KEYNOTE CAPITAL LTD, MUMBAI V. ADDL CIT RG 4(3), MUMBAI

ITA 6131/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2134 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 18-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Speculation loss
• Section: 143(3); 234B

Judgement Text

KEYNOTE CAPITAL LTD. ITA NO. 6573 /MUM/201 2 ITA NO. 61 /MUM/201 3 ITA NO. 6131 /MUM/201 3 1 A IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A , MUMBAI , , BEFORE SHRI RAJENDRA ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMB ER , ITA NO. : 6573 /MUM/20 1 2 ( ASSESSMENT YEAR: 200 9 - 1 0 ) KEYNOTE CAPITAL LTD., THE RIBY 9 TH FLOOR, SENAPATI BAPAT MARG, DADAR (WEST), MUMBAI - 400 026 .: PAN: AAACK 2618 R VS JT. COMMISSIONER OF INCOME TAX (OSD) - 4(3), AAYAKAR BHAVAN, M K ROA D, MUMBAI - 400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI DHARMESH SHAH & SHRI DHAVAL SHAH RESPONDENT BY : SHRI R A DHYANI ITA NO. : 61 /MUM/20 13 ( ASSESSMENT YEAR: 200 9 - 10 ) ASST. COMM ISSIONER OF INCOME TAX - 4(3), 6 TH FLOOR, ROOM NO. 649, AAYAKAR BHAVAN, MUMBAI - 400 020 VS M/S KEYNOTE CAPITAL LTD., 4 TH FLOOR, BALMER LAWRIE BUILDING, BALLARD ESTATE, MUMBAI - 400 001 (APPELLANT) (RESPONDENT) AP PELLANT BY : SHRI R A DHYANI RESPONDENT BY : SHRI DHARMESH SHAH & SHRI DHAVAL SHAH ITA NO. : 6131 /MUM/20 13 ( ASSESSMENT YEAR: 20 1 0 - 11 ) KEYNOTE CAPITAL LTD., THE RIBY 9 TH FLOOR, SENAPATI BAPAT MARG, DADAR (WEST), MUMBAI - 400 026 .: PAN: AAACK 2618 R VS ADDL . COMMISSIONER OF INCOME TAX (OSD) - 4(3), AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI DHARMESH SHAH & SHRI DHAVAL SHAH RESPONDENT BY : SHRI R A DHYANI /DATE OF HEARING : 19 - 10 - 201 5 / DATE OF PRONOUNCEMENT : 30 - 11 - 201 5 KEYNOTE CAPITAL LTD. ITA NO. 6573 /MUM/201 2 ITA NO. 61 /MUM/201 3 ITA NO. 6131 /MUM/201 3 2 ORDER , . . : PER AMIT SHUKLA, J M : T HE AFORESAID CROSS APPEALS BY THE ASSESS EE AS WELL AS BY THE REVENUE FOR THE ASSESSMENT YEAR 200 9 - 10 HAVE BEEN FILED AGAINST IMPUGNED ORDER DATED 08.10.2012 AND ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2010 - 11 HA S BEEN FILED AGAINST IMPUGNED ORDER DATED 1 8 .0 9 .201 3 , PASSED BY CIT(A) - 8, MUMBAI F OR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) . S INCE THE ISSUES INVOLVED IN TH ESE APPEALS ARE COMMON ARISING OUT OF IDENTICAL SET OF FACTS, THEREFORE, SAME WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY WAY OF THIS CONSOLIDATED ORDER. 2. WE WILL TAKE - UP ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2009 - 10, ITA 6573/MUM/2012 , VIDE WHICH FOLLOWING GROUNDS HAVE BEEN RAISED : - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) LEGALLY ERRED IN NOT ALLOWING THE DEPRECIATION ON THE MOTOR CARE P URCHASED DURING THE YEAR IN THE NAME OF THE DIRECTORS. 1.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT(A) ERRED IN NOT FOLLOWING THE JURISDICTIONAL HIGH COURT JUDGMENT RELIED BEFORE HIM, CIT VS. DILIP SINGH SARDAR SINGH BAGS (201 ITR 995) AND OTHE R JUDGMENTS IN FAVOUR OF APPELLANT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN CONFIRMING THE LEVY OF THE INTEREST U/S 234B & 234C OF THE ACT. 3. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER TO AMEND THE GROUNDS OF APPEAL ON OR BEFORE THE HEARING OF THIS APPEAL. 3. BRIEF FACTS ARE THAT, THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF SHARE BROKING AND SHARE TRADING. THE ASSESSEE COMPANY HAD PURCHASED A MOTOR CAR FOR RS. 56,64,191/ - IN THE NAME OF THE DIRECTOR AND HAD CLAIME D DEPRECIATIO N OF RS. 8,94,920/ - . THE LD. AO HAS DISALLOWED THE DEPRECIATION ON THE KEYNOTE CAPITAL LTD. ITA NO. 6573 /MUM/201 2 ITA NO. 61 /MUM/201 3 ITA NO. 6131 /MUM/201 3 3 GROUND THAT THE ASSESSEE IS NOT THE OWNER OF THE ASSET AND THE VEHICLE WAS OWNED IN THE PERSONAL CAPACITY OF THE DIRECTOR, THEREFORE, DEPRECATION CANNOT BE CLAIMED BY THE A SSESSEE. IN SUPPORT OF HIS CONTENTION, HE HAS REFERRED TO VARIOUS DECISIONS AS DISCUSSED FROM PAGES 3 TO 4 OF THE ASSESSMENT ORDER. 4. THE LD. CIT(A) UPHELD THE ACTION OF THE AO STATING THAT , HE WAS JUSTIFIED IN REJECTING THE ASSESSEES CLAIM FOR DEPRECI ATION AS THE ASSESSEE CANNOT BE HELD TO BE OWNER IN TERMS OF SECTION 32(1) . 5. BEFORE US, T HE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT , NOW THIS ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ICD S LTD. VS CIT, REPORTED IN [2013] 350 ITR 527. 6. ON THE OTHER HAND, LD. DR FILED A COPY OF ITAT MUMBAI DECISION IN THE CASE OF ADVICE CONSULTANT P LTD VS. ADD. CIT IN ITA NO. 309/MUM/2011 VIDE ORDER DATED 19.04.2013 WHEREIN, THE TRIBUNAL AFTER DISCUSSING THE ISSUE AT LENGTH HAS HELD THAT MERELY BECAUSE THE COMPANY HAS SHOWN THE CAR AS ITS ASSETS IN THE BOOKS OF ACCOUNT, IT WILL NOT MAKE THE COMPANY OWNER OF THE CAR SO AS TO GET THE BENEFIT OF DEPRECATION U/S 3 2 (1). 7. AFTER CONSIDERING THE RIVAL CONTENTI ONS AND ON PERUSAL OF THE IMPUGNED ORDER, WE FIND THAT ONLY ISSUE INVOLVED IS , WHETHER THE DEPRECATION ON THE VEHICLE WHICH IS APPEARING IN THE BLOCK OF ASSET OF THE ASSESSEE COMPANY AND UTILIZED BY THE ASSESSEE COMPANY FOR ITS BUSINESS PURPOSE CAN BE ALLO WED DESPITE THE FACT THAT VEHICLE HAS BEEN PURCHASED IN THE NAME OF THE DIRECTOR. THIS ISSUE NO LONGER IS RES - INTEGRA AS HONBLE SUPREME COURT IN THE CASE OF ICD S LTD. ( SUPRA ) AFTER REFERRING TO THE VARIOUS DECISIONS OF SUPREME COURT AND HIGH COURT AND MOT OR VEHICLE ACT HAS HELD THAT , AS LONG AS ASSET IS UTILIZED FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE, KEYNOTE CAPITAL LTD. ITA NO. 6573 /MUM/201 2 ITA NO. 61 /MUM/201 3 ITA NO. 6131 /MUM/201 3 4 THE REQUIREMENT OF SECTION 32 STANDS SATISFIED EVEN THOUGH VEHICLE IS REGISTERED IN THE NAME OF DIFFERENT PERSONS. 8. THUS, RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE. 9. SO FAR AS LEVY OF INTEREST U/S 234B & 234C IS CONCERNED , THE SAME IS CONSEQUENTIAL. IN THE RESULT ASSESSEES APPEAL IS ALLOWED IN PART. 10. NOW, IN ASSES SEES APPEAL FOR THE ASSESSMENT YEAR 2010 - 11 IN ITA NO. 6131/MUM/2013 , SIMILAR GROUND S HA VE BEEN RAISED, THUS, THE FINDING GIVEN IN THE AFORESAID APPEAL WILL APPLY MUTATIS MUTANDIS IN THIS YEAR ALSO AND ACCORDINGLY , THE GROUND RAISED BY THE ASSESSEE IS TRE ATED AS PARTLY ALLOWED. 11. NOW, WE WILL TAKE - UP REVENUES APPEAL FOR THE ASSESSMENT YEAR 2009 - 10 IN ITA NO. 61/MUM/2013 VIDE WHICH FOLLOWING GROUND HAS BEEN RAISED : - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE AO TO RESTRICT THE APPORTIONED EXPENSES BETWEEN SPECULATIVE AND NON SPECULATIVE BUSINESS OF RS. 13,98,833/ - ON THE BASIS OF TURNOVER AND RESTRICT IT TO RS. 66,312/ - 12. THE AO FROM THE PERUSAL OF THE PROFIT AND LOSS ACCOUNT NOTED THA T, ASSESSEE HAD SHOWN AN INCOME FROM CAPITAL MARKET OPERATION OF RS.1,47,659/ - . HOWEVER WHEN THE STT PAID ON SHARE TRANSACTION AND THE PROPORTIONATE EXPENSES ARE DISALLOWED AGAINST THE SAID INCOME, THE RESULTANT FIGURE IS A LOSS. THE AO HELD THAT IN THAT CASE, THE MAJOR PORTION OF ASSESSEES INCOME WOULD BE F ROM BUSINESS AND NOT FROM CAPITAL GAINS, HOUSE PROPERTY OR INCOME KEYNOTE CAPITAL LTD. ITA NO. 6573 /MUM/201 2 ITA NO. 61 /MUM/201 3 ITA NO. 6131 /MUM/201 3 5 FROM OTHER SOURCES , THEREFORE, THE ASSESSEE GETS COVERED BY THE E XPLANATION TO SECTION 73. THE AO FURTHER OBSERVED THAT , SINCE AS PER THE WORKING GIVEN BY THE ASSESSEE, THERE IS A LOSS OF RS. 26,33,077/ - ON SHARE TRADING, THEREFORE, SUCH A LOSS SHOULD BE TREATED AS SPECULATION LOSS . 13. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THE COMPUTATION OF GROSS TOTAL INCOME IN THE FOLLOWING MA NNER : - (AMT. IN RS. ) HEADS OF INCOME AMOUNT (RS) A BUSINESS INCOME 49,82,938 B OTHER SHORT TERM CAPITAL LOSS 16,977 (A) OTHER SHORT TERM CAPITAL LOSS 60,21,115 (B) EXEMPTED LONG TERM CAPITAL GAIN 1,11,37,101 (C) EXEMPTED DIVIDEND INCOME 3,94,740 (D) INTEREST INCOME 52,74,541 1,13,12,633 INNER TOTAL 2,28,44,474 TOTAL (A + B) 1,62,95,560 THUS, IT WAS SUBMITTED THAT, INCOME FROM OTHER SOURCES I.E. CAPITAL GAINS AND IN TEREST WAS FAR HIGHER THAN THE BUSINESS INCOME, THEREFORE, THE E XPLANATION TO SECTION 73 WILL NOT APPLY. THE LD. CIT(A) AFTER CONSIDERING THE FACTS AND THE PROVISION S OF SECTION 73 ACCEPTED THE ASSESSEES CONTENTION AFTER OBSERVING AND HOLDING AS UNDER : 4.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE. THE PROVISIONS OF EXPLANATION TO SECTION 73 DOES NOT APPLY IN CASE WHERE THE GROSS TOTAL INCOME CONSIST MAINLY OF INCOME CHARGEABLE UNDER THE HEAD INTEREST ON SECURITIES, INCOME FROM HOUSE PROPERTY, CAPITAL GAINS AND INCOME FROM OTHER SOURCES. IN THE CASE UNDER CONSIDERATION, THE GROSS TOTAL INCOME OF THE APPELLANT WAS CONSISTING OF : - (AMT. IN RS. ) BUSINE SS INCOME 49,82,936 CAPITAL GAINS 60,21,116 INCOME FROM OTHER SOURCES 52,74,541 LONG TERM CAPITAL GAINS (EXEMPT RS. 1,11,37,701) THUS, APPELLANTS GROSS TOTAL INCOME WAS MAINLY CONSISTING OF CAPITAL GAINS AND INCOME FROM OTHER SOURCES. I N THE FACTS AND CIRCUMSTANCES THE PROVISIONS OF EXPLANATION OF SECTION 73 WERE NOT APPLICABLE IN THE APPELLANTS CASE. IT IS NOT UNDERSTOOD AS TO HOW THE AO STATED IN THE ASSESSMENT ORDER THAT THE MAJOR KEYNOTE CAPITAL LTD. ITA NO. 6573 /MUM/201 2 ITA NO. 61 /MUM/201 3 ITA NO. 6131 /MUM/201 3 6 PORTION OF APPELLANTS INCOME WAS FROM THE BUSINESS A ND NOT FROM THE CAPITAL GAINS, HOUSE PROPERTY OR INCOME FROM OTHER SOURCES. CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES, THE PROVISIONS OF EXPLANATION TO SECTION 73 OF THE ACT WERE NOT APPLICABLE IN THIS CASE. THE AO IS THEREFORE DIRECTED TO CONSIDER THE LOSS ON SHARE TRANSACTIONS AS BUSINESS LOSS AND ALLOW CONSEQUENTIAL BENEFITS / ADJUSTMENTS ACCORDINGLY. 14. AFTER CONSIDERING THE RIVAL SUBMISSIONS MADE BY THE PARTIES AND ON PERUSAL OF THE IMPUGNED ORDER, WE FIND THAT IT IS AN UNDISPUTED FACT WHICH HAS BEEN RECORDED BY THE CIT(A) , THAT THE IN THE COMPUTATION OF GROSS TOTAL INCOME, THE INCOME FROM OTHER SOURCES AND CAPITAL GAINS ARE FAR HIGHER THAN THE BUSINESS INCOME AND, THEREFORE, BASED ON THESE FACTS THE LD. CIT(A) HAS RIGHTLY CONCLUDED THAT, PR OVISIONS OF EXPLANATION TO SECTION 73 ARE NOT APPLICABLE , WHICH WE AFFIRM . ACCORDINGLY, WE DO NOT FIND ANY MERITS IN THE GROUNDS RAISED BY THE ASSESSEE AND THE SAME IS DISMISSED. 15. IN THE RESULT, APPEAL BY THE ASSESSEE FOR AY 2009 - 10 & 2010 - 11 ARE PAR TLY ALLOWED AND THE REVENUES APPEAL FOR AY 2009 - 10 STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER , 2015. SD/ - SD/ - ( ) ( ) ( RAJENDRA ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 30 TH NOVEMBER , 2015 / COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3) THE CIT (A) - 8 , MUMBAI. 4 ) THE CIT 4 , MUMBAI. 5 ) A , , / KEYNOTE CAPITAL LTD. ITA NO. 6573 /MUM/201 2 ITA NO. 61 /MUM/201 3 ITA NO. 6131 /MUM/201 3 7 THE D.R. A BENCH, MUMBAI. 6 ) \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS