DC.C.C.47, MUMBAI v. R.R. HOSIERY LTD, MUMBAI

ITA 3237/MUM/2009 | 2005-2006
Pronouncement Date: 30-09-2010 | Result: Allowed

Appeal Details

RSA Number 323719914 RSA 2009
Assessee PAN AAACR2450G
Bench Mumbai
Appeal Number ITA 3237/MUM/2009
Duration Of Justice 1 year(s) 4 month(s) 15 day(s)
Appellant DC.C.C.47, MUMBAI
Respondent R.R. HOSIERY LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2010
Appeal Filed By Department
Order Result Allowed
Bench Allotted D
Tribunal Order Date 30-09-2010
Date Of Final Hearing 15-07-2010
Next Hearing Date 15-07-2010
Assessment Year 2005-2006
Appeal Filed On 15-05-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH MUMBAI. BEFORE SHRI SHRI PRAMOD KUMAR(ACCOUNTANT MEMBER) AN D SMT. ASHA VIJAYARAGHAVAN(JUDICIAL MEMBER) I.T.A NO. 3156/MUM/2009 ASSESSMENT YEAR: 2005-06 R.R.HOSIERY P. LTD. SHRILAXMI WOOLEN MILLS ESTATE DR. E.MOSES ROAD MUMBAI. PA NO.AAACR 2450 G APPELLANT VS. THE I.T.O. 7(2)(1) MUMBAI. .. RESPONDENT I.T.A NO. 3237/MUM/2009 ASSESSMENT YEAR: 2005-06 THE I.T.O. 7(2)(1) MUMBAI. .. APPELLANT VS R.R.HOSIERY P. LTD. SHRILAXMI WOOLEN MILLS ESTATE DR. E.MOSES ROAD MUMBAI. RESPONDENT ASSESSEE BY: SHRI H.G.BUCH REVENUE BY : SHRI HARI GOVIND SINGH O R D E R PER PRAMOD KUMAR: 1. THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORD ER DATED 27.2.2009 PASSED BY THE CIT(A)-VII MUMBAI IN THE MATTER OF A SSESSMENT UNDER SECTION 2 143(3) OF THE INCOME TAX ACT 1961 FOR THE ASSESSME NT YEAR 2005-06. AS THESE APPEALS WERE HEARD TOGETHER AND DIRECTED AGAI NST THE COMMON ORDER BOTH THE APPEALS ARE DISPOSED OF BY WAY OF THIS CON SOLIDATED ORDER. WE WILL FIRST TAKE UP APPEAL FILED BY THE ASSESSEE IN ITA N O. 3156/MUM/2009. 2. IN GROUND NO.1 THE ASSESSEE HAS RAISED THE FOLL OWING GRIEVANCE: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT (A) ERRED IN CONFIRMING THE ACTION OF THE A O OF TREATING THE ADJUSTMENT/SETTLEMENT OF ACCOUNTS AGGREGATING T O A SUM OF RS 1 28 72 913 AS DEEMED DIVIDEND UNDER SECTION 2 (22)(2) OF THE INCOME TAX ACT 1061 ON THE ALLEGED GROUND THAT THE IMPUGNED SUM WAS A PAYMENT BY WAY OF ADVANCE OR LOA N TO THE PARTIES COVERED UNDER SECTION 2(22)(E) OF THE ACT. 3. AT THE TIME OF HEARING LEARNED REPRESENTATIVES FAIRLY AGREED THAT THE ISSUE IS COVERED IN PRINCIPLE BY THE SPECIAL BENCH DECISION OF THIS TRIBUNAL IN THE CASE OF BHAUMIK COLOUR (P)LTD. 27 SOT 270(MUM )(SB) INASMUCH AS IT IS AN UNDISPUTED POSITION THAT BEFORE US THE ASSESSEE WAS NOT A SHAREHOLDER OF ASHOK APPARELS PRIVATE LIMITED AND THE AMOUNT SOUG HT TO BE TAXED AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) WAS CLAIMED TO HAVE BEEN RECEIVED FROM THE SAID ASHOK APPARELS PRIVATE LIMITED. IN B HAUMIK COLOUR (P)LTD.(SUPRA) THE SPECIAL BENCH HAS HELD THAT THE ADDITION U/S.2(22)(E) CAN ONLY BE MADE IN THE HANDS OF THE SHAREHOLDER OF THE COMPANY FROM MONEY IS RECEIVED AND SOUGHT TO BE TAXED AS DEEMED DIVIDEND UNDER SECTION 2(22)(E). CLEARLY THAT IS NOT THE POSITION IN THE FACTS OF T HE PRESENT CASE. LEARNED COUNSEL FOR THE ASSESSEE HOWEVER URGED BEFORE US ALSO TO HEAR THE MATTER ON MERITS AND CONTENDED THAT IN ANY EVENT THE AMOUNT IN QUESTION COULD NOT HAVE BEEN TAXED AS DEEMED DIVIDEND UNDER SECTION 2( 22)(E) EVEN IN THE HANDS OF THE SHAREHOLDER. WE SEE NO NEED TO DO SO AND EVEN HAVING NOTED LEARNED DEPARTMENTAL REPRESENTATIVES VEHEMENT REL IANCE ON THE ORDERS OF THE AUTHORITIES BELOW WE ARE INCLINED TO ADJUDICA TE ON THE GRIEVANCE ON THE 3 SHORT TECHNICAL GROUND AS ABOVE. IN VIEW OF THE AB OVE DISCUSSION AND HAVING NOTED THE UNDISPUTED POSITION THAT THE ASSESSEE WAS NOT A SHAREHOLDER IN THE COMPANY FROM WHICH THE MONEY WAS RECEIVED WE HOLD THAT THE ASSESSEE IS JUSTIFIED IN CONTENDING THE IMPUGNED ADDITION OF `. 1 28 61 553/- AS DEEMED DIVIDEND COULD NOT HAVE BEEN MADE IN THE HANDS OF T HE ASSESSEE FOR THE BASIC REASON THAT THE ASSESSEE IS NOT A SHAREHOLDER IN TH E COMPANY FROM WHICH THE AMOUNT WAS SAID TO HAVE BEEN RECEIVED. IN DOING SO WE RESPECTFULLY FOLLOW THE DECISION OF THE SPECIAL BENCH IN THE CASE OF BH AUMIK COLOUR PVT LTD (SUPRA). WE THEREFORE DIRECT THE ASSESSING OFFICE R TO DELETE THE IMPUGNED DISALLOWANCE. THE ASSESSEE GETS THE RELIEF ACCORDIN GLY. 4. GROUND NO.1 IS THUS ALLOWED. 5. IN GROUND NO.2 THE ASSESSEE HAS RAISED GRIEVANC E AGAINST THE CIT(A)S DECISION IN ENHANCING THE DISALLOWANCE U/S.14A BY D IRECTING THE AO TO APPLY RULE 8D. 6. LD REPRESENTATIVES FAIRLY AGREED THAT THE ISSUE IS NOW COVERED BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF GODREJ& BOYCE LIMITED VS. ACIT (ITA NO.626 OF 2010) DATED 12.8.2 010. IN THIS VIEW OF THE MATTER WHILE RULE 8D WILL NOT HAVE ANY APPLICATION IN THE MATTER A REASONABLE ESTIMATE OF THE EXPENSES INCURRED TO EAR N THE TAX EXEMPTED INCOME WILL HAVE TO BE DISALLOWED. IT IS POINTED O UT THAT IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HIMSELF HAS DISALLOWED THE AMOUNT OF BY THE CIT (A) ON THE BASIS OF APPLICATION RULE 8D. TO THAT EX TENT WE UPHOLD THE DISALLOWANCE UNDER SECTION 14A. 7. GROUND NO.2 IS THUS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. 8. IN GROUND NO.3 THE ASSESSEE HAS RAISED THE FOLL OWING GRIEVANCE:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT (A)ERRED IN CONFIRMING THE ACTION OF THE AO OF TREATING 4 THE ADVANCES OF `.75 73 831/- RECEIVED FROM THE CUS TOMERS AS BUSINESS INCOME ON THE GROUND THAT THE ADVANCES WER E NO LONGER LIABLE TO BE REPAID BACK. 9. SO FAR AS THIS GRIEVANCE OF THE ASSESSEE IS CONC ERNED THE RELEVANT MATERIAL FACTS ARE LIKE THIS. IN THE COURSE OF ASSE SSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE ACCOUNTS OF THE AS SESSEE REFLECT OUTSTANDING ADVANCES RECEIVED BY THE ASSESSEE FOR EXPORT OF HO SIERY ITEMS FROM ALBAUG TRADING CO. (RS 44 95 086) FROM DEIRA GENERAL CO. (RS 27 22 623) AND FROM SUPERMAX DUBAI (RS 3 56 122). IT WAS NOTED THAT TH ESE AMOUNTS WERE SAID TO HAVE BEEN RECEIVED IN 1991 AND EVEN AS LONG TIME HAS ELAPSED THE ASSESSEE HAS NEITHER REPAID THESE AMOUNTS NOR EXPORTED THE H OSIERY TO THEM. THE ASSESSING OFFICER ALSO NOTED THAT IN VIEW OF THE AP PLICABILITY OF LIMITATION ACT THESE AMOUNTS ARE NO LONGER PAYABLE BY THE ASS ESSEE. FOR THIS REASON THE ASSESSING OFFICER ADDED AGGREGATE OF THESE ADVA NCES WHICH CAME TO RS 75 73 831 TO THE INCOME OF THE ASSESSEE AS ADVANCE S NO LONGER LIABLE TO BE PAID BACK. AGGRIEVED ASSESSEE CARRIED THE MATTER I N APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. THE ASSESSEE IS NOT SATISF IED AND IS IN APPEAL BEFORE US. 10. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING P ERUSED THE MATERIAL ON RECORD WE FIND THAT THE STAND OF THE ASSESSING OFF ICER IS CLEARLY CONTRARY TO THE PRINCIPLE LAID DOWN BY HONBLE GUJARAT HIGH COU RT IN THE CASE OF CIT VS SILVER COTTON MILLS CO LTD (254 ITR 728) TO THE EF FECT THAT MERELY BECAUSE RECOVERY OF MONEY IS TIME BARRED UNDER THE LIMITATI ON ACT IT CANNOT BE INFERRED THAT THERE IS CESSATION OF LIABILITY. IN T HE PRESENT CASE THERE IS NOTHING MORE THAN THE FACT OF CLAIM HAVING BECOME T IME BARRED UNDER THE LIMITATION ACT. IN THIS VIEW OF THE MATTER WE SEE NO MERITS IN THE DISALLOWANCE SUSTAINED BY THE CIT(A). THE ASSESSING OFFICER IS DIRECTED TO DELETE THE SAME. 11. GROUND NO. 3 IS THUS ALLOWED. 5 12. IN GROUND NO.4 THE ASSESSEE IS AGGRIEVED AGAIN ST CONFIRMATION OF DISALLOWANCE OF RS. 3 013/- BEING THE EMPLOYEES CO NTRIBUTION TO THE PF AND ESIC PAID BEYOND THE DUE DATE. 13. LEARNED REPRESENTATIVES FAIRLY AGREED THAT THE AFORESAID ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE HONBLE SUPREME COURT IN THE CASE OF CIT V. ALOM EXTRUSIONS LTD. ( 2009) 185 TAXMAN 416 (SC) EVEN THOUGH LEARNED DEPARTMENTAL REPRESENTATIV E RATHER DUTIFULLY RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. RES PECTFULLY FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F ALOM EXTRUSIONS LTD (SUPRA) WE DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCE. 14. GROUND NO.4 IS THUS ALLOWED. 15. GROUND NO.5 IS AGAINST LEVY OF INTEREST U/S.234 B OF THE ACT. THE LEVY OF INTEREST IS CONSEQUENTIAL. THE AO IS DIRECTED A CCORDINGLY. 16. IN THE RESULT THE APPEAL OF THE ASSESSEE IS AL LOWED. 17. WE NOW TAKE UP ITA NO.3237/M/2009 I.E. REVENUE S APPEAL. 18. THE REVENUE HAS TAKEN THE FOLLOWING GROUND:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT (A) HAS ERRED IN DIRECTING THE AO NOT TO TREAT THE LOSS ON ACCOUNT OF TRADING IN DERIVATIVE AS SPECULATION LOSS BUT TO TREAT THE SAME AS BUSINESS LOSS WITHOUT APPRECIATI NG THE FACT THAT THE CONTRACTS IN DERIVATIVE TRADING ARE SETTLE D WITHOUT DELIVERY OF GOODS/COMMODITY. 6 19. LD REPRESENTATIVES OF THE PARTIES FAIRLY AGREED THAT THIS ISSUE THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE DECISI ON OF THE ITAT (SB) IN THE CASE OF SHREE CAPITAL SERVICES P.LTD V. ACIT 121 IT D 498(KOL)(SB ) WHEREIN IT HAS BEEN HELD THAT THE LOSS ON DERIVATIVE TRANSA CTION IS TO BE TREATED AS SPECULATIVE LOSS PRIOR TO INSERTION OF CLAUSE (D) T O SECTION 43(5) BY THE FINANCE ACT 2005 W.E.F. 1.4.2006 AS THE SAME IS PR OSPECTIVE IN NATURE AND THEREFORE FROM A.Y. 2006-07 ONWARDS ONLY THEY HAVE TO BE TREATED AS BUSINESS LOSS. THUS THIS GROUND IS ALLOWED. 20. THE APPEAL FILED BY THE REVENUE IS ALSO THUS AL LOWED. 21. IN THE RESULT APPEAL FILED BY THE ASSESSEE AS ALSO REVENUE ARE ALLOWED IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER 2010 SD/- (ASHA VIJAYARAGHAVAN) (JUDICIAL MEMBER) SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI DATED 30 TH SEPTEMBER 2010 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)-VII MUMBAI 4. COMMISSIONER OF INCOME TAX-7 MUMBAI 5. DEPARTMENTAL REPRESENTATIVE BENCH D MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR ITAT MUMBAI 7