M/s Crossseas Capital Services Pvt. Ltd., Kolkata V. DCIT, CIR-6(2), KOLKATA, Kolkata

ITA 632/KOL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1424 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 08-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S M SURNA ADVOCTE SHRI
• Assessee Lawyers: T VARKEY JUDIC IA L M EMBER
• Keywords: Business income; Earning of tax free income; Question of law
• Section: 143(3); 14A

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI ABY.T VARKEY, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 632 / KOL / 2016 ASSESSMENT YEAR :2010-11 M/S CROSSSEAS CAPITAL SERVICES PVT. LTD. 1, R.N. MUKHERJEE ROAD, 5 TH FLOOR, SUITE NO.37, MARTIN BURN HOUSE, KOKATA-01 [ PAN NO.AACCC 5470 H ] V/S . DCIT, CIRCLE-6(2), P-7, CHOWRINGHEE SQUARE, AAYAKAR BHAVAN, 6 TH FLOOR, KOLKATA-69 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI S.M. SURNA, ADVOCTE /BY RESPONDENT SHRI SAURABH KUMARA, ADDL. CIT-DR /DATE OF HEARING 11-09-2017 !' /DATE OF PRONOUNCEMENT 22-09-2017 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-16, KOLKATA DA TED 09.03.2016. ASSESSMENT WAS FRAMED BY DCIT, CIRCLE-6, KOLKATA U/ S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) VIDE HIS ORDER DATED 04.03.2013 FOR ASSESSMENT YEAR 2011-12. ITA NO.632/KOL/2016 A.Y. 2010-11 M/S CROSSSEAS CAPITAL SERVICES PVT. LTD. VS. D CIT, CIR-6(2) KOL. PAGE 2 SHRI S.M. SURANA, LD. ADVOCATE APPEARED ON BEHALF O F ASSESSEE AND SHRI SAURABH KUMAR, LD. DEPARTMENTAL REPRESENTATIVE REPR ESENTED ON BEHALF OF REVENUE. 2. SOLITARY ISSUE RAISED BY ASSESSEE IN THIS APPEA L IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF ASSESSING OFFICER BY SUS TAINING DISALLOWANCE OF 1,19,586/- UNDER THE PROVISION OF SECTION 14A OF TH E ACT. 3. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS A PRIV ATE LIMITED COMPANY AND ENGAGED IN BUSINESS OF SHARE BROKING AND TRADING AC TIVITIES. THE ASSESSEE IS A REGISTERED BROKER WITH THE BOMBAY STOCK EXCHANGE AN D NATIONAL STOCK EXCHANGE. THE ASSESSEE, DURING THE YEAR HAS EARNED DIVIDEND INCOME OF 1,52,195/- ONLY. BUT IT HAS MADE NO DISALLOWANCE OF THE EXPENSE INCURRED IN RELATION TO SUCH DIVIDEND INCOME. THEREFORE, AO INV OKED THE PROVISION OF SECTION 14A R.W.S. RULE 8D OF THE IT RULES, 1962 AN D MADE A DISALLOWANCE OF 1,19,586/- AND ADDED TO THE TOTAL INCOME OF ASSESSE E. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHO CONFIRMED THE ORDER OF ASSESSING OFFICER. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US. 5. BEFORE US LD. AR FOR THE ASSESSEE SUBMITTED THAT IT IS ENGAGED IN SHARE TRADING BUSINESS AND THEREFORE INVESTMENT MADE IN S HARE WAS HELD AS STOCK- IN-TRADE. THE LD. AR FOR THE ASSESSEE FURTHER SUBMITTED THAT IT HAS NOT DECLARED ANY INCOME ON ACCOUNT OF SALE-PURCHASE OF SHARES UNDER THE HEAD CAPITAL GAINS AS EVIDENT FROM THE RETURN OF INCOME. THE ASSESSEE WAS MAINTAINING SINGLE PORT-FOLIO OF S HARES AS TRADER. NONE OF THE SHARES HAVE BEEN CLASSIFIED AS INVESTMENT IN IT S BOOKS OF ACCOUNT. LD. AR IN SUPPORT OF ASSESSEES CLAIM HAS PRODUCED THE COPY OF AUDITED FINANCIAL STATEMENTS WHICH ARE PLACED ON RECORD. ITA NO.632/KOL/2016 A.Y. 2010-11 M/S CROSSSEAS CAPITAL SERVICES PVT. LTD. VS. D CIT, CIR-6(2) KOL. PAGE 3 IN VIEW OF ABOVE THE LD. AR PRAYED BEFORE THE BENCH THAT NO DISALLOWANCE UNDER SECTION 14A R.W.R. 8D IS WARRANTED. ON THE OT HER HAND, LD. DR HEAVILY RELIED ON THE ORDER OF AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE UNDISPUTED FACT A RE DETAILED AS UNDER I) THAT ASSESSEE HAS EARNED DIVIDEND INCOME ON THE SHARES WHICH WERE HELD AS STOCK-IN-TRADE. II) THE MAIN BUSINESS OF ASSESSEE IS TO TRADE IN SH ARES/ SECURITIES. THESE SHARES/ SECURITIES WERE CLASSIFIED IN THE BOO KS OF ACCOUNT AS STOCK-IN-TRADE AND NO PART OF IT WAS SHOWN UNDER THE HEAD OF INVESTMENT AS EVIDENT FROM THE FINANCIAL STATEMENT PRODUCED BEFORE US. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE O F CIT VS. G.K.K. CAPITAL MARKETS (P) LTD. REPORTED IN 392 ITR 196 (CAL) HAS HELD THAT IF THE ASSESSEE IS INTO THE TRADING BUSINESS OF SHARES / SECURITIES TH EN NO DISALLOWANCE CAN BE MADE UNDER THE PROVISION OF SECTION 14A R.W.R. 8D O F IT RULES. THE RELEVANT EXTRACT IS REPRODUCED BELOW:- 9. IN DHANUKA & SONS CASE (SUPRA) IT WAS FOUND THERE WAS NO DISPUTE THAT PART OF THE INCOME OF THE ASSESSEE FROM ITS BUSINES S WAS FROM DIVIDEND WHEREAS THE ASSESSEE WAS UNABLE TO PRODUCE ANY MATE RIAL BEFORE THE AUTHORITY BELOW SHOWING THE SOURCE FROM WHICH SUCH SHARES WERE ACQUIRED. THAT DECISION IS DISTINGUISHABLE ON FACTS AS NOT AP PLICABLE TO THIS CASE. WE ALSO DO NOT FIND THE REVENUE HAD URGED THAT THE EXP ENDITURE BEING DISALLOWED WAS IN RELATION TO EXEMPT INCOME NOT ARISING IN THE PREVIOUS YEAR FOR APPLICATION OF THE SAID CIRCULAR TO BE CONSIDERED. THE ASSESSING OFFICER HAD ACCEPTED THE CORRECTNESS OF THE DISALLOWABLE EXPEND ITURE OFFERED BY THE ASSESSEE ON ITS CLAIM OF RS.25,68,04,353/- AS LONG TERM CAPITAL GAIN. HE DID NOT ALLOW THE CLAIM ITSELF TREATING THE SAID AMOUNT AS BUSINESS INCOME TO THEREAFTER DISALLOW THE OFFERED EXPENDITURE. 10. IN VIEW OF THE CLEAR FINDING OF FACT REGARDING THE EXEMPT INCOME CLAIMED TREATED TO BE BUSINESS INCOME AND THE SHARES HELD B Y THE ASSESSEE HAVING BEEN TREATED AS STOCK IN TRADE, WE DO NOT FIND THE CASE INVOLVES A SUBSTANTIAL QUESTION OF LAW. THE APPLICATION AND APPEAL ARE THU S DISMISSED. AS THE PRINCIPLE LAID DOWN BY HON'BLE JURISDICTIONA L HIGH COURT IS SQUARELY APPLICABLE TO THE INSTANT FACTS OF THE CASE, WE HAV E NO HESITATION IN REVERSING ITA NO.632/KOL/2016 A.Y. 2010-11 M/S CROSSSEAS CAPITAL SERVICES PVT. LTD. VS. D CIT, CIR-6(2) KOL. PAGE 4 THE ORDER OF AUTHORITIES BELOW. THUS, AO IS DIRECTE D TO DELETE THE ADDITION MADE UNDER THE PROVISION OF SECTION 14A R.W.R. 8D O F THE IT RULES, 1962. HENCE, THIS GROUND OF ASSESSEES APPEAL IS ALLOWED. 7. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 22 /09/2017 SD/- SD/- (ABY. T. VARKEY) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP #$%&- 22 / 09 /201 7 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-M/S CROSSSEAS CAPITAL SERVICES PVT. LTD. , 1, R.N. MUKHERJEE ROAD, 5 TH FLOOR, SUITE NO.37, MARTIN BURN HOUSE, KOLKATA-01 2. /RESPONDENT-DCIT, CIRCLE-6(2), P-7,CHOWRINGHEE SQ.6 TH FL,AAYAKAR BHAVAN, KOL-69 3.%.%/ 0 / CONCERNED CIT KOLKATA 4. 0- / CIT (A) KOLKATA 5.34566/ , / , / DR, ITAT, KOLKATA 6.589:; / GUARD FILE. BY ORDER/ $, /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO / ,