2019 (4) TMI 210 - AT - Income Tax

Loss on sale of unquoted shares - particulars regarding the year of acquisition, cost price, indexed cost and sale consideration were furnished in the course of assessment proceedings - sales were not effected through Recognized stock exchange and were not sold in acute financial exigency - HELD THAT - The cost of acquisition of shares in Tatia Skylines & Health Farms Ltd. i.e. ₹ 41,25,000/- is apparent from schedule 5 of audited accounts of the assessee. In view of the totality of facts explained above the disallowance of assessee s claim for long term capital loss of ₹ 81,90,769/- is beyond any controversy and requires to be allowed and therefore we confirm the findings of ld CIT(A). We note that so far of long term capital loss arising from sale of 20,56,850 shares of JP Morgan, it is an admitted fact that the company failed to furnish any details. The failure to furnish such details may result in disallowance of Long term capital loss of ₹ 6,52,950/- relating to acquisition and sale of shares of JP Morgan shares only. The loss arises from the sale of 20,56,850 shares of JP Morgan wherein the assessee failed to furnish any details are not allowed and balance loss is allowed. Hence, A.O. is directed to delete the addition accordingly and balance loss of ₹ 6,52,950/- is confirmed. That being so, we decline to interfere with the order of Id. C.I T.(A) in deleting the aforesaid addition. His order on this addition is, therefore, upheld and the ground of appeal of the Revenue is dismissed. Disallowance of expenses u/s 40(a)(ia)for non deduction of tds - TDS u/s 194C - expenses claimed under the sub-head Dyes & Chemical are purchase of material- HELD THAT - Expenses claimed under the sub-head Dyes & Chemical is in relation to purchases of materials. This fact is also admitted at para 5 of the assessment order. Therefore, the question of deduction of TDS U/s 194C is not applicable. That is, the provisions of Chapter XVIIB of the Act relating to TDS do not attract on purchase of goods and materials. Therefore, the disallowance made by AO is contrary to the provisions of section 194C of the Act. That being so, we decline to interfere with the order of Id. C.I T.(A) in deleting the aforesaid addition - Decided against revenue

Summary

Issues:
1. Disallowance of long term capital loss arising from the sale of unquoted shares.
2. Disallowance of expenses related to Dyes & Chemicals under section 40(a)(ia) of the Income Tax Act.

Issue 1: Disallowance of Long Term Capital Loss:
The Revenue appealed against the order of the Commissioner of Income Tax (Appeals) regarding the disallowance of a long term capital loss of ?88,43,720 arising from the sale of unquoted shares. The Revenue contended that the loss of ?81,90,769 from the sale of shares of Tatia Skylines & Health Farms Ltd. and JP Morgan was erroneously allowed by the CIT(A). The assessee failed to provide details of purchase for verification, leading the AO to conclude that the claim of loss was unsubstantiated. However, the ITAT Kolkata upheld the CIT(A)'s decision, stating that the sale of unquoted shares does not automatically render the loss as bogus. The ITAT noted that bills supporting the sale of unquoted shares were furnished, and the denial of the long term capital loss was unjustified. The ITAT allowed the claim of ?81,90,769 as it was adequately supported by evidence. Regarding the loss of ?6,52,950 from JP Morgan shares, where details were not provided, the ITAT upheld the disallowance of this portion of the claim while allowing the balance loss.

Issue 2: Disallowance of Expenses related to Dyes & Chemicals:
The Revenue challenged the CIT(A)'s decision to allow ?2,79,962 out of the expenses under Dyes & Chemicals, citing section 40(a)(ia) of the Act. The AO disallowed the amount as the assessee failed to deduct tax at source under section 194C. However, the CIT(A) deleted this addition, and the ITAT Kolkata upheld this decision. The ITAT noted that the expenses claimed under Dyes & Chemicals were related to material purchases, not services attracting TDS under section 194C. As the provisions of TDS did not apply to the purchase of goods and materials, the disallowance made by the AO was deemed incorrect. Therefore, the ITAT dismissed the Revenue's appeal and upheld the CIT(A)'s decision to delete the addition.

In conclusion, the ITAT Kolkata dismissed the Revenue's appeal, confirming the decisions of the CIT(A) regarding the disallowance of long term capital loss from the sale of unquoted shares and the expenses related to Dyes & Chemicals. The judgment emphasized the importance of providing adequate evidence to support claims and highlighted the correct application of tax deduction provisions under the Income Tax Act.