M/S. PANTHER INVESTRADE LTD, MUMBAI V. THE ACIT CEN CIR-40, MUMBAI

ITA 77/MUM/2009

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4143 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 11-06-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 05-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P DANIEL
• Keywords: Business income; Speculation loss
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH J, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 77/MUM/2009 ASSESSMENT YEAR : 2005-06 PANTHER INVESTRADE LTD. RADHA BHAVA, 1 ST FLOOR 121, NAGINDAS MASTER ROAD MUMBAI-400 023. PAN NO.AAACP 3259 R VS. ACIT, CENTRAL CIRCLE - 40 MUMBAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJIV KHANDELWAL REVENUE BY : DR. P. DANIEL DATE OF HEARING : 11/06/2013 DATE OF PRONOUNCEMENT : 12/ 07/2013 O R D E R PER B. RAMAKOTAIAH, AM: THIS IS AN ASSESSEES APPEAL AGAINST THE ORDER OF C IT(A), CENTRAL-7, MUMBAI DATED 08.10.2008. THE ASSESSEE HAS RAISED SI X GROUNDS ON VARIOUS ISSUES. 2. WE HAVE HEARD THE LD. COUNSEL AND THE LD. DR IN DETAIL. GROUND NO.1 PERTAINS TO NON-ALLOWANCE OF LOSS OF RS.58,420 /- ON TRANSACTIONS ITA NO.77/M/09 A.Y.05-06 PANTHE R INVESTRADE LTD. 2 BACKED BY DELIVERY ON THE REASON THAT THE TRANSACT ION ARE NON-GENUINE IN NATURE. THE ASSESSEE BELONGS TO KETAN PAREKH GRO UP OF CASES AND WAS ENGAGED IN SHARE BROKING AND SHARE TRADING AND INVE STMENT IN SHARE TRADING SECURITIES TILL 2004. THE ASSESSEE CLAIMED REDUCTION IN VALUE OF SHARES TO THE EXTENT OF RS.58,420/- AS LOSS IN P&L ACCOUNT. THERE WERE NO SALE OF SHARES DURING THE YEAR AS THE ASSESSEES BUSINESS WAS STOPPED BECAUSE OF SUSPENSION OF TRADING IN SECURITIES OF T HIS COMPANY ON 21.12. 2004 FOR THE REASON THAT THE ASSESSEE IS NOT HAVING ANY BUSINESS ACTIVITY AND THE LOSS RESULTING ON ACCOUNT OF DIFFERENCE IN VALUATION OF SHARES WAS NOT ALLOWED. 2.1 IT WAS SUBMITTED THAT LOSS WAS BEING ALLOWED TO THE ASSESSEE BY THE ORDERS OF THE ITAT IN ASSESSEES OWN CASE IN EARLIE R YEARS AS WELL AS IN CASE OF GROUP CONCERN ON SIMILAR FACTS. WHETHER ASS ESSEE IS HAVING BUSINESS ACTIVITY OR NOT PENDING CANCELLATION OF TH E LICENSE DUE TO THE ORDERS OF THE SUSPENSION GRANTED BY SEBI IN THE INT ERIM PERIOD WAS THE ISSUE CONSIDERED BY ITAT BENCH IN THE CASE OF K&P SECURITIES P. LTD. IN ITA NO.5008/MUM/07 DATED 29.05.2009 WHEREIN IT WAS HELD THAT TEMPORARY SUSPENSION OF BUSINESS CAN NOT BE TAKEN A S CLOSURE OF BUSINESS AND NECESSARY EXPENDITURE WAS ALLOWED. FO LLOWING THE SAME IN ASSESSEES OWN CASE IN ASSESSMENT YEARS 2002-03 TO 2004-05, SUCH BUSINESS LOSSES, INCLUDING REDUCTION IN VALUATION O F SHARES, WERE ALLOWED TO THE ASSESSEE. RESPECTFULLY FOLLOWING THE PRINCIP LES THEREON, WE DIRECT THE AO TO ALLOW LOSS OF RS.58,420/- WHICH IS REDUCT ION IN VALUE OF SHARES HELD AS STOCK IN TRADE. GROUND IS ALLOWED. 3. GROUND NO.2 PERTAINS TO THE ISSUE OF DISALLOWING AMOUNT OF RS.12,025/- BEING LEGAL FEES PAID TO ADVOCATE UNDER SECTION 40(A)(IA). DURING THE ASSESSMENT THE AO NOTICED THAT THE ASSES SEE CLAIMED AN AMOUNT OF RS.2,52,375/- AS LEGAL AND PROFESSIONAL E XPENSES OUT OF WHICH ITA NO.77/M/09 A.Y.05-06 PANTHE R INVESTRADE LTD. 3 AMOUNT RS.2,39,875/- WAS PAID TO SHRI R.S. KHANDELW AL & ASSOCIATES (AUDITOR AND COUNSEL TO THE ASSESSEE ).THE AO NOTIC ED THAT THE ASSESSEE HAD DEDUCTED TAX AT SOURCE ON PROFESSION FEE UNDER SECTION 194J OF THE ACT BUT HAD NOT PAID THE TAX IN TIME PRESCRIBED UND ER SECTION (1) OF SECTION 200. HE DISALLOWED THE AMOUNT OF RS.12,025/ - UNDER SECTION 40(A)(IA). BEFORE CIT(A) IT WAS SUBMITTED THAT OUT OF THE AMOUNT OF RS.2,39,875/- PAID TO R.S. KHANDELWAL & ASSOCIATES THE ASSESSEE HAD DEDUCTED TAX AND HAS PAID BELATEDLY. AMOUNT OF RS. 12,025/- WAS PAID TO ADVOCATE DHRUVA & COMPANY. THE AMOUNT WAS LESS THAN RS.20,000/- THEREFORE, THERE IS NO NEED FOR DEDUCTING TAX. ACCO RDINGLY, IT WAS SUBMITTED THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE. HOWEVER, CIT(A) CONFIRMED THE SAME. 3.1 AFTER CONSIDERING THE RIVAL CONTENTIONS, WE ARE OF THE VIEW THAT THE AO AND THE CIT(A) ERRED IN MIXING UP THE FACTS. AS FAR AS FEES OF RS.2,39,875/-, THERE WAS TDS WHICH WAS PAID BELATED LY. EVEN THOUGH AO MENTIONED THE SAME, HE DID NOT DISALLOW THE AMOU NT OF RS.2,39,875/- . ONLY DISALLOWANCE IN THE ORDER IS R S.12,025/- PAID TO ADVOCATE ON WHICH PROVISIONS OF SEC. 194J ARE NOT A PPLICABLE AS THE AMOUNT WAS LESS THAN RS.20,000/-. WHEN THESE FACTS WERE BROUGHT TO THE NOTICE OF CIT(A) , CIT(A) REPEATED THE STATEMENT OF AO THAT APPELLANT ADMITTED LIABILITY TO MAKE TDS BUT FAILED TO DEPOSI T THE SAME. WE ARE UNABLE TO UNDERSTAND HOW THIS STATEMENT WAS MADE BY THE CIT(A). OBVIOUSLY THE DISALLOWANCE WAS NOT ON THE AMOUNT PA ID TO M/S R.S. KHANDELWAL & ASSOCIATES . PROVISION OF SECTION 40(A )(IA) CANNOT BE APPLIED TO AMOUNT OF RS 12,025 PAID TO THE ADVOCATE, AS THE RE IS NO NEED TO MAKE TDS ON THAT AMOUNT UNDER THE PROVISIONS. ACCORDINGL Y, WE DIRECT THE AO TO ALLOW THE AMOUNT. THE GROUND IS ALLOWED. ITA NO.77/M/09 A.Y.05-06 PANTHE R INVESTRADE LTD. 4 4. GROUND NO.3 PERTAINS TO TREATMENT OF INTEREST IN COME OF RS.31,223/- AS INCOME FROM OTHER SOURCES. THIS IS AN AMOUNT WRITTEN BACK TO P/L ACCOUNT UNDER PROVISIONS OF SEC.41(1). THE AO AND THE CIT(A) TREATED THE SAME AS OTHER INCOME. EVEN THOUG H THERE IS NO DETAILS FILED WITH REFERENCE TO AMOUNT WRITTEN BACK, IT WAS THE CONTENTION THAT WRITE BACK OF BUSINESS LIABILITY PROVIDED IN EARLIE R YEARS WAS CONSIDERED AS INCOME UNDER SECTION 41(1), WHICH FALLS UNDER TH E HEAD BUSINESS. THEREFORE, THE AMOUNT HAS TO BE CONSIDERED AS BUSIN ESS INCOME. AS THE AMOUNT WAS WRITTEN BACK U/S 41(1), WE ARE OF THE OP INION THAT THE SAME HAS TO BE CONSIDERED AS BUSINESS INCOME ONLY, THERE FORE, TO THAT EXTENT THE ORDERS OF THE AO AND THE CIT(A) ARE MODIFIED. T HE GROUND IS ALLOWED. 5. GROUND NO.4 PERTAINS TO TREATING BUSINESS LOSS A S SPECULATION LOSS BY INVOKING PROVISIONS OF EXPLANATION-2 TO SEC.73 T HEREBY NOT SETTING OFF AGAINST INCOME FROM OTHER SOURCES. WHILE TAKING INC OME OF RS.31,223/- AS INCOME FROM OTHER SOURCES, THE BUSINESS LOSS CLA IMED AS REDUCTION IN VALUE WAS NOT SET OFF CONSIDERING THAT AS SPECULATI ON LOSS. WE HAVE ALREADY HELD IN GROUND NO.1 THAT ASSESSEE IS ENTITL ED TO CLAIM BUSINESS LOSS AND IN GROUND NO.3 AS INCOME FROM BUSINESS. A SSESSEE IS ENTITLED SET OFF NET BUSINESS LOSS IF ANY. EXPLANATION TO S ECTION 73 DOES NOT APPLY TO THE FACTS AS THERE ARE NO PURCHASES AND SALE OF SHARES DURING YEAR AND LOSS IS OF REDUCTION IN VALUATION OF CLOSING ST OCK. GROUND NO.4 IS ACCORDINGLY ALLOWED. 6. GROUND NO.5 PERTAINS TO NOT ALLOWING EXPENSES CL AIMED BY THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS NOT CA RRIED OUT ANY BUSINESS ACTIVITY DURING THE YEAR THERE BY NOT ALLO WING CARRY FORWARD OF LOSS. THIS IS ALSO CONSEQUENTIAL AND IS COVERED BY THE DECISION OF THE CO- ORDINATE BENCH IN THE CASE OF KNB SECURITIES LTD. ( SUPRA). SINCE THE EXPENSES WERE INCURRED IN CONNECTION WITH THE BUSIN ESS ACTIVITY TO KEEP ITA NO.77/M/09 A.Y.05-06 PANTHE R INVESTRADE LTD. 5 BUSINESS ALIVE, TO THE EXTENT OF BUSINESS LOSS DETE RMINED DURING THE YEAR IS TO BE CARRIED FORWARD FOR SETTING OFF ,IF ANY IN LATER YEARS. THE AO IS DIRECTED TO DO THE WORKING ACCORDINGLY. GROUND IS A LLOWED. 7. GROUND NO.6 IS CONSEQUENTIAL IN NATURE ABOUT CHA RGING OF INTEREST UNDER SECTION 234B . IT DOES NOT REQUIRE ANY ADJUDI CATION. 8. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH JULY, 2013. SD/- SD/- (DR. S.T.M. PAVALAN ) JUDICIAL MEMBER (B. RAMAKOTAIAH ) ACCOUNTANT MEMBER MUMBAI, DATED: 12/07/2013. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.