DCIT, New Delhi V. M/s. Suraj Overseas Pvt. Ltd., New Delhi

ITA 5821/DEL/2012

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3874 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 11 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 18-05-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 16-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: TIWARI
• Assessee Lawyers: ROHIT JAIN ADV SH DEEPESH JAIN
• Keywords: Business income; Business expenditure; Corroborative evidences
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDEN T & SHRI K.N. CHARY, JUDICIAL MEMBER ITA NO.-5821/DEL/2012 ( ASSESSMENT YEAR: 2005-06) DCIT CIRCLE 9(1) ROOM NO. 163, C.R. BUILDING NEW DELHI. VS SURAJ OVERSEAS PVT. LTD. GREEN FIELD FARM, KHASRA NO. 8/1/1, 10/2 & 9/3 & 4, GADAIPUR, JAUNPUR ROAD, TEHSIL MEHRAULI, NEW DELHI. AAACS4002K ASSESSEE BY SH. ROHIT JAIN, ADV. SH. DEEPESH JAIN, CA REVENUE BY SH. TIWARI, SR. DR ORDER PER SHRI K.N. CHARY, JUDICIAL MEMBER AGGRIEVED BY THE ORDER DATED 31.08.2012 IN APPEAL N O. 196/10-11 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEA LS)-NEW DELHI (HEREINAFTER FOR SHORT CALLED AS THE LD. CIT (A)) . REVENUE PREFERRED THIS APPEAL ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) ERRED IN LAW IN DELETING THE ADDITION OF RS. 2,86,468/- MADE BY THE AO UNDER SECTION 14A OF THE ACT ON ACCOUNT OF DIVIDEND INCOME. DATE OF HEARING 12.10.2017 DATE OF PRONOUNCEMENT 27.10.2017 2 ITA NO. 5821/DEL/2012 2. THE LD. CIT (A) ERRED IN LAW AND ON FACTS IN ASS ESSING SHORT TERM CAPITAL GAIN ON SHARES/UNITS AT RS. 7,64,671/- AND LONG TER M CAPITAL GAIN ON SHARES AT RS. 71,52,517/- INSTEAD OF TREATING IT AS BUSINESS INCOME. 3. THE APPELLANT CRAVES TO AMEND MODIFY, ALTER, ADD OR FOREGO ANY GROUND OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 2. BRIEFLY STATED RELEVANT FACTS ARE THAT THE ASSES SEE WAS DERIVING INCOME FROM RENT, INTEREST AND DIVIDEND AND FOR THE AY 2008-09 THEY HAVE FILED THEIR RETURN OF INCOME ON 29.09.2008 DECLARIN G THE TOTAL INCOME OF RS. 35,10,350/-. DURING THE SCRUTINY AO FOUND THAT THE ASSESSEE PRIMARILY ENGAGED IN THE BUSINESS OF RENT, PURCHASE AND SALE OF SHARES AND INTEREST AND A PART OF THE RECEIPTS DERIVED FROM THE TRADING OF SHARES WAS SHOWN IN PROFIT AND LOSS ACCOUNT AND A PART WAS CLAIMED AS S HORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN. AO TREATED THE ENTIRE SHORT TERM AND LONG TERM CAPITAL GAINS AS BUSINESS INCOME OF THE ASSESSEE AN D MADE AN ADDITION OF RS. 79,17,188/- ON THAT COUNT. FURTHER, AO FOUND T HAT DURING THE YEAR THE ASSESSEE EARNED A DIVIDEND INCOME OF RS. 33,65,755/ - AND BY INVOKING PROVISIONS U/S 14A OF THE INCOME TAX ACT, 1961 (FOR SHORT CALLED AS THE ACT) AND 8D OF THE INCOME TAX RULES (FOR SHORT RE FERRED TO AS THE RULES) AO MADE AN ADDITION OF RS. 2,86,468/-. IN THE APPE AL, LD. CIT (A) ACCEPTED THE CONTENTION OF THE ASSESSEE THAT A SUM OF RS. 7,64,671/- WAS SHORT TERM CAPITAL GAIN ON SHARES/UNITS AND A SUM O F RS. 71,52,517/- AS LONG TERM CAPITAL GAIN ON SHARES, INSTEAD OF TREATI NG IT AS BUSINESS INCOME 3 ITA NO. 5821/DEL/2012 AS WAS DONE BY THE AO. LD. CIT (A) FURTHER ACCEPTE D THE CONTENTION OF THE ASSESSEE AND DELETED RS. 2,86,468/- ADDITION MADE B Y THE AO BY INVOKING THE PROVISIONS U/S 14A OF THE ACT. HENCE, THE REVE NUE IS IN APPEAL BEFORE US. 3. AT THE OUTSET, LD. AR BROUGHT IT TO OUR NOTICE T HAT INSOFAR AS THE ISSUE RELATING TO THE SHORT TERM AND LONG TERM CAPI TAL GAINS BEING TREATED AS BUSINESS INCOME, IN ASSESSEES OWN CASE FOR THE AY 2006-07 THE FOLLOWING QUESTION WAS REFERRED TO THE SPECIAL BENC H: WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE CIT (APPEALS) ERRED IN LAW IN HOLDING THAT PROFIT AGGRE GATING TO RS. 2,51,50,313/- EARNED BY THE APPELLANT FROM SALE OF SHARES AND SEC URITIES HELD UNDER DISCRETIONARY PORTFOLIO MANAGEMENT SCHEME WAS ASSES SABLE UNDER THE HEAD BUSINESS INCOME AS OPPOSED TO CAPITAL GAINS RETUR NED BY THE APPELLANT? AND THE SPECIAL BENCH ANSWERED THE ABOVE ISSUE IN T HE FOLLOWING TERMS: 13. THUS IN VIEW OF THE AFORESAID DECISIONS OF TH E TWO HIGH COURTS IN FAVOUR OF THE ASSESSEE WHERE NO CONTRARY DECISION IS CITED BEFORE US, WE ANSWER THE QUESTION IN FAVOUR OF THE ASSESSEE HOLDING THAT THE ISSUE IS NO LONGER RE INTEGRA. ONLY THE FACTS OF THE PRESENT CASE NEED T O BE EXAMINED BY THE DIVISION BENCH AS THE ISSUE OF ADMISSION OF THE 2-P MS AGREEMENTS INCLUDING THE OTHER SUPPORTING EVIDENCES IS PENDING ADJUDICATION BEFORE THE DIVISION BENCH. SIMILARLY THE DETAILS OF THE TRANS ACTIONS AS CULLED OUT BY THE HONBLE HIGH COURT IN THE CASE OF RADIAL INTERNATIO NAL VIS--VIS THE ASSESSEES CASE HAVE BEEN TABULATED BY THE ASSESSEE SO AS TO CANVASS THAT THE PERIOD OF HOLDING OF SHARES UNDER PMS IS I DENTICAL. THE CORRECTNESS OF THE CLAIMS MADE IN THE TABULATION AT PAGES 568-5 73 OF THE PAPER BOOK NEEDS TO BE VERIFIED. WE FIND THAT ALTHOUGH NO OBJ ECTION WAS TAKEN BY THE DEPARTMENT THAT IT WAS FRESH EVIDENCE AS THE DEPART MENTAL STAND WAS THAT IT MAY BE VERIFIED AT THE AOS LEVEL. HOWEVER, WE ALL OW THE ASSESSEE TO FILE AN APPROPRIATE PETITION BEFORE THE DIVISION BENCH. 4 ITA NO. 5821/DEL/2012 14. ACCORDINGLY HAVING ANSWERED THE QUESTION POSED WITHIN THE PROCEDURAL AND FACTUAL CONSTRAINTS, WE RETURN THE R EFERENCE TO THE DIVISION BENCH TO DECIDE THE APPEAL OF THE ASSESSEE. HE SUBMITTED THAT PURSUANT TO THE ABOVE FINDING RET URNED B Y THE SPECIAL BENCH, A COORDINATE BENCH OF THIS TRIBUNAL IN ITA N O. 3827/DEL/2009 RESTORED THIS QUESTION TO THE FILE OF AO FOR APPLIC ATION OF THE PROPOSITION OF LAW LAID DOWN BY THE SPECIAL BENCH OF THIS TRIBUNAL AND ALSO THE JURISDICTIONAL HIGH COURT TO THE CASE OF THE ASSESS EE FOR AY 2006-07. BASING ON THIS LD. AR SUBMITTED THAT THIS MATTER MA Y ALSO BE REMANDED BACK TO THE FILE OF AO FOR GIVING EFFECT TO THE PRO POSITION OF LAW LAID DOWN BY THE SPECIAL BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE AY 2006-07. LD. DR REPORTS NO OBJECTION. HENCE, RECO RDING THE SAME, WE DEEM IT JUST AND NECESSARY TO SET ASIDE GROUND NO. 2 TO THE FILE OF THE AO FOR CARRYING OUT THIS DIRECTION, AFTER GIVING AN OP PORTUNITY TO THE ASSESSEE. 4. IN SO FAR AS THE DELETION OF THE ADDITION MADE B Y THE AO U/S 14A OF THE ACT IS CONCERNED, LD. CIT (A) IN HIS ORDER OBSE RVED THAT THE ASSESSING OFFICER HELD THE PROFIT ON SALE OF INVESTMENT AS BU SINESS INCOME AND RECOMPUTED THE BUSINESS PROFIT AFTER INCLUDING THE SALE OF INVESTMENT AS BUSINESS INCOME AND CONSIDERING THE TOTAL EXPENSES OF RS. 30,79,941/- WAS CHARGED IN THE PROFIT AND LOSS ACCOUNT, AND DIS ALLOWED A SUM OF RS. 5 ITA NO. 5821/DEL/2012 2,86,468/- OUT OF THE ABOVE EXPENSES U/S 14A READ W ITH RULE 8D IN RESPECT OF EXEMPT DIVIDEND INCOME OF RS. 33,65,755/ -. LD. CIT(A) FURTHER OBSERVED THAT IN VIEW OF THE FINDING GIVEN BY HIM O N THE GAIN ON SALE OF SHARES AND REDEMPTION OF UNITS OF MUTUAL FUND TO TH E EFFECT THAT THE ASSESSEES INCOME FROM THE SALE OF INVESTMENT LIABL E TO TAX UNDER THE HEAD CAPITAL GAIN, AND CONSIDERING THAT THE ASSES SEE HAD CLAIMED ONLY RS. 68,009/- AS TAX DEDUCTIBLE BUSINESS EXPENSES OU T OF TOTAL EXPENSES OF RS. 30,79,941/-, NO FURTHER DISALLOWANCE U/S 14A IS WARRANTED. WE DO NOT FIND ANY ILLEGALITY OR IRREGULARITY IN THIS FINDING OF THE LD. CIT (A), AS SUCH, WE DO NOT PROPOSE TO INTERFERE WITH THE SAME. HENC E, GROUND NO. 1 IS DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED IN PART FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 27.10.2017 SD/- SD/- (G.D. AGRAWAL) (K.N. CHARY) PRESIDENT JUDICIAL MEMBER DATED: 27.10.2017 *KAVITA ARORA 6 ITA NO. 5821/DEL/2012 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI