2012 (5) TMI 822 - AT - Income Tax

Summary

Issues involved: Appeal against Commissioner of Income Tax (Appeals) order u/s 143(3) for assessment year 2008-09 regarding disallowance of detention charges, commission expenditure, and treatment of profit from sale of shares.

Detention Charges Disallowance:
- Assessee engaged in commission agency and trading in chemicals.
- AO disallowed detention charges of Rs. 2,82,702 as penal in nature.
- CIT(A) deleted the addition, considering it as additional rent for delay in returning containers, not penal in nature.
- ITAT upheld CIT(A)'s decision, stating charges were contractual, not infringing any law, hence allowable under section 37(1).

Commission Expenditure Disallowance:
- AO disallowed commission of Rs. 1,20,644 for lack of recipients' income tax returns.
- CIT(A) deleted disallowance, noting services rendered, payment mode, and business turnover.
- ITAT supported CIT(A)'s decision, finding commission genuine, reasonable business expenditure.

Profit from Sale of Shares Treatment:
- Assessee had long term and short term capital gains, also declared business profit on shares.
- AO treated short term gains as business income due to frequent transactions.
- CIT(A) directed treating short term gains as capital gains based on investment intent.
- ITAT upheld CIT(A)'s decision, considering investment motive, dividend income, and limited share transactions.

Conclusion:
- ITAT dismissed revenue's appeal, upholding CIT(A)'s decisions on detention charges, commission expenditure, and profit from sale of shares.
- Shares held for less than one year treated as short term capital gains, aligning with investment intent and judicial precedents.