ACIT, New Delhi V. M/s. Har Sai Investment Ltd., New Delhi

ITA 4590/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4020 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 11-05-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 15-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTY
• Assessee Lawyers: N O N E

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH C DELHI ] BEFORE SHRI I. P. BANSAL, JM AND SHRI K. D. RA NJAN, AM I. T. APPEAL NO. 4590 (DEL) OF 2010. ASSESSMENT YEAR : 2001-02. ASSTT. COMMISSIONER OF INCOME-TAX, M/S. HAR SAI INVESTMENT LTD., C I R C L E : 12 (1), VS. 2 ND FLOOR, GOPALA TOWER, N E W D E L H I. 25 RAJENDRA PLACE, N E W D E L H I. P A N / G I R NO. AAA CH 3112 P. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : N O N E; DEPARTMENT BY : MS. MONA MOHANTY, SR. D. R. O R D E R. PER K. D. RANJAN, AM : THIS APPEAL BY THE REVENUE FOR ASSESSMENT YEAR 200 1-02 ARISES OUT OF ORDER OF THE LD. CIT (APPEALS)VIII, NEW DELHI. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE READ AS FOLLOWS :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE ORDER OF THE LD. CIT (APPEALS) IS WRONG, PERVERSE, ILLEGAL AND A GAINST THE PROVISIONS OF LAW WHICH IS LIABLE TO BE SET ASIDE; 2. ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT (APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS. 7,36,781/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SHARE TRANSFER EXPE NSES; 3. ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT (APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS. 82,67,497/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXPENDITURE ON SPEC ULATIVE BUSINESS. 2 I. T. APPEAL NO. 4590 (DEL) OF 2010 . 3. AT THE TIME OF HEARING, NONE ATTENDED ON BEHALF OF THE ASSESSEE. DURING THE COURSE OF HEARING, THE LD. SR. DR WAS REQUESTED TO INTIMATE W HETHER THE ASSESSEE HAS FILED APPEAL AGAINST THE ORDER OF THE LD. CIT (APPEALS). IT WAS INFORME D BY THE LD. SR. DR AS WELL AS BENCH CLERK THAT AS PER RECORD, NO APPEAL HAS BEEN FILED BY THE ASSE SSEE. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. SR. DR WAS HEARD AND THE APPEAL IS BEING DISPOSED OF ON MERITS. 4. THE FIRST ISSUE FOR CONSIDERATION RELATES TO ADD ITION OF RS.7,36,781/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SHARE TRANSFER EXPENSES. THE ASSESSING OFFICER TREATED THE AMOUNT INCURRED ON SHARE TRANSFERS CAPITAL IN NATURE AND DISALLOWED THE SAME. ON APPEAL IT WAS ARGUED BY THE ASSESSEE THAT THE EXPENDITURE INCURRED ON SHARE TRA NSFER WAS REVENUE IN NATURE. THE ASSESSING OFFICER HAD NOT EXAMINED THE BALANCE SHEET WHERE TH ERE WAS SUBSTANTIAL TRADING IN THE STOCKS AND THERE WAS DOWNWARD TREND IN INVESTMENTS. THE EXPEN DITURE WAS INCURRED FOR BUSINESS PURPOSES. THE LD. CIT (APPEALS) ON CONSIDERATION OF SUBMISSIO NS MADE BY THE ASSESSEE OBSERVED THAT THE EXPENDITURE WAS INCURRED ON DAY-TO-DAY TRADING ACTI VITIES OF THE ASSESSEE AND NO PART OF IT WAS FORMING INVESTMENT ACTIVITIES OF THE ASSESSEE. THE LD. CIT (A) ACCORDINGLY DELETED THE ADDITION. 5. WE HAVE HEARD THE LD. SR. DR. DURING THE COURSE OF HEARING, THE REVENUE COULD NOT PRODUCE ANY EVIDENCE TO CONTROVERT THE FINDINGS OF THE LD. CIT (A) THAT THE SHARE TRANSFER EXPENDITURE RELATED TO DAY-TO-DAY TRADING ACTIVITIE S OF THE ASSESSEE AND NO PART OF IT WAS FORMING PART OF INVESTMENT ACTIVITIES OF THE ASSESSEE. IN THE ABSENCE OF ANY MATERIAL TO PROVE THAT THE EXPENDITURE WAS INCURRED ON ACCOUNT OF INVESTMENT A CTIVITIES, DISALLOWANCE OF SHARE TRANSFER EXPENSES COULD NOT BE MADE. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT (APPEALS) DELETING THE ADDITION. 6. THE NEXT ISSUE FOR CONSIDERATION RELATES TO DELE TING THE ADDITION OF RS.82,67,497/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXPENDITURE ON SPECULATIVE BUSINESS. THE ASSESSING OFFICER DISALLOWED THE AMOUNT OF RS.82,67,497/-, BEING 77 P ER CENT OF RS.1,07,10,147/- ON ACCOUNT OF 3 I. T. APPEAL NO. 4590 (DEL) OF 2010 . MANAGEMENT / ADMINISTRATIVE EXPENSES RELATING TO DE ALING IN SHARES. ON APPEAL, IT WAS SUBMITTED BY THE ASSESSEE THAT AMOUNT OF RS.1,07,10,147/- WAS SPENT BY THE ASSESSEE ON MANAGEMENT/ADMINISTRATIVE EXPENSES ON DEALING IN SH ARES. THE ASSESSING OFFICER HAD NO BASIS FOR PROPORTIONATE ALLOCATION AND DISALLOWANCE ON ACCOUN T OF SPECULATIVE AND NON-SPECULATIVE BUSINESS ACTIVITIES CARRIED ON BY THE ASSESSEE. TH EREFORE, THE DISALLOWANCE WAS NOT JUSTIFIED. IT WAS ALSO SUBMITTED THAT THE ASSESSING OFFICER HAD N OT MADE ANY ATTEMPT TO ESTABLISH NEXUS BETWEEN THE EXPENSES AND NORMAL COURSE OF BUSINESS WHERE THOSE EXPENSES HAVE BEEN INCURRED. THE AO HAD CHOSEN SHORTEST ROUTE BY ESTIMATING THE VARIOUS HEADS FOR VARIOUS PURPOSES. COMPETE DETAILS WERE MADE AVAILABLE TO THE AO DURIN G THE COURSE OF HEARING. THE AO HAD NOT POINTED OUT AS TO WHAT WOULD FALL UNDER PROVISIONS OF SECTION 14-A OF THE ACT. IT WAS ALSO SUBMITTED THAT THE ALLOCATION OF EXPENSES DONE BY T HE AO IN RESPECT OF SPECULATIVE AND NON- SPECULATIVE BUSINESS COULD NOT BE DONE. IT WAS FUR THER SUBMITTED THAT THE AO HAD NOT EXCLUDED THOSE EXPENSES WHICH HE HAS OTHERWISE DISALLOWED. IN OTHER WORDS, THE EXPENDITURE OF RS.47,063/- ON ACCOUNT OF PRELIMINARY EXPENSES; RS. 50,510/- ON ACCOUNT OF BROKERAGE AND RS.22,34,800/- DISALLOWED UNDER SECTION 14-A OF THE ACT SHOULD HAVE BEEN EXCLUDED. THE BALANCE EXPENSES WERE AT RS.83,77,774/-. THE LD. A R OF THE ASSESSEE FURTHER SUBMITTED THAT THE EXPENSES OUT OF THE BALANCE AMOUNT COULD NOT BE DIS ALLOWED, WHICH RELATES TO DEPOSITORY EXPENSES OF RS.17,45,268/-, WHICH WERE INCURRED IN RESPECT OF DELIVERY BASED TRANSACTION AND. 7. THE LD. CIT (APPEALS) AFTER CONSIDERING THE REPL Y DELETED THE ADDITION BY OBSERVING AS UNDER :- 7.4 I HAVE CAREFULLY PERUSED THE SUBMISSIONS MAD E ON BEHALF OF THE APPELLANT COMPANY AND THE FINDINGS RECORDED BY THE LD. AO. O N CONSIDERATION, I FIND THAT THE AO WAS NOT JUSTIFIED IN DISALLOWING 77 PER CENT OF THE TOTAL EXPENDITURE OF RS.1,07,07,147/- WITHOUT TAKING INTO CONSIDERATION THE FACT THAT SEPARATE DISALLOWANCES ON ACCOUNT OF PRELIMINARY EXPENSES, B ROKERAGE AND EXPENSES RELATING TO EARNING OF DIVIDEND INCOME HAVE ALREADY BEEN MADE BY HIM. THEREFORE, I AM IN AGREEMENT WITH THE LD. COUNSEL T HAT BEFORE MAKING DISALLOWANCE ON PROPORTIONATE BASIS, THE AO SHOULD EXCLUDE EXPENSES OF RS.17,45,268/-, AS THE SAME EXCLUSIVELY RELATE TO D ELIVERY BASED TRANSACTION, INTEREST OF RS.34,19,176/- AND DISALLOWANCE OF RS.1 3,30,669/- MADE UNDER SECTION 14-A OF THE ACT [SUBJECT TO VERIFICATION AT THE END OF THE AO]. IN VIEW OF ABOVE, 4 I. T. APPEAL NO. 4590 (DEL) OF 2010 . THE ASSESSING OFFICER IS DIRECTED TO CALCULATE DISA LLOWANCE IN TERMS OF AFORESAID OBSERVATIONS AND ALLOW CONSEQUENTIAL RELIEF TO THE APPELLANT COMPANY. 8. WE HAVE HEARD THE LD. SR. DR. FROM THE ABOVE, W E FIND THAT THE ASSESSING OFFICER HAD DISALLOWED PROPORTIONATE EXPENSES WITHOUT TAKING IN TO CONSIDERATION THE PRELIMINARY EXPENSES, THE BROKERAGE, DISALLOWANCE UNDER SECTION 14-A, DEP OSITORY EXPENSES, INTEREST ETC. THEREFORE, THE LD. CIT (A) IN OUR CONSIDERED OPINION WAS JUSTIFIED IN DIRECTING THE AO TO EXCLUDE THE AMOUNTS FOR THE PURPOSE OF PROPORTIONATE DISALLOWANCE. ACC ORDINGLY, WE DO NOT FIND ANY INFIRMITY IN DIRECTING THE ASSESSING OFFICER TO RECOMPUTE THE DI SALLOWANCE. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 20 TH MAY, 2011. SD/- SD/- [ I. P. BANSAL ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 20 TH MAY, 2011. *MEHTA * COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT.