DEEPI SINGH ARORA, MUMBAI V. ASST CIT 19(1), MUMBAI

ITA 6349/MUM/2012

• Counselvise Citation: 634919914 RSA 2012
• Duration Of Justice: 1 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 16-07-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 17-10-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: PRAKASH K JOTWANI
• Keywords: Capital asset; Business income; Depreciation; Cost of acquisition; Wrong claim; Revised return; Unabsorbed depreciation; Revenue expenditure
• Section: 139(5)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN (AM) AND SANJAY GARG, (JM) . . , , ./I.T.A. NO.6349/MUM/2012 ( ! ' # / ASSESSMENT YEARS : 2008-09) MRS.DEEPI SINGH ARORA 16, GOLF LINK, ARORA HOUSE, UNION PARK, KHAR (E), MUMBAI-400052. / VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, 19(1), MUMBAI. ( $% / APPELLANT) .. ( &'$% / RESPONDENT) $ ./ ( ./PAN/GIR NO. : AAIPA1690A $% ) / APPELLANT BY : SHRI PRAKASH K JOTWANI &'$% * ) /RESPONDENT BY : SHRI SANJEEV JAIN + , * - . / DATE OF HEARING : 16.7.2014 /0#' * - . /DATE OF PRONOUNCEMENT : 20. 8.2014 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 03.07.2012 PASSED BY LD CIT(A)-30, MUMBAI AND IT RE LATES TO THE ASSESSMENT YEAR 2008-09. 2. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) (A) IN CONFIRMING THE DISALLOWANCE OF INTEREST EXPE NDITURE OF RS.5,81,410/- CLAIMED BY THE ASSESSEE AGAINST SHORT TERM CAPITAL GAINS. AND (B) IN NOT CONSIDERING THE REVISED RETURN OF INCOM E FILED BY THE ASSESSEE. 3. THE FACTS RELATING TO THE ABOVE SAID ISSUES ARE STATED IN BRIEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SALE OF ELEC TRICITY GENERATED BY WIND MILLS. I.T.A. NO.6349/MUM/2012 2 IN THE RETURN OF INCOME, THE ASSESSEE CLAIMED INTER EST EXPENDITURE OF RS.5,81,410/- AS DEDUCTION AGAINST THE SHORT TERM C APITAL GAIN ON THE REASONING THAT THE BANK INTEREST ON THE LOAN TAKEN FOR MAKING INVESTMENTS IN PURCHASE OF SHARES SHOULD BE CONSIDERED AS PART OF COST OF ACQ UISITION OF SHARES. THE A.O. DID NOT ACCEPT THE SAME AND HELD THAT THE PROVISION S OF SEC. 48 DO NOT PROVIDE FOR DEDUCTION OF INTEREST EXPENSES AGAINST THE CAPI TAL GAINS. THE AO, HOWEVER, EXPRESSED THE VIEW THAT THE SAID CLAIM MAY BE ALLOW ED AGAINST BUSINESS INCOME. ACCORDINGLY, THE AO DISALLOWED THE CLAIM OF INTERES T EXPENDITURE, REFERRED ABOVE. THE LD CIT(A) ALSO CONFIRMED THE SAME. 4. IN THE ORIGINAL RETURN OF INCOME, THE ASSESS EE HAD CLAIMED SET OFF OF BROUGHT FORWARD UNABSORBED DEPRECIATION AGAINST THE BUSINESS INCOME. HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDING S, THE ASSESSEE FILED A REVISED RETURN OF INCOME ON 26.07.2010, WHEREIN SHE WITHDREW THE CLAIM OF SET OFF UNABSORBED DEPRECIATION. HOWEVER, THE AO HELD THAT THE REVISED RETURN CANNOT BE CONSIDERED TO BE A VALID RETURN, SINCE IT HAS BEEN FILED BEYOND THE TIME LIMIT PRESCRIBED U/S 139(5) OF THE ACT. ACCOR DINGLY HE DID NOT CONSIDER THE REVISED RETURN. SINCE THE ASSESSEE HAD FILED THE R EVISED RETURN OF INCOME DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO HAS OB SERVED THAT THE ASSESSEE HAS FILED THE REVISED RETURN OF INCOME ONLY TO AVOI D THE POSSIBILITY OF EXPOSURE OF WRONG CLAIM OF SET OFF OF UNABSORBED DEPRECIATION M ADE IN THE ORIGINAL RETURN OF INCOME. HE ALSO EXPRESSED THE VIEW THAT THE FILING OF REVISED RETURN IS TACIT ACCEPTANCE OF THE ASSESSEES DELIBERATE ATTEMPT TO CLAIM INELIGIBLE SET OFF OF UNABSORBED DEPRECIATION. THE ASSESSEE HAD ALSO CHA LLENGED THE ABOVE SAID OBSERVATIONS MADE BY THE AO. THE LD CIT(A), HOWEV ER, HELD THAT THESE I.T.A. NO.6349/MUM/2012 3 OBSERVATIONS ARE RELEVANT FOR PENALTY PROCEEDINGS A ND ACCORDINGLY REJECTED THE GROUND RAISED AGAINST THE ABOVE SAID OBSERVATIONS O F AO HOLDING THE SAME AS PREMATURE. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE RECORD. THE FIRST ISSUE RELATES TO THE CLAIM FOR DEDUCTION OF INTERES T EXPENDITURE AGAINST THE SHORT TERM CAPITAL GAIN. WE NOTICE THAT THE ASSESSEE HAS PLACED RELIANCE ON THE FOLLOWING CASE LAW BEFORE LD CIT(A) TO SUPPORT HER CLAIM:- (A) CIT VS. MAITHREYI PAI (152 ITR 247) (B) ACIT VS. K.S.GUPTA (119 ITR 372)(AP) (C) CHALLAPALLI SUGARS LTD (98 ITR 167)(SC) IN ALL THE ABOVE CITED CASES, THE EXPRESSION ACTUA L COST HAS BEEN EXPLAINED. AS OBSERVED BY THE ASSESSING OFFICER, THE QUESTION OF ASCERTAINING THE ACTUAL COST ARISES ONLY FOR A CAPITAL ASSET UNDER THE HEAD I NCOME FROM BUSINESS. IN THIS REGARD, WE MAY MAKE A GAINFUL REFERENCE TO SEC. 43 OF THE ACT, WHEREIN THE EXPRESSION ACTUAL COST IS DEFINED. FURTHER EXPLA NATION-8 TO SEC. 43, WHICH READS AS UNDER, IS MORE RELEVANT:- EXPLANATION -8 FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT WHERE ANY AMOUNT IS PAID OR IS PAYABLE AS INTEREST IN CONNECTION WITH THE ACQUISITION OF AN ASSET, SO MUCH OF SUCH AMOUNT AS IS RELATABLE TO ANY PERIOD AFTER SUCH ASSET IS FIRST PUT TO USE SHALL N OT BE INCLUDED, AND SHALL BE DEEMED NEVER TO HAVE BEEN INCLUDED, IN THE ACTUA L COST OF SUCH ASSET. UNDER ACCOUNTANCY PRINCIPLES ALSO, ALL THE EXPENSES INCURRED UPTO THE DATE OF INSTALLING THE PLANT AND MACHINERY AND ALSO EXPENSE S INCURRED TO MAKE IT OPERATIONAL ARE CONSIDERED AS FORMING PART OF THE C OST OF THE PLANT AND MACHINERY. THUS, IT CAN BE SEEN THAT THE INTEREST EXPENDITURE UP TO THE PERIOD WHEN AN ASSET IS FIRST PUT TO USE IS REQUIRED TO BE CAPITALIZED AND THE INTEREST PERTAINING TO THE SUBSEQUENT PERIOD IS ALLOWABLE AS REVENUE EXPENDITURE. I.T.A. NO.6349/MUM/2012 4 6. BY APPLYING THE ABOVE PRINCIPLES, IN OUR VIEW, WE HAVE TO EXAMINE THE PRESENT CASE. THE ASSESSEE HAS PURCHASED SHARES AND HENCE THE QUESTION OF PUTTING THE SAME TO USE DOES NOT ARISE IN THOSE C ASES. CONSEQUENTLY, THE QUESTION OF CAPITALIZING PART OF INTEREST EXPENDITU RE ALSO WILL NOT ARISE. THE GAIN ARISING ON SALE OF SHARES CONSTITUTES CAPITAL RECEI PT AND IT IS TAXED UNDER THE ACT UNDER THE HEAD CAPITAL GAIN. THE DIVIDEND EARNED OUT OF THE SHARES CONSTITUTES REVENUE EXPENDITURE AND THE ASSESSEE CA N CLAIM THE INTEREST EXPENDITURE AS DEDUCTION AGAINST THE DIVIDEND INCOM E, IF ANY, EARNED FROM THE SHARES. THE ABOVE SAID VIEW GETS SUPPORT FROM THE DECISION RENDERED IN THE CASE OF V. MAHESH, ITO VS. VIKRAM SADANAND HOSKOT E (2007)(18 SOT 130)(MUM), WHEREIN IT IS HELD THAT THE INTEREST EXP ENDITURE INCURRED ON BORROWED FUNDS FOR THE PERIOD COMMENCING FROM THE DATE OF AC QUISITION OF SHARES TILL DATE OF SALE WOULD NOT FORM PART OF COST OF ACQUISITION OF SHARES. 7. BEFORE US, THE LD A.R PLACED RELIANCE ON THE FOLLOWING CASE LAWS TO SUPPORT HIS CONTENTIONS:- (A) ALKA RAJESH AGARAWAL VS. ACIT (ITA NO.2393/MU M/2012 DATED 09.10.2013) (B) KALYANJI J TANNA (DECD.), MUMBAI VS. ITO (ITA NO.3137/MUM/2010 DATED 29.03.20 11. (C) S.BALAN ALIAS SHANMUGAM BALAKRISHNAN CHETTIA R VS. DCIT (ITA NO.1859/PN/2005 DATED 31-01-200 8) A PERUSAL OF THE ABOVE SAID DECISIONS SHOWS THAT TH E FIRST TWO DECISIONS WERE CONCERNED WITH THE INTEREST INCURRED ON APPLYING FO R INITIAL PUBLIC OFFER OF SHARES. THERE MAY NOT BE ANY CONTROVERSY THAT THE INTEREST EXPENDITURE INCURRED TILL THE DATE OF ALLOTMENT OF SHARES SHOULD BE CONSIDERED PA ST OF COST OF ACQUISITION OF SHARES, AS IT IS IN ACCORDANCE WITH THE PRINCIPLES DISCUSSED IN THE PRECEDING I.T.A. NO.6349/MUM/2012 5 PARAGRAPHS. THE ASSESSEE HAS FURNISHED ONLY RELEV ANT EXTRACT IN RESPECT OF THE DECISION RENDERED IN THE CASE OF S. BALAN (SUPRA). HENCE, IN THE ABSENCE OF FULL FACTS RELATING TO THE SAID CASE, WE ARE UNABLE TO P LACE RELIANCE ON THE SAME. IN ANY CASE, IN OUR VIEW, THE SETTLED LEGAL POSITION C OUPLED WITH THE ACCOUNTANCY PRINCIPLES DISCUSSED ABOVE ARE RELEVANT IN THE INST ANT CASE. 8. IN THE INSTANT CASE, IT IS NOT THE CASE OF THE ASSESSEE THAT SHE HAS APPLIED FOR SHARES UNDER INITIAL PUBLIC OFFERING. HENCE, T HE CASE LAWS RELIED UPON BY LD A.R IS NOT APPLICABLE TO THE INSTANT CASE. THE QUE STION OF DEDUCTION OF INTEREST AGAINST THE SALE VALUE OF SHARES WOULD ARISE ONLY I F THE INTEREST EXPENDITURE IS CAPITALIZED UNDER THE PRINCIPLES DISCUSSED IN THE P RECEDING PARAGRAPHS. IN THE INSTANT CASE, IT IS NOT SHOWN TO US THAT THE ASSESS EE HAS CAPITALIZED THE INTEREST EXPENDITURE IN ACCORDANCE WITH THE PRINCIPLES DISCU SSED ABOVE. ACCORDINGLY, IN OUR VIEW, THE LD CIT(A) WAS JUSTIFIED IN HOLDING TH AT THE INTEREST EXPENDITURE IS NOT DEDUCTIBLE AGAINST SHORT TERM CAPITAL GAINS. 9. THE NEXT ISSUE RELATES TO THE REVISED RETURN OF INCOME FILED BY THE ASSESSEE. ACCORDING TO THE ASSESSEE, THE LD CIT(A) WAS NOT CO RRECT IN HOLDING THAT THE SAID FACT IS RELEVANT ONLY FOR PENALTY PROCEEDINGS. WE HAVE ALREADY NOTICED THAT THE ASSESSEE HAS FILED REVISED RETURN OF INCOME ONLY ON 26.07.2010. UNDER THE PROVISIONS OF SEC. 139(5), THE REVISED RETURN OF IN COME FOR THE YEAR UNDER CONSIDERATION COULD BE FILED ON OR BEFORE 31.3.2010 . SINCE THE REVISED RETURN OF INCOME WAS FILED BY THE ASSESSEE AFTER THE EXPIRY O F THE TIME LIMIT PRESCRIBED UNDER THE ACT, THE AO DID NOT CONSIDER THE SAME. A S STATED EARLIER, THE AO HAS MADE CERTAIN OBSERVATIONS BY MAKING CERTAIN INFEREN CES. SINCE THOSE INFERENCES ARE NOT RELEVANT IN THE QUANTUM ASSESSMENT PROCEEDI NGS, THE LD CIT(A) HELD THE I.T.A. NO.6349/MUM/2012 6 GROUND URGED AGAINST THE SAME AS PREMATURE. THOUGH THE ASSESSEE HAS URGED THIS GROUND IN THIS REGARD, WE ALSO DO NOT FIND NEC ESSARY TO EXPRESS ANY OPINION IN THIS REGARD. ACCORDINGLY, WE DISMISS THIS GROUN D ALSO. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSE SSEE IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COUR T ON 20TH AUG , 2014. /0#' + 1 2 3 20TH AUG, 2014 0 * , 4 SD SD ( /SANJAY GARG) ( . . / B.R. BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER + , MUMBAI: 20TH AUG,2014. . . ./ SRL , SR. PS ! ' / COPY OF THE ORDER FORWARDED TO : 1. $% / THE APPELLANT 2. &'$% / THE RESPONDENT. 3. + 6- ( ) / THE CIT(A)- CONCERNED 4. + 6- / CIT CONCERNED 5. 78 &-9! , . 9! ' , + , / DR, ITAT, MUMBAI CONCERNED 6. : , / GUARD FILE. ; + / BY ORDER, TRUE COPY < (ASSTT. REGISTRAR) . 9! ' , + , /ITAT, MUMBAI