ASIATIC GASES LTD.,KOLKATA vs. DCIT, CIR-4(1), KOLKATA, KOLKATA

O R D E R

PER Waseem Ahmed, Accountant Member:

- This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-16, Kolkata dated 25.02.2016. Assessment was framed by DCIT, Circle-4, Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 09.03.2013 for assessment year 2010-11. The grounds raised by the assessee per its appeal are as under:- “1. Ld. CIT(A) should have deleted the addition of bad debts R.47767/- on the basis of details submitted along with written submission as marked Annexure ‘A’.

2. The Ld. CIT(A) erred in confirming the action of AO for addition of bad debts Rs.477677/- without asking any details in course of hearing by the AO.

3. The Ld. CIT(A) erred in confirming the action of the AO for disallowing the expenses of Rs.285209/- as claimed against the short term capital gain.

4. The Ld. CIT(A) show have not given the direction to the AO to assess the short term capital gain at Rs.1010723/- & long term capital loss Rs.9492855/- as per revised income statement submitted before AO along with letter dt. 29.01.13 & also before the Ld. Commissioner of Income Tax (Appeals) along with written submission as marked Annexure ‘B’. A.Y. 2010-11 Asiatic Gases Ltd. Vs. DCIT, Cir-4(1) Kol. Page 2

5. Ld CIT(A) should have given the direction to AO to allow the credit of tax at source as per 26AS at Rs.720746/- instead of the claim made in income tax return at Rs.720073/-.” Shri Anil Kochar, Ld. Advocate appeared on behalf of assessee and Shri S. Dasgupta Ld. Departmental Representative appeared on behalf of Revenue.

2. First issue raised by assessee in ground No.1 & 2 are that Ld. CIT(A) erred in confirming the order of Assessing Officer by sustaining the disallowance of ₹47,767/- on account of bad debt written off.

3. Briefly stated facts are that assessee is a limited company and engaged in the manufacturing and trading of gases and development of real estate. The assessee during the year has claimed bad debt of ₹47,767/- in its profit and loss account but failed to furnish the details to show that the same was offered to tax in the earlier year. Therefore, AO disallowed the same and added to the total income of assessee.

4. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who confirmed the order of AO by observing as under:- “… … I have gone through the submission of the AR. This is quite general in nature. It is a fact that after 01.04.1989, it is not necessary for the assessee to establish that debts had become bad. But onus is on the assessee to give basic details. No details have been given during assessment stage as sit is evident from the assessment ordered. Even before me, a general reply has been filed. Hence, appeal of the assessee is dismissed on this ground.” Being aggrieved by this order of Ld. CIT(A) assessee came in second appeal before us.

5. Ld. AR for the assessee filed paper book which is running pages 1 to 19 and submitted that necessary details for the bad debt written off and the corresponding income shown in the earlier year were filed before AO during assessment proceedings. Ld. AR in support of assessee’s claim filed copy of ledger and details of sales in respect of bad debt which are placed on pages 1 to 8 of the paper book. On the other hand, Ld. DR vehemently relied on the order of Authorities Below.

6. We have heard the rival contentions of both the parties and perused the material available on record. In the present case, the issue relates to the disallowances made on account of bad debt claimed by assessee in its income tax return. We find A.Y. 2010-11 Asiatic Gases Ltd. Vs. DCIT, Cir-4(1) Kol. Page 3 that AO disallowed the same on the ground that assessee failed to furnish any supporting evidence with regard to bad debts. The view taken by AO was subsequently confirmed by Ld. CIT(A). On perusal of the records, we note that all the necessary details were filed by assessee before Ld. CIT(A) showing the amount of bad debt and corresponding sales. This fact is evident from the observation of Ld. CIT(A) which was rejected on the ground that it is a general reply but no specific defect was pointed out by Ld. CIT(A). On perusal of the details filed in paper book on pages 1 to 8 we note that the details of bad debts & corresponding income were available with the AO during assessment proceedings. The ld. DR has also not brought anything on record contrary to the arguments advanced by the ld. AR for the assessee. Therefore, we hold that all the necessary details with regard to bad debt and its corresponding income was duly shown by assessee before Ld. CIT(A). In view of above, we have no hesitation in reversing the order of Authorities Below. AO is directed accordingly. This ground of assessee is allowed.

7. Next issue raised by assessee in ground No.3 is that Ld. CIT(A) erred in confirming the order of AO by sustaining the disallowance of ₹2,85,209/- against the Short Term Capital Gains (STCG for short). The assessee during the year has declared short term capital gain after adjusting the following expenses:- i) Demat charges of ₹62,265/- ii) DP maintenance charge of ₹552/- iii) Custodian charges ₹2,404/- iv) Investment advisory fee ₹1,95,055/- v) Investment advisory fee expenses ₹25,033/- 2,85,309/- The Assessing Officer was of the view that these expenses have not been incurred in connection with the transfer of capital assets. Therefore, the same cannot be allowed as deduction under section 48 of the Act. Accordingly, AO disallowed the same and added to the total income of assessee.

8. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that expenses incurred by it are statutory in nature and A.Y. 2010-11 Asiatic Gases Ltd. Vs. DCIT, Cir-4(1) Kol. Page 4 these were incurred as per Security Exchange Board of India guidelines. Therefore, same should be allowed while computing the income under the head STCG. The Ld. CIT(A) disregarded the contention of assessee and confirmed the order of AO by observing as under:- “I have gone through the decision of Hon'ble Pune Tribunal and two decisions of Hon'ble Mumbai Tribunal. The tax laws provide that capital gain on transfer of an asset is to be computed by deducting expenses incurred in connection with transfer of the asset. Only cost of acquisition and cost of improvement of the asset have to be allowed. No other type of expenditure is allowable as deduction. The portfolio management fees are not a cost for improvement of the asset as there is no improvement in the asset on account of such expenditure. Hence, this ground of the assessee is dismissed and the order of the AO is sustained.” Being aggrieved by this order of Ld. CIT(A) assessee came in second appeal before us.

9. Before us Ld. AR submitted that all the expenses were incurred in relation to the transfer of shares and these were incurred as per the guidelines of SEBI. On the other hand, Ld. DR submitted that these expenses had to be incurred by the assessee irrespective of assessee’s STCG / loss. It has nothing to do with the transfer of share. He vehemently relied on the order of Authorities Below.

10. We have heard the rival contentions of both the parties and perused the material available on record. The issue in the present case relates to the disallowance made by the AO for the expense claimed to have incurred against the STCG. At this juncture, we find important to reproduce the provisions of Section 48 of the Act, which read below:- [Mode of computation. 1248. The income chargeable under the head “Capital gains” shall be computed, by deducting from the full value of the consideration 13 received or accruing as a result of the transfer of the capital asset the following amounts, namely :— (i) expenditure incurred wholly and exclusively in connection with such transfer 14; (ii) the cost of acquisition of the asset and the cost of any improvement 14 thereto: From the above provision, we note that assessee is entitled to claim the deduction for the expenditure incurred wholly and exclusively in connection with the transfer of capital assets but on perusal of the above expense we note that these expenses were incurred by assessee in relation to its activity of carrying on investment. The provision A.Y. 2010-11 Asiatic Gases Ltd. Vs. DCIT, Cir-4(1) Kol. Page 5 of Sec. 48 of the Act requires that the deduction will be available for those expenses incurred wholly and exclusively in connection with the transfer of capital assets. In our considered view, the above expenses had not incurred wholly and exclusively in connection with transfer as capital asset. Therefore, we do not find any reason to interfere in the order of Ld. CIT(A). We uphold the same. This ground of assessee is dismissed.

11. Next issue raised by assessee in ground No.4 is that Ld. CIT(A) erred in not giving direction to AO for adjusting the STCG.

12. Ld. AR for the assessee before us submitted that assessee has shown mutual fund profit and loss under the head “Short term profit and loss” Though same is to be classified under the head “Long Term”. The assessee during the assessment proceedings, brought this mistake to the notice of AO vide letter dated 8.1.2013 but AO failed to consider the same. The above mistake was also brought to the notice of Ld. CIT(A) during appellate stage who rejected the same after having reliance on the judgment of Hon'ble Supreme Court in the case of Goetze India Ltd. vs. CIT 284 ITR 323 (SC). Ld. AR further submitted that the impugned issue is arising from the details available before AO and no fresh documentary evidence is required for the adjudication of the same. Accordingly, Ld AR before us prayed that a direction should be made to AO for rectification of the mistake committed by the assessee. On the other hand, Ld. DR raised no objection if the direction is be issued to AO to adjudicate the matter in accordance with law.

13. We have heard the rival contentions of both the parties and case law relied upon by the assessee. Now the limited issue before us arises for our adjudication so as to whether the assessee can make a fresh claim during the assessment proceedings which was not claimed in the return of income. On this issue, the law is fairly settled by the judgment of Hon'ble Supreme Court in the case of Goetze (India) Ltd. (supra), wherein it was held as under:- “4. The decision in question is that the power of the Tribunal under section 254 of the Income-tax Act, 1961, is to entertain for the first time a point of law provided the fact on the basis of which the issue of law can be raised before the Tribunal. The decision does not in any way relate to the power of the Assessing Officer to entertain a claim for deduction otherwise than by filing a revised return. In the circumstances of the case, we dismiss the civil appeal. However, we make it clear that the issue in this case A.Y. 2010-11 Asiatic Gases Ltd. Vs. DCIT, Cir-4(1) Kol. Page 6 is limited to the power of the assessing authority and does not impinge on the power of the Income-tax Appellate Tribunal under section 254 of the Income-tax Act, 1961. There shall be no order as to costs.”