Appeal Details
Counselvise Citation
[2015] 120 COUNSELVISE.COM (IT) 9997 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
3 year(s) 7 month(s) 1 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
08-04-2015
Appeal Filed By
Department
Order Result
Allowed
Bench Allotted
E
Next Hearing Date
02-02-2015
Assessment Year
2008-2009
Appeal Filed On
06-09-2011
Judgement Text
INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E : NEW DELHI BEFORE SHRI N.K.SAINI , ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER ITA NO. 4055 /DEL/ 2011 (ASSESSMENT YEAR: 2008 - 09 ) ACIT CIRCLE - 13(1), ROOM NO.406, C.R. BUILDING, I.P. ESTATE NEW DELHI VS. NANDA BROTHERS (EXPORTS) (P) LTD., B - 314, OKHLA INDUSTRIAL AREA, PHASE - I, NEW DELHI PANAAACN3112B (APPELLANT) (RESPONDENT) APPELLANT BY : SANJESH JAWAR A NI, CA RESPONDENT BY : P.DAM KANUNJNA, SR. DR. DATE OF HEARING 02.02.2015 DATE OF PRONOUNCEMENT 08 .04 .2015 O R D E R PER A. T. VARKEY, JUDICIAL MEMBER THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE IMPUGNED ORDER DATED 15 / 0 4 /20 1 1 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - XV I , NEW DELHI ON THE FOLLOWING GROUNDS: - 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN ALLOWING THE RELIEF TO THE ASSESSEE ON THE ISSUE OF TREATMENT OF CAPITAL GAINS AS BUSINESS INCOME. 2. THAT ON THE FACTS AND CIRCU MSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE ON THE GROUND OF DISALLOWANCE OF INTEREST ACCRUED ON A SUM ADVANCED TO M/S SHASYAMAGLAM REAL DEVELOPERS (P) LTD., 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 5,90,625/ - MADE BY THE AO U/S. 14A OF THE IT ACT, 1961. 4. THAT THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FRESH GROUNDS OF APPEAL AND / OR DELETE OR AMEN D ANY OF THE GROUNDS OF APPEAL. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE COMPANY IS AN EXPORTER OF READYMADE GARMENTS IN EUROPEAN AND INTERNATIONAL MARKET. THE SALES OF THE PAGE 2 OF 7 COMPANY IN THE INSTANT YEAR WAS ONLY RS. 12,87,584/ - . IN THIS CASE ORIGINAL E - RETURN DULY DIGITALLY SIGNED WAS FILED ON 27. 0 9.2008 AT A RETURNED INCOME OF RS.70,79,880/ - . THE CASE WAS PROCESSED U/S. 143(1) OF THE INCOME TAX ACT, 1961 (HEREIN AFTER THE ACT) AT THE RETURNED INCOME ON 13.3.2010. THE CASE WAS PIC KED UP FOR SCRUTINY UNDER CASS. A NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED ON 18.8.2009 AND SERVED THROUGH REGISTERED POST. ANOTHER NOTICE UNDER SECTION 143(2) ALONG WITH NOTICE U/S. 142(1) OF THE ACT WAS ISSUED ON 15.11.2009. THEREAFTER, NOTICE U/S. 143(2) AND QUESTIONNAIRE DATE D 15.1 .2010 AND 9.6.2010 WERE ISSUED. THE ASSESSEE FILED ITS SUBMISSIONS. THEREAFTER, AO COMPLETED THE ASSESSMENT U/S. 143(3) OF THE ACT AND MADE VARIOUS ADDITIONS VIDE HIS ASSESSMENT ORDER. 3. BEING AGGRIEVED WITH THE ASSESSMENT ORDER , ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 15 . 4 .201 1 HAS DELETED THE PART ADDITION BY PARTLY ALLOW ING THE APPEAL OF THE ASSESSEE. 4 . NOW THE REVENUE IS AGGRIEVED AGAINST THE IMPUGNED ORDER AND FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 5 . GROUND NO.1 RELATES TO RELIEF GRANTED TO ASSESSEE ON THE ISSUE OF TREATMENT OF CAPITAL GAIN AS BUSINESS INCOME. 6. AT THE TIME OF HEARING LD. DR RELIED UPON THE ORDER OF THE AO AND REITERATED REASONS OF THE AO WHILE PASSING THE ASSESSMENT ORDER. ON THE OT HER HAND THE LD AR RELIED ON THE ORDER OF THE LD CIT(A). 7 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED AND CONSIDERED THE RELEVANT RECORD BEFORE US; WRITTEN SUBMISSIONS FILED BY THE ASSESSEE ALONG WITH THE PAPER BOOK . 8 . THE ASSESSEE COMPANY HAS BEEN DERIVING RENTAL INCOME SINCE ASSESSMENT YEAR 2003 - 04. IT HAD ALSO BEEN INVESTING INTO SHARES AND MUTUAL FUNDS AND HAD BEEN EARNING LONG TERM AND SHORT TERM CAPITAL GAIN AS WELL AS DIVIDEND INCOME. THE APPELLANT FILED A RETURN OF INCOME DECLARING A TOTAL INCOME OF RS.70,79,880/ - INCLUDING INTER - ALIA BUSINESS LOSS OF RS.47,46,398/ - , INCOME FROM HOUSE PROPER TY OF RS.1,21,04,999/ - , SHORT TERM CAPITAL GAIN, ALSO ON ACCOUNT OF SHARES AND MUTUAL FUND OF RS.1,74,067/ - AND INCOME FROM OTHER SOURCES RS.1,72 ,212/ - AND DIVIDEND PAGE 3 OF 7 INCOME OF RS.4,90,409/ - . THE APPELLANT ALSO DECLARED LONG TERM CAPITAL GAINS ON ACCOUNT OF SHARE AND MUTUAL FUNDS OF RS.3424458/ - (EXEMPT ST PAID). THE APPELLANT ALSO DECLARED A SPECULATION LOSS OF RS.20,48,990/ - . 9. IT HAS BEEN POINTE D OUT BY THE LD AR THAT THE APPELLANT PREFERRED AN APPEAL BEFORE THE CIT(APPEAL) ON TREATMENT GIVEN TO LONG TERM CAPITAL GAIN; HOWEVER IT DID NOT CONTEST THE DECISION IN REGAR D TO SHORT TERM CAPITAL GAIN SINCE THE AMOUNT BEING SMALL AND THERE BEING NO DIF FERENCE IN TAX RATES. 10. THE APPELLANTS INCOME FROM LONG TERM AS WELL AS SHORT TERM CAPITAL GAINS FOR THE FEW YEARS ARE AS UNDER: - ASS. YEAR 2005 - 06 0 2006 - 07 2007 - 08 2008 - 09 LONG TERM CAPITAL GAIN 0 - 3747023 0 3424457 SHORT TERM CAPITAL GAIN 276198 1072204 0 174067 DIVIDEND 0 725199 325153 490409 11. THE ASSESSMENT FOR THE A.Y.S 2005 - 06, 2006 - 07 HAS BEEN COMPLETED UNDER SECT IO N 143(3) AFTER SCRUTINY. IT CAN BE SEEN FROM THE ABOVE CHART THAT THE ASSESSEE HAD ALL ALONG BEE N DECLARING CAPITAL GAIN FROM SHARES WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT EVEN IN SCRUTINY ASSESSMENT. HOWEVER THE DEPARTMENT CHOSE TO DIVERT FROM THE ACCEPTED POSITION AND TREATED THE LONG TERM AS WELL AS THE SHORT TERM CAPITAL GAIN S AS INCOME FROM BUSINESS FOR THE IMPUGNED ASSESSMENT YEAR AND ON THE GROUND OF CONSISTENCY ALONE ACCORDING TO THE LDAR, THE AO SHOULD NOT HAVE TAKEN A DIFFERENT VIEW AS HELD BY HONBLE APEX COURT IN THE CASE OF RADHASOAMI SATSANG VS. CIT (1992) 193 ITR 32 1 (SC) . 12. WE FIND THAT THE AOS OBSERVATION, THAT TH E ASSESSEE HAD BORROWED FUNDS FOR DEALING IN SHARES IS ALSO MISCONCEIVED. NO FUNDS HAVE BEEN RAISED TO INVEST IN SHARES. WE FIND THAT THERE IS NO OPENING BALANCE IN RESPECT OF ANY LOAN FROM INDIA BULLS. AND THE INTEREST PAID TO CENTURION BANK IS CONCERNED, I.E. THE LD AR HAS POINTED OUT THAT IT WAS A PURELY SHORT TERM LOAN OF RS.60,00,000/ - FOR A PERIOD OF 4 MONTHS LEADING TO PURCHASE OF ILFC FUND FROM WHICH SHORT TERM CAPITAL GAIN PAGE 4 OF 7 WAS DERIVED AND HAS BE EN SUBJECTED TO TAX. AND THIS IS NOT RELATABLE TO EARNING OF LONG TERM CAPITAL GAIN. THE ASSESSEE COMPANY HAD HUGE INVESTIBLE RENTAL INCOME AS IS EVIDENT FROM THE FOLLOWING CHART. S.NO. ASS. YEAR TURN OVER GROSS RENT RECEIVED INVESTMENT SHARES 1. 2004 - 05 218,467.00 3,116,032.00 18,873,459.83 2. 2005 - 06 302,500.00 6,780,000.00 31,268,236.07 3. 2006 - 07 2,874,645.25 9,879,677.00 36,590,253.86 4. 2007 - 08 2,135,979.50 9,690,806.00 27,652,465.44 5. 2008 - 09 1,287,584.00 17,460,000.00 21,522,243.28 6. 2009 - 10 120,000.00 26,760,000.00 14,910,546.63 7. 2010 - 11 630,102.00 11,931,014.00 15,882,061.95 13. WE FIND THAT LD. FIRST APPELLATE AUTHORITY HAS E LABORATELY DISCUSSED THE ISSUE S IN DISPUTE BY CONSIDERING THE SUBMISSIONS OF THE LD. AR OF THE ASSESSEE AND ADJUDICATED THE ISSUE S IN DISPUTE . WE FIND THAT LD. CIT(A) HAS OBSERVED THAT THE ASSESSEE COMPANY IS AN EXPORTER WHOSE MAIN SOURCE OF INCOME ARE FROM EXPORT AND RENT. THE INVESTMENT IN SHARES DURING THE YEAR IS MADE OUT OF THE SECURIT Y DEPOSITS RECEIVED FROM TENANTS . THEN THERE WERE SUBSTANTIAL INVESTMENTS REFLECTED IN THE OPENING BALANCE FOR THE YEAR. LD. CIT(A) FURTHER OBSERVED THAT THE ASSESSEE IS DEVOTING ITS TIME TO ITS PRIMARY ACTIVITY OF EXPORT AND THE ACTIVITY OF SHARES IS DONE BY PROFESSIONALS . MOREOVER, SINCE THE CAPITAL GAIN ON SALE OF SHARES, TREATED AS BUSINESS INCOME BY THE AO, WAS LONG TERM CAPITAL GAIN, IT IMPLIES THAT THE HOLDING PERIOD OF THE SHARES WAS MORE THAN ONE YEAR. A SIZEABLE AMOUNT OF DIVIDEND INCOME HAS BEEN EARNED BY THE ASSESSEE DURING THE YEAR LEADING TO THE CONCLUSION THAT THE INVESTMENTS IN SHARES WERE NOT MADE WITH THE INTENTION OF RESALE WITHIN A SHORT PERIOD BUT FOR LONG TERM APPRECIATION AND EARNING OF DIVIDENDS AND INTEREST. WE ALSO FIND THAT LD. C IT(A) FURTHER NOTED THAT THE LARGE NUMBER OF TRANSACTIONS REFERRED TO BY THE AO ARE ATTRIBUTABLE TO THE TRADING IN FUTURES AND OPTIONS, FROM WHICH SPECULATION LOSS OF RS. 20.48 LACS HAS BEEN DECLARED. WE FIND THAT LD. CIT(A) HAS RIGHTLY REFERRED THE CB DT CIRCULAR NO. 4 OF 2007, BY WHICH THE ACTIVITY OF SALE AND PUR CHASE OF SHARES BY THE ASSESSEE CANNOT BE TERMED AS ITS USUAL TRADE OR BUSINESS BUT WAS ONLY AN OCCASIONAL INDEPENDENT ACTIVITY AND THE PROFIT ON SALE OF SHARES IS ASSESSABLE AS PAGE 5 OF 7 LONG TERM CA PITAL GAINS AND NOT BUSINESS INCOME OF THE ASSESSEE (AS DONE BY THE AO). HE NCE, LD. CIT(A) HAS RIGHTLY GIVEN THE RELIEF ACCORDINGLY AND ALLOWED THIS GROUND OF AP PEAL IN FAVOUR OF THE ASSESSEE. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE WELL REASONED ORDER PASSED BY THE LD. CIT(A), HENCE, WE UPHOLD THE SAME BY REJECTING THE GROUND RAISED BY THE BY THE REVENUE. 14 . WITH REGARD TO ISSUE RELATING TO DISALLOWANCE OF INTEREST ACCRUED ON A SUM ADVANCED TO M/S SHASYAMANGALM REAL DEVELOPERS (P) LTD., IS CONCERNED, WE FIND THAT LD. CIT(A) HAS OBSERVED THAT THE AO HAS HELD THAT THE ASSESSEE MUST HAVE RECEIVED INTEREST @25% O N THE LOAN OF RS. 1 CRORE ADVANCED BY IT TO THE BORROWER, AS PE R THE AGREEMENT BETWEEN THE TWO. THE ASSESSEE HAS EXPLAINED THAT IT BECAME DIFFICULT TO RECOVER EVEN THE PRINCIPAL AMOUNT FROM THE BORROWER, WHICH WAS FINALLY RECEIVED BY THE ASSESSEE IN STAGGE RED AMOUNTS AND THE QUESTION OF RECEIPT OF INTEREST DID NOT ARISE. WE FIND THAT DURING THE APPELLATE PROCEEDINGS, THE COPIES OF IT RETURN AS WELL AS BALANCE SHEET AND P&L ACCOUNT OF THE BORROWER M/S SHASYAMANGALAM REAL DEVELOPMENT PVT. LTD. FOR A.Y. 2008 - 0 9 WERE OBTAINED BY THE LD. CIT(A), BY EXERCISING HIS POWER U/S 250(4) OF THE ACT AND HE HOLD THAT THIS CONFIRMS THE FACT THAT NO INTEREST WAS PAID BY THIS PARTY TO THE ASSESSEE COMPANY. WE FIND THAT LD. CIT(A) THEREAFTER OPINED THAT AO HAS NOT BEEN ABLE T O PLACE ON RECORD ANY MATERIAL TO CONTROVERT THE ASSESSEES CLAIM THAT IT DID NOT RECEIVE ANY INTEREST. THEREFORE, HE DIRECTED THE AO TO DELETE THE ADDITION MADE ON ACCOUNT OF INTEREST AND PENAL INTEREST PURPORTEDLY RECEIVED BY THE ASSESSEE ON LOAN GIVEN B Y IT. FROM THE IMPUGNED ORDER AS AFORE - STATED , WE FIND THAT THE LD CIT(A) HAS EXERCISED HIS POWER U/S 250( 5) OF THE ACT AND HAS BROUGHT IN CERTAIN EVIDENCE WHICH HAVE BEEN ADMITTED BY THE LD. CIT(A) TO COME TO THE AFORESAID CONCLUSION WITHOUT THE SAME BEIN G SENT TO THE AO , FOR HIS REMAND REPORT, WHICH IN OUR OPINION VIOLATES OF RULE 46A OF THE INCOME TAX RULES, 1962 (HEREIN AFTER THE RULES) . HENCE, WE FIND FORCE IN THE SUBMISSION OF THE LD DR THAT AN OPPORTUNITY SHOULD HAVE BEEN GIVEN TO THE AO AS PRESCRIBED UNDER RULE 46A, THEREFORE WE REMIT BACK THIS ISSUE TO THE FILE OF THE AO, TO CONSIDER THE SAME AFRESH, AFTER EXAMINING ALL THE ASPECTS AND EVIDE NCES PAGE 6 OF 7 ON THIS ISSUE AND ALSO EXAMINE THE NEW EVIDENCES WHICH THE LD . CIT(A) HAS OBTAINED DURING APPELLATE PROCEEDINGS AND THEN DECIDE THE ISSUE, ACCORDINGLY, AFTER GIVING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 15 . W ITH REGARD TO ISSUE RELATIN G TO DISALLOWANCE OF RS. 5,90,625/ - MADE BY THE AO U/S. 14A OF THE I.T. ACT, 1961 IS CONCERNED , W E FIND THAT LD. CIT(A) HAS CONSIDERED THE SUBMISSIONS MADE BY THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE COMPANY AND HELD THAT SINCE THE INTEREST DISALLOW ED BY THE AO IS NOT ATTRIBUTABLE TO EXEMPT INCOME, THERE WAS NO JUSTIFICATION FOR DISALLOWING THE SAME U/S. 14A OF THE ACT. THEREFORE, LD. CIT(A) HAS DELETED THE ADDITION MADE ON THIS ACCOUNT. ON THE BASIS OF THE FOLLOWING CONTENTION OF THE ASSESSEE : - THE WORKING OF THE ASSESSEE DID NOT CONTAIN THE INTEREST AMOUNT OF RS.4,47,914/ - THE BREAK - UP OF WHICH AS FOLLOWS: - (I) INTEREST ON FUNDS UTILIZED - INDIA BULLS RS. 1,32,177/ - (II) INTEREST ON LOAN - SECURITIES RS.2,79,481/ - (III) INTEREST ON LOAN AGAINST RENTAL INCOME RS.36,256/ - RS.4,47,914/ - IT MAY BE SEEN FROM THE INTEREST DETAILS THAT RS.1,32,177/ - AND RS.2,79,481/ - PERTAINS TO INTEREST PAID ON DEALINGS IN SHARES AND SECURITIES, THE INCOME OF WHICH IS TAXABLE UNDER THE HEADS L ONG - TERM CAPITAL GAINS AND A SUM OF RS.36,256/ - IS PAID TOWARDS INTEREST ON LOAN AGAINST RENTAL INCOME WHICH IS TAXABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY MAKING THEM BOTH DIRECTLY ATTRIBUTABLE TO THE PARTICULAR RECEIPTS AND HENCE THE QUESTION OF INCOME OF TAKING THIS INTEREST COMPONENT FOR DISALLOWANCE, DOES NOT ARISE. 16. HOWEVER WE FIND THAT IN PAGE NO.8 OF THE PAPER BOOK LONG TERM CAPITAL GAIN HAS BEEN CLAIMED AS EXEMPT, THUS IT CANNOT BE SAID THAT INTEREST IS NOT ATTRIBUTABLE TO EXEMPT IN COME. IN SUCH CIRCUMSTANCES THE ALLOCATION BY THE AO BY ADOPTING RULE 8D IS APPROPRIATE, AS NO OTHER SUBMISSION WAS MADE BEFORE US SO AS TO SUPPORT THE CONCLUSION OF THE LD CIT(A). SO WE ALLOW THIS GROUND OF THE REVENUE. PAGE 7 OF 7 17 . IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 08 . 04 . 2015 . - SD/ - - SD/ - ( N.K.SAINI ) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED :08 / 04 / 2015 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI
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