THE DCIT, Vijayawada V. M/s Optimus Commodity, Vijayawada

ITA 49/VIZ/2015

• Counselvise Citation: [2016] 130 COUNSELVISE.COM (IT) 9635 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 27-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S ARAVINDAKSHAN
• Assessee Lawyers: K RAJESWA R
• Keywords: Depreciation
• Section: 143(3); 154

Judgement Text

ITA NO.49/VIZAG/2015 M/S. OPTIMUS COMMODITY FUTURES PVT. LTD., VIJAYAWAD A 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.49/VIZAG/2015 ( / ASSESSMENT YEAR:2009-10) DCIT, CIRCLE - 1(1), VIJAYAWADA VS. M/S. OPTIMUS COMMODITY FUTURES PVT. LTD., VIJAYAWADA [PAN: AAACO6472B ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI R.S. ARAVINDAKSHAN, DR / RESPONDENT BY : SHRI K. RAJESWAR, AR / DATE OF HEARING : 14.12.2016 / DATE OF PRONOUNCEMENT : 23.12.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST ORDER OF THE CIT(A), VIJAYAWADA DATED 24.11.2014 AND IT PERTAINS TO THE ASSESSMENT YEAR 2009-10. ITA NO.49/VIZAG/2015 M/S. OPTIMUS COMMODITY FUTURES PVT. LTD., VIJAYAWAD A 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF TRADING OF COMMODITY FUTURES FILED ITS RETURN OF INCOME FOR THE ASSESSME NT YEAR 2009-10 ON 29.9.2009 DECLARING TOTAL INCOME OF ` 7,04,990/-. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND THE ASSESSMENT WAS COMP LETED U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT') ON 24.11.2011 DETERMINING TOTAL INCOME OF ` 9,54,990/-. SUBSEQUENTLY, THE A.O. PASSED AN ORDER U/S 154 OF THE ACT AND DETERMI NED TOTAL INCOME OF ` 92,32,780/- INTER-ALIA BY MAKING ADDITIONS TOWARDS DISALLOWANCE OF DEPRECIATION ON MEMBERSHIP CARD, EXCESS DEPRECIATIO N ON PLANT AND MACHINERY AND ADDITIONS TOWARDS BROKERAGE INCOME WH ICH WAS NOT BROUGHT TO TAX. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE HAS CHALLENGED THE VALIDITY OF ORDER PASSED U/S 154 OF THE ACT AND ALSO CHALLENGED THE ISSUES ON MERIT. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE CIT(A) FORWARDED ADDITIONAL EVIDEN CES FILED BY THE ASSESSEE TO THE A.O. FOR HIS COMMENTS. THE A.O. VI DE HIS REMAND REPORT DATED 12 TH NOV14 STATED THAT ADDITIONS MADE BY THE A.O. TOWA RDS DISALLOWANCE OF DEPRECIATION ON MEMBERSHIP CARD, EX CESS DEPRECIATION ITA NO.49/VIZAG/2015 M/S. OPTIMUS COMMODITY FUTURES PVT. LTD., VIJAYAWAD A 3 ON ASSETS AND TAXATION OF BROKERAGE INCOME DO NOT C OME UNDER THE PURVIEW OF SECTION 154 OF THE ACT AND HENCE, THE OR DER PASSED U/S 154 OF THE ACT DOES NOT HOLD GOOD ON THIS COUNT. 4. THE CIT(A) AFTER CONSIDERING THE EVIDENCES FILED BY THE ASSESSEE AND ALSO TAKEN INTO ACCOUNT THE REMAND REPORT OF TH E A.O. HELD THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN INITIATING PR OCEEDINGS U/S 154 OF THE ACT, TO RECTIFY THE MISTAKES, WHICH ARE IN THE NATU RE OF DEBATABLE ISSUES. THE CIT(A) FURTHER HELD THAT UNDER THE PROVISIONS O F SECTION 154 OF THE ACT, RECTIFICATION CAN BE MADE TO RECTIFY ANY MISTA KE APPARENT FROM RECORD. THE MISTAKE MUST BE OBVIOUS, WHICH SHOULD NOT BE SOMETHING, WHICH MAY BE ESTABLISHED BY A LONG DRAWN PROCESS OF REASONING ON THE POINTS ON WHICH THERE MAY BE CONCEIVABLY TWO OPTION S, AS THE ISSUE INVOLVED IN THE RECTIFICATION PROCEEDINGS IS DEBATA BLE ONE AND NOT A MISTAKE APPARENT FROM RECORD, WHICH CANNOT BE RECTI FIED U/S 154 OF THE ACT. ACCORDINGLY, THE ORDER PASSED BY THE A.O. U/S 154 OF THE ACT IS ANNULLED. AGGRIEVED BY THE CIT(A) ORDER, THE REVEN UE IS IN APPEAL BEFORE US. 5. THE LD. D.R. SUBMITTED THAT THE LD. CIT(A) FAILE D TO CONSIDER THE REMARKS OF THE A.O. IN REMAND REPORT, WHEREIN IT WA S CLEARLY STATED THAT DISALLOWANCE OF DEPRECIATION COMES UNDER THE PURVIE W OF SECTION 154 OF ITA NO.49/VIZAG/2015 M/S. OPTIMUS COMMODITY FUTURES PVT. LTD., VIJAYAWAD A 4 THE ACT. THE LD. CIT(A) FAILED TO TAKE COGNIZANCE OF THE FACT THAT DISALLOWANCE OF EXPENDITURE FROM SPECULATION BUSINE SS ALSO COMES UNDER THE PURVIEW OF SECTION 154 OF THE ACT, SINCE, PROFI T ON SPECULATION BUSINESS WAS ARRIVED WITHOUT DEDUCTING THE RELATED EXPENDITURE AND ENTIRE EXPENDITURE WAS ATTRIBUTED TO NON-SPECULATIO N BUSINESS. THE LD. CIT(A) OUGHT TO HAVE CONSIDERED THE FACT THAT NON-D EDUCTION OF EXPENDITURE FROM GROSS PROFIT WHILE ARRIVING AT THE PROFIT FROM SPECULATION BUSINESS IS A MISTAKE APPARENT FROM REC ORD, WHICH NEEDS SOME PROBE FOR THE APPORTIONMENT OF EXPENDITURE. I N THIS REGARD, RELIED UPON THE DECISION OF HONBLE HIGH COURT OF MADRAS, IN CASE OF RAJAN (TS) VS. CED REPORTED IN 69 ITR 342. 6. ON THE OTHER HAND, THE LD. A.R. FOR THE ASSESSEE STRONGLY SUPPORTING ORDER OF THE CIT(A) SUBMITTED THAT THE O RDER PASSED BY THE ASSESSING OFFICER U/S 154 OF THE ACT, IS INVALID AS ADDITIONS MADE BY THE A.O. IS NOT A MISTAKE APPARENT FROM THE FACE OF THE ORDER, BUT ARE DEBATABLE ISSUES WHICH INVOLVES TWO POSSIBLE VIEWS. THE A.R. FURTHER SUBMITTED THAT THE A.O. CAN PASS ORDERS U/S 154 OF THE ACT, TO RECTIFY ANY MISTAKES WHICH ARE APPARENT FROM THE FACE OF TH E ORDER. IN THIS CASE, THE ADDITIONS MADE BY THE A.O. TOWARDS DISALL OWANCE OF DEPRECIATION ON MEMBERSHIP CARD AND DEPRECIATION ON OTHER ASSERTS IS A ITA NO.49/VIZAG/2015 M/S. OPTIMUS COMMODITY FUTURES PVT. LTD., VIJAYAWAD A 5 DEBATABLE ISSUE. WHETHER THE ASSESSEE IS ELIGIBLE FOR DEPRECIATION OR NOT ON MEMBERSHIP CARD IS A HIGHLY DEBATABLE ISSUE WHIC H CAN BE RESOLVED BY LONG PROCESS OF DISCUSSION AND DELIBERATIONS AND ACCORDINGLY, IT WAS INCORRECT ON THE PART OF THE A.O. TO INVOKE THE PRO VISIONS OF SECTION 154 OF THE ACT TO MAKE ADDITIONS. IN SO FAR AS ADDITIO NS TOWARDS PROPORTIONATE ADMINISTRATIVE EXPENSES, THE ASSESSEE SUBMITTED THAT WHETHER ADMINISTRATIVE EXPENDITURE INCURRED BY THE ASSESSEE IS APPORTIONABLE OR NOT TO THE SPECULATIVE BUSINESS AN D NON-SPECULATIVE BUSINESS IS A CLEAR FACT, WHICH CAN BE RESOLVED BY A THOROUGH EXAMINATION OF FACTS CANNOT BE CONSIDERED U/S 154 O F THE ACT. THE CIT(A) AFTER CONSIDERING ALL THESE ASPECTS HAS RIGH TLY ANNULLED THE ASSESSMENT ORDER PASSED BY THE A.O. AND HIS ORDER S HOULD BE UPHELD. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE A.O. INVOKED THE PROVISIONS OF SECTION 154 OF THE A CT, TO RECTIFY THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT, TO M AKE ADDITIONS TOWARDS DISALLOWANCE OF DEPRECIATION ON MEMBERSHIP CARD, DISALLOWANCE OF DEPRECIATION ON OTHER ASSETS AND DISALLOWANCE OF PROPORTIONATE ADMINISTRATIVE EXPENDITURE RELATED TO SPECULATIVE B USINESS. THE A.O. WAS OF THE OPINION THAT THE ASSESSEE IS NOT ELIGIBL E TO CLAIM DEPRECIATION ITA NO.49/VIZAG/2015 M/S. OPTIMUS COMMODITY FUTURES PVT. LTD., VIJAYAWAD A 6 ON MEMBERSHIP CARD. THE A.O. FURTHER WAS OF THE OP INION THAT IN THE ASSESSMENT U/S 143(3) OF THE ACT, EXCESS DEPRECIATI ON WAS ALLOWED ON ASSETS WHICH WAS NOT OTHERWISE ALLOWABLE TO THE ASS ESSEE. SIMILARLY, BROKERAGE REALIZED NOT BELONGING TO SPECULATION LOS S WAS NOT BROUGHT TO TAX. THEREFORE, OPINED THAT THESE ISSUES ARE MISTA KES APPARENT FROM THE RECORD WHICH REQUIRES RECTIFICATION U/S 154 OF THE ACT. IT IS THE CONTENTION OF THE ASSESSEE THAT THE ISSUES INVOLVED SUCH AS DEPRECIATION ON STOCK EXCHANGE MEMBERSHIP CARD, EXCESS DEPRECIAT ION ON ASSETS AND PROPORTIONATE ADMINISTRATIVE EXPENDITURE RELATABLE TO SPECULATIVE AND NON-SPECULATIVE BUSINESS IS A HIGHLY DEBATABLE ISSU E, WHICH CAN BE RESOLVED BY A PROCESS OF DISCUSSION AND DELIBERATIO NS CANNOT BE RECTIFIED U/S 154 OF THE ACT. 8. HAVING HEARD BOTH THE SIDES, WE FIND FORCE IN TH E ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT THE ISSUE OF DEPRECIAT ION ON MEMBERSHIP CARD IS A DEBATABLE ISSUE WHICH INVOLVES TWO POSSIB LE VIEWS. WHETHER THE ASSESSEE IS ELIGIBLE FOR DEPRECIATION OR NOT ON MEMBERSHIP CARD CAN BE RESOLVED ON A PROLONGED DISCUSSION, WHICH CANNOT BE RECTIFIED U/S 154 OF THE ACT. SIMILARLY, THE ISSUE OF EXCESS DEPRECI ATION ON OTHER ASSETS SUCH AS AIR CONDITIONERS, TELEVISIONS, LCD PROJECTO RS, WATER COOLERS, EPABX, ETC. IS COMING UNDER PLANT AND MACHINERY WHI CH IS ELIGIBLE FOR ITA NO.49/VIZAG/2015 M/S. OPTIMUS COMMODITY FUTURES PVT. LTD., VIJAYAWAD A 7 DEPRECIATION OF 15% OR COMES UNDER ELECTRICAL FITTI NGS WHICH IS ELIGIBLE FOR DEPRECIATION OF 10% IS A DEBATABLE ISSUE, WHICH CAN BE RESOLVED BY A PROCESS OF DISCUSSIONS AND DELIBERATIONS CANNOT BE CONSIDERED U/S 154 OF THE ACT. IN SO FAR AS ALLOWABILITY OF EXPENDITURE AGAINST BROKERAGE INCOME, WE FIND THAT IN THE ASSESSMENT U/S 143(3) O F THE ACT, THE A.O. HAS ALLOWED EXPENDITURE CLAIMED BY THE ASSESSEE. I N THE RECTIFICATION PROCEEDINGS, THE A.O. HAS TAKEN A VIEW THAT ADMINIS TRATIVE EXPENDITURE INCURRED BY THE ASSESSEE SHOULD BE PROPORTIONATELY ALLOCATED TO SPECULATIVE AND NON-SPECULATIVE BUSINESS. THE ISSU E OF APPORTIONMENT OF EXPENDITURE PROPORTIONATELY TO THE BUSINESS OF S PECULATIVE AND NON- SPECULATIVE IS A DEBATABLE ISSUE, WHICH DEPENDS UPO N THE FACTS OF THE ASSESSEE, WHERE THE ASSESSEE HAS INCURRED EXPENDITU RE PROPORTIONATELY TO BOTH THE BUSINESSES. THEREFORE, WE ARE OF THE V IEW THAT WHEN AN ISSUE INVOLVES TWO POSSIBLE VIEWS, WHICH CAN BE RES OLVED BY A PROCESS OF DISCUSSIONS AND DELIBERATIONS, THE A.O. WAS INCORRE CT IN RECTIFYING THE ISSUE U/S 154 OF THE ACT. THE CIT(A) AFTER CONSIDE RING THE RELEVANT INFORMATION AND ALSO TAKEN INTO ACCOUNT THE REMAND REPORT OF THE A.O., CAME TO THE CONCLUSION THAT THE ADDITIONS MADE BY T HE A.O. U/S 154 OF THE ACT ARE DEBATABLE ISSUES WHICH CANNOT BE CONSID ERED U/S 154 OF THE ACT. THEREFORE, WE ARE OF THE VIEW THAT THE CIT(A) HAS RIGHTLY SET ASIDE ITA NO.49/VIZAG/2015 M/S. OPTIMUS COMMODITY FUTURES PVT. LTD., VIJAYAWAD A 8 THE ORDER PASSED BY THE A.O. U/S 154 OF THE ACT. H ENCE, WE UPHELD THE CIT(A) ORDER AND DISMISS APPEAL FILED BY THE REVENU E. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 23 RD DEC16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 23.12.2016 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE DCIT, CIRCLE-1(1), VIJAYAWAD A 2. / THE RESPONDENT M/S. OPTIMUS COMMODITY FUTURES PVT. LTD., 4 TH FLOOR, IMDAD GHAR, SIVALAYAM STREET, VIJAYAWADA-1 3. + / THE CIT, VIJAYAWADA 4. + ( ) / THE CIT (A), VIJAYAWADA 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM