Dr.K.D.John, Cochin V. ITO, Ernakulam

ITA 621/COCH/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73841 (ITAT-COCHIN)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 22-01-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 20-09-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K K JOHN
• Assessee Lawyers: K M V PANDALAI
• Keywords: Reassessment proceedings
• Section: 148; 56

Judgement Text

ITA NO. 621 / COCH/ 2013 1 IN THE INCOME TAX AP P EL LA TE T R IBUNAL COCHIN BENCH , COCHIN BEFORE S/SH RI N.R.S. GANESAN, JM & B. R. BASKARAN, AM ITA NO. 621 /COCH/ 2013 (ASST YEAR 2005 - 06 ) DR K D JOHN 43/1910 POTTAKUZHI ROAD, PACHALAM ERANAKULAM KOCHI 682 012 VS THE INCOME TAX OFFICER W ARD 3(2), ERANAKULAM, KOCHI 602 018 ( APPELLANT) (RESPONDENT) PAN NO. ACIPJ9074B ASSESSEE BY SRI K M V PANDALAI. REVENUE BY SRI K K JOHN, SR DR DATE OF HEARING 22 ND JAN 2014 DATE OF PRONOUNCEMENT 24 TH JAN 2014 OR D ER PER B.R. BASKARAN, AM: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 30.7.2013 PASSED BY THE LD CIT(A) - II, KOCHI AND IT RELATES TO THE AY 2005 - 06. 2 THE ONLY ISSUE RAISED IN THIS APPEAL IS WHETHER THE LD CIT(A) WAS JUSTIFIED IN UPHOLDING THE ORDER OF THE AO IN DISALLOWING THE CLAIM OF LOSS OF RS.25,05,000/ - . 3 THE FACTS RELATING TO THE FACTS ARE STATED IN BRIEF: THE ASSESSEE IS A RETIRED CIVIL SURGEON. HIS MAIN SOURCE OF INCOME CONSISTED OF PENSION INCOME , HOUSE PROPERTY INCOME AND INCOME FROM OTHER SO URCE S. THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSID ERATION DECLARING A LOSS OF RS.19,52,320/ - . SUBSEQUENTLY, IT WAS NOTICED THAT THE ASSESSEE HAS CLAIMED LOSS OF RS.25,05,000/ - UNDER THE HEAD INCOME FROM OTHER SOURCES. IT ITA NO. 621 / COCH/ 2013 2 WAS NOT ICED THAT THE ASSESSEE HAS SUFFERED LOSS IN REALIZATION OF FIXED DEPOSITS MADE BY HIM WITH A COMPANY NAMED M/S MERCANTILE CREDIT CORPORATION. SINCE THE SAID LOSS WAS NOT ALLOWABLE AS DEDUCTION U/ S 57 OF THE ACT, THE AO REOPENE D THE ASSESSMENT BY ISSUING NOTICE U/S 148 OF THE ACT. IN THE REASSESSMENT PROCEEDINGS , THE AO DISALLOWED THE LOSS OF RS.25,05,000/ - CLAIMED BY THE ASSESSEE . IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) CONFIRMED THE ORDER OF THE AO AND HENCE, THE ASSESSEE HAS FILED THIS APPEAL BEF ORE US CHALLENGING THE DECISION OF LD CIT(A) . 4 THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD MADE A DEPOSIT OF R S.51 .00 LACS WITH M/S MERCANTILE CREDIT CORPORATION . THE ASSESSEE HAS REGULARLY OFFER ED THE INTEREST RECEIVE D FROM THE ABOVE SAID DEPOSIT IN THE EARLIER YEARS . SUBSEQUENTLY, THE ABOVE SAID COMPANY WENT INTO LIQUIDATION AND CONSEQUENT THERETO THE ASSESSEE COULD REALIZE A SUM OF RS.25,95,000/ - ONLY AGAINST HIS FIXED DEPOSIT , THUS SUFFERING A LOSS OF RS. 25,05,00 0/ - . SINCE THE ASSESSEE WAS REGULARLY DECLARING THE INTEREST INCOME IN THE EARLIER YEARS , THE ASSESSEE CLAIMED THE ABOVE SAID LOSS AS DEDUCTION UNDER THE HEAD INCOME FROM OTHER SOURCES. 4.1 THE LD DR SUBMITTED THAT THERE IS NO PROVISION IN THE INCOME T AX ACT TO ALLOW LOSS SUFFERED ON REALIZATION OF FIXED DEPOSITS. BY PLACING RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS DR V P GOPINATHAN (2001) 248 IR 449, THE LD DR SUBMITTED THAT THE DEDUCTION CLAIMED BY THE ASSESSEE CANN OT BE ALLOWED , SINCE THERE IS NO PROVISION IN THE ACT TO ALLOW SUCH KIND OF CLAIM. 5 . WE HAVE HEARD RIVAL CONTENTIONS AND CAREFULLY PERUSED THE RECORD. ADMITTEDLY, THE ASSESSEE HAS REALIZED A SUM OF RS. 25,95,000/ - ONLY OUT OF THE FIXED DEPOSIT OF RS . 51 .00 LA C S ITA NO. 621 / COCH/ 2013 3 MADE BY HIM WITH M/S MERCANTILE CREDIT CORPORATION AND THUS SUFFERED A LOSS OF RS.25,05,000/ - . IT IS ALSO AN ADMITTED FACT THAT THE ASSESSEE HAS BEEN OFFERING INTEREST RECEIVED ON THE ABOVE SAID FIXED DEPOSIT U/S 56 OF THE ACT UNDER THE HEA D INCOME FROM OTHER SOURCES. WE NOTICE THAT THE PROVISIONS OF SE CTION 57 OF THE ACT PRESCRIBE VARIOUS TYPES OF DEDUCTIONS THAT ARE ALLOWABLE AGAINST THE INCOME OFFERED UNDER THE HEAD INCOME FROM OTHER SOURCES. 6. AT THIS JUNCTURE, WE FEEL IT PE RTINENT TO REFER TO THE FOLLOWING OBSERVATIONS MADE BY HONBLE SUPREME COURT IN THE CASE OF VIJAYALAKSHMI SUGAR MILLS LTD VS. CIT (1991 AIR 2042; 1991 SCR (3) 383) , WHEREIN THE SCOPE OF PROVISIONS OF SEC. 57(III) OF THE ACT HAS BEEN DISCUSSED BY THE HONBL E APEX COURT : - IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'INCOME FROM OTHER SOURCES', SECTION 57(III) PROVIDES THAT DEDUCTION IS TO BE MADE IN RESPECT OF EXPENDITURE LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARN ING SUCH INCOME. THE QUESTION FOR CONSIDERATION, THEREFORE, IS WHETHER THE EXPENSES OF THE TYPE INCURRED BY THE LIQUIDATOR IN THIS CASE CAN BE SAID TO HAVE BEEN INCURRED SOLELY FOR THE PURPOSE OF EARNING THE INTEREST INCOME. IT IS TRUE THAT THE CONNECTION BETWEEN THE EXPENDITURE AND THE EARNING OF INCOME NEED NOT BE DIRECT AND IT MAY BE INDIRECT. BUT SINCE THE EXPENDITURE MUST HAVE BEEN INCURRED FOR THE PURPOSE OF EARNING THAT INCOME THERE SHOULD BE SOME NEXUS BETWEEN THE EXPENDITURE AND THE EARNING OF THE INCOME. IN THE INSTANT CASE, THE ASSESSEE HAS DECLARED INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES AND THE PROVISIONS OF SEC. 57(III) ARE APPLICABLE FOR INTEREST INCOME OFFERED BY THE ASSESSEE . AGAINST THE SAID INTEREST INCOME, THE ASSES SEE HAS CLAIMED LOSS OF RS.25,05,000/ - SUFFERED ON REALIZATION OF FIXED DEPOSIT , MEANING THEREBY THE ASSESSEE HAS CLAIMED DEDUCTION U/S 57(III) OF THE ACT . AS OBSERVED BY HONBLE SUPREME COURT, THERE MUST BE DIRECT OR INDIRECT CONNECTION BETWEEN THE EARNI NG OF INCOME AND THE EXPENDITURE. THERE SHOULD NOT BE ANY DOUBT THAT THE LOSS SUFFERED BY THE ASSESSEE ON REALIZATION OF FIXED DEPOSIT CANNOT BE CONSIDERED AS EXPENDITURE INCURRED IN EARNING OF INTEREST INCOME. FURTHER OTHER PROVISIONS OF SECTION 57 OF T HE ACT DO NOT PROVIDE FOR DEDUCTION OF LOSS SUFFERED ON REALIZATION OF THE F IXED ITA NO. 621 / COCH/ 2013 4 D EPOSIT . UNDER THESE CIRCUMSTANCES, IN OUR VIEW, THE LD CIT(A) WAS JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE AND ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD CIT(A). 7 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 TH , DAY OF JAN 2014 . SD/ - SD/ - (N.R.S. GANESAN) ( B.R. BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER COCHIN: DATED : 24 TH , JAN 201 4 RAJ* C OPY TO: 1. APPELLANT DR K D JOHN 43/1910 POTTAKUZHI ROAD, PACHALAM, KOCHI 682 012 2. RESPONDENT THE INCOME TAX OFFICER WARD 3(2), ERANAKULAM, KOCHI 3. CIT(A) 4. CIT, KOCHI 5. DR 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN