M/s Devki Nandan Steel Works, Una V. ACIT, Palampur

ITA 406/CHANDI/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6569 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 03-03-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital asset; Capital expenditure
• Section: 43B; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, SMC, CHANDIGARH BEFORE MS. DIVA SINGH, JUDICIAL MEMBER ITA NO 406/CHD/2017 ASSESSMENT Y EAR: 2009-10 M/S DEVKI NANDAN STEEL WORKS, VS. THE ACIT, PLOT NO. 70, INDL AREA, CIRCLE, TAHLIWAL, DISTT. UNA. PALAMPUR. PAN : AAEFD7442H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PARIKSHIT AGGARWAL RESPONDENT BY : SMT.CHANDER KANTA, SR.DR DATE OF HEARING : 01.11.2017 DATE OF PRONOUNCEMENT : 27.11.2017 ORDER THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE ASS AILING THE CORRECTNESS OF THE ORDER DATED 27.01.2017 OF CIT(A) PALAMP UR PERTAINING TO 2009-10 ASSESSMENT YEAR ON THE FOLLOWING GROUNDS : 1. THAT ON THE FACTS, CIRCUMSTANCES AND LEGAL POSITION OF THE CASE, THE WORTHY CIT(A) IN APPEAL NO. CIT(A) PLP/IT/540/2011-12 DATE D 27.01.2017 HAS ERRED IN PASSING THAT ORDER IN CONTRAVENTION OF THE PROVISIONS OF SECTION 250(6) OF THE INCOME TAX ACT, 1961. 2. THAT ON LAW, FACTS AND CIRCUMSTANCES OF THE CASE, T HE WORTHY CITFA) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE LD. AO FO R MAKING ADDITION OF RS. 1,20,840/- ON ACCOUNT OF DISALLOWANCE OF LOSS ON SA LE OF MUTUAL FUND EVEN WHEN THE APPELLANT WAS RUNNING A MANUFACTURING UNIT WHOS E PROFIT WAS DEDUCTIBLE U/S 80-IC @ 100% AND ANY EXPENSE DISALLOWANCE SHOULD HA VE BEEN ALLOWED AS DEDUCTION U/S 80-IC THEREON. 2. NO ARGUMENTS WERE ADVANCED IN RESPECT OF GROUND NO. 1. ADDRESSING GROUND NO. 2, LD. AR SUBMITTED THAT THE DISMISSAL OF ASSESSEE'S GROUND B Y THE CIT(A) IN PARA 6.3 IS CONTRARY TO LAW AND FACTS AS ONCE AN EXPENDITURE OR LOSS IS DISALLOWED, THEN IT AUTOMATICALLY ENHANCES THE INCOME OF THE ASSESSEE AND SINCE THE ASSESSEE QUALIFIES FOR DEDUCTION U/S 80IC AND TH E CIT(A) RELYING UPON CBDT CIRCULAR NO. 37/2016 DATED 02.11.2016 AS QUA THE OTHER ADDITIONS MADE BY THE AO HAS GRANTED RELIEF, HOWEVER QUA THE ISSUE HE HAS FAILED TO CONSIDER THE SAID CIRCULAR AND DIRECT NECESSARY R ELIEF. IT WAS HIS SUBMISSION THAT IN THE FACTS OF THE PRESENT CASE, DISALLOWAN CE IS MADE U/S 37 AND ON READING FROM THE BOARDS CIRCULAR, IT WAS HIS SUBMIS SION THAT IT ITA-406/CHD//2017 A.Y 2009-10 PAGE 2 O F 3 AUTOMATICALLY ENHANCES THE INCOME AND IN TERMS OF THE IN TENTION OF THE BOARD, AS BROUGHT OUT IN THE SAID CIRCULAR WHEREIN ONLY S OME ILLUSTRATIVE CASES HAVE BEEN REFERRED TO THE RESULTANT RELIEF TO THE ASSESSEE HAS WRONGLY BEE DENIED. 3. THE LD. SR. DR, ON THE OTHER HAND, INVITING ATTENTION TO PARA 6 OF THE ASSESSMENT ORDER SUBMITTED THAT THE ASSESSEE HAD DEB ITED LOSS ON SALE OF MUTUAL FUNDS AND THIS SPECIFIC ALTERNATE CLAIM OF THE ASSES SEE HAD BEEN CONSIDERED AND REJECTED BY THE AO HIMSELF AS THE LOSS OF MUTUAL FUND IS A CAPITAL LOSS AND RELYING UPON THE DECISION OF THE APEX COU RT IN THE CASE OF LIBERTY INDIA VS CIT, IT HAS BEEN HELD THAT THERE WAS NO DIRECT NEXUS BETWEEN LOSS ON SALE OF MUTUAL FUND AND THE MANUFACTURING ACTIVITIES. CLAIM OF THE ASSESSEE IT WAS SUBMITTED HAS CORRECTLY BEEN HELD TO B E NOT ALLOWABLE. FOR READY REFERENCE, RELEVANT EXTRACT FOR THE ASSESSMENT OR DER RELIED UPON BY ITS RECORD IS REPRODUCED HEREUNDER : ISSUE OF CAPITAL EXPENDITURE DISALLOWED:- FROM THE PERUSAL OF THE BALANCE SHEET AND P&L ACCOU NT SUBMITTED BY THE ASSESSEE , IT WAS SEEN THAT THE ASSESSEE HAS DEBITED RS. 1,2 0,840/- FOR 'LOSS ON SALE OF MUTUAL FUND. THE ASSESSEE WAS ASKED VIDE ORDER SHEET ENTRY DATED 16.11.2011 & ALSO THROUGH QUESTIONNAIRE DATED 13.12.2011, WHETHER LOSS ON SAL E OF MUTUAL FUND WAS REVENUE LOSS OR CAPITAL LOSS, & WHY THE SAME SHOULD NOT BE DISAL LOWED AS THE IT WAS A CAPITAL LOSS. THE ASSESSEE SUBMITTED REPLY AS UNDER: - 'REGARDING LOSS ON SALE OF MUTUAL FUND THE SAME IS DEBITED , BEING THE LOSS FROM THE CAPITAL ASSET, WHICH MAY BE ALLOWED AS PER THE INCO ME TAX ACT, SINCE ANY ADDITION TO THE INCOME WILL QUALIFY FOR THE DEDUCTION U/S 80 1C OF INCOME TAX ACT.' THE REPLY OF THE ASSESSEE IS NOT TENABLE. LOSS ON S ALE OF MUTUAL FUND IS A CAPITAL LOSS. ALSO, THERE IS NO DIRECT NEXUS BETWEE N 'LOSS ON SALE OF MUTUAL FUND' & THE MANUFACTURING ACTIVITIES, DIRECTLY DERIVED FROM THE FIRM (M/S LIBERTY INDIA VS CIT . HENCE THE SAME IS SUBMITTED TO TAXATION. ADDITION : RS. 1,20,840/- 3.1. INVITING ATTENTION TO THE IMPUGNED ORDER, IT WAS SUBM ITTED THAT SIMILAR ARGUMENT WAS ADVANCED BY THE ASSESSEE BEFORE THE CIT (A). FOR READY REFERENCE, THE RELEVANT ARGUMENT IS REPRODUCED HEREUNDER : 6.2 DURING APPEAL, THE APPELLANT FILED WRITTEN SU BMISSIONS STATING THAT THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF LOSS ON SALE OF MUTUAL F UNDS BY TREATING IT AS CAPITAL LOSS HAS THE IMPACT OF ENHANCING THE ELIGIBLE PROFITS OF THE MANUFACTUR ING UNIT FOR DEDUCTION US 80IC OF THE ACT. THE LD. A.O, HAS NOT GIVEN ANY BENEFIT OF DEDUCTION ON THE ENHANCED PROFITS. 3.2. IT WAS HER SUBMISSION THAT THE SAID SUBMISSION HAS A LSO BEEN REJECTED BY THE CIT(A) IN PARA 6.3 IN VERY CATEGORIC TERMS. INVITING ATTENTION TO THE AFORESAID CIRCULAR NO. 37/2016, IT WAS HER SUBMISSION THAT T HE PRESENT CASE IS NOT A DISALLOWANCE PERTAINING TO SECTION 32, 40(A)(IA), 40A(3), 43B ETC. AND WAS AN ACTIVITY COMPLETELY UNCONNECTED WITH MANUFACTURING ACTIVITY. IT WAS HER SUBMISSION REFER TO THE ORDER THAT THUS, WHEREVER MAINTAINABLE, ITA-406/CHD//2017 A.Y 2009-10 PAGE 3 O F 3 APPROPRIATE RELIEF HAS ALREADY BEEN GRANTED BY THE CIT(A) AND NO FURTHER RELIEF ON THE SAID ISSUE IT WAS AS PER LAW COULD BE ALLOWED. 4. I HAVE HEARD THE SUBMISSIONS AND PERUSED THE MATER IAL AVAILABLE ON RECORD. IT WOULD NOT BE OUT OF PLACE TO REPRODUCE THE RELEVANT FINDING OF THE CIT(A) ON THE AFORESAID ISSUE : 6.3 1 HAVE CONSIDERED THE FACTS OF THE CASE AND THE WRI TTEN SUBMISSIONS OF THE APPELLANT. THE ADDITION MADE BY THE A.O.IS UPHELD. THE AC) HAS RIGHTLY HELD THAT THE LOSS OF RS. 1.20,840.- ON SALE OF MUTUAL F UND UNITS OF TATA INDIA GLOBAL INFRASTRUCTURE FUND IS A CAPITA! LOSS. DEDUCTION U/'S 80IC IS ALLOWABLE ONLY ON THE PROFITS AND GAINS OF BUSINESS OR PROFESSION OF THE INDUSTRIAL UNDERTAKING WHICH, ACCORDING TO SEC 29, ARE TO BE COMPUTED AS P ER SECTION 30 TO 43D. THE LOSS ON SALES OF UNITS HAS NO DIRECT NEXUS WITH THE ELIGIBLE BUSINESS OF THE INDUSTRIAL UNDERTAKING. HENCE IT IS NOT ELIGIBLE FO R DEDUCTION U/S 801C OF THE ACT. THE GROUND OF APPEAL IS DISMISSED. 5. IN THE LIGHT OF THE FACTS AS SET OUT HEREIN ABOVE, I FIN D THAT THE ALTERNATE PRAYER OF THE ASSESSEE HAS BEEN CONSISTENTLY REJECTED BY THE TAX AUTHORITIES IN SPEAKING TERMS AND IT IS NOT A CASE THAT T HE ALTERNATE PRAYER HAS NOT BEEN ADDRESSED. LOSS ON SALE OF MUTUAL FUNDS IS A CAPITA LOSS AND IS ASSESSABLE UNDER THE HEAD INCOME FROM CAPITAL GAINS. ACCORDINGLY, IT HAD NO OCCASION TO ENHANCE THE ELIGIBLE PROFITS U/S 80IC. THE CLAIM HAS CORRECTLY BEEN REJECTED BY THE TAX AUTHORITIES. ACCOR DINGLY, GROUND NO. 2 RAISED BY THE ASSESSEE IS REJECTED. SINCE NO SPECIFIC ARG UMENT WAS ADVANCED FOR GROUND NO. 1, SAME IS ALSO DISMISSED AS NOT ARGUED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH NOV., 2017. SD/- (DIVA SINGH) JUDICIAL MEMBER POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR ASSTT. REGISTRAR ITAT,CHANDIGARH.