Indi Stock Pvt Ltd., Kolkata v. ITO, Wd-6(2), kolkata, Kolkata

ITA 851/KOL/2014 | 2006-2007
Pronouncement Date: 30-11-2017 | Result: Dismissed

Appeal Details

RSA Number 85123514 RSA 2014
Assessee PAN AAACI6554J
Bench Kolkata
Appeal Number ITA 851/KOL/2014
Duration Of Justice 3 year(s) 6 month(s) 25 day(s)
Appellant Indi Stock Pvt Ltd., Kolkata
Respondent ITO, Wd-6(2), kolkata, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 30-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Dismissed
Bench Allotted SMC
Tribunal Order Date 30-11-2017
Date Of Final Hearing 12-06-2017
Next Hearing Date 12-06-2017
First Hearing Date 12-06-2017
Assessment Year 2006-2007
Appeal Filed On 05-05-2014
Judgment Text
1 ITA NO. 851/KOL/2014 ASSESSMENT YEAR: 2006-2007 IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA SMC BENCH KOLKATA BEFORE SHRI P.M. JAGTAP ACCOUNTANT MEMBER I.T.A. NO. 851/KOL./2014 ASSESSMENT YEAR: 2006-2007 INDI STOCK PVT. LIMITED ........................... ...............................APPELLANT 7 LYONS RANGE 3 RD FLOOR KOLKATA-700 001 [PAN: AAACI 6554 J] -VS.- INCOME TAX OFFICER ................................ ............................RESPONDENT WARD-6(2) KOLKATA AAYAKAR BHAWAN P-7 CHOWRINGHEE SQUARE KOLKATA-700 069 APPEARANCES BY: SHRI P.J. BHIDE FCA FOR THE ASSESSEE SHRI SATYAJIT MONDAL ADDL. CIT D.R. FOR THE DEPA RTMENT DATE OF CONCLUDING THE HEARING : NOVEMBER 30 2017 DATE OF PRONOUNCING THE ORDER : NOVEMBER 30 2017 O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-VI KOLKATA DA TED 03.03.2014. 2. THE ASSESSEE IN THE PRESENT CASE IS A NON-BANKIN G FINANCE COMPANY. THE RETURN OF INCOME FOR THE YEAR UNDER CO NSIDERATION WAS FILED BY IT ON 23.10.2006 DECLARING TOTAL INCOME OF RS.29 40 150/-. IN THE SAID RETURN PROFIT OF RS.31 72 624/- SHOWN BY THE ASSES SEE FROM THE TRANSACTIONS OF PURCHASE AND SALE OF SHARES WAS DEC LARED BY THE ASSESSEE AS SHORT-TERM CAPITAL GAIN. IN THE ASSESSMENT COMPL ETED UNDER SECTION 143(3) VIDE AN ORDER DATED 17.12.2008 THE SAID PRO FIT WAS TREATED BY THE ASSESSING OFFICER AS BUSINESS INCOME OF THE ASSESSE E AFTER TAKING INTO CONSIDERATION THE VOLUME OF TRANSACTIONS OF SHARES THE FREQUENCY OF TRANSACTIONS THE PERIOD OF HOLDING ETC. HE ALSO M ADE A DISALLOWANCE OF 2 ITA NO. 851/KOL/2014 ASSESSMENT YEAR: 2006-2007 RS.1 00 000/- UNDER SECTION 14A OF THE ACT ON ACCOU NT OF ESTIMATED EXPENSES INCURRED BY THE ASSESSEE IN RELATION TO TH E EARNING OF EXEMPT INCOME OF RS.2 77 360/- ON ACCOUNT OF DIVIDEND AND RS.1 85 69 802/- ON ACCOUNT OF LONG-TERM CAPITAL GAIN. 3. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER PASSED UNDER SECTION 143(3) AN APPEAL WAS PREFERRED BY THE ASSE SSEE BEFORE THE LD. CIT(APPEALS) AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD THE LD . CIT(APPEALS) UPHELD THE ACTION OF THE ASSESSING OFFICER IN TREATING THE SHORT-TERM CAPITAL GAIN DECLARED BY THE ASSESSEE ON ACCOUNT OF PROFIT FROM THE TRANSACTIONS OF PURCHASE AND SALE OF SHARES AS BUSINESS INCOME BY F OLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSME NT YEAR 2005-06 RENDERED VIDE ITS ORDER DATED 30.09.2008 PASSED IN ITA NO. 1004/KOL/2008. HE ALSO CONFIRMED THE DISALLOWANCE O F RS.1 00 000/- MADE BY THE ASSESSING OFFICER UNDER SECTION 14A FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO. 4.2 OF HIS IMPUGNED ORDER:- 4.2 I HAVE CONSIDERED THE SUBMISSION OF THE APPEL LANT. THE MAIN CONTENTION MADE BY THE APPELLANT IS THAT IT HAD UT ILIZED ITS OWN FUNDS FOR MAKING INVESTMENT AND THERE WAS NO INTERE ST PAID FOR EARNING EXEMPT INCOME. HOWEVER DISALLOWANCE U/S.14 A IS NOT RESTRICTED ONLY TO THE DIRECT EXPENSES INCURRED FOR EARNING OF EXEMPT INCOME AND ALSO INCLUDES VARIOUS INDIRECT EX PENSES. THE EXPRESSION 'EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME' HA S A WIDER MEANING. THEREFORE SUCH EXPENDITURES WOULD NOT ENCO MPASS ONLY THE DIRECT OR PROXIMATE EXPENDITURES INCURRED FOR T HE PURPOSE OF EARNING EXEMPT INCOME BUT IT WOULD INCLUDE ALL OTHE R EXPENSES ATTRIBUTABLE OR IN RELATION TO EXEMPT INCOME I.E. I T IMPLIES BOTH DIRECT AND INDIRECT RELATIONSHIP BETWEEN EXPENDITUR E AND EXEMPT INCOME. SINCE THE APPELLANT IS ENGAGED INTER ALIA I N TRADING OF SHARES ITS OFFICE ESTABLISHMENT MAN-POWER & OTHER RESOURCES WERE EMPLOYED IN THE ACTIVITY OF DEALING IN SHARES A PART OF WHICH WOULD NATURALLY BE RELATED TO INVESTMENT IN S HARES ON WHICH DIVIDEND AND LONG TERM CAPITAL GAIN HAS BEEN EARNED. ALSO A COMPANY CANNOT EARN DIVIDEND WITHOUT ITS EXISTENC E AND MANAGEMENT. INVESTMENT DECISIONS ARE VERY COMPLEX I N NATURE. THEY REQUIRE SUBSTANTIAL MARKET RESEARCH DAY TO DA Y ANALYSIS OF MARKET TRENDS AND DECISIONS WITH REGARD TO ACQUISIT ION RETENTION AND SALE OF SHARES UNITS OF MUTUAL FUNDS ETC. AT THE MOST APPROPRIATE TIME. THE INVESTMENT REQUIRES AVAI LABILITY OF FUNDS AND CONSEQUENTIAL BLOCKING OF FUNDS. BESIDES INVESTMENT DECISIONS ARE GENERALLY TAKEN IN THE MEETINGS OF TH E BOARD OF 3 ITA NO. 851/KOL/2014 ASSESSMENT YEAR: 2006-2007 DIRECTORS FOR WHICH ADMINISTRATIVE EXPENSES ARE INC URRED. IT IS THEREFORE NOT CORRECT TO SAY THAT DIVIDEND INCOME CAN BE EARNED BY INCURRING NO OR NOMINAL EXPENDITURE. THIS HAS AL SO BEEN HELD BY CHENNAI BENCH OF THE HON'BLE TRIBUNAL IN SOUTHER N PETROCHEMICAL INDUSTRIES V. DCIT [2005] 3 SOT 157; 93 TTJ (CHENNAI) 161 THEREFORE IT IS NOT REASONABLE TO CO NTEND THAT NO EXPENDITURE WAS INCURRED FOR EARNING OF EXEMPT INCO ME. IT IS SEEN THAT IN THE IMMEDIATELY PRECEDING YEAR I.E. A. Y. 2005-06 MY PREDECESSOR HAD VIDE ORDER DATED 18.03.2008 IN APP EAL NO. 311/CIT(A)-VII07-08IWD-6(2) UPHELD THE ACTION OF TH E ASSESSING OFFICER IN MAKING DISALLOWANCE U/S.14A IN RESPECT O F EXEMPT INCOME OF RS.7 38 529/- BUT RESTRICTED THE SAME TO RS.10 000/-. NO APPEAL AGAINST THE SAME APPEARS TO HAVE BEEN FIL ED BY THE APPELLANT. IN THE YEAR UNDER CONSIDERATION AMOUNT OF EXEMPT INCOME (DIVIDEND & LONG TERM CAPITAL GAIN) IS MUCH HIGHER. CONSIDERING THIS THE DISALLOWANCE OF RS.1 00 000/- MADE BY THE ASSESSING OFFICER IS IN MY OPINION QUITE REASONAB LE. THE DISALLOWANCE IS ACCORDINGLY CONFIRMED. 4. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS) THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL ON THE FO LLOWING GROUNDS:- 1. FOR THAT IN VIEW OF THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE THE LD CIT(A) ERRED IN CONFIRMING THE ACTION O F AO IN HOLDING THE PROFIT OF RS.31 72 624/- EARNED BY THE PETITIONER COMPANY ON SALE OF ITS INVESTMENTS AS BUSINESS INCO ME INSTEAD OF CAPITAL GAIN AS WAS OFFERED BY YOUR PETITIONER C OMPANY. THE ACTION OF ID. CIT(A) IS WHOLLY UNJUSTIFIED ILLEGAL AND BAD IN LAW AND IT MAY KINDLY BE HELD ACCORDINGLY. 2. FOR THAT IN VIEW OF THE FACTS AND IN THE CIRCUM STANCES THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF AO IN DISA LLOWING A SUM OF RS.1 00 000/- U/S 14A ON ESTIMATE AND IN VIE W OF THE FACTS AND IN THE CIRCUMSTANCES NO SUCH DISALLOWANCE WAS AT ALL CALLED FOR. EVEN OTHERWISE THE DISALLOWANCE MADE WA S HIGHLY EXCESSIVE AND WHOLLY UNREASONABLE. 3. FOR THAT IN VIEW OF THE FACTS AND IN THE CIRCUM STANCES THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF AO IN CHAR GING INTEREST U/S 234B AND 234D AS THE ADDITION / MADE BY THE AO CONFIRMED BY THE LD. CIT(A) IS SUBJECT TO BE DELETED AND IN V IEW OF THE FACTS AND IN THE CIRCUMSTANCES YOUR PETITIONER DENI ES ANY LIABILITY TOWARDS SUCH INTEREST CHARGED AND IN VIEW OF THE FACTS AND IN THE CIRCUMSTANCES SUCH INTEREST CHARGED MAY KINDLY BE DELETED. 5. AS REGARDS THE ISSUE INVOLVED IN GROUND NO. 1 T HE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT SIMILAR ISSUE INVOL VED IN ASSESSEES OWN CASE FOR THE EARLIER YEARS IS PENDING BEFORE THE HO NBLE CALCUTTA HIGH COURT. IN THIS REGARD HE HAS FILED A DECLARATION O F THE ASSESEE IN FORM NO. 4 ITA NO. 851/KOL/2014 ASSESSMENT YEAR: 2006-2007 8 AS PER SECTION 158A(1) OF THE ACT AND SUBMITTED T HAT THIS ISSUE MAY BE DECIDED AGAINST THE ASSESSEE AT THIS STAGE WITH A D IRECTION TO THE ASSESSING OFFICER TO AMEND HIS ORDER OF ASSESSMENT IF NECESSARY IN CONFORMITY WITH THE DECISION OF THE HONBLE CALCUTT A HIGH COURT FOR THE EARLIER YEARS WHEN IT BECOMES FINAL. GROUND NO. 1 O F THE ASSESSEES APPEAL IS ACCORDINGLY DISMISSED WITH A DIRECTION TO THE AS SESSING OFFICER TO AMEND THE ORDER OF ASSESSMENT FOR THE YEAR UNDER CO NSIDERATION IF NECESSARY ON THIS ISSUE IN CONFORMITY WITH THE DEC ISION OF HONBLE CALCUTTA HIGH COURT ON THE SIMILAR ISSUE AS AND WHE N IT BECOMES FINAL AS PER SUB-SECTION 5 OF SECTION 158A. 6. AS REGARDS THE ISSUE INVOLVED IN GROUND NO. 2 RE LATING TO THE DISALLOWANCE OF RS.1 00 000/- MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(APPEALS) UNDER SECTION 14A THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE DISALLOWANCE UN DER SECTION 14A OF RS.1 00 000/- IS EXCESSIVE AND UNREASONABLE KEEPING IN VIEW THE CORRESPONDING EXEMPT INCOME RECEIVED BY THE ASSESSE E IN THE FORM OF DIVIDEND ONLY TO THE EXTENT OF RS.2 77 363/-. HE HA S CONTENDED THAT THIS DISALLOWANCE MAY BE RESTRICTED TO 1% OF THE DIVIDEN D INCOME AS PER THE CONSISTENT STAND TAKEN BY THE TRIBUNAL. HOWEVER AS RIGHTLY SUBMITTED BY THE LD. D.R. THE ASSESSEE DURING THE YEAR UNDER CO NSIDERATION HAS RECEIVED IN ADDITION TO DIVIDEND INCOME SUBSTANTIAL LONG-TERM CAPITAL GAIN AMOUNTING TO RS.1 85 65 802/-. HE HAS CONTENDE D THAT THE DISALLOWANCE OF RS.1 00 000/- MADE UNDER SECTION 14 A KEEPING IN VIEW THE QUANTUM OF TOTAL EXEMPT INCOME EARNED BY THE AS SESSEE DURING THE YEAR UNDER CONSIDERATION IN THE FORM OF DIVIDEND AN D LONG-TERM CAPITAL GAIN IS QUITE FAIR AND REASONABLE. I FIND MERIT IN THE ARGUMENT OF THE LD. D.R. I ACCORDINGLY CONFIRM THE DISALLOWANCE OF RS.1 00 000/- MADE UNDER SECTION 14A AND DISMISS GROUND NO. 2 OF THE ASSESSE ES APPEAL. 7. THE ISSUE INVOLVED IN GROUND NO. 3 RELATING TO T HE CHARGING OF INTEREST UNDER SECTION 234B AND 234D IS CONSEQUENTI AL IN NATURE AND THE 5 ITA NO. 851/KOL/2014 ASSESSMENT YEAR: 2006-2007 ASSESSING OFFICER IS ACCORDINGLY DIRECTED TO ALLOW CONSEQUENTIAL RELIEF TO THE ASSESSEE IF ANY ON THIS ISSUE. 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DAY OF NOVEMBER 2017. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER KOLKATA THE 30 TH DAY OF NOVEMBER 2017 COPIES TO : (1) INDI STOCK PVT. LIMITED 7 LYONS RANGE 3 RD FLOOR KOLKATA-700 001 2) INCOME TAX OFFICER WARD-6(2) KOLKATA AAYAKAR BHAWAN P-7 CHOWRINGHEE SQUARE KOLKATA-700 069 (3) CIT(APPEALS)-VI KOLKATA (4) CIT- KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY HEAD OF OFFICE/DDO INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES KOLKATA LAHA/SR. P.S.