The ITO, Ward-4(4),, Ahmedabad v. Madhuram Traders Pvt.Ltd.,, Ahmedabad

ITA 190/AHD/2013 | 2009-2010
Pronouncement Date: 28-11-2014 | Result: Dismissed

Appeal Details

RSA Number 19020514 RSA 2013
Assessee PAN AABCM3170F
Bench Ahmedabad
Appeal Number ITA 190/AHD/2013
Duration Of Justice 1 year(s) 10 month(s) 7 day(s)
Appellant The ITO, Ward-4(4),, Ahmedabad
Respondent Madhuram Traders Pvt.Ltd.,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 28-11-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 28-11-2014
Date Of Final Hearing 09-07-2014
Next Hearing Date 09-07-2014
Assessment Year 2009-2010
Appeal Filed On 21-01-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER AND SHRI N.S. SAINI ACCOUNTANT MEMBER ITA NO . 190 /AHD/20 1 3 A. Y. 2009 - 10 ITO WARD 4(4) AHMEDABAD. VS MADHURAM TRADERS PVT. LTD. 82 MADHUBAN BUI LDING NR. MADALPUR UNDERBRIDGE ELLISBRIDGE AHMEDABAD. PAN: AABCM 3170F (APPELLANT) (RESPONDENT) REVENUE BY : SHRI B. KULSHRESTHA SR. D.R. ASSESSEE(S) BY : SHRI VIJAY RANJAN A.R. / DATE OF HEARING : 1 3 / 11 /201 4 / DATE OF PRONOUNCEMENT: 28 /11 /201 4 / O R D E R PER MUKUL KUMAR SHRAWAT JUDICIAL MEMBER THIS IS AN A PPEAL FILED BY THE REVENUE ARISING FROM THE ORDER OF L EARNED CIT (A ) - V III AHMEDABAD DAT ED 15 / 10 /201 2 FOR A.Y. 2009 - 10. THE GROUNDS RAISED ARE HEREBY DECIDED AS FOLLOWS. 2. GROUND NO.1 IS REPRODUCED BELOW: THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING DEDUCTION CLAIMED U/S.24 OF RS.11 21 367/ - WITHOUT A PPRECIATING THE FACT THAT THE ASSESSEE IS IN THE BUSINESS OF LETTING OUT ITS PROPERTIES TO EARN PROFIT. 3. THIS IS A CASE OF DOMESTIC COMPANY WHO IS IN THE BUSINESS OF TRADING IN SHARES FINANCING AND EARNING PROPERTY INCOME. THE AO HAS NOTED THAT RENT I NCOME OF RS.37 92 216/ - WAS NOT TO BE CONSIDERED AS INCOME FROM HOUSE PROPERTY . HE HAS ALSO PROPOSED TO DIS ALLOW THE ITA NO. 190 /AHD/201 3 ITO WARD 4(4) AHMEDABAD VS. MADHURAM TRADERS PVT. LTD. FOR A.Y. 2009 - 10 - 2 CLAIM OF DEDUCTION U/S.24 OF IT ACT. HE HAS ASSIGNED FEW REASONS TO HOLD THAT THE INCOME RECEIVED FROM LETTING OUT OF THE PROPERTIES WAS TO BE TAXED UNDER THE HEAD P ROFIT AND G AINS OF B USINESS O R P ROFESSION AFTER DISALLOWING THE DEDUCTION CLAIMED U/S.24 OF IT ACT. HE HAS TAXED THE INCOME AT RS.11 21 367/ - . WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY LEARNED CIT(A) HA S DISCUSSED THE RULE OF CONSISTENCY AND HELD THAT THERE WAS NO JUSTIFICATION ON THE PART OF THE AO TO ADOPT A DIFFERENT VIEW. ON MERITS HE HAS ALSO DISCUSSED FEW CASE LAWS; NAMELY SURAT CO - OPERATIVE SOCIETY 264 ITR 289 (GUJ.) FOR THE LEGAL PROPOSITION T HAT THE RENT RECEIVED FROM SHOPS AND GODOWNS FALL UNDER THE HEAD INCOME FROM HOUSE PROPERTY . A DECISION OF HON BLE MADRAS HIGH COURT IN THE CASE OF NEW INDIA MARITIME AGENCIES 256 ITR 513 (MAD) HAS ALSO BEEN CITED FOR THE LEGAL PROPOSITION THAT IN A SIT UATION WHEN ASSETS HAVE NOT BEEN USED FOR THE PURPOSE OF THE BUSINESS TO LET OUT THEN SUCH RENTAL INCOME IS TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY . FINALLY HE HAS HELD AS UNDER: 3.2. I HAVE CAREFULLY CONSIDERED ASSESSMENT ORDER AND SUBMISSION FIL ED BY THE APPELLANT. THE UNDISPUTED FACTS OF PRESENT CASE ARE THAT APPELLANT HAS BEEN CONSISTENTLY SHOWING RENT INCOME EARNED FROM INVESTMENTS MADE IN PROPERTIES AS INCOME FROM HOUSE PROPERTY ON YEAR TO YEAR BASIS AND IN ALL THE PRECEDING ASSESSMENT YEARS WHEREIN ASSESSMENT UNDER SECTION 143(3) HAS BEEN COMPLETED ASSESSING OFFICER HAS ACCEPTED THE TREATMENT SHOWN BY APPELLANT IN RETURN OF INCOME. WHILE PASSING THE CURRENT ASSESSMENT ORDER ASSESSING OFFICER HAS NOT BROUGHT OUT ANY NEW FACTS WHICH CAN PROVE THAT INCOME EARNED BY APPELLANT IS INCOME FROM BUSINESS AND PROFESSION HENCE DECISION OF HON'BLE LUCKNOW I.T.A.T. IN CASE OF ACIT V/S HARBILAS COLD STORAGE & FOOD PRODUCTS 140 TTJ 626 RELIED BY THE APPELLANT AND REFERRED SUPRA IS DIRECTLY APPLICABLE ON PR ESENT CASE. VARIOUS COURTS HAVE CONSISTENTLY HELD THAT EVEN THOUGH DOCTRINE OF RES JUDICATA IS NOT APPLICABLE TO TAX PROCEEDINGS WHEN THE ISSUE HAS BEEN CONSIDERED AND DECIDED CONSISTENTLY IN NUMBER OF EARLIER ASSESSMENT YEARS THE SAME VIEW SHOULD CONTIN UE TO PREVAIL IN SUBSEQUENT ASSESSMENT YEARS UNLESS THERE IS SOME MATERIAL CHANGES IN THE FACTS AND IN PRESENT CASE THERE IS NO MATERIAL CHANGE IN THE FACTS. FURTHER FROM THE PAST RECORDS AND RETURN OF INCOME FILED BY APPELLANT IT IS EVIDENT THAT APPELLAN T HAS NOT CARRIED OUT ANY TRADING IN FLATS OR APARTMENTS OR EVEN PURCHASE/SALES IN IMMOVEABLE PROPERTIES IS NOT SIGNIFICANT AND IMMOVEABLE ITA NO. 190 /AHD/201 3 ITO WARD 4(4) AHMEDABAD VS. MADHURAM TRADERS PVT. LTD. FOR A.Y. 2009 - 10 - 3 PROPERTIES ARE HELD BY APPELLANT EVEN PRIOR TO YEAR 2001 AND ONLY NEW PROPERTY HAS BEEN ACQUIRED IN FY 2007 - 08 HENCE TREATMENT GIVEN BY APPELLANT FOR TREATING RENT INCOME AS INCOME FROM HOUSE PROPERTY IS JUSTIFIED. THE OBSERVATION OF ASSESSING OFFICER THAT APPELLANT HAS CLAIMED MAINTENANCE EXPENSES IN ITS PROFIT & LOSS ACCOUNT WHICH SUGGESTS THAT APPELLANT HAS EARNED RE NT INCOME AS INCOME FROM BUSINESS AND PROFESSION CANNOT BE ACCEPTED AS IT IS EVIDENT FROM COMPUTATION OF TOTAL INCOME FILED BY APPELLANT THAT SUCH MAINTENANCE EXPENDITURE IS NOT CLAIMED AGAINST BUSINESS INCOME ANY TAXABLE INCOME. THE OBSERVATION OF ASSESSI NG OFFICER THAT IN TAX AUDIT REPORT AUDITOR HAS CLASSIFIED THE NATURE OF BUSINESS OF APPELLANT AS LETTING OUT OF PROPERTIES HENCE RENT INCOME IS INCOME FROM BUSINESS AND PROFESSION IS ALSO NOT ACCEPTED AS IT IS AN UNDISPUTED FACT THAT APPELLANT IS A NON - BANKING FINANCE COMPANY REGISTERED WITH RESERVE BANK OF INDIA AND EVEN AUDITOR HAS CLASSIFIED MAIN BUSINESS OF APPELLANT AS FINANCING AND TRADING IN SHARES AND SECURITIES. THE APPELLANT HAS SUBMITTED COPY OF AUDITED ANNUAL ACCOUNTS AND IN SUCH ACCOUNTS EVE N AUDITOR HAS CLASSIFIED INVESTMENT IN IMMOVEABLE PROPERTIES UNDER THE HEAD 'INVESTMENTS' SINCE BEGINNING WHICH PROVES THE INTENTION OF APPELLANT THAT IMMOVEABLE PROPERTIES WERE PURCHASED FOR INVESTMENT PURPOSE AND NOT FOR BUSINESS PURPOSE. FURTHER RENT I NCOME EARNED FROM SUCH IMMOVEABLE PROPERTY IS ALSO CLASSIFIED AS 'OTHER INCOME' IN PROFIT & LOSS ACCOUNT AGAINST SPECIFIC HEAD OF INCOME FROM OPERATIONS WHICH PROVES BEYOND DOUBT THAT RENT INCOME EARNED BY APPELLANT IS NOT IN NATURE OF 'INCOME FROM BUSINES S OR PROFESSION' AND EVEN ACCOUNTING ENTRIES PASSED IN BOOKS OF ACCOUNT SUPPORTS THE VIEW OF APPELLANT. THE HON'BLE GUJARAT HIGH COURT IN CASE OF CIT V/S SURAT CO - OPERATIVE HOUSING SOCIETY 264 ITR 289 HAS HELD THAT IT IS SETTLED POSITION OF LAW THAT WHERE A SEPARATE HEAD OF INCOME IS PROVIDED UNDER SECTION 14 AND INCOME FROM SUCH SOURCE HAS TO BE FALL UNDER THAT SPECIFIC HEAD AND EVEN IN THAT CASE APPELLANT HAS CONSTRUCTED A BIG COMMERCIAL BUILDING HAVING MORE THAN 1000 SHOPS MORE THAN 100 GODOWNS AND AUD ITORIUM AS WELL AS CANTEEN AND RENT INCOME WAS TREATED AS INCOME FROM HOUSE PROPERTY AS HELD BY THE JURISDICTIONAL GUJARAT HIGH COURT. \ THUS APPELLANT WAS JUSTIFIED IN TREATING RENT INCOME AS INCOME FROM HOUSE PROPERTY. CONSIDERING THE TOTALITY OF FACTS OF APPELLANT'S CASE ASSESSING OFFICER WAS NOT JUSTIFIED IN TREATING RENT INCOME AS INCOME FROM BUSINESS AND PROFESSION AND DENYING DEDUCTION UNDER SECTION 24 OF THE ACT. IN THE RESULT THE RELATED GROUND OF APPEAL IS ALLOWED. 4. WITH THIS BRIEF BACKGROUND WE HAVE HEARD BOTH THE SIDES. AT THE OUTSET IT IS PERTINENT TO MENTION THAT NOT ONLY IN THE PAST I.E. FOR A.Y. 2008 - 09 BUT ALSO IN THE SUBSEQUENT YEARS I.E. A.Y. 2012 - 13 THE REVENUE DEPARTMENT HAS ACCEPTED THE NATURE OF INCOME AS PROPERTY INCOME. TH E RELEVANT ASSESSMENT ORDERS PASSED U/S. 143(3) HAVE BEEN PLACED BEFORE US. ITA NO. 190 /AHD/201 3 ITO WARD 4(4) AHMEDABAD VS. MADHURAM TRADERS PVT. LTD. FOR A.Y. 2009 - 10 - 4 APART FROM THIS WE HAVE ALSO NOTED THAT THE INCOME FROM THE IMPUGNED PROPERTIES WAS RENTAL INCOME; THEREFORE THE VIEW TAKEN BY FEW HIGH COURTS ARE REQUIRED TO BE APPLIED ON THE F ACTS OF THIS CASE. THEREFORE CONSIDERING THE EVIDENCES ON RECORD AND THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS THE RULE OF CONSISTENCY WE HEREBY DISMISS THIS GROUND OF THE REVENUE. 5. GROUND NO.2 IS REPRODUCED BELOW: 2. THE LD . CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.3 61 799/ - U/S. 14A OF THE ACT WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD MADE SUO MOTU AD - HOC DISALLOWANCE OF RS.56 000/ - INSTEAD OF WORKING THE ALLOWABLE DEDUCTION AS PER SECTION 14A READ WITH RULE 8D. 6. IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAD CLAIMED DIVIDEND INCOME OF RS.1 29 750/ - AS EXEMPT INCOME. HOWEVER THE ASSESSEE HAS ALSO SUO MOTU DISALLOWED AN AMOUNT OF RS.56 000/ - U/S.14A OF IT ACT. THE AO S OBJECTION W AS THAT THE SAID DISALLOWANCE SHOULD HAVE BEEN COMPUTED AS PRESCRIBED UNDER RULE 8D OF IT ACT. THE AO HAS THEREFORE APPLIED THE FORMULA AS PRESCRIBED UNDER RULE 8D AND COMPUTED A PROPORTIONATE DISALLOWANCE OF RS.3 61 799/ - WHICH WAS TAXED IN THE HANDS OF THE ASSESSEE. 7. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY LEARNED CIT(A) HAS REPRODUCED THE CALCULATION OF THE AO AS FOLLOWS: PARTICULARS AMOUNT RS PROPORTIONATE DISALLOWANCE OF INTEREST 2 60 153 0.5% OF AVERAGE INVESTMENTS A S DISALLOWANCE OF OTHER EXPENDITURE 1 57 646 TOTAL 4 17 799 LESS : AMOUNT DISALLOWED IN RETURN OF INCOME 56 000 ITA NO. 190 /AHD/201 3 ITO WARD 4(4) AHMEDABAD VS. MADHURAM TRADERS PVT. LTD. FOR A.Y. 2009 - 10 - 5 TOTAL DISALLOWANCE U/S 14A 3 61 799 7.1 HOWEVER HE WAS OF THE VIEW THAT THE AO HAS NOT ESTABLISHED ANY NEXUS BETWEEN THE FUNDS BORROWED W ITH THE IMPUGNED INVESTMENT. ACCORDING TO LEARNED CIT(A) NO INTEREST EXPENDITURE COULD BE DISALLOWED BY MECHANICALLY APPLYING RULE 8D. FEW DECISIONS WERE CITED BY HIM AS LISTED BELOW: I. WIMCO SEEDLINGS LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX107ITD267 ; II. INDO - GERMAN INTERNATIONAL (P.) LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX 185 TAXMAN 103; III . DEPUTY COMMISSIONER OF INCOME - TAX RANGE 3(1) MUMBAI VS. BECK INDIA LTD. 26 SOT 141; IV . IMPULSE (INDIA) (P.) LTD. VS. ASSISTANT COMMISSIONER OF INCOME - TAX (OSD) NEW DELHI 22 SOT 368; V . CIT VS. HERO CYCLES LTD. [2010] 189 TAXMAN 50 (P& H HIGH COURT). 7.2 FINALLY HE HAS TAKEN A VIEW IN FAVOUR OF THE ASSESSEE AS FOLLOWS: 5.4. ON CAREFUL PERUSAL OF DETAILS PRODUCED BEFORE ME BY THE LEARN ED AR I FIND THAT THE ASSESSING OFFICER HAS MADE DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D ON AVERAGE INVESTMENT OF RS.3 15 29 252 WHICH INCLUDES INVESTMENT MADE IN IMMOVEABLE PROPERTIES AT RS. 2 55 29 250. AS APPELLANT HAS EARNED RENT INCOME FROM SUCH INVESTMENT AND SAME IS OFFERED TO TAX ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING DISALLOWANCE UNDER SECTION 14A ON INVESTMENT MADE IN IMMOVEABLE PROPERTIES AS NO TAX FREE INCOME IS EARNED FROM SUCH INVESTMENTS. FURTHER IT IS SEEN THAT DURING THE RELE VANT PERIOD APPELLANT IS HAVING SUBSTANTIAL INTEREST FREE FUNDS AT ITS DISPOSAL TO MAKE INVESTMENTS. THE APPELLANT IS HAVING SHARE CAPITAL AND RESERVE & SURPLUS OF RS. 2 26 27 058. IT IS TO BE MENTIONED THAT IN CASE OF UTILISATION OF FUNDS FOR ANY PURPOSE OTHER THAN BUSINESS PURPOSE THE AVAILABILITY OF INTEREST FREE FUNDS AT THE DISPOSAL OF THE ASSESSEE IS REQUIRED TO BE SEEN IN THE INSTANT CASE AS COULD BE SEEN THAT APPELLANT IS HAVING INTEREST FREE FUNDS AT THE BEGINNING AND AT THE END OF THE YEAR WHI CH IS SUBSTANTIALLY HIGHER THAN INVESTMENT IN SHARES OF RS. 60 LACS. DURING THE YEAR UNDER CONSIDERATION NO NEW INVESTMENTS HAVE BEEN MADE BY APPELLANT. THE ASSESSING OFFICER'S ARGUMENT THAT THE ASSESSEE COULD HAVE UTILIZED ITS SURPLUS FUNDS FOR REPAYING THE BORROWINGS INSTEAD OF INVESTING IN SHARES AND BY NOT DOING SO THERE WAS DIVERSION OF BORROWED FUNDS TOWARDS INVESTMENT IN SHARES TO EARN DIVIDEND INCOME IS NOT ACCEPTABLE IN VIEW OF CIT V/S HERO CYCLES LIMITED 323 ITR 518 (P&H) WHERE ABHISHEK INDUSTR IES WAS ITA NO. 190 /AHD/201 3 ITO WARD 4(4) AHMEDABAD VS. MADHURAM TRADERS PVT. LTD. FOR A.Y. 2009 - 10 - 6 DISTINGUISHED AND IT WAS HELD DISALLOWANCE UNDER SECTION 14A OF INTEREST ON BORROWED FUNDS WAS NOT PERMISSIBLE IF THE INVESTMENT IN SHARES WAS MADE OUT OF OWN FUNDS. THEREFORE AFTER GOING THROUGH THE FACTS OF THE CASE AS WELL AS DECISIONS REFERRED AS ABOVE WHICH ARE RELIED UPON BY THE AR OF THE APPELLANT I AM INCLINED TO ACCEPT THE SUBMISSION OF THE AR OF THE APPELLANT. THEREFORE IN LIGHT OF THE ABOVE DISCUSSION I AM OF THE OPINION THAT WHEN THE APPELLANT IS HAVING SUFFICIENT SURPLUS FUND AT ITS DISPOSAL FOR MAKING INVESTMENT IN SHARES AND FOR NON - BUSINESS PURPOSE THERE WAS NO NEXUS THAT COULD BE ESTABLISHED WITH THE EXPENDITURE INCURRED BY THE APPELLANT FOR EARNING THE DIVIDEND INCOME. THE APPELLANT ITSELF HAS DISALLOWED RS. 56 000 AS ADMINISTR ATIVE EXPENSES U/S 14A OF THE INCOME TAX ACT 1961 WHILE FILING RETURN OF INCOME. THE ASSESSING OFFICER HAS NOT BROUGHT OUT ANY MATERIAL ON RECORD TO SHOW THAT ANY HIGHER DISALLOWANCE TOWARDS ADMINISTRATIVE EXPENSES IS CALLED FOR. THE SIMILAR DISALLOWANCE WAS MADE IN CASE OF APPELLANT IN A.Y. 2008 - 09 WHEREIN VIDE ORDER DATED 18TH JULY 2012 IN APPEAL NO. CIT(A) - VIII/ACIT/R.4/587/10 - 11 SUCH ADDITIONAL WAS DELETED BY THE UNDERSIGNED. AFTER CONSIDERING THE FACTS OF THE CASE AND CASE LAWS THE DISALLOWANCE MADE BY ASSESSING OFFICER CANNOT SURVIVE. THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION OF RS. 3 61 799. THE RELATED GROUND OF APPEAL IS ALLOWED. 8. WE HAVE HEARD BOTH THE SIDES. IN THE PRESENT CASE THE ASSESSEE HAS SUO MOTU DISALLOWED AN AMOUNT; HOWEVER THE AO WAS NOT CONVINCED AND INVOKED THE PROVISIONS OF RULE 8 D OF IT RULES . ON ONE HAND THE TAX FREE INCOME FROM DIVIDEND WAS ONLY RS.1 29 750/ - WHICH WAS AN EXEMPTED INCOME. AS AGAINST THAT THE AO HAS APPLIED THE FORMULA AS PRESCRIBED UNDER RULE 8D OF IT ACT AND THE DISALLOWANCE WAS COMPUTED AT RS.4 17 799/ - . A FTER REDUCING THE OFFERED AMOUNT OF RS.56 000/ - THE BALANCE AMOUNT OF RS.3 61 799/ - WAS TAXED. BUT ACCORDING TO US LEARNED CIT(A) WAS CORRECT TO HOLD THAT THE ASSESSEE HAD SUFFICIENT SURPL US FUND AT ITS DISPOSAL FOR MAKING INVESTMENT IN SHARES. THE ASSESSEE HAS EXPLAINED THAT THERE WAS NO NEXUS WITH THE EXPENDITURE INCURRED FOR EARNING THE DIVIDEND INCOME. IN THE ABSENCE OF ANY MATERIAL AGAINST THE ASSESSEE EITHER BEFORE LEARNED CIT(A) OR B EFORE THIS TRIBUNAL WE ARE OF THE VIEW THAT THE RELIEF GRANTED BY LEARNED CIT(A) SHOULD BE SUSTAINED. RESULTANTLY THIS GROUND OF THE REVENUE IS ALSO DISMISSED. ITA NO. 190 /AHD/201 3 ITO WARD 4(4) AHMEDABAD VS. MADHURAM TRADERS PVT. LTD. FOR A.Y. 2009 - 10 - 7 9. GROUND NO.3 IS REPRODUCED BELOW: 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN TREATI NG THE SPECULATION LOSS OF RS.34 53 861/ - AS BUSINESS LOSS WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD INCURRED LOSS IN THE BUSINESS OF SHARE TRADING INCLUDING F&O TRANSACTION AND ASSESSEE WAS NOT ELIGIBLE TO SET OFF LOSS OF SHARE TRADING AND F&O A GAINST THE OTHER INCOME BY VIRTUE OF SECTION 73 OF THE ACT. 9.1 THE ASSESSEE HAD CLAIMED A LOSS OF RS.34 53 861/ - WHILE COMPUTING THE TOTAL INCOME. THE AO HAS HELD THAT BY VIRTUE OF SECTION 73 OF IT ACT THE LOSS WAS A SPECULATION LOSS; THEREFORE THE OPE RATION LOSS OF RS.34 53 861/ - WAS DISALLOWED AND THE IMPUGNED AMOUNT WAS TAXED . L EARNED CIT(A) HAS HELD THAT THE ASSESSEE WAS GRANTED THE STATUS OF N ON B ANKING F INANCE C OMPANY (NBFC) BY RBI. LEARNED CIT(A) HAS ALSO EXAMINED THE APPLICABILITY OF E XPLANATION TO SECTION 73 AND THEREUPON HELD AS UNDER: THE ANNUAL ACCOUNTS SUBMITTED BY THE APPELLANT CLEARLY SHOW THAT OUT OF THE TOTAL ASSETS OF RS. 9.1 CRORES AMOUNT OF RS. 5.08 CRORES HAS BEEN DEPLOYED IN FUNDS GIVEN AS LOAN/ADVANCES WHICH ARE MORE THAN 50% OF TOTAL ASSETS OF THE COMP ANY. FURTHER GROSS TOTAL INCOME OF THE APPELLANT COMPANY AS APPEARING IN PROFIT & LOSS ACCOUNT IS OF RS. 22 45 714 AND OUT OF SUCH INCOME INTEREST INCOME EARNED ON BUSINESS OF GRANTING LOANS AND ADVANCES IS RS. 14 72 339 WHICH IS M ORE THAN 50% OF TOTAL GROSS INCOME EARNED BY APPELLANT WHICH CLEARLY ESTABLISHES THAT APPELLANT COMPANY IS IN THE BUSINESS OF GRANTING OF LOANS AND ADVANCES. THE DECISION OF HON'BLE AHMEDABAD ITAT IN CASE OF PUNJAB LEASE FINANCING V/S ITO 20 SOT 281 DECI SION OF CALCUTTA HIGH COURT IN CASE OF PCBL INDUSTRIES LIMITED V/S CIT 337 ITR 536 RELIED UPON BY APPELLANT AND REPRODUCED HEREIN ABOVE CLEARLY SUPPORT THE CLAIM OF APPELLANT THAT WHILE PRINCIPAL BUSINESS OF APPELLANT IS OF GRANTING OF LOANS AND ADVANCES EXPLANATION TO SECTION 73 IS NOT APPLICABLE. FURTHER AS OBSERVED HEREIN ABOVE APPELLANT IS AN NBFC COMPANY REGISTERED WITH RBI HAVING MAIN BUSINESS OF GRANTING LOANS AND ADVANCES ASSESSING OFFICER WAS NOT JUSTIFIED IN INVOKING EXPLANATION 73 OF THE ACT TO LOSS ARISING FROM SHARE TRADING BUSINESS. THE ASSESSING OFFICER IS DIRECTED TO TREAT THE LOSS OF RS. 34 53 861 AS BUSINESS LOSS AS COMPUTED BY THE APPELLANT. THE RELATED GROUND OF APPEAL IS ALLOWED. 10. HEARD BOTH THE SIDES. WE ARE OF THE VIEW THAT TH E PROVISIONS OF SECTION 73 CANNOT BE INVOKED MECHANICALLY DUE TO THE REASON THAT AS PER ITA NO. 190 /AHD/201 3 ITO WARD 4(4) AHMEDABAD VS. MADHURAM TRADERS PVT. LTD. FOR A.Y. 2009 - 10 - 8 EXPLANATION WHERE ANY PART OF THE BUSINESS OF A COMPANY OTHER THAN A COMPANY WHOSE GROSS TOTAL INCOME CONSISTS MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEAD IN TEREST ON SECURITIES INCOME FROM HOUSE PROPERTY SHALL BE DEEMED TO BE CARRYING ON A SPECULATION LOSS; THEREFORE IN THIS EXPLANATION EXCEPTION HAS BEEN PROVIDED WHICH SAYS THAT EXCEPT THE COMPANIES HAVING INTEREST ON SECURITIES INCOME FROM HOUSE PROPERT Y CAPITAL GAINS OTHER ARE TAXABLE. WE HAVE NOTED THAT TO ASCERTAIN THE VARIOUS RESOURCES OF INCOME LEARNED CIT(A) HAS EXAMINED THE ACCOUNTS OF THE ASSESSEE AND THEREUPON CAME TO THE CONCLUSION THAT THE EXCEPTION AS CARVED OUT IN EXPLANATION IS APPLICABLE ON THE ASSESSEE; HENCE ALLOWED THE ISSUE IN FAVOUR OF THE ASSESSEE . W E FIND NO FALLACY IN THE SAID JUDGMENT OF LEARNED CIT(A); HENCE APPROVE THE SAME. RESULTANTLY THIS GROUND OF THE REVENUE IS DISMISSED. 11. IN THE RESULT REVENUE S APPEAL IS DISMISSED . SD/ - SD/ - ( N.S. SAINI ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 28 / 11 / 20 1 4 PRA BHAT KR. KESARWANI SR. P . S . / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) - III AHMEDABAD 5. / DR ITAT AHMEDABAD 6. / GUARD FILE . / BY ORDER / ( DY./ASSTT.REGISTRAR) / ITAT AHMEDABAD ITA NO. 190 /AHD/201 3 ITO WARD 4(4) AHMEDABAD VS. MADHURAM TRADERS PVT. LTD. FOR A.Y. 2009 - 10 - 9 1. DATE OF DICTATION - 27 . 1 1 .2 014 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER - 28 .1 1 .2014 OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P.S./P.S . 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR P RONOUNCEMENT .10. 2014 . 5. DATE ON WHICH THE FAIR DRAFT COMES TO THE SR.P.S/P.S. .. 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK - . 10 .2014 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGN ATURE ON THE ORDER .. 9 . DATE OF DESPATCH OF THE ORDER