ACIT, New Delhi v. M/s Nuwave E Solutions (P) Ltd., New Delhi

ITA 3217/DEL/2011 | 2008-2009
Pronouncement Date: 16-09-2011 | Result: Dismissed

Appeal Details

RSA Number 321720114 RSA 2011
Assessee PAN AABCN5790Q
Bench Delhi
Appeal Number ITA 3217/DEL/2011
Duration Of Justice 3 month(s)
Appellant ACIT, New Delhi
Respondent M/s Nuwave E Solutions (P) Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 16-09-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 16-09-2011
Date Of Final Hearing 29-08-2011
Next Hearing Date 29-08-2011
Assessment Year 2008-2009
Appeal Filed On 15-06-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E NEW DELHI) BEFORE G.E. VEERABHADRAPPA HON'BLE VICE-PRESIDENT AND SHRI RAJPAL YADAV: HONBLE JUDICIAL MEMBER ITA NO.3217/DEL/2011 ASSESSMENT YEAR: 2008-09 ASSISTANT COMMISSIONER OF IT VS. M/S. NUWARE E SOLUTION (P) LTD. CIRCLE 13(1) 3 RD FLOOR DISTRICT CENTRE NEW DELHI. DDA BUILDING NEHRU PLACE NEW DELHI. (PAN: AABCN5790Q) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI RN TAN DON CIT(DR) RESPONDENT BY: SH. KR MANJANI A DV. ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LEARNED CIT(APPEALS) DATED 15.12.2010 PASSED FOR ASSESSMENT YEAR 2008-09. THE REVENUE HAS TAKEN THREE GROUNDS APPEAL HOWEVER TH EY REVOLVE AROUND A SINGLE ISSUE I.E. WHETHER LEARNED CIT(APPEALS) IS J USTIFIED IN DELETING THE ADDITION OF RS.8 83 66 179 WHICH WAS ADDED BY THE A SSESSING OFFICER ON THE GROUND THAT ASSESSEE PAID A SUM OF RS.17 67 32 352 TO DR. ANIL GUPTA FOR BUYING BACK THE SHARES. THE RATE OF TAX ON THE CAPI TAL GAIN AROSE TO SHRI ANIL GUPTA IS 20% INSTEAD OF 10% DEDUCTED BY THE ASSESSE E THEREFORE 50% OF THE PAYMENT AMOUNTING TO RS.8 83 66 179 DESERVE TO BE D ISALLOWED UNDER SEC. 40(A)(I) OF THE INCOME-TAX ACT 1961. 2 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE I S A PRIVATE LIMITED COMPANY. IT HAS FILED ITS RETURN OF INCOME ON 20.8. 2008 DECLARING NET LOSS OF RS.3 75 18 630. THE CASE OF THE ASSESSEE WAS SELECT ED FOR SCRUTINY ASSESSMENT AND A NOTICE UNDER SEC. 143(2) OF THE AC T WAS ISSUED AND SERVED UPON THE ASSESSEE. ON SCRUTINY OF THE ACCOUNTS IT REVEALED TO THE ASSESSING OFFICER THAT ASSESSEE HAS BOUGHT BACK 433 FULLY PAI D EQUITY SHARES OF FACE VALUE OF RS.10 EACH AT RS.4 15 213 PER SHARE ON PRO PORTIONATE BASIS THROUGH PRIVATE OFFER IN ACCORDANCE WITH THE COMPANIES ACT 1956. THESE SHARES WERE HELD BY DR. ANIL GUPTA WHO IS NRI. ASSESSEE HA D PAID A SUM OF RS.17 67 32 318 ON BUY BACK OF ITS SHARES. ASSESSIN G OFFICER WAS OF THE VIEW THAT AS PER SEC. 195 ASSESSEE OUGHT TO HAVE D EDUCTED THE TDS @ 20% ON SUCH PAYMENT. THE ASSESSEE HAD DEDUCTED TDS OF R S.2 23 776 @ 10% + EDUCATION CESS. ASSESSING OFFICER WAS OF THE VIEW T HAT TDS OUGHT TO BE DEDUCTED BY THE ASSESSEE @ 20%. SINCE ASSESSEE FAIL ED TO DEDUCT THE TDS HE MADE AN ADDITION OF RS.8 83 66 179 BEING 50% OF THE TOTAL PAYMENT WITH THE HELP OF SEC. 40(A)(I) OF THE ACT. 3. AGGRIEVED WITH THE ACTION OF THE ASSESSING OFFIC ER ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(APPEALS ). IT WAS CONTENDED BY THE ASSESSEE THAT THESE SHARES WERE PURCHASED BY TH E ASSESSEE FROM DR. ANIL GUPTA BY UTILIZING ITS CAPITAL AND SURPLUS FUNDS. I T HAS NOT CLAIMED ANY DEDUCTION OF RS.17 96 87 324. THE PAYMENT MADE BY T HE ASSESSEE ON 3 ACCOUNT OF BUY BACK OF SHARES IS A TRANSFER OF CAPI TAL ASSETS BY THE SHAREHOLDER. IN OTHER WORDS THE SHARES WERE HELD B Y DR. ANIL GUPTA AS A CAPITAL ASSETS AND ON TRANSFER OF SUCH SHARES IF A NY BENEFIT AROSE TO HIM THEN IT WILL BE TAXABLE AS A LONG TERM OR SHORT-TERM CAP ITAL GAIN. THE ASSESSEE HAS NOT CLAIMED IT AS ANY EXPENDITURE HENCE IT CANNOT B E DISALLOWED UNDER SEC. 40(A)(I) OR 40(A)(IA) OF THE ACT. LEARNED CIT(APPEA LS) HAS GONE THROUGH THE CONTENTIONS OF THE ASSESSEE AND DELETED THE DISALLO WANCE. 4. LEARNED DR WHILE IMPUGNING THE ORDER OF THE LEAR NED CIT(APPEALS) RELIED UPON THE ORDER OF THE ASSESSING OFFICER WHER EAS ON THE OTHER HAND LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT LEA RNED CIT(APPEALS) HAS RECORDED A FINDING OF FACT THAT NO DEDUCTION OF THE AMOUNT PAID FOR ACQUISITION OF SHARES ON ACCOUNT OF BUY BACK HAS BE EN CLAIMED. THEREFORE THERE CANNOT BE ANY DISALLOWANCE UNDER SECTION 40(A )(I) OR 40(A)(IA). HE FURTHER SUBMITTED THAT KEEPING IN VIEW THIS ASPECT LEARNED CIT(APPEALS) DID NOT GO IN THE ALTERNATIVE CONTENTION OF THE ASSESSE E THAT IF ANY TDS WAS REQUIRED TO BE DEDUCTED UNDER SEC. 195 OF THE ACT T HEN IT WAS @ 10%. 5. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D GONE THROUGH THE RECORD CAREFULLY. SECTION 40 STARTS WITH A NON-OBST INATE CLAUSE NAMELY NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTIO NS 30 TO 38 THE FOLLOWING 4 AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTING THE INCO ME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSI ON:- A) X X X X X X MEANING THEREBY THAT DISALLOWANCE OF THE AMOUNTS ME NTIONED IN CLAUSE (A)(I) WOULD NOT BE ALLOWED IF THE ASSESSEE HAS NOT COMPLI ED WITH THE REQUISITE CONDITIONS. THE FIRST AND FOREMOST CONDITIONS IS TH AT SUCH EXPENSES OUGHT TO BE CLAIMED AS A DEDUCTION ONLY THAN SUCH AMOUNT WO ULD BE DISALLOWED FOR NON-COMPLIANCE OF THE PROVISIONS. IN THE PRESENT C ASE ASSESSEE HAS SPECIFICALLY DEMONSTRATED BEFORE THE LEARNED CIT(AP PEALS) THAT IT HAS NOT CLAIMED ANY DEDUCTION OF RS.17 67 32 358 WHICH COUL D BE SET OFF AGAINST THE PROFIT AND GAINS OF THE ASSESSEE UNDER SEC. 28 TO 4 3C OF THE INCOME-TAX ACT 1961. IF IT HAS NOT CLAIMED ANY DEDUCTION THEN THE RE CANNOT BE ANY DISALLOWANCE. ASSESSING OFFICER HAS ERRED IN APPROA CHING THE CONTROVERSY WITH THE IMPUGNED ANGLE. LEARNED FIRST APPELLATE AU THORITY HAS RIGHTLY DELETED THE ADDITION AND WE DO NOT SEE ANY REASON T O INTERFERE IN HIS ORDER. 7. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 16.09.201 1 SD/- SD/- ( G.E. VEERABHADRAPPA) ( RAJPAL YAD AV ) VICE-PRESIDENT JUDICIAL MEMBER DATED: 16 /09/2011 MOHAN LAL 5 COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR