R.K. Import Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 6143/DEL/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69152 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 23-07-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 10-12-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: BHIM SINGH
• Keywords: Capital asset; Business income; Depreciation; Business expenditure; Cost of acquisition
• Section: 142(1); 14A

Judgement Text

ITA NO.6143/DEL/2012 ASSTT.YEAR: 2009-10 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `F NEW DELHI BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.NO.6143/DEL/2012 ASSESSMENT YEAR : 2009-10 M/S R.K. IMPORT PVT. LTD., VS INCOME TAX OFFICER, 10-B, NETAJI SUBHASH ROAD, WARD 1 5(1), NEW DELHI. DARYA GANJ, DELHI-110002 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI ANIL PURI RESPONDENT BY : SHRI BHIM SINGH, SR. DR O R D E R PER CHANDRA MOHAN GARG, JUDICIAL MEMBER THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-XVIII, NEW DELHI DATED 01.10.2012 IN APPEAL NO. 238/11-12 FOR AY 2009-10. GROUNDS NO. 7 & 8 OF THE ASSESSEE ARE GENERAL IN NATURE WHICH NEED NO ADJUDICATION. REMAINING GROUNDS RAISED BY THE ASSESSEE READ AS UNDER:- 1.THE LEARNED COMMISSIONER OF INCOME TAX( APPEALS) - XVIII, NEW- DELHI, ERRED BOTH IN LAW AS WELL AS IN RESPECT OF THE FACTS OF THE CASE, WHILE DISMISSING THE APPE AL, VIDE HIS ORDER DATED 01.10.2012. 2. THE C.I.T(APPEALS) WAS ABSOLUTELY UNJUSTIFIED IN UPHOLDING THE DISALLOWANCE OF TOTAL EXPENSES OF RS. 1,86,653, DEBITED TO THE PROFIT AND LOSS ACCOUNT, W ITHOUT APPRECIATING THE FACTS OF THE CASE JUDICIOUSLY ITA NO.6143/DEL/2012 ASSTT.YEAR: 2009-10 2 3. THE LEARNED C.I.T(APPEALS) FAILED TO APPRECIATE THE SUBMISSIONS OF THE APPELLANT JUDICIOUSLY, MISCONSTR UED PROVISIONS OF SECTION 14A READ WITH RULE 80, ARBITR ARILY REJECTED THE CLAIM OF THE APPELLANT AND ERRONEOUSLY UPHELD THE TOTAL DISALLOWANCE OF RS. 1,86,653. 4. SHE WAS, FURTHER, UNJUSTIFIED IN UPHOLDING THE DISALLOWANCE OF BONAFIDE, STATUTORY AND OTHER EXPEN SES INCURRED FOR THE MAINTENANCE AND EXISTENCE OF THE APPELLANT COMPANY. 5. THE LEARNED C.I.T(APPEALS), FURTHER ERRED IN UPHOLDING THE DISALLOWANCES MADE FOR THE EXPENSES CLAIMED AGAINST SHORT TERM AND LONG TERM CAPITAL GA INS ASSESSED AT RS. 10,845 AND RS. 5,16,527 AS AGAINST RS. (-) 53,492 AND RS. 4,52,241 DECLARED IN THE RETURN OF INCOME. 6. THE C.I.T(APPEALS) ALSO FAILED TO APPRECIATE THE PROVISIONS OF SECTION 71(2) OF THE INCOME TAX ACT, 1961 AND WRONGLY DISMISSED THE GROUND, CLAIMING SET-OFF OF LOSSES RS. 73,078 DETAILED BELOW CURRENT BUSINESS LOSS 40,423 CURRENT DEPRECIATION LOSS 7,595 BROUGHTFORWARD DEPRECIATION LOSS 5,060 73,078 2. BRIEFLY STATED, THE FACTS GIVING RISE TO THIS APPEA L ARE THAT THE CASE WAS SELECTED FOR COMPULSORY SCRUTINY UNDER CASS NORMS A ND A NOTICE U/S 143(2) OF THE INCOME TAX ACT (FOR SHORT THE ACT) WAS ISSUE D AND SERVED UPON THE ASSESSEE. SUBSEQUENTLY, ANOTHER NOTICE U/S 142(1) OF THE ACT ALONG WITH QUESTIONNAIRE WAS ISSUED AND SERVED ON THE ASSESSEE . THE ASSESSING OFFICER NOTED THAT THE ASSESSEE COMPANY DID NOT CARRY ANY B USINESS ACTIVITY DURING ITA NO.6143/DEL/2012 ASSTT.YEAR: 2009-10 3 THE YEAR UNDER CONSIDERATION AND HAS SHOWN ONLY SHO RT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN IN ITS RETURN OF INCOME. DU RING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE VIDE ITS LETTER DATED 11. 02.2011 STATED THAT IN THE COMPUTATION OF INCOME, A SUM OF RS. 1,28,623 HAS TO BE DISALLOWED IN ACCORDANCE WITH SECTION 14A OF THE ACT R/W RULE 8D OF THE INCOME TAX RULES OUT OF TOTAL EXPENSES OF RS.1,86,653 BOOKED I N THE P&L ACCOUNT. THE ASSESSING OFFICER FINALIZED THE ASSESSMENT BY DISAL LOWING ENTIRE EXPENSE OF RS.1,86,653 AND ADDED BACK THE SAME TO THE INCOME O F THE ASSESSEE. THE ASSESSING OFFICER ALSO OBSERVED THAT THE VOLUNTARY DISALLOWANCE MADE BY THE ASSESSEE ITSELF AMOUNTING TO RS.1,28,623 BOOKED AGA INST LONG TERM AND SHORT TERM CAPITAL GAINS WERE NOT THE EXPENDITURE INCURRE D WHOLLY AND EXCLUSIVELY IN CONNECTION WITH TRANSFER OF CAPITAL ASSET AND TH E ASSESSING OFFICER DISALLOWED ENTIRE AMOUNT OF EXPENSES AND ADDED BACK TO THE INCOME OF THE ASSESSEE. 3. BEING AGGRIEVED BY THE ABOVE ASSESSMENT ORDER, T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX(A) WHICH WAS ALSO DISALLOWED WITH FOLLOWING FINDINGS AND OBSERVATIONS :- 4.1 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT OR DER AND THE SUBMISSIONS FILED BY THE APPELLANT. THE AP PELLANT HAS NOT SHOWN ANY INCOME FORM BUSINESS AND HAS ONLY SHOWN SHORT TERM AND LONG TERM CAPITAL GAINS. THERE IS NO BUSINESS ACTIVITY DURING THE YEAR. THE FUNDS AV AILABLE WITH THE COMPANY HAVE BEEN INVESTED IN MUTUAL FUNDS . ITA NO.6143/DEL/2012 ASSTT.YEAR: 2009-10 4 THE INCOME EARNED UNDER THE HEADS CAPITAL GAINS HAS NOT BEEN CLAIMED AS A BUSINESS ACTIVITY, BUT HAS BEEN REFLECTED UNDER SECTION 45 OF THE INCOME TAX ACT, 1 961. THE CLAIM OF THE APPELLANT THAT MINIMAL EXPENDITURE IS REQUIRED FOR BONA FIDE DAY-TO-DAY EXPENSES IS NOT ACCEPTED ON THE BASIS OF THE FACTS OF THE CASE. RE LIANCE IS PLACED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS:- - C.I.T. VS K. NARENDRA (DEL) 246 ITR 579 - EXPRESS NEWSPAPERS PVT. LTD. VS C.I.T.(MAD) 227 ITR 325 - C.I.T. VS RAMDAS & SONS (PAT) 225 ITR 416 THE ADDITION MADE BY THE ASSESSING OFFICER IS, THER EFORE, CONFIRMED. 5. GROUND OF APPEAL NO.4 IS DIRECTED AGAINST NOT ALLOW ING SET OFF OF BUSINESS LOSSES. IN THE SUBMISSIONS, TH E APPELLANT HAS NOT SUBMITTED ANYTHING ON THIS GROUND OF APPEAL. AS PER THE GROUND OF APPEAL AND AS PER THE ASSESSMENT ORDER, THE LOSSES HAVE NOT BEEN ALLOWED TO BE SET OFF WITHOUT GIVING ANY SPECIFIC REASON. HOWEVE R, AS THE INCOME HAS BEEN ASSESSED UNDER SECTION 45, THER E IS NO JUSTIFICATION FOR CLAIM OF SET OFF OF CURRENT BU SINESS LOSS, DEPRECIATION LOSS, AND BROUGHT FORWARD DEPREC IATION LOSS, AGAINST THE INCOME FOR THE CURRENT YEAR. THE GROUND OF APPEAL IS, THEREFORE, DISMISSED. 4. NOW, THE ASSESSEE IS AGAIN BEFORE THIS TRIBUNAL IN THE SECOND APPEAL WITH THE GROUNDS AS MENTIONED HEREINABOVE. GROUND NOS. 1 TO 5 5. APROPOS THESE GROUNDS, THE LD. COUNSEL FOR THE A SSESSEE SUBMITTED THAT THE COMMISSIONER OF INCOME TAX(A) ERRED BOTH IN LAW AS WELL AS IN RESPECT OF THE FACTS OF THE CASE WHILE DISPOSING THE APPEAL OF THE ASSESSEE. THE ITA NO.6143/DEL/2012 ASSTT.YEAR: 2009-10 5 COUNSEL FURTHER SUBMITTED THAT THE COMMISSIONER OF INCOME TAX(A) WAS ABSOLUTELY UNJUSTIFIED IN UPHOLDING THE DISALLOWANC E OF ENTIRE EXPENSES OF RS. 1,86,653 DEBITED TO THE PROFIT & LOSS ACCOUNT W ITHOUT APPRECIATING THE RELEVANT FACTS AND CIRCUMSTANCES OF THE CASE. THE COUNSEL VEHEMENTLY CONTENDED THAT THE CIT(A) MISERABLY FAILED TO APPRE CIATE THE SUBMISSIONS OF THE APPELLANT IN A JUDICIOUS MANNER AND MISCONSTRUE D THE PROVISIONS OF SECTION 14A OF THE ACT R/W RULE 8D OF THE RULES. TH E COUNSEL OF THE ASSESSEE ALSO SUBMITTED THAT THE AUTHORITIES BELOW ARBITRARI LY REJECTED THE CLAIM OF THE ASSESSEE AND ERRONEOUSLY MADE AND UPHELD THE TOTAL DISALLOWANCE OF ENTIRE AMOUNT OF EXPENSES. THE COUNSEL CONTENDED THAT THE AUTHORITIES BELOW WERE UNJUSTIFIED IN UPHOLDING THE DISALLOWANCE OF BONA F IDE STATUTORY AND GENUINE EXPENSES INCURRED FOR THE MAINTENANCE OF THE APPELL ANT COMPANY. THE COUNSEL FINALLY SUBMITTED THAT THE COMMISSIONER OF INCOME TAX(A) ERRED IN UPHOLDING THE DISALLOWANCE MADE FOR THE EXPENSES CL AIMED AGAINST SHORT TERM AND LONG TERM CAPITAL GAINS AS PER RETURN OF I NCOME. 6. REPLYING TO THE ABOVE, LD. DR SUBMITTED THAT ADM ITTEDLY, THE ASSESSEE COMPANY DID NOT CARRY ANY BUSINESS ACTIVITY DURING THE YEAR UNDER CONSIDERATION AND HAS NOT SHOWN ANY BUSINESS INCOME DURING THE YEAR UNDER CONSIDERATION. THE DR FURTHER SUBMITTED THAT THE A SSESSEE HAD SHOWN ONLY SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN IN ITS RETURN OF INCOME. ITA NO.6143/DEL/2012 ASSTT.YEAR: 2009-10 6 THE DR FAIRLY ACCEPTED THE FACT THAT DESPITE NO BUS INESS ACTIVITY DURING THE YEAR, THERE WAS NO BUSINESS INCOME BUT THE ASSESSEE HAD TO MAKE SOME EXPENSES PERTAINING TO THE BASIC MAINTENANCE FOR TH E ESTABLISHMENT OF ASSESSEE COMPANY. THE DR FURTHER SUBMITTED THAT TH E VOLUNTARY DISALLOWANCE MADE BY THE ASSESSEE OUT OF BUSINESS E XPENSES CANNOT BE ATTRIBUTED AS EXPENDITURE WHOLLY AND EXCLUSIVELY MA DE IN CONNECTION WITH TRANSFER OF CAPITAL AMOUNT, THEREFORE, THE AUTHORIT IES BELOW RIGHTLY HELD THAT AS PER SECTION 48(I) OF THE ACT, THE INCOME CHARGEA BLE UNDER THE HEAD OF CAPITAL GAINS SHALL BE COMPUTED BY DEDUCTING FROM T HE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUED AS A RESULT OF TH E TRANSFER OF CAPITAL ASSETS FOLLOWING THE AMOUNT, NAMELY: I) EXPENDITURE INCURR ED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER II) TH E COST OF ACQUISITION OF THE ASSET AND THE COST OF ANY IMPROVEMENT THEREOF. 7. THE DR CONTENDED THAT THE EXPENSES DEBITED TO TH E P&L ACCOUNT OF THE ASSESSEE I.E. CONVEYANCE, POSTAGE AND TELEGRAM, TELEPHONE, PRINTING AND STATIONERY, BANK CHARGES, INSURANCE CHARGES, SCOOTE R MAINTENANCE, CAR MAINTENANCE AND DEPRECIATION WERE NOT THE EXPENDITU RE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH TRANSFER OF CAPITAL ASSETS, THEREFORE, THE AUTHORITIES BELOW RIGHTLY DISALLOWED THE SAME. THE DR SUBMITTED THAT THE APPEAL OF THE ASSESSEE BEING DEVOID OF MERITS DESER VES TO BE DISMISSED. ITA NO.6143/DEL/2012 ASSTT.YEAR: 2009-10 7 8. ON CAREFUL CONSIDERATION OF THE RIVAL SUBMISSION S AND CONTENTIONS AND LEGAL PROPOSITIONS RELIED BY BOTH THE PARTIES, AS W E HAVE ALREADY OBSERVED THAT ADMITTEDLY THERE WAS NO BUSINESS ACTIVITY BY T HE ASSESSEE DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, WE ALSO OBSERV E THAT THE ASSESSEE HAS SHOWN ONLY INCOME FROM LONG TERM AND SHORT TERM CAP ITAL GAINS. IN THIS SITUATION, EXPENSES CLAIMED BY THE ASSESSEE CANNOT BE ATTRIBUTED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND THE SAM E ARE NOT ALLOWED AS BUSINESS EXPENSES OF THE ASSESSEE. THEREFORE, WE H OLD THAT THE ASSESSING OFFICER RIGHTLY DENIED THE CLAIM OF THE ASSESSEE IN THIS REGARD AND LATER COMMISSIONER OF INCOME TAX(A) WAS QUITE JUSTIFIED I N UPHOLDING THE ASSESSMENT ORDER IN THIS REGARD. 9. COMING TO THE NEXT ISSUE OF DISALLOWANCE OF RS.1 ,28,623/- WHICH WAS VOLUNTARILY DISALLOWED BY THE ASSESSEE U/S 14A OF T HE ACT R/W RULE 8D OF THE RULES, THE ASSESSEE CLAIMED THAT THE AMOUNT OF VOLU NTARY DISALLOWANCE HAS TO BE ALLOWED AGAINST SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN. THE DR SUBMITTED THAT ONLY EXPENSES INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER OF THE CAPITAL ASSET C AN BE ALLOWED OUT OF SHORT TERM AND LONG TERM CAPITAL GAIN AS PER SECTION 48(I ) OF THE ACT. FROM A GLANCE ON THE TRADING AND P&L ACCOUNT OF THE ASSESS EE AVAILABLE ON PAGE 4 OF THE PAPER BOOK, WE OBSERVE THAT NONE OF THE EXPE NSES CLAIMED AND SHOWN ITA NO.6143/DEL/2012 ASSTT.YEAR: 2009-10 8 BY THE ASSESSEE ARE PERTAINING TO THE TRANSFER OF C APITAL ASSETS WHICH BROUGHT LONG TERM AND SHORT TERM CAPITAL GAINS FOR THE ASSE SSEE. IT IS A WELL-SETTLED PRINCIPLE THAT AS PER SECTION 48(I) OF THE ACT, EXP ENSES INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF TRANSFER OF CAPITAL ASSET ARE TO BE ALLOWED WHILE COMPUTING CAPITAL GAINS. THEREFORE, WE HOLD THAT THE AUTHORITIES BELOW RIGHTLY DISALLOWED THE CLAIM OF THE ASSESSEE IN THI S REGARD. IN VIEW OF ABOVE, GROUND NOS. 1 TO 5 OF THE ASSESSEE ARE DISMISSED IN THE MANNER AS INDICATED ABOVE. GROUND NO.6 10. APROPOS GROUND NO.6, LD. COUNSEL FOR THE ASSESS EE SUBMITTED THAT THE COMMISSIONER OF INCOME TAX(A) FAILED TO APPRECIATE THE PROVISIONS OF SECTION 71(2) OF THE ACT AND WRONGLY DENIED THE CLA IM OF THE ASSESSEE FOR SETTING OFF LOSSES OF RS.73,078. REPLYING TO THE A BOVE, THE DR SUBMITTED THAT THE CURRENT BUSINESS LOSSES, CURRENT DEPRECIAT ION LOSSES AND BROUGHT FORWARD DEPRECIATION LOSSES CANNOT BE SET OFF FROM THE INCOME OF CAPITAL GAINS, THEREFORE, THE AUTHORITIES BELOW RIGHTLY REJ ECTED THE CLAIM OF THE ASSESSEE. 11. ON CAREFUL CONSIDERATION OF THE ABOVE SUBMISSIO NS, WE OBSERVE THAT THERE WAS NO BUSINESS ACTIVITY OF THE ASSESSEE DURI NG THE YEAR UNDER CONSIDERATION AND THE ASSESSEE HAS NOT SHOWN ANY BU SINESS INCOME IN ITS ITA NO.6143/DEL/2012 ASSTT.YEAR: 2009-10 9 RETURN. SINCE AS PER FIRST PART OF THIS ORDER PERT AINING TO GROUND NOS. 1 TO 5, WE HAVE UPHELD THE ORDER OF THE COMMISSIONER OF INC OME TAX(A) BY DISMISSING ALL THESE FIVE GROUNDS OF THE ASSESSEE I N FAVOUR OF THE REVENUE, THEREFORE, EXPENSES CLAIMED BY THE ASSESSEE AS BUSI NESS EXPENSES HAVE BEEN DISALLOWED AS PER FACTUAL MATRIX OF THE CASE. AS FA R AS CURRENT DEPRECIATION LOSS AND BROUGHT FORWARD DEPRECIATION LOSS IS CONCE RNED, THESE AMOUNTS ALSO CANNOT BE SET OFF FROM INCOME UNDER THE HEAD OF CAP ITAL GAINS U/S 71(2) OF THE ACT. TO SUM UP, WE HOLD THAT AS PER SECTION 71 (2) OF THE ACT, THE CURRENT AND BROUGHT FORWARD DEPRECIATION LOSS ARE NOT PERMI TTED TO BE SET OFF AGAINST THE INCOME FROM LONG TERM AND SHORT TERM CAPITAL GA INS. THEREFORE, GROUND NO. 6, BEING DEVOID OF MERITS, IS ALSO DISMISSED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2.8.2013. SD/- SD/- (B.C. MEENA) (CHANDRAMOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 2 ND AUGUST 2013 GS ITA NO.6143/DEL/2012 ASSTT.YEAR: 2009-10 10 COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. C.I.T.(A) 4. C.I.T. 5. DR BY ORDER ASSTT.REGISTRAR