DCIT, BHILWARA V. M/s. Unique Precured Retreaders, BHILWARA

ITA 415/JODH/2013

• Counselvise Citation: 41523314 RSA 2013
• Duration Of Justice: 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 06-03-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 01-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Keywords: Deemed to accrue or arise in india

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K.SAINI, ACCOUNTANT MEMBER ITA NO. 415/JU/2013 ASSESSMENT YEAR: 2009-10 THE DY. CIT VS. M/S UNIQUE PRECURED RETREAD ERS CIRCLE NEAR RAILWAY CROSSING BHILWARA BHILWARA PAN NO. AAAFU 5593 J (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SUNIL PORWAL DEPARTMENT BY : SHRI N.A. JOSHI, DR DATE OF HEARING : 06.03.2014 DATE OF PRONOUNCEMENT : 13.03.2014 ORDER PER HARI OM MARATHA, J.M. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE CIT(A), AJMER, DATED 05.04.2013 FO R A.Y 2009-2010. 2 2. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: TH E LD. CIT(A), AJMER IN THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE, HAS ERRED IN: 1. DELETING THE ADDITION OF RS. 31,30,592/- AS MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF CLAIM OF LOSS IN SHARE TRADING, WITHOUT PROPERLY APPRECIATIN G THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. DELETING THE ADDITION OF RS. 50,000/- AS MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OUT OF THE CLAIMED EXPENSES WITHOUT PROPERLY APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. DELETING THE ADDITION OF RS. 50,000/- AS MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OUT OF THE CLAIMED SALARY EXPENSES WITHOUT PROPERLY APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. 3 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS A PARTNERSHIP FIRM WHICH CARRIES ON THE BUSINESS OF TYRE RETREADING [COLD]. FOR A.Y. 2008- 09, THE ASSESSEE FILED ITS RETURN OF INCOME [ROI] ON 26.9.2 009 DECLARING TOTAL INCOME AT RS. 81,74,150/-. THE BOO KS OF ACCOUNT OF THE ASSESSEE WERE TEST CHECKED AND A PER USAL OF PROFIT AND LOSS ACCOUNT REVEALED THAT THE ASSESSEE HAS CLAIMED LOSS ON SHARES AT RS. 31,30,592/-. THE A.O . WAS OF THE VIEW THAT THIS SHARE LOSS CANNOT BE ALLOWED AS THE ASSESSEES BUSINESS LOSS AS NO SUCH LOSS OR SHARE B USINESS HAS BEEN DISCLOSED IN THE PAST AND FUTURE YEAR BY T HE ASSESSEE. THEREFORE, HE HAS TREATED THE SHARE LOSS AS NOT GENUINE. WHEN QUERIED, IT WAS REPLIED FROM THE ASSE SSEES SIDE ON 17.8.2011 THAT SHARE TRANSACTIONS WERE DONE ELECTRONICALLY ON SCREEN. AGAIN THE A.O REQUIRED T HE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE TO EXPLAI N AS TO HOW THIS LOSS IS ALLOWABLE IN THE CASE OF THIS ASSE SSEE. THE SHARE DEALING IS FOUND IN THE NAME OF SHRI RAVINDER KUMAR GARG WHO IS A PARTNER OF THE FIRM. A BANK STATEMEN T WAS FURNISHED AND COPY OF AGREEMENT VIDE WHICH THE 4 PARTNERSHIP DEED WAS STATED TO HAVE BEEN MODIFIED T O INCLUDE DEALING IN SHARES AS ONE OF ITS BUSINESS WI TH THE NOTING THAT THIS BUSINESS SHALL BE DONE IN THE NAME OF THE PARTNER SHRI RAVINDER KUMAR GARG AND WHICH IS DATED 30.11.2007 WAS FILED BEFORE THE A.O. THE A.O. NOTE D THAT THIS AGREEMENT DATED 30.11.2007 IS NEITHER CERTIFIE D BY NOTARY OR ANY OTHER CONCERNED AUTHORITY. HE FOUND THAT THE ASSESSEE HAD NEVER SUBMITTED THAT THE AGREEMENT WITH THE OBSERVATION THAT AS PER THE ACT, ANY SUBSEQUENT CHANGE(S) MADE IN THE CONSTITUTION OF THE FIRM, ETC . HAS TO BE INTIMATED TO THE A.O. AND FAILING WHICH, IT CANN OT BE CONSIDERED. ACCORDINGLY, THE A.O. HAS HELD HAT THIS BUSINESS DOES NOT PERTAIN TO THE ASSESSEE-FIRM. AS A RESULT, HE HAS DISALLOWED LOSS IN SHARE BUSINESS OF RS. 31,30,592/- AND HAS ADDED THIS AMOUNT TO THE DECLAR ED AMOUNT OF THE FIRM IN THIS YEAR. FURTHER, FROM THE PROFIT AND LOSS ACCOUNT, IT WAS FOUND THAT THE ASSESSEE HA S CLAIMED CERTAIN EXPENSES FROM WHICH LUMPSUM DISALLOWANCE HAVE BEEN MADE LIKE A DISALLOWANCE OF RS. 50,000/- OUT OF CLAIM ON VOUCHERS AND SIMILARLY, 5 DISALLOWANCE OF RS. 50,000/- OUT OF SALARY EXPENSES HAS BEEN MADE. THE A.O. ALSO MADE TRADING ADDITION OF RS. 39,27,253/-. THE COMMERCIAL TAXES DEPARTMENT ISSUED FORM NO. 16A ON 26.3.2007 CREDITING INTEREST OF RS. 91,49,303/- ON THE REFUND AND TDS WAS DEDUCTED AT R S. 9,74,473/-. HOWEVER, IN THE ROI, THE ASSESSEE HAS S HOWN ONLY INTEREST RECEIPT OF 52,22,050/- AND REMAINING INTEREST OF RS. 39,27,253/- HAS NOT BEEN OFFERED FOR TAXATIO N PURPOSES. IT WAS REPLIED THAT ON INTEREST RECEIPT OF REFUND ON RS. 35,11,946/- AFTER DEDUCTING TDS OF RS. 4,04, 507/- AND ADDITION OF DD COMMISSION OF RS. 10,800/- HAS B EEN SHOWN. IT WAS STATED THAT INTEREST ON VAT REFUND I S NOT FIXED, THEREFORE, THE INTEREST HAS AND WHEN IS RECE IVED, WAS CREDITED TO THE PROFIT AND LOSS ACCOUNT IN THE SAME F.Y. THEREFORE, THIS AMOUNT OF RS. 39,27,253/- AND TDS ON IT, WHICH IS CREDITED BY THE COMMERCIAL TAXES DEPAR TMENT DURING A.Y. 2009-10 HAS BEEN DEEMED INCOME OF THE ASSESSEE OF THIS YEAR. 6 4. AGAINST THE ABOVE STATED ADDITIONS, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) WHO HAS GIVE N PART RELIEF TO THE ASSESSEE. NOW THE REVENUE IS AGGRIEVE D AND HAS FILED THIS APPEAL BY RAISING THE ABOVE EXTRACTE D GROUNDS OF APPEAL. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAREFULLY PERUSED THE ENTIRE MATERIAL ON RECORD. T HE MAIN GROUND OF APPEAL IS GROUND NO. 1 WHICH RELATES TO D ELETION OF ADDITION ON ACCOUNT OF DISALLOWANCE ON CLAIM OF LOSS IN SHARE TRADING. THE FACTS OF THIS ISSUE HAVE ALREADY BEEN NARRATED IN THE FORMER PART OF THIS ORDER. 6. BOTH THE PARTIES HAVE REITERATED THEIR EARLIER S TANDS BEFORE US ALSO. IT WAS ARGUED BY THE LD. D.R. THAT THE LOSS IN SHARE TRADING CANNOT BE ALLOWED AS THE ASSESSEE S BUSINESS LOSS SINCE THE ASSESSEE HAS NOT BEEN CARRY ING ON SUCH A BUSINESS EITHER IN THE PAST OR IN THE FUTURE . ON THE OTHER HAND, THE LD. A.R. HAS SUPPORTED THE FINDING OF THE LD. CIT(A). 7 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE HAVE FOUND THAT THE ASSESSEE PRODUCED A COPY OF PARTNERS HIP DEED BEFORE THE LD. CIT(A) WHICH WAS ALSO VETTED BY THE A.O. AS PER PROVISIONS OF SECTION 184(1) OF THE AC T, A FIRM SHALL BE ASSESSED AS SUCH WITH REFERENCE TO PARTNER SHIP DEED OR INDIVIDUAL SHARES OF THE PARTNERS SPECIFIED THEREIN. ONLY CHANGE IN THE CONSTITUTION OF THE FIRM OR SHAR E OF THE PARTNERS MENTIONED IN THE DEED. SAME HAS TO BE FUR NISHED BY WAY OF CERTIFIED COPY OF REVISED INSTRUMENT OF PARTNERSHIP ALONGWITH RETURN OF INCOME [ROI] FOR A. Y. RELEVANT TO SUCH PREVIOUS YEAR AND ALL THE PROVISIO NS OF THIS SECTION SHALL APPLY ACCORDINGLY. SUB-SECTION (5) OF SECTION 184 STATES THAT NOTWITHSTANDING ANYTHING PR OVIDED BY THIS ACT, WHERE IN RESPECT OF ANY A.Y. THERE IS ON THE PART OF THE FIRM ANY SUCH FAILURE NO DEDUCTION BY W AY OF PAYMENT OF INTEREST, SALARY COMMISSION OR BONUS OR REMUNERATION SHALL BE ALLOWED IN COMPUTING CHARGEAB LE INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINES S OR PROFESSION. THUS, IN VIEW OF SECTION 184, THE ASS ESSEE IS ESSENTIALLY REQUIRED TO FILE COPY OF PARTNERSHIP DE ED 8 EXCEPT IN CASES WHERE CHANGE IN OBJECT CLAUSE IS MA DE. BUT NO CHANGE IN THE CONSTITUTION OR IN THE SHARES OF THE PARTNERS IS MADE. IT IS FOUND THAT THE ASSESSEE FI RM HAS AMENDED THE OBJECT CLAUSE OF THE INSTRUMENT OF PARTNERSHIP AND HAS ADDED TO THE EXISTING BUSINESS OF TYRE RETREADING AND THIS CHANGE HAS BEEN CARRIED OUT BY MUTUAL CONSENT OF PARTNERS. THERE IS NO CHANGE IN THE SHAR E PARTNER OR CONSTITUTION OF THE FIRM OR PARTNERSHIP. WITH THE PERMISSION AND CONSENT OF THE PARTNERS OF THE F IRM, CHANGE IN BUSINESS IS PERMISSIBLE UNDER THE ACT. I T IS FOUND THAT WHILE REGISTERING THE FIRM FOR SALE OF S HARES, IT APPLIED FOR REGISTRATION IN THE NAME OF PARTNER SHR I RAVINDRA KUMAR GARG, AS PER AMENDED DEED OF PARTNER SHIP. WE HAVE FOUND FORCE IN THE SUBMISSION OF THE LD. A. R. THAT THE REGISTRATION IN THE NAME OF THE PARTNER IS AS P ER REQUIREMENT AND SEBI RESTRICTIONS WHICH SAYS THAT O NLY INDIVIDUALS, OR FIRM THROUGH INDIVIDUALS, SHALL BE REGISTERED FOR SHARE BUSINESS. ACCORDINGLY, THE FIRM HAS NO O PTION TO GET IT REGISTERED THROUGH PARTNER. WE HAVE FOUND T HAT ALL THE TRANSACTIONS IN THE SHARE BUSINESS HAVE BEEN MA DE BY 9 THE FIRM THROUGH ITS BANK ACCOUNT ONLY. SECTION 43 (5) OF THE ACT SPECIFIES THAT TRADING IN DERIVATIVES IS BU SINESS ACTIVITY. THE A.O. HAS ALSO ACCEPTED AS A PERMISSI BLE BUSINESS TRANSACTIONS IN SHARES. HOWEVER, ONLY BEC AUSE THE AMENDED OBJECT OF THE FIRM WAS NOT BROUGHT BEFO RE HIM, HE HAS NOT ACCEPTED THIS LOSS AS RELATING TO A SSESSEES BUSINESS. THE OBJECTION REGARDING REGISTRATION AND CARRYING ON BUSINESS IN THE NAME OF THE PARTNER ALSO STANDS EXPLAINED AS ABOVE. THEREFORE, THERE REMAINS NO HI TCH IN ALLOWING THIS LOSS AS BUSINESS LOSS OF THE ASSESSEE FIRM. THE FINDING GIVEN BY THE LD. CIT(A) IS CORRECT AND WE CONFIRM THE SAME. ACCORDINGLY, WE UPHOLD THE ACTIO N OF THE LD. CIT(A) IN DELETING THE DISALLOWANCE OF LOSS OF RS. 31,30,593/- MADE BY THE A.O. IN ASSESSEES HANDS AN D DISMISS GROUND NO. 1 OF REVENUES APPEAL. 8. GROUND NOS. 2 AND 3 RELATE TO DELETION OF RS. 50 ,000/- MADE ON ADHOC BASIS OUT OF EXPENSES CLAIMED IN THE ACCOUNT OF CLAIMED EXPENSES AND IN SALARY EXPENS ES. 10 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE HAVE FOUND THAT THESE ARE SIMPLICITER ADHOC DISALLOWANCE S WHICH ARE BASED ON NO LOGIC AND REASONS. WE CANNOT APPRO VE SUCH ADHOC DISALLOWANCE AND THEREFORE, HOLD THAT TH E LD. CIT(A) HAS CORRECTLY DELETED THE SO MADE LUMPSUM ADDITIONS WITHOUT ANY VERIFICATION OF FACTS. AS A RESULT, WE CANNOT ALLOW GROUND NOS. 2 AND 3 OF THIS APPEAL AS WELL. 10. GROUND NO. 4 IS FORMAL AND DOES NOT REQUIRE ANY ADJUDICATION. 11. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 13.03.2014. SD/- SD/- (N.K.SAINI) [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13 TH MARCH, 2014 VL/- 11 COPY TO: THE APPELLANT THE RESPONDENT THE CIT BY ORDER THE CIT(A) THE DR ASSISTANT REGISTRAR ITAT, JODHPUR