Income Tax Appellate Tribunal - Bangalore
Deepak Jagmohan Vakharia , Bangalore vs The Income Tax Officer Ward-1(2)(3), ... on 13 July, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
"SMC-C" BENCH : BANGALORE
BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND
SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER
ITA No. 989/Bang/2018
Assessment Year :2013-14
Shri Deepak Jagmohan
Vakharia,
No. 201, Abrar Matrushri, The Income Tax Officer,
25, AGA Abbas Ali Road, Vs. Ward 1 (2)(3),
Ulsoor, Bangalore.
Bangalore - 560 042.
PAN: AAIPV7387H
APPELLANT RESPONDENT
Appellant by : Smt. Sheetal Borkar, Advocate
Respondent by : Shri Tshering Ongda, JDIT (ISCI)
Date of hearing : 28.06.2018
Date of Pronouncement : 13.07.2018
ORDER
Per Shri A.K. Garodia, Accountant Member
This appeal is filed by the assessee which is directed against the order of ld. CIT(A)-3, Bangalore dated 07.03.2018for Assessment Year 2013-14.
2. The grounds raised by the assessee are as under.
"1. On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (A) erred in passing the order in the manner in which he did.
2. On the facts and in the circumstances of the case, the learned CIT(A) ought to have refrained from including the net sale consideration of the sale of stamp as "income from other sources"
without appreciating that the sale proceeds were capital receipt not liable to tax under the Act.
3. The learned CIT(A) failed to appreciate that the sale proceeds of postal stamps which were collected by the Appellant as a hobby over a period of time, would result to capital receipt, thus not liable to tax under this Act.
ITA No.989/Bang/2018 Page 2 of 54. The learned CIT (A) failed to appreciate that the collection of rare stamp collection falls within the characteristic of personal effect' under section 2(4A) (ii) of the Act and hence not exigible to tax for capital gain.
5. Without prejudice, even if the sale proceeds on stamps are liable to be assessed, the same can be assessed only under the head "capital gains" by proving them as long term capital gains after determination of capital gains as provided u/s.45 and 48 of the Act.
6. The learned CIT(A) erred in disallowing the interest of Rs.4 lakhs claimed by the appellant.
7. The learned CIT(A) ought to have appreciated that the said interest of Rs.4 lakhs has been subjected to TDS, in favour of the recipient and it has also been offered for taxation by the recipient and hence disallowance as made is unjust and liable to be deleted.
8. Without prejudice, the disallowances as made as confirmed by the CIT(A) are excessive, arbitrary and unreasonable and liable to be deleted in toto.
9. The learned CIT(A) erred in confirming the levy of interest u/s.234B 86 234D of the Act.
10. The learned CIT(A) also erred in confirming the levy of interest u/s.244A on the amount of refund directed to be given.
11. For these and other grounds that may be urged at the time of hearing of the appeal the appellant prays that the appeal may be allowed."
3. It was submitted by ld. AR of assessee that although the assessee has raised as many as 11 grounds of appeal but only two effective issues are to be decided. She submitted that the first issue to be decided is regarding addition made by the AO of Rs. 5.79 Lakhs on account of sale of postal stamps, which were stated to be collected by assessee as a hobby over a period of time and therefore, such sale proceeds is not taxable as per the assessee. But the AO has taxed the same and CIT(A) has confirmed such addition. Thereafter, she submitted that the second issue to be decided is regarding disallowance of interest of Rs. 4 Lakhs claimed by the assessee and this issue is raised by the assessee in ground no. 6 of the appeal. Regarding the first issue, she placed reliance on a Tribunal order rendered in the case of G.B. Pai Vs. ACIT as ITA No.989/Bang/2018 Page 3 of 5 reported in (2007) 18 SOT 540(Delhi). Regarding the second issue, she reiterated the submissions made before CIT(A). The ld. DR of revenue supported the orders of authorities below.
4. We have considered the rival submissions. We find that the balance sheet of the assessee as on 31.03.2013 is available on page no. 11 of the paper book and from the same, it is seen that the assessee is showing an amount of Rs. 1,63,56,648.10 under the heading Stamps under the broad heading investments. Hence it is seen that the assessee is acquiring stamps as investment as per the balance sheet of the assessee. In the light of these facts, now we examine the applicability of Tribunal order cited by ld. AR of assessee which is rendered in the case of G.B. Pai Vs. ACIT (supra). Para nos. 7 and 8 of this Tribunal order are relevant and hence, these paras are reproduced hereinbelow for the sake of ready reference.
"7. In the present case the assessee has collected rare postal stamps and covers since last more than 50 years as his personal assets. The assessee was founder member of the Philatelic Congress of India (the apex organization of stamp collectors) and remained its Secretary General from 1975 to 1979 and President from 1980 to 1982. He was also member of International Philatelic Jury from 1980 to 2001 and participated in Philatelic Exhibitions, in and outside India from time to time. The assessee had sold some of his collection of rare stamps at the fag end of his life as his personal asset in an auction held in London, U.K. for Rs. 7,66,848. The object of collection of rare postal stamp and covers is not only the pride possession but it also gives joy to the possessor. Thus the assessee can be said to have an intimate connection with the rare stamp and covers. Thus the element of personal attachment with the object did exist in the facts of the case. In Re Collins' Will Trusts v. Hewetson (1971) WLR 37, valuable stamp collection was held to be personal effect. In the case of Asstt. CIT v. Mrs. Dilnavaz S. Variava (Mum.) (sic), wherein the assessee being management consultant had hobby of collecting paintings. She sold some of the paintings in 1992-93 and claimed exemption of entire sale proceeds under Section 2(14)(ii), same being her personal effects. Her claim was upheld by the Tribunal considering her collection of painting being her personal effects, because the assessee had esthetic taste for paintings, it gave her pleasure and pride of possession.
8. Thus, in the circumstances we hold that the collection of rare postal stamps and covers has the characteristic of 'personal effects' being a physical movable property having intimate relation with the possessor i.e., the assessee and has been held for personal use by the collector, to satisfy his hobby of collection of rare stamps. He has used them in various philatelic exhibition in and outside India as his pride ITA No.989/Bang/2018 Page 4 of 5 possession which have given tremendous joy and pleasure. Hence the sale proceed of rare collection amount to Rs. 7,66,848 are not exigible to tax being exempt under Section 2(14)(ii) of the Act. We, therefore, direct to delete the impugned addition."
5. From the above paras reproduced from this Tribunal order, it is seen that in that case, it was shown by assessee that assessee was having an intimate connection with the rare stamp and covers. In the present case, the assessee is having investment of Rs. 163.56 Lakhs in stamps and the same is shown as investment in the balance sheet of the assessee available on page no. 11 of the paper book. Hence in our considered opinion, this Tribunal order is not applicable in the present case because the facts are different. No other argument was raised by her in this regard. Considering the facts of present case, we find no reason to interfere in the order of CIT(A) on this issue. Accordingly, this issue is decided against the assessee.
6. Regarding the second issue i.e. allowability of interest of Rs. 4 Lakhs, it is seen that this issue is decided by CIT(A) as per para 5 of his order and hence, the same is reproduced hereinbelow for the sake of ready reference.
"5.0 The grounds of appeal 6 and 7 relate to the disallowance of expenditure of Rs.4.00,000/- by the AO. In brief, during assessment proceedings this was observed by the AO that the appellant had shown professional income of Rs.7,50,000/- As against the same he had claimed interest expenditure of Rs.4.00,000/-. The professional income was stated to be on account of certain management fees received by the appellant. Since the appellant failed to provide any nexus between the expenditure and the income. the AO disallowed the interest expenditure of Rs.4,00,000/-. In his written submissions the appellant has submitted that interest of Rs.4,00,000/- was paid by him on account of loan taken from Mandira Vakaria. The appellant further submitted that the loan was used for purchasing fixed deposits to earn the bank interest, which was one of the sources of income for him. The appellant submitted that the fixed deposits and interest were duly disclosed by him in the return of income. However the appellant has also not brought anything on record to show any relation between the loans and the fixed deposits. During appellate proceedings (vide order sheet entry dt 22.02.2018) the appellant was specifically asked to produce documents to show that there was any relation between payment of interest and earning of professional/management fee. In response to the same, the appellant submitted that he is not in a position to provide any such details to substantiate his claim of loan being related to earning of professional/management fee. Considering above the action of the AO is upheld and grounds of appeal 6 and 7 of ITA No.989/Bang/2018 Page 5 of 5 the appellant are dismissed."
7. From the above para, it is seen that the business income of the assessee is of Rs. 7.50 Lakhs as professional income and this is the submission of the assessee that interest is paid on the loan borrowed which was used by the assessee for purchasing fixed deposits to earn bank interest. But this finding is also given by CIT(A) that the assessee has not brought anything on record to show any relation between the loans and fixed deposits. The CIT(A) has further noted in the same para reproduced above that during appellate proceedings vide order sheet entry dated 22.02.2018, the assessee was specifically asked to produce documents to show that there was any relation between payment of interest and earning of professional/management fee and in reply, it was submitted by assessee before CIT(A) that assessee is not in a position to provide any such details. Since the interest expenditure is not connected with earning of professional or management fees or earning of interest income, we find no reason to interfere in the order of CIT(A) on the second issue also. Hence the second issue is also decided against the assessee.
8. In the result, the appeal filed by the assessee is dismissed. Order pronounced in the open court on the date mentioned on the caption page.
Sd/- Sd/-
(SUNIL KUMAR YADAV) (ARUN KUMAR GARODIA)
Judicial Member Accountant Member
Bangalore,
Dated, the 13th July, 2018.
/MS/
Copy to:
1. Appellant 4. CIT(A)
2. Respondent 5. DR, ITAT, Bangalore
3. CIT 6. Guard file
By order
Senior Private Secretary,
Income Tax Appellate Tribunal,
Bangalore.