TMI Blog2018 (3) TMI 210X X X X Extracts X X X X X X X X Extracts X X X X ..... quantum disallowance u/s 14A following the Tribunal’s order for earlier years, since aggregate interest free owned funds far exceeded aggregate investment, drawing the presumption in assessee’s favor, we delete the impugned addition. Resultantly, this ground of assessee’s appeal succeeds. Disallowance u/s 40(a)(ia) on account of delayed payment of TDS - Held that:- the matter stood covered in assessee’s favour by the judgment of Hon’ble Delhi High Court rendered in CIT Vs. Naresh Kumar [2013 (9) TMI 275 - DELHI HIGH COURT]. Although the TDS has been deposited by the assessee beyond due date but it is well before the due date of filing of return of income by the assessee. The facts of the issue are squarely covered by the ratio of cited decision of Hon’ble Delhi High Court where it has been held that the provisions of Section 40(a)(ia) were to be interpreted liberally and equitably keeping in mind the object and purpose behind the same so that the assessee do not suffer unintended and deleterious consequences and therefore the amendment to Section 40(a)(ia) as made by Finance Act, 2010 was retrospective in nature and therefore the amount of TDS which is deposited late but before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not been verified by the lower authorities. Therefore, we concur with the stand of Ld. CIT(A) subject to verification of factual matrix by Ld. AO. Therefore, the matter is remitted back to the file of Ld. AO for verification of factual matrix - I.T.A. Nos.3980, 3981 & 3982/Mum/2013, I.T.A. No.4459/Mum/2013 - - - Dated:- 24-1-2018 - Shri Saktijit Dey, JM And Shri Manoj Kumar Aggarwal, AM For the Revenue : S.C.Tiwari CIT (DR) Saurabh Kumar Rai, Ld.DR s For the Assessee : M.M.Golvala Akram Khan, Ld.AR s ORDER Per Bench 1. The captioned appeals by assessee as well as revenue from Assessment Years [AY] 2005-06 to 2007-08 contests common order of Ld. First Appellant Authority on various grounds of appeal. Since the issues are common, we dispose-off the same by way of this common order for the sake of convenience and brevity. The appeals ITA Nos. 3980 to 3982/Mum/2013 are the assessee s appeal for AYs 2005-06 to 2007-08 whereas ITA No. 4459/Mum/2013 is revenue s appeal for AY 2006-07. The assessments for three years was framed by Ld. Deputy Commissioner of Income Tax-Circle 2(2), Mumbai [AO] u/s 143(3) vide separate orders dated 28/12/2007, 24/12/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness income, then the Appellant should be granted rebate under section 88E in respect of the securities transaction tax (STT) paid on purchase and sale of shares and mutual funds. 3.1 Facts qua the issues are that the assessee being resident corporate assessee engaged as Non-Banking Finance Company [NBFC] in the business of leasing, Hire purchase and other financial activities was assessed u/s 143(3) at ₹ 7,42,58,740/- under normal provisions after certain adjustments / disallowances as against returned income of ₹ 1,81,27,820/- filed by the assessee on 28/10/2005. 3.2 The first issue relates with treatment of certain Short Term Capital Gains [in short STCG ] on sale of Shares / Mutual Fund. During assessment proceedings, it was noted that the assessee earned STCG on sale of shares / mutual fund for ₹ 1,37,35,373/-. Keeping in view the frequency and volume, Ld. AO opined that the same was chargeable to tax under Business Income and hence, taxable at higher rate of 35% as against concessional rate of 10% as claimed by the assessee. After considering assessee s submissions, not convinced, the said income was treated as Business Income ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uced the same to ₹ 8,50,107/-. 4. The Ld. Counsel for Assessee [AR], vehemently argued the various grounds of appeal by drawing our attention to various documents placed in the paper-book whereas Ld. Departmental Representative [DR] supported the stand taken by the revenue. 5.1 We have carefully heard the rival contentions and perused relevant material on record. Ground No.1 is related with treatment of STCG on sale of shares / mutual fund whereas Ground No. 8 is alternative ground qua rebate u/s 88E for STT paid by the assessee. During hearing before us, Ld. AR fairly conceded that the amount of STCG earned by the assessee included certain intra-day gains / losses which were in the nature of speculation and hence were required to be excluded while arriving at figures of STCG . Therefore, at the outset, we direct Ld. AO to exclude the same from the figures of STCG and treat the same as speculation in nature. The assessee is directed to provide the relevant details thereof to the Ld. AO. The assessee s ground of appeal to that extent stand dismissed. 5.2 Proceeding further, the assessee has placed on record working of various ratios to assert th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ease of reference:- 8.1 Thus, the nature of activities, modus operandi of the assessee, manner of keeping records and presentation of shares as investment at the year end is same in all the years, hence; apparently, there appears no reason as to why the claims made by the assessee should not be accepted. However, the Revenue Authorities have taken a different view in the year under consideration by holding that principle of res judicata is not applicable to the assessment proceedings. There cannot be, in our view, any dispute on this aspect but there is also another judicial thought, that there should be uniformity in treatment and consistency under the same facts and circumstances and we have already found that facts and circumstances are identical, even though a different stand has been taken by the Revenue Authorities. This action of the Revenue Authorities has led us to ask ourselves that in this year why it has been done so. In the process to find the answer, we noted that there was a change in the scheme of taxation relating to short-term capital gains and long-term capital gains. Through the Finance Act, 2004, the Legislature imposed securities transaction tax on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ins only subject to adjustment as envisaged by us in Paragraph 5.1 above. Resultantly, Ground No. 1 of assessee s appeal stands partly allowed which makes Ground No. 8 infructuous. 5.3 Ground Numbers 2 3 are related with gains on securitization of certain assets. In this regard, the Ld. AR drew attention to the fact that this matter stood against the assessee by the orders of the Tribunal from AYs 2000-2001 to 2004-05. However, the Ld. AR contended that a proportion of this amount has already been offered to tax by the assessee on spread over basis and therefore, the same amount could not be taxed twice and therefore, the relief to that extent should be granted to the assessee. Upon perusal of paragraph 3.2 of the order of Ld. first appellate authority, we find that relief of spread over amounts already offered to tax by the assessee starting from AYs 2005-06 to 2008-09 has already been provided by Ld. CIT(A) to the assessee. Further, the income from securitization has accrued to the assessee in the impugned AY only and we fail to understand how this income was already offered to tax on spread over basis in earlier AYs 2003-04 2004-05. Prima facie, it appears that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ushan Steel Ltd. , in turn, placed reliance on the decision of Hon ble Supreme Court rendered in Apollo Tyres Ltd. Vs. CIT [255 ITR 273] which held that the Assessing Officer did not have the jurisdiction to go behind the net profit shown in the Profit Loss Account except to the extent provided in Explanation to Section 115J. Similar view has been expressed by our jurisdictional Bombay High Court rendered in CIT Vs. JSW Energy Limited [2015 60 Taxmann.com 303], CIT v. Essar Teleholdings Ltd. [ITA No. 438 of 2012, dated 07/08/2014] CIT Vs. Bengal Finance Investments Pvt. Limited [ITA No. 337 of 2013 dated 10/02/2015]. Therefore, respectfully following the catena of judgment in assessee s favour, we, at the outset, hold that adjustment of disallowance u/s 14A was not required to be made in Book Profits for the purpose of Section 115JB. Resultantly, Ground No. 6 stands allowed. 5.5 So far as the quantum disallowance u/s 14A as raised in Ground Numbers 3 4 is concerned, the primary contention of Ld. AR is that the assessee had sufficient interest free own funds to make the investments and therefore, a presumption had to be drawn that investments were out of interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010 was retrospective in nature and therefore the amount of TDS which is deposited late but before due date of filing of return of income enables the assessee to claim the deduction of the expenditure in the concerned year itself. Respectfully following the same, by deleting the impugned addition, we allow this ground of assessee s appeal. 6. Resultantly, the assessee s appeal stands partly allowed in terms of our above order. ITA No. 3981/Mum/2013 for AY 2006-07-Assessee s Appeal 7. The assessee, in this year has raised identical worded original grounds of appeal as well as additional grounds of appeal which may be summed up in the following manner:- 1. On the facts and circumstances of the case and in law, the learned Commissioner of Income tax (Appeals) erred in confirming the action of the assessing officer to treat the gain arising on sale of equity shares and mutual funds as business income instead of short term capital gain. 2. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in confirming the disallowance of depreciation in respect of motor cars given under finance lease by the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.1 Ground No. 2 is related with allowance of depreciation on motors cars given on finance lease basis. Facts related to the same are that the assessee claimed depreciation of ₹ 50.81 Lacs on vehicles claimed to be given on lease. The Ld. AO opined that the same were mere financing in nature and the borrowers were the actual owner. Relying on the decision of Hon ble Supreme Court rendered in Asea Brown Boveri Ltd. Vs. IFCI [154 Taxman 512], Ld. AO denied depreciation to the extent of ₹ 50.81 Lacs and allowed consequential relief to the extent of ₹ 31.43 Lacs, being capital recovery of loans included in the lease rentals. The Ld. CIT(A) after perusal of various clauses of agreement confirmed the stand of Ld. AO that the transactions were mere granting of loans in the nature of finance lease and the lessees were the real owner of the vehicles and therefore, the depreciation could not be allowed to the assessee. Aggrieved, the assessee is in further appeal before us. 8.2 The Ld. AR, placing reliance on the judgment of Apex Court rendered in I.C.D.S. Ltd. Vs. CIT [350 ITR 527], drew attention to the fact that the matter was decided by the Tribunal agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther the investments which did not yield any exempt income during the year would not enter into the computations thereof. Upon perusal, we concur with the stand of Ld. AR that Rule 8D was not applicable during the impugned AY and therefore, disallowance, if any, was required to be made only on an estimated basis. We find that the assessee has earned exempt income of ₹ 281.06 Lacs in the impugned AY and therefore, upon factual matrix, we estimate the same @2% of the exempt income which comes to ₹ 5.62 Lacs. The assessee gets partial relief for the balance addition. Accordingly, these grounds stands partly allowed. In nutshell, the assessee s appeal stands partly allowed. ITA No. 3982/Mum/2013 for AY 2007-08-Assessee s Appeal 9. The original grounds as well as additional grounds raised by the assessee may be summed up in the following manner:- 1. On the facts and circumstances of the case and in law, the learned Commissioner of Income tax (Appeals) erred in confirming the action of the assessing officer to treat the gain arising on sale of equity shares and mutual funds as business income instead of short term capital gain. 2. On the facts and in the ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round No. 9 stands allowed. Ground No. 10 is treated as dismissed being infructuous since Ground No. 1 has been held in assessee s favour. Ground Numbers 3 4 raises new claims by the assessee and therefore, remitted back to the file of Ld. AO on similar lines. Hence, the same stands allowed for statistical purposes. 10.2 Ground Numbers 5 to 8 are related with disallowance u/s 14A. The assessee earned exempt income of ₹ 138.37 Lacs during the year and during proceedings before Ld. AO, furnished disallowance in terms of Rule 8D at ₹ 185.66 Lacs which has been confirmed by Ld. AO. The Ld. CIT(A), upon factual matrix, restricted the same to ₹ 14.33 Lacs u/r 8D(2)(iii) against which the assessee is in further appeal before us. Since we have already estimated the same @2% in AY 2006-07, taking the same stand, we restrict the same to 2% of exempt income which comes to ₹ 2.76 Lacs. The assessee gets partial relief for the balance addition and therefore, these grounds stands partly allowed. Resultantly, the assessee s appeal stands partly allowed. ITA No. 4459/Mum/2013 for AY 2006-07 Revenue s Appeal 11. The revenue has raised the following effecti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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