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TMI Blog2013 (10) TMI 785X X X X Extracts X X X X X X X X Extracts X X X X ..... other sources. In the assessment order, the Assessing Officer treated interest received from loans of Rs.13,87,536/- as "Income from other sources" as no business of money lending was being carried on by the assessee. The assessee had claimed the following items as business expenditure. Bank charges Rs. 231 Interest paid on loan Rs.1,30,453 Car Insurance paid Rs. 87,163 Office expenditure Rs. 13,794 Legal expenses Rs. 92,500 Vehicle maintenance Rs. 1,725 Salaries Rs. 54,000 3. The Assessing Officer did not consider the expenditure claimed in the income and expenditure account for deduction in the absence of business income. Aggrieved, the assessee is in appeal before the CIT(A). Before the CIT(A) the assessee had offered income from business at Rs. 7,85,742/-. On verification of the receipts offered in the P L account, the Assessing officer noticed that the assessee had no business activity in reality. She found that the assessee had disclosed interest income of Rs. 13,87,536/-, other misc. income of Rs.3,338/- and car hire charges of Rs. 15,000/-, which, as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hire charges Rs. 15,000 3. Dividends Rs.13,37,891 4. Other Incomes Rs. 3,338 5. Interest from loans Rs.13,87,536 6. Interest from banks Rs. 3,16,488 Total Rs.31,68,253 It was submitted that out of the above 6 items, car hire charges of Rs.15,000/- and interest from loans of Rs.13,87,536/- were treated as business income, while the remaining were admitted as income from other sources. He maintained that it was only for the purpose of accounting and for the sake of convenience that the other items were also included in the income and expenditure account. 7. The representative submitted that the assessee had claimed the following items as business expenditure. Bank charges Rs. 231 Interest paid on loan Rs.1,30,453 Car Insurance paid Rs. 87,163 Office expenditure Rs. 13,794 Legal expenses Rs. 92,500 Vehicle maintenance Rs. 1,725 Salaries Rs. 54,000 It was submitted that the other expenses shown in the income and expenditure account were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision in the case of CIT Vs. Bharat Nidhi Ltd. (60 ITR 524)(Puj) to support the above contention. The representative relied on the decision in the case of Gangaprasad and Chhotey Lal (31 ITR 177)(All) contending that it was held in the said decision that the activity of financing, though on one occasion, would by itself constitute business on trading activity. 10. With regard to the income from hiring of car, the representative submitted that the assessee had booked a BMW Car on 27.12.2006. In the order booking form, the delivery period was mentioned as March, 2007. Since the assessee was hoping to get the car in the first week of March, he identity, though a family concern. The said car was delivered to the assessee on 30.03.2007 and was delivered by him to the lessee company for their business purpose. The representative averred that the assessee had earned lease rent of Rs. 15,000/- towards the same, which was offered as business income. He argued that merely because the car was leased to a group company, the same could not have been considered as colourable transaction, without bringing on record any documentary evidence in this regard. He averred that since the registered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee, Shri A.V. Raghuram, reiterated the submissions made before the lower authorities and submitted that in the succeeding year i.e., assessment year 2008-09, 50% of the expenditure claimed towards vehicle has been disallowed on estimated basis. 16. The learned Counsel for the assessee, Shri A.V. Raghuram, submitted that the legal expenses under section 57(3) are to be allowed even if the income is assessed under the head "Income from other sources" and not the 'business income'. 17. The learned D.R. on the other hand submitted as follows : "The CIT(A), Hyderabad, vide his order dated 30.09.2010 in ITA No. 226/Addl.CITR.6/CIT(A)-IV/2009-10, upheld the assessment order, categorically giving a finding that the assessee never carried out any business of money lending. Before the Hon'ble Andhra Pradesh High Court, assessee, in his own case, i.e., S.V. Rao vs. Credential Finance Ltd. and ors., has taken a plea that he is not in the business of money lending, but he has financed amount to a company as a special case in his personal capacity, and it is only occasion that he has lent the amount. Copy of High Court order dated 17.02.2006 was submitted. This clearly brings out that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's explanation acceptable. She opined that as per annexure I A of the sale deed, the land cost of the property was taken at Rs. 36,93,600/- whereas the built up area of 1750 sq. ft was valued at Rs. 6,12,400/ -. She considered the same very reasonable and therefore taking the value as per the Stamp Duty Authorities as deemed consideration in terms of sec. 50C of the Act, added the difference of Rs. 7,56,000/-. During the course of proceedings, it was submitted that vide his letter dated 13.11.2009, the assessee had explained the following reasons for the lesser price received by him. (a) The flat was lying vacant since last 40 months and no tenant was approaching for taking the same on rent due to its bad location. (b)The building was more than 15 years old. (c) There was no maintenance of building (d)There was no drinking water supply (e) Sewerage connection of the building was disconnected (f) There was no car parking space. (g) Lift was not working (h)Drainage and flood water stagnated in cellar for many months due to disconnection of sewerage connection. It was maintained that the above factors scaled down the selling rate of the flat. The learned A.R. argued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see is with regard to the disallowance of Rs.26,818/- contentedly incurred for earning Short term capital gains/loss through Kotak PMS Management services, claiming that the special rate of tax under sec. 111 A of the Act is applicable to Short term capital gains/loss, which is calculated after deducting the incidental expenses incurred for the said earning. Similarly, ground No.9 has been raised to contest the disallowance of Rs.1,02,190/- charge by Unifi Wealth Management portfolio managers towards DP charges, service tax and other expenses incurred by them for managing the share investment portfolio of the assessee, claiming the same as incidental to the earning of income. 24. The Assessing Officer noted that the assessee had shown Short term capital gains/loss at Rs. 1,54,497/ - in the trading account of Kotak PMS Management after including management fee and other charges of Rs. 26,818/-. She noted that since the assessee was offering income under the head short term capital gains, taxable at the special rate under sec. 111 A, the said expenses are not to be allowed. The Assessing officer further noted that the assessee was engaged in trading of shares through portfolio mana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim of taxation at special rate was made under the specific provisions of sec. 111 A, the appellant was indeed not entitled for taking the benefit of the normal provisions regarding computation of capital gains. It is clear that the case raw relied upon by the appellant's representative pertains to computation of capital gains under normal provisions. Accordingly, I am of the view that the expenses claimed towards earning such income were correctly not allowed by the Assessing officer. Ground No. 8 9 are therefore decided against the appellant". 27. Aggrieved by the Order of the learned CIT(A), the assessee is in appeal before us and submitted that the expenses claimed as against short term gains/loss on sale of shares for Rs.1,02,190/- and Rs.26,818/- are to be allowed as it is a separate expenditure for which the assessee is entitled for deduction. We are of the opinion that expenditure of Rs.1,02,190/- and Rs.26,818/- incurred by the assessee cannot be allowed for the reasons given by the CIT(A) which in our opinion is to be upheld. The assessee is not entitled for taking the benefit of the normal provisons regarding computation of capital gains. It is clear that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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