Puran Associates Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 4711/DEL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3070 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2012-2013
• Appeal Filed On: 02-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Business expenditure; Earning of tax free income
• Section: 14A; 10

Judgement Text

1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F : NEW DELHI BEFORE SHRI SUDHANSHU SRIVASTAVA , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO . 4711 /DEL/20 16 A Y 2012 - 13 O R D E R PER PRASHANT MAHARISHI, ACCOUNTANT MEMBER 1 . THIS APPEAL IS FILED BY ASSESSEE AGAINST THE ORDER OF CIT (A PPEALS ) - 7, NEW DELHI DATED 27.06 .2016. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL : 1 . THAT THE CIT(APPEALS) HAS ERRED ON FACTS AND UNDER LAW IN RECONFIRMING THE ADDITIONS MADE BY THE LD AO FOR THE ASSESSMENT YEAR 2012 - 13 WITHOUT HAVING REGARDS TO THE SUBMISSIONS MADE BY THE ASSESSE. PURAN ASSOCIATES PVT. LTD. 4 TH FLOOR, PUNJABI BHAWAN, 10, ROUSE AVENUE NEW DELHI 110002 PAN AAACP0458J VS ACIT CIRCLE 20 (1) NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY : SH. M. P. RASTOGI, ADVOCATE RESPONDENT BY: SH. ATIQ AHMAD, SR. DR DATE OF HEARING 16 /0 1 /2018 DATE OF PRONOUNCEMENT 2 6 /03/2018 2 2 . THAT THE CIT (APPEALS)/ AO HAS ERRED ON FACTS AND UNDER TH E LAW IN TAXING THE INCOME FROM LONG TERM LISTED EQUIT I ES OF RS 25,13,359 AS BUSINESS INCOME, WITHOUT GOING INTO THE FACTS OF THE RELEVANT YEAR AND IGNORING THE CBDT S CIRCULAR. 3 . THAT THE CIT (APPEALS)/AO HAS ERRED ON FACTS AND IN LAW IN INCREASING THE DISA LLOWANCE U/S 14A BY RS 43,75,447, WITHOUT FACTORING THE ASSESSE HIMSELF HAD DISALLOWED RS 767286. 4 . THAT THE CIT (APPEALS)/ AO HAS ERRED ON FACTS AND IN LAW IN DISALLOWING THE BUSINESS EXPENSES OF RS 15,68,000 ON ADHOC BASIS WITHOUT GIVING REASONS AS TO HOW THE FIGURE OF RS 15,68,000 IS WORKED OUT. 5 . THAT THE ABOVE GROUNDS OF APPEAL ARE INDEPENDENT AND WITHOUT PREJUDICE TO ONE ANOTHER. YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR WITHDRAW ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING. 2 . THE GROUND NO.1 AND NO. 5 ARE GENERAL IN NATURE AND THEREFORE, THEY ARE DISMISSED. 3 . THE GROUND NO. 2 OF THE APPEAL IS AGAINST THE ORDER OF THE ASSESSING OFFICER WHEREIN THE LONG TERM CAPITAL GAIN EARNED FROM LISTED SECURITIES OF RS. 25 , 13 , 359 / - IS TREATED AS BUSINESS INCOME. THE LD. CIT (A) CONFIRMED THE SAME BY HOLDING THAT FOR A.Y. 2006 - 07 AND 2008 - 09 THE COORDINATE BENCH H AS HELD THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF SHARE AS DEALER IN SHARE AND NOT AN INVESTOR. THEREFORE, THE LONG T ERM CAPITAL GAIN WAS CHARGED TO TAX AS BUSINESS INCOME. 4 . THE LD. AR SUBMITTED THAT THE CENTRAL BOARD OF DIRECT TAXES HAS ISSUED A CIRC U L AR NO. 6 DATED 29.02.2016 WHEREIN IT HAS BEEN HELD THAT IN 3 RESPECT OF LISTED SHARES HELD FOR MORE THAN 12 MONTHS IMMEDI ATELY PRECEDING THE DATE OF TRANSFER , IF THE ASSESSEE DESIRES TO TREAT THE INCOME FROM TRANSFER OF THOSE SHARES AS CAPITAL GAIN , IT SHALL NOT BE PUT TO DISPUTE BY THE ASSESSING OFFICER. HE THEREFORE, SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THAT CIRC ULAR . 5 . T HE LD. DR RELIED UPON THE ORDER OF LOWER AUTHORITIES AND ALSO THE DECISION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE. 6 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND ALSO PURSUED THE ORDERS OF THE LOWER AUTHORITIES. THE ASSESSEE IS NON BANKING FINANCIAL COMPANY AND INCOME FROM CAPITAL GAINS WHERE INVESTMENT MADE IN EQUITIES ARE SOLD. THE ASSESSEE TREATED LONG TERM CAPITAL GAIN FROM SALE OF EQUITIES HELD FOR MORE THAN 12 MONTHS EXEMPT U/S 10 (38) OF THE ACT. THE ASSESS ING OFFICER TREATED IT AS BUSINESS INCOME. NOW, THE ABOVE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY CIRC ULAR NO. 6 DATED 29.02.2016 ISSUED BY CBDT. THE ABOVE CIRCULAR SPEAKS THAT IF SHARES ARE HELD FOR MORE THAN 12 MONTHS, IF ASSESSEE SHOWS IT AS LTCG, SAME SHOULD BE ACCEPTED. 7 . IN VIEW OF ABOVE FACTS WE ARE OF THE OPINION THAT WHEN THE ASSESSEE HIMSELF HAS TREATED THE INCOME ARISING FROM SALE OF SECURITIES HELD FOR MORE THAN 12 MONTHS AS CAPITAL GAINS , THERE IS NO REASON TO DISPUTE IT BY ASSESSING OFFICER. 8 . IN VIEW OF THIS GROUND NO. 2 OF THE APPEAL OF THE ASSESSEE IS ALLOWED HOLDING THAT LONG TERM GAIN FROM LISTED SECURITIES OF RS. 25 , 13 , 359/ - IS 4 CHARGEABLE TO TAX UNDER THE HEAD CAPITAL GAIN AND NO T BUS INESS INCOME. GROUND NO. 2OF THE APPEAL IS ALLOWED. 9 . GROUND NO. 3 IS WITH RESPECT TO DISALLOWANCE U/S 14 A. DURING THE YEAR ASSESSEE HAS EARNED AN EXEMPT INCOME OF RS. 26 , 43 , 57 , 693/ - . THE LD. ASSESSING OFFICER QUESTIONED THE ASSESSEE REGARDING DISALLOWANC E U/S 14 A OF THE ACT WHERE THE ASSESSEE HAS DISALLOWED A SUM OF RS. 767286/ - ON HIS OWN. THE ASSESSEE REPLIED VIDE LETTER DATED 22.01.2015. THE LD. ASSESSING OFFICER NOTED THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE AND THEREFORE INVOKED R ULE 8D AND DISALLOWED RS. 43 , 75 , 447/ - U/S 14A. THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT (A). BEFORE THE CIT (A) ASSESSEE SHOWED THE AMOUNT OF DISALLOWANCE WOR KED OUT BY ON ITS OWN RS.7 , 67 , 286/ - . THE ASSESSEE CONTENDED THAT DIVIDEND IS RECEIVED FROM DABUR INDIA LIMITED CONSTITUTES 85% OF THE EXEMPT INCOME ON WHICH NO EXPENSES ARE INCURRED AND THEREFORE, DISALLOWANCE ON THAT CANNOT BE MADE. HOWEVER, THE LD. CIT (A) CONFIRMED THE ABOVE DISALLOWANCE. THEREFORE, ASSESSEE IS IN APPEAL BEFORE US. 10 . THE LD. AR SUBMITTED THAT THERE IS NO SATISFACTION RECORDED BY THE LD. ASSESSING OFFICER THAT HOW THE DISALLOWANCE MADE BY THE ASSESSEE OF RS. 7 , 67 , 286/ - IS INCORRECT. THEREFORE, IN ABSENCE OF ANY SATISFACTION THE DISALLOWANCE CANNOT BE MADE BY INVOKING R ULE 8D OF THE INCOME RULES. HE FURTHER REITERATED ON MERITS HIS SUBMISSION BEFORE THE CIT (A). 5 11 . THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE CIT (A) AND THE ASSESSING OFFICER. 12 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AS WELL AS PERUSED THE ORDERS OF THE LOWER AUTHORITIES. THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS. 26,43,57,693/ - WHICH IS EXEMPT U/S 10 (34) OF THE ACT. WHILE F ILLING THE RETURN OF INCOME ASSESSEE ON ITS OWN DISALLOWED RS. 767286/ - U/S 14 A. THE ASSESSEE HAS GIVEN A DETAILED COMPUTATION FOR THE S A M E . 13 . THE LD. ASSESSING OFFICER DID NOT SAY THAT HOW THE CLAIM OF THE ASSESSEE IS NOT CORRECT. ASSESSING OFFICER HAS NOT RECORDED SATISFACTION THAT HOW THE CLAIM OF THE ASSESSEE IS INCORRECT. HE ALSO DID NOT COMMENT UPON THE ARGUMENT OF THE ASSESSEE THAT ON THE DIVIDEND RECEIVED FROM DABUR LIMITED NO EXPENDITURE IS INCURRED. THE PROVISIONS OF SECTI ON 14 A ( 2 ) MANDATORILY PROVIDES THAT LD. ASSESSING OFFICER SHOULD RECORD SATISFACTION ABOUT THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE. IN THE PRESENT CASE THERE IS NO SUCH SATISFACTION RECORDED BY THE ASSESSING OFFICER. IN VIEW OF THIS THE ADDITION M ADE BY THE LD. ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT (A) CANNOT BE SUSTAINED. ACCORDINGLY GROUND NO.3 OF THE APPEAL OF THE ASSESSEE IS ALLOWED AND ASSESSING OFFICER IS DIRECTED TO DELETE THE DISALLOWANCE OF RS. 4375447/ - . 14 . THE NEXT GROUND OF APP EAL IS RELATED TO DISALLOWANCE OF RS. 1568000/ - ON AD - HOC BASIS. THE ASSESSEE HAS INCURRED RS. 13,93,000/ - UNDER THE HEAD BUSINESS PROMOTION EXPENSES OF RS. 16,01,689/ - UNDER TRAVELLING EXPENSES. 6 THE ASSESSEE COULD NOT PRODUCE BILLS AND VOUCHERS OF THE A BOVE BUSINESS EXPENSES AND THEREFORE, DISALLOWANCE OF RS. 15,68000/ - WAS MADE U/S 37. BEFORE THE LD. CIT (A) THE ASSESSEE SUBMITTED THAT EXPENSES HAVE BEEN INCURRED FOR THE PURPOSES OF THE BUSINESS HOWEVER, THE DETAILS OF SUCH EXPENDITURE WAS NOT PRODUCE D. THEREFORE, HE CONFIRMED THE DISALLOWANCE. 15 . THE LD. AR , BEFORE US ALSO SUBMITTED THE SAME ARGUMENTS. HOWEVER, NO DETAILS WERE PRODUCED BEFORE US TO O . 16 . THE LD. DR SUBMITTED THAT THE ASSESSEE IS NOT PRODUCING DETAILS BEFORE CONCURRENT AUTHORITIES THERE IS NO QUESTION OF ALLOWING THOSE EXPENDITURE. 17 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS. THE ASSESSEE HAS INCURRED EXPENDITURE OF RS. 1399300/ - AND RS. 175000/ - OUT OF TRAVELLING EXPENSES WERE DISALLOWED AS ASSESSEE COULD NOT PRODUCE THE BILLS A ND VOUCHERS FOR THESE EXPENSES BEFORE THE LOWER AUTHORITIES. NO SUCH DETAILS WAS ALSO PRODUCED BEFORE US. WHETHER AN EXPENDITURE IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR NOT CAN BE DETERMINED ONLY IF THE NECESSARY BILLS AND VOUCHERS FOR THOSE EXPENDITURE CAN BE VERIFIED. AS ASSESSEE HAS FAILED TO PRODUCE T HIS DETAILS BEFORE THE LOWER AUTHORITIES WE FIND NO INFIRMITY IN THE ORDER OF CIT (A) IN CONFIRMING THE ABOVE DISALLOWANCE. 18 . IN THE RESULT GROUND NO. 4 OF THE APPEAL IS DISMISSED. 19 . IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 7 20 . ORDER PRONOUNCED IN THE OPEN COURT ON 2 6 .03.2018 . S D / - S D / - ( SUDHANSHU SRIVASTAVA ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 6 /03/2018 *NEHA* COPY FORWARDED TO 1 . APPLICANT 2 . RESPONDENT 3 . CIT 4 . CIT (A) 5 . DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI 8 1. DRAFT DICTATED ON 26 .0 3 .2018 PS 2. DRAFT PLACED BEFORE AUTHOR 26 .0 3 .2018 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.