Salora International Ltd., New Delhi V. DCIT, New Delhi

ITA 467/DEL/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1785 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 16-11-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 24-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUJIT KUMAR SENIOR
• Assessee Lawyers: P N MEHTA PARTNER
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G : NEW DELHI) BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI A.T. VARKEY, JUDICIAL MEMBER ITA NO.467/DEL./2013 (ASSESSMENT YEAR : 2008-09) M/S. SALORA INTERNATIONAL LTD., VS. DCIT, CIRCLE 7 (1), D 13/4, OKHLA INDL. AREA PHASE II, NEW DELHI. NEW DELHI. (PAN : AAACS3041G) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P.N. MEHTA, PARTNER REVENUE BY : SHRI SUJIT KUMAR, SENIOR DR DATE OF HEARING : 16.11.2015 DATE OF PRONOUNCEMENT : 30.11.2015 O R D E R PER A.T. VARKEY, JUDICIAL MEMBER : THIS APPEAL, AT THE INSTANCE OF THE ASSESSEE, IS FI LED AGAINST THE ORDER OF CIT (APPEALS)-X, NEW DELHI DATED 17.12.2012 FOR THE ASSESSMENT YEAR 2008- 09. 2. THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE READ AS UNDER :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE COMMISSIONER (A) IS WRONG IN SUSTAINING AN ADDITION OF RS.43.47 LACS MADE BY THE ASSESSING OFFICER ON ACCO UNT OF APPRECIATION IN VALUE OF INVESTMENT IN SHARES OF SA LORA RETAIL ITA NO.467/DEL./2013 2 VENTURES LIMITED ( FORMERLY KNOWN AS FX TECHNOLOGIE S LIMITED). 2. THAT THE APPELLANT DURING ASSESSMENT YEAR 2002-0 3 PROVIDED A SUM OF RS.43.47 LACS IN ITS BOOKS OF ACC OUNT ON ACCOUNT OF DIMINUTION IN VALUE OF SHARES IN THE PRO FIT & LOSS ACCOUNT OF FX TECHNOLOGIES LIMITED (NOW KNOWN AS SA LORA RETAIL VENTURES LIMITED) BUT WHILE SUBMITTING RETUR N OF INCOME ADDED BACK THAT AMOUNT FOR TAX PURPOSES. 3. THAT THE SAID AMOUNT PROVIDED IN 2002-03 WAS RES TORED BACK TO ITS ORIGINAL VALUE DURING THE ASSESSMENT YE AR UNDER APPEAL AND CLAIMED THE SAME AS NOT TAXABLE SINCE TH E AMOUNT WAS NOT CLAIMED AS DEDUCTION IN 2002-03 ASSESSMENT. 4. THAT THE LD. COMMISSIONER (APPEALS) WITHOUT APPRECIATING THE FACTS OF THE CASE SUSTAINED ADDITI ON MADE BY THE ASSESSING OFFICER. 5. THAT THE ORDER OF THE LD. COMMISSIONER (APPEALS) IN UPHOLDING THE ADDITION MADE BY THE ASSESSING OFFICE R IS AGAINST THE LAW & FACTS OF THE CASE. 3. BRIEF FACTS OF THE AFORESAID GROUNDS ARE THAT TH E ASSESSEE IS A WIDELY HELD PUBLIC LIMITED COMPANY WHOSE SHARES ARE QUOTED AT STOCK EXCHANGE ENGAGED IN THE BUSINESS OF MANUFACTURE OF CTVS, ITS COMPONENTS AND TRADING IN COMPUTERS AND OTHER ELECTRONIC GOODS. THE RETUR N OF INCOME WAS FILED ON 17.12.2008 DECLARING INCOME OF RS.31,73,45,620/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER THE ACT). THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND PURSUANT THERE TO, AN ORDER U/S 143(3) DATED 22.12.2010 WAS MADE AT AN INCOME OF RS.32,50, 16,230/- BY INTER ALIA ITA NO.467/DEL./2013 3 MAKING AN ADDITION OF RS.43,47,000/- REPRESENTING D IMINUTION IN VALUE OF INVESTMENT WRITTEN BACK. 3.1 AS REGARDS THE ABOVE ADDITION, THE AO OBSERVED THAT ON PERUSAL OF ACCOUNTS FILED BY THE ASSESSEE, IT WAS REVEALED THA T ASSESSEE HAD ADDED RS.43.47 LACS, AS DIMINUTION IN INVESTMENT VALUE, I N THE PROFIT BEFORE EXTRA ORDINARY ITEMS IN ORDER TO ARRIVE AT PROFIT BEFORE TAX. THE AO FOUND THAT THE SAID FIGURE (PROFIT BEFORE TAX) CAME TO RS.33.5 CRO RES, HOWEVER, WHILE COMPUTING THE TAXABLE INCOME, ASSESSEE HAD REDUCED THE SAID AMOUNT FROM THE PROFIT BEFORE TAX AND THIS RESULTED INTO CLAIM OF R S. 43.47 LACS AS DIMINUTION IN INVESTMENT. THE AO OBSERVED THAT AS A MATTER OF FAC T, SUCH PROVISIONS WERE NOT ASCERTAINED LIABILITY, THEREFORE, COULD NOT BE ALLOWED AS PER THE ACT. THE AO IN THIS REGARD PLACED RELIANCE ON THE DECISION O F HON'BLE SUPREME COURT IN THE CASE OF INDIAN MOLASSES COMPANY PVT LTD VS CIT. HE FURTHER OBSERVED THAT A DISTINCTION IS MADE BETWEEN AN ACTUAL LIABIL ITY IN PRAESENTI AND A LIABILITY DE FUTURO WHICH, FOR THE TIME BEING, IS O NLY CONTINGENT. THE FORMER IS DEDUCTIBLE BUT NOT THE LATTER. HE OBSERVED THAT TH E CASE WHICH ILLUSTRATES THIS DISTINCTION IS PETER MERCHANT LTD. VS. STEDEFORD (1 948) 30 TC 496 (CA) AND NO DOUBT, THAT CASE WAS DECIDED UNDER THE SYSTEM OF INCOME-TAX LAWS PREVALENT IN ENGLAND, BUT THE DISTINCTION IS REAL. HE OBSERVED THAT WHAT A PRUDENT TRADER SETS APART TO MEET A LIABILITY, NOT ACTUALLY PRESENT BUT ONLY ITA NO.467/DEL./2013 4 CONTINGENT, CANNOT BEAR THE CHARACTER OF EXPENSES T ILL THE LIABILITY BECOMES REAL. 3.2 SIMILARLY, THE AO OBSERVED THAT IN THE CASE OF CIT VS. GEMINI CASHEW SALES CORPN., THE HONBLE SUPREME COURT HELD THAT, BROADLY STATED, THE PRESENT VALUE ON COMMERCIAL VALUATION OF MONEY TO B ECOME DUE IN FUTURE, UNDER A DEFINITE OBLIGATION, WOULD BE A PERMISSIBLE OUTGOING OR DEDUCTION IN COMPUTING THE TAXABLE PROFITS OF A TRADER EVEN IF I N CERTAIN CONDITIONS THE OBLIGATION MIGHT CEASE TO EXIT BECAUSE OF FORFEITUR E OF THE RIGHT. WHERE, HOWEVER, THE OBLIGATION OF THE TRADER WAS PURELY CO NTINGENT, NO QUESTION OF ESTIMATING ITS PRESENT VALUE MIGHT ARISE, FOR, TO B E A PERMISSIBLE OUTGOING OR ALLOWANCE, THERE MUST IN THE YEAR OF ACCOUNT BE A P RESENT OBLIGATION CAPABLE OF COMMERCIAL VALUATION. ' ACCORDINGLY, THE AO DISALLOWED RS.43.47 LAKHS AS DIMINUTION IN VALUE OF INVESTMENT AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 3.3 AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE T HE FIRST APPELLATE AUTHORITY AND THE LD. CIT (A) CONFIRMED THE ADDITIO N BY OBSERVING AS UNDER :- 6.3. AFTER GOING THROUGH THE OBSERVATIONS OF THE A O AND THE SUBMISSIONS OF THE A.R. OF THE APPELLANT, IT IS CLE AR THAT THE APPELLANT HAS NOT DISPUTED THAT THIS WAS A CONTINGE NT LIABILITY AND COULD NOT BE ALLOWED. THE A.O. WAS FULLY JUSTIF IED IN DISALLOWING THIS CLAIM. THE CONTENTIONS OF THE A.R . OF THE APPELLANT WAS NOT SUPPORTED BY ANY EVIDENCE OR DOCU MENTS AND ARE LIABLE TO BE REJECTED. ACCORDINGLY, THIS GROUN D OF THE APPELLANT IS DISMISSED. ITA NO.467/DEL./2013 5 4. THE ASSESSEE, BEING AGGRIEVED, IS IN APPEAL BEFO RE US AGAINST THE AFORESAID ADDITION OF RS.43.47 LAKHS. 5. LD. AR FOR THE ASSESSEE SUBMITTED THAT DURING TH E COURSE OF APPELLATE PROCEEDINGS, IT WAS SUBMITTED THAT THE AFORESAID AM OUNT HAD BEEN ADDED BACK IN AY 2002-03 AND DURING THE YEAR UNDER CONSIDERATI ON, THE VALUE OF INVESTMENT WAS WRITTEN OFF AND SHOWN AS INCOME IN P & L ACCOUNT, BUT WHILE FILING THE RETURN OF INCOME, THIS AMOUNT WAS REDUCE D FROM THE ASSESSABLE INCOME AS THE DEDUCTION OF THIS AMOUNT WAS NOT CLAI MED IN 2002-03 ASSESSMENT. ACCORDINGLY, HE SUBMITTED THAT THIS DE DUCTION SHOULD BE ALLOWED IN THIS YEAR BUT THE SAME WAS NOT RIGHTLY APPRECIAT ED BY THE AUTHORITIES BELOW. HE, THEREFORE, PLEADED THAT THE ORDERS OF THE AUTHO RITIES BELOW BE SET ASIDE AND THE ADDITION BE DELETED. THE LD DR RELIED ON THE OR DER OF THE LOWER AUTHORITIES AND DOES NOT WANT US TO INTERFERE IN THE SAME. 6. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE AND PE RUSED THE MATERIAL ON RECORD. THE CLAIM OF THE ASSESSEE IS THAT FIGURE OF RS.43,47,360/- REPRESENTED DIMINUTION IN VALUE OF INVESTMENT IN SHARES OF M/S. SALORA RETAIL VENTURES LTD. EARLIER KNOWN AS FX TECHNOLOGIES LTD. HOWEVER , IT HAS BEEN STATED THAT THE DIMINUTION WAS NOT CLAIMED BY THE ASSESSEE IN T HE RETURN FOR AY 2002-03 AND, THEREFORE, CORRESPONDINGLY WHEN THE SAID VALUE HAS BEEN WRITTEN BACK IN THE INSTANT YEAR, THE SAID VALUE SHOULD BE REDUCED FROM THE INCOME OF THE ITA NO.467/DEL./2013 6 INSTANT YEAR. WE ARE IN AGREEMENT WITH THE CLAIM M ADE BY THE ASSESSEE, BUT THE SAME SHOULD BE ALLOWED ONLY IF THE ASSESSEE IS ABLE TO ESTABLISH TO THE SATISFACTION OF THE AO, THAT THE AMOUNT WRITTEN BAC K IN THE INSTANT YEAR PERTAINS TO THE DIMINUTION IN VALUE OF INVESTMENTS IN AY 2002-03. WE MAY ADD HERE, THAT BOTH THE AUTHORITIES BELOW HAD COMMI TTED A FUNDAMENTAL FALLACY IN AS MUCH AS A SUM WRITTEN BACK HAS BEEN TAXED WIT HOUT EVEN COMING TO A CONCLUSION THAT THERE WAS A TRANSFER OF THE INVESTM ENT U/S 45 OF THE ACT. IT IS CLAIMED THAT APPRECIATION/DIMINUTION IN THE VALUE O F INVESTMENT ARE NEITHER TAXABLE NOR DEDUCTIBLE. IT IS ON ACCOUNT OF THIS V ERY PRINCIPLE THAT THE DIMINUTION WAS NOT CLAIMED ACCORDING TO THE ASSESSE E IN AY 2002-03 AND, THEREFORE, CORRESPONDINGLY SUCH WRITE-BACK OF DIMIN UTION IN THE INSTANT YEAR HAS CLAIMED TO BE NOT TAXABLE. IN THE LIGHT OF THE ABOVE, THE ISSUE IS RESTORED TO THE FILE OF AO TO BE DECIDED IN THE LIGHT OF THE DI RECTION HEREIN ABOVE. 7. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 30 TH DAY OF NOVEMBER, 2015. -SD- -SD- (N.K. SAINI) (A.T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 30 TH DAY OF NOVEMBER, 2015 TS ITA NO.467/DEL./2013 7 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A) -X, NEW DELHI . 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.