M/s. Gyan Traders Ltd., Kolkata V. ITO, Ward - 6(2), Kolkata, Kolkata

ITA 1014/KOL/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100043 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 18-07-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ALOK NAG
• Assessee Lawyers: S JHAJHARIA
• Keywords: Business income; Question of law
• Section: 143(3); 14A

Judgement Text

I.T.A. NOS. 1014 & 1015/KOL./2011 ASSESSMENT YEARS: 2006-2007 & 2007-2008 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NOS. 1014 & 1015/KOL/ 2011 ASSESSMENT YEARS : 2006-2007 & 2007-2008 M/S. GYAN TRADERS LIMITED,......................... ..........................,....APPELLANT C/O. M/S. SALARPURIA JAJODIA & CO., 7, C.R. AVENUE, KOLKATA-700 072 [PAN : AABCG 2656 C] -VS.- INCOME TAX OFFICER,................................ ...................................RESPONDENT WARD-6(2), KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 APPEARANCES BY: SHRI S. JHAJHARIA, FCA , FOR THE ASSESSEE SHRI ALOK NAG, JCIT, SR. D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : OCTOBER 09, 2015 DATE OF PRONOUNCING THE ORDER : NOVEMBER 06, 2015 O R D E R PER SHRI P.M. JAGTAP :- THESE TWO APPEALS FILED BY THE ASSESSEE AGAINST TWO SEPARATE ORDERS PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEA LS)-VI, KOLKATA, BOTH DATED 18.03.2011 FOR THE ASSESSMENT YEARS 2006-07 & 2007-08 INVOLVE ONE COMMON ISSUE AND THE SAME, THEREFORE, HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED OF BY A SINGLE CONSOLIDATED ORDE R FOR THE SAKE OF CONVENIENCE. 2. FIRST WE TAKE UP THE APPEAL OF THE ASSESSEE FOR A.Y. 2006-07 BEING ITA NO. 1014/KOL/2011 . THE ISSUE INVOLVED IN GROUND NO. 1 OF THIS APPEAL RELATES TO THE DETERMINATION OF HEAD OF INCO ME, UNDER WHICH PROFIT ARISING FROM THE PURCHASE AND SALE OF SHARES IS CHA RGEABLE TO TAX IN THE HANDS OF THE ASSESSEE. I.T.A. NOS. 1014 & 1015/KOL./2011 ASSESSMENT YEARS: 2006-2007 & 2007-2008 PAGE 2 OF 6 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH IS ENGAGED IN THE BUSINESS OF SHARE TRADING AND INVESTMENT. THE R ETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 21. 10.2006 DECLARING TOTAL INCOME OF RS.2,20,23,260/-. DURING THE COURSE OF AS SESSMENT PROCEEDINGS, THE CLAIM OF THE ASSESSEE FOR CAPITAL GAIN ARISING FROM THE PURCHASE AND SALE OF SHARES WAS EXAMINED BY THE ASSESSING OFFICE R WITH REFERENCE TO THE DIFFERENT ASPECTS OF THE RELEVANT SHARE TRANSAC TIONS. ON SUCH EXAMINATION, HE FOUND THAT MOST OF THE SHARES WERE SOLD BY THE ASSESSEE WITHIN A PERIOD OF 1 TO 150 DAYS FROM THE DATE OF P URCHASES. HE ALSO FOUND THAT SOME OF THE SHARES WERE SOLD BY THE ASSESSEE E VEN WITHIN A PERIOD OF 10 DAYS FROM THE DATE OF PURCHASES. KEEPING IN VIEW THE PERIOD OF HOLDING OF SHARES, THE FREQUENCY OF SHARE TRANSACTIONS, ETC . THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE WAS ENTERING INTO THE SHARE TRANSACTIONS AS TRADER AND NOT INVESTOR AND THE PROFIT ARISING F ROM SUCH TRANSACTIONS AMOUNTING TO RS.1,22,49,695/- WAS CHARGEABLE TO TAX IN ITS HANDS AS BUSINESS INCOME AND NOT SHORT-TERM CAPITAL GAIN. AC CORDINGLY, THE SAID AMOUNT WAS BROUGHT TO TAX BY THE ASSESSING OFFICER IN THE HANDS OF THE ASSESSEE AS BUSINESS INCOME IN THE ASSESSMENT COMPL ETED UNDER SECTION 143(3) VIDE AN ORDER DATED 17.12.2008. 4. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R UNDER SECTION 143(3), AN APPEAL WAS PREFERRED BY THE ASSESSEE BEF ORE THE LD. CIT(APPEALS) AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AND PERUSING THE RELEVANT MATERIAL AVAILABLE ON REC ORD, THE LD. CIT(APPEALS) UPHELD THE ACTION OF THE ASSESSING OFF ICER IN BRINGING TO TAX THE INCOME OF THE ASSESSEE FROM THE TRANSACTIONS OF PURCHASE AND SALE OF SHARES AS BUSINESS INCOME BY FOLLOWING THE DECISION OF THIS TRIBUNAL DATED 30.09.2008 IN ASSESSEES OWN CASE FOR A.Y. 20 05-06 IN ITA NO. 1006/KOL/2008, WHEREIN A SIMILAR ISSUE WAS DECIDED AGAINST THE ASSESSEE. I.T.A. NOS. 1014 & 1015/KOL./2011 ASSESSMENT YEARS: 2006-2007 & 2007-2008 PAGE 3 OF 6 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ALTHOUGH THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE RATIO OF VARIOUS DE CISIONS OF THE TRIBUNAL AND HIGH COURTS IS APPLICABLE TO THE FACTS OF THE P RESENT CASE AND THE ISSUE INVOLVED IS REQUIRED TO BE DECIDED IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE SAID RATIO, WE ARE OF THE VIEW THAT T HE ISSUE AS TO WHETHER THE PROFIT ARISING FROM TRANSACTIONS IN SHARES IS C HARGEABLE TO TAX AS BUSINESS INCOME OR CAPITAL GAIN, IS PURELY A FACTUA L ISSUE, WHICH HAS TO BE CONSIDERED AND DECIDED AFTER TAKING INTO CONSIDERAT ION THE TOTALITY OF THE FACTS AND CIRCUMSTANCES INVOLVED IN EACH CASE. IN T HE CASE OF THE ASSESSEE BEFORE US, THIS ISSUE HAS ALREADY BEEN DECIDED BY T HE TRIBUNAL AGAINST THE ASSESSEE FOR A.Y. 2005-06 INVOLVING IDENTICAL FACTS AND CIRCUMSTANCES AND EVEN THE LD. COUNSEL FOR THE ASSESSEE HAS NOT BEEN ABLE TO POINT OUT ANY DISTINCTION IN THE MATERIAL FACTS OF THE CASE RELEV ANT TO THE ISSUE UNDER CONSIDERATION AS INVOLVED IN THE YEAR UNDER CONSIDE RATION, VIS-A-VIS, THE IMMEDIATELY PRECEDING YEAR, I.E. A.Y. 2005-06, WHER EIN A SIMILAR ISSUE HAS BEEN DECIDED BY THE TRIBUNAL FOR THE FOLLOWING REAS ONS GIVEN IN ITS ORDER DATED 30.09.2008:- 7 . WE HAVE CAREFULLY CON S ID E R E D THE ORDER S OF THE A UTHORITIES BELOW AND T H E SUBMISSIONS OF THE ID. REPRESENTATIVES OF BOTH THE P A RTI E S AND HAVE ALSO CONSIDERED THE CASES EITED AT THE TIME OF HEARING OF THE APPEAL . IT IS A FACT THAT THE INTENTION OF THE PERS ON AS TO WHETHER A PARTICULAR TRANSACTION IS IN THE NATURE OF I NVESTMENT OR IN THE NATURE OF TRADE IS TO BE ASCERTAINED, IS A MIXED QUESTION OF LAW AND FACTS . IF A PERSON INVESTS MONE Y IN ACQUIRING THE SHARES OR ANY OTHER ASSET INTENDING TO HOLD IT, 'ENJOYS ITS INCOME FOR SOMETIME, AND THEN SELLS IT AT A PROFIT, IT WOULD BE A CLEAR CASE OF CAPITAL ACCRETION AND NOT PROFIT DERIVED FROM AN ADVENTURE IN . THE NATURE OF TRADE . HOWEVER, IN DECIDING THE CHARACTER OF SUCH TRANSACTION , AS HELD BY THE HON'BLE APEX COURT IN THE CASE OF G. VENKATASWAMI NA IDU & CO . (SUPRA), SEVER A L FACTORS ARE RELEVANT, SUCH AS, E.G . , WHETHER THE PURCHASER WAS A TRADER AND THE PURCHASE OF THE COMMODI TY AND ITS RESALE WERE ALLIED TO HIS USUAL TRADE OR BUSINESS OR INCIDENTAL TO IT , THE NATURE AND QUANTITY OF THE COMMODITY PURCHASED AND RE SOLD; ANY ACT SUBSEQUENT TO THE PURCHASE TO IMPROVE THE QUALITY O F THE COMMODITY PURCHASED AND THEREBY M A KE IT MORE RE A DILY RE-SALEABLE ; ANY ACT PRIOR TO THE PURCHASE SHOWING A DESIGN OR PURPO S E; THE SIMILARITY OF THE TRANSACTION TO OPERATIONS USUALLY . ASS OCIATED WITH TRADE OR BUSINE S S; THE REPETITION OF THE TRANSACTION; THE ELEMENT OF PRIDE OF POSSESSION. IF WE APPLY THE ABOVE PRINCIPLES TO THE FACTS OF I.T.A. NOS. 1014 & 1015/KOL./2011 ASSESSMENT YEARS: 2006-2007 & 2007-2008 PAGE 4 OF 6 THE CASE BEFORE US, WE OBSERVE THAT THE ASSESSEE HA S PURCHASED DURING THE COURSE OF FINANCIAL YEAR RELEV ANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, THE SCRIPT S OF 25 COMPANIES. MOST OF THE SHARES WERE PURCHASED AND AL SO SOLD IN THE FINANCIAL YEAR RELEVANT TO THE ASSESSME NT YEAR UNDER CONSIDERATION. ON PERUSAL OF THE TABLE 1 AT P AGES 2 & 3 OF THE ASSESSMENT YEAR, WE OBSERVE THAT SOME OF THE SCRIPTS WERE RETAINED BY THE ASSESSEE FOR A PERIOD OF 1 TO 10 DAYS ONLY. THERE WERE ONLY A VERY FEW SHARES, TH E DETAILS OF WHICH ARE GIVEN BY THE A.O. IN TABLE 2 A T PAGES 3 & 4 OF THE ASSESSMENT ORDER AND THE SHARES WERE NOT SOLD DURING THE YEAR AND THE ASSESSEE RECEIVED DIVIDEND THEREFROM. THEREFORE, WE AGREE WITH THE A.O. THAT T HE DIVIDEND EARNING WAS NOT THE MOTIVE OF THE ASSESSEE BUT THE MOTIVE WAS ONLY TO EARN QUICK PROFIT THROUGH TR ADING OF SHARES. THE A.O. HAS ALSO STATED THAT THE INFRAS TRUCTURE EMPLOYED IS INDICATIVE OF THE FACT THAT THOSE SHARE S WERE ACQUIRED BY THE ASSESSEE WITH A CLEAR MOTIVE OF EAR NING QUICK PROFIT. THE ASSESSEE HAS NOT DISPUTED THE SAI D OBSERVATION OF THE A.O. BEFORE THE LD. CIT(A) AS WE LL AS BEFORE US. WE ARE OF THE CONSIDERED VIEW THAT THE D EALING OF THE ASSESSEE IN THE SHARES WAS SOLELY AND EXCLUS IVELY WITH THE INTENTION TO EARN PROFIT AND THE ASSESSEE HAD NO INTENTION OF HOLDING THE SHARES AS AN INVESTMENT. ACCORDINGLY, WE HOLD THAT THE A.O. WAS JUSTIFIED TO TREAT THE PROFIT OF RS.29,28,799/- IN RESPECT OF THE SHAR ES, DETAILS GIVEN IN TABLE 1 OF THE ASSESSMENT ORDER, I S THE PROFIT OF THE ASSESSEE FROM ADVENTURE IN THE NATURE OF TRADE AND IS THE NORMAL BUSINESS PROFIT AND NOT THE SHORT- TERM CAPITAL GAIN AS CLAIMED BY THE ASSESSEE. HENCE , WE CONFIRM THE FINDING OF THE A.O. BY REVERSING THE OR DER OF THE ID. CIT(A). ACCORDINGLY, THE GROUND NO. 1 OF TH E APPEAL TAKEN BY THE DEPARTMENT IS ALLOWED. 6. THE TRIBUNAL THUS HAS DECIDED A SIMILAR ISSUE IN ASSESSEES OWN CASE FOR A.Y. 2005-06 HOLDING THAT THE PROFIT ARISI NG FROM THE TRANSACTION OF PURCHASE AND SALE OF SHARES IS CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE AS BUSINESS INCOME AND NOT CAPITAL GAIN. A S THE ISSUE INVOLVED IN THE YEAR UNDER CONSIDERATION AS WELL AS ALL THE MAT ERIAL FACTS RELEVANT THERETO ARE ADMITTEDLY SIMILAR TO THAT OF A.Y. 2005 -06, WE RESPECTFULLY FOLLOW THE DECISION OF THE TRIBUNAL FOR THE A.Y. 20 05-06 AND UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) HOLDING THAT THE PROFIT ARISING FROM THE TRANSACTIONS IN PURCHASE AND SALE OF SHARE S IS CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE AS BUSINESS INCOME AND NOT CAPITAL GAIN. I.T.A. NOS. 1014 & 1015/KOL./2011 ASSESSMENT YEARS: 2006-2007 & 2007-2008 PAGE 5 OF 6 GROUND NO. 1 OF THE ASSESSEES APPEAL FOR A.Y. 2006 -07 IS ACCORDINGLY DISMISSED. 7. AS REGARDS THE ISSUE INVOLVED IN GROUND NO. 2 RE LATING TO THE DISALLOWANCE UNDER SECTION 14A OF THE ACT, IT IS OB SERVED THAT A SIMILAR ISSUE INVOLVED IN IDENTICAL FACTS AND CIRCUMSTANCES HAS ALREADY BEEN DECIDED BY THE COORDINATE BENCHES OF THIS TRIBUNAL BY TAKING A VIEW THAT THE DISALLOWANCE ON ACCOUNT OF EXPENSES INCURRED BY THE ASSESSEE IN RELATION TO THE EARNING OF EXEMPT DIVIDEND INCOME U NDER SECTION 14A CAN BE MADE BEFORE THE APPLICABILITY OF RULE 8D FROM A. Y. 2008-09 ON ESTIMATED BASIS @ 1% OF THE EXEMPT DIVIDEND INCOME. RESPECTFULLY FOLLOWING THIS CONSISTENT VIEW TAKEN BY THE TRIBUNA L, WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE UNDE R SECTION 14A AT 1% OF THE EXEMPT DIVIDEND INCOME. GROUND NO. 2 OF THE ASS ESSEES APPEAL FOR A.Y. 2006-07 IS THUS PARTLY ALLOWED. 8. AS REGARDS THE APPEAL OF THE ASSESSEE FOR A.Y. 2 007-08 BEING ITA NO. 1015/KOL/2011, IT IS OBSERVED THAT THE SOLITARY ISS UE INVOLVED THEREIN RELATING TO THE DETERMINATION OF HEAD OF INCOME UND ER WHICH THE PROFIT ARISING FROM THE TRANSACTION OF PURCHASE AND SALE O F SHARES IS CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE IS SIMILAR TO T HE ONE INVOLVED IN GROUND NO. 1 OF THE ASSESSEES APPEAL FOR A.Y. 2006 -07, WHICH HAS ALREADY BEEN DECIDED BY US IN THE FOREGOING PORTION OF THIS ORDER FALLING IN A.Y. 2005-06. WE, THEREFORE, UPHOLD THE IMPUGNED ORDER O F LD. CIT(APPEALS) ON THIS ISSUE AND DISMISS THE APPEAL OF THE ASSESSE E FOR A.Y. 2007-08. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR AS SESSMENT YEAR 2006-07 IS PARTLY ALLOWED, WHILE THE APPEAL OF THE ASSESSEE FOR A.Y. 2007-08 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 6 TH , 2015. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER KOLKATA, THE 6 TH DAY OF NOVEMBER, 2015 I.T.A. NOS. 1014 & 1015/KOL./2011 ASSESSMENT YEARS: 2006-2007 & 2007-2008 PAGE 6 OF 6 COPIES TO : (1) M/S. GYAN TRADERS LIMITED, C/O. M/S. SALARPURIA JAJODIA & CO., 7, C.R. AVENUE, KOLKATA-700 072 (2) INCOME TAX OFFICER, WARD-6(2), KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 (3) COMMISSIONER OF INCOME-TAX (APPEALS)- VI, KOL KATA (4) COMMISSIONER OF INCOME TAX, KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.