Income Tax Appellate Tribunal - Mumbai
Jamnadas Morarjee Sec.Ltd., Mumbai vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "I", MUMBAI
BEFORE SHRI D.K. AGARWAL, J.M AND SHRI A.L. GEHLOT, A.M.
ITA No. 6077/M/2008
Assessment Year: 2002-03
Jamnadas Morarjee Sec. Ltd., ... Appellant
204, Stock Exchange Tower,
Dalal Street, Fort, Mumbai - 400 023.
(PAN - AAACJ2850J)
Vs.
Income Tax Officer, Ward 4(3)(1), ...Respondent
Mumbai.
Appellant by : Mr. Pramod Kumar Parida
Respondent by : Mr. Kishan Vyas
ORDER
PER A.L. GEHLOT, A.M.:
This appeal filed by the Assessee is directed against the order of CIT(A)-XV, Mumbai, passed on 23 rd July, 2008 for the assessment year 2002-03.
1. Ground No.1 is in respect of disallowance of diminution in value of closing stock of Rs. 10,23,038/- by treating the same as speculation loss.
2. From the perusal of trading account as well as balance sheet, the AO found that the assessee had shown loss on account of valuation of closing stock at Rs. 10,23,038/- due to decrease in the market value of shares. On being asked to show cause as to why the provision of Explanation to section 73 should not be applied to the alleged depreciation of closing stock of shares as 'speculation loss, the assessee argued that income from other sources comprising interest from bank etc. and dividend income represented the major chunk of income shown in the total income at Rs. 2,70,796/-. The AO did not accept the argument of the assessee and he found that the assessee has shown business loss to the extent of Rs. 29,31,247/- against the income form other 2 ITA NO. 6077/M/08 Jamnadas Morarjee Sec. Ltd.
sources at Rs. 2,70,796/-. The AO held that for the purpose of Explanation to section 73, the assessee had got the major income only from business, as it has shown a loss of Rs. 29,31,247/- as against the income from other sources at Rs. 2,70,796/-. The AO was of the view that Explanation to section 73 is also applicable in valuation of closing stock. The CIT(A) confirmed the action of the AO.
3. At the outset, learned AR submitted that this issue is covered against the assessee by the judgment of the jurisdictional High court in the case of Prasad Agents (P) Ltd. V. ITO, 226 CTR 13 (Bom.) wherein it was held that Explanation to s. 73 is not restricted only to group companions, and is applicable to all companies which carry on business of purchase and sale of shares; loss originating from and traceable to the valuation of stock of shares is also covered by Explanation to s. 73.
4. After hearing the learned DR, we find that the issue is covered against the assessee by the judgment of the jurisdictional High Court in the case of Prasad Agents (P) Ltd. cited supra and in the light of that we do not find any infirmity in the order of CIT(A), hence, the order of CIT(A) is confirmed on this issue.
5. 2 n d ground is in respect of disallowance of expenses of Rs. 8,81,281/- by attributing the same towards speculation business.
6. The AO noticed that the assessee did not allocate expenses in respect of speculation business. The AO allocated the expenditure in the proportionate of turnover of speculation business as well as non-speculation business. The order of the AO has been confirmed by the CIT(A).
7. The contention of the assessee is that certain expenses which are not related to speculation business have also been wrongly allocated to speculation business by adopting the turnover formula. The learned AR submitted that there are certain expenses which 3 ITA NO. 6077/M/08 Jamnadas Morarjee Sec. Ltd.
are not related at all to the speculation business like, share transfer expenses of Rs. 30,714/-, brokers contingency fund expenses of Rs. 54,813/-, etc. The learned AR submitted that only the following expenses could be appropriated in the ratio of turnover:-
Out of payment to employees Directors remuneration 4,60,000 Out of administrative expenses Motor Car Exp. 2,24,214 Elec. Charges 2,04,597 Office repair & maint. 31,498 Computer exp. 1,74,160 Out of interest & Fin. Chg. None Depreciation Depreciation 1,22,293 12,16,762/-
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8. The learned DR, on the other hand, relied upon the order of CIT(A).
9. We have heard the learned representatives of the parties and perused the record. At the time of hearing, it was specifically to furnish the details of expenses, which are not related to speculation business but the assessee failed furnish the same. On perusal of record we find that on the basis of formula adopted by the AO, expenses attributable to speculation business comes to 22% of the total expenses. The assessee submitted that only the above detailed expenses are to be appropriated in the ratio of turnover but the assessee failed to furnish the details of other expenses whether they were related to speculation business or not. In the absence of such details and after considering the assessee's submissions, it will be fair and just if 10% of the expenses are allocated to speculation business. The AO is directed to allocate 10% of the total expenses in respect of speculation business. Thus, this ground of appeal of the assessee is partly allowed.
4 ITA NO. 6077/M/08Jamnadas Morarjee Sec. Ltd.
10. In the result, the appeal of the assessee is partly allowed.
Pronounced in open Court on this 18 t h day of June, 2010.
Sd/- Sd/-
(D.K. AGARWAL) (A.L. GEHLOT)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 18 t h June, 2010.
Copy to:-
1) The Appellant.
2) The Respondent.
3) The CIT (A) concerned.
4) The CIT concerned.
5) The Departmental Representative, "I" Bench, I.T.A.T.,
Mumbai.
By Order
//true copy// Asst. Registrar,
I.T.A.T., Mumbai.
Kv
S.No. Description Date Intls
1. Draft dictated on 14.6.10 Sr.P.S./P.S
2. Draft placed before author 15.6.10 Sr.P.S/PS
3 Draft proposed & pla ced before the JM/AM
second Member
4 Draft discussed/approved by second JM/AM
Member
5 Approved Draft comes t o the Sr.P.S./P.S
Sr.P.S./PS
6. Kept for pronouncement on Sr. P.S./P.S.
7. File sent to the Bench Clerk Sr.P.S./P.S
8 Date on which file goe s to the Head
Clerk
9 Date of Dispatch of ord er