DCIT, New Delhi V. M/s Vashulinga Finance Pvt. Ltd., New Delhi

ITA 103/DEL/2011

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6602 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 27-07-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 07-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SRUJANI MOHANTY
• Assessee Lawyers: S KRISHNAN
• Keywords: Rule of consistency; Speculation loss

Judgement Text

ITA NO. 103/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 103/DEL/2011 A.Y. : 2007-08 DCIT, CIRCLE - 17(1), CR BUILDING, NEW DELHI VS. M/S VASHULINGA FINANCE PVT. LTD., 1004, CHIRANJIV TOWERS, 43, NEHRU PLACE, NEW DELHI 110 019 (PAN : AABCV 4461G) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : SH. K. SAMPATH, ADV. & SH. S. KRISHNAN DEPARTMENT BY : MS. SRUJANI MOHANTY, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 04.10. 2010 PERTAINING TO ASSESSMENT YEAR 2007-08. 2. THE ISSUE RAISED IS THAT LD. COMMISSIONER OF INCO ME TAX (APPEALS) ERRED IN HOLDING THAT LOSS FROM SHARE TRA NSACTIONS BY THE ASSESSEE WAS NOT SPECULATION LOSS IN VIEW OF THE EX CEPTIONS PROVIDED IN EXPLANATION TO SECTION 73. ITA NO. 103/DEL/2011 2 3. THE ASSESSEE IN THIS CASE IS A NON-BANKING FINA NCE COMPANY. APART FROM DOING THE FINANCING BUSINESS BY ADVANCI NG LOANS/ADVANCES FOR INTEREST, HAS BEEN TRADING IN SHARES. THE ASSE SSEE HAS INCURRED LOSS ON THIS ACTIVITY OF TRADING. THE ASSESSING O FFICER TREATED THE SAID LOSS AS FROM SPECULATION BUSINESS IN TERMS OF EXPL ANATION TO SECTION 73 AND THE INTEREST INCOME ON BANK DEPOSITS AND OTH ER INTEREST RECEIPTS WERE TAXED AS INCOME FROM OTHER SOURCES A ND SET OFF WAS NOT ALLOWED. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT THE ASSESSEES MAIN BUSINESS IS GRANTING LOANS/ADVANCES. IN SUCH A CASE, EXCEPTIONS PROVIDED IN EXPLANATION TO SECTION 73 ARE APPLICABLE. LD. COMMISSIONER OF INCO ME TAX (APPEALS) FURTHER REFERRED THE DECISION OF THE HONBLE SPECIA L BENCH IN THE CASE OF DCIT VS. VENKATESWAR INVESTMENT & FINANCE (P) LTD . 93 ITD 177 (KOL) (SB). LD. COMMISSIONER OF INCOME TAX (APPE ALS) ACCORDINGLY, CONCLUDED THAT THE EXCEPTIONS PROVIDED IN EXPLANAT ION TO SECTION 73 ARE APPLICABLE TO THE FACTS OF THE CASE. HENCE, THE LOSS ARISING ON ACCOUNT OF TRADING OF SHARES CANNOT BE CONSIDERED A S LOSS FROM SPECULATION BUSINESS. FURTHER, LD. COMMISSIONER OF I NCOME TAX (APPEALS) HELD THAT RULE OF CONSISTENCY IS TO BE FO LLOWED. THE ASSESSING OFFICER CANNOT TAKE A DIFFERENT STAND FROM THE PRE VIOUS YEARS(S) IF ITA NO. 103/DEL/2011 3 THERE IS CHANGE OF FACTS AND LEGAL POSITION. HE OP INED THAT THERE IS NO SUCH FINDINGS. 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. WE CAN GAINFUL LY HERE REFER THE PROVISIONS OF SECTION 73 :- EXPLANATION EXPLANATION EXPLANATION EXPLANATION WHERE ANY PART OF THE BUSINESS OF A COMPANY [OTHER THAN A COMPANY WHOSE GROSS TOTAL INCOME CONSI STS MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS INTEREST ON SECURITIES, INCOME FROM HOUSE PROPER TY, CAPITAL GAINS AND INCOME FROM OTHER SOURCES], O R A COMPANY THE PRINCIPAL BUSINESS OF WHICH IS THE BUSIN ESS OF BANKING OR THE GRANTING OF LOANS AND ADVANCES) CONS ISTS IN THE PURCHASE AND SALE OF SHARES OF OTHER COMPANIES, SUCH COMPANY SHALL, FOR THE PURPOSES OF THIS SECTION, BE DEEMED TO BE CARRYING ON A SPECULATION BUSINESS TO THE EXT ENT TO WHICH THE BUSINESS CONSISTS OF THE PURCHASE AND SAL E OF SUCH SHARES.] 6.1 THE ASSESSEES MAIN CONTENTION IS THAT SINCE TH E BUSINESS OF THE ASSESSEE IS GRANTING OF LOANS, THE EXCEPTIONS PROVI DED IN EXPLANATION TO SECTION 73 ARE APPLICABLE TO THE FACTS OF THE CA SE. IN THIS REGARD, ITA NO. 103/DEL/2011 4 THE SPECIAL BENCH DECISION IN THE CASE OF DCIT VS. VENKATESWAR (SUPRA) SUPPORTS THE CASE OF THE ASSESSEE. IN THIS REGARD , THE SPECIAL BENCH HAS OPINED AS UNDER:- THE EXPLANATION TO SECTION 73 IS IN THE NATURE OF DEEMING PROVISIONS AND AS SUCH TO BE STRICTLY CONSTRUED AN D THE ONUS WAS ON THE REVENUE TO SHOW THAT THE CASE OF TH E ASSESSEE FELL WITHIN THE FOUR CORNERS OF THE DEEMIN G PROVISIONS OF LAW. MERELY BECAUSE THE LOSS IN DEALING IN SHARES IN ONE PARTICULAR YEAR WAS MORE THAN THE INCOME FROM THE PR INCIPAL BUSINESS OF THE ASSESSEE OF GRANTING LOANS AND ADV ANCES, IT COULD NOT BE SAID THAT THE PRINCIPAL BUSINESS OF T HE ASSESSEE WAS NOT THAT OF GRANTING LOANS AND ADVANCE S. CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, THE ADVANCES AND THE PROVISIONS OF EXPLANATIO N TO SECTION 73 WERE NOT ATTRACTED TO THE CASE AND, ACCO RDINGLY, THE LOSS INCURRED IN THE BUSINESS OF PURCHASE AND S ALE OF SHARES WAS NOT TO BE TREATED AS SPECULATIVE LOSS WI THIN THE MEANING OF EXPLANATION TO SECTION 73. TO DECIDE AS TO WHETHER THE CASE OF AN ASSESSEE F ALLS IN EXCEPTIONS PROVIDED IN EXPLANATION TO SECTION 73 OF THE ACT OR NOT AND TO DECIDE AS TO WHETHER THE PRINCIPAL B USINESS OF THE ASSESSEE IS THAT OF GRANTING LOANS AND ADVANCES , THE DECISIVE FACTOR IS THE NATURE OF THE ACTIVITIES OF THE ASSESSEE AND NOT THE ACTUAL INCOME FROM SUCH ACTIVITIES DURIN G A PARTICULAR YEAR. IN THAT VIEW OF THE MATTER, THERE W AS NO MISTAKE IN THE ORDER OF THE COMMISSIONER (APPEALS) IN ITA NO. 103/DEL/2011 5 HOLDING THAT THE CASE OF ASSESSEE-COMPANY WAS NOT HI T BY EXPLANATION TO SECTION 73 AND THE LOSS SO SUFFERED SHOULD BE TREATED AS BUSINESS LOSS AND NOT SPECULATION LOS S. 7. IN THE LIGHT OF THE AFORESAID PRECEDENT, WE ARE OF THE CONSIDERED OPINION, THAT THE LD. COMMISSIONER OF INCOME TAX (APP EALS) IS CORRECT IN HOLDING THAT EXPLANATION TO SECTION 73 IS NOT AP PLICABLE, AS ASSESSEES CASE FALLS IN THE EXCEPTIONS PROVIDED IN EXPLANATION TO SECTION 73 OF THE ACT. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY OR ILLEGALITY IN THE ORDER OF THE LD. COMMISSIONER OF I NCOME TAX (APPEALS), HENCE, WE UPHOLD THE SAME. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15/6/2011 UPO N CONCLUSION OF HEARING. SD/ SD/ SD/ SD/- -- - SD/ SD/ SD/ SD/- -- - [A.D. JAIN] [A.D. JAIN] [A.D. JAIN] [A.D. JAIN] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 15/6/2011 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES