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TMI Blog2003 (6) TMI 187X X X X Extracts X X X X X X X X Extracts X X X X ..... ut of total disallowance of Rs. 10,150 made out of subscription paid to various clubs. (iv) Allowing relief of Rs. 1,10,601 out of disallowance of Rs. 2,28,593 made on account of commission paid to managing director and other executives. (v) Deleting the disallowance of Rs. 49,591 made out of managerial remuneration to the managing director. (vi) Allowing relief of Rs. 3,33,059 treating the same as revenue expenditure out of total disallowance of Rs. 3,50,609 made out of expenses debited under the head repairs and maintenance of building." 3. At the time of hearing the learned counsel of the assessee stated that except ground Nos. 1 and 2, all other grounds are covered by the orders of the Tribunal for earlier years. The attention of the Bench was drawn on copies of the orders of the Tribunal placed in the record. On the other hand, the learned Departmental Representative fairly conceded to the submissions made by the learned Authorised Representative. Regarding ground Nos. 1 and 2, the learned Departmental Representative placed reliance on the order of the AO. On the other hand, the learned counsel of the assessee placed reliance on the order of the CIT(A). 4. After peru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the CIT(A) and had stated that except ground Nos. 1 and 5, all other grounds have already been decided by the Tribunal while deciding the appeals for earlier years, either in favour of the assessee or against the assessee or the matter was restored to the file of the AO. Therefore, it was requested that in regard to all those grounds, similar view may be taken. 8. On the other hand, the learned Departmental Representative fairly stated that most of the issues involved in the appeal of the assessee have already been decided by the Tribunal as stated by the counsel of the assessee. As per chart, the grounds of the assessee are summarized as under: Rs. 1.Saleof UTI units treated as speculation loss 51,61,875 2. Deduction under s. 80-I 20,97,948 3.1 Add back of amount paid to auditors for taxation matters under s. 40A(12) 14,000 3.2 Retainership fee paid to Sh. Anoop Gupta disallowed as non-business purposes 24,000 3.3 Professional charges paid to Lall Lahiri Salhotra disallowed as non-revenue expenses 14,200 4. Subscription and membership to clubs disallowed as non-business exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round No. 8 is against disallowance under r. 6D at Rs. 12,512. This issue has been decided against the assessee in immediately preceding year, i.e., asst. yr. 1990-91 decided in ITA No. 2337/Del/1996. Accordingly, we confirm the order of the CIT(A) on this issue. 16. Ground No. 12 was not pressed, as the same was decided by the Tribunal against assessee in earlier year. Therefore, the same is dismissed as not pressed. 17. Ground No. 15, which is against the deduction under s. 80HHC, was partly allowed by the Tribunal for asst. yr. 1990-91 in ITA No. 2337/Del/1996. Therefore, we direct the AO to recompute the deduction, in view of the finding of the Tribunal given for asst. yr. 1990-91. 18. Ground No. 5 is against the sustenance of addition of Rs. 54,177 on account of general expenses. The AO disallowed the entire claim of the assessee by observing that these expenses pertain to earlier year. The contention of the assessee was not accepted by the CIT(A), that the payment of these bills were cleared during the year under consideration because there was a dispute and the matter was not settled during the year under consideration. 18.1 The counsel reiterated his contentions as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion on27th May, 1990; no correspondence could be filed by assessee in support of the claim. The employee of the bank was also examined, who stated that he had not advised to enter into transaction. It was also found by the AO that bank has not charged any interest on the amount of loan sanctioned for purchase of these units. It was further noted by the AO that in the month of May there was highest price of the units, whereas in the month of July, there was decline in price of units. Examples for last four years were also quoted in his order. Further, by placing reliance on the decision of McDowell Co. vs. CTO (1985) 47 CTR (SC) 126 : (1985) 154 ITR 148 (SC), the AO held that the transactions are of speculation in nature which were entered with a device for the motive to reduce the taxability. Accordingly, the claim of loss of the assessee was negatived. 19.2 Before the CIT(A), same contentions were reiterated. It was further submitted that there was no colourable device, as neither assessee was related to ANZ nor with UTI. It was further submitted that units were transferred in the name of assessee and heavy dividend of Rs. 45 lakhs was earned by assessee, which has already be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its remained with ANZ because the ownership was duly transferred in the name of the assessee. Again, attention of the Bench was drawn on same pp. 90-92 of the paper book. It was further stated that all the transactions, as and when they took place, were duly recorded in regular books of account. The attention of the Bench was drawn on various pages of the paper book. It was further submitted that huge dividend, i.e., of Rs. 45 lakhs was earned and has been shown in the P L a/c. Regarding the observation of the CIT(A) that assessee has claimed exemption under s. 80M, it was submitted that the deduction was claimed as per the provisions of law and the same was allowed also, therefore, it cannot be said that there was any mala fide. Regarding provisions of s. 73, it was stated that now it does not survive, because in the case of Appollo Tyres Ltd. vs. CIT (2002) 174 CTR (SC) 521 : (2002) 255 ITR 273 (SC), the Hon ble Supreme Court has held that the AO cannot disturb the consistent method of accounting adopted by the assessee. On a query from the Bench, the learned counsel fairly admitted that this was the planning of the assessee to buy units in the month of May, 1990, with a mind tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 993, received from the bank, which reads as under: "We had extended the facility for Rs. 3,75,00,000 at an interest rate of 16 per cent for a period of 60 days in purchase of the units. The interest on this facility was adjusted in the price of the units sold to the company. This facility was secured by a demand promissory note given by the company." 20.1 The assessee was confronted with this letter received from the bank. The assessee vide its letter dt.18th March, 1994, relied on its office letter dt.21st May, 1990, written by the company secretary to the bank that the payment for the units was to be made after two months without interest. 20.2 After perusing all these replies and letter from the bank, the AO noted that the assessee entered into these transactions just to reduce its taxability. It was noted by him that no correspondence was made with the bank in regard to purchase of the units from ANZ. It was also noted by the AO that the units were shown as purchased on21st May, 1990, but minutes of the board meeting dt.27th May, 1990, ratify the purchase. Therefore, it was inferred by the AO that even there was no proper authorisation to the person, who purchased the uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was a common knowledge that the prices of the units are highest in the month of May and lowest in the month of July, then why the assessee entered into these transactions. The reply of the learned counsel was that it was tax planning of the assessee and many assessees have made similar planning. In our considered view, this type of planning cannot be and should not be approved by any authority of law. It is commonly known factor that tax planning is permitted but only those tax plannings are permitted, which are bona fide. This is a settled position that assessee wants to earn as much profit as it can, and, on the other hand, the assessee likes to pay minimum tax thereon. It is never seen that a person will knowingly enter into the transaction which results into losses. This is undisputed fact that prices were highest in the month of May, when the assessee purchased 25 lakhs of units for a consideration of Rs. 3.75 crores and the same were sold on 20th July, when the prices were on the lowest side. 20.4 In the case of Twin Star Holding Ltd. vs. Anand Kedia, Dy. CIT (2002) 178 CTR (Bom) 205 : (2003) 260 ITR 6 (Bom), the Hon ble Bombay High Court has held that where on a resolu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same was declared also. The assessee claimed deduction under s. 80M of the IT Act. On the other hand, the assessee was knowing that there will be a loss on account of sale in the month of July and there was a loss of Rs. 51 lakhs and odd, which it claimed against its business income. In this way, the assessee claimed deduction under s. 80M and then he claimed deduction on account of loss against business income also. This planning, in our considered view, cannot be approved, as the same was a clear cut planning to reduce the tax effect, which is not permissible in the eyes of law. It is also worth noting that no banker will pass the entry after 60 days from the date of actual transaction, which was entered on21st May, 1990, as the same was entered on 21st July, the day when the units were sold by the assessee to the bank. This also clearly proves that there was a clear understanding between the banker and the assessee that the units will be sold after 60 days. Though the units were transferred in the name of assessee and then in the name of bank, but there is no material on record which suggests that physical delivery of the units in question was handed over to the assessee or not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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