COMMISSIONER OF INCOME TAX DELHI IV vs. DALMIA (BROS.) P.LTD.

IN THE HIGH COURT OF DELHI AT NEW DELHI ITA 211/2009 COMMISSIONER OF INCOME TAX, DELHI-IV ..... Appellant Through: Mr. R.D.Jolly with Ms. Rani Kiyala . versus . DALMIA(BROS.) PVT. LTD. ..... Respondent Through: Nemo . . CORAM HON BLE MR JUSTICE VIKRAMAJIT SEN HON BLE MR JUSTICE RAJIV SHAKDHER . . O R D E R 15.04.2009 . 1. This is an Appeal preferred by Revenue under Section 260A of the Income Tax Act, 1961 (hereinafter referred to in short as the Act ) against the judgment dated 30.04.2008 passed by the Income Tax Appellate Tribunal (hereinafter referred to in short as the Tribunal ) in respect of ITA No.50/Del/2005 pertaining to assessment year 2001-02 whereby the order of the Commissioner of Income Tax (Appeals) [hereinafter referred to as CIT(A)] dated 14.10.2004 was impugned on merits (i.e. quantum appeal) as well as in ITA No. 1658/Del/2007 in which the orders of CIT(A) dated 24.4.2007 in respect of the very same assessment year was challenged on the ground of deletion of penalty under Section 271(1) (c) of the Act. 2. In the present appeal the Revenue has proposed the following questions of law:- (a) Whether the ITAT was correct in law in deleting the amount of Rs 39,66,007/- on account of interest payment as the same was not wholly and exclusively for the business purpose of the assessee. (b) Whether the ITAT was correct in law in deleting the addition of Rs10,27,250/- treated by the Assessing Officer as a capital loss and not a bad debt allowable u/s 36(1)(vii) of the Income Tax Act, 1961 3. Insofar as the question No.(a) is concerned, the Tribunal has relied upon its order dated 17.2.2006 in the assessee s case pertaining to assessment year 1999-2000. By the said order the Tribunal had deleted the addition made by the Revenue in respect of the very same issue. The said matter was carried in appeal to this Court, whereby the appeal of the Revenue was dismissed and the order of the Tribunal was sustained. The judgment of this Court is titled as CIT vs Dalmia Bros. (P) Ltd. (2007) 164 Taxman 63 (Delhi). Therefore this issue will suffer the same fate. 4. As regards the second proposed issue, we are of the view that the order of the Tribunal deserves to be sustained. Briefly, the issue arises in the background of the following facts:- 4.1 The assessee sold 13,000 shares of one Balaji Steels Ltd. to another entity by the name Lakshna Holding (P) Ltd. for a total sum of Rs 45,27,250/-. The assessee received only a part of the sale consideration, that is, a sum of . . Rs 35 lacs in the assessment year under consideration i.e., assessment year 2001-2002. The assessee wrote off the balance amount being a sum of Rs10,27,250 which it was unable to recover; as bad debt. The Assessing Officer disallowed the deduction on the ground that assessee s business was not that of sale and purchase of shares and loss suffered, was on account of the investment made by it. The Assessing Officer was of the view that sale proceeds never formed a part of the income of the assessee in the past and thus the condition stipulated under Section 36(1)(vii) of the Act having not been fulfilled, the claim of the assessee for bad debt was not allowable. He was, in any event, of the opinion that the loss in issue was in the nature of a capital loss. 5. Aggrieved, the assessee carried the matter in appeal to CIT(A). The CIT(A) sustained the order of the Assessing Officer. In a further appeal the Tribunal reversed the decision of the CIT(A) as well as the Assessing Officer. The Tribunal in coming to the conclusion that the assessee s claim for deduction of a sum of Rs 10,27.250/- on account of bad debt had to be allowed recorded the following findings of fact:- (i) the assessee had shown the entire sale consideration of Rs 45,27,250/-in respect of sale of shares of Balaji Steels Ltd. to M/s Lakshna Holding (P) Ltd. as income in the assessment year 1995-96; (ii) out of the said sale consideration the assessee had recorded in the previous year relevant to assessment year 1996-97, the receipt of a sum of Rs 35 lakhs; (iii) the sale consideration had been reflected in the account of Lakshna Holding (P) Ltd on 31.03.1995 and alongwith the receipt of Rs 35 lakhs, with a closing balance of Rs 10,27,250/- in the account of Lakshana Holding (P) Ltd. maintained in the books of the assessee; (iv) the assessee had supplied information with respect to profit earned/loss suffered on sale of shares of various companies which included profit to the tune of Rs 18,81,751/- on sale of shares of Balaji Steels Ltd. The profit on sale of shares of various companies including that of Balaji Steels Ltd had been shown by the assessee in the profit and loss account under the head other income . The details of other income ; the sum total of which amounted to Rs 57,88,808/-, include a sum of Rs 54,38,494/- on account of profit on sale and purchase of shares traded by the assessee which sum was inclusive of the profit on sale of shares of Balaji Steels Ltd sold to Lakshna Holding (P) Ltd.; (v) the profit on shares earned by the assessee in assessment year 1995-96 was more than the bad debt written off by the assessee; and (vi) lastly, based on the aforesaid circumstances it was concluded that shares in issue were neither held as an investment nor was the profit earned returned by the assessee as a capital gain and accordingly, the Assessing Officer had erred in concluding that the shares were held as a capital investment. 6. Having perused the findings returned by the Tribunal we have no doubt in mind, that the shares in issue were not held by the assessee as an investment. Therefore, there was no question of disallowing the deduction claimed on the ground that it was a capital loss. Furthermore, the findings returned by the Tribunal clearly demonstrate that the conditions prescribed under Section 36(1)(vii) read with Section 36(2) of the Act have been fully complied with. 7. Hence, in our view, no substantial question of law arises for our consideration. Resultantly, the Appeal is dismissed. . . VIKRAMAJIT SEN, J . . RAJIV SHAKDHER, J April 15, 2009 da ITA 211/2009 Page 5 of 5 . . . . . .