M/s Punjab Distillers & Bottlers Ltd., Chandigarh V. Addl. CIT, Chandigarh

ITA 1051/CHANDI/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68472 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 26-08-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 02-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR
• Assessee Lawyers: ASHOK MALIK
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 1051/CHD/2010 ASSESSMENT YEAR:2006-07 M/S PUNJAB DISTILLERS & VS THE ADDL.COMMISS IONER OF INCOME TAX, BOTTLERS LTD., RANGE IV, SCO 140-141, CHANDIGARH. SECTOR 34A, CHANDIGARH. PAN NO. AAACT-5130B (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI ASHOK MALIK, RESPONDENT BY : SHRI J.S.NAGAR DATE OF HEARING : 26.08.2013 DATE OF PRONOUNCEMENT : 06.09.2013 O R D E R PER SUSHMA CHOWLA, J.M. THE ASSESSEE HAS FILED THE APPEAL AGAINST THE ORDER OF THE CIT(APPEALS), CHANDIGARH DATED 17.05.2010 RELATING TO ASSESSMENT YEAR 2006-07 AGAINST THE ORDER PASSED UNDER SECTION 143( 3) OF THE INCOME-TAX ACT, 1961 ( 'THE ACT' FOR SHORT). 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APP EAL: 1. THE LEARNED CIT(A). HAS GROSSLY ERRED ON THE FACTS OF THE CASE AND IN LAW IN UPHOLDING THE ACTION OF THE A.O. WHO HAD HELD THAT THE SHORT TERM CAPITAL GAIN OF RS. 41,72, 665/- IS BUSINESS INCOME OF THE ASSESSEE. 2. THE LEARNED CIT(A). HAS NOT ADJUDICATED ON THE S ECOND GROUND OF APPEAL TAKEN BEFORE HER I.E. WITHOUT PREJ UDICE TO GROUND NO.L, THE LEARNED A.O. HAS GROSSLY ERRED ON THE FACTS OF THE CASE AND IN LAW IN TREATING ONLY THE SHORT TERM CAPITAL GAIN/LOSS EARNED ON SALE OF FOUR SHARES AGAINST TWE NTY FIVE SHARES ON WHICH THE DIVIDEND HAS BEEN RECEIVED BY T HE ASSESSEE AS SHORT TERM CAPITAL GAIN WITHOUT ANY REASON . 2 3. THE ASSESSEE BEFORE US IS AGGRIEVED BY THE ORDER OF CIT(APPEALS) IN HOLDING THE GAIN ARISING ON SALE OF SHARES AS BUSIN ESS INCOME OF THE ASSESSEE. THE LD. AR FOR THE POINTED OUT THAT THE CIT(APPEALS) HAS FAILED TO ADJUDICATE THE ISSUE IN THE TOTALITY AS THE GROU ND NO.2 RAISED BY THE ASSESSEE BEFORE THE CIT(APPEALS) HAS NOT BEEN ADJUD ICATED BY HIM. 4. THE ASSESSEE BEFORE US HAS RAISED TWO GROUNDS OF APPEAL. THE ISSUE IN GROUND NO.1 RAISED BY THE ASSESSEE IS AGAINST TH E UPHOLDING OF ORDER OF ASSESSING OFFICER IN ASSESSING THE INCOME AS BUSINE SS INCOME AT RS. 41,72,665/-. THE ISSUE IN GROUND NO.2 RAISED BY TH E ASSESSEE IS AGAINST NON-ADJUDICATION OF SECOND GROUND OF APPEAL RAISED BEFORE THE CIT(APPEALS) IN TREATING ONLY THE SHORT TERM CAPITA L GAINS/LOSS EARNED ON SALE OF FOUR SHARES AGAINST 25 SHARES ON WHICH DIVI DEND HAD BEEN RECEIVED BY THE ASSESSEE AS SHORT TERM CAPITAL GAINS, WITHOU T ANY REASON. 5. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD DECLARED SHORT TERM CAPITAL GAINS ARISING ON THE SALE OF VARIOUS SCRIPS. THE ASSESSING OFFIC ER HAS TABULATED THE DETAILS OF SALE OF SHARES UNDER TABLE 1, 2 AND 3 ON DIFFERENT PAGES OF THE ASSESSMENT ORDER. THE ISSUE ARISING BEFORE THE ASS ESSING OFFICER WAS WHETHER THE SAID GAIN ARISING ON SALE OF SHARES WAS ASSESSABLE UNDER THE HEAD INCOME FROM SHORT TERM CAPITAL GAINS AS SHOW N BY THE ASSESSEE OR UNDER THE HEAD BUSINESS INCOME. THE ASSESSING OF FICER WAS OF THE VIEW THAT BY HOLDING THE SHARE FOR A SHORT TERM AND RECE IVING DIVIDEND ON THE SAME WERE IN THE NATURE OF DIVIDEND STRIPPING AND T HE ASSESSEE WAS FOUND TO BE HOLDING HIS SHARES ONLY TILL RECEIPT OF DIVID END AND THEN SELLING THE SAME, THUS REDUCING THE LIABILITY TO THE EXTENT OF EXEMPT DIVIDEND AND BY TAXING THE PROFITS AS CAPITAL GAINS @ 10%. THE ASS ESSING OFFICER FURTHER OBSERVED THAT OUT OF 25 SHARES TRANSACTED BY THE AS SESSEE COMPANY, IN THE INVESTMENT PORTFOLIO, ONLY FOUR COULD BE TREATED A S CAPITAL INVESTMENT AND CONSEQUENTLY, PROFIT OF RS. 66,925/- WAS ASSESSED A S SHORT TERM CAPITAL 3 GAINS ON ACCOUNT OF DIVIDEND YIELDING SHARES. THE B ALANCE GAIN OF RS. 41,72,665/- WAS ASSESSED AS BUSINESS INCOME OF THE ASSESSEE. THE PLEA OF THE ASSESSEE IN THIS REGARD WAS THAT IN TOTAL, IT H AD RECEIVED DIVIDEND ON 25 SCRIPS AND NOT ON FOUR SCRIPS AS NOTED BY THE ASSES SING OFFICER. FURTHER PLEA OF THE ASSESSEE IN THIS REGARD WAS THAT FOLLOW ING THE SAME PRINCIPLE WHERE THE ASSESSING OFFICER HAD TREATED THE GAIN AR ISING ON FOUR DIVIDEND YIELDING SCRIPS AS SHORT TERM CAPITAL GAINS, THE GA IN ARISING ON THE BALANCE SCRIPS ON WHICH THE ASSESSEE HAD RECEIVED DIVIDEND WAS ALSO TO BE ASSESSED AS INCOME FROM SHORT TERM CAPITAL GAINS AND NOT AS INCOME FROM BUSINESS. THE ASSESSEE IN THIS PERSPECTIVE HAD RAISED TWO GRO UNDS OF APPEAL BEFORE THE CIT(APPEALS) WHICH READ AS UNDER : 1. THE LEARNED A.O., HAS GROSSLY ERRED ON THE FACTS OF THE CASE AND IN LAW IN TREATING THE SHORT TER M CAPITAL GAIN OF RS. 41,72,665/- AS A BUSINESS INCOME O F THE ASSESSEE. 2. WITHOUT PREJUDICE TO GROUND NO. '1, THE LEARNE D A.O., HAS GROSSLY ERRED ON THE FACTS OF THE CASE AND IN L AW IN TREATING ONLY THE SHORT TERM CAPITAL GAIN/LOSS EARNED ON SAL E OF FOUR SHARES AGAINST TWENTY FIVE SHARES ON WHICH THE DI VIDEND HAS BEEN RECEIVED BY THE ASSESSEE AS SHORT TERM CAPITAL GAIN WITHOUT ANY REASON. 6. THE GRIEVANCE OF THE ASSESSEE BEFORE US NOW IS T HAT THE CIT(APPEALS) HAS FAILED TO ADJUDICATE THE ISSUE RAISED BY WAY OF GROUND NO.2 WHICH GOES TO THE ROOT OF THE ISSUE RAISED IN THE PRESENT APPE AL. FROM THE PERUSAL OF THE ORDER OF THE CIT(APPEALS), WE FIND THAT THOUGH THE CIT(APPEALS) HAS CONSIDERED VARIOUS ASPECTS OF SHARE TRANSACTION AND HAS UPHELD THE ORDER OF ASSESSING OFFICER IN HOLDING THAT THE PROFITS OF RS . 41,72,665/- IS TO BE ASSESSED AS BUSINESS INCOME, BUT HAS FAILED TO ADDR ESS THE GROUND NO.2 RAISED BEFORE HIM WITH REGARD TO THE FACT THAT THE ASSESSING OFFICER HAD ERRED BOTH ON FACTS AND IN LAW IN TREATING ONLY THE SHORT TERM CAPITAL GAIN/LOSS EARNED ON SALE OF FOUR SHARES AGAINST TWE NTY FIVE SHARES ON WHICH THE DIVIDEND HAS BEEN RECEIVED BY THE ASSESSE E AS SHORT TERM CAPITAL GAIN WITHOUT ANY REASON. IN THE INTEREST O F JUSTICE, WE ARE OF THE 4 VIEW THAT THE SAID ISSUE NEEDS ADJUDICATION AT THE LEVEL OF CIT(APPEALS) IN ORDER THE DECIDE THE ISSUE IN TOTAL PERSPECTIVE VIS --VIS THE DIVIDEND YIELDING SHARES. THE ASSESSING OFFICER HAD ALLOWED THE CLAIM OF THE ASSESSEE IN RESPECT OF FOUR DIVIDEND YIELDING SCRIP S. IN CASE THE CLAIM OF THE ASSESSEE IS FOUND TO BE CORRECT I.E. IT HAD MOR E THAN FOUR DIVIDEND YIELDING SCRIPS, THEN THE ISSUE IS TO BE ADJUDICATE D UPON BY THE CIT(APPEALS) AFTER RECORDING REASONING ON THE ISSUE RAISED BY THE ASSESSEE. IN VIEW THEREOF, WE RESTORE THE ISSUE BACK TO THE F ILE OF CIT(APPEALS) TO RE- DECIDE THE ISSUES RAISED BY THE ASSESSEE AND ADJUDI CATE BOTH THE GROUNDS OF APPEAL BEFORE HIM AS THE TWO REFLECT THE ADJUDICATI ON OF THE SAME ISSUE RAISED IN THE PRESENT APPEAL. REASONABLE OPPORTUNI TY OF HEARING SHALL BE ACCORDED TO THE ASSESSEE BY THE CIT(APPEALS). THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 6 TH DAY OF SEPTEMBER,2013. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 6 TH SEPTEMBER,2013 POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH