DCIT CIR 4(3), MUMBAI V. MILL CONSULTANTS & INVESTMENT P. LTD, MUMBAI

ITA 8275/MUM/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78978 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 12-12-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 30-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Business expenditure; Opportunity of being heard; Earning of tax free income; Revised return
• Section: 143(3); 11A; 14A

Judgement Text

B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI { .. , # %, & # ' BEFORE SHRI P.M. JAGTAP, AM AND SHRI SANJAY GARG, J M ./ I.T.A. NO.8315 /MUM/2010 ( &% % / ASSESSMENT YEAR : 2007-2008 M/S MILL CONSULTANTS & INVESTMENT PVT. LTD., 204, SHREEPAL COMPLEX, SUREN ROAD, ANDHERI (E), MUMBAI 400 093. / VS. THE ACIT CIRCLE 4(3), 6 TH FLOOR, 638 AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400020. ./ PAN : AAACM 6095Q ( / APPELLANT ) .. ( / RESPONDENT ) ./ I.T.A. NO.8275 /MUM/2010 ( &% % / ASSESSMENT YEAR : 2007-2008 THE DCIT CIRCLE 4(3), 6 TH FLOOR, 638 AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400020. / VS. M/S MILL CONSULTANTS & INVESTMENT PVT. LTD., 204, SHREEPAL COMPLEX, SUREN ROAD, ANDHERI (E), MUMBAI 400 093. ./ PAN : AAACM 6095Q ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY SHRI K. GOPAL DEPARTMENT BY : SHRI RAVI PRAKASH / DATE OF HEARING : 11-03-2014 / DATE OF PRONOUNCEMENT : 23-05-2014 [ / O R D E R PER P.M. JAGTAP, A.M . : .. , THESE TWO APPEALS, ONE FILED BY THE ASSESSEE BEING ITA NO. 8315/MUM/2010 AND THE OTHER FILED BY THE REVENUE BE ING ITA NO ITA 8315/M/10 & ITA 8275/M/10 2 8275/MUM/2010 ARE CROSS APPEALS WHICH ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A) 8, MUMBAI DATED 21-9-2010. 2. THE ISSUE INVOLVED IN GROUND NO. 1 OF THE ASSESS EES APPEAL RELATES TO THE DISALLOWANCE MADE BY THE A.O. U/S 14A OF THE IN COME TAX ACT, 1961 WHICH HAS BEEN SUSTAINED PARTLY BY THE LD. CIT(A). 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF SHARE BROKING AS WELL AS DEALING IN SHA RES AND SECURITIES. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION W AS FILED BY IT ON 27-10-2007 DECLARING TOTAL INCOME OF RS. 1,42,14,74 0/-. IN THE SAID RETURN, DIVIDEND INCOME OF RS. 47,57,659/- AND LONG TERM CA PITAL GAIN OF RS. 72,31,602/- WAS CLAIMED TO BE EXEMPT BY THE ASSESSE E FROM TAX. IN THE ASSESSMENT COMPLETED U/S 143(3) OF THE ACT VIDE AN ORDER DATED 17-12-2009, THE DISALLOWANCE U/S 14A OF THE ACT ON ACCOUNT OF E XPENDITURE INCURRED IN RELATION TO THE SAID EXEMPT INCOME WAS WORKED OUT B Y THE A.O. BY APPLYING RULE 8-D OF THE INCOME TAX RULES, 1962 AS UNDER:- 1) AS PER RULE 8D(2)(1) = AS DISCUSSED ABOVE RS.5, 99,463/- 2) AS PER RULE 8D(2)(II) = A X B/C = 42,54,895 X 3,76,380/15,74,80,090 [FOR THIS WORKING PL. REFER THE BALANCE SHEET AND THE WORKING GIVEN BY THE AR} = 88,523/- 3) AS PER RULE 8D(2)(III) = 32,76,380/- AGGREGATE OF ALL THREE AS PER RULE AMOUNTS TO RS. 3 9,64,366/- AND HENCE THIS AMOUNT IS CONSIDERED FOR DISALLOWANCE U/S 14 R.W.RU LE 8D. 4. THE ENTIRE DISALLOWANCE MADE BY THE A.O. U/S 14A R.W. RULE 8-D WAS CHALLENGED BY THE ASSESSEE IN AN APPEAL FILED BEFOR E THE LD. CIT(A). HOWEVER, AT THE TIME OF HEARING BEFORE THE LD. CIT(A), THE A SSESSEE PRESSED THIS ISSUE ONLY TO THE EXTENT OF DISALLOWANCE MADE BY THE A.O. AS PER RULE 8D(2)(I) TO THE ITA 8315/M/10 & ITA 8275/M/10 3 EXTENT OF RS. 5,99,462/-. IN THIS REGARD, THE CONT ENTION RAISED ON BEHALF OF THE ASSESSEE RELYING ON THE DECISION OF HONBLE BOM BAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. (2010) 328 ITR 81 (BOM.) THAT RULE 8D IS NOT APPLICABLE TO A.Y. 2007-08 WAS ACCEPTED BY THE LD. CIT(A). HE HELD RELYING ON THE SAID DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT THAT THE DISALLOWANCE U/S 14A OF THE ACT FOR A.Y. 2007-08 WA S REQUIRED TO BE MADE ON SOME REASONABLE BASIS. IN THIS REGARD, HE FOUND IT REASONABLE TO DETERMINE THE QUANTUM OF EXPENDITURE TO BE DISALLOWED U/S 14A OF THE ACT IN THE RATIO OF THE VALUE OF TRANSACTIONS IN SHARES WHICH YIELDED DIVID END INCOME AND CAPITAL GAIN TO THE VALUE OF TOTAL TRANSACTIONS IN SHARES A ND ACCORDINGLY DIRECTED THE A.O. TO RECOMPUTE THE DISALLOWANCE TO BE MADE U/S 1 4A OF THE ACT. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ONLY CON TENTION RAISED BY THE LD. COUNSEL FOR THE ASSESSEE IS THAT WHILE RECOMPUTING THE DISALLOWANCE TO BE MADE U/S 14A OF THE ACT AS PER THE DIRECTION OF THE LD. CIT(A), THE A.O. SHOULD CONSIDER THE DISALLOWANCE ALREADY OFFERED BY THE AS SESSEE IN THE COMPUTATION OF TOTAL INCOME. ACCORDINGLY, WE DIRECT THE A.O. T O CONSIDER THE DISALLOWANCE, IF ANY, ALREADY OFFERED BY THE ASSESSEE U/S 14A OF THE ACT WHILE RECOMPUTING THE DISALLOWANCE TO BE MADE AS PER THE DIRECTION OF THE LD. CIT(A). GROUND NO. 1 OF THE ASSESSEES APPEAL IS ACCORDINGLY TREATED A S PARTLY ALLOWED FOR STATISTICAL PURPOSE. 6. IN GROUND NO. 2, THE ASSESSEE HAS DISPUTED THE A DDITIONS OF RS. 1,78,046/- AND RS. 2,67,859/- MADE BY THE A.O. AND CONFIRMED BY THE LD.CIT(A) ON ACCOUNT OF PROFIT ON SALE OF FURNITURE AND INDEXATION OF LONG TERM CAPITAL GAIN RESPECTIVELY. 7. IN THE COMPUTATION OF TOTAL INCOME, INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION WAS DECLARED BY THE ASSESSEE AT RS. 1,31,79,337/-. THE SAID AMOUNT WAS ARRIVED AT AFTE R ADDING A SUM OF RS. ITA 8315/M/10 & ITA 8275/M/10 4 19,79,060/- BEING ITEMS INADMISSIBLE AND REDUCING A SUM OF RS. 1,39,08,911/- BEING THE DEDUCTION/EXEMPTIONS AS WEL L AS ITEMS CONSIDERED SEPARATELY TO BOOK PROFIT OF RS. 2,47,81,014/-. AC CORDING TO THE A.O., THE ITEMS OF DEDUCTION/EXEMPTIONS CONSIDERED SEPARATELY WERE AS UNDER:- DEPRECIATION AS PER I.T. ACT RS.3,69,795/- INCOME FROM LONG TERM CAPITAL GAIN [EXEMPT U/S 10[38]] RS.69,63,744/- INCOME FROM SHORT TERM CAPITAL GAIN NOT FALLING UNDER SECTION 111A RS.45,222/- INCOME FROM SHORT TERM CAPITAL GAIN FALLING UNDER SECTION 11A RS.9,98,412/- INCOME FROM DIVIDEND RS.47,57,659/- RS.1,31,34,832/- THERE WAS THUS A DIFFERENCE OF RS. 7,74,079/- (RS. 1,39,08,911/- (-) RS. 1,31,34, 832/-) WHICH, AS NOTED BY THE A.O., WAS AT TRIBUTABLE TO SPECULATION PROFIT TO THE EXTENT OF RS. 3,28,175/-. THE BALANC E AMOUNT OF RS. 4,45,904/- WAS TREATED BY THE A.O. AS THE INCOME OF THE ASSESS EE NOT OFFERED TO TAX AND ADDITION TO THAT EXTENT WAS MADE BY HIM TO THE TOTA L INCOME OF THE ASSESSEE. BEFORE THE LD. CIT(A), IT WAS POINTED OUT ON BEHALF OF THE ASSESSEE THAT THE SUM OF RS. 4,45,904/- INCLUDED THE PROFIT ON SALE O F FURNITURE AMOUNTING TO RS. 1,78,046/- AND LONG TERM CAPITAL GAIN OF RS. 2, 67,859/- WHICH DID NOT FORM PART OF BUSINESS INCOME AND THEREFORE THE ADDI TION MADE BY THE A.O. TREATING THESE TWO EXEMPT ITEMS AS INCOME OF THE AS SESSEE WAS NOT SUSTAINABLE. ACCORDING TO THE LD. CIT(A), THIS CLA IM, HOWEVER, WAS NOT MADE BY THE ASSESSEE EITHER IN THE RETURN OF INCOME ORIG INALLY FILED OR EVEN IN THE FORM OF REVISED RETURN. HE THEREFORE DID NOT ALLOW THE CLAIM OF THE ASSESSEE ON THIS ISSUE AND CONFIRMED THE ADDITION OF RS. 4,45,9 05/- MADE BY THE A.O. ITA 8315/M/10 & ITA 8275/M/10 5 8. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LD. COUN SEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE COMPUTATION OF TOTAL I NCOME PLACED AT PAGE 11 OF THE PAPER BOOK WHEREIN THE DETAILS OF ITEMS OF EXEMPTION/DEDUCTION/SEPARATELY CONSIDERED AGGREGATI NG TO RS. 1,39,08,911/- ARE GIVEN. HE THEN INVITED OUR ATTENTION TO THE DE TAILS OF SUCH ITEMS GIVEN BY THE A.O. ON PAGE 7 OF THE ASSESSMENT ORDER TO POINT OUT THAT THE DIFFERENCE OF RS. 4,45,905/- WAS ON ACCOUNT OF TWO ITEMS. FIRSTL Y, THE LONG TERM CAPITAL GAIN OF RS. 72,31,603/- WAS REDUCED BY THE ASSESSEE IN THE COMPUTATION OF TOTAL INCOME WHEREAS THE AMOUNT OF THESE ITEMS WERE TAKEN BY THE A.O. AT RS. 69,63,710/- WHICH REPRESENTED LONG TERM CAPITAL GAI N COMPUTED AFTER ALLOWING THE BENEFIT OF INDEXATION. THE SECOND ITEM OF DIFFERENCE WAS ON ACCOUNT OF PROFIT ON SALE OF FIXED ASSETS AMOUNTING TO RS. 1,78,046/- WHICH WAS NOT TAKEN BY THE A.O. IN THE DETAILS GIVEN ON P AGE 7 OF THE ASSESSMENT ORDER. AS POINTED OUT BY THE LD. COUNSEL FOR THE A SSESSEE, THE FURNITURE WAS SOLD BY THE ASSESSEE FOR A SALE CONSIDERATION OF RS . 2 LACS AND THIS ENTIRE SALE CONSIDERATION WAS DIRECTLY CREDITED TO THE RESPECTI VE ASSET ACCOUNT (PAGE 44 OF THE PAPER BOOK) AS PER THE CONCEPT OF BLOCK OF ASS ET AND THERE WAS THUS NO QUESTION OF ANY INCOME CHARGEABLE TO TAX AS BUSINES S INCOME ON ACCOUNT OF PROFIT ON SALE OF FURNITURE. THIS EXPLANATION OFFE RED BY THE LD. COUNSEL FOR THE ASSESSEE IN RESPECT OF DIFFERENCE OF RS. 4,45,904/- WITH THE HELP OF THE RELEVANT DOCUMENTARY EVIDENCE HAS NOT BEEN CONTROVE RTED BY THE LD. D.R. HE, HOWEVER, HAS CONTENDED THAT SINCE THIS EXPLANATION WAS NOT SPECIFICALLY OFFERED BY THE ASSESSEE BEFORE THE AUTHORITIES BELO W, OPPORTUNITY MAY BE GIVEN TO THE A.O. TO VERIFY THE SAME. WE FIND MERIT IN T HIS CONTENTION OF THE LD. D.R. ACCORDINGLY, THE IMPUGNED ORDER OF THE LD. CIT(A) O N THIS ISSUE IS SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF THE A.O. FOR DECIDING THE SAME AFRESH AFTER VERIFYING THE EXPLANATION OF THE ASSESSEE FRO M THE RELEVANT RECORD. THE A.O. SHALL AFFORD PROPER AND SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ITA 8315/M/10 & ITA 8275/M/10 6 ASSESSEE. GROUND NO. 2 OF THE ASSESSEES APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 9. IN GROUND NO. 3, THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF ASSESSEES CLAIM FOR SHORT TERM CAPITAL LOSS OF RS. 11,380/- ( SUBJECT TO STT) AGAINST INCOME FROM SALE OF QUOTED WARRANTS (NOT SUBJECT TO STT) WHICH IS CHARGEABLE TO TAX AT NORMAL RATE. 10. IN THE COMPUTATION OF TOTAL INCOME, THE SHORT T ERM CAPITAL LOSS ON SALE OF QUOTED SHARES AMOUNTING TO RS. 11,380/- (SUBJECT TO STT) WAS SET OFF BY THE ASSESSEE AGAINST THE SHORT TERM CAPITAL GAIN ON SALE OF QUOTED WARRANTS (NOT SUBJECT TO STT). SINCE THE SHORT TERM CAPITAL GAIN ON QUOTED SHARES (SUBJECT TO STT) WAS CHARGEABLE TO TAX AT CONCESSIO NAL RATES WHEREAS THE SHORT TERM CAPITAL GAIN ON QUOTED WARRANTS (NOT SUBJECT T O STT) WAS TAXABLE AT NORMAL RATE, THE A.O. DISALLOWED THE CLAIM OF THE A SSESSEE FOR SET OFF OF SHORT TERM CAPITAL LOSS ON SALE OF QUOTED SHARES (SUBJECT TO STT) AGAINST SHORT TERM CAPITAL GAIN ON SALE OF QUOTED WARRANTS (NOT SUBJEC T TO STT) AND ADJUSTED THE SAID LOSS AGAINST SHORT TERM CAPITAL GAIN SHOWN BY THE ASSESSEE ON QUOTED SHARES. ON APPEAL, THE LD. CIT(A) UPHELD THE ORDER OF THE A.O. ON THIS ISSUE. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AL SO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE INTER ALIA BY THE DECISIO N OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF FIRST STATE INVESTMENT S (HONGKONG) LTD. VS. ASSTT. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) REP ORTED IN [2009] 33 SOT 26 (MUM) WHERE IN A SIMILAR ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE FOR THE FOLLOWING REASONS GIVEN IN ITS ORDER:- ITA 8315/M/10 & ITA 8275/M/10 7 IN THE INSTANT CASE, THE DISPUTE WAS ONLY ABOUT THE CHOICE OF SETTING OFF OF SHORT-TERM CAPITAL LOSS SUFFERED AFTER THE CUT-O FF DATE AGAINST THE SHORT- TERM CAPITAL GAIN EARNED PRIOR TO THE CUT-OFF DATE. THIS POSITION HAD ARISEN DUE TO THE INTRODUCTION OF SECTION 111A FOR THE FIR ST TIME FROM 1-4-2005 ONLY, PROVIDES WHICH FOR LOWER RATE OF TAX ON SHORT -TERM CAPITAL GAINS ARISING ON THE TRANSACTIONS WHICH HAVE SUFFERED SEC URITIES TRANSACTION TAX. SUCH DISPUTE IS RELEVANT ONLY FOR THE FIRST YE AR OF THE OPERATION OF THIS PROVISION AND CANNOT CROP UP IN THE LATER YEARS. TH E SETTING OFF OF SHORT- TERM CAPITAL LOSS IS GOVERNED BY SUB-SECTION (2) OF SECTION 70. PRIMA FACIE THERE IS A CUE IN THE LANGUAGE OF SUB-SECTION (2) O F SECTION 70 THAT THE OPTION IS WITH THE ASSESSEE AND HE WILL DECIDE AS TO WHETHER THE SHORT-TERM CAPITAL LOSS FROM THE FIRST TRANSACTION OUGHT TO BE SET OFF AGAINST THE SHORT-TERM CAPITAL GAIN OF THE TRANSACT ION NO. 2, 3 OR 4, ETC., AS THE CASE MAY BE. THE SAID VIEW ABOUT THE VESTING OF THE DISCRETION IN THE ASSESSEE FOR THE PURPOSES OF SET-OFF OF SHORT-T ERM CAPITAL LOSS AGAINST ANY SHORT-TERM CAPITAL GAIN IS FORTIFIED WHEN THE L ANGUAGE OF SUB-SECTION (3) OF SECTION 70 IS CONSIDERED, WHICH SPECIFICALLY PROHIBITS THE SETTING OFF OF LONG-TERM CAPITAL LOSS AGAINST SHORT-TERM CAPITA L GAIN. IT HAS BEEN PROVIDED IN UNAMBIGUOUS WORDS IN SUB-SECTION (3) TH AT THE LONG-TERM CAPITAL LOSS CAN BE SET-OFF ONLY AGAINST LONG-TERM CAPITAL GAIN AND NOT AGAINST THE SHORT-TERM CAPITAL GAIN. IF THE INTENTI ON OF THE LEGISLATURE HAD BEEN NOT TO CONFER THE CHOICE ON THE ASSESSEE IN TH E MATTER OF SETTING OFF OF THE SHORT-TERM CAPITAL LOSS SUFFERED IN THE POST CUT-OFF DATE AGAINST THE SHORT-TERM CAPITAL GAIN OF THE PRE-CUT-OFF DATE, IT WOULD HAVE CLEARLY SET OUT SUCH INTENTION IN THE LANGUAGE OF SUB-SECTION ( 2) ITSELF, AS HAS BEEN DONE IN SUB-SECTION (3). IN THE ABSENCE OF ANY STIP ULATION IN THIS REGARD IN SUB-SECTION (2), IT IS EVIDENT THAT THE CHOICE HAS BEEN LEFT OVER TO THE ASSESSEE IN TAKING DECISION ABOUT THE SETTING OFF O F SHORT-TERM CAPITAL LOSS FROM ONE TRANSACTION AGAINST ANY OTHER SHORT-TERM C APITAL GAIN, WHETHER WITHIN OR OUTSIDE THE CUT-OFF DATE. IF HIGHER BENEF IT POURS IN FROM THE EXERCISE OF THE OPTION IN A PARTICULAR WAY VIS-A-VIS THE LOWER BENEFIT RESULTING IN THE OTHER WAY, THEN THE HIGHER BENEFIT AVAILABLE AS PER LAW SHOULD NOT BE DENIED. ITA 8315/M/10 & ITA 8275/M/10 8 12. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-O RDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF FIRST STATE INVESTMENTS (HO NGKONG) LTD. (SUPRA), WE DIRECT THE A.O. TO ALLOW THE CLAIM OF THE ASSESSEE FOR SET OFF OF SHORT TERM CAPITAL LOSS ON SALE OF QUOTED SHARES OF RS. 11,380 /- (SUBJECT TO STT) AGAINST SHORT TERM CAPITAL GAIN ON SALE OF QUOTED WARRANTS (NOT SUBJECT TO STT) WHICH IS CHARGEABLE TO TAX AT NORMAL RATE. GROUND NO. 3 OF ASSESSEES APPEAL IS ACCORDINGLY ALLOWED. 13. AS REGARDS GROUND NO. 1 OF REVENUES APPEAL, IT IS OBSERVED THAT THE ISSUE RAISED THEREIN RELATING TO THE DELETION OF TH E LD. CIT(A) OF THE DISALLOWANCE OF RS. 2,01,170/- MADE BY THE A.O. U/S 40(A)(IA) OF THE ACT IN RESPECT OF LEASE LINE CHARGES PAID TO STOCK EXCHANG E IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE B OMBAY HIGH COURT IN THE CASE OF CIT VS. ANGEL CAPITAL & DEBIT MARKET LTD. ( INCOME TAX APPEAL NO. 475 OF 2011 DTD. 28 TH JULY, 2011) WHEREIN IT WAS HELD THAT THE LEASE LIN E CHARGES PAID BY THE ASSESSEE TO STOCK EXCHANGE BEING MERELY REIMBURSEMENT OF THE CHARGES PAID BY THE STOCK EXCHANGE TO THE DEPARTMEN T OF TELECOMMUNICATION WITHOUT THERE BEING ANY ELEMENT OF INCOME, NO TAX W AS DEDUCTIBLE FROM THE PAYMENT OF THE SAID LEASE LINE CHARGES AND THE QUES TION OF DISALLOWANCE U/S 40(A)(IA) OF THE ACT DID NOT ARISE. RESPECTFULLY F OLLOWING THE SAID DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F ANGEL CAPITAL & DEBIT MARKET LTD. (SUPRA), WE UPHOLD THE IMPUGNED ORDER O F THE LD. CIT(A) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE AND DISMISS GR OUND NO. 1 OF REVENUES APPEAL. 14. IN GROUND NO. 2, THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS. 11,79,150/- MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF INTEREST. ITA 8315/M/10 & ITA 8275/M/10 9 15. THE ASSESSEE HAD CLAIMED DEDUCTION ON ACCOUNT O F INTEREST OF RS. 11,79,150/- PAID ON LOAN TAKEN FROM NATHOO COMMODIT IES PVT. LTD. FROM THE RELEVANT STATEMENT OF THE SAID PARTY, THE A.O. FOUN D THAT THE LOAN CLAIMED TO BE TAKEN BY THE ASSESSEE ACTUALLY REPRESENTED THE A MOUNT RECEIVED BY THE ASSESSEE FOR PURCHASE OF SHARES WHICH WAS SUBSEQUEN TLY UTILIZED BY THE ASSESSEE FOR PURCHASE OF SHARES ON BEHALF OF NATHOO COMMODITIES PVT. LTD. HE HELD THAT THE AMOUNT RECEIVED BY THE ASSESSEE FROM NATHOO COMMODITIES PVT. LTD. THUS WAS NOT IN THE NATURE OF LOAN AND INTERES T PAID THEREON COULD NOT BE ALLOWED AS DEDUCTION. 16. THE DISALLOWANCE OF RS. 11,79,150/- MADE BY THE A.O. ON ACCOUNT OF INTEREST PAID TO NATHOO COMMODITIES PVT. LTD. WAS C HALLENGED BY THE ASSESSEE IN AN APPEAL FILED BEFORE THE LD. CIT(A) AND AFTER CONSIDERING THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE AS WELL AS MATERIAL AVAILABLE ON RECORD, THE LD. CIT(A) DELETED THE SAID DISALLOWANCE MADE BY THE A. O. FOR THE FOLLOWING REASONS GIVEN IN PARA 4.1 OF HIS IMPUGNED ORDER:- 4.1. UPON CONSIDERATION OF THE REASONS STATED BY T HE A.O. FOR MAKING THE DISALLOWANCE, I FIND THAT THE ISSUE THAT AROSE FOR DETERMINATION IS WHETHER THE INTEREST PAID AMOUNTING TO RS.11,79,150 /- WAS FOR BUSINESS PURPOSE OR NOT. IT IS NOT THE CASE OF THE A.O. THAT NO AMOUNT AS REFLECTED IN THE ACCOUNTS HAD BEEN RECEIVED FROM NATHOO COMMODITIES PVT. LTD. THIS FACT AS WHETHER SUCH AMO UNT HAD BEEN RECEIVED AND WHETHER INTEREST HAD BEEN PAID ON SUCH AMOUNT HAS TO BE DETERMINED ON THE BASIS OF THE NARRATION MENTIONED IN THE ACCOUNTS. I FIND THAT THE A.O. HAS NOT DISPUTED THE FACT THAT T HE ASSESSEE HAD RECEIVED CERTAIN AMOUNT AS DISCLOSED IN THE ACCOUNT S FROM NATHOO COMMODITIES PVT. LTD. AND ALSO THAT THE INTEREST OF RS.11,79,150/- HAD BEEN PAID. THUS, THE ADMITTED FACT IS THAT THE ASSE SSEE HAD RECEIVED CERTAIN AMOUNT ON WHICH IT HAD PAID INTEREST AMOUNT ED TO RS.11,79150/-. THE CONTENTION RAISED BY THE A.O. TH AT THIS INTEREST CANNOT BE TREATED AS BUSINESS EXPENDITURE BECAUSE T HE ASSESSEE HAD RECEIVED PURPORTED AMOUNT FROM NATHOO COMMODITIES P VT. LTD. NOT AS LOAN BUT FOR PURCHASES OF SHARES HAS NO JUSTIFIABLE BASIS BECAUSE WHEN NO DISPUTE HAS BEEN RAISED REGARDING RECEIPT OF THE AMOUNT AND PAYMENT OF INTEREST, MERELY BECAUSE THE AMOUNT RECE IVED HAS BEEN MENTIONED AS HAVING BEEN RECEIVED FOR PURCHASE OF S HARES, INTEREST PAID IN THIS REGARD CANNOT BE TREATED AS NON-BUSINESS EX PENDITURE AS HAS BEEN DONE BY THE A.O. THERE CANNOT BE A BAR ON CHAR GE OF INTEREST ON ITA 8315/M/10 & ITA 8275/M/10 10 OUTSTANDINGS OTHER THAN LOAN. IT IS ALSO NOT THE CA SE OF THE A.O. THAT THE AMOUNT OF INTEREST WAS EXCESSIVE OR UNREASONABLE. T HEREFORE, I DO NOT FIND ANY JUSTIFICATION FOR THE DISALLOWANCE MADE BY THE A.O. WHICH IS DELETED. THE APPEAL ON THIS GROUND IS ALLOWED. 17. THE LD. D.R. SUBMITTED THAT THE AMOUNT RECEIVED BY THE ASSESSEE FROM M/S NATHOO COMMODITIES PVT. LTD. WAS MEANT FOR THE PURCHASE OF SHARES ON BEHALF OF THE SAID PARTY AND THE SAME BEING NOT IN THE NATURE OF LOAN, THE INTEREST PAID THEREON WAS RIGHTLY DISALLOWED BY THE A.O. HE THEREFORE STRONGLY RELIED ON THE ORDER OF THE A.O. IN SUPPORT OF THE R EVENUES CASE ON THIS ISSUE AND CONTENDED THAT THE LD. CIT(A) HAS ALLOWED THE C LAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF INTEREST WITHOUT APPRECIATI NG THE REAL NATURE OF THE RELEVANT TRANSACTIONS. 18. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, STRONGLY SUPPORTED THE IMPUGNED ORDER OF THE LD. CIT(A) ALLOWING THE C LAIM OF THE ASSESSEE FOR INTEREST PAID TO M/S NATHOO COMMODITIES PVT. LTD. H E CONTENDED THAT ALTHOUGH THE RELEVANT TRANSACTIONS WERE RELATING TO THE PURCHASE AND SALE OF SHARES, THE RESULTING FUNDS BELONGING TO M/S NATHOO COMMODITIES PVT. LTD. WERE ALLOWED TO BE USED BY THE ASSESSEE AND SINCE T HE SAID FUNDS WERE UTILIZED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUS INESS, INTEREST PAID THEREON WAS RIGHTLY ALLOWED BY THE LD. CIT(A). 19. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND A LSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS NOTED BY THE LD. CIT(A) IN HIS IMPUGNED ORDER, THE AMOUNT IN QUESTION WAS UNDOUBTE DLY RECEIVED BY THE ASSESSEE FROM M/S NATHOO COMMODITIES PVT. LTD. FOR THE PURCHASE OF SHARES ON THEIR BEHALF AND TILL THE ACTUAL DATE OF PURCHAS E, THE AMOUNT SO RECEIVED WAS ALLOWED TO BE UTILIZED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS. THE FUNDS MADE AVAILABLE TO THE ASSESSEE BY PAYING THE AMOUNT IN QUESTION FOR PURCHASE OF SHARES WELL IN ADVANCE THUS WERE UT ILIZED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS AND THE INTEREST PAID T HEREON REPRESENTING ITA 8315/M/10 & ITA 8275/M/10 11 TEMPORARY LOANS, IN OUR OPINION, WAS ALLOWABLE AS D EDUCTION U/S 36(1)(III) OF THE ACT AS RIGHTLY HELD BY THE LD. CIT(A). WE THER EFORE FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LD. CIT(A) GIVING RELIEF TO T HE ASSESSEE ON THIS ISSUE AND UPHOLDING THE SAME, WE DISMISS GROUND NO. 3 OF THE REVENUES APPEAL. 20. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED WHEREAS APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23*05*2014 . / 0 1 23-05-2014 SD/- SD/- - (SANJAY GARG) (P.M. JAGTAP ) /4 JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; 1 DATED 23*05*2014 [ .4../ RK , SR. PS , -&./ 0/ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 6 () / THE CIT(A)8 MUMBAI. 4. 6 / CIT 4, MUMBAI 5. 9 44; , ; , / DR, ITAT, MUMBAI B BENCH 6. > / GUARD FILE. / BY ORDER, 9 4 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI