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Income Tax Appellate Tribunal, DELHI BENCH: ‘B’ NEW DELHI
Before: SHRI S.V. MEHROTRA & MS. SUCHITRA KAMBLE
PER SUCHITRA KAMBLE, JM
2 ITA NO. 1835/DEL/2012 & C.O213.DEL.2012 This appeal and cross objection are filed by the revenue and assessee against the order dated 03/01/2012 passed by Ld. CIT (A) IV, New Delhi for the Assessment Year 2008-09. 2. The grounds of appeal are as follows:- (In ITA No. 1835)
“1. Whether the Ld. CIT(A) on the facts and circumstances of the case is correct in holding the profit on sale of shares as Long Term and Short Term Capital Gain instead of business income as assessed by the A.O 2. Whether the Ld. CIT(A) on the facts and circumstances of the case and in law was justified in allowing 60% depreciation on Printers, UPS, Scanner etc as against normal rate of 15% depreciation allowed by the A.O. 3. The appellant craves leave, to add, alter or amend any ground of appeal raised above at the time of hearing.
2.1 The grounds of appeal are as follows: - (In C.O No. 213) “1. That the Learned A.O and Ld. CIT(A) both had erred on facts and in law, in making disallowance a sum of Rs.4,14,472/- u/s14A towards expenses in earning exempted income by ignoring the factual position. 2. The respondent craves leave, to add, alter or amend any ground of cross objections raised above at the time of the hearing.”
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. The assessee company filed its return for Assessment Year 2008-
3 ITA NO. 1835/DEL/2012 & C.O213.DEL.2012 2009 declaring an income of Rs. 14,40,64,570/- on 15.10.2008. During the course of assessment proceedings, Assessing Officer asked the assessee to submit details of short term and long term capital gain, which was duly submitted by the company. Total short term capital gain of Rs. 78,11,351/- and long term capital gain of Rs. 16,94,045/- was earned during the financial year by the company and was charged under Section 111A and 10(38) of Income Tax Act, 1961/- respectively. The assessee submitted before the Assessing Officer that the investment were not directly co- related with the business line of company and the investments were done through the investment agencies, where a lump sum amount was transferred to them. There was no direct day to day nexus between the company business personnel and the investments in the name of the company.
The Assessing Officer has disallowed the short term capital gain and treated the same as a business income by holding that the same was earned on sale and charges of shares and thus form a part of business income. The Assessing Officer further held that an amount of Rs. 4,14,472/- is expenses incurred in relation to earning the tax free income during the year and hence added back under Section 14A read with Rule 8D of the Income Tax Rules, 1962. The Assessing Officer also disallowed the depreciation claimed on the computer.
The Ld. DR submitted that the Assessing Officer has rightly held that the investment made by the assessee and income earned
4 ITA NO. 1835/DEL/2012 & C.O213.DEL.2012 on it, 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 which form part of the business income. The Ld. DR further submitted that the depreciation has also been rightly disallowed by the Assessing Officer and the invocation of Section 14A read with Rule 8D was just and proper.
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 and being investment in equity shares as “Profit and Gains of Business or Profession”. Thus CIT(A) directed the Assessing Officer to treat the above income as long term and short term capital gain as shown by the assessee. As relates to depreciation the Ld. AR submitted that the CIT(A) has rightly allowed the depreciation. The Ld. AR further 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. 1 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. In fact
5 ITA NO. 1835/DEL/2012 & C.O213.DEL.2012
in earlier year also the CIT(A) has held the same. Therefore, Ground No. 1 of the Revenue is dismissed. As relates to Ground No. 2 of the appeal of the Revenue, the depreciation has been rightly allowed by the CIT(A) on the basis of decision in the case of M/s. Datacraft India Limited vs. DCIT passed by the Special Bench ITAT Mumbai and also Delhi High Court’s decision in case of CIT vs. BSES Rajdhani Power Ltd. wherein it was held that computer accessories and peripherals such as printers, scanners and server etc. form an integral part of the computer system and are therefore, entitled to depreciation @ 60%. The issue is covered discussed therein is in favour of the assessee therefore, this ground of the Revenue is dismissed.
As relates to Ground No. 1 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, this issue 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
6 ITA NO. 1835/DEL/2012 & C.O213.DEL.2012
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 2. 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. Approved Draft comes to the 5. .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. 1835/DEL/2012 & C.O213.DEL.2012