TMI Blog2020 (3) TMI 1225X X X X Extracts X X X X X X X X Extracts X X X X ..... ional Bank, no other details were furnished before the lower authorities as to how the above business can be assessed as a business income. Therefore, we conquer with the findings of the lower authorities and dismiss ground number four of the appeal. Interest income from fixed deposit receipts as income from other sources - HELD THAT:- No infirmity in the order of the lower authorities as assessee has merely placed fixed deposits with the banks and it has not been shown that how the earning of the bank‟s deposit receipt interest can be said to be interest income chargeable to tax under the head business income. Thus, ground number five of the appeal is also dismissed. Penalty u/s 271(1)(c) - HELD THAT:- Claim of the assessee though ultimately not accepted by the concurrent authorities but it cannot be denied that issue raised is not debatable. Further, when the issue itself is debatable, it cannot result into penalty. Based on our discussion also in the quantum appellate proceedings before us covered in this order, it cannot be denied that claim of the assessee is not debatable. Assessee has furnished all the particulars related to its claim. None of the evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest expenses of ₹ 2,23,03,31,321/- in computing total income of the appellant. 3.0 That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified grossly erred in holding that no business activity was carried out by the appellant without considering the fact that transaction of purchase of shares was carried out in the normal course of business. 4(a). That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified grossly erred in treating the Services Revenue of ₹ 15,28,000/- earned by the appellant during the normal course of carrying on its business activities, including renting of space for ATMs as 'Income from House Property'. 4(b). That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) erred in ignoring the appellant's claim with regard to deduction allowable under the Act while computing the Income under the head Profit Gains of Business or Profession . 5.0 That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified grossly erred in treating interest income from FDRs amounting to ₹ 29,82,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or provision of ATM machines and except the agreement, no other evidences were furnished. He further held that interest income of ₹ 2982000/- being interest on fixed deposit receipt is chargeable to tax as income from other sources and not as profits and gains of business as claimed by the assessee. However he directed the learned assessing officer to verify the allowability of the brought forward depreciation of ₹ 437968/ . Thus, he dismissed the appeal filed by the assessee and therefore assessee is in appeal before us. 7. The first, second and third ground of appeal are on the issue whether the assessee is carrying on any business or not. First ground of appeal is with respect to the disallowance confirmed by the learned CIT A of expenditure incurred towards professional fees of ₹ 2 5000000. The learned assessing officer noted that assessee has shown income from rent of ATM building and interest only. The assessee has paid professional fees in the profit and loss account of ₹ 2.50 crores. This amount also did not match with the figures mentioned in the TDS certificates. Therefore, learned assessing officer asked the assessee to explain the allowabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equity shares of Wireless TT Info services Ltd being 75596524 shares at the face value of ₹ 10/- each. He further referred to notes on account placed at page number 12 to show that the nature of the business of the company is of setting up ATM sites for the banks and providing complete infrastructure in terms of space, power supply, security, ATM machines, air-conditioners and interiors as specified by the bank. He further stated that the stocks acquired by the company are shown as stock in trade. He further referred to schedule [16] wherein other income is tabulated to show that assessee is deriving also income on sale of investments. Therefore, he submitted that assessee is engaged in the business of dealing in securities. He also referred to agreement entered into between the assessee and one Mr. Rishi Sahai to show that the company was interested in raising equity in shares etc to the tune of ₹ 900 crores for its business. He further referred to page number 41 which is scheme of arrangement between assessee and Wireless TT Info services Ltd under section 391 394 of The Companies Act wherein it at number 1.9 the remaining business‟ means and includes the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein it has been stated that wherein the assessee itself, irrespective the period of holding the listed shares and securities, opts to treat it as stock in trade, the income arising from transfer of shares / securities would be treated as its business income. He therefore submitted that the assessee itself treated the stocks/shares invested by the assessee company are stock in trade and therefore the income arising there from is a business income. Thus, the assessee is engaged in the business. With respect to the claim of deduction of borrowed funds he referred to the decision of the honourable Bombay High Court placed at page number 92 94 of the paper book in 2018-TIOL-2515-HC-MUM-IT in case of principal Commissioner of income tax versus Hardik Bharatbhai Patel, covers the issue in favour of the assessee. He also referred to the decision of the honourable Gujarat High Court in 410 ITR 540 in principle Commissioner of income tax versus Ramniwas Ramjivan Kasat for the proposition. He also referred to the decision of the honourable Delhi High Court in 378 ITR 28 in Eicher GoodEarth Ltd versus CIT wherein it has been held that interest paid on amount borrowed to subscribe writ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessee, the services of Mr. Sahai who is an investment advisor, were obtained. The investment advisor was to provide investment advisory services to the assessee for finding of probable investor and assessee was to pay a fee in accordance with the terms and conditions of that agreement. Thus, it is clear that appellant company was to acquire 49-percentage stake in that the demerged tower business of Tata tally services Ltd. As per share purchase agreement dated 24/12/2008, it decided to purchase 46449516 shares of that company from Tata Sons Ltd. In the same agreements, reference was also made for share purchase agreement executed between the assessee and Tata tally services Ltd for purchases of 91451000 shares of WTTIL. This agreement was neither made available to the assessing officer or the learned CIT A. Thus, it is apparent that Assessee Company was acquiring the shares of WT TIL from various companies of the Tata group as a part of business reorganization. The disclosure of those shares as stock in trade does not help the case of the assessee to show that it is engaged in the business of sale and purchase of securities as the above transaction of the purchase of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000 000 is the fees involved for arranging the finance which has been disallowed by the learned assessing officer and confirmed by the learned CIT A which is for raising of the fund in the merger scheme for acquisition of shares. Thus, it is part of the business reorganization scheme of the assessee. It is the answer with respect to the secured loan and unsecured loan obtained by the assessee. Thus, reference to them does not help to show that assessee was carrying on any business activities. The notes at serial number 19 (1) (a) read together with (b) clearly shows that assessee has demerged its business of passive telecom infrastructure and now is really left with the business of renting of ATM sites for the banks. Merely when the assessee has shown the equity shares in Wireless TT info services Ltd as securities held, as stock in trade does not show that assessee is carrying on any business because these shares were acquired in business organization process of restructuring business of the assessee. Reference to clause C Other Objects in the memorandum of Association of the company which allows as per clause 45 for carrying on the business as share and stock brokers and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... renting of ATMs were left with the assessee company. The company did not have any of the debtors left on transfer of the above business. It is important to note that even the company does not have any cash or balances with the bank, except in deposit account as margin money. All its loans and advances also were transferred. With respect to the current liabilities, it has only the advances received and other petty liabilities. Thus, on verification of the balance sheet also it does not show that assessee is carrying on any business. It has only acquisition of the shares of WTTL in which now company is holding 49% shares on account of above demerger. Reliance placed on circular issued of the CBDT also does not help as it was with respect to the dispute, which continued to exist wherein it is difficult to prove the intention in acquiring the shares and securities in case of the assessee, and whether they should be taxed under the head business income or under the head capital gains. The relevant decisions cited before us are also not applicable to the facts of the case. The decision relied upon of honourable Delhi High Court in 378 ITR 28 where the issue was whether the interest e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pts of ₹ 2982000/- as income from other sources, we also do not find any infirmity in the order of the lower authorities as assessee has merely placed fixed deposits with the banks and it has not been shown that how the earning of the bank‟s deposit receipt interest can be said to be interest income chargeable to tax under the head business income. Thus, ground number five of the appeal is also dismissed. 13. In the result, ITA number 2006/del/2017 filed by the assessee for assessment year 2010 11 is dismissed. 14. ITA number 2191/ Del/2017 assessment year 2010 11 is filed by the assessee against the order of the learned Commissioner Of Income Tax (Appeals) 7, New Delhi dated 25/1/2017 wherein penalty levied by the learned assessing officer as per order dated 21/6/2013 under section 271 (1) ( C) of the act is confirmed . 15. The assessee has raised following ground of appeal in ITA No. 2191/Del/2017 for the Assessment Year 2010-11:- 1.0 That on the facts and in the circumstances of the case, confirmation of imposition of penalty by the Ld. Commissioner of Income Tax (Appeals) [here-in-after referred to as Ld. CIT(Appeals)] is grossly erroneous, unjus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecify as to whether the penalty proceedings was intiated for 'furnishing inaccurate particulars of income' or 'concealing particulars of income'. 16. The fact shows that the learned assessing officer has disallowed professional service expenditure claimed by the assessee under section 37(1) of the act holding that assessee is not carrying on any business as well as disallowed interest expenditure under section 36 (1) (iii) of the act claimed by the assessee holding that it is carrying on business and therefore same is allowable. 17. The learned assessing officer as well as the learned CIT A held that assessee is not carrying on any business. Hence, disallowance was confirmed. Therefore on the above sum the learned assessing officer initiated penalty under section 271 (1) (C) of the act on holding that assessee has furnished inaccurate particulars of its income. Such satisfaction is recorded in the assessment order at paragraph number 6.2 with respect to the disallowance of the professional fees as well as in para number 7.4 with respect to the disallowance of interest expenditure. 18. Before the assessing officer assessee submitted a written reply on 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of income; hence, he dismissed this ground of appeal. Thereafter relying upon the decision of the honourable Delhi High Court in CIT V Zoom Communications Limited 327 ITR 510 and CIT V Escorts Finance Limited 188 taxman 87, he confirmed the penalty levied by the AO. Therefore, assessee is in appeal before us. 22. The learned authorised representative vehemently submitted that a. Penalty cannot be levied for a different reason than for which it was initiated. He referred to the notice dated 15/3/2013 issued under section 274 of the income tax act wherein the assessing officer has mentioned that assessee has concealed the particulars of income or furnished inaccurate particulars of such income in terms of explanation one, two, three, four and five. He therefore submitted that the penalty notice does not specify for which limb the penalty has been levied. He referred to the decision of the honourable Karnataka High Court in 73 taxman.com 241 as well as the decision of the honourable Supreme Court dismissing the special leave petition against that order of the Karnataka High Court. Thus he submitted that issue is squarely covered in favour of the assessee by the decision of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meaning of concealment of income and furnishing of inaccurate particulars of income carry two different connotations. Referring to the fact that there is a direction in the assessment order, he submitted that merely direction in the assessment order could not be the basis to determine the basis of charge in penalty proceedings if there is no strike off in the notice under section 274 of the income tax act. e. In the end, he submitted that because of the loss claimed by the assessee, the penalty has been levied. He submitted that such losses have lapsed and assessee does not have any benefit because of claim of the above expenditure as business expenditure. It was also submitted that in the subsequent year when those shares were sold the assessment was made under section 143 (3) by the assessing officer for assessment year 2011 12 wherein the assessee has shown the profit arising on the sale of those shares as business income wherein the AO accepted it without changing its character from business loss/profit and accepted it, therefore, it is apparent that the revenue in the subsequent year has accepted the claim of the assessee of profit on sale of shares as business income thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riking of one of the limb cannot invalidate the penalty. On the merit, she submitted that the claim of the assessee was found to be false and such expenditure is not deductible, as assessee was not carrying on any business. 24. We have carefully considered the rival contention and perused the orders of the lower authorities. One of the issues involved in this appeal is whether the AO without striking out one of the limb i.e. furnishing of inaccurate particulars of income or concealment of income can levy penalty under section 271 (1) (c) of the act. The honourable Delhi High Court in ITA number 475/2019 along with other appeals in case of Sahara India life insurance Co Ltd in order dated 2 August 2019 has considered the identical issue as under:- 21. The Respondent had challenged the upholding of the penalty imposed under Section 271(1) (c) of the Act, which was accepted by the ITAT. It followed the decision of the Karnataka High Court in CIT v. Manjunatha Cotton Ginning Factory 359 ITR 565 (Kar) and observed that the notice issued by the AO would be bad in law if it did not specify which limb of Section 271(1) (c) the penalty proceedings had been initiated under i.e. whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded correct satisfaction. 26. Even otherwise, the claim of the assessee is that assessee is carrying on business of sale and purchase of securities. Such claim assessee tried to substantiate with the annual audited accounts of the assessee. It also supported the same with the other objects mentioned in the memorandum of Association along with share purchase agreements and the relevant scheme of demerger. On careful perusal of the assessment order for assessment year 2011 12 where the assessee has shown the sale of shares and resultant gain or loss from under the head business income, the learned assessing officer has not disturbed it but has disallowed the loss booked on sale of such shares holding that it is much below the market price and transaction is not executed at arm‟s length. Therefore, it is apparent that that the claim of the assessee though ultimately not accepted by the concurrent authorities but it cannot be denied that issue raised is not debatable. Further, when the issue itself is debatable, it cannot result into penalty. Based on our discussion also in the quantum appellate proceedings before us covered in this order, it cannot be denied that claim of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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