JCIT(OSD), CIRCLE - 10, KOLKATA, KOLKATA vs. TOLLYGUNGE ESTATES PVT. LTD., KOLKATA

These two appeals filed by Revenue relate to single assessee therefore we heard them after clubbing together for the sake of convenience and adjudicating by this common order.

Briefly stated facts are that assessee is a Private Limited Company and has income under head of property, other sources, Short Term Capital Gains (STCG), Long Term Capital Gain (LTCG) and business. During the year under consideration assessee has sold certain shares and mutual funds, resulting the STCG for an amount of Rs. 86,58,516.00. The AO held the STCG as business income considering the volume and frequency of transactions, the organized and systematic manner for carrying out the sale, purchase of shares. Besides the AO found that the value of the investment shown in the books of the assessee was just of Rs.1,32,280/- whereas the stock-in-trade was shown for an amount ₹4,53,11,556/- which proved that assessee was engaged in business of purchase & sale of shares and units of mutual funds. The assessee also submitted that such income was accepted by the department as capital gain in past. But the AO observed that such income was accepted by the department without examining the issue on this line. Accordingly the AO disregarded the claim of assessee of STCG and treated the income from the sale-purchase of shares and mutual funds as income from business for an amount of Rs. 86,58,516/-.

Aggrieved, the assessee preferred appeal before Ld. CIT(A) who deleted the addition made by Assessing Officer by observing as follows:-

We have heard rival contentions of both the parties and perused the materials available on record. Ld. DR vehemently relied on the order of Assessing Officer whereas Ld. AR relied on the order of Ld. CIT(A). Ld. AR submitted paper book running into pages from 1 to 161 and submitted that the assessee is maintaining two portfolios one for stock in trade and other for investment. Our attention was drawn on pages 56 to 59 of paper book where the details for Short Term and Long Term profit were furnished.

We find from the aforesaid discussion and submission that the AO has treated STCG as business income of assessee considering the volume and frequency of the transactions in a systematic and organized manner. As per the AO numerous transactions of buying and selling of shares, units of mutual funds were carried out by the assessee and constitutes business activity of assessee. It was also observed that many transactions were completed within a short span of time and in some cases the next day. Accordingly the AO held such transactions constitute the business therefore the profit from such transactions is business profit. However, we find that the assessee was

Next ground is as regards that Ld. CIT(A) erred in deleting the disallowance made by Assessing Officer u/s 40(a)(ia) of the Act. Facts of the case are that during the year assessee has given a building on rent and the same was shown as income under the head “house property”. Besides this, assessee was also charging fees for several services in respect of building such as hire charges, protection charges, service charges, water supply charges & misc. receipts and the same was shown as income under the head “business”. The assessee claimed expenses for the repair and maintenance in respect of building and furniture during the year for an amount of ₹40,70,426/-. The AO found that out of the said expenses, certain expenditure for an amount of Rs.25,42,973/- for repair of furniture and building were liable for the deduction of TDS as the payment was exceeding more than ₹20,000/-. The repair expenses for the furniture are Rs. 269820.00 only whereas repair expenses for building are Rs. 22,73,153/-. On question by AO to assessee about the disallowance of expenses under the provision of TDS, assessee submitted that payments were made towards the purchase of materials from local markets and labour charges paid to local masons does

Aggrieved, assessee preferred appeal before Ld. CIT(A) who deleted the addition partly made by AO by observing in para-6 of his order:- “6. Regarding ground no.4 which relates to disallowance of Rs.25,42,973/- under the head repair to furniture and building u/s. 40(a)(ia) of IT Act, 1961. The assessee company has received rent and other service charges to the extent of Rs.37,51,361/- in the financial year. From property including the other amenities have been rented to Dunlop India Ltd., G.K.W. India Ltd., which is shown in the balance sheet under the head fixed assets which includes land, building furniture, electrical and office equipment including generator, air- conditioner etc., i.e. assessee had received composite nature of income which the company had shown under two heads of income namely House Property income and income from Business. The assessee had debited Rs.40,70,426/- as expenditure under the head repairs and maintenances. The nature of expenses for which disallowance has been made to the extent of Rs.25,42,973/- relates to purchase of wood, bricks, cement, sanitary goods, paint, stone etc., and payments made to small time work contractors under the head Labour Charges and assessee contended that since the payments made to contractors is less than Rs.20,000/- each to various labour contracts, no TDS is required to be deducted under 194C on these labor contracts and provision of TDS is not applicable on the purchase made of various items for repair of building. The assessee company has produced complete chart giving details of nature of these expenses during appellate proceedings. Keeping in view the nature of expenses, no TDS is required to be deducted on the purchase of cement, bricks, iron, wood etc., and payment made to contractors for minor labour work is less than Rs.20,000/- each and in the whole year the payments made to one contractor is less than Rs.50,000/- in aggregate. Therefore, no TDS is required to be deducted u/s. 194C on these payments made to various contractors. Hence, the ground no. 4 relating to addition made u/s. 40(a)(ia) of the I.T. Act, 1961 is allowed on this account. However, assessee has taken additional ground for deduction u/s. 24(a) relating

We have heard rival contentions of both the parties and perused the materials available on record. Ld. DR vehemently relied on the order of AO and submitted Ld. CIT(A) has passed the order without calling for remand report from AO. Therefore Ld. DR requested the Bench to refer the matter to the file of Ld. CIT(A) simply for fresh adjudication after having the remand report from the AO. On the other hand, Ld. AR relied on the order of Ld. CIT(A). From the above discussion, we find that assessee derived its income from building given on rent and for the same building certain facilities were given to tenants for which assessee was charging service fee which was shown as business income. The AO disallowed the repair expenses for the violation of TDS provisions. The ld. CIT(A) found that the most of the expenses were incurred for the purchase of the materials and labour expenses alone was not exceeding the specified limit mentioned under section 194C of the Act. Therefore the ld. CIT(A) allowed the appeal of the assessee. But before the ld. CIT(A), the assessee has taken an additional ground for the deduction of repair and maintenance of building by virtue of the

Next ground of Revenue’s appeal is as regards to delete the disallowance of security transaction tax. At the time of hearing, both Ld. AR and Ld. DR agreed that this ground does not require any adjudication because it is consequential in nature on the decision of treating the income earned by assessee as STCG or business income. Since the issue has adjudicated by holding the profit on sale and purchase of shares as STCG, so the AO is directed to give effect STT accordingly. This ground of Revenue’s appeal is dismissed as consequential in nature. 12. In the result, Revenue’s appeal is dismissed.

In combine result, both appeal of Revenue are dismissed. Order pronounced in the open court 11/12/2015 Sd/- Sd/- (N.V.Vasudevan) (Waseem Ahmed) (Judicial Member) (Accountant Member) Kolkata, *Dkp �दनांकः- 11/12/2015 कोलकाता । आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. आवेदक/Assessee-Tollygunge Estates Pvt. Ltd., 1, Humayan place, Kolkata-87 2. राज�व/Revenue-JCIT(OSD), Cir-10, P-7, Chowringhee Sq. 3rd Floor, Kolkata-69 3. संबं�धत आयकर आयु�त / Concerned CIT Kolkata 4. आयकर आयु�त- अपील / CIT (A) Kolkata 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, कोलकाता / DR, ITAT, Kolkata 6. गाड� फाइल / Guard file. By order/आदेश से, /True Copy/ उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, कोलकाता ।