TMI Blog2019 (7) TMI 1081X X X X Extracts X X X X X X X X Extracts X X X X ..... curred loss and tried to justify it as shortterm capital loss incurred by the assessee. The learned departmental representative could not point out any distinction between the transactions entered into by the assessee in assessment year 2004 05 and transactions entered into by the assessee in assessment year 2005 06. In view of the above facts, it is a clear-cut case of the change of opinion by the learned assessing officer only to extract the higher tax. The assessing officer is blowing hot and cold on the same set of facts in two different assessment years to cough up more taxes from the assessee. This tactic of the learned AO deserves to be condemned. The learned departmental representative also could not point out any infirmity in the order of CIT A in he stated that assessee has maintained two portfolios whereas the life insurance investment is held to be an investment portfolio and other securities are held to be the trading assets. In view of this, we dismiss ground number 3 of the appeal of AO. Disallowance u/s 35D in respect of preliminary expense - HELD THAT:- This issue is squarely covered in favour of the assessee by the decision of the honourable Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said that assessee does not have any business in this year. The learned DR could not point out any infirmity in the order of the learned CIT(A) - dismiss ground of the appeal of revenue - ITA No. 2477 And 981/Del/2011 - - - Dated:- 18-7-2019 - Shri Kuldip Singh, Judicial Member And Shri Prashant Maharishi, Accountant Member For the Assessee : Shri Rohit Jain, Adv, Shri Bharath Janarthanan, Adv For the Revenue : Smt Naina Soin Kapil, Sr. DR ORDER PER PRASHANT MAHARISHI, A. M. 1. These are the two appeals filed by the learned Assessing Officer against the order of the learned COMMISSIONER OF INCOME TAX (APPEALS) 1, New Delhi dated 25/2/2011 for assessment year 2005 06 and 15/11/2010 for assessment year 2007 2008. 2. The revenue has raised the following grounds of appeal in ITA No. 2477/Del/2011 for the Assessment Year 2005-06 1. The order of the ld CIT(A) is not correct in law and facts. 2. Whether on the facts and in the circumstances of the case, the CIT (A) has erred in deleting disallowance of ₹ 8,403/- made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal is general in nature and therefore it is dismissed. 6. Ground number 2 is against the disallowance u/s 14 A of the income tax act of INR 8 403/ deleted by the learned CIT appeal. The learned assessing officer noted that assessee has earned dividend income of INR 1 640946/ and operational expenses against such income have claimed deduction. However no deduction is to be allowed under section 14 A of the income tax act in respect of the expenditure incurred by the assessee in relation to the income which does not form part of the total income. As per order sheet entry dated 4/10/2007 the assessee was asked to show cause as to why the proportional disallowance of expenses against this dividend income should not be made. The assessee submitted that these expenses incurred by the assessee are minimum expenses, which are required by a corporate entity to retain its status as a corporate entity and should not be disallowed. After considering the explanation of the assessee, he proportionately disallowed the expenses of INR 8 403/ out of total operational expenses incurred by the assessee of INR 3 00608/ . On appeal before the learned CIT A, he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the order of the learned CIT A in deleting the disallowance of INR 8 403/ u/s 14 A of the income tax act. Accordingly, ground number 2 of the appeal is dismissed. 10. Ground number 2 is with respect to the disallowance deleted by the learned CIT A on account of loss on sale of securities of INR 1 2435157/ . The learned assessing officer noted that assessee has claimed the loss on sale of securities of INR 1 2435157/ . The assessee was asked to justify its claim. The assessee submitted that company is in the nature of investment company. Making of investment is the only business of the company. Assets held are not in the nature of capital asset but are business assets of the company. Therefore, the profit and loss, which arises as to the assessee on transfer of such assets, is chargeable to tax only under the head business income. The learned assessing officer noted that assessee company is not engaged in the business of dealing in shares of securities but the surplus fund which were available with the assessee were invested for earning of the income such was the claim of the assessee as per his letter dated 19/11/2007. On consideration of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve carefully considered the rival contention and perused the order of the learned lower authorities. The fact shows that the assessee has debited loss on sale of securities of INR 1 2435157/ in its profit and loss account and claimed it as business loss. The claim of the assessee is that assessee company is in the business of investment in making of investment, that is the only business of the company. Therefore investemnst hld by the assessee in non life insurance business held are not in the nature of capital asset but are business assets of the assessee company. Therefore any profit or loss arising in liquidation of such asset is in the nature of business income/loss as has been rightly claimed by the assessee. It was further claimed by the assessee that from the conduct of the assessee in the earlier years which is of treating the income arising from sale of purchase of securities as business income in assessment year 2004 05, which is assessed as such u/s 143 (3) of the act for that year, now the stand of the assessing officer to treat it otherwise, when there is a loss on sale of securities as capital loss is changing the stand in the year in which it is beneficial to reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with it, were invested by it to earn income from shares on securities. According to the assessing officer the appellant s reply is in contravention and, therefore referring to the sum circular number 4 of CBDT he proceeded to treat the loss claimed by the appellant on the sale of securities to be in the nature of capital loss and not as business loss and disallowed the same. On behalf of the appellant it was vehemently argued that the assessing officer has misunderstood the reply of the appellant as the main object of the appellant company was to promote life insurance company and to invest in purchase of shares, debentures and stocks of other companies and the appellant company was, therefore, in the nature of an investment company. The nature of the activity of the appellant company is that of investing turnaround, selling and buying of shares and securities on a regular basis and, therefore the appellant was entitled to show income as business income and to claim the loss as business loss. I have carefully considered the facts and circumstances of the case and I have also perused the circular referred to by the assessing officer in which circula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i). As a result, I direct the assessing officer to treat the laws of the sale of securities as business loss in the hands of appellant and compute the income accordingly. [ underline supplied by us ] 15. It is interesting to note that in assessment year 2004 05 the assessee has earned profit on sale of the securities which has been assessed by the learned assessing officer u/s 143 (3) of the income tax act as business income. However, during the year the learned assessing officer has changed his stand when assessee has incurred loss and tried to justify it as shortterm capital loss incurred by the assessee. The learned departmental representative could not point out any distinction between the transactions entered into by the assessee in assessment year 2004 05 and transactions entered into by the assessee in assessment year 2005 06. In view of the above facts, it is a clear-cut case of the change of opinion by the learned assessing officer only to extract the higher tax. The assessing officer is blowing hot and cold on the same set of facts in two different assessment years to cough up more taxes from the assessee. This tac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year 2005 06 is dismissed. 19. Now we come to the appeal of the assessing officer for assessment year 2007 08 wherein he has raised the following grounds of appeal in ITA No. 981/Del/2011 for the Assessment Year 2007-08:- 1. The order of the ld CIT(A) is not correct in law and facts. 2. On the facts and in the circumstances of the case, the ld CIT(A) has erred in law and facts in deleting the addition of ₹ 2,24,140/- made by AO on the account of preliminary expenses written off during the year. 3. On the facts and in the circumstances of the case, the ld CIT(A) has erred in law and facts in deleting the addition of ₹ 1,01,54,708/- made by the AO on the account of interest expenses. 20. In short the fact shows that assessee is a company, filed its return of income at INR 1 33033102/ on 31/10/2007. The assessee company is a promoter company of Sahara India life insurance Company for conduct of life insurance business. During the year the assessee company has received interest of INR 1 22813372/ and income from sale of securities of INR 1 04410014/ . The assessment u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06 wherein we have dismissed the above ground following the decision of the honourable Supreme Court in 73 taxmann.com 293 (SC ) in case of Shashun chemicals and drugs Ltd vs Commissioner Of Income Tax, wherein it has been held that where the assessee company was granted deduction under section 35D for a period of 10 years and same was granted for initial 2 years, the assessing officer could not reject claim for subsequent year stating that such expenditure are capital in nature. As in the present case also the deduction allowed to the assessee under section 35D initially has not been disturbed, therefore the learned assessing officer cannot now disturbed in subsequent years this deduction. Accordingly, ground number 2 of the appeal is dismissed. 24. Ground number 3 of the appeal is with respect to the disallowance deleted by the learned CIT A on account of interest expenditure of INR 1 0154708/ . The briefly the fact shows that the assessee has earned interest on income tax refund of INR 8 42910/ which has been shown by the assessee under the head income from other sources however assessee has claimed the total interest expenditure of INR 1 0378848/ under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant is entitled to deduction of claim of interest on the funds borrowed which, in turn, have augmented the income of the appellant under the head income from other sources and therefore the same is a direct Nexus with the earning of income and is fully allowable u/s 57 of the income tax act. In light of the above, I direct the assessing officer to delete the addition of INR 1 0154708/ . The learned CIT A has examined the allowability of expenditure under the head profits and gains of business or profession as well as under the other head of income from other sources , and in both the heads, he held that the expenditure is allowable to the assessee. On analysis of the annual accounts of the assessee and further when deduction u/s 35D of the income tax act under the head profits and gains of the business has been allowed to the assessee as per the decision of the honourable Supreme Court, it cannot be said that assessee does not have any business, therefore, the interest expenditure incurred by the assessee is allowable as deduction under both the heads. In AY 2005-06, we have also held that assessee s loss of sales of securities is c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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