Case Law Details
RPK Warehousing (P.) Ltd. Vs ITO (ITAT Ahmedabad)
Conclusion: Loss on the transactions in castor oil and castor seeds entered between sister concerns could not be allowed to be set-off against business income and LTCG on sale of land as these were speculative transactions as assessee had not obtained the delivery of goods of alleged trading since the purchased item was sold on the same day in the same quantity and also that there was no transportation expenses claimed by assessee.
Held: During the course of scrutiny assessment proceedings, AO noted that assessee had warehouse rental income, weigh bridge income, truck hiring income as also long term capital gain on sale of land. However, these incomes had been wiped off on account of alleged loss in castor seed and castor oil trading. When these transactions were probed further, it was noted that admittedly assessee did not have any storage facility for castor oil and castor seed, and that there were no opening and closing balances in respect of the same. It was also found that the assessee had nine transactions in respect of castor oil, that on all these occasions purchases were made from one Vishal Agrotech operating from the same premises from which assessee was operating, that on all the occasions castor oil was sold to Aditya Marine Ltd on the same date in the same quantity but on a substantially lower rate, and that the transactions, therefore, seemed dubious. In respect of castor seed transactions also, the story was on the same pattern. All the transactions in castor oil and castor seeds were speculative transactions as assessee had not obtained the delivery of goods of alleged trading since the purchased item was sold on the same day in the same quantity and also that there was no transportation expenses claimed by assesses. The loss on these transactions was thus disallowed. Assessee contended that mere fact that concerned entities were operating from the same premises could not lead to the inference that these were sister concerns or the transactions were collusive. It was held variations in castor oil and castor seed prices were not supported by authoritative data. The sequence of events, showing repeated loss transactions, not made sense either. It was also difficult to understand that when ultimate buyer and seller operated from same premises, why was assessee roped in every time, and every time that happened, assessee incurred a loss. There was no explanation about nature of office sharing arrangement or the nature of association. The “ease of business” for every connected party operating from the same premises was too vague an explanation to merit judicial approval. Thus, AO had rightly disallowed loss on impugned transactions.
FULL TEXT OF THE ITAT JUDGMENT
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