Deepak Jagmohan Vakharia , Bangalore V. The Income TAx Officer Ward-1(2)(3), Bangalore

ITA 989/BANG/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7682 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 02-04-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: TSHERING ONGDA JDIT ISCI
• Keywords: Source of fund; Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-C BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO. 989 / BANG/201 8 ASSESSMENT YEAR : 201 3 - 1 4 SHRI DEEPAK JAGMOHAN VAKHARIA, NO. 201, ABRAR MATRUSHRI, 25, AGA ABBAS ALI ROAD, ULSOOR, BANGALORE 560 042. PAN: AAIPV7387H VS. THE INCOME TAX OFFICER, WARD 1 (2)(3), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SMT. SHEETAL BORKAR, ADVOCATE RESPONDENT BY : SHRI TSHERING ONGDA , JDIT (ISCI) DATE OF HEARING : 2 8 .0 6 .2018 DATE OF PRONOUNCEMENT : 13 .0 7 .2018 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE WHICH IS DIREC TED AGAINST THE ORDER OF LD. CIT(A)-3, BANGALORE DATED 07.03.2018FOR ASSESSM ENT YEAR 2013-14. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED COMMISSIONER OF INCOME-TAX (A) ERRED IN PASSING THE ORDER IN THE MANNER IN WHICH HE DID. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) OUGHT TO HAVE REFRAINED FROM INCLUDING THE N ET SALE CONSIDERATION OF THE SALE OF STAMP AS 'INCOME FROM OTHER SOURCES' WITHOUT APPRECIATING THAT THE SALE PROCEEDS WERE CA PITAL RECEIPT NOT LIABLE TO TAX UNDER THE ACT. 3. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE SALE PROCEEDS OF POSTAL STAMPS WHICH WERE COLLECTED BY THE APPELLANT AS A HOBBY OVER A PERIOD OF TIME, WOULD RESULT TO CAPITAL RECEIPT, TH US NOT LIABLE TO TAX UNDER THIS ACT. ITA NO.989/BANG/2018 PAGE 2 OF 5 4. THE LEARNED CIT (A) FAILED TO APPRECIATE THAT TH E COLLECTION OF RARE STAMP COLLECTION FALLS WITHIN THE CHARACTERISTIC OF PERSONAL EFFECT' UNDER SECTION 2(4A) (II) OF THE ACT AND HENCE NOT E XIGIBLE TO TAX FOR CAPITAL GAIN. 5. WITHOUT PREJUDICE, EVEN IF THE SALE PROCEEDS ON STAMPS ARE LIABLE TO BE ASSESSED, THE SAME CAN BE ASSESSED ONLY UNDER TH E HEAD 'CAPITAL GAINS' BY PROVING THEM AS LONG TERM CAPITAL GAINS A FTER DETERMINATION OF CAPITAL GAINS AS PROVIDED U/S.45 AND 48 OF THE A CT. 6. THE LEARNED CIT(A) ERRED IN DISALLOWING THE INTE REST OF RS.4 LAKHS CLAIMED BY THE APPELLANT. 7. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THA T THE SAID INTEREST OF RS.4 LAKHS HAS BEEN SUBJECTED TO TDS, IN FAVOUR OF THE RECIPIENT AND IT HAS ALSO BEEN OFFERED FOR TAXATION BY THE RECIPI ENT AND HENCE DISALLOWANCE AS MADE IS UNJUST AND LIABLE TO BE DEL ETED. 8. WITHOUT PREJUDICE, THE DISALLOWANCES AS MADE AS CONFIRMED BY THE CIT(A) ARE EXCESSIVE, ARBITRARY AND UNREASONABLE AN D LIABLE TO BE DELETED IN TOTO. 9. THE LEARNED CIT(A) ERRED IN CONFIRMING THE LEVY OF INTEREST U/S.234B 86 234D OF THE ACT. 10. THE LEARNED CIT(A) ALSO ERRED IN CONFIRMING THE LEVY OF INTEREST U/S.244A ON THE AMOUNT OF REFUND DIRECTED TO BE GIV EN. 11. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED A T THE TIME OF HEARING OF THE APPEAL THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED. 3. IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT ALTH OUGH THE ASSESSEE HAS RAISED AS MANY AS 11 GROUNDS OF APPEAL BUT ONLY TWO EFFECT IVE ISSUES ARE TO BE DECIDED. SHE SUBMITTED THAT THE FIRST ISSUE TO BE DECIDED IS REGARDING ADDITION MADE BY THE AO OF RS. 5.79 LAKHS ON ACCOUNT OF SALE OF POSTAL STAMPS, WHICH WERE STATED TO BE COLLECTED BY ASSESSEE AS A HOBBY OVER A PERIOD OF TIME AND THEREFORE, SUCH SALE PROCEEDS IS NOT TAXABLE AS PER THE ASSESSEE. BUT THE AO HAS TAXED THE SAME AND CIT(A) HAS CONFIRMED SUCH AD DITION. THEREAFTER, SHE SUBMITTED THAT THE SECOND ISSUE TO BE DECIDED IS RE GARDING DISALLOWANCE OF INTEREST OF RS. 4 LAKHS CLAIMED BY THE ASSESSEE AND THIS ISSUE IS RAISED BY THE ASSESSEE IN GROUND NO. 6 OF THE APPEAL. REGARDING T HE FIRST ISSUE, SHE PLACED RELIANCE ON A TRIBUNAL ORDER RENDERED IN THE CASE O F G.B. PAI VS. ACIT AS ITA NO.989/BANG/2018 PAGE 3 OF 5 REPORTED IN (2007) 18 SOT 540(DELHI). REGARDING TH E SECOND ISSUE, SHE REITERATED THE SUBMISSIONS MADE BEFORE CIT(A). THE LD. DR OF REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT THE BALANCE SHEET OF THE ASSESSEE AS ON 31.03.2013 IS AVAILABLE ON PAGE NO. 11 OF THE PAPER BOOK AND FROM THE SAME, IT IS SEEN THAT THE ASSESSEE IS SHOWING AN AMOUNT OF RS. 1,63,56,648.10 UNDER THE HEADING STAMPS UNDER THE B ROAD HEADING INVESTMENTS. HENCE IT IS SEEN THAT THE ASSESSEE IS ACQUIRING STAMPS AS INVESTMENT AS PER THE BALANCE SHEET OF THE ASSESSEE . IN THE LIGHT OF THESE FACTS, NOW WE EXAMINE THE APPLICABILITY OF TRIBUNAL ORDER CITED BY LD. AR OF ASSESSEE WHICH IS RENDERED IN THE CASE OF G.B. PAI VS. ACIT (SUPRA). PARA NOS. 7 AND 8 OF THIS TRIBUNAL ORDER ARE RELEVANT AN D HENCE, THESE PARAS ARE REPRODUCED HEREINBELOW FOR THE SAKE OF READY REFERE NCE. 7. IN THE PRESENT CASE THE ASSESSEE HAS COLLECTED R ARE POSTAL STAMPS AND COVERS SINCE LAST MORE THAN 50 YEARS AS HIS PER SONAL ASSETS. THE ASSESSEE WAS FOUNDER MEMBER OF THE PHILATELIC CONGR ESS OF INDIA (THE APEX ORGANIZATION OF STAMP COLLECTORS) AND REMAINED ITS SECRETARY GENERAL FROM 1975 TO 1979 AND PRESIDENT FROM 1980 T O 1982. HE WAS ALSO MEMBER OF INTERNATIONAL PHILATELIC JURY FROM 1 980 TO 2001 AND PARTICIPATED IN PHILATELIC EXHIBITIONS, IN AND OUTS IDE INDIA FROM TIME TO TIME. THE ASSESSEE HAD SOLD SOME OF HIS COLLECTI ON OF RARE STAMPS AT THE FAG END OF HIS LIFE AS HIS PERSONAL ASSET IN AN AUCTION HELD IN LONDON, U.K. FOR RS. 7,66,848. THE OBJECT OF COLLEC TION OF RARE POSTAL STAMP AND COVERS IS NOT ONLY THE PRIDE POSSESSION B UT IT ALSO GIVES JOY TO THE POSSESSOR. THUS THE ASSESSEE CAN BE SAID TO HAVE AN INTIMATE CONNECTION WITH THE RARE STAMP AND COVERS. THUS THE ELEMENT OF PERSONAL ATTACHMENT WITH THE OBJECT DID EXIST IN TH E FACTS OF THE CASE. IN RE COLLINS' WILL TRUSTS V. HEWETSON (1971) WLR 3 7, VALUABLE STAMP COLLECTION WAS HELD TO BE PERSONAL EFFECT. IN THE C ASE OF ASSTT. CIT V. MRS. DILNAVAZ S. VARIAVA (MUM.) (SIC), WHEREIN THE ASSESSEE BEING MANAGEMENT CONSULTANT HAD HOBBY OF COLLECTING PAINT INGS. SHE SOLD SOME OF THE PAINTINGS IN 1992-93 AND CLAIMED EXEMPT ION OF ENTIRE SALE PROCEEDS UNDER SECTION 2(14)(II), SAME BEING HER PE RSONAL EFFECTS. HER CLAIM WAS UPHELD BY THE TRIBUNAL CONSIDERING HER CO LLECTION OF PAINTING BEING HER PERSONAL EFFECTS, BECAUSE THE AS SESSEE HAD ESTHETIC TASTE FOR PAINTINGS, IT GAVE HER PLEASURE AND PRIDE OF POSSESSION. 8. THUS, IN THE CIRCUMSTANCES WE HOLD THAT THE COLL ECTION OF RARE POSTAL STAMPS AND COVERS HAS THE CHARACTERISTIC OF 'PERSON AL EFFECTS' BEING A PHYSICAL MOVABLE PROPERTY HAVING INTIMATE RELATION WITH THE POSSESSOR I.E., THE ASSESSEE AND HAS BEEN HELD FOR PERSONAL U SE BY THE COLLECTOR, TO SATISFY HIS HOBBY OF COLLECTION OF RARE STAMPS. HE HAS USED THEM IN VARIOUS PHILATELIC EXHIBITION IN AND OUTSIDE INDIA AS HIS PRIDE ITA NO.989/BANG/2018 PAGE 4 OF 5 POSSESSION WHICH HAVE GIVEN TREMENDOUS JOY AND PLEA SURE. HENCE THE SALE PROCEED OF RARE COLLECTION AMOUNT TO RS. 7,66, 848 ARE NOT EXIGIBLE TO TAX BEING EXEMPT UNDER SECTION 2(14)(II) OF THE ACT. WE, THEREFORE, DIRECT TO DELETE THE IMPUGNED ADDITION. 5. FROM THE ABOVE PARAS REPRODUCED FROM THIS TRIBUN AL ORDER, IT IS SEEN THAT IN THAT CASE, IT WAS SHOWN BY ASSESSEE THAT ASSESSEE WAS HA VING AN INTIMATE CONNECTION WITH THE RARE STAMP AND COVERS. IN THE PRESENT CASE, THE ASSESSEE IS HAVING INVESTMENT OF RS. 163.56 LAKHS IN STAMPS AND THE SAME IS SHOWN AS INVESTMENT IN THE BALANCE SHEET OF THE ASSESSEE AVA ILABLE ON PAGE NO. 11 OF THE PAPER BOOK. HENCE IN OUR CONSIDERED OPINION, T HIS TRIBUNAL ORDER IS NOT APPLICABLE IN THE PRESENT CASE BECAUSE THE FACTS AR E DIFFERENT. NO OTHER ARGUMENT WAS RAISED BY HER IN THIS REGARD. CONSIDER ING THE FACTS OF PRESENT CASE, WE FIND NO REASON TO INTERFERE IN THE ORDER O F CIT(A) ON THIS ISSUE. ACCORDINGLY, THIS ISSUE IS DECIDED AGAINST THE ASSE SSEE. 6. REGARDING THE SECOND ISSUE I.E. ALLOWABILITY OF INTEREST OF RS. 4 LAKHS, IT IS SEEN THAT THIS ISSUE IS DECIDED BY CIT(A) AS PER PARA 5 OF HIS ORDER AND HENCE, THE SAME IS REPRODUCED HEREINBELOW FOR THE SAKE OF READ Y REFERENCE. 5.0 THE GROUNDS OF APPEAL 6 AND 7 RELATE TO THE DIS ALLOWANCE OF EXPENDITURE OF RS.4.00,000/- BY THE AO. IN BRIEF, D URING ASSESSMENT PROCEEDINGS THIS WAS OBSERVED BY THE AO THAT THE AP PELLANT HAD SHOWN PROFESSIONAL INCOME OF RS.7,50,000/- AS AGAIN ST THE SAME HE HAD CLAIMED INTEREST EXPENDITURE OF RS.4.00,000/-. THE PROFESSIONAL INCOME WAS STATED TO BE ON ACCOUNT OF CERTAIN MANAG EMENT FEES RECEIVED BY THE APPELLANT. SINCE THE APPELLANT FAIL ED TO PROVIDE ANY NEXUS BETWEEN THE EXPENDITURE AND THE INCOME. THE A O DISALLOWED THE INTEREST EXPENDITURE OF RS.4,00,000/-. IN HIS WRITT EN SUBMISSIONS THE APPELLANT HAS SUBMITTED THAT INTEREST OF RS.4,00,00 0/- WAS PAID BY HIM ON ACCOUNT OF LOAN TAKEN FROM MANDIRA VAKARIA. THE APPELLANT FURTHER SUBMITTED THAT THE LOAN WAS USED FOR PURCHASING FIX ED DEPOSITS TO EARN THE BANK INTEREST, WHICH WAS ONE OF THE SOURCES OF INCOME FOR HIM. THE APPELLANT SUBMITTED THAT THE FIXED DEPOSITS AND INT EREST WERE DULY DISCLOSED BY HIM IN THE RETURN OF INCOME. HOWEVER T HE APPELLANT HAS ALSO NOT BROUGHT ANYTHING ON RECORD TO SHOW ANY REL ATION BETWEEN THE LOANS AND THE FIXED DEPOSITS. DURING APPELLATE PROC EEDINGS (VIDE ORDER SHEET ENTRY DT 22.02.2018) THE APPELLANT WAS SPECIF ICALLY ASKED TO PRODUCE DOCUMENTS TO SHOW THAT THERE WAS ANY RELATI ON BETWEEN PAYMENT OF INTEREST AND EARNING OF PROFESSIONAL/MAN AGEMENT FEE. IN RESPONSE TO THE SAME, THE APPELLANT SUBMITTED THAT HE IS NOT IN A POSITION TO PROVIDE ANY SUCH DETAILS TO SUBSTANTIAT E HIS CLAIM OF LOAN BEING RELATED TO EARNING OF PROFESSIONAL/MANAGEMENT FEE. CONSIDERING ABOVE THE ACTION OF THE AO IS UPHELD AND GROUNDS OF APPEAL 6 AND 7 OF ITA NO.989/BANG/2018 PAGE 5 OF 5 THE APPELLANT ARE DISMISSED. 7. FROM THE ABOVE PARA, IT IS SEEN THAT THE BUSINES S INCOME OF THE ASSESSEE IS OF RS. 7.50 LAKHS AS PROFESSIONAL INCOME AND THIS IS T HE SUBMISSION OF THE ASSESSEE THAT INTEREST IS PAID ON THE LOAN BORROWED WHICH WAS USED BY THE ASSESSEE FOR PURCHASING FIXED DEPOSITS TO EARN BANK INTEREST. BUT THIS FINDING IS ALSO GIVEN BY CIT(A) THAT THE ASSESSEE HAS NOT BROU GHT ANYTHING ON RECORD TO SHOW ANY RELATION BETWEEN THE LOANS AND FIXED DEPOS ITS. THE CIT(A) HAS FURTHER NOTED IN THE SAME PARA REPRODUCED ABOVE THA T DURING APPELLATE PROCEEDINGS VIDE ORDER SHEET ENTRY DATED 22.02.2018 , THE ASSESSEE WAS SPECIFICALLY ASKED TO PRODUCE DOCUMENTS TO SHOW THA T THERE WAS ANY RELATION BETWEEN PAYMENT OF INTEREST AND EARNING OF PROFESSI ONAL/MANAGEMENT FEE AND IN REPLY, IT WAS SUBMITTED BY ASSESSEE BEFORE CIT(A ) THAT ASSESSEE IS NOT IN A POSITION TO PROVIDE ANY SUCH DETAILS. SINCE THE IN TEREST EXPENDITURE IS NOT CONNECTED WITH EARNING OF PROFESSIONAL OR MANAGEMEN T FEES OR EARNING OF INTEREST INCOME, WE FIND NO REASON TO INTERFERE IN THE ORDER OF CIT(A) ON THE SECOND ISSUE ALSO. HENCE THE SECOND ISSUE IS ALSO DECIDED AGAINST THE ASSESSEE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (SUNIL KUMAR YADAV) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 13 TH JULY, 2018. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.