VIPIN KUMAR JAIN, MUMBAI V. JCIT 11(3), MUMBAI

ITA 4086/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9161 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 27-11-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 18-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: DR K SHIVARAM

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F , MUMBAI BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 4086/MUM/2011 ASSESSMENT YEAR : 2001-02 MR. VIPIN KUMAR JAIN 19 TH FLOOR, NIRMAL 241/242, NARIMAN POINT MUMBAI-400 021. PAN NO. AABPJ 7248 Q VS. JT. COMMISSIONER OF INCOME TAX -11(3) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : DR. K. SHIVARAM RESPONDENT BY : SHRI MANOJ KUMAR DATE OF HEARING : 27.11.2012 DATE OF PRONOUNCEMENT : 07.12.2012 O R D E R PER RAJENDRA SINGH, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER D ATED 18.3.2011 OF CIT(A) FOR THE ASSESSMENT YEAR 2001-02. TH E DISPUTE RAISED BY THE ASSESSEE IN THIS APPEAL RELATES TO ADDITION ON ACCOUNT OF LONG TERM CAPITAL GAIN AND ESTIMATED DISALLOWANCE OF E XPENSES. 2. WE FIRST TAKE UP THE DISPUTE RELATING TO ADDITION ON ACCOUNT OF LONG TERM CAPITAL GAIN. THE FACTS IN BRIEF ARE THAT TH E AO DURING THE ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE WHILE COMPUTI NG THE TAX ON LONG TERM CAPITAL GAIN HAD ADJUSTED LONG TERM CAPITAL GAIN ITA NO. 4086/M/11 A.Y. 01-02 2 WITHOUT INDEXATION AGAINST LONG TERM CAPITAL LOSS WI TH INDEXATION AND RATE OF TAX HAD BEEN APPLIED @ 10% UNDER SECTION 112 OF THE ACT. THE AO OBSERVED THAT UNDER THE PROVISIONS OF SECTION 48, LON G TERM CAPITAL GAIN HAS FIRST TO BE COMPUTED WITH INDEXATION ONLY AND ONLY FOR THE PURPOSE OF RATE, THE CAPITAL GAIN WAS REQUIRED TO BE COMPUTED BOTH, WITH OR WITHOUT, INDEXATION AS PER SECTION 112. HE, TH EREFORE, COMPUTED BOTH LOSS AS WELL AS GAIN WITH INDEXATION WHI CH RESULTED INTO ADDITION OF RS.17,56,488/- TO THE LONG TERM CAPITAL G AIN DECLARED BY THE ASSESSEE. 2.1 IN APPEAL, CIT(A) NOTED THAT THE TRANSACTIONS IN SH ARES OF 29 COMPANIES HAD RESULTED INTO LOSS WHICH WAS RS.47,26,796/- A S PER BOOKS AND, AFTER INDEXATION, THE LOSS WAS RS.68,96,431/ -. FURTHER TRANSACTIONS IN SHARES OF ONE COMPANY HAD RESULTED INTO LO NG TERM CAPITAL GAIN OF RS.3,80,67,842/- AS PER BOOKS OF ACCOUNT AND RS.3,79,43,580/- AFTER INDEXATION. THE ASSESSEE HAD ALSO INCURRED SHORT TERM CAPITAL LOSS OF RS.38,26,896/-. CIT(A) OBSERVE D THAT UNDER THE PROVISIONS OF SECTION 112, THE LONG TERM CAPITAL GAI N WAS REQUIRED TO BE COMPUTED BOTH USING INDEXATION AND WITHOUT INDE XATION. THE RATE OF TAX WAS 20% IN RESPECT OF LONG TERM CAPITAL GAIN COMP UTED WITH INDEXATION, WHICH WAS LIMITED TO 10% OF LONG TERM CAPI TAL GAIN WITHOUT INDEXATION. CIT(A) COMPUTED NET LONG TERM CAPITAL LO SS WITH INDEXATION WHICH WAS RS.2,72,20,253/- AFTER SETTING OFF SHORT TERM CAPITAL LOSS OF ITA NO. 4086/M/11 A.Y. 01-02 3 RS.38,26,896/-. HE ALSO COMPUTED LONG TERM CAPITAL GAIN WITHOUT INDEXATION WHICH AFTER SETTING OFF SHORT TERM CAPITAL LOSS CAME TO RS.2,95,14,150/-. HE THEREFORE, COMPUTED TAX AT RS.29,5 1,415/- BEING 10% OF LONG TERM CAPITAL GAIN WITHOUT INDEXATION. A GGRIEVED BY THE DECISION OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE T RIBUNAL. 2.2 BEFORE US, THE LD. AR SUBMITTED THAT LONG TERM CAP ITAL GAIN OR LOSS HAD TO BE COMPUTED IN RESPECT OF EACH TRANSACTION SEPA RATELY AND ASSESSEE HAD OPTION TO COMPUTE CAPITAL GAIN WITH OR WITH OUT INDEXATION WHICHEVER WAS IN ITS FAVOUR. IN OTHER WORDS, THE ASSESSEE WAS FREE TO COMPUTE LONG TERM CAPITAL LOSS USING INDEXATION AS THERE WAS NO TAX LIABILITY IN RESPECT OF LOSS WHICH HAD TO BE SET OFF AGAI NST LONG TERM CAPITAL GAIN WITHOUT INDEXATION AND THE NET GAIN WHI CH WILL BE A LONG TERM CAPITAL GAIN WITHOUT INDEXATION HAD TO BE CHARGE D @ 10%. THE LD. AR PLACED RELIANCE ON THE JUDGMENT OF HON'BLE HIGH COU RT OF BOMBAY IN CASE OF CIT VS. ANUJ A SHETH (HUF) (324 ITR 191) AN D ON THE DECISION OF TRIBUNAL IN CASE OF KESAV S. PHANSALKAR VS. IT O (3 ITR (AT) 236). THE LD. DR ON THE OTHER HAND SUPPORTED THE OR DER OF AO AND PLACED RELIANCE ON THE FINDINGS GIVEN IN THE ASSESSMENT O RDER. 2.3 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTE R CAREFULLY. THE DISPUTE IS REGARDING COMPUTATION OF TAX IN RESPECT OF LONG TERM CAPITAL GAIN. THE ASSESSEE HAD INCURRED LONG TE RM CAPITAL ITA NO. 4086/M/11 A.Y. 01-02 4 LOSS IN CASE OF CERTAIN TRANSACTIONS AND LONG TERM CAPITAL G AIN IN RESPECT OF SHARES OF ONE COMPANY. THE ASSESSEE HAD COMPUTED L ONG TERM CAPITAL LOSS WITH INDEXATION WHICH HAD BEEN SET OFF AGAINST LONG TERM CAPITAL GAIN WITHOUT INDEXATION AND NET LONG TE RM CAPITAL GAIN WAS SUBJECTED TO 10% TAX AS PER SECTION 112. THE REVENUE HAS NOT ACCEPTED THE APPROACH ADOPTED BY THE ASSESSEE. CIT(A) HAS T AKEN THE VIEW THAT UNDER THE PROVISIONS OF SECTION 112, BOTH LON G TERM CAPITAL LOSS AND LONG TERM CAPITAL GAIN HAD TO BE COMPUTED WITH INDEXATION IN WHICH CASE TAX RATE OF 20% IS APPLICABLE WHICH HAS TO BE LIMITED TO 10% OF TAX ON NET CAPITAL GAIN IF COMPUTED WITH INDE XATION. THE ARGUMENT ADVANCED BY THE ASSESSEE IS THAT IT HAS THE OPTIO N TO COMPUTE LONG TERM CAPITAL GAIN OR LOSS IN RESPECT OF EAC H TRANSACTION SEPARATELY WITH OR WITHOUT INDEXATION WHICHEVER IS BE NEFICIAL TO IT. THEREFORE, IN CASE OF LOSS, ASSESSEE COMPUTED LOSS WITH INDEXA TION WHICH IS IN ITS FAVOUR WHICH HAS BEEN SET OFF AGAINST LONG TERM CAPITAL GAIN WITHOUT INDEXATION AND SINCE NET LONG TERM CAPIT AL GAIN IS WITHOUT INDEXATION THE RATE OF TAX APPLIED IS 10%. THE APPRO ACH ADOPTED BY THE ASSESSEE IS SUPPORTED BY THE JUDGMENT OF HON'BLE HIGH C OURT OF BOMBAY IN CASE OF ANUJ A. SHETH (HUF) (SUPRA). IN THAT CASE, THE ASSESSEE HAD SET OFF LONG TERM CAPITAL LOSS WITH INDEXATION AGAINST LONG TERM CAPITAL GAIN WITHOUT INDEXATION AND APPLIED TAX RATE OF 10% WHICH HAD BEEN UPHELD BY THE HONBLE COURT. SIMILAR APPROA CH WAS ADOPTED ITA NO. 4086/M/11 A.Y. 01-02 5 BY THE ASSESSEE IN THE CASE OF KESHAV S. PHANSALKAR (SUPRA) , WHICH WAS UPHELD BY THE MUMBAI BENCH OF THE TRIBUNAL. THER EFORE THE APPROACH ADOPTED BY CT(A) WHICH IS CONTRARY TO ABOVE DE CISIONS CAN NOT BE UPHELD. WE ACCORDINGLY SET ASIDE THE ORDER OF CI T(A) AND ALLOW THE CLAIM OF THE ASSESSEE. 3. THE SECOND DISPUTE IS REGARDING ESTIMATED DISALLOWANCE OF EXPENSES. THE ASSESSEE HAD INCURRED EXPENDITURE OF RS.4,14, 714/- ON ACCOUNT OF TELEPHONE EXPENSES ; RS.72,736/- ON ACCOUNT OF STAFF WELFARE EXPENSES AND RS.56,489/- ON ACCOUNT OF CONVEYANCE AND TRAVEL. THE AO DISALLOWED ON ESTIMATE RS.50,000/- OUT OF TELEPHONE EXPENSES ; RS.10,000/- OUT OF STAFF WELFARE EXPENSES AN D RS.5,000/- OUT OF CONVEYANCE AND TRAVELING EXPENSES FOR PERSONAL USE S. IN APPEAL CIT(A) OBSERVED THAT THE ASSESSEE HAS NOT PRESSED THIS GROUN D AND ACCORDINGLY DISMISSED THIS GROUND AS NOT PRESSED. AGGRIEVE D BY THE SAID DECISION, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBU NAL. 3.1 BEFORE US, THE LD. AR SUBMITTED THAT IT WAS NOT CO RRECT THAT THE ASSESSEE HAD NOT PRESSED THIS GROUND BEFORE CIT(A). IT WAS ARGUED THAT THE ASSESSEE WAS PRESSING THE GROUND WHICH SHOULD BE DE CIDED ON MERIT. THE LD. DR ON THE OTHER HAND SUPPORTED THE OR DER OF CIT(A). ITA NO. 4086/M/11 A.Y. 01-02 6 3.2 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTE R CAREFULLY. THE DISPUTE IS REGARDING ESTIMATION OF DISAL LOWANCE OF EXPENSES OUT OF TELEPHONE EXPENSES, STAFF WELFARE EXPENSE S AND CONVEYANCE AND TRAVELLING EXPENSES FOR PERSONAL USE. CIT( A) CONFIRMED THE DISALLOWANCE ON THE GROUND THAT THE ISSUE WAS NOT PRESSED BEFORE HIM. THOUGH THE LD. AR FOR THE ASSESSEE SUB MITTED BEFORE US THAT THE ISSUE HAD BEEN PRESSED BEFORE CIT(A), THERE IS NO EVIDENCE PRODUCED TO SUBSTANTIATE THE CLAIM. WE THEREFOR E, SEE NO INFIRMITY IN THE ORDER OF CIT(A) AND THE SAME IS UPHE LD. 4. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07.12.2012. SD/- SD/- (VIJAY PAL RAO ) JUDICIAL MEMBER (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 07.12.2012. JV. ITA NO. 4086/M/11 A.Y. 01-02 7 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR F BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.