M/s BCL Securities & Jewellers Ltd., Delhi V. DCIT, Ludhiana

ITA 782/CHANDI/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8924 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2005-2006
• Appeal Filed On: 13-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 782/CHD/2016 ASSESSMENT YEAR : 2005-06 M/S BCL SECURITIES & VS THE DCIT, JEWELERS LTD. CENTRAL CIRCLE-I, 4, BATTERY LANE, LUDHIANA. RAJPUR ROAD, CIVIL LINES, DELHI. PAN: AAACB5493R (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGAL RESPONDENT BY : SHRI MANJIT SINGH DATE OF HEARING : 08.12.2016 DATE OF PRONOUNCEMENT : 09.12.2016 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS)-5, LUDHIANA DATED 18.03.2016 FOR ASSESSMENT YEAR 2005-06. 2. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. 3. THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS GROUND NO. 3, SAME IS DISMISSED AS NOT PRESSED. 2 GROUND NOS. 1 AND 4 ARE GENERAL IN NATURE AND NEED NO ADJUDICATION. 4. ON GROUND NO. 2, ASSESSEE CHALLENGED THE ORDERS OF AUTHORITIES BELOW IN CONFIRMING THE DISALLOWANCE OF LOSS OF RS. 2 LACS. THE ASSESSING OFFICER MADE ADD ITION OF RS. 2 LACS ON ACCOUNT OF DISALLOWANCE OF EXPENDI TURE CLAIMED BY ASSESSEE FOR FORFEITURE OF ADVANCE OF RS . 2 LACS AGAINST THE PURCHASE OF SHOP. THE ASSESSING OFFICER HAS MENTIONED THAT ASSESSEE IN THE TRADING ACCOUNT HAD SHOWN PURCHASE OF RS. 2 LACS. AFTER CA LLING THE DETAILS, IT WAS NOTICED THAT THERE WAS NO FRESH PURCHASES AND THE AMOUNT REPRESENTS FORFEITURE OF P ART OF THE AMOUNT OUT OF ADVANCE MONEY PAID EARLIER. T HE ASSESSEE HAD BOOKED A SHOP WITH M/S AMITY AMUSEMENT LTD. THE ASSESSEE PAID RS. 35 LACS FOR PURCHASE OF SHOP BUT IT WAS NEVER SHOWN AS STOCK-IN-TRADE. OUT OF TH IS AMOUNT, ASSESSEE RECEIVED BACK S 33 LACS DURING THE YEAR AND BALANCE AMOUNT WAS FORFEITED. THE ASSESSE E CLAIMED RS. 2 LACS AS EXPENSES BY SHOWING IT AS PURCHASE. THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE TREATING IT AS CAPITAL LOSS NOT ALLOWA BLE AS EXPENDITURE IN THE YEAR UNDER CONSIDERATION. 5. THE ASSESSEE CHALLENGED ADDITION BEFORE LD. CIT(APPEALS) AND IT WAS SUBMITTED THAT ASSESSEE IS IN 3 THE BUSINESS OF REAL ESTATE AND JEWELLERY BUSINESS. THE ASSESSEE COMPANY HAS MADE ADVANCE OF RS. 35 LACS FO R PURCHASE OF SHOP TO M/S AMITY AMUSEMENT LTD., DEHRADUN BUT THE DEAL WAS NOT MATURED, THEREFORE, I N ASSESSMENT YEAR UNDER APPEAL THE COMPANY HAS RETURN ED AMOUNT OF RS. 33 LACS AND FORFEITED A SUM OF RS. 2 LACS ON ACCOUNT OF CANCELLATION OF SHOP. THE ASSESSEE COMPANY HAS CLAIMED IT AS LOSS BEING OCCURRED DURIN G THE REGULAR COURSE OF BUSINESS OF REAL ESTATE BUT T HE ASSESSING OFFICER HAS DISALLOWED THE SAME CONSIDERI NG IT TO BE CAPITAL LOSS. THE OBSERVATIONS OF THE ASSESS ING OFFICER ARE INCORRECT THAT IT IS A CAPITAL LOSS AS THE AMOUNT HAS BEEN ADVANCED IN REGULAR COURSE OF BUSIN ESS OF REAL ESTATE NOT AS INVESTMENT. THEREFORE, THE S AME COULD NOT BE TREATED AS CAPITAL INVESTMENT AND SHOU LD HAVE BEEN TREATED AS BUSINESS LOSS AND IS ALLOWABLE EXPENDITURE. THE LD. CIT(APPEALS), HOWEVER, ON THE SAME REASONING AS ADOPTED BY THE ASSESSING OFFICER, CONSIDERED IT TO BE CAPITAL LOSS AND DISMISSED THIS GROUND OF APPEAL OF THE ASSESSEE. 6. AFTER CONSIDERING RIVAL SUBMISSIONS, WE ARE OF T HE VIEW ADDITION IS WHOLLY UNJUSTIFIED. IT IS ADMITTE D FACT THAT ASSESSEE COMPANY IS IN THE BUSINESS OF REAL ES TATE. IT IS ALSO NOT IN DISPUTE THAT ASSESSEE MADE ADVANC E FOR PURCHASE OF SHOP IN A SUM OF RS. 35 LACS TO M/S AMI TY AMUSEMENT LTD. PB-12 IS THE CONFIRMATION OF ACCOUN T TO SHOW THAT ON 01.04.2004 RS. 35 LACS WAS OPENING 4 BALANCE OF ADVANCE GIVEN TO THE AFORESAID COMPANY AS ADVANCE. SINCE ADVANCE IS GIVEN FOR PURCHASE OF SH OP, THEREFORE, IT WAS RIGHTLY NOT TAKEN INTO STOCK-IN-T RADE BECAUSE THE PROPERTY WAS YET TO BE PURCHASED BY THE ASSESSEE. SINCE ASSESSEE IS IN REAL ESTATE BUSINES S, THEREFORE, PURCHASE OF SHOP IS A REGULAR BUSINESS ACTIVITY OF THE ASSESSEE AND COULD NOT BE TREATED A S INVESTMENT. SINCE RS. 2 LACS HAVE BEEN FORFEITED O N ACCOUNT OF CANCELLATION OF THE DEAL, THEREFORE, RS. 2 LACS SHOULD HAVE BEEN CONSIDERED AS BUSINESS LOSS OF THE ASSESSEE. THE ASSESSEE IN THE ACCOUNTS ALSO, SPECIFICALLY NOTED THAT IT IS DEALING IN THE REAL E STATE AND HAS SHOWN IN THE TRADING ACCOUNT, RS. 2 LACS ON ACCOUNT OF PURCHASE WHICH SHOULD BE MENTIONED AS ADVANCE FOR PURCHASE, WHICH HAVE BEEN FORFEITED. THEREFORE, AUTHORITIES BELOW WERE NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE OF BUSINESS LOS S CONSIDERING THAT BOOKING OF THE SHOP WAS NOT REFLEC TED IN THE STOCK-IN-TRADE. THEREFORE, BUSINESS LOSS SU FFERED BY ASSESSEE CANNOT BE CONSIDERED AS CAPITAL LOSS. 7. CONSIDERING THE ABOVE DISCUSSION, WE ARE OF THE VIEW SINCE ASSESSEE SUFFERED BUSINESS LOSS OF RS. 2 LACS IN ASSESSMENT YEAR UNDER APPEAL ON CANCELLATION OF THE DEAL OF THE SHOP, THEREFORE, IT SHOULD BE ALLOWED A S BUSINESS EXPENDITURE INCURRED FOR THE PURPOSE OF BUSINESS. THE ORDERS OF THE AUTHORITIES BELOW ARE ACCORDINGLY SET ASIDE AND ADDITION OF RS. 2 LACS IS 5 DELETED. THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- ( ANNAPURNA GUPTA) (BHAVNESH SAINI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 09 TH DECEMBER, 2016. POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT,DR ASSISTANT REGISTRAR, ITAT/CHD