ASST CIT CIR 4(2), MUMBAI V. OASIS SECURITIES LTD, MUMBAI

ITA 6948/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93325 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2015
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 28-11-2013
• Court: TRIBUNAL
• Department Lawyers: UDAY BHASKAR J
• Assessee Lawyers: PRAKASH K JOTWANI
• Keywords: Business income; Speculation loss

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND AMIT SHUKLA, JUDICIAL MEMBER I.T.A. NO. 6948/M/2013 (AY:2009 - 2010 ) ASST. CIT, CIRCLE 4(2), R.NO.642, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 20. / VS. OASIS SECURITIES LTD., BLDG. NO.5 RAJBAHADUR COMPOUND, 43, TAMARIND LANE, FORT, MUMBAI 400001. ./ PAN : AAACO0091J ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI UDAY BHASKAR J., DR / RESPONDENT BY : SHRI PRAKASH K. JOTWANI / DATE OF HEARING : 13.07.2015 / DATE OF PRONOUNCEMENT : 29 .07.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 28.11.2013 IS AGAINST THE ORDER OF THE CIT (A) - 8, MUMBAI DATED 17.09.2013. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN DELETING THE ALLOCATION OF EXPENSES MADE BY AO FOR COMPUTING INCOME FROM SPECULATION BUSINESS WITHOUT APPRECIATING THE FACT THAT THE ENTITY IS NOT MAINTAINING SEPARATE BOOKS OF ACCOUNT FOR SPECULATION INCOME AND NON - SPECULATION INCOME AND AO MADE A REASONABLE ALLOCATION OF EXPENSES ON PROPORTIONATE INCOME OF SPECULATION AND NON - SPECULATION INCOME. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE IMPUGNED ORDER OF THE CIT (A) IS CONTRARY TO LAW AND CONSEQUENTLY MERITS TO BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE INCURRED A SPECULATION LOSS OF RS.56,42,063/ - AND INCOME FROM NON - SPECULATION BUSINESS BEFORE ALLOCATION OF EXPENDITURE IS RS. 1,55,26,273/ - . THUS, THE SPECULATION IS 26.7% OF TOTAL INCOME / LOSS OF RS. 2,11,68,336/ - . TOTAL EXPENDITURE DEBITED IN PROFIT & LOSS ACCOUNT IS RS. 1,80,66,802/ - . THE ENTIRE EXPENDITURE HAS BEEN ALLOCATED AGAINST INCO ME FROM NON - SPECULATION BUSINESS. IN VIEW OF THE ABOVE FACTS, AO HELD THAT CERTAIN EXPENDITURE IS TO BE ALLOCATED FOR COMPUTING INCOME FROM SPECULATION 2 BUSINESS. HOWEVER, IN THE ABSENCE OF TWO SEPARATE BOOKS OF ACCOUNT, THE AO ALLOCATED EXPENDITURE ON TH E BASIS OF PROPORTIONATE INCOME 26.7% OF TOTAL EXPENDITURE TOWARDS SPECULATION BUSINESS WHICH WORKED OUT TO RS. 48,23, 836/ - . CONSEQUENTLY, THE SPECULATION LOSS WAS INCREASED TO RS. 1,04,65,899/ - AND THE SAME WAS ALLOWED TO BE CARRIED FORWARD. THUS, THE B USINESS LOSS OF RS. 27,14,160/ - WAS REDUCED BY THE SAME AMOUNT RESULTING IN BUSINESS INCOME OF RS. 21,09,126/ - . AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 3. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT (A) PARTLY ALLOWED THE APPEAL. AGGRIEVED WITH THE DECISION OF THE CIT (A), REVENUE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUNDS. 4. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE FILED A NOTE AND INFORMED STATING THAT THE AO MADE A DISALLOWANCE OF RS. 48,23,836/ - BEING EXPENDITURE ALLOCABLE TO THE SPECULATION BUSINESS OF THE ASSESSEE. THE SIMILAR DISALLOWANCE WAS MADE IN THE PAST IE AYS 2004 - 05 TO 2 006 - 07. THE CRITERIA ADOPTED BY THE REVENUE OFFICERS IN THE PAST AND THE SAME WAS CONSIDERED BY THE RESPECTIVE CIT (A)S AND PART RELIEF WAS GRANTED DURING THE FIRST APPELLATE PROCEEDINGS FOR THE AYS 2004 - 05 TO 2006 - 07. ON FINDING THAT THE CIT (A) IN THE ASSESSMENT YEAR 2004 - 05 BECAME FINALITY AS THERE WAS NO APPEAL FILED BY THE REVENUE AGAINST THE ORDERS OF THE CIT (A) FOR THE AYS 2004 - 05 TO 20006 - 07. FURTHER, IT WAS INFORMED THAT DURING THE AYS 2007 - 08 AND 2008 - 09, NO DISALLOWANCE WAS MADE BY THE AO AND THEREFORE, THE CLAIM OF THE ASSESSEE WAS ACCEPTED ON THIS ISSUE OF ALLOCATION OF RELATABLE EXPENSES TO THE SPECULATION ACTIVITY. THEREFORE, FOR THE AYS START FROM 2004 - 05 TO 2008 - 09, THE CRITERIA ADOPTED BY THE CIT (A)S BECAME FINAL AND THE REVENUE IS NO T AGGRIEVED IN ALL THESE ASSESSMENT YEARS. SIMILAR CRITERIA WAS ADOPTED BY THE CIT (A) IN THE YEAR UNDER CONSIDERATION AND ACCORDINGLY, THE CIT (A) DECIDED THE ISSUE RELYING ON THE ORDER OF THE FAA FOR THE AY 2004 - 05. THE CONTENTS OF PARA 2.3 OF THE CIT (A)S ORDER ARE RELEVANT IN THIS REGARD. 5. ON THE OTHER HAND, LD DR FOR THE REVENUE RELIED ON THE ORDER OF THE AO. 6. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE ORDERS OF THE REVENUE AUTHORITIES IN GENERAL AND PARA 2.3 OF THE CIT (A)S ORDER IN GENERAL, WE FIND THE 3 SAME IS RELEVANT IN THIS REGARD. CONSIDERING THE SIGNIFICANCE OF THE SAID PARA 2.3 OF CIT (A)S ORDER AS WELL AS FOR THE SAKE OF COMPLETENESS OF THIS ORDER, THE SAME IS EXTRACTED AS FOLLOWS: - 2.3. I HAVE CONSIDERED THE FACTS OF THE C ASE AND THE ARGUMENTS OF THE APPELLANT. I FIND THAT SIMILAR ISSUE WAS THERE IN AYS 2004 - 05 WHERE MY PREDECESSOR VIDE ORDER NO. IT/CIT(A) - IV/CIR.4/351/06 - 07 DATED 2/9/2008 HAVE DECIDED THIS ISSUE AS UNDER: I HAVE GONE THROUGH THE ORDER OF THE AO AND SUBM ISSION OF THE APPELLANT. THE ACTION OF THE AO TO ALLOCATE EXPENSES IS CORRECT AS IT CANNOT BE SAID THAT SPECULATIVE INCOME WAS EARNED WITHOUT INCURRING ANY EXPENSE. THE PERCENTAGE OF EXPENDITURE ADOPTED TOWARDS SPECULATION BY AO AS QUOTED AT PAGE 3 AND T HE PERCENTAGE TO BE ALLOCATED AS PER THE APPELLANT AS QUOTED AT PAGE 4 & 5 ARE SEEN AND IT IS FOUND THAT THE ALLOCATION OF PERCENTAGE BY THE APPELLANT IS MORE SCIENTIFIC. BUT THE APPELLANTS SUBMISSION THAT NIL AMOUNT IS REQUIRED TO BE ALLOCATED WITH RESP ECT OF BANK GUARANTEE, KEYMAN INSURANCE, MEMBERSHIP AND SUBSCRIPTION AND VSAT EXPENSES IS FOUND TO BE WITHOUT ANY BASIS. THESE EXPENSES DO HAVE SOME BEARING TOWARDS EARNING OF SPECULATIVE INCOME. ALLOCATION OF 10% OF THESE EXPENSES IS, THEREFORE, CONSIDE RED FAIR AND REASONABLE. THUS, THE EXPENSES ALLOCATED SHOULD BE AS PER SUBMISSION OF TH E APPELLANT 3,81,437/ - 10% OF I) BANK GUARANTEE 22,812/ - II) KEYMAN INSURANCE 76,417/ - IV) MEMBERSHIP & SUBSCRIPTION 14,502/ - V) V SAT EXPENSES 19,200/ - 1,32,931/ - 5,14,368/ - THUS, ADDITION UPTO RS. 5,14,368/ - IS SUSTAINED AND THE APPELLANT GETS A RELIEF OF RS. 12,70,622/ - . SINCE, THE FACTS AND CIRCUMSTANCES OF THE CASE ARE IDENTICAL, I HAVE NO REASON TO DIFFER WITH THE VIEW TAKEN BY MY PREDECESSOR. THE AO IS, THEREFORE, DIRECTED TO CALCULATE THE DISALLOWANCE ON THE BASIS OF MY PREDECESSORS ORDER DATED 2/9/2009. THIS GROUND OF APPEAL IS THUS PARTLY ALLOWED. 7. FROM THE ABOVE, IT IS EVIDENT THAT THE AO WAS DIRECTED TO CALCULATE THE DISALLOWANCE CONSIDERING THE BASIS ADOPTED BY THE CIT (A)S ORDER DATED 2.9.2009 RELEVANT FOR THE AY 2004 - 05. IN OUR OPINION, THE CONCLUSIONS DRAWN BY THE CIT (A) ARE CONFIRMED CONSID ERING THE PRINCIPLES OF CONSISTENCY WHEN THE FACTS ARE COMPARABLE. WE ACCORDINGLY, FIND NO INFIRMITY IN THE ORDER OF THE CIT (A) AND THEREFORE, THE SAME DOES NOT CALL FOR ANY INTERFERENCE. THUS, THE GROUNDS RAISES BY THE REVENUE ARE DISMISSED. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUN CED IN THE OPEN COURT ON 29 TH JULY, 2015. SD/ - SD/ - (AMIT SHUKLA) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 29 .7 .2015 . . ./ OKK , SR. PS 4 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI