CHEMITO TECHNOLOGIES P.LTD, MUMBAI V. ACIT 7(3), MUMBAI

ITA 7052/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1199 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 15-09-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 20-11-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: CHANDRA VIJAY
• Keywords: Capital asset; Principle of natural justice
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, MUMBAI BEFORE SHRI JASON P. BOAZ, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER ITA NO. 7052/MUM/2014 (ASSESSMENT YEAR: 2010-11) CHEMITO TECHNOLOGIES P. LTD. VS. D C I T 7(3) 8 MOHATTA BHAVAN OFF DR. E. MOSES ROAD WORLI, MUMBAI 400018 ROOM NO. 615, 6 TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 PAN AAACT1930B APPELLANT RESPONDENT APPELLANT BY: SHRI RUTURAJ H. GURJAR RESPONDENT BY: SHRI CHANDRA VIJAY DATE OF HEARING: 06.04.2017 DATE OF PRONOUNCEMENT: 12.04.2017 O R D E R PER JASON P. BOAZ, A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)- 13, MUMBAI DATED 25.09.2014 FOR A.Y. 2010-11. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER: - 2.1 THE ASSESSEE, A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE OF SCIENTIFIC AND CHEMICAL ENGINEERING EQUIPMENTS, FIL ED ITS RETURN OF INCOME FOR A.Y. 2010-11 ON 29.09.2010 DECLARING LOSS OF ( -) ` 16,36,296/-. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT W AS COMPLETED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHOR T 'THE ACT') VIDE ORDER DATED 15.03.2013, WHEREIN THE ASSESSEES LOSS WAS D ETERMINED AT ` 16,65,837/-. AGGRIEVED BY THE ORDER OF ASSESSMENT D ATED 15.03.2013 FOR A.Y. 2010-11, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(A)-23, MUMBAI, CHALLENGING (I) THE ASSESSING OFFICERS (AO ) DISALLOWANCE OF ` 6,78,893/- OUT OF TRAVEL EXPENSES AND (II) THE ACTI ON OF THE AO IN HOLDING THAT LONG TERM CAPITAL GAINS (LTCG) OF ` 17,04,000/- SHOULD BE ADJUSTED AGAINST BUSINESS LOSS UNDER SECTION 71(2) OF THE AC T. THE LEARNED CIT(A) ITA NO. 7052/MUM/2014 CHEMITO TECHNOLOGIES P. LTD. 2 DISMISSED THE ASSESSEES APPEAL VIDE THE IMPUGNED O RDER DATED 25.09.2014. 3. AGGRIEVED BY THE ORDER OF THE CIT(A)-13, MUMBAI DAT ED 25.09.2014 FOR A.Y. 2010-11, THE ASSESSEE HAS PREFERRED THIS A PPEAL, RAISING THE FOLLOWING GROUNDS: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS); CIT(A ) -13 ERRED IN CONFIRMING DISALLOWANCE OF EXPENDITURES OF RS.67 8,893/- MADE BY THE LEARNED AO WITHOUT APPRECIATING THAT TH E EXPENDITURES WERE REGULAR REVENUE EXPENSES AND WERE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE APPELLANTS BUSINESS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) 13 ERRED IN HOLDING THAT EXPENDITU RE INCURRED ON ACCOUNT OF REIMBURSEMENT OF CUSTOMERS AND CONSULTAN TS (BEING PART OF TRAVELLING EXPENDITURES) DOES NOT HAVE NEXU S WITH BUSINESS. LD. CIT(A)-13 ERRED IN NOT APPRECIATING T HAT THE EXPENSES WERE ENTIRELY DEDUCTIBLE. 3. THE LEARNED CIT(A) -13 ERRED IN HOLDING THAT THE RE IS NO OPTION WITH THE APPELLANT AS REGARDS SETTING OFF OF BUSINE SS LOSS AGAINST CAPITAL GAINS. LD. CIT(A) FAILED TO APPRECIATE THAT SUCH AN OPTION IS PROVIDED UNDER S. 71(2) OF THE ACT. 4. THE ORDER OF THE LD CIT(A)-13 IS AGAINST THE WEI GHT OF EVIDENCE, EQUITY AND NATURAL JUSTICE. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D THE ABOVE GROUND OF APPEAL. 4. GROUNDS NO. 1&2 DISALLOWANCE OUT OF TRAVEL EXPEND ITURE ` `` ` 6,78,893/- 4.1 IN THESE GROUNDS, THE ASSESSEE HAS ASSAILED TH E ORDER OF THE LEARNED CIT(A) IN CONFIRMING THE DISALLOWANCE OF TRAVEL EXP ENDITURE OF ` 6,78,893/- MADE BY THE AO; WITHOUT APPRECIATING THAT THESE EXP ENDITURES WERE EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF ITS BUSINESS AND WERE WHOLLY DEDUCTIBLE, BEING REIMBURSEMENT TO CUSTOMERS AND CONSULTANTS. AT THE OUTSET OF THE HEARING, THE LEARNED A.R. OF THE ASSESSEE FAIRLY CONCEDED THAT THIS VERY ISSUE IS SQUARELY COVERED AGAINST TH E ASSESSEE BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL B Y ITS ORDER IN ASSESSEES OWN CASE FOR A.Y. 2009-10. ITA NO. 7052/MUM/2014 CHEMITO TECHNOLOGIES P. LTD. 3 4.2.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JU DICIAL PRONOUNCEMENTS CITED. WE FIND THAT THE VERY SAME ISSUE OF TRAVELLI NG EXPENSES, WAS CONSIDERED AND ADJUDICATED AGAINST THE ASSESSEE BY A COORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR A.Y. 2 009-10, WHEREIN IN ITS ORDER IN ITA NO. 447/MUM/2013 DATED 16.10.2015 AT P ARA 8 THEREOF, THE COORDINATE BENCH HELD AS UNDER: - ISSUE NO. 5: THIS GROUND WHICH HAS BEEN CHALLENGED BY THE ASSESSEE IS IN CONNECTION WITH DISALLOWANCE OF AN A MOUNT OF RS.5,53,470/- ON ACCOUNT OF TRAVELLING EXPENSES PAI D AS REIMBURSEMENT TO THE CUSTOMERS AND CONSULTANT. THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.90,30,897/- AS TRAVELLING E XPENDITURE AND AT THE TIME ASSESSMENT, THE AO VERIFIED THE TRAVELLING EXPENSES AND FOUND THAT AN AMOUNT OF RS.5,53,470/- WERE RELATING TO NON- EMPLOYEES. A NOTICE WAS ISSUED BY THE AO, BUT NO PL AUSIBLE EXPLANATION WAS TENDERED BY THE ASSESSEE. MOREOVER IT IS INCUMBENT UPON THE ASSESSEE TO PROVE THIS FACT THAT THE SAID EXPENDITURE WAS INCURRED UPON THE EMPLOYEE OR INCURRED FOR BUSINESS PURPOSE. THEREFORE, IN SUCH CIRCUMSTANCES, THE AO HAS RIGHTL Y DECLINED THE SAID TRAVELLING EXPENSES BEING NOT INCURRED UPON THE EMP LOYEES OF THE ASSESSEE FIRM, WHICH HAS SUBSEQUENTLY BEEN CONFIRME D BY THE LEARNED CIT(A). THEREFORE, FINDING NO FORCE IN THE CONTENTIONS RAISED BY THE ASSESSEE THIS ISSUE IS ALSO DECIDED AGAINST THE ASSESSEE. ACCORDINGLY, THE GROUND OF APPEAL OF THE ASSESSEE I S DISMISSED. 4.2.2 FOLLOWING THE AFORECITED DECISION OF THE COOR DINATE BENCH IN THE ASSESSEES OWN CASE FOR A.Y. 2009-10 IN ITA NOS. 44 7 &768/MUM/2013 DATED 16.10.2015, WE FIND NO MERIT IN THE GROUNDS A ND CONTENTIONS RAISED BY THE ASSESSEE ON THE ISSUE OF DISALLOWANCE OF TRA VEL EXPENSES OF ` 6,78,893/- AND ACCORDINGLY DECIDE THIS ISSUE AGAINS T THE ASSESSEE. CONSEQUENTLY, GROUNDS 1 AND 2 OF THE ASSESSEES APP EAL ARE DISMISSED. 5. GROUND NO. 3 SET OFF OF BUSINESS LOSS AGAINST LTC G 5.1 IN THIS GROUND, THE ASSESSEE ASSAILS THE ORDER OF THE LEARNED CIT(A) IN HOLDING THAT THE BUSINESS LOSS IS TO BE SET OFF AGA INST LTCG AS PER THE PROVISIONS OF SECTION 71(2) OF THE ACT. THE LEARNED A.R. OF THE ASSESSEE FAIRLY CONCEDED THAT THIS ISSUE IS SQUARELY COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUN AL IN THE CASE OF SUMARIA APPLIANCES PVT. LTD. VS. ACIT IN ITA NO. 27 12/MUM/2012 DATED 11.06.2014. ITA NO. 7052/MUM/2014 CHEMITO TECHNOLOGIES P. LTD. 4 5.2.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JU DICIAL PRONOUNCEMENTS CITED. WE FIND THAT IDENTICAL ISSUE OF SET OFF OF B USINESS LOSS AGAINST CAPITAL GAINS (WHETHER STCG OR LTCG) WAS CONSIDERED BY THE COORDINATE BENCH IN ITS ORDER IN THE CASE OF SUMARIA APPLIANCE PVT. LTD . IN ITA NO. 2712/MUM/2013 DATED 11.06.2014 AND IT WAS HELD THAT THE ASSESSEE HAD NO OPTION TO CARRY FORWARD BUSINESS LOSS TO SUBSEQU ENT YEARS WITHOUT SETTING OFF OF THE SAME AGAINST CAPITAL GAINS ARISI NG DURING THE YEAR. IN THIS ORDER, THE COORDINATE BENCH HAS CONSIDERED AND DECI DED THE ISSUE AS UNDER AT PARAS 7 TO 7.4 AS UNDER: - 7. ADVERTING TO GROUND NO.2 & 3, IT WILL BE RELEVA NT TO REPRODUCE THE RELEVANT PORTION OF SECTION 71 SUB-SECTION (1) & (2 ). 71. SET OFF OF LOSS FROM ONE HEAD AGAINST INCOME FR OM ANOTHER.- (1) WHERE IN RESPECT OF ANY ASSESSMENT YEAR THE NET RESULT OF THE COMPUTATION UNDER ANY HEAD OF INCOME, OTHER THAN C APITAL GAINS, IS A LOSS AND THE ASSESSEE HAS NO INCOME UN DER THE HEAD CAPITAL GAINS, HE SHALL, SUBJECT TO THE PROVISION S OF THIS CHAPTER, BE ENTITLED TO HAVE THE AMOUNT OF SUCH LOS S SET OFF AGAINST HIS INCOME, IF ANY, ASSESSABLE FOR THAT ASS ESSMENT YEAR UNDER ANY OTHER HEAD. (2) WHERE IN RESPECT OF ANY ASSESSMENT YEAR, THE NE T RESULT OF THE COMPUTATION UNDER ANY HEAD OF INCOME, OTHER THAN C APITAL GAINS, IS A LOSS AND THE ASSESSEE HAS INCOME ASSES SABLE UNDER THE HEAD CAPITAL GAINS, SUCH LOSS MAY, SUBJECT TO THE PROVISIONS OF THIS CHAPTER, BE SET OFF AGAINST HIS INCOME, IF ANY, ASSESSABLE FOR THAT ASSESSMENT YEAR UNDER ANY HEAD OF INCOME INCLUDING THE HEAD CAPITAL GAINS (WHETHER RELATIN G TO SHORTTERM CAPITAL ASSETS OR ANY OTHER CAPITAL ASSETS). 7.1 FROM THE PERUSAL OF THE AFOREMENTIONED PROVISIO N IT IS CLEAR THAT SECTION 71(1) WILL NOT BE APPLICABLE TO THE CASE OF THE ASSESSEE AS IN THE PRESENT CASE ASSESSEE HAS INCOME UNDER THE HEAD CAPITAL GAIN. SECTION 71(2) WILL BE APPLICABLE AS IN THE PRESENT CASE THE ASSESSEE HAS COMPUTED LOSS UNDER THE HEAD INCOME FROM BUSIN ESS OR PROFESSION. IT IS THE CONTENTION OF LD. AR THAT WO RD USED IN SECTION 71(2) MAY GIVES AN OPTION TO THE ASSESSEE SO AS T O WHETHER ADJUST THE SAID LOSS AGAINST CAPITAL GAIN OR NOT. THUS, AC CORDING TO ASSESSEE IT IS ENTITLED TO CARRY FORWARD BUSINESS LOSS SEPAR ATELY AND TO GET ASSESSED CAPITAL GAIN IN THE YEAR UNDER CONSIDERATI ON. 7.2 IN OUR CONSIDERED OPINION THERE IS NO FORCE IN THE CLAIM MADE BY THE ASSESSEE. FIRSTLY, SUB-SECTION (2) OF SECTION 7 1 DOES NOT GIVE ANY OPTION TO THE ASSESSEE TO CARRY FORWARD BUSINESS LO SS SEPARATELY DESPITE THERE BEING INCOME UNDER THE HEAD CAPITAL G AIN. SECTION 71(2) ITA NO. 7052/MUM/2014 CHEMITO TECHNOLOGIES P. LTD. 5 CONTEMPLATES A SITUATION WHERE IN RESPECT OF ANY AS SESSMENT YEAR, THE NET RESULT OF COMPUTATION UNDER ANY HEAD OF INC OME , OTHER THAN CAPITAL GAIN IS A LOSS AND ASSESSEE HAS INCOME AS SESSABLE UNDER THE HEAD CAPITAL GAINS, IN SUCH SITUATION, SUCH L OSS MAY, SUBJECT TO PROVISION OF CHAPTER VI (SECTION 66 TO 80), BE SET OFF, FOR AND FROM ASSESSMENT YEAR 1992-93, AGAINST ASSESSEES INCOME, IF ANY, ASSESSABLE FOR THAT ASSESSMENT YEAR UNDER ANY HEAD OF INCOME INCLUDING THE HEAD CAPITAL GAINS (WHETHER RELATIN G TO SHORT TERM CAPITAL GAIN ASSET OR ANY OTHER CAPITAL ASSET). THU S, PROVISIONS OF SECTION 71(2) CANNOT BE CONSTRUED TO GIVE OPTION TO THE ASSESSEE TO CARRY FORWARD BUSINESS LOSS SEPARATELY WITHOUT SET OFF OF INCOME ARISING OUT OF SHORT TERM CAPITAL GAIN. ONLY ON THE BASIS OF WORD MAY AS APPEARING IN SECTION 71(2), SUCH BENEFIT CANNOT BE GRANTED TO THE ASSESSEE AS HAS BEEN SOUGHT BY IT. THE LANGUAGE OF THE PROVISION IS CLEAR. NO OPTION HAS BEEN GIVEN TO THE ASSESSEE TO CARRY FORWARD LOSS UNDER ANY OTHER HEAD TO SUBSEQUENT YEAR WITHOUT SET TING OFF OF THE SAME AGAINST SHORT TERM CAPITAL GAIN. 7.3 RELIANCE BY THE ASSESSEE ON THE DECISION OF HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BRITISH INSULATION CAL ENDARS LTD. (SUPRA) IS ALSO MISPLACED AS THE SAID DECISION HAS NOT BEEN RE NDERED FOR THE PROPOSITION WHICH HAS BEEN RAISED BY THE ASSESSEE I N THE PRESENT APPEAL. THE ISSUE IN THAT CASE WAS WHETHER OR NOT D IVIDEND INCOME OF THE ASSESSEE COULD BE SET OFF AGAINST BUSINESS LOSS OF THE SAME YEAR. DIVIDEND INCOME WAS TAXABLE AT THE CONFESSIONAL RAT E. THEREFORE, ACCORDING TO ASSESSEE TAX WAS TO BE CHARGED ON DIVI DEND INCOME AND BUSINESS LOSS WAS TO BE CARRIED FORWARD TO BE SET O FF AGAINST INCOME OF SUBSEQUENT YEARS. THE TRIBUNAL HELD THAT ASSESSE E HAD SUCH OPTION. IT WAS HELD BY THEIR LORDSHIPS THAT TRIBUNA L WAS NOT JUSTIFIED IN HOLDING THAT ASSESSEE HAS SUCH OPTION AND IT WAS HELD THAT BUSINESS LOSS WAS RIGHTLY SET OFF AGAINST DIVIDEND INCOME BY THE ITO. SIMILAR IS THE POSITION IN THE PRESENT CASE AND IT HAS TO BE HELD THAT ASSESSEE HAS NO OPTION TO CARRY FORWARD BUSINESS LO SS TO SUBSEQUENT YEARS WITHOUT SET OFF OF THE SAME TO CAPITAL GAIN A RISING DURING THE YEAR. THE LANGUAGE OF SECTION IS VERY CLEAR AND NO SUCH OPTION HAS BEEN GIVEN TO THE ASSESSEE. 7.4 IN VIEW OF ABOVE DISCUSSION, WE DISMISS GROUND NO.2 & 3 OF THE ASSESSEE. 5.2.2 FOLLOWING THE ABOVE CITED ORDER OF THE COORDI NATE BENCH IN THE CASE OF SURMARIA APPLIANCE PVT. LTD. IN ITA NO. 2712/MUM/20 12 DATED 11.06.2014, WE HOLD THAT IN VIEW OF THE PROVISIONS OF SECTION 71(2) OF THE ACT, THE ASSESSEE HAD NO OPTION TO CARRY FORWARD THE BUS INESS LOSS TO SUBSEQUENT YEARS WITHOUT SETTING OFF THE SAME AGAINST CAPITAL GAINS (I.E. IN THIS CASE LTCG OF ` 17,04,000/-) ARISING DURING THE YEAR. FINDING NO ME RIT IN THIS GROUND AND CONTENTIONS RAISED BY THE ASSESSEE, WE D ISMISS GROUND NO. 3. ITA NO. 7052/MUM/2014 CHEMITO TECHNOLOGIES P. LTD. 6 6. GROUND NO. 4 & 5 6.1 THESE GROUNDS BEING GENERAL IN NATURE AND NOT B EING URGED BEFORE US ARE RENDERED INFRUCTUOUS AND ARE ACCORDINGLY DIS MISSED. 7. IN THE RESULT, THE ASSESSEES APPEAL FOR A.Y. 2010- 11 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH APRIL, 2017. SD/ - SD/ - (SANDEEP GOSAIN) (JASON P. BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 12 TH APRIL, 2017 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -13, MUMBAI 4. THE CIT - 7, MUMBAI 5. THE DR, C BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.