The DCIT, 1(1), Indore V. M/s. Arihant Capital Markets Ltd., Indore

ITA 482/IND/2013

• Counselvise Citation: 48222714 RSA 2013
• Duration Of Justice: 2 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 17-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G S GAUTAM
• Assessee Lawyers: MANISH VAIDYA CAS
• Keywords: Gift; Business income; Business expenditure; Opportunity of being heard; Rule of consistency; Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, J.M. AND SHRI B.C.MEENA, A.M. I.T.A.NOS. 482 & 483/IND/2013 A.YS. : 2008-09 & 2009-10 DY. CIT, 1(1), INDORE VS M/S. ARIHANT CAPITAL MARKETS LTD., INDORE P.A.N. NO AAB CA6832G APPELLANT BY SHRI G.S.GAUTAM, DR RESPONDENT BY SHRI AJAY TULSIYAN AND SHRI MANISH VAIDYA, CAS DATE OF HEARING : 27.07.2015 DATE OF PRONOUNCEMENT : 20 .08.2015 -: 2: - 2 O R D E R PER GARASIA, J.M. THESE APPEALS OF THE REVENUE ARE DIRECTED AGAINST T HE SEPARATE ORDERS OF CIT(A)-I, INDORE, BOTH DATED 22. 2.2013 FOR ASSESSMENT YEARS 2008-09 & 2009-10. 2. THE FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE REVENU E IN THE ASSESSMENT YEARS 2008-09 :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD . CIT(A)-I ERRED IN DIRECTING TO RESTRICT THE DISALLOWANCE OF EXPENDITURE OF RS. 7,24,583/- COMPUTED BY THE ASSESSING OFFICER AS PER RULE 8D TO RS. 1,00,000/- ON AN ESTIMATED BASIS WITHOUT APPRECIATING THE FACT THAT IN THE INSTANT CASE THE DISALLOWANCE WAS TO BE COMPUTED AS PER RULE 8D OF THE INCOME TAX RULES R.W.S. 14A OF THE INCOME-TAX ACT, 1961. 1(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A)-I ERRED IN DIRECTING TO RESTRICT THE -: 3: - 3 DISALLOWANCE OF EXPENDITURE OF RS. 7,24,583/- COMPUTED BY THE ASSESSING OFFICER AS PER RULE 8D TO RS. 1,00,000/- ON AN ESTIMATED BASIS BY RELYING UPON THE RATION OF THE DECISION OF GODREJ BOYCE LTD.AND MUMBAI I.T.A.T. DECISION IN THE CASE OF YATISH TRADING CO. WITHOUT APPRECIATING THE FACT THAT THE RATION OF THE AFORESAID DECISIONS PERTAINE D TO THE POSITION OF LAW PRIOR TO INSERTION OF RULE 8 D R.W.S. 14A W.E.F. 01.04.2008. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN DIRECTING TO CONSIDER THE BUSINESS INCOME ON SALE OF SECURITIES OF RS. 1,29,82,129/- A S SHORT TERM CAPITAL GAIN WITHOUT APPRECIATING THE FACTS THAT MAIN BUSINESS OF THE ASSESSEE WAS TRADING IN SHARES AND SAID DECISION HAS NOT BEEN ACCEPTED BY THE DEPARTMENT. 3. THE SHORT FACTS OF THE CASE ARE AS UNDER. -: 4: - 4 4. THE ASSESSEE IN HIS PROFIT AND LOSS ACCOUNT HAS SHO WN THE DIVIDEND INCOME OF RS. 21,46,254/- CLAIMED AS E XEMPT U/S 10(34) OF THE INCOME-TAX ACT, 1961. THE ASSESSEE WA S ASKED TO FURNISH THE REASON FOR NON-DISALLOWANCE OF EXPENSES FOR EARNING TAX FREE INCOME AS PER SECTION 14A. THE ASS ESSEE HAS TAKEN THE CONTENTION THAT NO DISALLOWANCE U/S 14A I S CALLED FOR IN THE CASE. THE ASSESSEE HAS NOT MADE ANY INVE STMENT TO EARN THE DIVIDEND INCOME. HOWEVER, THE ASSESSEE COM PANY DISALLOWED RS. 1 LAC IN COMPUTATION OF INCOME. THE ASSESSEES BUSINESS OF SHARE PROFIT IN TRADING AND INVESTMENT IN ASSETS. IT HAS PURCHASED THE SHARES WITH SOLE INTENTION OF EIT HER TRADING OR INVESTMENT PURPOSE. THE INCOME FROM TRADING IS N OT EXEMPT AND IT IS TAXABLE AS BUSINESS INCOME. THEREFORE, NO DISALLOWANCE U/S 14A IS NECESSARY. THE AO AFTER CON SIDERING THE REPLY DISALLOWED RS. 7,24,583/- OBSERVING AS UN DER :- THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTABLE IN THE VIEW BECAUSE OF THE FACT THAT IT CANNOT BE RULED OU T THAT SOME SORT OF TIME, ENERGY AND RESOURCES ARE UTILIZE D FOR THE PURPOSE OF MAKING INVESTMENT AND KEEPING A TRAC K OF SAME THEREFORE THE ASSESSEES SUBMISSION THAT NO -: 5: - 5 EXPENSES ARE BEING INCURRED FOR THE INVESTMENT ACTI VITY IS NOT ACCEPTABLE. THIS IS ALSO WORTH TO MENTION HE RE THAT THE DISALLOWANCE UNDER SECTION 14A IS WARRANT EVEN IF THE ASSESSEE HAS NO TAX FREE DIVIDEND INCOM E. FURTHER SUB-SECTION (3) OF SEC. 14A, SPECIFIES THAT DISALLOWANCE UNDER THE SECTION HAS TO BE DETERMINED BY THE ASSESSING OFFICE WHEN ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURRED BY HIM IN RELATION TO INCOME WHICH DOES NOT FORMS PART OF TOTAL INCOME UN DER THIS ACT. RELYING ON THE DECISION OF DAGA CAPITAL (SUPRA), TH E DISALLOWANCE AS PER SEC.NA READ WITH RULE 8D WORKS OUT AS UNDER: DETAILS OF EXPENSES DISALLOWABLE, BEING INCURRED IN RELATION TO EXEMPT INCOME U/S 14A (READ WITH RULE 8 D) OF THE INCOME TAX ACT 1961 FOR THE FINANCIAL YEAR 2007 -08 I.E. ASSESSMENT YEAR 2008-09 PARTICULARS AMOUNT A EXPENSES DIRECTLY RELATABLE (RULE 8D(2)(I)) 0 -: 6: - 6 B INTEREST EXPENSES WHICH IS NOT DIRECTLY RELA1 ABLE (RULE 8D(2)(II) AMOUNT OF AVERAGE VALUE OF INVESTMENTS INTEREST EXP. X ON WHICH INCOME IS EXEMPT 3247972 X 91939854 - 364884 AVERAGE OF TOTAL ASSETS 818391525 C OTHER EXPENSES WHICH IS NOT DIRECTLY RELATABLE (R ULE 8D(2)(III) 172% OF AVERAGE VALUE OF INVESTMENTS ON WHICH INCOME IS EXEMPT 91939854 X 0.50 = 459699 100 LESS ALREADY DISALLOWED IN COMPUTATION OF INCOME. 1 00000 724583 THUS, IN VIEW OF THE PROVISIONS OF RULE 8D READ WIT H SECTION 14A OF RS. 724583/- ARE BEING DISALLOWED AN D ADDED OF THE INCOME OF THE ASSESSEE. 5. THE MATTER CARRIED TO LD. CIT(A). THE LD. CIT(A) HA S ALLOWED THE APPEAL PARTLY. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT DURING THE COURSE OF HEARING, THE LD. AUTHORIZED -: 7: - 7 REPRESENTATIVE HAS FILED THE INVESTMENT PATTERNS FO R BOTH THE ASSESSMENT YEARS IN 2008-2009 AND 2009-10, WHICH IS PRODUCED BEFORE US BY WAY OF PAPER BOOK, WHICH READ S AS UNDER :- THE ASSESSEE'S MAJOR LONG TERM INVESTMENTS ARE IN UNLISTED/ UNQUOTED COMPANIES, WHICH IS MADE SOLELY FOR THE FURTHERANCE OF THE BUSINESS AND NOT WITH AN INTENTION TO EARN T AX FREE INCOME. THESE INVESTMENTS ARE LONG TERM AND ONCE MA DE ARE NORMALLY NOT DISTURBED OVER NUMBER OF YEARS. IT WIL L BE WORTHWHILE TO DRAW KIND ATTENTION TO THE INVESTMENT PATTERN OF THE ASSESSEE WHICH IS AS UNDER:- INVESTMENT PATTERN SCHEDULE V OF BALANCE SHEET ON PAGE 21 OF PAPER BOO K PARTICULARS MAR - 08 MAR - 09 A. LONG TERM INVESTMENTS - UNQUOTED (I) SHARES OF BOMBAY STOCK EXCHANGE 11965000 11965000 (II) SHARES OF SAURASHTRA STOCK EXCHANGE 505000 505000 12470000 12470000 B. INVESTMENT IN UNQUOTED COMPANIES (I) ARIHANT FINCAP LIMITED 0 8125000 (II) AKJ SECURITIES LTD. 0 483000 (III) SARASWATH CO - OPERATE BANK 5000 5000 (IV) ARIHANT FUTURE & COMMODITIES LTD. 2501745 0 INVESTMENT IN SUBSIDARIES ARIHANT FINANCIAL SERVICES LTD. 20545235 20494000 23051980 29107000 TOTAL INVESTMENT IN UNQUOTED SHARES - (A + B) 35521980 41577000 C. INVESTMENT IN QUOTED EQUITY SHARES 811361 27520335 D. QUOTED PREFERENCE SHARES 134500 0 E. QUOTED BONDS 0 1816578 -: 8: - 8 INVESTMENT IN QUOTED SHARES 945861 29336913 TOTAL INVESTMENTS 36467841 70913913 7. MOREOVER, THE ASSESSEE HAS ALSO FILED THE COMPARATI VE TABLE OF FINANCIAL POSITION FOR BOTH THE YEARS 2008 -09 AND 2009-10, WHICH READ AS UNDER :- COMPARATIVE TABLE OF VITAL FINANCIALS PARTICULARS MARCH 08 MARCH 09 CAPITAL 35522000 35522000 SHARE CAPITAL SUSPENSE 29548500 0 RESERVE & SURPLUS 325743124 79888054 390813624 115410054 LOAN FUNDS OD AGAINST FDS 20237662 0 INVESTMENTS 36467841 70913913 STOCK OF SHARES 38396770 38101183 FIXED DEPOSITS 366225000 50975000 -: 9: - 9 8. WE FIND FROM THE ABOVE TABLE THAT THE ASSESSEE HAS TAKEN THE CONTENTION THAT HE HAS NOT MADE ANY BORRO WING FOR INVESTMENT IN SALE AND HE HAS MADE THE INVESTMENT I N SALES FROM ITS OWN SOURCES AND NOT FROM BORROWED FUND. TH E ASSESSEE HAD UNSECURED LOANS ALSO AND ASSESSEE HAS ALSO BORROWED FUNDS OF SOME OF THE MONEY BY OVERDRAFT. T HEREFORE, THE AO HAS NOT VERIFIED TO THESE TRANSACTIONS OF TH E ASSESSEE, WHILE DISALLOWING BY APPLYING UNDER RULE 8D. THEREF ORE, WE REVERSE THE FINDING OF THE CIT(A) AND RESTORE THE M ATTER BACK TO THE FILE OF AO TO VERIFY WHETHER THE ASSESSEE HAS I NCURRED ANY INTEREST EXPENDITURE OR NOT. MOREOVER, THE ASSESSEE HAS TAKEN OVERDRAFT FROM THE BANK. THEREFORE, WHETHER THE ASS ESSEE HAS PAID ANY INTEREST ON FDS OR NOT AND AFTER VERIFYING THE PROFIT AND LOSS ACCOUNT, THE AO IS DIRECTED TO DECIDE THE DISALLOWANCE U/S 14A READ WITH RULE 8D AFTER CONSIDERING ALL THE JUDICIAL DECISIONS AS PER LAW. THE AO IS FURTHER DIRECTED TO GIVE PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE. 9. IN THE RESULT, BOTH THE APPEALS FOR ASSESSMENT YEAR S 2008-09 AND 2009-10 ON GROUND NOS. 1 & 2 ARE ALLOWE D FOR STATISTICAL PURPOSES. -: 10: - 10 GROUND NO. 2 OF I.T.A.NO. 482/IND/2013 : 10. THE AO HAS TREATED THE INCOME ON SHORT TERM CAPITAL GAINS OF RS. 1,29,82,129/-. THE AO HAS TREATED THIS AS BUSINESS EXPENDITURE BY OBSERVING AS UNDER :- THE ASSESSEE HAS SHOWN PROFIT FROM SHORT TERM CAPITAL GAINS AMOUNTING TO RS. 2.64 LAKH CHARGEABLE @ 10% BEING STT PAID. DURING THE COURSE OF HEARING TH E ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE STCG MA Y NOT BE TREATED AS TRADING PROFIT AND BE TAXED AT TH E NORMAL RATS. THE ASSESSEE COMPANY RELIED UPON THE CIRCULAR NO. 4 OF 2007 DATED 5.6.20076 ISSUED BY THE CBDT. IT WAS CLAIMED THAT THE ASSESSEE HAS MAINTAINED TWO PORTFO LIOS FOR TRADING AND INVESTMENTS ACTIVITY AS VISIBLE FRO M THE BALANCE SHEET. THE CLAIM OF THE ASSESSEE FOR STCG CANNOT BE ALLOWE D. BECAUSE OF THE FOLLOWING :- FROM THE DETAILS FILED DURING, THE COURSE OF THE ASSESSMENT PROCEEDINGS IT HAS BEEN NOTICED THAT THE SECURITIES IN WHICH THE ASSESSEE HAS SHOWN SHORT TERM CAPITAL GAINS HAVE ALSO BEEN SIMULTANEOUSLY -: 11: - 11 TRADED BY IT DURING THE YEAR. RATHER THERE IS NO DISTINCTION BETWEEN THE MANNER IN WHICH THE SECURITIES WERE TRADED AND IN WHICH STCG HAVE BEEN SHOWN. MOST OF THE TIMES THE ASSESSEE HAS MADE COMBINED PURCHASES AND SALES FROM THE SAME SETTLEMENT NUMBERS. OUT OF THESE TRANSACTIONS PART OF THOSE PURCHASES OR SALES HAVE BEEN SHOWN AS STCG WHICH HAVE RESULTED HIGHER PROFIT AND REST HAVE BEE N SHOW AS TRADING.LT HAS ALSO BEEN NOTICED THAT IN BETWEEN THE SALE PURCHASE DATES FOR ME STCG, THE ASSESSEE HAS ALSO DONE TRADING IN THE SAME SECURITIES. THIS CAN HE CONSIDERED AS AN AFTERTHOUG HT THAT THE ASSESSEE HAS OUT OF THE ITEMS TRADED DURIN G THE YEAR, HAS PICKED UP SOME OF TRANSACTIONS FOR CLAIMING STCG AND REMAINING TRANSACTIONS HAVE BEEN SHOWN AS TRACING. THE CLAIM OF THE ASSESSEE THAT VOLUME OF SHARES WHICH RESULTED IN STCG ARC SMALLER IS IN A WAV CORRECT TO THE EXTENT THAT MOST OF THE TRANSACTIONS WERE HAND PICKED OUT OF THE VOLUMINOUS TRADING TRANSACTIONS -: 12: - 12 IT HAS ALSO BEEN NOTICED THAT IN MOST OF THE SECURI TIES IN WHICH THE ASSESSEE HAS SHOWN STCG HAD BEEN PURCHASED AND THEN SOLD DURING THE YEAR ITSELF AND THERE REMAINED NO STOCK, EXCEPT IN FEW CASES THE ASSESSEE IS EARNED DIVIDEND INCOME OF RS. 13,12,802 DURING THE FINANCIAL YEAR. IT HAS BEEN NOTICED THAT MAJORITY OF DIVIDEND HAS BEEN EARNED B Y THE COMPANY OUT OF THE STOCK WHICH WERE KEPT BY IT FOR TRADING PURPOSES ON THE RECORD DATE. THUS IT CANNOT BE CLAIMED THAT THE ASSESSEE HAD THE INTENTION TO EARN THE DIVIDEND AND THEREFORE- MADE THE INVESTMENTS. MOREOVER, THE ASSESSEE CO IS A BROKER HAVING SUBSTANTIAL BROKERAGE INCOME AS WELL AS SHARE TRADING INCOME WHICH ALSO GIVE JUSTIFICATION THAT INVESTMENT IS NEVER A WAY OF THINKING. IN VIEW OF ABOVE DISCUSSIONS AND CONSIDERING THE FREQUENCY AND THE VOLUME OF TRANSACTIONS CARRIED OU T BY THE ASSESSEE, THE SHORT TERM CAPITAL GAIN OF RS. 2. 64 LAKH IS BEING HELD AS INCOME FROM THE TRADING ACTIV ITIES -: 13: - 13 TO BE TAXED AT NORMAL RATES. 11. THE MATTER CARRIED TO LD. CIT(A). THE LD. CIT(A) HAS ALLOWED THE CLAIM BY OBSERVING AS UNDER :- 6.2 FURTHER, THE APPELLANT AR DRAWN MY ATTENTION TO THE FACT THAT FROM AY 05-06 TO AY 09-10 ASSESSMENTS WERE BEING COMPLETED U/S 143(3) AND IN ALL THE YEAR S THE TREATMENT OF SHORT TERM CAPITAL GAIN WAS DISTUR BED BY TREATING THE SAME AS INCOME FROM BUSINESS. IT WA S STRESSED THAT THE CLAIM OF LONG TERM CAPITAL GAIN W AS NOT DISTURBED AND WAS ACCEPTED AND THE VALUATION AND PRESENTATION OF INVESTMENT AS APPEARING ON THE BALANCE SHEET DATE WAS ALSO ACCEPTED. IT WAS ARGUED BY THE AR PRESENT THAT HAD THE AO BEEN OF THE OPINI ON THAT THE ASSESSEE HAS ALTERED THE TRANSACTIONS IN SHARES FROM BUSINESS ACTIVITY TO INVESTMENT ACTIVIT Y, IT WAS IMPERATIVE ON HIS PART TO EXAMINE THE ENTIRE SE T OF TRANSACTIONS OF THE SAME ANALOGY. THE MERE FACT THA T THE CLAIM OF LTCG HAS NOT BEEN DISTURBED AND HAS -: 14: - 14 BEEN ACCEPTED AND ALSO THAT THE VALUATION AND PRESENTATION SHOWN IN THE BALANCE SHEET HAS ALSO BEEN ACCEPTED SHOULD BE SUFFICIENT TO ALLOW SHORT T ERM CAPITAL GAINS AS SUCH. ATTENTION WAS ALSO DRAWN TO THE ORDER PASSED BY C1T (APPEALS) - II, INDORE IN T HIS VERY CASE FOR AY 05-06 & AY 06-07 WHEREIN THE TREATMENT GIVEN BY THE APPELLANT IN THE COMPUTATION OF INCOME WAS DIRECTED TO BE ACCEPTED. AGAINST THE SAI D ORDER OF CIT(A) - II INDORE, THE REVENUE FILED SECO ND APPEAL BEFORE THE HONBLE ITAT, INDORE WHICH IN ITS CONSOLIDATED ORDER FOR AY 05-06 & AY 06-07 PRONOUNCED ON 30.09.11 HAS UPHELD THE FINDINGS AND DECISION OF CIT (A) ON THIS ISSUE AND HAS DISMISSED THE APPEAL OF REVENUE. 6.3 HAVING TAKEN NOTE OF THE AOS ORDER AS WELL AS THE APPELLANTS AR SUBMISSION I AM OF THE CONSIDERED VI EW THAT THIS GROUND OF APPEAL IS COVERED IN FAVOUR OF THE APPELLANT BY JURISDICTIONAL ITAT DECISION IN THE APPELLANT OWN CASE IN AY 04-05 & AY 2005-06, HENCE -: 15: - 15 FOLLOWING THE RULE OF CONSISTENCY THE APPELLANT THI S GROUND OF APPEAL IS DECIDED IN THE FAVOUR OF THE APPELLANT. ACCORDINGLY, THE APPELLANT THIS GROUND O F APPEAL IS ALLOWED 12. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE LD. CIT(A) HAS TREATED THE SHORT T ERM CAPITAL GAIN BY RELYING UPON THE DECISION OF ASSESSEES OWN CASE PASSED BY THE INDORE TRIBUNAL IN I.T.A.NOS. 286 & 287/IND/2010, WHEREIN THE TRIBUNAL HAS ACCEPTED THE TRANSACTION BY THE ASSESSEE TO BE SHORT TERM CAPITA L GAINS. THE TRIBUNAL HAS DECIDED THIS ISSUE AND HELD AS UNDER : - 8. ON CONSIDERATION OF ABOVE IN THE LIGHT OF THE FACTS & CIRCUMSTANCES, SUBMISSIONS AND JUDICIAL PRONOUNCEMENTS (SUPRA), WE FIND THAT THE ASSESSEE H AD SUCCESSFULLY EXPLAINED EACH AND EVERY GENERAL DEFEC T POINTED OUT BY THE AO AS ALSO RECORDED BY THE LD. C IT(A) ABOVE. THE ASSESSEE HAD ALREADY FURNISHED THE COMPL ETE DESIRED DETAILS REGARDING THE CLAIM, WHICH WERE NOT CONTROVERTED BY THE REVENUE THROUGH ANY EVIDENCE. -: 16: - 16 FURTHER, THE ASSESSEE WAS ASKED BY THIS BENCH TO FI LE THE SUMMARY OF SHORT TERM CAPITAL GAIN FOR THE AY 2005- 06 & 2006-07 SHOWING THE PERIOD OF HOLDING OF SHARES. TH E SAME WAS FILED BY THE ASSESSEE AS UNDER: SUMMARY OF SHORT TERM CAPITAL GAIN FOR THE AY 2005- 06 PROFIT FROM HOLDING SCRIPT < 15 DAYS < 1 MONTH < 3 MONTHS <6 MONTHS < 1 YEAR TOTAL LIC HOUSING FINANCE 75,752 24,937 100,689 TAMIL NADU NEWSPRINT 148,786 148,786 BANSWARA SYNTHETICS (4,211) (2,289) 23,634 17,134 BOMBAY DYEING 302,063 302,063 GUJRAT ALAKAI 195,142 195,142 TCS 302,947 302,947 TATA INVESTMENT CORP. 591,827 591,827 BANK OF MAHARASHTRA 583,197 583,197 LDBI BANK 2,626,119 2,626,119 CHAMBEL FRETILIZERS - 542,675 542,675 NTPC 1,710,495 1,710,495 LESS: EXPENSES INCURRED (3,995) TOTAL 522,390 192,852 1,526,542 4,879,289 0 7,117,079 SUMMARY OF SHORT TERM CAPITAL GAIN FOR THE AY 2006- 07 PROFIT FROM HOLDING SCRIPT < 15 DAYS < 1 MONTH < 3 MONTHS < 6 MONTHS < 1 YEAR TOTAL BANSWARA SYNTHETICS 0 0 79,376 87,018 681,395 847,789 LDBI BANK 228,393 1,685,340 15,840 1,929,574 -: 17: - 17 BOC 0 844,117 844,117 JAYSNREE TEA 0 778,241 981,386 1,759,627 SUTLEJ 0 585,470 585,470 RELIANCE MUTUAL FUND 0 324,976 PORTFOLIO MANAGEMENT SERVICE 0 356,612 TOTAL 0 0 1,151,886 3,136,069 1,678,621 6,648,164 '' 9. FROM THE ABOVE, IT IS CLEAR THAT SHARES HAVE BEEN HELD FOR A CONSIDERABLE PERIOD BEFORE SELLING. MOST OF SHORT TERM CAPITAL GAINS HAVE BEEN EARNED ON SHARES , WHICH HAVE BEEN HELD FOR MORE THAN ONE MONTH, IT CLEARLY ESTABLISHES THE FACT THAT THESE SHARES WERE HELD AS INVESTMENT AND NOT FOR TRADING OR BUSINESS. HOWE VER, THE AO HAD MADE THE ADDITION ON PRESUMPTION BASIS WITHOUT POINTING OUT ANY SPECIFIC DEFECTS. THE AO D ID NOT BRING ON RECORD ANY SINGLE IOTA OF EVIDENCE IN SUPPORT OF DISALLOWANCE WHEREAS THE ASSESSEE HAS SUCCESSFULLY MET OUT WITH THE GENERAL DEFECTS POINT ED OUT BY THE LD. AO. 10. IN VIEW OF THE FACTS & CIRCUMSTANCES AS DISCUSSED ABOVE AND JUDICIAL PRONOUNCEMENTS, WE ARE OF THE CONSIDERED VIEW THAT LD. CIT(A) HAS RIGHTLY DELETED THE -: 18: - 18 ADDITION IN BOTH THE AYS. WE CONFIRM THE ORDERS OF THE LD. CIT(A) FOR BOTH THE AYS UNDER CONSIDERATION. 13. WE, RESPECTFULLY FOLLOWING THE SAME, DISMISS THE DEPARTMENTAL APPEAL. I.T.A.NO. 483/IND/2013 : 14. GROUND NOS. 1 & 2 ARE COMMON TO THE GROUNDS TAKEN IN I.T.A.NO. 482/IND/2013, WHICH WE HAVE ALREADY DE CIDED, AS PER DECISION GIVEN IN THAT APPEAL. 15. GROUND NO. 3 RELATES TO DISALLOWANCE OF EXPENSES AT RS. 6,00,000/- OUT OF THE COMMUNICATION EXP. BUSINE SS DEV., MISC. EXPENSES, OFFICE EXPENSES, TRAVEL EXPENSES AN D STAFF WELFARE EXPENSES. 16. THE AO HAS DISALLOWED THE EXPENDITURE ON V-SAT EXPENSES AT RS. 1,00,000/-, BUSINESS DEVELOPMENT EX PENSES AT RS. 1,00,000/-, MISC. EXPENSES AT RS. 1,00,000/- , OFFICE EXPENSES AT RS. 50,000/-, TRAVELLING AND CONVEYANCE EXPENSES AT RS. 2,00,000/- AND STAFF WELFARE EXPENS ES AT RS. 50,000/-, TOTALLING TO RS. 6 LAKHS.. -: 19: - 19 17. THE MATTER CARRIED TO LD. CIT(A). THE LD. CIT(A) H AS ALLOWED THE EXPENSES. 18. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE LD. CIT(A) HAS DELETED THE ADDITIO N OF RS. 6 LAKHS ON THE GROUND THAT THE AUDITOR HAS NOT POINTE D OUT ANY DEFECT IN HIS REPORT U/S 44AB OF THE INCOME-TAX ACT , 1961. THEREFORE, HE HAS DELETED THE EXPENDITURE, BUT WE H AVE GONE THROUGH THE ORDER OF AO AND IN RESPECT OF COMMUNICA TION INCLUDING V-SAT EXPENSES, THE ASSESSEE HAS PAID A S UM OF RS. 35,83,030/- ON ACCOUNT OF POSTAGE AND COURIER CHARG ES. THE ASSESSEE HAS MADE CASH PAYMENT FOR WHICH SATISFACTO RY REPLY WAS NOT GIVEN. THEREFORE, AD HOC DISALLOWANCE OF RS . 1 LAC WAS MADE. THEREFORE, THE LD. CIT(A) HAS DELETED THE ENT IRE AMOUNT, BUT WE RESTRICT THE DISALLOWANCE AT RS. 50,000/- ON ACCOUNT OF UNEXPLAINED EXPENSES. IN RESPECT OF BUSINESS DEVELO PMENT EXPENSES, THE ASSESSEE HAS NOT GIVEN ANY SATISFACTO RY EXPLANATION IN RESPECT OF GIFT DISTRIBUTED TO VARIO US ATTENDEE OF THE CONFERENCE. THEREFORE, WE ALSO DISALLOW RS. 50, 000/- ON -: 20: - 20 THIS AND WE ALLOW THE MISC.EXPENSES, OFFICE EXPENSE S AND TRAVELLING AND CONVEYANCE EXPENSES. 19. IN THE RESULT, THE DEPARTMENTAL APPEAL IS PARTLY ALLOWED ON GROUND NO. 3. 20. GROUND NO. 4 RELATES TO DISALLOWANCE OF EXPENSES OF RS. 4,91,641/- ON ACCOUNT OF PRIOR PERIOD EXPENSES MAIN LY PAID ON DELAY OF DEPOSIT OF STAMP DUTY. 21. THE ASSESSEE HAS CLAIMED PRIOR PERIOD EXPENSES AT R S. 4,91,641/-. THE ASSESSEE WAS ASKED TO JUSTIFY THE C LAIM OF PRIOR PERIOD EXPENSES. THE ASSESSEE HAS TAKEN THE C ONTENTION THAT THERE WAS SOME LIABILITY, WHICH WAS DETERMINED IN THE YEAR UNDER CONSIDERATION. THEREFORE, THIS AMOUNT WA S PAID. THE AO HAS CONSIDERING THE PAYMENT OF INTEREST ON S TAMP DUTY AND LIABILITY OF PAYMENT OF INTEREST AND WHICH WAS NOT PROVED. THEREFORE, HE DISALLOWED RS. 4,91,641/-. 22. THE MATTER CARRIED TO LD. CIT(A). THE LD. CIT(A) HA S ALLOWED THE SAME. 23. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSEE HAS PAID THE INTEREST ON STAMP DUTY, -: 21: - 21 BUT NO EVIDENCE WAS PRODUCED BEFORE US. THEREFORE, WE ARE UNABLE TO CONVINCE WITH THE ORDER OF LD. CIT(A). TH EREFORE, WHAT INTEREST EXPENSES HAVE BEEN INCURRED INTEREST, WAS NOT EXPLAINED BEFORE THE AO AND BEFORE THE LD. CIT(A). WE TAKE NOTE OF THIS THAT IF ANY AMOUNT OF INTEREST IS PAID TO SUPERINTENDENT OF STAMPS, MUMBAI ON ACCOUNT OF DELA Y IN DEPOSIT OF STAMP DUTY FOR TRANSACTION MADE IN MAHAR ASHTRA STATE, THEN IT IS ALLOWABLE EXPENDITURE, BUT IT IS THE DUTY OF THE ASSESSEE TO FURNISH THE SAME BEFORE THE AO THE AMOU NT OF INTEREST PAID TO THE GOVERNMENT. IF THE INTEREST IS PAID FOR COMPENSATION IN NATURE, THEN IT MAY BE ALLOWED AS P ER LAW. THEREFORE, WE REVERSE THE FINDING OF THE LD. CIT(A) AND RESTORE THIS ISSUE TO THE FILE OF AO TO VERIFY THE SAME AND ASSESSEE IS DIRECTED TO GIVE EXACT AMOUNT OF COMPENSATION AND I NTEREST PAID TO MAHARASHTRA GOVERNMENT AND WITH ALL THE EVI DENCE BEFORE THE AO AND IF THE AO FINDS THAT INTEREST PA YMENT IS MADE OF COMPENSATORY IN NATURE, THEN IT MAY BE ALLO WED. THE AO IS DIRECTED TO DECIDE AS PER LAW. WE FURTHER DIR ECT THE AO TO AFFORD OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. -: 22: - 22 24. IN THE RESULT, THE APPEAL ON GROUND NO. 4 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 25. IN THE RESULT, BOTH THE DEPARTMENTAL APPEALS ARE PA RTLY ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 20 TH AUGUST, 2015. SD/- (B. C. MEENA) ACCOUNTANT MEMBER SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 20 TH AUGUST, 2015. CPU* 2719