND NO. 2 OF THE REVENUE THE CIT(A ) HAS RIGHTLY HELD THAT THE TRANSACTION OF SHARES CARRIED OUT BY THE ASSESSEE DURING THE YEAR SHOULD BE TREATED AS INVESTMENTS AN D THE SHORT TERM CAPITAL GAIN ON SALE OF SUCH SHARES SHALL BE A SSESSED UNDER THE HEAD CAPITAL GAIN AND NOT AS BUSINESS INCOME. THE R EASON BEING THAT THE ASSESSEES BUSINESS WAS NOT THAT OF SHARE TRANSACTION BUT THAT OF PROVIDING ONLINE AND REAL TIME EDUCATION TO RETAIL AND INSTITUTIONAL PLANS ON A VARIETY OF PROGRAMMES AND SUBJECT. THEREFORE, GROUND NO. 2 OF THE REVENUE IS DISMISSED . AS RELATES TO 5 ITA NO.3945/DEL/10 AND CO.NO. 332/DEL/10 GROUND NO. 2 OF THE CROSS OBJECTION, SECTION 14A TH OUGH WAS DISCUSSED BY THE ASSESSING OFFICER AND CIT(A), BUT THE SAME WAS NOT IN CONSONANCE WITH INVOCATION OF RULE 8D. THUS , THE MATTER NEEDS TO BE LOOKED INTO, THEREFORE, WE REMAND BACK THIS ISSUE TO THE ASSESSING OFFICER. 8. IN RESULT, THE REVENUES APPEAL IS DISMISSED AND CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED FOR STA TISTICAL PURPOSE. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 28 TH OF JANUARY 2016. SD/- SD/- ( S. V. MEHROTRA) (SUCH ITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 28/01/2016 *R. NAHEED* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 04.01.2016 PS 6 ITA NO.3945/DEL/10 AND CO.NO. 332/DEL/10 2. DRAFT PLACED BEFORE AUTHOR 05.01.2016 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .01.2016 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. .01.2016 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS .01.2016 PS/PS 6. KEPT FOR PRONOUNCEMENT ON .01.2016 PS 7. FILE SENT TO THE BENCH CLERK 1.02.2016 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 7 ITA NO.3945/DEL/10 AND CO.NO. 332/DEL/10