9911796707
TMI Blog2015 (2) TMI 250X X X X Extracts X X X X X X X X Extracts X X X X ..... partnership firm M/s Prasad & Co. Thus the entire amount transferred by the assessee company to M/s Prasad & Co. should have been allowed as expenditure of the assessee company. The First Appellate Authority has recognised this fact that the assessee could have claimed expenses to the extent of the amount payable to M/s Prasad & Co. While observing so, he chose to uphold the illegal action of the AO in bringing the tax to gross receipts. When the assessee has not received any income from this activity, tax is levied on gross receipts, on a hypothetical basis. This is against the provisions of the Income Tax Act. Same income is sought to be taxed twice. This should not have been done. Thus we direct the AO to grant deduction of ₹ 12,95,636/- from the income assessed in the hands of the assessee as no income that arises from the business of IPO can be brought to tax in the hands of the assessee company for the reason that it has not earned or derived any income from such activity. - Decided partly in favour of assessee. - ITA No. 419/Del/2012 - - - Dated:- 31-12-2014 - Shri H. S. Sidhu And Shri J. Sudhakar Reddy,JJ. For the Appellant : Sh. Mayank Jain, Adv. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the same to its sister concerns. He determined the income u/s 143(3) at ₹ 11,54,700/-. Aggrieved the assessee carried the matter in appeal. Before the First Appellate Authority the assessee submitted that prior to the incorporation of the assessee company, the Director Mr.Rohit Prasad, was a partner in a Partnership Firm named M/s Prasad Co. along with Mr.Rajat Prasad. The firm M/s Prasad Co. works as broker in primary financial markets and it was the Member of the Delhi Stock Exchange having Membership No. D- 201 and allotted IPO broker code no. 5/0201/4. After the incorporation of the assessee company, the Membership of DSE and the IPO broker code no. belonging to the partnership firm, had been transferred to the assessee company. It was further submitted that the assessee company was dealing only in sale and purchase of shares on behalf of clients and the business relating to IPO, was being carried on by the partnership firm M/s Prasad Co. using the IPO broker code 5/0201/4, which was transferred by the partnership firm to the assessee company. It was argued that it was the partnership firm which has carried out the entire business of IPO and only because the IPO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed as expenditure but acting only as a conduit. Therefore, the addition made to be deleted. 2. Without prejudice to ground no.1, in the alternatives, if the said receipts are treated as income then the proportionate expenses should have been allowed as the gross receipt can t be taxed. 3. The Ld.CIT(A) has failed to appreciate that the business of the assessee was conducted in this manner and was pre-existing and it continued to remain so, therefore, the CIT(A) as well as AO cannot disturb the past practice and tax the same as income of the assessee. 4. The Ld.CIT(A) has erred in upholding the order of AO taxing the sum of ₹ 12,95,636/- merely on the basis of entries recorded in the bank account filed by the assessee. Whereas the assessee has explained the reasons for such entry which should have been appreciated and the said amount should not have been taxed as assessee s income. 5. The Ld.CIT(A) has erred in not following consistency principle because in the earlier years also the same practice has been existing and the assessments have been completed u/s 143(3) way back in AY 98-99 and AY 1996-97. 6. The Ld.CIT(A) has erred in not appreciating that the hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee s claim should be accepted. (d) entire loss can never be taxed as income and principle of netting should be applied. For this proposition he relied on the decision of Hon ble Delhi High Court in CIT vs. UK Bose (2013) 212 Taxman 399 (Del). (e) the arrangement is a simple commercial business arrangement done in good faith and the taxation principles have to be applied in accordance with legal rights of the parties which are not in dispute. (f) the assumptions of the Ld.AO that the brokerage is received by the company on account of work done by the Directors is without any evidence. (g) the Tax rates of the assessee company and that of M/s Prasad Co. are same and hence there is no loss to Revenue. 5.2. The Ld.Sr.D.R. Mr.Shammer Sharma relied on the order of AO, as well as that of Ld.CIT(A) and submitted that it is the assessee company which is holding the registration as a Member of DSE and it is also the owner of the IPO broker code 5/0201/4 and whatever is received by the assessee company is due to its legal rights and hence is income of the assessee company at the first stage. He submitted that there is no diversion of income by over riding title and under ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
