ACIT, Cir-8, Pune, Pune V. Advik Hi-Tech Pvt.Ltd., Pune

ITA 541/PUN/2012

• Counselvise Citation: 54124514 RSA 2012
• Duration Of Justice: 1 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 15-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Keywords: Business income; Business expenditure; Opportunity of being heard; Revenue expenditure; Capital expenditure

Judgement Text

INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 541/PN/2012 (ASSESSMENT YEAR 2007-08) ASST. COMMISSIONER OF INCOME TAX, CIRCLE-8, PUNE. .. APPELLANT VS. ADVIK HI-TECH PVT. LTD., GAT NO.357/99A, CHAKAL TALEGAON ROAD, VILLAGE KHARABWADI, TAL-KHED, CHAKAN, PUNE-410501. .. RESPONDENT ITA NO. 468/PN/2012 (ASSESSMENT YEAR 2007-08) ADVIK HI-TECH PVT. LTD., GAT NO.357, PLOT NO.99 PART A, CHAKAL TALEGAON ROAD, VILLAGE KHARABWADI, TAL-KHED, CHAKAN, PUNE-410501. .. APPELLANT VS. ASST. COMMISSIONER OF INCOME TAX, CIRCLE-8, PUNE. .. RESPONDENT ASSESSEE BY : SRI SHARAD SHAH DEPARTMENT BY : MS. ANN KAPTHUAMA DATE OF HEARING : 26-04-2013 DATE OF PRONOUNCEMENT : 30-04-2013 ORDER PER R.K. PANDA, AM : THESE ARE CROSS APPEALS FILED BY THE REVENUE AND AS SESSEE RESPECTIVELY AND ARE DIRECTED AGAINST THE ORDER DATED 28-12-2011 OF THE CIT(A)-V, PUNE RELATING TO ASSESSMENT YEAR 2007-08. FOR THE SAKE OF CONVENIENCE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY TH IS COMMON ORDER. ITA NO.541/PN/2012 (BY REVENUE) : 2. GROUND NO.1 BY THE REVENUE READS AS UNDER : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THE AMOUNT OF RS.2, 94,444/- AS LONG TERM CAPITAL GAIN ON SALE AND PURCHASE OF SHARES AS AGAINST THE ACTION OF THE AO IN HOLDING THE SAME AS BUSINESS INCOME. 2 3. AFTER HEARING BOTH THE SIDES WE FIND THE ASSESSE E HAD SHOWN A SUM OF RS.2,94,444/- AS LONG TERM CAPITAL GAIN ON SALE AND PURCHASE OF SHARES AND CLAIMED THE SAME AS EXEMPT. THE ASSESSING OFFICER NOTED THAT IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR IT HAS BEEN H ELD THAT ASSESSEE IS DOING SALE AND PURCHASE OF SHARES ON REGULAR BASIS AND HE NCE IT SHOULD BE TREATED AS ADVENTURE IN NATURE OF TRADE FOR WHICH THE INCOME E ARNED FROM THE SAME SHOULD BE TREATED AS BUSINESS INCOME. IN VIEW OF T HE ABOVE THE ASSESSING OFFICER TREATED THE INCOME OF RS.2,94,444/- AS BUSI NESS INCOME. IN APPEAL THE LD. CIT(A) FOLLOWING VARIOUS DECISIONS ALLOWED THE CLAIM OF THE ASSESSEE. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 4. WE FIND FROM THE ORDER OF THE TRIBUNAL IN ASSESS EES OWN CASE FOR A.Y. 2006-07 THAT THE TRIBUNAL VIDE ITA NO.24/PN/2010 OR DER DATED 06-01-2012 HAS RESTORED THE ISSUE TO THE FILE OF THE CIT(A) IN THE LIGHT OF THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2005-0 6. SINCE IDENTICAL ISSUE IS PENDING BEFORE THE CIT(A) FOR THE TWO PRECEDING ASS ESSMENT YEARS AND SINCE THE ASSESSING OFFICER WHILE DECIDING THE ISSUE HAS FOLLOWED THE ORDER OF HIS PREDECESSOR IN THE CASE OF THE ASSESSEE IN A.Y. 200 6-07, THEREFORE, WE IN THE INTEREST OF JUSTICE, DEEM IT PROPER TO RESTORE THE ISSUE TO THE FILE OF THE LD. CIT(A) FOR DECIDING THE ISSUE AFRESH AND IN ACCORDA NCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. GROUND OF APPEAL NO.1 BY THE REVENUE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 5. GROUND OF APPEAL NO.2 BY THE REVENUE READS AS UN DER : 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THE AMOUNT OF RS.2, 84,632/- OUT OF RS.4,80,984/- AS SHORT TERM CAPITAL GAIN ON SALE AND PURCHASE OF SHA RES AS AGAINST THE ACTION OF THE AO IN HOLDING THE SAME AS BUSINESS INCOME. 3 6. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE HAD SHOWN A SUM OF RS.4,80,984/- AS SHORT TERM CAPITAL GAIN ON SALE AN D PURCHASE OF SHARES AND OFFERED 10% TAX THEREON. SINCE THE ASSESSING OFFIC ER HELD THE ACTIVITY OF PURCHASE AND SALE OF SHARES BY THE ASSESSEE AS ADVE NTURE IN NATURE OF TRADE, THEREFORE, HE TREATED THE AMOUNT OF RS.4,80,984/- A S BUSINESS INCOME. 6.1 IN APPEAL THE LD. CIT(A) FOLLOWING THE DECISIO N OF THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF SUGAMCHAND SHA H REPORTED IN (2010) 37 DTR (AHD) (TRIB) 345 DIRECTED THE ASSESSING OFFICER TO CONSIDER THE GAIN ON SALE OF SHARES SOLD AFTER HOLDING LESS THAN 30 DAYS AS BUSINESS INCOME AND SHARES HELD FOR MORE THAN 30 DAYS AS INCOME FROM SH ORT TERM CAPITAL GAIN. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 7. SINCE GROUND OF APPEAL RELATING TO TREATMENT OF RS.2,94,444/- AS BUSINESS INCOME OR LONG TERM CAPITAL GAIN HAS BEEN RESTORED TO THE FILE OF THE LD. CIT(A) FOR FRESH ADJUDICATION IN THE LIGHT OF T HE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE IMMEDIATELY 2 PRECEDING YEARS, THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THIS GROUND ALSO REQ UIRES FRESH ADJUDICATION BY THE LD.CIT(A). ACCORDINGLY, WE RESTORE THIS GROUND TO THE FILE OF THE LD.CIT(A) FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUND RAISED BY THE REVENUE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 8. GROUND OF APPEAL NO.3 BY THE REVENUE READS AS UN DER : 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DIRECTING THE EXPENDITURE O F RS.5,61,260/- INCURRED FOR ISO- TS-16949 QUALITY MANAGEMENT SYSTEM CERTIFICATION AS REVENUE EXPENDITURE BY IGNORING THE FACT THAT THE EXPENDITURE INCURRED FOR QUALITY SYSTEM AND CERTIFICATION IS HAVING ENDURING BENEFIT TO THE COMPANY AND HENCE THE SAME WAS CORRECTLY TREATED AS CAPITAL EXPENDITURE BY THE AO. 4 9. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE HAD CLAIMED A SUM OF RS.5,61,260/- AS TPM-TS EXPENSES. IT WAS STATED TH AT THE FULL FORM OF TPM IS TOTAL PRODUCTIVITY MAINTENANCE AND TS IS TECHNICAL SPECIFICATION. FOR THIS, THE ASSESSEE HAS TO OBTAIN A CERTIFICATE LIKE ISO A ND THIS CERTIFICATE HAS BEEN OBTAINED FROM AN ADVOCATE WHO COMPLETES THE FORMALI TIES FOR OBTAINING THE SAID CERTIFICATE. IT WAS STATED THAT THE EXPENSES ON THIS ARE RECURRING IN NATURE. HOWEVER, THE ASSESSING OFFICER NOTED THAT THE ASSES SEE HAS NOT CLAIMED SUCH EXPENSES IN THE PAST. HE THEREFORE WAS OF THE OPIN ION THAT THIS GIVES AN ENDURING BENEFIT TO THE ASSESSEE AND THEREFORE THE EXPENDITURE INCURRED FOR THE SAME IS CAPITAL IN NATURE. THE ASSESSING OFFICER T HEREFORE DISALLOWED AN AMOUNT OF RS.5,61,260/- TREATING THE SAME AS CAPITA L EXPENDITURE. 10. IN APPEAL THE LD.CIT(A) ALLOWED THE CLAIM OF TH E ASSESSEE BY HOLDING THAT THE EXPENDITURE INCURRED BY THE ISO/TS CERTIFI CATION FOR QUALITY SYSTEMS CANNOT BE TREATED AS CAPITAL EXPENDITURE. WHILE DO ING SO, HE FOLLOWED THE DECISION OF JODHPUR BENCH OF THE TRIBUNAL IN THE CA SE OF TIRUPATI MICRO TECH PVT. LTD. REPORTED IN 112 ITD 328 WHEREIN IT HAS BE EN HELD THAT EXPENDITURE INCURRED FOR OBTAINING ISO CERTIFICATION IS REVENUE IN NATURE. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL B EFORE US. 11. AFTER HEARING BOTH THE SIDES WE FIND THE LD. CI T(A) WHILE ALLOWING THE CLAIM OF ISO/TS CERTIFICATION FOR QUALITY SYSTEMS A S REVENUE EXPENDITURE HAS FOLLOWED THE DECISION OF THE JODHPUR BENCH OF THE T RIBUNAL IN THE CASE OF TIRUPATI MICRO TECH PVT. LTD. (SUPRA). NOTHING CON TRARY WAS BROUGHT TO OUR NOTICE AGAINST THE DECISION OF THE JODHPUR BENCH OF THE TRIBUNAL RELIED ON BY THE LD. CIT(A). UNDER THESE CIRCUMSTANCES, WE DO N OT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) DIRECTING THE ASSESSING OFFICER TO CONSIDER THE EXPENDITURE OF RS.5,61,260/- INCURRED FOR ISO-TS-16 949 QUALITY MANAGEMENT 5 SYSTEM CERTIFICATION AS REVENUE EXPENDITURE. THE G ROUND RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED. ITA NO.468/PN/2012 (BY ASSESSEE) : 12. GROUND OF APPEAL NO.1 BY THE ASSESSEE READS AS UNDER : 1. THE LEARNED AO ERRED IN HOLDING ( AND LEARNED C IT(A) ERRED IN CONFIRMING) THAT THE PROFIT ON SALE OF SHARES HELD FOR A PERIOD NOT EXCEEDING 30 DAYS IS CHARGEABLE AS BUSINESS INCOME INSTEAD OF SHORT TERM CAPITAL GAINS (AMOUNT INVOLVED RS. 1,96,352/-). 13. AFTER HEARING BOTH THE SIDES WE FIND THE ABOVE GROUND IS CORRELATED TO GROUND OF APPEAL NO.2 BY THE REVENUE. WE HAVE ALRE ADY RESTORED THE ISSUE TO THE FILE OF THE LD. CIT(A) FOR FRESH ADJUDICATION O F THE ISSUE IN THE LIGHT OF THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2005-06 AND 2006- 07. THEREFORE, THIS GROUND BY THE ASSESSEE IS REST ORED TO THE FILE OF THE LD. CIT(A) FOR FRESH ADJUDICATION IN ACCORDANCE WITH LA W AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS G ROUND BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 14. GROUND OF APPEAL NO.2 BY THE ASSESSEE READS AS UNDER : 2. THE LEARNED AO ERRED IN HOLDING (AND LEARNED CI T(A) ERRED IN CONFIRMING) THAT THE EXPENDITURE ON FOREIGN TRAVEL BY CHAIRMAN OF THE COMPANY, SRI RADHESHYAM BHARTIA IS NOT FOR BUSINESS AND THEREFOR E DISALLOWABLE (AMOUNT INVOLVED RS.1,06,567/-). 15. FACTS OF CASE IN BRIEF, ARE THAT THE ASSESSING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, NOTED THAT MR. ADITYA BH ARTIA AND HIS WIFE MRS. PAYAL BHARTIA ALONG WITH RELATIVE SRI RADHESHYAM BH ARTIA HAD PERFORMED FOREIGN JOURNEYS AND INCURRED A SUM OF RS.10,22,838 /- ON THOSE JOURNEYS. HE NOTED THAT MR. ADITYA BHARTIA IS THE MANAGING DIREC TOR AND A SUBSTANTIAL SHARE HOLDER OF THE ASSESSEE COMPANY. SIMILARLY, MRS. PA YAL BHARTIA IS THE MANAGING DIRECTOR AND A SUBSTANTIAL SHAREHOLDER IN ADVIK TECHNOLOGIES PVT. 6 LTD. WHICH IS ALMOST A LOSS MAKING COMPANY. INSTE AD OF GROWING HER COMPANY MRS. PAYAL BHARTIA HAD PERFORMED FOREIGN JO URNEYS IN THE COMPANY IN WHICH SHE IS WORKING AS MANAGER. THE ASSESSING OFFICER REJECTED THE SUBMISSION OF THE ASSESSEE THAT SHE HAD VISITED FOR EIGN COUNTRIES TO SEARCH SOME NEW CUSTOMERS FOR THE COMPANY AND HAD ATTENDED SOME EXHIBITIONS TO GAIN KNOWLEDGE FOR THIS COMPANY ON THE GROUND THAT THE ASSESSEE COMPANY COULD NOT EXPLAIN THE NECESSITY FOR THE ABOVE FOREI GN JOURNEY. HE NOTED THAT MR.ADITYA BHARTI AND MS. RADHESHYAM BHARTIA HAD VIS ITED THAILAND BETWEEN 11-06-2006 TO 17-06-2006. SIMILARLY, MR. ADITYA BH ARTIA AND MRS. PAYAL BHARTI HAD VISITED LONDON FROM 14-11-2006 TO 22-11- 2006. IN ABSENCE OF ANY SUFFICIENT DETAILS FURNISHED BY THE ASSESSEE THE AS SESSING OFFICER CAME TO CONCLUSION THAT IT IS NOT KNOWN WHETHER THESE WERE THE BUSINESS TRIPS WHERE VISIT OF ONE PERSON WAS SUFFICIENT AT ONE PLACE OR NOT. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER DISALLOWED THE EXPENDITURE IN CURRED ON TRIPS OF MRS.PAYAL BHARTI AMOUNTING TO RS.3,67,555/- AND ON THE TRIPS OF MR.RADHESHYAM BHARTI AMOUNTING TO RS.1,06,567/-. T HUS, HE DISALLOWED AN AMOUNT OF RS.4,74,122/-. 16. IN APPEAL THE LD. CIT(A) GAVE PART RELIEF BY HO LDING AS UNDER : 17. I HAVE CONSIDERED THE APPELLANT'S EXPLANATION CAREFULLY. SO FAR AS THE FOREIGN VISIT OF MRS. PAYAL BHARTIA WAS CONCERNED, IT WAS EXPLAINED THAT SHE WAS ALSO AN EMPLOYEE OF THE APPELLANT CO. APART FRO M BEING THE MANAGING DIRECTOR OF THE SISTER CONCERN, AND HER ACADEMIC QU ALIFICATION, EXPERIENCE HAS BEEN GIVEN BY THE APPELLANT. CONSIDERING THE SA ME, THE FOREIGN TRAVEL EXPENSES IN RESPECT OF MRS.PAYAL BHARTIA IS HELD TO BE ALLOWABLE AS BUSINESS EXPENDITURE. HOWEVER, IN SO FAR AS SHRI RADHYESHYAM IS CONCERNED, THE APPELLANT'S EXPLANATION NOWHERE SHOWS AS TO HOW HIS VISIT WAS FOR THE APPELLANT'S BUSINESS PURPOSE. SHRI RADHYESHYAM BHAR TIA IS EXPLAINED TO BE THE CHAIRMAN OF ADVIK HI-TECH PVT.LTD., THEREFORE, HIS FOREIGN TRAVEL EXPENSES WOULD RELATE TO THE BUSINESS OF THE SISTER CONCERN. THE DISALLOWANCE IN RESPECT OF SHRI RADHESHYAM BHARTIA IS THEREFORE, UPHELD. THIS GROUND OF APPEAL IS THEREFORE, PARTLY ALLOWED. 7 17. AGGRIEVED WITH SUCH PART RELIEF BY THE CIT(A) T HE ASSESSEE IS IN APPEAL BEFORE US. 18. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. ON A POINT ED QUERY BY THE BENCH WHETHER SIMILAR EXPENDITURE HAD BEEN INCURRED BY TH E COMPANY IN THE PAST AND IF SO THE OUTCOME OF THE SAME, THE LD. COUNSEL FOR THE ASSESSEE COULD NOT ANSWER AND NEEDED SOMETIME TO FURNISH THE DETAILS. THE ORDER OF THE LD. CIT(A) IS ALSO SILENT AS TO WHETHER SIMILAR EXPENDI TURE WAS INCURRED BY THE ASSESSEE ON ACCOUNT OF ABOVE PERSONS IN THE PAST OR NOT. UNDER THESE CIRCUMSTANCES, WE DEEM IT PROPER TO RESTORE THE ISS UE TO THE FILE OF THE LD. CIT(A) WITH A DIRECTION TO ADJUDICATE THE ISSUE AFR ESH AND IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 19. IN THE RESULT, THE APPEAL FILED BY THE REVENUE AS WELL AS THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS THE 30 TH DAY OF APRIL, 2013. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R. K. PANDA) JUDICIAL MEMBER A CCOUNTANT MEMBER PUNE DATED: THE 30TH APRIL 2013 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-V, PUNE 4. CCIT, PUNE 5. THE D.R, A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE