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M/s Frost International Ltd. Versus ACIT, -6, Kanpur

2015 (11) TMI 1202 - ITAT LUCKNOW

Rectification of mistake - First mistake is that the amount of ₹ 60.20 lakh noted by the Tribunal in Para 6 of the Tribunal order is in fact not an investment for earning tax free income and therefore, this should not be considered as a basis for deciding the disallowance u/s 14A of the Act and in the same manner, the amount of investment of ₹ 340.80 lakh as on 31.03.2009 is also not an investment for earning tax free income and therefore, this should also not be considered for decid .....

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nd as on 31.03.2009 are noted by the Tribunal in Para 6 of the impugned tribunal order, it cannot be said that there is an apparent mistake in the Tribunal order which will result in the change in ultimate conclusion. We have seen that even after omitting these two figures of closing stock and adoption of a correct figure in place of wrong figure of income, the result and ultimate conclusion remain the same because these figures were not at all considered as a basis for coming to this conclusion .....

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nce sheet as on 31.03.2008 and 31.03.2009 showing closing stock of shares at ₹ 2431 lakh and ₹ 795.36 lakh is not considered by tribunal is factually incorrect because both these figures are duly considered in Para 6.1 of the Tribunal order as reproduced above. Hence, the ultimate conclusion remains the same. Even if there is a mistake in the tribunal order in coming to this conclusion that the assessee is not a dealer in shares, such mistake, if any, is not an apparent mistake recti .....

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identical and the same is reproduced below for the sake of ready reference:- The Department has preferred an appeal against the order of learned CIT (A) -II, Kanpur dated 19.04.2012 before the Hon'ble Tribunal which were registered as Income Tax Appeals No. 419 & 420/L/2012 relevant for A.Y. 2008-09 & 09-10. During the passing of the consolidation order by the Hon'ble Tribunal dt. 07.01.2015 the following mistakes have inadvertently crept in the order of Tribunal. Particulars of .....

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the jurisdictional High Court has held that it is the frequency of the transaction the test which will decide whether the share were held in stock in trade or as investment. A. In correct/mistaken reading of the final account of the assessee: In Para 6 an investment of ₹ 6.20 Laces, is referred. This is not an amount which is relevant for determining sec.!4A disallowance because it represents a land purchased by the assessee at Delhi. The income of ₹ 728.23 Laces resulting in gain on .....

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this investment no evident has been earned during the year and this investment is a part of strategic business investment of the assessee i.e. to create holding subsidiary relationship. In the 3rd line of para6 a figure of ₹ 790.93 has been written as 709.93. The valuation of the closing stock of shares as per accounting slandered 2. The ITAT omitted to consider the following schedules. (i) Balance sheet as on 31,03.2008 Schedule 6 appearing on page 11 of the Paper Book under the head cur .....

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and it was pointed out that as per page 6 of the paper book, the amount of investment as on 31.03.2008 is shown at ₹ 60.20 lakh. He further pointed out that on page 11 of the paper book is Schedule-5 which gives the details of these investments and as per the same, it can be seen that this amount of ₹ 60.20 lakh is on account of land at New Delhi and not on account of investment in shares and therefore, this investment is not relevant for the purpose of disallowance u/s 14A of the A .....

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of the Tribunal order particularly last three line on this page of the Tribunal order and it was pointed out that amount of ₹ 709.93 lakh noted by the Tribunal on this page is incorrect and the same should be ₹ 790.93 lakh. It was also a submission that the Tribunal has omitted to consider Schedule-6 of the balance sheet as on 31.03.2008 available on page 11 of the paper book and also relevant schedule for the balance sheet as on 31.03.2009 available on page 33 of the paper book and .....

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basis for deciding the disallowance u/s 14A of the Act and in the same manner, the amount of investment of ₹ 340.80 lakh as on 31.03.2009 is also not an investment for earning tax free income and therefore, this should also not be considered for deciding the disallowance u/s 14A of the Act. Regarding both these aspects, we find force in the submissions of the Ld. AR of the assessee to the extent that these two investment amounts should not be taken into consideration for deciding the issu .....

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Para 6 of the impugned tribunal order should read as under:- 6. Learned AR of the asessee has also placed reliance on the decision of Hon'ble Karnataka High Court rendered in the case of CCI Limited vs. JCIT, 250 CTR 291 wherein it is held that if the assessee is dealer in shares, it has to be accepted that dividend income is incidental to his business of dealing in the shares and therefore, the expenditure incurred in acquiring shares, cannot be apportioned to the extent of dividend income .....

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herefore, it is seen that the assessee is not a dealer in shares but investor in shares. Similarly, as per Schedule-8 to the profit & loss account for the year ended as on 31.03.2009, appearing on page No. 34 of the paper book, the assessee is showing income of ₹ 10.13 lacs under the head profit from trading in securities and in the previous year column, the assessee is showing income of ₹ 790.93 lacs under the same heading whereas in the Schedule-8, for the preceding year, the a .....

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g income is not reported in net figure but is reported by showing opening stock, purchase, closing stock and sale. A specific approved method of valuing closing stock is also disclosed in such cases which has to be consistently followed by the assessee. In the present case, all these features are missing. Therefore, this judgment of Hon'ble Karnataka High Court is not applicable because the assessee is not dealer in present case. 5. Hence, we find that even as per the amended Para 6 as above .....

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.1 and 6.2 of the impugned Tribunal order because major discussion is in these two paras regarding this finding that the assessee company is not dealing in shares. Hence, these paras are also reproduced herein below:- 6.1 We have also seen that in Schedule No. 6 of the Balance Sheet as appearing on page 11 of the paper book, the assessee is showing Inventories on account of Shares of unlisted Indian companies ₹ 53 Lacs and Listed Securities ₹ 2431.49 Lacs as on 31.03.2008. Similarly, .....

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stated on page 13 and 35 of the paper book. 6.2 Moreover in clause 17 of Notes to Accounts for year ending on 31.03.2008 on page 16 of paper book and in clause 18 of Notes to Accounts for year ending on 31.03.2009 on page 37 of paper book, it is stated that the company is engaged in trading of various commodities and quantitative details as required by paragraph 3 of part II to the Schedule VI of the Companies Act, 1956 are stated in these paras which include Agri Commodities, Diamonds, Iron Or .....

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ven for other commodities. Hence we have no hesitation in holding that as per the facts coming out from above discussion, the assessee company was not dealing in shares. 6. On combined reading of amended and rectified Para 6 of the Tribunal order as above and Para 6.1 and 6.2 of the impugned Tribunal order reproduced above, it can be seen that basis of the decision of the Tribunal that assessee company is not dealing in shares is not the amount of investment as on 31.03.2008 of ₹ 60.20 lak .....

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0.13 lakh under the head profit from trading in securities and against this amount, under the head profit from trading in securities, in the previous year column, the assessee is showing income of ₹ 790.93 lakh, which is the total of income of ₹ 728.23 under the heading gain on short term investment and ₹ 62.70 lakh under the heading profit from derivative. Based on these facts and also this fact that the assessee company has not reported the transaction in share in the form of .....

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n shares particularly when assessee company is valuing inventories of trading goods at cost or market price whichever is lower but the stock of shares is valued at cost as stated on page 13 and 35 of the paper book. Apart from this, it is also noted by the Tribunal in Para 6.2 of the Tribunal order that the assessee company is engaged in trading of various commodities and quantity details as required by paragraph 3 of part II to the Schedule VI of the companies Act, 1956 are stated with regard t .....

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