ITO Ward-4 (1), V. Jain Motors Finance & Leasing Pvt. Ltd,

ITA 576/DEL/2008

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9762 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2009
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 18-08-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 15-02-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BK GUPTA
• Assessee Lawyers: H G MALIK
• Keywords: Cost of acquisition; Rule 8D
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D: NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI DEEPAK R. SHAH, ACCOUNTANT MEMBER I.T.A.NO.576/DEL/2008 ASSESSMENT YEAR : 2001-02 INCOME-TAX OFFICER, M/S. JAIN MOTOR FINANCE & L EASING WARD 4(1), NEW DELHI. VS. PVT. LTD., 1/14, ASA F ALI ROAD, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B.K. GUPTA, SR. DR. RESPONDENT BY : SHRI H.G. MALIK, ADVOCATE. O R D E R PER DEEPAK R. SHAH, ACCOUNTANT MEMBER. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-VII, NEW DELHI , DATED 11.10.2007 FOR THE ASSESSMENT YEAR 2001-02. 2. THE FIRST GROUND OF APPEAL IS AGAINST ALLOWING T HE LOSS CLAIMED BY THE ASSESSEE OF RS.30,54,003/- BEING SHORT TERM CAPITAL LOSS ON SALE OF UNITS OF MUTUAL FUND. 3. THE ASSESSEE ACQUIRED AND TRANSFERRED THE UNITS OF JM BALANCED FUND. THE SAME WAS COMPUTED AS UNDER:- 2 COST OF MUTUAL FUND 100,00,000 ADD: INTEREST AND DOCUMENTATION CHARGES 14809 ------------ 10014809 LESS: REBATE ON INVESTMENT MADE 135000 ------------ NET COST OF ACQUISITION 9879809 LESS: SELLING PRICE OF UNITS 6825806 ------------ SHORT TERM CAPITAL LOSS 3054003 ------------ THE ASSESSEE ALSO EARNED DIVIDEND AMOUNTING TO RS.2 9,03,226/- ON THE INVESTMENT MADE IN THE UNITS. THUS, THE ACTUAL LOS S SUFFERED AMOUNTED TO RS.1,50,777/- (3054003-2903226). AS PER THE COMPUT ATION OF INCOME ENCLOSED ALONG WITH THE RETURN, THE SHORT TERM CAPI TAL LOSS HAS BEEN WORKED OUT SEPARATELY AND THE DIVIDEND EARNED HAS BEEN CLA IMED AS EXEMPT UNDER SECTION 10(33) OF THE INCOME-TAX ACT, 1961. THE AS SESSING OFFICER REJECTED THE CLAIM OF THE COMPANY AND DISALLOWED THE LOSS CL AIMED BY TREATING IT AS A COLOURABLE DEVICE TO SAVE TAX. THE LEARNED CIT(A) FOLLOWING THE DECISION OF SPECIA L BENCH OF TRIBUNAL IN THE CASE OF WALLFORT SHARES & STOCK BRO KERS LTD. VS. ITO & ANR., 96 TTJ 673 (MUMBAI) HELD THAT THE LOSS IS ALL OWABLE. THE PROVISION INTRODUCED IN SECTION 94(7) TO CURB SUCH TYPE OF PR ACTICE IS APPLICABLE ONLY WITH EFFECT FROM THE DATE THE SAID SECTION WAS INTR ODUCED I.E. ASSESSMENT 3 YEAR 2002-03 AND HENCE NOT APPLICABLE TO THE YEAR U NDER APPEAL. THE REVENUE IS IN FURTHER APPEAL BEFORE US. 4. AT THE TIME OF HEARING BOTH THE COUNSELS AGREED THAT IDENTICAL ISSUE HAS BEEN DECIDED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. VIKRAM ADITYA & ASSOCIATES PVT. LTD., 287 ITR 268 WHICH HA S ALSO BEEN FOLLOWED IN SUBSEQUENT DECISION BY DELHI HIGH COURT IN THE CASE OF CIT VS. VIMGI INVESTMENT PVT. LTD., 290 ITR 505. EVEN THE DECISI ON OF SPECIAL BENCH OF TRIBUNAL HAS BEEN UPHELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF WALLFORT SHARES & STOCK BROKERS LTD. THUS THE ASSE SSEE WAS RIGHTLY ALLOWED LOSS ON SALE OF UNITS OF MUTUAL FUND. WE, THEREFOR E, UPHOLD THE ORDER OF THE LEARNED CIT(A) IN THIS REGARD. 5. NEXT GROUND OF APPEAL IS AGAINST DELETION OF DIS ALLOWANCE OF RS.3,19,055/- BEING 76% OF THE ESTABLISHMENT EXPENS ES AND ADMINISTRATIVE EXPENSES BY INVOKING THE PROVISION OF SECTION 14A O F THE ACT. 6. AT THE TIME OF HEARING BOTH THE COUNSELS AGREED THAT THE ISSUE IS DECIDED BY THE SPECIAL BENCH OF THE TRIBUNAL AT MUM BAI IN THE CASE OF ITO VS. DAGA CAPITAL MANAGEMENT PVT. LTD., 117 ITD 168. SPECIAL BENCH OF THE TRIBUNAL HELD THAT RULE 8D PRESCRIBED PURSUANT OF I NSERTION OF SUB-SECTIONS (2) & (3) IN SECTION 14A ARE RETROSPECTIVE IN NATUR E. WE, THEREFORE, DIRECT THE 4 ASSESSING OFFICER TO COMPUTE THE DISALLOWANCE UNDER SECTION 14A ON THE BASIS OF RULE 8D OF THE INCOME-TAX RULES, 1962. 7. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 11 TH SEPTEMBER, 2009. SD/- SD/- (A.D. JAIN) (DEEPAK R. SHAH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 11 TH SEPTEMBER, 2009. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.