The ACIT, Circle-4, Ahmedabad V. India Gelatine & Chemicals Ltd., Ahmedabad

ITA 571/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0192 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 29-07-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 14-02-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K MADHUSUDANSR
• Keywords: Business income; Capital Gains
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI D.C. AGRAWAL, ACCOUNTANT MEMBER DATE OF HEARING : 29/07/2010 DRAFTED ON: 05/ 08/2010 ITA NO.571/AHD/2008 ASSESSMENT YEAR : 2004-05 THE ACIT CIRCLE-4 AHMEDABAD VS. INDIA GELETINE & CHEMICALS LTD. 1 ST FLOOR NAVJIVAN TRUST BUILDING OFF. ASHRAM ROAD AHMEDABAD-380 014 PAN/GIR NO. : AAACJ 3676 F (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI K. MADHUSUDAN,SR. D.R. RESPONDENT BY: - NONE- O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WHI CH HAS EMANATED FROM THE ORDER OF THE LEARNED CIT(APPEALS)-VIII, AH MEDABAD DATED 05/11/2007 PASSED FOR ASSESSMENT YEAR 2004-05. 2. GROUND NO.1 READS AS FOLLOWS: 1. THE LD. CIT(A) ERRED IN LAW AND ON FACTS OF THE CASE IN DIRECTING THE A.O. NOT TO INCLUDE SALES TAX AND EXC ISE DUTY IN THE TOTAL TURNOVER FOR THE COMPUTATION OF DEDUCTION U/S.80HHC. 2.1. THE ISSUE WHETHER THE SALES TAX AND EXCISE DU TY CAN BE HELD ON PART OF THE TURNOVER HAS NOW BEEN SETTLED BY THE HO N'BLE SUPREME COURT IN THE CASE OF CIT VS. LAXMI MACHINE WORKS REPORT ED AS (2007) 290 ITA NO.571/AHD/ 2008 ACIT VS. INDIA GELETINE & CHEMICALS LTD. ASST.YEAR - 2004-05 - 2 - ITR 667 (SC), WHEREIN IT WAS HELD THAT THE SALES TA X, ETC. DO NOT FOR A PART OF THE TOTAL TURNOVER. IN VIEW OF THIS, THE DIRECTIONS OF THE LEARNED CIT(APPEALS) IS AFFIRMED AND GROUND IS HEREBY DISM ISSED. 3. GROUND NO.2 READS AS FOLLOWS: 2. THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS O F THE CASE IN DIRECTING THE A.O. TO TREAT THE PROFIT ON SALE OF S HARES AS CAPITAL GAINS, BOTH LONG TERMS AND SHORT TERM, AS C LAIMED BY THE ASSESSEE AND NOT AS BUSINESS INCOME. 3.1. FACTS IN BRIEF AS EMERGED FROM THE CORRESPOND ING ASSESSMENT ORDER PASSED U/S. 143(3) OF THE I.T. ACT, 1961 DAT ED 28/12/2006 WERE THAT THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING O F OSSEIN, DI-CALCIUM PHOSPHATE AND GELATINE. ON SALE OF SHARES, THE AS SESSEE HAS DISCLOSED 'SHORT-TERM CAPITAL GAIN' OF RS.64,79,171/- AND ' LONG-TERM CAPITAL GAIN' OF RS.RS.34,21,407/-. AS PER ASSESSING OFFICER, THE ASSESSEE WAS REGULARLY ENGAGED IN THE BUSINESS OF PURCHASE AND SALES OF SH ARES. HOWEVER, THE CLAIM OF THE ASSESSEE WAS THAT THOSE SHARES WERE SH OWN AS INVESTMENT IN THE BALANCE-SHEET. HENCE, PROFIT EARNED THEREON WA S DISCLOSED UNDER THE HEAD CAPITAL GAIN. AFTER DISCUSSING VARIOUS CAS E LAWS, THE ASSESSING OFFICER HAS HELD THE IMPUGNED INCOME AS BUSINESS I NCOME. WHEN THE MATTER REACHED BEFORE THE FIRST APPELLATE AUTHORITY THE LEARNED CIT(APPEALS) HAS DISCUSSED THE ISSUE AT LENGTH AND THEREAFTER GIVEN HIS FINDING VIDE PARAGRAPH NO.3.2 AS BELOW: 3.2. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS M ADE AND THE DECISIONS CITED BY THE LD. AUTHORISED REPRESENTATIV E. IT IS FOUND THAT THE APPELLANT HAS SHOWN THE SHARES OF RS.42,00 0/- OF ORIENTAL BANK OF COMMERCE AS INVESTMENT FROM 1-6-1995. SIM ILARLY THE SHARES OF IPCL OF RS.3,26,387/- HAVE BEEN SHOWN AS INVESTMENT ITA NO.571/AHD/ 2008 ACIT VS. INDIA GELETINE & CHEMICALS LTD. ASST.YEAR - 2004-05 - 3 - FROM 31-3-2001 AND SHARES OF ALLIANCE FRONTLINE FUN D AS INVESTMENT FROM 1-2-2003. THE APPELLANT HAS CONTEN DED THAT IT IS A CASH SURPLUS COMPANY AND IT HAS GOT SHARE CAPITAL O F RS.8.48 CORES AND RESERVES OF RS.72.32 CRORES. CONSIDERING THE D ISCLOSURE IN BALANCE SHEET IN THE EARLIER YEARS AS INVESTMENT AN D THE PERIOD OF HOLDING AND THE FACT THAT OWN FUNDS HAVE BEEN INVES TED AND NO BORROWED FUNDS HAVE BEEN INVESTED IN SHARES AND THE SHARES ARE HELD AS INVESTMENT AND RELYING ON THE CASE LAWS REL IED UPON BY THE LD. A.R., IT IS HELD THAT, THE PROFIT ON SALE OF SH ARES SHOULD BE TAXED AS CAPITAL GAINS BOTH LONG TERM AND SHORT TERM AS C LAIMED BY THE APPELLANT. THIS GROUND IS THUS ALLOWED. 4. ON HEARING THE SUBMISSIONS OF BOTH THE SIDES, SO ME SPECIFIC FINDING ON FACTS HAVE BEEN GIVEN BY THE LEARNED CIT (APPEALS) THAT THE SHARES IN QUESTION OF ORIENTAL BANK OF COMMERCE WER E SHOWN AS AN INVESTMENT FROM 01/06/1995 AND SHARES OF IPCL HAVE ALSO BEEN SHOWN AS AN INVESTMENT FROM 31/03/2001 ONWARDS AND LIKEWISE SHARES OF ALLIANCE FRONTLINE FUND HAVE BEEN SHOWN IN THE BALANCE-SHEET WITH EFFECT FROM 01/02/2003. THEREFORE, THE VIEW TAKEN BY THE FIRST APPELLATE AUTHORITY; WHICH APPEARS TO HAVE BEEN TAKEN AFTER DUE VERIFICA TION OF THE RECORDS OF THE CASE, NEED NOT TO BE DISTURBED. AN ANOTHER F INDING ON FACTS WAS THAT THE ABOVE INVESTMENTS WERE NOT OUT OF THE BORROWED FUNDS, BUT OUT OF THE CASH SURPLUS AVAILABLE WITH THE ASSESSEE. THOUGH N O ONE WAS PRESENT FROM THE SIDE OF THE RESPONDENT-ASSESSEE, BUT AS FA R AS THE QUESTION OF THE REVENUES APPEAL IS CONCERNED, SINCE NO CONTRARY EV IDENCE PERTAINING TO THOSE FINDINGS ON FACTS IS BEFORE US, THEREFORE, WE HEREBY UPHELD THOSE FINDINGS AND DISMISS THIS GROUND. 5. GROUND NO.3 READS AS FOLLOWS: ITA NO.571/AHD/ 2008 ACIT VS. INDIA GELETINE & CHEMICALS LTD. ASST.YEAR - 2004-05 - 4 - 3. THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE PROPORTIONATE DISALLOWANCE OF INTEREST U/S.14A. 5.1. THERE WAS A MEAGRE DISALLOWANCE OF RS.27,274/- BY INVOKING THE PROVISIONS OF SECTION 14A OF THE I.T. ACT, 1961. T HE FIRST APPELLATE AUTHORITY HAS SIMPLY HELD THAT IN THE PAST, I.E. AS SESSMENT YEAR 2001-02, THE SAID DISALLOWANCE WAS DELETED BY HIS PREDECESSO R, HENCE, FOLLOWING THE SAME VIEW FOR THE YEAR UNDER CONSIDERATION, THE DISALLOWANCE WAS DELETED. BEFORE US, REVENUE HAS FAILED TO PRODUCE ANY INFORMATION ABOUT THE FATE OF THE SAID ORDER OF LEARNED CIT(APPEALS) FOR ASSESSMENT YEAR 2001-02. IN THE ABSENCE OF ANY SPECIFIC DETAIL, WI THOUT MUCH DELIBERATION AND CONSIDERING THE SMALLNESS OF THE AMOUNT WE DEEM IT PROPER NOT TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(APPEALS ). THIS GROUND IS, THEREFORE, DISMISSED. REST OF THE GROUNDS ARE GENE RAL IN NATURE. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 6 TH AUGUST, 2010. SD/- SD/- ( D.C. AGRAW AL) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED 06 / 08 /2010 T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPAR TMENT. 3. THE CIT CONCERNED. 4. THE LD. CIT(AP PEALS)-VIII, AHMEDABAD 5. THE DR, AHMEDABAD BENCH.6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD