Sh. Vineet Jain, Ludhiana V. ACIT, Ludhiana

ITA 720/CHANDI/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68586 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 21-11-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 02-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR
• Keywords: Business income; Revised return
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI T.R.SOOD ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.720/CHD/2012 ASSESSMENT YEAR : 2008-09 SHRI VINEET JAIN, VS THE A.C.I.T., 35-K, CIRCLE VI, SARABHA NAGAR, LUDHIANA. LUDHIANA. PAN : AAZPJ9779N (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ASHWANI KUMAR DEPARTMENT BY : SHRI J.S.NAGAR DATE OF HEARING : 21.11.2013 DATE OF PRONOUNCEMENT : 27.11.2013 ORDER PER SUSHMA CHOWLA, JM THE APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(APPEALS) LUDHIANA DATED 30.05.2012 RELATING TO ASSESSMENT YEAR 2002-03 AGAINST THE ORDER PASSED UNDER SECTION 143( 3) OF THE INCOME-TAX ACT, 1961 ( 'THE ACT' FOR SHORT). 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE REA D AS UNDER: 1. THAT ORDER PASSED U/S 250(6) OF THE INCOME TAX ACT, 1961 IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS THE LD. CIT (A) WAS NOT JUSTIFIED TO UPHOLD THE ACTION OF THE LD. ASSESSING OFFICER IN N OT ALLOWING THE COST OF INTEREST AT RS. 8,25,616/- AGAINST SHORT TERM CAPIT AL GAIN/LOSS. 2. THAT HE WAS FURTHER NOT JUSTIFIED TO ARBITRARILY UP HOLD THE DISALLOWANCE OF RS. 32,500/- PAID AS INTEREST TO SH . SUSHIL GARG AGAINST INTEREST INCOME EARNED BY THE APPELLANT. 3. THAT HE WAS FURTHER NOT JUSTIFIED TO ARBITRARILY HO LD THAT THE EXPENDITURE CLAIMED IS DISALLOWABLE U/S 14A READ WI TH RULE 8D WITHOUT AFFORDING ANY OPPORTUNITY TO THE APPELLANT BEFORE M AKING SUCH AN OBSERVATION. 2 3. THE ISSUE RAISED IN THE PRESENT APPEAL IS IN RELATION TO THE CLAIM OF INTEREST EXPENDITURE OF RS. 825,616/- AND RS. 32,500/-. 4. THE BRIEF FACTS OF THE CASE ARE THAT IN THE RETU RN OF INCOME FILED FOR THE YEAR UNDER CONSIDERATION, THE ASSESSE E HAD DECLARED BUSINESS INCOME AND ALSO INCOME FROM SHORT TERM CAP ITAL GAINS ON SALE OF SHARES. DURING THE YEAR UNDER CONSIDERATIO N, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD CLAIMED INTERES T OF RS. 858,116/- WHEREAS NO LOANS WERE OUTSTANDING IN THE BALANCE SHEET AS ON 31.3.2008. THE ASSESSEE WAS ASKED TO EXPLAIN THE NATURE OF SUCH INTEREST EXPENDITURE. IN REPLY, IT WAS POINTED OUT BY THE ASSESSEE THAT DURING THE YEAR, SHARES OF M/S RELIAN CE POWER LTD. WERE ALLOTTED VIDE PUBLIC ISSUE WHICH IN-TURN WERE PURCHASED BY WAY OF FINANCE FROM M/S ILFS INVESTMENT ON WHICH TH E ASSESSEE PAID INTEREST AMOUNTING TO RS. 8,25,616/-. THE SAI D SHARES WERE SOLD BY THE ASSESSEE DURING THE YEAR ITSELF AND THE INCOME WAS SHOWN UNDER THE HEAD SHORT TERM CAPITAL GAINS/LOSS. HOWEVER, WHILE PREPARING THE PROFIT & LOSS ACCOUNT, THE INTE REST EXPENDITURE WAS DEBITED TO THE PROFIT & LOSS ACCOUNT BY AN ERRO R. HOWEVER, REQUEST WAS MADE TO ALLOW THE INTEREST OF RS. 8,25, 616/- ON THE COST OF INVESTMENT OF THE SHARES SOLD BY THE ASSESSEE. FURTHER, IT WAS EXPLAINED THAT SUM OF RS. 32,500/- WAS PAID TO SHRI SUSHIL GARG ON ACCOUNT OF LOAN RECEIVED WHICH IN-TURN WAS INVESTED BY THE ASSESSEE ON WHICH THE ASSESSEE WAS RECEIVING INTERE ST @ 15%. THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSE E AND IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT I N GOETZE INDIA LTD. VS CIT 284 ITR 322 AND MADE AN ADDITION OF RS. 8,58,116/-. 5. THE CIT(APPEALS) UPHELD THE SAID ADDITION AND FU RTHER OBSERVED THAT AS THE ASSESSEE HAD MADE THE INVESTME NT IN THE SHARES 3 OF M/S RELIANCE PETRO LTD., THE SAID INTEREST EXPEN DITURE WAS, HOWEVER NOT ALLOWABLE IN VIEW OF THE PROVISIONS OF SECTION 14A OF THE ACT I.E. IN RESPECT OF THE INVESTMENT MADE IN A SSETS, INCOME FROM WHICH WAS EXEMPT. THE ASSESSEE IS IN APPEAL A GAINST THE SAID ORDER OF THE CIT(APPEALS). 6. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT THE ASSESSEE HAD, BY AN ERROR CLAIMED THE INTEREST EXPENDITURE UNDER THE HEAD BUSINESS INCOME WHEREAS THE SAME HAD TO BE CLAIME D UNDER THE HEAD INCOME FROM CAPITAL GAINS. IT WAS VEHEMENTL Y POINTED OUT BY THE LD. AR FOR THE ASSESSEE THAT IT HAD NOT MADE FRESH CLAIM BY WAY OF EXPLANATION FILED BEFORE THE ASSESSING OFFIC ER BUT HAD ONLY CHANGED THE HEAD OF INCOME WHEREAS THE GROSS TOTAL INCOME FOR THE YEAR REMAINED THE SAME. RELIANCE WAS PLACED ON THE RATIO LAID DOWN IN CIT VS JAI PARABOLIC SPRINGS LTD. 306 ITR 4 2 (DEL). IN RESPECT OF THE ORDER OF CIT(APPEALS) IN INVOKING SE CTION 14A OF THE ACT, LD. AR FOR THE ASSESSEE POINTED OUT THAT THE S AME WAS NOT CORRECT. IN WAS FURTHER POINTED OUT THAT THE INTERE ST EXPENDITURE WAS DIRECTLY RELATABLE TO THE INTEREST INCOME EARNE D BY THE ASSESSEE AND HENCE, THE EXPENDITURE WAS ALLOWABLE. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RELAT ION TO THE DISALLOWANCE OF INTEREST EXPENDITURE OF RS. 8,58,11 6/-. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD DE CLARED INCOME FROM BUSINESS AND ALSO INCOME FROM SHORT TERM CAPIT AL GAINS/LOSS ON SALE OF SHARES AND ALSO INTEREST INCOME. THE ASS ESSEE HAD INCURRED INTEREST EXPENDITURE OF RS. 8,58,116/- WHI CH COMPRISED OF INTEREST PAID TO M/S ILFS INVESTMENT OF RS. 8,25,61 6/- AND RS. 32,500/- PAID TO SHRI SUSHIL GARG. THE SAID INTERES T EXPENDITURE 4 WAS DEBITED TO THE PROFIT & LOSS ACCOUNT BY THE ASS ESSEE. HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDING S, IT WAS EXPLAINED BY THE ASSESSEE THAT THE SAID INTEREST EX PENDITURE IS PARTLY RELATABLE TO THE COST OF SHARES PURCHASED AN D SOLD DURING THE YEAR AND PARTLY RELATABLE TO THE INTEREST INCOME EA RNED BY THE ASSESSEE. THE EXPLANATION OF THE ASSESSEE VIDE REP LY DATED 13.12.2010 IS INCORPORATED UNDER PARA 4 AT PAGE 2 O F THE ASSESSMENT ORDER. THE PLEA OF THE ASSESSEE WAS THA T IT HAD RECEIVED SHARES OF M/S RELIANCE POWER LTD. VIDE ITS PUBLIC I SSUE THROUGH FINANCE FROM M/S ILFS INVESTMENT, ON WHICH THE ASSE SSEE CLAIMS TO HAVE PAID INTEREST AMOUNTING TO RS. 8,25,616/-. SH ARES SO ALLOTTED WERE SOLD DURING THE YEAR UNDER CONSIDERATION AND T HE INCOME ARISING THEREFROM HAS BEEN REFLECTED AS SHORT TERM CAPITAL GAINS/LOSS FOR THE YEAR UNDER CONSIDERATION. WE FI ND MERIT IN THE PLEA OF THE ASSESSEE THAT THE SAID INTEREST IS ATTR IBUTABLE TO THE COST OF SHARES AGAINST WHICH THE ASSESSEE HAD DECLARED I NCOME FROM SHORT TERM CAPITAL GAINS/LOSS. HOWEVER, THE SAID I NCOME HAS TO BE RECOMPUTED AFTER ALLOWING THE BENEFIT OF THE INTERE ST PAID OF RS. 8,25,616-. THE AUTHORITIES BELOW HAD REJECTED THE CLAIM OF THE ASSESSEE IN VIEW OF THE RATIO LAID DOWN BY THE HON' BLE SUPREME COURT IN /S GOETZE INDIA LTD. VS CIT (SUPRA) WHEREI N IT HAS BEEN HELD THAT A FRESH CLAIM OF DEDUCTION CANNOT BE ENTE RTAINED BY THE ASSESSING OFFICER OTHERWISE THAN BY FILING A REVISE D RETURN. ADMITTEDLY, NO REVISED RETURN WAS FILED BY THE ASSE SSEE AS THE ASSESSEE IN THE PRESENT CASE HAS NOT REVISED ITS CL AIM BUT HAS ONLY INTRA-HEAD CHANGED THE HEAD OF INCOME I.E. AS AGAIN ST THE CLAIM OF INTEREST EXPENDITURE UNDER THE HEAD INCOME FROM BU SINESS, THE SAID DEDUCTION IS NOW BEING CLAIMED UNDER THE HEAD INCOME FROM SHORT TERM CAPITAL GAINS ON SALE OF SHARES FOR THE YEAR UNDER 5 CONSIDERATION ITSELF. WE FIND MERIT IN THE CLAIM O F THE ASSESSEE AND THE SAME IS DIRECTED TO BE ALLOWED. THE ASSESSING OFFICER IS DIRECTED TO RECOMPUTE THE INCOME UNDER THE HEAD INC OME FROM SHORT TERM CAPITAL GAINS/LOSS. 8. THE ASSESSEE IN ADDITION HAD ALSO PAID SUM OF RS . 32,500/- AS INTEREST TO SHRI SUSHIL GARG FROM WHOM LOAN HAD BEE N RAISED @ 13%. THE ASSESSEE CLAIMS THAT THE SAID AMOUNT WAS INVESTED WITH M/S VEERA AUTO COMPONENTS PVT. LTD. FROM WHERE THE ASSESSEE HAD RECEIVED INTEREST @ 15%. IN VIEW OF THE NEXUS BETW EEN THE LOAN RAISED AND ITS APPLICATION, WE FIND MERIT IN THE CL AIM OF THE ASSESSEE AND ACCORDINGLY, DIRECT THE ASSESSING OFFI CER TO SET OFF THE INTEREST EXPENDITURE AGAINST INTEREST EXPENDITURE E ARNED BY THE ASSESSEE. HOWEVER, THE GROSS TOTAL INCOME OF THE A SSESSEE FOR THE YEAR UNDER CONSIDERATION WOULD REMAIN THE SAME. TH US, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWE D. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH NOVEMBER,2013. SD/- SD/- ( T.R.SOOD) (SUSHMA CHOWL A) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 27 TH NOVEMBER,2013 POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR ITAT,CHD.