ACIT, Circle - 5, Kolkata v. M/s. South Asia Electricity Holding Ltd., Kolkata

IN THE INCOME TAX APPELLATE TRIBUNAL BEN CH A KOLKATA () BEFORE . .. . . .. . SHRI D.K.TYAGI JUDICIAL MEMBER. !' !' !' !' /AND . .. . . .. .! !! ! # SHRI C.D.RAO ACCOUNTANT MEMBER '$ '$ '$ '$ / ITA NO.1433/KOL/2009 %&' !()/ ASSESSMENT YEAR : 2003-04 (+ / APPELLANT ) A.C.I.T. CIRCLE-5 KOLKATA - !& - - VERSUS - . (.+ / RESPONDENT ) M/S.SOUTH ASIA ELECTRICITY HOLDING LTD. KOLKATA (PAN:AAECS 5060 M) + / 0 / FOR THE APPELLANT: SHRI A.RAJHANS .+ / 0 / FOR THE RESPONDENT: SHRI D.S.DAMLE 1 / ORDER ( (( ( . .. . . .. .! !! !) )) ) # PER SHRI C.D.RAO AM THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER DATED 27.03.2009 OF THE CIT(A)-V KOLKATA PERTAINING TO ASSESSMENT YEAR 200 3-04. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN ALLOWING WRITE-OFF OF NO N PERFORMING ASSETS AMOUNTING TO RS.1 73 625/- HOLDING THAT THE ASSESSE E WAS A NON BANKING FINANCE CO. WHEREAS MAIN BUSINESS OF THE ASSESSEE W AS TRADING IN SHARE AND IT HAS INCURRED A LOSS OF RS.48 10 233/- WHICH IS HIGH ER IN COMPARISON TO THE INTEREST INCOME OF RS.80 759/-. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN NOT CONSIDERING THE LOSS OF RS.48 10 233/- INCURRED BY THE ASSESSEE IN SHARE TRADING AS SPECULATION LOSS WHEREAS PROVISION OF EXPLANATION BELOW SEC.73 AND ALSO THE RATIO OF THE DECISION HONBLE KOLKATA 2 HIGH COURT PRONOUNCED IN THE CASE OF EASTERN AVIAT ION & INDUSTRIES LTD ARE SQUARELY APPLICABLE TO THE CASE OF THE ASSESEE. 3. THAT THE APPELLANT CRAVES FOR LEAVE TO ADD DELE TE OR MODIFY ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 3. AT THE TIME OF HEARING BEFORE US BOTH THE PART IES FAIRLY CONCEDED THAT GROUND NO.1 IS SQUARELY COVERED BY THE HONBLE APEX COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. VS JCIT 320 ITR 577 AGAINST THE A SSESSEE WHEREIN IT WAS HELD THAT PROVISION FOR NON-PERFORMING ASSETS IN TERMS OF RBI DIRECTIONS SINCE THE PROVISION FOR DOUBTFUL DEBT IS KEPT OUT OF THE AMBIT OF THE B AD DEBTS BY EXPLANATION TO SECTION 36 (1)(VII) SAID EXPLANATION HAS TO BE TAKEN INTO ACCO UNT IN THE COMPUTATION OF TOTAL INCOME UNDER THE INCOME TAX ACT SECTION 37 APPLIE S ONLY TO ITEMS WHICH DO NOT FALL IN SECTIONS 30 TO 36 SINCE PROVISION FOR DOUBTFUL DEBT IS EXPRESSLY EXCLUDED FROM SECTION 36(1)(VII) IT CANNOT BE CLAIMED AS DEDUCTI ON U/S 37 EVEN ON THE BASIS OF REAL INCOME THEORY. KEEPING IN VIEW OF THE ABOVE WE SET ASIDE THE ORDERS OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE OF THE LD. AO. 4. IN THE RESULT GROUND NO.1 TAKEN BY THE REVENUE I S ALLOWED. 5. AS REGARDING GROUND NO.2 THE BRIEF FACTS ARE TH AT WHILE DOING THE SCRUTINY ASSESSMENT THE AO AFTER ANALYZING THE INCOME OF TH E ASSESSEE BY APPLYING THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF EASTERN AVIATION & INDUSTRIES LTD. VS CIT REPORTED IN 208 ITR 1023 IS OF THE VIEW THAT IN THE PRESENT CIRCUMSTANCES OF THE CASE THE EXPLANATION SECTION.73 THE LOSS ON ACCOUNT OF P URCHASE AND SALE OF SHARES OF RS.48 10 233/- IS TREATED AS SPECULATION LOSS. 5.1. ON APPEAL THE LD. CIT(A) AFTER ANALYZING THE F UNDS DEPLOYED IN INVESTMENTS STOCK OF SHARES AND LOANS GIVEN HAS COME TO THE CON CLUSION THAT THE ASSESSEE COMPANY IS ENTITLED TO THE BENEFIT OF THE EXPLANATION TO SE CTION 73 OF THE INCOME TAX ACT 1961 AND THEREFORE THE LOSS IS TREATED AS BUSINESS LOSS AND NOT SPECULATION LOSS. 5.2. AGGRIEVED BY THIS THE REVENUE IS IN APPEAL BEF ORE US. 3 6. AT THE TIME OF HEARING THE LD. DR APPEARING ON B EHALF OF THE REVENUE HAS RELIED ON THE OBSERVATIONS OF THE LD. AO. 7. ON THE OTHER HAND THE LD. AR APPEARING ON BEHAL F OF THE ASSESSEE HAS SUBMITTED THAT IN THE SIMILAR SET OF FACTS AND CIRCUMSTANCES IN THE CASE OF M/S. ADAPT INVESTMENT LTD. IN ITA NOS.1420 AND 1421/KOL/2009 DATED 11.01. 2010 THIS TRIBUNAL HAS TAKEN SIMILAR VIEW. THEREFORE HE REQUESTED TO UPHOLD THE ORDERS OF THE LD. CIT(A) WHICH IS IN CONFORMITY WITH THE TRIBUNALS DIRECTIONS. 8. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREF UL PERUSAL OF THE MATERIAL AVAILABLE ON RECORD IT IS OBSERVED THAT THE TRIBUNA L IN ITA NOS.1420 & 1421/KOL/2009 HAS HELD AS UNDER :- 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND THE CASE LAW CITED BY THE LD. COUNSEL. W E FIND THAT THE ORDER OF THE LD. CIT(A) IN ALLOWING RELIEF TO THE ASSESSEE IS IN CONFORMITY WITH THE ORDER OF THE SPECIAL BENCH ITAT REPORTED IN 93 ITD 177 (CIT ED SUPRA). IN THE SAID CASE THE HONBLE SPECIAL BENCH HAS HELD AS UNDER : SECTION 73 OF THE INCOME-TAX ACT 1961 LOSSES IN SPECULATION BUSINESS ASSESSMENT YEAR 1997-98 WHETHER IN VIE W OF PROVISIONS OF EXPLANATION TO SECTION 73 LOSS IN PURCHASE AND SAL E OF SHARES SHALL NOT BE TREATED AS SPECULATION LOSS IN CASE OF A COMPANY P RINCIPAL BUSINESS OF WHICH IS OF GRANTING OF LOANS AND ADVANCES HELD YES WHE THER MEMORANDUM OF ASSOCIATION OF COMPANY ITS PAST HISTORY CURRENT D EPLOYMENT OF ITS CAPITAL BREAK-UP OF INCOME EARNED DURING YEAR WOULD ALL HEL P IN DETERMINING PRINCIPAL BUSINESS OF COMPANY HELD YES WHETHER MERELY BE CAUSE INCOME/LOSS IN DEALING IN SHARES IN ONE PARTICULAR YEAR IS MORE TH AN INCOME/LOSS FROM PRINCIPAL BUSINESS OF ASSESSEE OF GRANTING LOANS AN D ADVANCES IT CANNOT BE SAID THAT PRINCIPAL BUSINESS OF ASSESSEE IS NOT THA T OF GRANTING LOANS AND ADVANCES HELD YES. IN VIEW OF THE ABOVE WE FIND INFIRMITY IN HIS ORDE R AND THE SAME IS HEREBY UPHELD. THEREFORE THE APPEALS OF THE REVENUE ARE D ISMISSED. 8.1. KEEPING IN VIEW OF THE ABOVE DECISION SINCE TH E LD. CIT(A)S ORDER IS IN CONFORMITY WITH THE TRIBUNALS ORDER WE FIND NO INF IRMITY IN THE ORDERS OF THE LD. CIT(A) TO BE INTERFERED WITH. 4 9. IN THE RESULT THE APPEAL OF THE REVENUE IS ALLOW ED IN PART. 2 1 3 4& 25 6 2 1 3 4& 25 6 2 1 3 4& 25 6 2 1 3 4& 25 6 ______________ ORDER PRONOUNCED IN THE COURT ON 11.02.2011. SD/- SD/- . .. . . .. . % % % % D.K.TYAGI JUDICIAL MEMBER . .. . . .. .! !! ! # C.D.RAO ACCOUNTANT MEMBER. ( (( (# # # #) )) ) DATE: 1 / .%%7 87(9- COPY OF THE ORDER FORWARDED TO: 1. M/S. SOUTH ASIA ELECTRICITY HOLDING LTD. 31 N.S.R OAD KOLKATA-700001. 2 A.C.I.T. CIRCLE-5 KOLKATA. 3. THE CIT 4. THE CIT(A)-V KOLKATA 5. DR KOLKATA BENCHES KOLKATA 7 .%/ TRUE COPY 1&4/ BY ORDER DEPUTY /ASST. REGISTRAR ITAT KOLKATA BENCHES R.G.(.P.S.)