Turakhia Overseas Pvt.Ltd.,, Ahmedabad v. The DCIT. Circle 4(1)(3),, Ahmedabad

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH BEFORE: SHR I RAJPAL YADAV JUDICIAL MEMBER AND SHRI AMARJIT SINGH ACCOUNTANT MEMBER TURAKHIA OVERSEAS PVT. LTD. B - 203 PUSHPAVAN APARTMENTS OPP. RUCHI BUNGLOWS BODAKDEV AHMEDABAD PAN: AAACT5636N (APPELLANT) VS THE DY. CIT CIRCLE - 4(1)(3) AHMEDABAD (RESPONDENT) REVENUE BY : S H RI MUDIT NAGP AL SR. D . R. ASSESSEE BY: SHRI PARIN SHAH A.R. DATE OF HEARING : 25 - 09 - 2 019 DATE OF PRONOUNCEMENT : 19 - 11 - 2 019 / ORDER P ER : AMARJIT SINGH ACCOUN TANT MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 2013 - 14 ARI SES FROM ORDER OF THE CIT(A) - 8 AHMEDABAD DATED 1 8 - 09 - 2 017 IN PROCEEDINGS UNDER SECTION 1 4 3(3) OF THE INCOME TAX ACT 1961; IN SHORT THE ACT . I T A NO . 2407 / A HD/20 17 A SS ESSMENT YEAR 2013 - 14 I.T.A NO. 2407 /AHD/20 17 A.Y. 201 3 - 14 PAGE NO TURAKHIA OVERSEAS PVT. LTD. VS. DY. CIT 2 2. IN THE INSTANT APPEAL THE ASSESSEE HAS FILED TWO GROUNDS OF APPEAL ON THE ISSUE I N CONFIRMING THE DISALLOWANCE ON ACCOUNT OF SHORT TERM CAPITAL GAIN TREATED AS BUSINESS INCOME TO THE AMOUNT OF RS. 6 67 260/ - AND DISALLOWANCE U/S. 14A R.W. RULE 8D OF RS. 43 300/ - . 3. THE FACT IN BRIEF IS THAT THE A SSESSMENT ORDER U/S. 143(3) OF THE ACT WAS PASSED ON 7 TH DECEMBER 2015. AT THE TIME OF ASSES SMENT THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS SHOWN SHORT TERM CAPITAL GAIN OF RS. 6 67 260/ - AND ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING A ND DEALING IN WOOD RELATED PRODUCTS. T HE ASSESSEE WAS SHOW CAUSE D TO EXPLAIN WHY THE SHORT TERM CAPITAL GAIN SHOULD NOT BE CONSIDERED AS BUSINESS INCOME. THE ASSESSEE CLARIFIED THAT IT HAS ALSO BEEN DEALING IN BUSINESS OF SHARE AN D SECURITIES AND THE SAM E WAS NOT ITS MAIN ACTIVITY. THE ASSESSEE HAS STATED THAT IT HAS ALSO MADE INVESTMENT IN MUTUAL FUND AS SHOWN IN THE BALANCE SHEET. THE ASSESSING OFFICER HAS NOT AGREED WITH THE SUBMISSION OF THE ASSESSEE AND HAS STATED THAT IT HAS ALWAYS BEEN WITHIN TH E HANDS OF THE ASSESSEE TO TREAT THE TRANSACTION TO HIS BENEFIT AFTER TRANSACTIONS ARE DONE. HE WAS OF THE VIEW THAT ASSESSEE HAS SOLD/PURC HASED SHARES/SECURITIES THROUGH OUT THE YEAR AND ASSESSEE WAS ENGAGED IN THE ORGANIZED ACTIVITY WITH THE PURPOSE OF E ARNING PROFIT. THEREFORE THE ASSESSING OFFICER HAS TREATED SHORT TERM CAPITAL GAIN OF RS. 6 67 260/ - AS BUSINESS INCOME OF THE ASSESSEE. 4. DURING THE COURSE OF ASSESSMENT THE ASSESSING OFFICER HAS ALSO NOTICED THAT ASSESSEE HAS CLAIMED RS. 2 68 49 1/ - AS EXEMPT INCOME EARNED AS DIVIDEND AND THE ASSESSEE WAS ASKED TO EXPLAIN WHY NOT EXPENSES INCURRED ON EARING EXEMPT INCOME SHOULD NOT BE DISALLOWED U/S. 14A R.W. RULE 8D OF I.T.A NO. 2407 /AHD/20 17 A.Y. 201 3 - 14 PAGE NO TURAKHIA OVERSEAS PVT. LTD. VS. DY. CIT 3 THE ACT. THE ASSESSEE EXPLAINED THAT IT HAS MADE INVESTMENT OF RS. 1.18 CRORE S WHEREAS THE ASSESSEE COMPANY WAS HAVING ITS OWN FUNDS OF RS. 20 .78 CRORES THEREFORE NO DISALLOWANCE IS CALLED FOR. HOWEVER THE ASSESSING OFFICER HAS STATED THAT ALL THE DIRECT AND INDIRECT EXPENSES WERE DISALLOWABLE U/S. 14A WHICH HAVE ANY RELATION W ITH THE INCOME NOT CHARGEABLE TO TAX UNDER THE ACT. ACCOR DI NGLY THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF RS. 43 300/ - U/S. 14A R.W. RULE 8D AS EXPENSES INCURRED TOWARDS EARNING EXEMPT INCOME. 5 . AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE. 6 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US THE LD. COUNSEL HAS FILED PAPER BOOK COMPRISING INFORMATI ON AND COPIES OF DOCUMENT FURNISHED AT THE TIME OF ASSESSMENT AND APPELLATE PROCEEDINGS BEFORE THE LOWER AUTHORITIES. WITH THE ASSISTANCE OF LD. REPRESENTATIVES WE HAVE GONE THROUGH THE RECORDS I.E. AUDIT REPORT AND ANNUAL ACCOUNT OF THE ASSESSEE COMPA NY PLACED IN THE PAPER BOOK. IT IS NOTICED THAT DURING THE YEAR UNDER CONSIDERATION THERE WAS NIL INVESTMENT IN THE MUTUAL FUND AND IN THE PRECEDING ASSESSMENT YEAR THE ASSESSEE HAS MADE INVESTMENT IN THE RELIANCE MUTUAL FUND TO THE AMOUNT OF RS. 10 LAC S ONLY . A T PAGE NO. 66 OF THE PAPER BOOK IN ITS S UBMISSION BEFORE THE LD. CIT(A) T HE ASSESSEE HAS SUBMITTED THAT SHARES AND SECURITIES WERE HELD AS STOCK IN TRADE IN ASSESSMENT YEAR 2012 - 13 AND L OSS ON SALE OF SHARES WAS SHOWN AT RS. 68 79 522/ - . S IM ILARLY IN ASSESSMENT YEAR 2011 - 12 T HERE WAS GAIN OF RS. 15 09 882/ - AS BUSINESS I.T.A NO. 2407 /AHD/20 17 A.Y. 201 3 - 14 PAGE NO TURAKHIA OVERSEAS PVT. LTD. VS. DY. CIT 4 INCOME . ON PERUSAL OF THE COPY OF THE BALANCE SHEET PLACED AT PAGE 39 OF THE PAPER BOOK IT IS NOTICED THAT ASSSESSEE HAS SHOWN SHARES/SECURITIES AT RS. 57 5 6 189/ - AND RS. 6 5 07 320 / - DURING THE YEAR UNDER CONSIDERATION AND IN THE PRECEDING YEAR UNDER THE HEAD TRA DE INVENTORIES . THE ASSESSEE HAS PLACED RELIANCE ON THE DECISION OF HON BLE HIGH C OURT OF GUJARAT PR. CI VS. BHANUPRASASD D. TRIVEDI (HUF) (2017) TAXMAN.COM 137 (GU J). IN THE ABOVE CITED CASE RELIED UPON BY THE COUNSEL IT IS HELD THAT THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE OF SHARES IS PARAMOUNT. IF ASSESSEE HAS CLEAR INTENTION OF BEING AN INVESTOR H E L D SHARES BY WAY OF INVESTMENT ASSESSEE WAS INVE STOR AND ANY GAIN ARISING OUT OF TRANSFER OF SHARES SHOULD BE TREATED AS CAPITAL GAIN AND NOT BUSINESS INCOME. HOWEVER THE FACT S OF THE CASE OF THE ASSESSEE ARE DISTINGUISHABLE FROM THE FACT OF THE ABOVE CITED JUDICIAL PRONOUNCEME NT AS IN THE CASE OF THE ASSESSEE I T HAS FAILED TO DEMONSTRATE THAT IT HAS SHOWN INVESTMENT IN THE MUTUAL FUND AND SHARES DURING THE YEAR UNDER CONSIDERATION AS IT I S NOTICED THAT NO SUCH INVESTMENT WAS REFLECTED IN THE BALANCE SH EET THEREFORE WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LD. CIT(A) IN ASSESSING THE SHORT TERM CAPITAL GAIN AS BUSINESS INCOME OF THE ASSESSEE. THEREFORE THIS GROUND OF THE APPEAL OF THE ASSESSEE IS REJECTED. 7. THE ASSESSEE HAS CLAIMED EXEMPT INCOME OF RS. 2 68 491/ - EARNED AS DIVIDEND. T HE ASSESSEE HAS EXPLAINED THAT IT WAS HAVING OWN FUND OF RS. 20.78 CRORES WHEREAS INVESTMENT IN THE SHARES WAS MADE ONLY TO THE AMOUNT OF RS. 1.18 CRORES. IN THIS REGARD WE HAVE NOTICED THAT LD. CIT(A) HAS SUSTAINED THE ADDITION STATING THAT DISALLOWANCE O UT OF ADMINISTRATIVE EXPENDITURE IS REQUIRED TO BE MADE ON THE FACT OF THE CASE SINCE SUBSTANTIAL I.T.A NO. 2407 /AHD/20 17 A.Y. 201 3 - 14 PAGE NO TURAKHIA OVERSEAS PVT. LTD. VS. DY. CIT 5 EXEMPT INCOME HAS BEEN EARNED BY THE ASSESSEE. THE ASSESSEE COULD NOT SUBSTANTIATE THAT NO ADMINISTRATIVE EXPENSE S ARE INCURRED FOR EARNING EXEMPT INCOME. C ONSIDERING THESE FACTS WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF THE LD. CIT(A) THEREFORE THIS GROUND OF APPEAL OF THE ASSESSEE IS ALSO REJECTED. 8 . IN THE RESULT THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 19 - 11 - 201 9 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 19 /11 /2019 / COPY OF ORDER FORWARDED TO: - 1. ASSES SEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER/ /