LALITA STEEL INDUSTRIES (P) LTD,KOLKATA vs. J.C.I.T (OSD) UNDER CIT - IV, KOLKATA

This appeal by the assessee is arising out of order of Commissioner of Income Tax (Appeals)-XII, Kolkata in appeal No.281/XX/10/11-12 dated 04.01.2012. Assessment was framed by JCIT(OSD) under CIT-IV, Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 28.11.2011 for assessment year 2009-10.

Facts of the case are that assessee is a Private Limited Company and having registration with Reserve Bank of India as Non-Banking Financial Corporation (NBFC for short) and engaged in the business of granting loan and advance, investment and share trading. During the year under consideration, assessee has earned STCG of ₹1,10,62,567/- arising out of sale of equity share and mutual units. The assessee has shown the following expense in its profit and loss account:- Administrative expense amounting to ₹17,75,305/-; (1) Interest expense of ₹93,99,773/-; (2) Depreciation of ₹6,90,490/-; (3)

Aggrieved assessee preferred appeal before Ld. CIT(A) who uphold the action of Assessing Officer by observing as under:- “I have considered the finding of the AO and the written submission filed by the AR I think STDCG u/s/ 111A of the IT Act, 1961 is charged at a Special Rate, therefore, A.O is justified in not allowing any expenditure incurred for this purpose. So far as, AR’s arguments that the expenditure should be allowed as business expenses then in that situation the AR/assessee should have shown their income from STCG Lalita Steel Inds.(P) Ltd. v. JCIT(OSD) under CIT-IV Kol. Page 3 as business income instead of income u/s. 111A of the IT Act, 1961. Therefore, AO’s action of not allowing any expenditure in this case seems justified, thus, assessee’s appeal grounds no. 2 and 3 are dismissed.”

We have heard both the parties and perused the material available on record. Ld. AR submitted that assessee is engaged in business of sale and purchase of share and all the expenses claimed in profit and loss account were in connection with business of assessee and prayed for allowabilty of those expenses. On the other hand, Ld. DR vehemently relied on the orders of authorities below. From the aforesaid discussion, we find that assessee during the year has earned profit which was taxable at special rate under head STCG and assessee has claimed expense against that income which was disallowed by AO on the ground that income is chargeable at a special rate. Therefore, no expense of whatsoever will be allowed from the income showed u/s. 111A of the Act. Before us the Ld. AR further took alternative plea stating that if such expenses are not allowed against the STCG u/s.111A of the Act then allow them as business expenditure against income under head of ‘business’. Ld. AR further submitted that assessee has incurred this expenditure for the purpose of its business and in case same are not allowed against the income under the head STCG then the same should be allowed against the business income of the assessee. After considering the plea of Ld. AR, in view of his submission, we restore this matter to the file of AO with a direction that if these expenses are having connections with the business of assessee then it should be allowed as business expenditure as specified in the chapter 6 of the Lalita Steel Inds.(P) Ltd. v. JCIT(OSD) under CIT-IV Kol. Page 4 Income Tax Act and as per the provisions of section 28 to 44D of the Act. This ground of assessee’s appeal is allowed for statistical purpose.