ACIT CEN CIR 40, MUMBAI V. CLASSIC SHARES & STOCK BROKING P. LTD, MUMBAI

ITA 5244/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8829 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 30-08-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 08-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P D ANIEL SPL OF DEPT
• Assessee Lawyers: JINAL SARVAIYA
• Keywords: Business income; Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C BEFORE I.P. BANSAL, JUDICIAL MEMBER AND SHRI P.M.JAGTAP, ACCOUNTANT MEMBER I.T.A. NO. 5244/MUM/2011. ASSESS MENT YEAR :2007-08. ASSTT. COMMISSIONER OF INCOME-TAX, CLASSIC SHARES & STOCK CENTRAL CORCLE-40, MUMBAI. VS. BROKING P. LTD., BHUPEN CHAMBERS, GROUND FLOOR, 9, DALAL STREET, FORT, MUMBAI-23. PAN AAACS5745P APPELLANT RESPONDENT. APPELLANT BY : DR. P. D ANIEL, SPL.COUNSEL OF DEPT. RESPONDENT BY : MS . JINAL SARVAIYA. A.R. DATE OF HEARING : 30-08-2012 DATE OF PRONOUNCEMENT : 26-09-2012. O R D E R PER P.M. JAGTAP, A.M. THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LEARNED CIT(APPEALS)-36, MUMBAI DATED 29-04-2011 AND THE GR IEVANCE OF THE REVENUE IS PROJECTED IN THE FOLLOWING GROUNDS RAISE D THEREIN: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING BUSINESS EXPENSES OF RS.5, 44,107/- EVEN THOUGH THERE WAS NO BUSINESS IN EXISTENCE DURING TH E YEAR AS THE 2 ITA NO.5244/MUM/2011 ASSESSEE WAS DEBARRED BY SEBI TO CARRY OUT BUSINESS ACTIVITIES VIDE ORDER DATED 11.04.2001. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN HOLDING INTEREST FROM FIXED DEPOSIT S OF RS.29,89,157/- AND MISCELLANEOUS INCOME OF RS.2,880/- AS BUSINESS INCOME INSTEAD OF INCOME FROM OTHER SOURCES WITHOUT CONSIDERING THE FACT THAT THERE WAS NO BUSINESS IN EXISTENCE DURING THE YEAR AND THE ASSESSEE HAD HIMSELF SHOWN THEM AS OTHER INCOME. 2. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SI DES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. ALTHOUGH THE SPECIAL C OUNSEL OF THE DEPARTMENT HAS RELIED ON THE ON THE ORDER OF THE AO IN SUPPORT OF THE REVENUES CASE ON ISSUES INVOLVED IN THIS APPEAL, IT IS OBSERVED THAT THE LEARNED CIT(APPEALS) HAS DECIDED THE SAID ISSUES BY HIS IMPUGNED ORDER I N FAVOUR OF THE ASSESSEE FOLLOWING THE DECISIONS OF THE TRIBUNAL RENDERED ON SIMILAR ISSUES IN THE CASE OF SISTER CONCERNS OF THE ASSESSEE COMPANY. AS REGA RDS THE ISSUE INVOLVED IN GROUND NO.1 RELATING TO EXISTENCE OF BUSINESS, HE H AS RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S KNP SECURITIES ( P) LTD. (ITA NO.5008 & 5009/MUM/2007) TO HOLD THAT THE BUSINESS OF THE ASS ESSEE COMPANY WAS NEITHER DISCONTINUED NOR CLOSED DOWN AND, THEREFORE , THE EXPENSES INCURRED IN RELATION TO THE SAID BUSINESS WERE ALLOWABLE AS DEDUCTION. AS POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE DECISI ON IN THE CASE OF KNP SERVICES (P) LTD. (SUPRA) WAS RENDERED BY THE TRIBU NAL RELYING ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE O F CIT VS. VELLORE ELECTRIC CORPORATION LTD. 243 ITR 529 AND THE SAME HAS BEEN FOLLOWED BY THE TRIBUNAL IN VARIOUS CASES BELONGING TO THE SAME GROUP TO DECIDE A SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE. AS THE ISSUE INVOL VED IN THE PRESENT CASE AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE UNDISPUTEDLY SIMILAR TO 3 ITA NO.5244/MUM/2011 OTHER GROUP CASES DECIDED BY THE TRIBUNAL, WE RESPE CTFULLY FOLLOW THE DECISION RENDERED BY THE COORDINATE BENCH OF THIS T RIBUNAL IN THE SAID CASES AND UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(AP PEALS) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE. GROUND NO.1 OF THE REVE NUES APPEAL IS ACCORDINGLY DISMISSED. 3. AS REGARDS GROUND NO.2, IT IS OBSERVED THAT THE ISSUE INVOLVED THEREIN RELATING TO THE HEAD OF INCOME UNDER WHICH INTEREST AND MISCELLANEOUS INCOME IS ASSESSABLE TO TAX IN THE HA NDS OF THE ASSESSEE, IS ALSO COVERED BY THE DECISION OF THE TRIBUNAL RENDER ED IN THE CASES OF VARIOUS SISTER CONCERNS OF THE ASSESSEE COMPANY BELONGING T O THE SAME GROUP. IN ONE OF SUCH DECISION RENDERED IN THE CASE OF M/S CLASSI C SHARES & STOCK BROKING SERVICES LTD. VS. ACIT (ITA NO. 191/MUM/2008 AND IT A NO. 1135/MUM/2008 DATED 19-11-2010 ) FOR ASSESSMENT YE AR 2002-03 AND 2003- 04, THE TRIBUNAL HAS DECIDED A SIMILAR ISSUE IN FAV OUR OF THE ASSESSEE FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO. 4.2 OF ITS ORDER : WE HAVE PERUSED THE RECORDS AND CONSIDERED T HE MATTER CAREFULLY. THE DISPUTE IS REGARDING NATURE OF INTEREST INCOME RECEIVED BY THE ASSESSEE FROM THE FDRS PLEDGED WITH THE BANKS FOR I SSUE OF BANK GUARANTEE TO THE STOCK EXCHANGE IN CONNECTION WITH THE TRADING BUSINESS OF THE ASSESSEE. THE ASSESSEE HAD BEEN DEB ARRED BY SEBI FOR SHARE TRANSACTIONS BUSINESS IN 2001 DUE TO ALLEGATI ONS OF IRREGULARITIES AND MANIPULATIONS. THE CASE OF THE ASSESSEE IS THAT THE ORDER OF SEBI HAD BEEN CHALLENGED. THE LICENSE OF THE ASSESSEE HA D BEEN CANCELLED ONLY IN THE YEAR 2005 AND THE ORDER CANCELLING THE LICENSE HAD ALSO BEEN CHALLENGED BY THE ASSESSEE WHICH WAS DISMISSED BY SAT MUCH LATER AND THE ORDER OF SAT WAS ALSO CONFIRMED BY TH E HONBLE SUPREME COURT. BUT THESE WERE SUBSEQUENT ACTIVITIES AND IN THE YEAR UNDER CONSIDERATION THE BUSINESS OF THE ASSESSEE HA D NOT CLOSED AND IT 4 ITA NO.5244/MUM/2011 WAS ONLY SUSPENDED IN VIEW OF THE ADVERSE ORDER OF SEBI. WE FIND SMALLER SITUATION HAD BEEN CONSIDERED BY THE TRIBUN AL IN CASE OF KNP SECURITIES PVT. LTD. (SUPRA) ANOTHER CONCERN OF KET AN PAREKH GROUP IN WHICH SIMILAR CLAIM WAS MADE BY THE ASSESSEE THAT B USINESS WAS IN EXISTENCE AND NOT CLOSED. THE TRIBUNAL FOLLOWING TH E JUDGMENT OF HONBLE HIGH COURT OF MADRAS IN THE CASE OF CIT VS VELLORE ELECTRICAL CORPORATION LTD. (243 ITR 529) HELD THAT THE BUSINESS HAD NOT CLOSED AND THE CLAIM OF EXPENDITURE HAD TO BE A LLOWED. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE TRI BUNAL WE HOLD THAT THE BUSINESS OF THE ASSESSEE HAD NOT BEEN CLOSED IN THE RELEVANT YEAR AND THEREFORE FDRS HAD TO BE TREATED AS PLEDGED IN CONNECTION WITH THE BUSINESS WHICH WAS IN EXISTENCE AND THEREFORE T HE INTEREST INCOME HAD TO BE TREATED AS INCIDENTAL BUSINESS INCOME. WE ACCORDINGLY SET ASIDE THE ORDER OF CIT(A) AND ALLOWED THE CLAIM OF THE ASSESSEE. 4. AS THE ISSUE INVOLVED IN THE PRESENT CASE AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE UNDISPUTEDLY SIMILAR TO THE OTHER CASES BELONGING TO THE SAME GROUP INCLUDING THE CASE OF M/S CLASSIC SH ARES AND STOCK BROKING SERVICE LTD. (SUPRA), WE RESPECTFULLY FOLLOW THE DE CISION RENDERED THEREIN BY THE COORDINATE BENCH OF THIS TRIBUNAL AND UPHOLD TH E IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE. GROUND NO.2 OF THE REVENUES APPEAL IS ACCORDINGLY DISMISS ED. 5. IN THE RESULT, THE APPEAL OF THE REV ENUE IS DISMISSED. ORDER PRONOUNCED ON 26 TH DAY OF SEPT., 2012. SD/- (I.P. BANSAL) JUDICIAL MEMBER SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER DATED : 26 TH SEPT., 2012 5 ITA NO.5244/MUM/2011 COPY TO : 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A)-CONCERNED. 4. THE CIT, CONCERNED. 5. THE DR CONCERNED, MUMBAI 6. GUARD FILE BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI