IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "J", MUMBAI
BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND
SHRI SANJAY GARG, JUDICIAL MEMBER
ITA No.358/M/2011
Assessment Year: 2006-07
ACIT 12(1), M/s. Business India,
Room No.117, 17/19, Wadia Bldg.,
Aayakar Bhavan, Vs. Dalal Street,
M.K. Marg, Fort,
Mumbai - 400020 Mumbai 400 001
PAN: AADFB7133Q
(Appellant) (Respondent)
ITA No.354/M/2011
Assessment Year: 2006-07
M/s. Business India, ACIT 12(1),
19, Adi Marzaban Path, Room No.117,
Vs.
Ballard Estate, Aayakar Bhavan,
Mumbai 400 001 M.K. Marg,
PAN: AADFB7133Q Mumbai - 400020
(Appellant) (Respondent)
Assessee by : Shri V. Mohan, A.R.
Revenue by : Shri B. Yadagiri, D.R.
Date of Hearing : 23.06.2014
Date of Pronouncement : 23.06.2014
ORDER
Per Sanjay Garg, Judicial Member:
These cross appeals one filed by the assessee and the other by the
Revenue are directed against the order of the Commissioner of Income Tax
(Appeals) [hereinafter referred to as the CIT(A)] dated 18.10.10 relevant to
assessment year 2006-07 and the same are being disposed of with this common
order. First we take up the assessee's appeal.
2 ITA Nos. 358/M/2011 & 354/M/2011
M/s. Business India
ITA No.354/M/2011
2. The assessee has taken the following grounds of appeal:
"1. It is prayed that delay of three days in filing the appeal may be
condoned.
2. On the facts and in the circumstances of the case, learned CIT(A)
erred in confirming the disallowance of Rs.22,10,554/- being loss
on account of damaged paper stock.
3. On the facts and in the circumstances of the case, learned CIT(A)
erred in confirming the disallowance of Rs.80,34,343/- on account
of diminution in value of shares held as stock in trade.
4. Appellant craves leave to amend or alter the existing grounds or
add further grounds at the time of hearing."
3. Vide first ground, the assessee has prayed for the condonation of delay
of three days in filing the present appeal. However, as per the note of the
registry, the appeal is barred by two days only. The ld. A.R. of the assessee
has submitted that though the assessee had instructed his chartered accountant
to file the appeal in time, but the said chartered accountant had to suddenly
leave for his home town due to some urgency and on return he immediately
filed the appeal of the assessee. The delay of two days was not intentional but
was due to the exceptional circumstances beyond the control of the assessee.
The assessee has also produced on file an affidavit of his said chartered
accountant Mr. Uday Mulay. Though the affidavit is not properly attested but
since the delay is of just two days and in view of the explanation given by the
assessee, we treat the affidavit of the chartered accountant as his unattested
declaration and keeping in view of the facts and circumstances of the case and
shortness of the delay period, the delay in filing the appeal is hereby condoned.
3 ITA Nos. 358/M/2011 & 354/M/2011
M/s. Business India
4. Vide ground No.2, the assessee has agitated the confirmation of the
disallowance of Rs.22,10,554/- being loss on account of damaged paper stock.
The Assessing Officer (hereinafter referred to as the AO) disallowed the said
claim of loss observing that the assessee had given a general explanation that
the paper was damaged in the rain. However, no such evidence was produced
on the file. Even the purchase of the stock of paper was of the year 1996 and it
was observed by the AO that by the year 2005, the said paper otherwise would
have become scrap. The AO therefore disallowed the said claim for want of
evidence.
5. Before the ld. CIT(A) also, the assessee failed to prove his claim with
any cogent and convincing evidence. Therefore the ld. CIT(A) confirmed the
said addition.
6. Even before us, the ld. A.R. could not bring any evidence in justification
of the above claim. The explanation given by the A.R. is general in nature and
is not supported with any convincing evidence. We do not find any infirmity
in the order of the lower authorities while making the above disallowance.
This ground is accordingly decided against the assessee.
7. Vide ground No.3, the assessee has agitated the confirmation of
disallowance of Rs.80,34,343/- on account of diminution in value of shares
held as stock in trade. The ld. CIT(A) noticed that the AO in the year 2004-05
had treated the assessee's holding in the shares as `capital assets' and not as
`stock in trade.' The assessee did not prefer any appeal against the said finding
of the AO and the said finding was further confirmed by the ld. CIT(A) vide
order dated 27.11.07 in appeal No.CIT(A)XII/Addl.CIT12(1)/IT-576/2006-07.
4 ITA Nos. 358/M/2011 & 354/M/2011
M/s. Business India
8. However, the assessee continued to show in his books of accounts the
said shares as stock in trade. The action of the assessee in continuing the
treatment of shares as stock in trade against the finding of the AO and ld.
CIT(A) was not justified. The finding of fact was given by the Income Tax
Authorities holding that the said shares were investments and not stock in trade
and the same was not challenged before the higher authorities by the assessee,
thus the said finding had become final. The assessee in subsequent years could
not have claimed the said shares as stock in trade as per its own will. The
assessee, after the finding of the Income Tax Authorities that the said shares
were investments, had not made any attempt or action to convert the said
shares into stock in trade. Accordingly, the said shares in view of the finding
given in earlier years by the Income Tax Authorities are required to be held as
investments only and the assessee is not entitled to claim any diminution in the
value of the said shares treating the same as stock in trade. This ground is
accordingly decided against the assessee.
9. Ground No.4 is general in nature.
10. Now we take up the Revenue's appeal.
ITA No.358/M/2011:
11. The Revenue vide its grounds of appeal has agitated the action of the ld.
CIT(A) in directing the AO to make reasonable disallowance of expenditure
under section 14A in respect of investments made for earning tax free income.
It may be observed that the assessment year in question is 2006-07. As per the
law laid down by the Hon'ble Bombay High Court in the case of "Godrej &
Boyce Manufacturing Co. Ltd. Vs. DCIT reported in (2010) 328 ITR 81
(Bom)", the rule 8D of the Income Tax Rules is applicable for assessment year
2008-09 onwards. In the case in hand, the ld. CIT(A) observed that the
5 ITA Nos. 358/M/2011 & 354/M/2011
M/s. Business India
assessee had earned certain exempt income, however the assessee had not
appropriated any expenditure for earning the exempt income. The ld. CIT(A)
therefore directed the AO to apportion/segregate the expenditure incurred for
earning taxable and non taxable income and make a reasonable disallowance
appropriated towards earning tax free income. In our view, the finding of the
ld. CIT(A) in directing the AO to make a reasonable disallowance after
apportionment of the expenses out of the composite expenditure for earning
taxable and tax free income is in accordance with the law and does not require
any interference. The appeal of the Revenue is therefore dismissed.
12. In the result, both the appeals, i.e. of the Revenue as well as of the
assessee, are dismissed.
Order pronounced in the open court on 23.06.2014.
Sd/- Sd/-
(D. Karunakara Rao) (Sanjay Garg)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 23.06.2014.
* Kishore, Sr. P.S.
Copy to: The Appellant
The Respondent
The CIT, Concerned, Mumbai
The CIT (A) Concerned, Mumbai
The DR "C" Bench
//True Copy// [
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.
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