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Income Tax Appellate Tribunal, DELHI BENCH: ‘B’ NEW DELHI
Before: SHRI S.V. MEHROTRA & MS. SUCHITRA KAMBLE
1 ITA NO.3945/DEL/10 AND CO.NO. 332/DEL/10
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: ‘B’ NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER I.T.A .No.-3945/DEL/2010 (A.Y 2007-08)
ACIT vs Dewsoft Overseas Pvt. Ltd. Circle 10(1), 101, Gagandeep Building, New Delhi 12, Rajendra Place, New Delhi (APPELLANT) AABCD3196J
(RESPONDENT) C.O No. 332/Del/2010 (A.Y 2007-08)
Dewsoft Overseas Pvt. Ltd. vs ACIT 101, Gagandeep Building, Circle 10(1), 12, Rajendra Place, New Delhi New Delhi AABCD3196J (RESPONDENT)
(APPELLANT)
Appellant by Sh. Neehar Ranjan Pandey, SR. DR Respondent by Sh. Tapas Mishra, Adv
Date of Hearing 14.12.2015 Date of Pronouncement 28.01.2016
ORDER PER SUCHITRA KAMBLE, JM
The appeal is filed by the Revenue and the Cross Objection is filed by the assessee against the order dated 14/06/2010 passed by Ld. CIT (A) XII, New Delhi for the Assessment Year 2007-08.
2 ITA NO.3945/DEL/10 AND CO.NO. 332/DEL/10 2. The grounds of appeal are as follows:- (In ITA No. 3945)
“1. On the facts and circumstances of the case and in law, the order of the Ld. CIT(A) is wrong, perverse, illegal and against the provisions of law which is liable to be set aside. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in directing the A.O to treat Rs.43,54,361/- as short term capital gain taxable u/s 111A instead of business income. 3. The appellant craves to leave, to add, alter or amend any ground of appeal raised above at the time of hearing.” 2.1 The grounds of cross objection are as follows:- (In C.O No. 332) “1. That the Ld. A.O had erred on the facts and in law in assessing the gains of Rs.43,54,361/- arising on sale of short term capital assets being investment in equity shares as “Profits and Gains of Business or Profession”. The same has already been treated as short term capital gain by the Ld. CIT (A) in his order dated 14/6/2010. 2. That the Learned A.O and Ld. CIT(A) both had erred on facts and in law, in making disallowance of a sum of Rs.1,44,078/- (Rs.One Lakhs Forty Four Thousands Seventy Eight Only) u/s14A towards expenses in earning exempted income by ignoring the factual position.”
The assessee company was engaged in the business of providing online and real time education to retail and institutional plans on a variety of programmes and subjects including computers, management, languages, personality development etc. Copy of profit and loss account, balance-sheet and audit report u/s 44B of the Income Tax Act 1961 was furnished by the assessee,
3 ITA NO.3945/DEL/10 AND CO.NO. 332/DEL/10 during the course of assessment proceedings. The assessee debited a sum of Rs.19,69,195/- in the profit and loss account under the head legal and professional charges. The assessee vide letter dated 5/10/2009 submitted a list of persons to whom such payments were made and TDS made thereupon. This letter was submitted to the Assessing Officer. The Assessing Officer observed that no TDS was made on payment of such charges aggregating to Rs.58,700/- to Shri Gaurav Mehra. The assessee furnished the copies of bills raised to Shri Gaurav Mehra. The Assessing Officer further observed that the assessee has made the payments to Shri Gaurav Mehra without deducting tax at source in violation of provisions of Section 194J of the Income Tax Act. Thus, the aggregate payment of Rs.58,700/- made to Shri Gaurav Mehra was disallowed u/s 40(a) (ia) and added to the total income of the assessee. The Assessing Officer also made an addition in respect of short term capital gain for Rs.43,54,361/- taxable u/s 111A instead of business income. The Assessing Officer held that the alleged short term capital gain of Rs.43,54,361/- earned on entire sale and purchase of shares has to be treated as business income and rejected the special tax treatment as per Section 111A and denied exemption u/s10(38) since it was its business.
The CIT(A) held that the transaction of shares carried out by the assessee during the year should be treated as investments and the short term capital gain on sale of such shares shall be assessed under the head capital gain and not as business income.
4 ITA NO.3945/DEL/10 AND CO.NO. 332/DEL/10 Accordingly, the CIT(A) directed the Assessing Officer to treat Rs.43,54,361/- as short term capital gain taxable u/s 111A at 10%. Thus allowed the appeal of the assessee.
The Ld. DR submitted that the Assessing Officer has rightly held the said income as business income as the entire sale and purchase of shares was related to the investment of the business and thus could not be treated as short term capital gain but it is a part of business income of the assessee.
The Ld. AR refuted the same. The Ld. AR further submitted that the CIT(A) has rightly held gains arising on sale of short term capital assets being investment in equity shares as “Profit and Gains of Business or Profession”. The Ld. AR submitted that the Assessing Officer has not invoked Rule 8D and, therefore, Section 14A will not come into picture.
We have perused all the records and heard both the parties. As relates to Ground No. 2 of the Revenue the CIT(A) has rightly held that the transaction of shares carried out by the assessee during the year should be treated as investments and the short term capital gain on sale of such shares shall be assessed under the head capital gain and not as business income. The reason being that the assessee’s business was not that of share transaction but that of providing online and real time education to retail and institutional plans on a variety of programmes and subject. Therefore, Ground No. 2 of the Revenue is dismissed. As relates to
5 ITA NO.3945/DEL/10 AND CO.NO. 332/DEL/10
Ground No. 2 of the Cross Objection, Section 14A though was discussed by the Assessing Officer and CIT(A), but the same was not in consonance with invocation of Rule 8D. Thus, the matter needs to be looked into, therefore, we remand back this issue to the Assessing Officer.
In result, the Revenue’s appeal is dismissed and cross objection of the assessee is partly allowed for statistical purpose.
The order is pronounced in the open court on 28th of January 2016.
Sd/- Sd/-
( S. V. MEHROTRA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 28/01/2016 *R. Naheed* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI
Date 1. Draft dictated on 04.01.2016 PS
6 ITA NO.3945/DEL/10 AND CO.NO. 332/DEL/10
Draft placed before author 05.01.2016 PS 3. Draft proposed & placed before .01.2016 JM/AM the second member Draft discussed/approved by 4. .01.2016 JM/AM Second Member. 5. Approved Draft comes to the .01.2016 PS/PS Sr.PS/PS 6. Kept for pronouncement on .01.2016 PS 7. File sent to the Bench Clerk PS 1.02.2016 8. Date on which file goes to the AR 9. Date on which file goes to the Head Clerk. 10. Date of dispatch of Order.
7 ITA NO.3945/DEL/10 AND CO.NO. 332/DEL/10