BRIJBALLABH D CHANDAK,MUMBAI vs. ADDL CIAT 14(3), MUMBAI

1. The present appeal is filed by the assessee against the order dated 28.03.2012 passed by the CIT(A)-28, Mumbai in respect of Assessment Year (AY) 2008-09 on the following grounds:

Brief facts of the case are that the assessee filed return of income for AY-2008-09 on 30.09.2008 for AY-2008-09 declaring total income of Rs. 2,14,50,540/- along with computation of total income with audit report and profit & loss account, balance-sheet, TDS certificate, challen etc. The return of income was selected for scrutiny and after serving the statutory notice, the AO made certain addition/disallowance in the assessment order dated 02.12.2010 including STCG and LTCG as business income and disallowance of brokerage paid on account of letting out of house property.

Against the order of AO dated 02.12.2010, the assessee filed an appeal before the CIT(A) and the CIT(A) confirmed the disallowance of brokerage and treating the STCG and LTCG as business income vide order dated 28.03.2012 against which the present appeal is filed before us.

We have heard the Authorised Representative (AR) of the assessee and Departmental Representative (DR) of the Revenue and perused the material available on record. AR of the assessee has argued that for the AY-2005-06 & 2007-08, the assessment order u/s. 143(3) was passed by revenue (copy of which is placed on record) wherein STCG and LTCG was accepted and argued that in view of the judgment of jurisdictional High Court passed in CIT vs. Gopal Purohit in dated 06.01.2010, the income made from investment must not treat the income from business and the principle of consistency must be followed .

Ld. DR of the revenue has argued that CIT (A) in paragraph no.4 of its order has discussed and concluded that major source of the assessee is trading in share and security in various form and overall purchase and sale made by the assessee during the year shows a clear picture that assessee is in business activity and is dealing with share and security and earning huge profit.

We have seen the copy of balance-sheet and capital account for the income from ended on 31.03.2005 and on 31.03.2008 and perused the assessment order for AY-2005-06 and 2007-08 wherein the STCG & LTCG was accepted by department. The assessee has also filed details of LTCG & STCG in respect of present AY, wherein the assessee has made the computation of share held for less than 30 days or less than 120 days.

The DR has not disputed the table/computation made by the assessee.

We further noticed that the assessee that the assessee did not borrowed any interest bearing funds for making investment in share. Further the assessee has maintained two portfolio one for trading and another for investment activity. The Hon,ble Bombay High Court in case of Gopal Purohit (supra) has held that the assessee is entitled to act both as trader as well as investor. The assessee has declared the profit from trading as income from Business further the assessee has also declared LTCG, which support the case of assessee that he has also acted as investor. The assessee has also received income dividend income to the tune of Rs. 5.82 lack. All these facts shows that the assessee has also acted as investor in respect of certain securities.

Since the revenue has accepted consistently STCG and LTCG for AY-2005-06 and 2007-08, thus we deem it appropriate that assessee is also entitled for the similar belief in the year under consideration, hence this ground raised by the assessee is accepted and the order passed by the AO and confirmed by the CIT(A) are hereby set-aside, and the appeal of the assessee is on this ground is accepted.

Next ground for our consideration is disallowance of brokerage amounting to Rs. 18,750/-. The AO while dealing with the disallowance has observed that assessee claimed deduction on account of Society charges of Rs. 67,807/- and brokerage paid of Rs. 18,750/- and claimed deduction @ 30% u/s 24 of the Act, and concluded that the reply of the queries was general in nature and held that assessee has failed to specifically mentioned under which provision, the deduction was claimed on account of brokerage charges and made the disallowance.

The CIT(A) while dealing with this ground concluded that the assessee is bound to compute the income under the head “Income from House Property” as per scheme of the Act and there is no scope for allowing any deduction which is not provided under the Act and further concluded that while determining the Annual Letting Value (ALV) due regard to be given for the amount of rent receipt, if FRV is less than the actual amount received the brokerage may indirectly affect the actual rent received.

We have perused the order of AO as well as CIT(A) and found that the brokerage was paid out of the rental income earned from the house property for which the assessee has already claimed deduction @ 30% u/s 24 of the Act. The claim of general deduction is provided u/s 37 of the Act which specified about the expenditure led or expanded wholly and exclusively for the purpose of business or profession shall be allowed in computing the income chargeable under the head “Profit & Gain” and “Business & Profession”. The assessee has not specified any exigencies of business, moreover, the assessee has already claimed deduction @ 30%, hence we are not inclined to interfere in the finding of the CIT(A) confirming the disallowance of brokerage, hence, this ground of appeal is rejected.