ITO, Ward-36(2), Kolkata, Kolkata V. M/S. Sri Ram Commercial Co., Kolkata

MA 150/KOL/2017

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 6474 (ITAT-KOLKATA)
• Duration Of Justice: 7 month(s) 5 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 04-04-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 29-08-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA CIT LD
• Assessee Lawyers: KALYAN ACHARYYA BHA DURI LD
• Keywords: Business income
• Section: 14A

Judgement Text

INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA BEFORE SHRI M. BALAGANESH, AM & SHRI S.S.VISW ANETHRA RAVI, JM M.A. NO.150/KOL /2017 [IN I.T A NO. 2200/KOL/2014 A.Y : 2011-12] INCOME TAX OFFICER VS. M/S. SRI RAM C OMMERCIAL CO. WARD 36(2), KOLKATA PAN: AAMFS 4086Q [ APPLICANT ] [ RESPONDENT ] APPLICANT BY : SHRI S. DASGUPTA, ADDL. C IT , LD.SR.DR RESPONDENT BY : SHRI KALYAN ACHARYYA BHA DURI, ADVOCATE, LD.AR DATE OF HEARING : 09-03-2018 DATE OF PRONOUNCEMENT : 04 -04-2018 ORDER SHRI S.S.VISWANETHRA RAVI, JM BY THIS MISCELLANEOUS APPLICATION BY THE APPLICANT REVENUE U/S. 254(2) OF THE ACT, INTENDS TO RECTIFY THE MISTAKE A PPARENT ON RECORD ALLEGED TO HAVE BEEN OCCURRED IN ADJUDICATING GROUN D NO. 4 BY TREATING AND HOLDING THE INCOME FROM SALE OF SHARES IS CAPI TAL GAIN INSTEAD OF AS BUSINESS INCOME AND ALSO ERRED IN ALLOWING THE CLAI M OF INTEREST U/S. 40(B) OF THE ACT (RS.6,71,719/-) PAID TO PARTNERS O N CURRENT/ CAPITAL ACCOUNT. 2. THE LD.DR SUBMITS THAT THIS TRIBUNAL IN ITS ORDE R DT. 13-04-2017 HAS ERRED IN TREATING AND HOLDING THE INCOME FROM SHARE S AS CAPITAL GAIN. HE FURTHER ARGUED THAT THE TRIBUNAL WAS WRONG IN ADJUD ICATING GROUND NO. 4 CHALLENGING THE CLAIM OF INTEREST PAID TO PARTNERS AS REDUNDANT. HENCE, HE ARGUED THAT THERE WAS A MISTAKE APPARENT IN THE SAI D ORDER PROPERLY IN NOT ADJUDICATING THE GROUND NO.4 RAISED BY THE REVENUE IN THE APPEAL AND IN VIEW OF THIS, THE REVENUE PREFERRED AN MISC. APPLIC ATION TO RECTIFY THE MISTAKE APPARENT ON RECORD. IN SUPPORT OF THE CONTE NTION, HE RELIED ON SUBMISSIONS GIVEN AT PAGE 4, WHICH EXTRACTED AS UND ER:- M.A NO 150/KOL/2017 2 GROUND NO. 3 RELATING TO ACCEPTING THE FRESH COMPU TATIONS VIOLATING RULE 46A. THE LD. DR WAS NOT ABLE TO POINT OUT FILING OF ANY FRESH EV IDENCES FILED BY ASSESSEE BEFORE THE CIT(A). HENCE, GROUND NO. 3 IS DISMISSED. GROUND NO. 4 IS RELATING TO QUESTIONING THE ALLOWAN CE OF CLAIM OF PARTNERS OF RS.6,71,719/- U/S. 40(B) OF THE ACT. THE LD. ITAT STATED THAT THE AO HAD ALLOWED DEDUCTION TOWARDS INTEREST ON PARTNERS CURRENT /CAP ITAL ACCOUNT TO THE TUNE OF RS.6,71,719/- IN THE ASSESSMENT AND THE LD.ITAT DI D NOT FIND ANY MERIT IN THE GROUND NO. 4 RAISED BY THE REVENUE AS IT BECOMES REDUNDANT AND HENCE GROUND O NO. 4 IS DISMISSED. 3. IN VIEW OF ABOVE, THE LD.DR SUBMITTED THAT THE T RIBUNAL IN ITS SAID ORDER WRONGLY HELD AND TREATING THE INCOME FROM SA LE OF SHARES IS CAPITAL GAIN INCOME INSTEAD OF BUSINESS INCOME AND ALSO ERR ED IN ALLOWING THE CLAIM OF PARTNERS INTEREST. 4. THE LD. AR RELIED ON THE ORDER OF THE TRIBUNAL . 5. HEARD RIVAL SUBMISSIONS AND PERUSED THE RECORD. THE FIRST POINT IN THE MISC. APPLICATION OF THE REVENUE IS WITH REGARD TO TREATMENT OF PROFIT ON SALE OF SHARES IS CAPITAL GAIN INSTEAD OF BUSINE SS INCOME. IN THIS REGARD, WE FIND THAT THE LD. CIT-A HAD CATEGORICALLY GIVEN A FINDING THAT THE ASSESSEE HAD HELD THE SHARES FOR MORE THAN 3 TO 5 YEARS AND HAVE MADE SALES ONLY IN THE MONTHS OF JUNE AND JULY 2010 FOR THE WHOLE YEAR. ACCORDINGLY, HE HAD HELD THAT THE ASSESSEE IS ONLY AN INVESTOR WITH THE PURPOSE OF EARNING INCOME IN THE FORM OF DIVIDEND A ND HELD THE SHARES WERE ONLY FOR CAPITAL APPRECIATION. THIS POINT WAS RIGHTLY APPRECIATED BY THIS TRIBUNAL. THIS TRIBUNAL HAS ALSO PLACED ITS RE LIANCE ON THE ORDER OF THE CO-ORDINATE BENCH OF KOLKATA TRIBUNAL IN ITA NOS. 1 148 & 1437/KOL/09 DT. 20-01-2016, WHICH IN TURN, PLACED RELIANCE ON THE D ECISION OF THE HONBLE HIGH COURT OF CALCUTTA IN THE CASE OF CIT VS. H.K. FINANCIER PVT. LTD REPORTED IN 61 TAXMANN. COM 175. WE FIND THAT THE REVENUE HAD NOT ADDUCED ANY REASON BEFORE US BY POINTING OUT ERROR, IF ANY, IN OUR ORDER WITH REGARD TO THIS ISSUE. HENCE, WE HELD THAT THE MISC. APPLICATION PREFERRED BY THE REVENUE ON THIS ISSUE WOULD ONLY T ANTAMOUNT TO REVIEW OF OUR ORDER AND NOT RECTIFICATION OF THE SAME. REV IEW OF AN ORDER IS NOT PERMISSIBLE U/S. 254(2) OF THE ACT. HENCE, THE MISC . APPLICATION OF THE REVENUE ON THIS ISSUE IS DISMISSED. M.A NO 150/KOL/2017 3 6. WITH REGARD TO COMPUTATION OF DISALLOWANCE U/S. 14A OF THE ACT UNDER RULE 8D(2)(II), THE LD. CIT-A HAD CONSIDERED THE INTEREST FIGURE OF RS.20,69,645/- AFTER REDUCING THE INTEREST PAID TO PARTNERS IN THE SUM OF RS. 6,71,719/-. WE FIND FOR OUR ORDER DT. 13-04-20 17, THE PROFIT ON SALE OF INVESTMENTS HAS BEEN HELD TO BE INCOME FROM CAPITAL GAINS AND NOT INCOME FROM BUSINESS. HENCE, THERE IS NO OCCASION F OR THE ASSESSEE TO CLAIM DEDUCTION TOWARDS INTEREST PAID TO PARTNERS U /S. 40(B) UNDER THE HEAD BUSINESS. WE HAD UPHELD THE ORDER OF THE LD. CIT-A ON THE ISSUE OF DISALLOWANCE U/S. 14A, WITHOUT NOTICING THIS ASPECT . THIS ERROR HAS BEEN RIGHTLY BROUGHT TO OUR NOTICE BY THE REVENUE VIDE P AGE-4 OF ITS MISC. APPLICATION. ACCORDINGLY, WE DEEM IT FIT AND PROPER TO RECTIFY OUR ORDER TO THIS LIMITED EXTENT IN GROUND NO. 2 ORIGINALLY RAIS ED BY THE REVENUE (I.E DISALLOWANCE U/S. 14A) AND DIRECT THE AO TO RE-COMP UTE THE TOTAL DISALLOWANCE U/S. 14A OF THE ACT R.W.R 8D OF THE IT RULES BY CONSIDERING THE TOTAL INTEREST PAYMENT OF RS.27,41,364/- AND BY APPLYING THE SAME ON DIVIDEND BEARING INVESTMENT ONLY. FOR THE SAKE OF C LARITY, WE REITERATE THAT ONLY DIVIDEND BEARING INVESTMENT SHOULD BE CONSIDE RED IN WORKING OUT THE DISALLOWANCE UNDER RULE 8D(2)(II) & 8D(2)(III). ACC ORDINGLY, GROUND NO. 2 OF OUR ORDER DT. 13-04-2017 IN THIS REGARD STANDS M ODIFIED. TO THIS EXTENT, THE MISC. APPLICATION PREFERRED BY THE REVENUE IS A LLOWED. 7. IN THE RESULT, THE MISC. APPLICATION FILED BY T HE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04-04-2018 SD/- SD/- M. BALAGANESH S.S.VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 04-04-2018 M.A NO 150/KOL/2017 4 COPY OF THE ORDER FORWARDED TO: 1 . APPLICANT/REVENUE : INCOME TAX OFFICER, WARD 36(2), AAYKAR BHAWAN POORVA, 8 TH FLOOR, 110 SHANTIPALLY, E.M. BYEPASS, KOLKATA-107. 2 RESPONDENT/ASSESSEE: M/S. SRI RAM COMMERCIAL CO. 21 STRAND ROAD, KOLKATA-1. 3 . CIT, 4 . CIT(A), 5 . DR, KOLKATA BENCHES, KOLKATA **PP/SPS TRUE COPY BY ORDER, SR.PS, H.O.O ITAT,KOL