Conclusion: Transaction charges paid to National Multi Commodity Exchange of India (NMCE) was clearly in the course of commodity business and thus, assessee was entitled to claim such expenditure as ‘business expenditure’.
Held: It was held by Tribunal that the claim of assessee that transaction charges paid to National Multi Commodity Exchange of India (NMCE) required to be allowed as ordinary business expenditure in the course of commodity trading carried good deal of force. The expense incurred was clearly in the course of commodity business and thus, assessee was entitled to claim such expenditure as ‘business expenditure’.
FULL TEXT OF THE ITAT JUDGMENT
The captioned appeal has been filed at the instance of the assessee against the order of the Commissioner of Income Tax (Appeals), Gandhinagar (‘CIT(A)’ in short), dated 18.01.2016 arising in the assessment order dated 26.03.2013 passed by the Assessing Officer (AO) under s. 143(3) of the Income Tax Act, 1961 (the Act) concerning assessment year 2010-11.
2. The assessee has raised several grounds but however, in essence, has impugned the action of the CIT(A) in confirming the addition/disallowance made by the AO on two grounds; (a) unexplained cash credit of Rs.21,62,282/- & (b) transaction charges of NMCX Rs.24,67,435/-.
3. When the matter was called for hearing, the learned AR for the assessee submitted with reference to the addition made by the Revenue authorities towards unexplained cash credit that the sundry creditors of the assessee included one M/s. Navin Enterprise, Proprietor – Shri Natwarbhai Ganpatbhai Vanzara amounting to Rs.21,62,282/-. Additions were made in the hands of the assessee despite address, PAN number and all other relevant information on the ground that said Mr. Natwarbhai Ganpatbhai Vanzara denied to have any bank account. The learned AR for the assessee referred to a copy of cheque dated 10.11.2009 issued by the creditor amounting to Rs.12,12,282/- which clearly rebuts the assertions made by the creditor. The AO has failed to grant cross examination despite request in this behalf. It was thus contended that the additions made under s.68 of the Act in violation of natural justice is clearly not sustainable in law. As regards the disallowance of transaction charges, the learned AR submitted that the expenses have been incurred in the course of commodity trading on the platform of the exchange and therefore, there was no warrant for expenditure incurred towards transaction charges in the ordinary course of commodity trading.
4. The learned DR, on the other hand, relied upon the order of the CIT(A).
5. We have carefully considered the rival submissions and perused the orders of the authorities below.
6. With reference to additions made under s.68 of the Act towards M/s. Navin Enterprise, we find that the assessee has been able to demonstrate the receipt from the aforesaid creditor and has successfully demolished the stand of refusal taken by the creditor in this regard. Thus, the version of the creditor cannot be prima facie taken as reliable. The cross examination of the creditor demanded has not been granted. Therefore, in view of the trite law, no addition can be made merely on the basis of statement of third person recorded at the back of the assessee without opportunity of cross examination thereon. One course of action would be to remit the matter back to the AO for fresh examination on this aspect. However, we are not inclined to do so as apparently the matter is quite old and there is a lapse of more than eight years since the execution of transaction. Hence, the protracted litigation requires to be avoided in view of the tangible evidence placed on behalf of the assessee and lapse committed by Revenue. Therefore, the additions of Rs.21,62,282/-under s.68 of the Act requires to be deleted. We direct the AO to do so.
7. In the result, grievance of the assessee on this score is decided in its favour.
8. The second issue pertains to allowability of transaction charges. The claim of the assessee that transaction charges paid to National Multi Commodity Exchange of India (NMCE) requires to be allowed as ordinary business expenditure in the course of commodity trading carries good deal of force. The expense incurred is clearly in the course of commodity business and thus, the assessee is entitled to claim such expenditure as ‘business expenditure’. The action of the Revenue authorities is accordingly set aside and impugned transaction charges amounting to Rs.24,67,435/- is allowed.
9. In the result, appeal of the assessee is allowed.
This Order pronounced in Open Court on 14/11/2018