Ishwar Constructions Pvt. Ltd., Pune V. ITO Wd. 1(2), Pune

ITA 67/PUN/2007

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49789 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 12-01-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: L RAMOJI RAO
• Keywords: Capital asset; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI I.C. SUDHIR, JM AND SHRI D. KARUNAKARA RAO, AM ITA NOS. 67/PN/2007 (A.YR. 2003-04) ISHWAR CONSTRUCTIONS P.LTD. B.J. ROAD, PUNE PAN AAAC 14136J APPELLANT VS. INCOME-TAX OFFICER, WD. 1(2), PUNE . RESPONDENT APPELLANT BY : SHRI NIKHIL PATHAK RESPONDENT BY : SHRI L RAMOJI RAO ORDER PER D.KARUNAKARA RAO, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF CIT(A)-I, PUNE DATED 20.10.2006 FOR THE ABOVE ASSESSMENT YEAR. THE GROUNDS RAISED BY THE ASSESSEE IN THIS APPEAL READ AS FOLLOWS: ON THE FACTS & IN LAW: 1. THE LD CIT(A) ERRED IN CONFIRMING DISALLOWANCE O F LOSS OF RS 14,60,760/- ON ACCOUNT OF EXTINGUISHMENTS OF ASSESS EES INVESTMENT IN PACHAGANI PLANTATIONS P LTD. 2. THE LD CIT(A) ERRED IN NOT APPRECIATING THAT THE ASSESSEE HAD ACQUIRED THE COMPANY VIZ. PACHAGANI PLANTATION S P LTD. FOR THE PURPOSE OF ITS BUSINESS AND THEREFORE, THE LOSS ARISING ON ACCOUNT OF EXTINGUISHMENTS OF ITS SHARES WAS A REVENUE LOSS. 3. WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE ASSE SSEE SUBMITS THAT THE LOSS ARISING ON EXTINGUISHMENTS OF ITS SHARES OF PACHAGANI PLANTATIONS P LTD WAS A LONG TE RM CAPITAL LOSS. 4. THE LD CIT (A) ERRED IN HOLDING THAT SINCE THERE WAS NO TRANSFER OF ANY ASSET ON ACCOUNT OF DECLARING THAT COMPANY AS DEFUNCT COMPANY AND ACCORDINGLY, THE LOSS COULD NOT BE ALLOWED AS CAPITAL LOSS. 5. THE LD CIT(A) FAILED TO APPRECIATE THAT ON ACCOU NT OF DECLARING PACHGANI PLANTATIONS P LTD. AS DEFUNCT CO MPANY, THE SHARES ALONG WITH THE RIGHTS THEREIN, OF THE AS SESSEE, IN 2 THE SAID COMPANY GOT EXTINGUISHED AND THEREFORE, TH ERE WAS TRANSFER AS PER SECTION 2(47) AND HENCE, THE LO SS WAS ALLOWABLE AS A CAPITAL LOSS. 2. GROUND NOS. 1 & 2 : IN CONNECTION WITH THESE GROUNDS, LD COUNSEL FOR THE ASSESSEE FAIRLY MENTIONED THAT THE TRIBUNAL MAY TAKE A DECISION AS DEEMED FIT. IN THIS REGARD, WE HAVE PERUSED THE ORDER OF T HE CIT(A) AND FOUND THE FOLLOWING PARAS ARE RELEVANT WHICH ARE AS FOLLOWS: 2.1 THE LD AO HAS DISCUSSED THIS ISSUE IN PARA 2 O F THE ASSESSMENT ORDER. THE CONCLUSIONS OF THE AO ARE CONTAINED IN P ARA 2.3 OF THE ASSESSMENT ORDER WHEREIN IT IS MENTIONED BY THE AO THAT INVESTMENT IN SHARES OF RS 14,60,760/- OF A COMPANY IS A CAPITAL INVESTMENT AND THEREFORE LOSS ARISING FROM EXTINGUI SHMENT OF SUCH INVESTMENT CANNOT BE CLAIMED AS A REVENUE EXPENDITU RE. 2.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND PERUSED THE MATERIALS ON RECORD. THE APPELLANT HAS FAILED TO SUBSTANTIATE ITS CONTENTION THAT THE INVESTMENT IN SHARES WAS MADE FOR ACQUIRING 100% CONTROL IN THE COMPANY PACHAGANI PLANTATIONS P. LTD. THEREFORE, THE AO WAS FULLY JUSTIFIED IN DR AWING ADVERSE INFERENCE AND IN INFERRING THAT THIS IS A NORMAL IN VESTMENT IN SHARES OF ANOTHER COMPANY WHICH IS CAPITAL IN NATURE AND T HEREFORE IT CANNOT BE CLAIMED AS REVENUE EXPENDITURE BECAUSE PA CHAGANI PLANTATIONS P. LTD. BECAME A DEAD COMPANY. 2.21 IN VIEW OF THE ABOVE AND FOR REASONS GIVEN BY THE AO, I AM OF THE CONSIDERED VIEW THAT ACTION OF THE AO IN DISALLOWIN G LOSS, WHICH IS CLAIMED TO BE ON ACCOUNT OF EXTINGUISHMENT OF INVES TMENT OF RS 14,60,760/-, BUT WHICH IN FACT IS CAPITAL LOSS , AS IS CLEAR FROM THE CONSPECTUS OF FACTS AVAILABLE ON RECORD, IS JUSTIFI ED ON FACTS AND IS IN ACCORDANCE WITH LAW AND DOES NOT CALL FOR ANY IN TERFERENCE. ACCORDINGLY, THE ACTION OF THE AO IN THIS REGARD IS UPHELD. GROUNDS OF APPEAL NOS 1.1 AND 1.2 IS HELD TO HAVE NO MERIT AND IT FAILS. 3. CONSIDERING THE ABOVE FACTS AND DECISIONS OF THE REVENUE AUTHORITIES, WE FIND THE ABOVE DECISIONS DO NOT CALL FOR ANY INTERF ERENCE AND CONFIRM THE DECISION OF THE CIT(A) IN HOLDING THAT THE SAID LOSS IS CAPITAL LOSS. ACCORDINGLY, THE SAID GROUNDS ARE DISMISSED. 4. GROUND NOS 3 TO 5 : THESE GROUNDS ARE ALTERNATIVE GROUND RAISED WITHOUT PREJUDICE TO THE ABOVE. IN THIS REGARD, THE COUNSEL MENTIONED THAT THE CIT(A) HAS NOT PASSED A SPEAKING ORDER AS EVIDENT FROM PARA 2.3 OF THE IMPUGNED ORDER. FURTHER, LD COUNSEL MENTIONED THAT THE SAID CAPITAL LOSS IS LONG TERM CAPITAL LOSS AND THE ASSETS INVOLVED ARE CAPIT AL ASSET WITHIN THE MEANING OF SECTION 2(47) OF THE ACT. LD COUNSEL MENTIONED THAT THE CIT(A) FAILED TO CONSIDER 3 THE SAID PROVISIONS AND DECIDE THE ISSUE WITH REQUI SITE REASONING AND DISCUSSION. ON THE OTHER HAND, LD DR RELIED ON THE ORDER OF TH E CIT(A). 5. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE. WE FIND THAT THE 2.3 IS THE ONLY RELEVANT PARAGRAPHS F OR THE ISSUE UNDER CONSIDERATION, WHICH READS AS FOLLOWS: AS REGARDS THE ALTERNATE PLEA OF THE APPELLANT THA T THE AO WAS NOT JUSTIFIED IN NOT COMPUTING THE LOSS AS LONG TERM CA PITAL LOSS, IT MAY BE MENTIONED THAT IN CASE OF CAPITAL ASSET, LOSS AND P ROFIT ARISING AS A RESULT OF TRANSFER IS TO BE COMPUTED. SINCE THE APPELLANT HAS FAILED TO PROVE THAT THERE WAS ANY TRANSFER IN THE PRESENT CASE THERE WA S NO NEED FOR THE AO TO COMPUTE THE CAPITAL LOSS. THE ALTERNATE PLEA FAI LS. 6. FROM THE ABOVE, IT IS EVIDENT THAT THE CIT(A) HA S NOT GONE INTO THE APPLICABILITY OF PROVISIONS OF SECTION 2(47) OF THE ACT IN GENERAL AND TO THE CONCEPT OF EXTINGUISHMENT OF RIGHTS, THE EXPRESSI ONS USED IN THE SAID CLAUSE, IN PARTICULAR. THEREFORE, WE ARE OF THE OPINION THAT T HE CIT(A) HAS NOT ADJUDICATED THE ISSUE IN MANNER SPECIFIED IN SECTION 250(6) OF THE ACT. THEREFORE, WE FEEL THE MATTER SHOULD BE SET ASIDE TO THE FILE OF THE CIT(A ) WITH DIRECTION TO PASS A SPEAKING ORDER IN HIS REGARD AS PER PROVISIONS OF S ECTION 250(6) OF THE ACT. THE CIT(A) SHALL PROVIDE A REASONABLE OPPORTUNITY OF BE ING HEARD TO THE ASSESSEE. ACCORDINGLY, THE GROUNDS 3 TO 5 ARE SET ASIDE . 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE COURT ON 3 RD DAY OF JUNE, 2011. SD/- SD/- (I.C.SUDHIR) (D.KARUNAKARA RAO) JUDICIAL MEMBER ACC OUNTANT MEMBER PUNE, DATED 3 RD JUNE, 2011 COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEE. 2. ACIT, CIR.I, AURANGABAD. 3. CIT (A), AURANGABAD. 4. CIT CONCERNED, 5. D.R. ITAT A BENCH, PUNE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR I.T.A.T PUNE