TMI Blog2015 (6) TMI 630X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 74,11,018/- needs to be reduced from the disallowance made during the year under consideration subject to verification by A.O. Therefore, we are of the opinion that the case of assessee be remitted back to the office of A.O. who on the basis of documents and returns and accounts of assessee for Assessment Year 2008-09 will examine the claim of Ld. A.R. regarding offering of such amount in the return of income and if the same is found to have been offered in such assessment year then he will reduce this amount from disallowance made in the year under consideration. - Decided partly in favour of assessee for statistical purposes. - I.T.A. No.902 /Del/2009 - - - Dated:- 10-6-2015 - Shri G. C. Gupta and Shri T.S. Kapoor,JJ For the Petitioner: Shri Pradeep Dinodia, CA Shri R. K. Kapoor, CA For the Respondent : Shri Dam Kununjna Sr. DR ORDER PER T.S. KAPOOR, AM: This is an appeal filed by assessee against the order of Ld. CIT(A) dated 09.01.2009. This appeal was earlier heard on 12.03.2015. However, the appeal was refixed and finally was heard on 15.05.2015. The assessee has taken five grounds of appeal, out of which grounds 1 5 are general in na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s stock in trade. It was submitted that 19 group companies were merged in the assessee company vide order of Hon'ble High Court and these companies were also engaged in the business of real estate development and these companies had purchased stamp papers for execution of various land purchases from various farmers. However, the sale deeds could not be executed as farmers had refused to execute the same and, therefore, an application for refund on account of these stamp papers was filed before Collector, Gurgaon on 27.04.2001 and Collector Gurgaon vide order dated 08.02.2003 had rejected the claim of these companies on the ground that the claim wass barred by limitation u/s 50 of Indian Stamp Act. It was further submitted that the total amount involved on account of purchase of stamp papers was ₹ 2,42,90,550/- out of which ₹ 24,29,055/- was written off in Assessment Year 2002-03 itself as the claim of refund was available for only 90% of value stamp papers. The assessee had claimed balance of ₹ 2,18,61,495/- as loss in the year under consideration. The A.O. however, did not accept the argument of assessee and made addition of ₹ 2,18,61,495/- by holding a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o stretch of logic this claim of loss/expenditure is related to assessment year 2004-05. The following table made it clear :- S.N. Description Date Fin. Year Assessment Year 1 Purchase of stamp papers 22.08.2000 01.09.2000 2000-01 2001-02 2 Execution of stamp papers March, 2001 2000-01 2001-02 3 Time barring limit as per stamp Act March, 2001 2000-01 2001-02 4 Order of collector Gurgaon 08.02.2003 2002-03 2003-04 5 Receipt of order of collector Gurgaon (as per certified copy furnished by the A.R.) 12.07.2005 2004-05 2005-06 The assessee was following mercantile system of accounting, therefore, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent under consideration. On going through the balance sheet of 19 different companies, it is seen that those companies were engaged in investments as well as purchase and after development sales of the land. It is not clear from the balance sheet or details filed by the appellant whether the land which was intended to be purchased was part of investment or stock in trade. However, from the fact that expense was debited under the head loan and advances' and not under the head 'stock in trade', it is ample clear that the purchase of land was intended for investment purposes. It is also 'seen that the appellant has not filed any documentary evidence or any other supporting evidences to substantiate its claim that these stamp papers were purchased by the erstwhile 19 companies for purchase of land. It is seen that the expenditure was not incurred by the appellant during the year under reference. The validity of the stamp papers has lapsed in the financial year 2000-01 which was relevant to A Y 2001- 02. If the appellant's contention is to be believed that this expenditure is revenue expenditure then it should have been claimed in the same A.Y. i.e. A.Y. 2001- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement filed in respect of four companies is unregistered documents on plain papers which have no legal validity. 5. The appellant itself has claimed 10% of the expenditure in A Y 2003-04 which shows that the expenditure was not revenue expenditure. In view of the above observations it is abundantly clear that the expenditure on account of stamp paper purchased was not supported by various documents and was not at all revenue expenditure allowable during the year under consideration. The reliance is placed on the judgement of Hon'ble Kerala High Court in the case of CIT Vs. M/s Malabar Building Products Ltd. (2001) 251 ITR 487 wherein it is held that expenditure incurred by the assessee on stamp paper in connection with registration of units in its names would not be allowable as deduction U!5 37(1) or u/s 57(iii) of the I. T Act . The assessee purchased units of units of Unit Trust of 1ndiafrom persons other than Unit Trust of India. It incurred expenditure on purchase of stamp paper for registration of units as deduction in computing income from units. It was held that the said expenditure was not merely for purpose of getting dividend but for register ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven advance to a joint venture company which was declared sick by BIFR and advance had become bad. Ld. A.R. submitted that Hon'ble Supreme Court had held that the said amount was allowable as deduction when it was written off in the books of account. Ld. A.R. further submitted that the case of assessee is also supported by Hon'ble Supreme Court decision in the case of TRF Ltd. vs CIT 323 ITR 397. He submitted this principle of law has been held by Hon ble Jurisdictional High Court in the case of CIT Vs D B India Securities Ltd. 187 Taxman 161. He submitted that the amount represented recoverable debt from Govt. and arose out of valid transaction of purchase of stamp papers which was for bona fide purposes of the assessee s business. He submitted that before it could be utilized the same were reflected in the balance sheets as business advance recoverable and when the assessee failed to recover the amount, it was written off and therefore he argued that the amount actually represented bad debt and, therefore, the ratio of Hon'ble Supreme Court in the case of TRF Ltd. was squarely applicable. Ld. A.R. further relied upon the following case law for the proposition that lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) Out of 39 companies, 19 companies had purchased stamp papers in the Assessment Year 2001-02 which could not be utilized for execution of sale deed, therefore, 10% of the cost of stamp papers were written off in the books of account in the Assessment Year 2002- 03. The assessee applied to Collector Gurgaon for refund of 90% of cost of stamp papers during Assessment Year 2002-03. iii) The Collector Gurgaon rejected the application of assessee vide order dated 08.02.2003, the copy of such order has been claimed to have been received by assessee on 20.07.2005. iv) During Assessment Year 2008-09, the Ld. A.R. has claimed to have received refund of ₹ 74,11,018/-, out of claim of the cost of stamp papers which the Ld. A.R. had claimed to have been offered as income in the said Assessment Year. 8. From the above facts and circumstances, it is apparent that the expenses for purchase of stamp papers were not incurred in the year under consideration. Now, the question is as to whether the expenses incurred in earlier year can be deemed be relating to the year under consideration on the basis of claim of assessee that the same were written off in the books of accounts in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prepared at least after three-four months from the date of closing. Therefore, there was sufficient time period available to assessee for writing off the claim in Assessment Year 2003-04. Therefore, the deduction claimed in the year under consideration cannot be said to have materialized in the present year specifically in view of the fact that assessee received part of claim in Assessment Year 2008-09, which implies that fact of non recovery of cost of stamp papers became final in Assessment Year 2008-09. 11. As per provisions of the income tax Act, income tax is chargeable on the income of an assessee and income has to be calculated in accordance with provisions of this Act and further every year is a separate Assessment Year. 12. As per section 145 of the I. T. Act, 1961, the income chargeable under the head profits and gains of business and profession is to be computed in accordance with cash or mercantile system of accounting as regularly employed by the assessee. Under mercantile system of accounting, all expenses relating to the year and all incomes relating to the year are considered in the year of its incurrence or accrual. Admittedly, the assessee w as following me ..... X X X X Extracts X X X X X X X X Extracts X X X X
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