ACIT, Panchkula v. M/s Haryana Financial Corporation, Chandigarh

ITA 1078/CHANDI/2010 | 2007-2008
Pronouncement Date: 31-03-2011 | Result: Dismissed

Appeal Details

RSA Number 107821514 RSA 2010
Assessee PAN AAAHC4685B
Bench Chandigarh
Appeal Number ITA 1078/CHANDI/2010
Duration Of Justice 7 month(s) 15 day(s)
Appellant ACIT, Panchkula
Respondent M/s Haryana Financial Corporation, Chandigarh
Appeal Type Income Tax Appeal
Pronouncement Date 31-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 31-03-2011
Date Of Final Hearing 30-03-2011
Next Hearing Date 30-03-2011
Assessment Year 2007-2008
Appeal Filed On 16-08-2010
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI D.K.SRIVASTAVA ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA JUDICIAL MEMBER ITA NO. 1078/CHD/2010 ASSESSMENT YEAR: 2007-08 THE ACIT VS. M/S HARYANA FINANCIAL CORPORATION CIRCLE CHANDIGARH PANCHKULA PAN NO. AAAHC4685B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.S.KHEMWAL RESPONDENT BY: SHRI B.K.NOHRIA ORDER PER SUSHMA CHOWLA JM THE APPEAL BY THE REVENUE IS AGAINST THE ORDER OF C IT(A) PANCHKULA DATED 1.6.2010 RELATING TO ASSESSMENT YEA R 2007-08 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE I.T. ACT 1961. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL :- (I) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 10 72 305/- DESPITE THE FACT THAT THE ASSESSING OFF ICER IN THE ASSESSMENT ORDER HAD CLEARLY HELD THAT THIS INC OME HAS BEEN EARNED ON THE SALE OF SHARES WHICH IS IN T HE NATURE OF BUSINESS INCOME AND THEREFORE THE ASSESSE E IS NOT ENTITLED TO EXEMPTION U/S 10(38)(B) OF THE INCO ME TAX ACT. 2 (II) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 1 91 30 478/- MADE BY THE ASSESSING OFFICER BY TREA TING THE DEPOSITS RECEIVED BY THE ASSESSEE AGAINST SETTL EMENT PENDING AS INCOME OF THE ASSESSEE DESPITE THE FACT THAT THE ASSESSEE IS MAINTAINING ITS ACCOUNTS ON CASH BA SIS. (III) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 37 080/- WHEN THE INVESTMENT FOR EARNING THE DIVIDE ND INCOME IS INCIDENTAL TO BUSINESS OF THE ASSESSEE. 3. SHRI S.S. KHEMWAL APPEARED FOR THE REVENUE AND S HRI B.K. NOHRIA APPEARED FOR THE ASSESSEE AND PUT FORTH THEIR CONTE NTIONS. 4. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE I SSUES RAISED IN THE PRESENT APPEAL IS IDENTICAL TO THE ISSUES RAISE D BEFORE THE TRIBUNAL IN ITA NO. 179/CHD/2010 IN THE ASSESSEES OWN CASE RELATING TO ASSESSMENT YEAR 2006-07. THE LD. DR FO R THE REVENUE SUPPORTED THE ASSESSMENT ORDER. 5. WE FIND THAT THE ISSUE RAISED VIDE GROUND NO. (I ) IS IDENTICAL TO THE ISSUE RAISED IN GROUND NO.1 IN THE CASE OF A SSESSEE ITSELF IN ITA NO. 179/CHD/2010 AND THE TRIBUNAL VIDE ORDER DA TED 15.10.2011 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE VID E PARA 7 WHICH IS AS UNDER:- 7. ON THIS ASPECT WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES. IT IS EVIDENT THAT THE ASSESSING OFFICER PROCEEDED ON A WRONG PRESUMPTION IN HOLDING THAT THE PROFIT ON SALE OF SHARES IN QUESTI ON WAS NOT EXEMPT U/S 10(38)(B) OF THE ACT. THE CIT(APPEA LS) HAS REFERRED TO THE DETAILS OF SHARES WHICH HAVE BE EN 3 SOLD BY THE ASSESSEE TO GENERATE THE IMPUGNED PROFI T. AS PER THE CIT(APPEALS) THE PROFIT HAS BEEN EARNED BY THE ASSESSEE ON SALE OF SHARES WHICH HAVE BEEN HELD AS INVESTMENT AND THE ASSESSING OFFICER IS WRONG IN PRESUMING THAT THE PROFIT HAS BEEN EARNED ON SALE O F SHARES ACQUIRED BY THE ASSESSEE BY WAY OF EQUITY PARTICIPATION IN TERMS OF COLLABORATION AGREEMENTS. THIS FACTUAL FINDING HAS NOT BEEN CONTROVERTED BY T HE REVENUE IN ANY MANNER RATHER THE DETAIL OF SHARES SOLD CLEARLY SUPPORT THE INFERENCE OF THE CIT(APPEALS). THE CIT(APPEALS) HAS SPECIFICALLY NOTICED THAT THE AFOR ESAID CONTENTION OF THE ASSESSEE HAS ALSO NOT BEEN CONTROVERTED BY THE ASSESSING OFFICER IN HIS REMAND REPORT SUBMITTED TO THE CIT(APPEALS). UNDER THESE CIRCUMSTANCES IN OUR VIEW THE CIT(APPEALS) MADE N O MISTAKE IN ALLOWING RELIEF TO THE ASSESSEE IN TERMS OF SECTION 10(38)(B) OF THE ACT. SECTION 10(38)(B) PR OVIDES EXEMPTION TO AN INCOME ARISING FROM THE TRANSFER OF AN LONG TERM CAPITAL ASSET BEING EQUITY SHARE IN A COMPANY WHERE SUCH TRANSACTION IS CHARGEABLE TO SECURITIES TRANSACTION TAX. IN THIS CASE ASSESSEE CONTENDED BEFORE THE CIT(APPEALS) THAT IT HAD SOLD SHARES THROUGH M/S KODAK SECURITIES LTD. ON THE REG ULAR STOCK EXCHANGES AND SECURITIES TRANSACTION TAX HAS BEEN PAID. UNDER THIS FACTUAL SCENARIO WE FIND TH E CIT(APPEALS) MADE NO MISTAKE IN ALLOWING EXEMPTION TO THE ASSESSEE U/S 10(38)(B) OF THE ACT ON THE INCOME OF RS.1 76 61 492/-ON ACCOUNT OF SALE OF EQUITY SHARES . THUS ON GROUND NO.1 REVENUE FAILS. 6. THE FACTUAL ASPECTS FOR THE YEAR BEING IDENTICAL AND IN VIEW OF THE AFORESAID ORDER OF THE TRIBUNAL WE DISMISS THE PRESENT GROUND OF APPEAL NO. (I) RAISED BY THE REVENUE. 7. WE FIND THAT THE ISSUE IN GROUND NO.(II) RAISED BY THE ASSESSEE IN THE PRESENT APPEAL IS IDENTICAL TO THE GROUND NO .3 IN ITA NO. 179/CHD/2010. THE TRIBUNAL VIDE PARA 16 OF ITS ORD ER DATED 15.10.2010 HAD DISMISSED THE GROUND OF APPEAL RAISE D BY THE REVENUE BY OBSERVING AS UNDER:- 16. WE HAVE CAREFULLY EXAMINED THE RIVAL CONTENTIO NS. IN THIS REGARD WE FIND THAT THE CIT(APPEALS) HAS APPRECIATED THE SYSTEM OF ACCOUNTING BEING REGULARL Y FOLLOWED BY THE ASSESSEE REGARDING THE AMOUNT RECEI VED 4 FROM THE DEFAULTING BORROWERS FOR BIFURCATION INTO PRINCIPAL AND INTEREST THEREON. THE CIT(APPEALS) H AS OBSERVED THAT UNLESS THE ACCOUNTS ARE FINALLY SETTL ED WITH THE DEFAULTING BORROWERS IT IS DIFFICULT TO APPORT ION THE INTERIM RECEIPTS BETWEEN PRINCIPAL AND INTEREST. CIT(APPEALS) HAS ALSO RECORDED A FINDING THAT SUCH ACCOUNTING SYSTEM HAS BEEN REGULARLY FOLLOWED BY TH E ASSESSEE. IN OUR CONSIDERED OPINION HAVING REGARD TO THE SUBMISSIONS PUT-FORTH BEFORE US THERE IS NO MATERI AL TO NEGATE THE AFORESAID FACTUAL FINDINGS RECORDED BY T HE CIT(APPEALS). MOREOVER THE CIT(APPEALS) HAS OBSER VED THAT NO REASON HAS BEEN ADDUCED BY THE ASSESSING OF FICER TO DISTURB ACCOUNTING SYSTEM REGULARLY BEING FOLLOW ED BY THE ASSESSEE. IN THIS CONNECTION WE HAVE PERUSED T HE CRYPTIC DISCUSSION MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER WHICH READS AS UNDER: THE ABOVE ACCOUNTING POLICY OF THE ASSESSEE CANNOT BE ACCEPTED. IT CANNOT OVER RIDE THE PROVISION OF INCOME TAX ACT AND MORE SPECIFICALLY OF SECTION 145. THE ASSESSEE IS MAINTAINING ITS ACCOUNTS ON CASH BASIS. SUCH DEPOSITS RECEIVED AGAINST SETTLEMENT HAVE BEEN SHOW AT RS. 2 06 23 367/- DURING THE YEAR. IN THE ABSENCE OF ANY DETAILS GIVE N THE ENTIRE AMOUNT IS TAKEN AS HAVING BEEN RECEIVED TOWARDS INTEREST AND IS BROUGHT TO TAX. AN ADDITION OF RS. 2 06 23 367/- IS THEREFORE MADE TO THE INCOM E OF THE ASSESSEE. EVIDENTLY THE ASSESSING OFFICER HAS MADE GENERALIZ ED OBSERVATIONS WITHOUT POINTING OUT ANY REASONS TO IN TERFERE WITH THE REGULAR ACCOUNTING SYSTEM FOLLOWED BY THE ASSESSEE. THERE IS NO MATERIAL TO ESTABLISH AS TO IN WHAT MANNER THE SYSTEM OF ACCOUNTING FOLLOWED BY THE ASS ESSEE WITH RESPECT TO THE IMPUGNED AMOUNTS DOES NOT LEAD TO PROPER DEDUCTION OF INCOME. THE CIT(APPEALS) IN OU R VIEW IS CORRECT IN OBSERVING THAT TILL THE FINAL S ETTLEMENT OF ACCOUNTS WITH THE DEFAULTING BORROWERS IT IS NO T POSSIBLE FOR THE APPELLANT TO BIFURCATE INTERIM PAY MENTS MADE BY THE DEFAULTING BORROWERS BETWEEN PRINCIPAL AND INTEREST TILL SUCH TIME THE SETTLEMENT IS FINALLY R EACHED. CONSIDERING THE TOTALITY OF CIRCUMSTANCES WE HEREB Y AFFIRM THE ORDER OF THE CIT(APPEALS) AND FIND NO JUSTIFICATION FOR THE ADDITION MADE BY THE ASSESSIN G OFFICER. ACCORDINGLY GROUND OF APPEAL RAISED BY T HE REVENUE IS DISMISSED . 8. THE FACTUAL ASPECTS FOR THE YEAR BEING IDENTICAL AND IN VIEW OF THE AFORESAID ORDER OF THE TRIBUNAL WE DISMISS THE PRESENT GROUND OF APPEAL NO. (II) RAISED BY THE REVENUE. 5 9. THE ISSUE RAISED IN GROUND NO. (III) IN THIS APP EAL IS IDENTICAL TO THE ISSUE RAISED IN GROUND NO.4 AND THE TRIBUNAL VIDE I TS ORDER DATED 15.10.2010 IN PARAS 17 TO 19 OF ITS ORDER HAS AFFIR MED THE ORDER OF CIT(A) AND DISMISSED THE GROUND RAISED BY THE REVENUE BY OBSERVING AS UNDER:- 17. IN THE LAST GROUND THE DISPUTE RELATES TO THE DIVIDEND INCOME OFRS.1 66 040/- EARNED BY THE ASSES SEE. THE ASSESSEE CLAIMED DIVIDEND INCOME RECEIVED ON SHARES AS EXEMPT IN TERMS OF SECTION 10(34) OF THE ACT. THE ASSESSING OFFICER DISALLOWED THE CLAIM ON THE GROUND THAT THE ASSESSEE WAS ENGAGED IN FINANCING INDUSTRIAL UNITS AND THEREFORE DIVIDEND EARNED ON SHARES WAS RELATED TO ITS BUSINESS ACTIVITY AND HEN CE THE SAME IS TO BE TREATED AS INCOME FROM BUSINESS. THE EXEMPTION WAS THUS DENIED. 18. IN APPEAL BEFORE CIT(APPEALS) ASSESSEE CONTEND ED THAT THE ASSESSING OFFICER ERRED IN DENYING THE EXEMPTION ON FACTS AND IN LAW. AS PER THE ASSESSEE THE SHARES WERE HELD AS INVESTMENT AND THE SAME WERE NO T ACQUIRED IN THE COURSE OF FINANCING INDUSTRIAL UNIT S. AS PER ASSESSEE THERE WAS NO MATERIAL TO ESTABLISH TH AT THE DIVIDEND INCOME WAS EARNED ON THE SHARES OF THE INDUSTRIAL UNITS FINANCED BY THE ASSESSEE CORPORATI ON. THE CIT(APPEALS) HAS NOTED THAT THE AFORESAID PLEA OF THE ASSESSEE WAS NOT CONTROVERTED BY THE ASSESSING OFFICER DURING REMAND PROCEEDINGS AND THEREFORE HE HELD THAT DIVIDEND INCOME HAS BEEN EARNED ON THE SH ARES WHICH HAVE BEEN PURCHASED BY THE ASSESSEE AS PART O F ITS INVESTMENTS. ACCORDINGLY HE HAS UPHELD THE PLEA O F THE ASSESSEE FOR EXEMPTION U/S 10(34) OF THE ACT. HOWE VER BY APPLYING THE PROVISIONS OF SECTION 14A OF THE AC T HE HAS DISALLOWED A SUM OF RS.16 604/-. ACCORDINGLY INSTEAD OF AN ADDITION OF RS.1 66 040/- MADE BY THE ASSESSING OFFICER THE CIT(A) RETAINED THE ADDITION AT RS.16 604/-. 19. AGAINST THE AFORESAID DECISION OF THE CIT(APPEALS) LEARNED DR HAS NOT POINTED OUT ANY COGENT INFIRMITY TO SUPPORT THE STAND OF THE ASSES SING OFFICER. THE CIT(APPEALS) HAS CLEARLY OBSERVED THA T THE DIVIDEND HAS BEEN RECEIVED ON SHARES ACQUIRED AS INVESTMENT AND NOT AS PART OF FINANCING OF THE INDU STRIAL UNITS. THEREFORE THE NATURE OF THE DIVIDEND INCOM E TREATED BY THE ASSESSING OFFICER AS BUSINESS INCOME IS NOT SUSTAINABLE HAVING REGARD TO THE FACTUAL FINDI NGS OF THE CIT(APPEALS) WHICH REMAIN UNCONTROVERTED BEFOR E US. ACCORDINGLY THE ORDER OF THE CIT(APPEALS) IS HEREBY AFFIRMED AND REVENUE FAILS ON THIS GROUND. 6 10. FOLLOWING THE EARLIER DECISION OF THE TRIBUNAL VIDE ITS ORDER DATED 15.10.2010 ON THE ISSUE AS THE FACTS ARE IDENTICAL AND UPHOLDING THE ORDER OF CIT(A) WE DISMISS THE GROUND OF APPEAL NO. (III ) RAISED BY THE REVENUE ON THIS ISSUE ALSO. 11. IN THE RESULT APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF MARCH 2011. SD/- SD/- (D.K.SRIVASTAVA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 31 ST MARCH 2011 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR 7