THE ACIT,PANCHMALA CIRCIE, GODHAR V. PANCHMAHAL STEEL LTD, KALOI

ITA 4086/AHD/2002

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9237 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2009
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 29-07-2009
• Assessment Year: 1994-1995
• Appeal Filed On: 30-12-2002
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHI P ORAM
• Keywords: Business income
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD D BENCH (BEFORE S/SHRI T.K. SHARMA, JUDICIAL MEMBER AND D.C. AGRAWAL, ACCOUNTANT MEMBER) ITA.NO.4086 AND 4087/AHD/2002 [ASSTT.YEAR : 1994-1995 AND 1995-1996] ACIT, PANCHMAHAL CIR. GODHRA. VS. PANCHMAHAL STEEL LTD. GIDC, KALOL DIST. PANCHMAHAL. REVENUE BY : SHI P.ORAM ASSESSEE BY : SHRI MILIN MEHTA O R D E R PER T.K. SHARMA, JUDICIAL MEMBER : THESE ARE TWO APPEALS BY THE REVENUE AGAINST THE ORDER OF THE CIT(A)-VI, BARODA DATED 9-9-2002 FOR ASSTT.YEARS 1994-95 AND 1995-1996. SINCE ASSESSEE BEING SAME AND ISSUES ARE MORE OR LESS SAME, FOR THE SAKE OF CONVENIENCE, WE DISPOSE OF BOTH THE APPEALS BY THIS COMMON ORDER. ASSTT.YEAR : 1994-1995 2. THE FOLLOWING GROUNDS ARE RAISED IN THE APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED I) IN DELETING THE ADDITION OF RS.1,29,712/- BEING DISALLOWANCE U/S.43-B ON ACCOUNT OF UNPAID ADHOC INCENTIVES. II) IN DELETING THE ADDITION OF RS.71,429/- ON ACCO UNT OF DISALLOWANCE OUT OF DEBENTURE REDEMPTION PREMIUM. III) IN DIRECTING TO TREAT THE LOSS OF RS.28,63,059 /- AS CAPITAL LOSS INSTEAD OF BUSINESS LOSS AND FURTHER ERRED IN DIREC TING TO ALLOW CARRY FORWARD OF THE SAID LOSS AS CAPITAL LOSS. 3. GROUND NO.1 IS AGAINST THE DELETION OF ADDITION OF RS.1,29,712/- BEING DISALLOWANCE U/S.43B OF THE I.T.ACT ON ACCOUNT OF U NPAID ADHOC INCENTIVES. IN THE ASSESSMENT ORDER, THE AO MADE DISALLOWANCE TREA TING THE UNPAID ADHOC PAGE - 2 ITA.NO.4086 AND 4087/AHD/2002 -2- INCENTIVE OF RS.1,29,712/- AS COVERED UNDER SECTION 43B OF THE IT ACT. ON APPEAL, IN THE IMPUGNED ORDER, THE LEARNED CIT(A) D ELETED THE SAID DISALLOWANCE ON THE GROUND THESE PAYMENTS ARE NOT B ONUS AND ARE NOT COVERED UNDER THE SECTION 43B. ON FURTHER APPEAL BEFORE US , THE LEARNED COUNSEL FOR THE ASSESSEE, AT THE TIME OF HEARING FAIRLY CONCEDED TH AT THIS UNPAID ADHOC INCENTIVE IS AKIN TO THE BONUS, AND THEREFORE, IT IS COVERED UNDER SECTION 43B OF THE ACT. HE ALSO STATED THAT THIS AMOUNT WAS NOT PAID BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME. HE FURTHER STATED THAT HE HAS NO OBJECTION IF THIS DISALLOWANCE IS RESTORED TO THE AO WITH A DIRECTION TO ALLOW THE SAME IN THE YEAR OF PAYMENT. IN VIEW OF THIS, IT IS HELD THAT THIS DISALLOWANCE OF RS.1,29,712/- UNDER SECTION 43B OF THE ACT IS RIGHTLY MADE BY THE AO, BECAUSE IT IS NOTHING BUT BONUS AND IT WAS NEITHER PAID DURING THE PREVIOUS YEAR RELEVA NT TO THE ASSESSMENT YEAR UNDER APPEAL NOR TILL THE DUE DATE OF FILING OF THE RETURN OF INCOME FOR THIS ASSESSMENT YEAR. THIS ADDITION IS ACCORDINGLY REST ORED WITH THE DIRECTION TO THE AO THAT THE AO WILL ALLOW THE SAME IN THE NEXT YEAR , AFTER VERIFICATION THAT THIS UNPAID AMOUNT IS ACTUALLY PAID. 4. GROUND NO.2 IS AGAINST THE DELETION OF ADDITION OF RS.71,429/- ON ACCOUNT OF DISALLOWANCE OUT OF DEBENTURE REDEMPTION PREMIUM. WE HAVE HEARD BOTH THE PARTIES. WE FIND THAT IN THE ASSESSMENT O RDER, THE AO DISALLOWED RS.71,429/- BEING THE PROVISION MADE AGAINST ITS LI ABILITY TO PAY SBI MUTUAL FUND AFTER SEVEN YEARS IN RESPECT OF PREMIUM ON RED EMPTION OF UTI DEBENTURES. ON APPEAL, IN THE IMPUGNED ORDER, THE LEARNED CIT(A ) ALLOWED THE SAME FOLLOWING THE DECISION OF SUPREME COURT IN THE CASE OF MADRAS INDUSTRIAL CORPORATION LTD. VS. CIT, 225 ITR 802. IN THIS VIE W OF THE MATTER, WE DECLINE TO INTERFERE WITH THE ORDER OF THE CIT(A) ON THIS I SSUE. 5. THIRD GROUND IS AGAINST DIRECTION TO TREAT THE L OSS OF RS.28,63,059/- AS CAPITAL LOSS INSTEAD OF BUSINESS LOSS AND ALSO DIRE CTING TO ALLOW CARRY FORWARD OF THE SAID LOSS AS CAPITAL LOSS. PAGE - 3 ITA.NO.4086 AND 4087/AHD/2002 -3- 6. WE HAVE HEARD BOTH THE SIDES. IN THE ASSESSMENT ORDER, THE AO TREATED THE CAPITAL LOSS OF RS.28,06,359/- CLAIMED BY THE A SSESSEE AS A BUSINESS LOSS AND TREATED IT AS PART OF THE CURRENT BUSINESS INCOME A ND DENIED THE SAME TO BE CARRIED FORWARD AS CAPITAL LOSS. ON APPEAL, THE CI T(A) NEGATIVED THE DECISION OF THE AO ON THE GROUND THAT IN THE A.Y.1993-94 AND 1996-97, SUCH CLAIM OF THE ASSESSEE FOR CARRY FORWARD OF CAPITAL LOSS HAS BEEN ACCEPTED. BESIDES, THE CIT(A) OBSERVED THAT THE AO COULD NOT CONVINCINGLY ESTABLISH THE NATURE LOSS AS NOT A CAPITAL LOSS. SHARES WERE HELD BY THE ASS ESSEE FOR THREE YEARS OR MORE. IN THE BALANCE SHEET AS ON 31-3-1995 THESE SHARES W ERE SHOWN AS INVESTMENT AND NOT AS STOCK-IN-TRADE. ACCORDINGLY, HE ALLOWED THE CLAIM OF THE ASSESSEE FOR CARRY FORWARD OF LOSS OF RS.28,06,359/- TO THE SUCC EEDING YEARS. NOTHING MORE HAS BEEN ADVANCED BY THE LEARNED DR BEFORE US TO FO RCE US TO DEVIATE FROM THE FINDINGS AND DECISION TAKEN BY THE LEARNED CIT(A), THEREFORE, WE DECLINE TO INTERFERE IN HIS IMPUGNED ORDER ON THIS ISSUE. APPEAL FOR A.Y.1995-1996 7. GROUND RAISED FOR THIS ASSESSMENT YEAR IN THE AP PEAL IS AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED I) IN DELETING THE ADDITION OF RS.71,429/-ON ACCOUN T OF DISALLOWANCE OF DEBENTURE REDEMPTION EXPENSES. II) IN DIRECTING TO TREAT THE PROFIT OF RS.16,40,279/- FROM THE SALE OF SHARES AS CAPITAL GAIN INSTEAD OF BUSINESS INCOME. SINCE THE TRADING OF SHARES AND INVESTMENT OF SURPLUS MONEY I N OTHER ACTIVITIES TO GAIN PROFITS ARE THE SUPPLEMENTARY OB JECTS OF THE ASSESSEE COMPANY AND SUCH EARNING FROM THESE ACTIVI TI4ES ARE THE EARNING FROM TRADING ACTIVITIES, THE DECISION OF TH E CIT(A) IS NOT JUSTIFIED. 8. GROUND NO.1 IS SIMILAR TO GROUND NO.1 IN APPEAL FOR A.Y.1994-95, WHEREIN THE CLAIM OF THE ASSESSEE WAS ALLOWED AND T HE ORDER OF THE CIT(A) WAS UPHELD. SINCE ISSUE, FACTS AND CIRCUMSTANCES BEIN G SIMILAR AS THAT OF PAGE - 4 ITA.NO.4086 AND 4087/AHD/2002 -4- A.Y.1994-95, FOLLOWING OUR ABOVE ORDER ON THIS ISSU E, THIS GROUND OF THE REVENUE IS ALSO DISMISSED. 9. COMING TO THE LAST GROUND NO.2, IN THE ASSESSMEN T ORDER, THE AO TREATED THE CAPITAL GAIN OF RS.16,40,279/- DECLARED BY THE ASSESSEE AS CAPITAL GAIN AGAINST WHICH THE ASSESSEE HAD CLAIMED LOSS OF CARR Y FORWARD CAPITAL GAIN OF EARLIER YEAR AS HE CONSIDERED THE SAME TO BE PART O F THE DAY-TO-DAY BUSINESS ACTIVITY TO BE LIABLE FOR TAXATION AS INCOME FROM B USINESS. THE SAME WAS CHALLENGED BEFORE THE CIT(A) WHO DELETED THE DISALL OWANCE ON THE GROUND THAT IDENTICAL ISSUE FOR A.Y.1994-95 HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. WE ALSO OBSERVED IN THE APPEAL OF THE REVENUE FOR A.Y. 1994-1995 ABOVE THAT THE LOSS INCURRED ON SALE AND PURCHASE OF THE SHARES ET C. WERE ALLOWED AS CAPITAL LOSS AND ALLOWED THE SAME TO BE CARRIED FORWARD TO THE SUBSEQUENT YEARS. SINCE THE FACTS AND CIRCUMSTANCES BEING SIMILAR IN THE PR ESENT APPEAL AS THAT OF A.Y.1994-1995, WE FIND OR BROUGHT BEFORE US ANYTHIN G TO DEVIATE FROM THE DECISION WE HAVE TAKEN FOR A.Y.1994-1995 AS ABOVE O N THE SIMILAR ISSUE. ACCORDINGLY, WE UPHOLD ORDER OF THE CIT(A) ON THIS ISSUE AND DISMISS THIS GROUND OF THE REVENUE. 10. IN THE RESULT, APPEAL OF THE REVENUE FOR A.Y.19 94-95 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE AND THAT OF A.Y.1995-96 IS DISM ISSED. ORDER PRONOUNCED IN OPEN COURT ON 28 TH AUGUST, 2009. SD/- SD/- (D.C. AGRAWAL) ACCOUNTANT MEMBER (T.K. SHARMA) JUDICIAL MEMBER PLACE : AHMEDABAD DATE : 28-08-2009 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR, ITAT, AHMEDABAD