Crown Tradelink Pvt.Ltd., Ahmedabad V. The Dy.CIT.,(OSD)Range-1, Ahmedabad

CO 65/AHD/2011

• Counselvise Citation: [2016] 112 COUNSELVISE.COM (IT) 4210 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 5 month(s) 9 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-08-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 01-06-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 22-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: O P CHAUDHURY
• Assessee Lawyers: M G PATEL HEARING CONCLUDED ON
• Keywords: Business income; Speculation loss; Capital Gains

Judgement Text

CO NO. 65/AHD/2011 I.T.A. NO.: 398/AHD/2011 ASSESSMENT YEAR : 2007 - 08 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD SMC BENCH, AHMEDABAD [CORAM : PRAMOD KUMAR AM ] I.T.A. NO. : 398/AHD/2011 ASSESSMENT YEAR : 2007 - 08 DY COMMISSIONER OF INCOME TAX OSD RANGE 1, AHMEDABAD ............APPELLANT VS CROWN TRADELINKS PVT LTD ...........RESPONDENT [PAN:AABCC8750E] CO NO. 65/AHD/2011 IN I.T.A. NO.: 398/AHD/2011 ASSESSMENT YEAR: 2007 - 08 CROWN TRADELINKS PVT LTD ......CROSS - OBJECTOR [PAN:AABCC8750E] VS DY COMMISSIONER OF INCOME TAX OSD RANGE 1, AHMEDABAD ...........RESPO NDENT APPEARANCES BY O P CHAUDHURY FOR THE REVENUE M G PATEL FOR THE ASSESSEE HEARING CONCLUDED ON: 01 /0 6 /16 ORDER PRONOUNCED ON : 31 /08/16 O R D E R 1. THE APPEAL FILED BY THE ASSESSING OFFICER CHALLENGES THE ORDER DATED 15 TH DECEMB ER 2010 PASSED BY THE CIT(A) FOR THE ASSESSMENT YEAR 2007 - 08 ON THE FOLLOWING GROUNDS: 1. THAT THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN DIRECTING THE AO TO TREAT LONG TERM CAPITAL GAIN OF RS 45,02,653 DISCLOSED BY THE ASSESSE AS LONG TERM CAPITAL CO NO. 65/AHD/2011 I.T.A. NO.: 398/AHD/2011 ASSESSMENT YEAR : 2007 - 08 PAGE 2 OF 4 GAIN INSTEAD OF PROFITS AND GAINS FROM BUSINESS OR PROFESSION. 2. THAT THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN DIRECTING TO GIVE UNIFORM TREATMENT TO ALL THEE SHARE TRANSACTIONS TREATED AS BUSINESS AND ACCORDINGLY REDUCE THE SPECULATION LOSS WHICH HAS BEEN CLAIMED AT RS 33,96,881. 2. IN THE CROSS OBJECTION FILED BY TH E ASSESSEE, FOLLOWING GRIEVANCE HAS BEEN RAISED: THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE BY CONFIRMING THE ACTION OF THE AO IN TREATING THE SHORT TERM CAPITAL GA IN OF R S.2 7,71,676 AS BUSINESS INCOME. 3. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CHANGED THE NATURE OF HIS BUSINESS AND IS NOW ENGAGED IN THE BUSINESS OF TRADING IN SHARES AND SECURITIES. HE ALSO NOTED THAT OUT OF RS 72,24,332 SHOWN AS PROFIT ON SALE OF INVESTMENTS IN SHARES, THE ASSESSEE HAS SHOWN RS 27,71, 679 AS SHORT TERM CAPITAL GAINS AND RS 45,02,653 AS LONG TERM CAPITAL GAINS. AS THE ASSESSING OFFICER PROBED THE MATTER FURTHER, IT WAS EXPLAINED BY THE ASSESSEE THAT THE SHARES, PROFIT ON SALE OF WHICH WAS SHOWN AS CAPITAL GAINS, WERE HELD AS INVESTMENTS AT THE POINT OF TIME WHEN ASSESSEE WAS NOT IN THE BUSINESS OF TRADING IN SHARES, AND THAT IT WAS FOR THIS REASON THAT SUCH PROFITS WERE SHOWN AS CAPITAL GAINS. THE ASSESSING OFFICER, HOWEVER, REJECTED THIS EXPLANATION AND HELD THAT ONCE THE ASSESSEE WAS IN THE BUSINESS OF TRADING IN SHARES, NO SUCH DISTINCTION, BETWEEN THE SHARES HELD AS INVESTMENTS AND THE SHARES HELD AS STOCK IN TRADE, COULD BE MADE OUT. HE, THEREFORE, PROCEEDED TO TREAT THE ENTIRE AMOUNT OF RS 72,24,332 AS BUSINESS PROFITS. ON A SEPARATE NOTE, THE ASSESSING OFFICER ALSO HELD THAT AS EXPLANATION TO SECTION 73 APPLIED TO THE FACTS OF THIS CASE, THE LOSS INCURRED BY THE A SSESSEE ON SALE OF SHARES WAS REQUIRED TO BE TREATED AS SPECULATION LOSS WHICH CANNOT BE SET OFF AGAINST NORMAL BUSINESS INCOME. AS SUCH LOSS OF RS 33,96,881 ON SALE OF SHARES WAS HELD TO BE SPECULATION LOSS AND IT WAS CARRIED FORWARD SEPARATELY, WITHOUT S ETTING OFF THE SAME AGAINST PROFIT ON SALE OF SHARES. AGGRIEVED, INTER ALIA, CO NO. 65/AHD/2011 I.T.A. NO.: 398/AHD/2011 ASSESSMENT YEAR : 2007 - 08 PAGE 3 OF 4 BY THESE DISALLOWANCES, ASSESSEE CARRIED THE MATTER IN APPEAL. WHILE LEARNED CIT(A) UPHELD THE CONTENTION OF THE ASSESSEE SO FAR AS LONG TERM CAPITAL GAINS IS CONCERNED, AS THE RE LATED SHARES WERE SHOWN AS INVESTMENT IN THE LAST YEAR S BALANCE SHEET, HE DECLINED TO ACCEPT THE CLAIM OF THE ASSESSEE IN RESPECT OF SHORT TERM CAPITAL GAIN AS THERE WAS NO EVIDENCE TO SHOW THAT THESE SHARES WERE HELD AS INVESTMENTS AND AS THE HOLDING PER IOD WAS VERY SMALL. AS REGARDS THE TREATMENT OF LOSS AS SPECULATION LOSS, THE CIT(A) HELD THAT THE LOSS AND PROFIT ON SALE OF SHARES ARE OF THE SAME NATURE AND, THEREFORE, SET OFF CANNOT BE DECLINED. BOTH THE PARTIES ARE AGGRIEVED OF THE STAND OF THE CIT(A ) AND IN APPEAL AND CROSS OBJECTION BEFORE ME. THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIEF GRANTED BY THE CIT(A) AND THE ASSESSEE HAS CHALLENGED THE ACTION OF THE CIT(A) IN DECLINING THE RELIEF IN RESPECT OF SHORT TERM CAPITAL LOSS. 4. I HAVE HEARD T HE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 5. I FIND THAT ONCE IT IS NOT EVEN IN DISPUTE THAT THE SHARES, ON SALE OF WHICH THE ASSESSEE HAS SHOWN LONG TERM CAPI TAL GAINS, WERE HELD AS INVESTMENT IN THE IMMEDIATELY PRECEDING YEAR S BALANCE SHEET AND THAT THE SHARE TRADING ACTIVITY IS STARTED ONLY IN THE CURRENT YEAR, THE PROFIT ON SALE OF SUCH SHARES CAN ONLY BE TREATED AS CAPITAL GAINS. THE FACT THAT THE ASSESSEE IS NOW IN THE BUSINESS OF TRADING IN SHARES AND SECURITIES CANNOT BE PUT AGAINST HIM IN THE PRESENT CONTEXT. LEARNED CIT(A) WAS THUS QUITE JUSTIFIED IN GRATING THE ASSESSEE IMPUGNED RELIEF BY HOLDING THAT PROFITS ON SALE OF SHARES HELD AS INVESTMENT IN TH E EARLIER YEAR(S) IS REQUIRED TO BE TREATED AS CAPITAL GAINS. AS REGARDS THE PROFIT ON SALE OF SHARES AND LOSS ON SALE OF SHARES BEING GIVEN THE SAME TREATMENT, SO FAR AS EXPLANATION TO SECTION 73 IS CONCERNED, IT IS IMPORTANT TO BEAR IN MIND THE FACT THAT EXPLANATION TO SECTION 73 REQUIRES THAT IN THE SITUATIONS IN WHICH THE CONDITIONS ARE SATISFIED, THE ASSESSEE WILL BE DEEMED TO BE CARR YING ON A SPECULATION BUSINESS TO THE EXTENT TO WHICH THE BUSINESS CONSISTS OF THE PU RCHASE AND SALE OF SUCH SHARES . O NCE IT IS HELD TO BE SPECULATION BUSINESS, IRRESPECTIVE OF WHETHER THE TRANSACTIONS RESULT IN PROFIT OR LOSS, ALL THE TRANSACTIONS ARE REQUIRED TO BE TREATED OF THE CO NO. 65/AHD/2011 I.T.A. NO.: 398/AHD/2011 ASSESSMENT YEAR : 2007 - 08 PAGE 4 OF 4 SPECULATION BUSINESS. THE LOSSES INCURRED ON THE SALE TRANSACTIONS ARE THUS INDEED REQUIRED TO BE SET OFF AGAINST THE PROFITS ON THE SALE TRANSACTIONS. THE RELIEF GRANTED BY THE CIT(A) WAS THUS QUITE JUSTIFIED AND I UPHOLD THE SAME. HOWEVER, SO FAR AS SHORT TERM CAPITAL GAINS ARE REQUIRED, I AGREE WITH THE LEARNED CIT(A) THAT THERE IS NO MATERI AL ON RECORD TO SUGGEST THAT THESE SHARES WERE HELD AS INVESTMENTS AT ANY STAGE. I, THEREFORE, CONCUR WITH THE CIT(A) ON THIS POINT AS WELL. 6. IN THE LIGHT OF THE ABOVE DISCUSSIONS, I UPHOLD THE ORDER OF THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER - AT THE REQUEST OF THE ASSESSING OFFICER OR AT THE REQUEST OF THE ASSESSEE. THE ACTION OF THE CIT(A) IS APPROVED AND CONFIRMED. 7. IN THE RESULT, THE APPEAL AND THE CO ARE DISMISSED. PRONOUNCED IN THE OPEN COURT TODAY ON 31 ST D AY OF AUGUST , 2 016. SD/ - PRAMOD KUMAR (ACCOUNTANT MEMBER) DATED: 31 ST D AY OF AUGUST , 2016 . COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD