Asstt. Commissioner of Income Tax, Ludhiana V. M/s Hero Investment Pvt. Ltd., Ludhiana

ITA 1246/CHANDI/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60867 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-05-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 29-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Assessee Lawyers: SUBHASH AGGARWAL
• Keywords: Capital asset; Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 1246 /CHD/2011 (ASSESSMENT YEARS: 2008-09) THE A.C.I.T., VS. M/S HERO INVESTMENT PVT. LTD., CIRCLE-V, G.T. ROAD, HERO NAGAR, LUDHIANA. LUDHIANA. PAN: AAACH4072N AND ITA NO. 1247 /CHD/2011 (ASSESSMENT YEARS: 2008-09) THE A.C.I.T., VS. M/S BAHADUR CHAND INVESTMENT P VT. LTD., CIRCLE-V, G.T. ROAD, HERO NAGAR, LUDHIANA. LUDHIANA. PAN: AAACB6706F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI N.K.SAINI, DR RESPONDENT BY : SHRI SUBHASH AGGARWAL DATE OF HEARING : 16.05.2012 DATE OF PRONOUNCEMENT : 24.05.2012 O R D E R PER SUSHMA CHOWLA, J.M. : THESE TWO APPEALS BY THE REVENUE RELATING TO DIFFE RENT ASSESSEES ARE AGAINST SEPARATE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II, LUDHIANA BOTH DATED 21.10.2011 RELATI NG TO ASSESSMENT YEAR 2008-09 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. BOTH THESE APPEALS RELATING TO DIFFERENT ASSESSE ES ON SIMILAR ISSUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF F BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2 ITA NO.1246/CHD/2011: 3. THE REVENUE IN ITA NO.1246/CHD/2011 HAS RAISED T HE FOLLOWING GROUND OF APPEAL: 1. THAT THE LD.CIT(A)-II, LUDHIANA, HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.2,87,61,549/- MADE BY THE A.O. BY ASSESSING THE INCOME SHOWN BY THE ASSESSEE UNDER THE HEAD CAPITAL GAINS AS BUSINESS INCOME OF THE ASSESSEE COMPANY. 4. THE ONLY ISSUE IN THE PRESENT APPEAL IS IN RELAT ION TO THE ASSESSABILITY OF INCOME SHOWN BY THE ASSESSEE ON SA LE OF CAPITAL ASSET. THE ASSESSEE HAD DECLARED THE SAID INCOME U NDER THE HEAD INCOME FROM CAPITAL GAINS, WHEREAS THE ASSESSING OFFICER HAD ASSESSED THE SAME AS BUSINESS INCOME. 5. THE CIT (APPEALS) HAD HELD THAT THE PROFITS ON S ALE AND PURCHASE OF MUTUAL FUNDS AND SHARES THROUGH PMS FUN DS MANAGER WERE TO BE CONSIDERED AS LONG TERM CAPITAL GAINS AN D NOT AS BUSINESS INCOME. THE CIT (APPEALS) NOTED THAT THE PURCHASE OF SHARES/MUTUAL FUNDS/AMOUNT INVESTED THROUGH PMS WER E SHOWN UNDER THE HEAD INVESTMENT IN THE AUDITED BALANCE SH EET OF THE COMPANY AND THE FUNDS WERE AVAILABLE WITH THE ASSES SEE COMPANY TO PURCHASE THE SHARES IN HIGHER QUANTITY OF ANY LISTE D COMPANY. AS PER THE CIT (APPEALS), MERELY BECAUSE THE ASSESSEE HAD PURCHASED HIGHER QUANTITY OF SHARES, DO NOT INDICATE HIGHER F REQUENCY OF PURCHASE AND SALE OF SHARES. FURTHER THE INVESTMEN T MADE IN SHARES/PMS WERE SHOWN BY THE ASSESSEE UNDER THE HEA D INVESTMENT PRIOR TO ASSESSMENT YEAR 2006-07. 3 6. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CI T (APPEALS). THE LEARNED D.R. FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. 7. THE LEARNED A.R. FOR THE ASSESSEE PLACED RELIANC E ON THE ORDER OF THE TRIBUNAL RELATING TO ASSESSMENT YEARS 2006-0 7 AND 2007-08 IN THE CASE OF BOTH THE ASSESSEES BEFORE US. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HA D SHOWN TOTAL INCOME OF RS.2,12,28,040/- AND HAD INCLUDED THE FOL LOWING INCOME FROM CAPITAL GAINS: (WITHOUT STT) 10,00,00,000 11,62,53,803 (A) LONG TERM CAPITAL GAIN ON SALE OF MUTUAL FUNDS PURCHASED ON 05. 12 .2006 SOLD ON 06.12.2007 16253803 (GROWTH) 1,00,00,000 1,14,03,800 LT.C.G ON SALE OF RELIANCE FIXED TENURE FUND PLAN PURCHASED ON 23. 12.2005 SOLD ON 22. 11. 2007 1403800 TOTAL 17657603 LESS: B/F LOSS OF ASSESSMENT YEAR 2005-06 2738978 BALANCE 14918625 11084103 19843 11103946 11103946 (B) L.T.C.G. (PMS) (STT PAID) WITH KOTAK SECURITIES A/C HJA17 KOTAK SECURITIES PMS A/C HCS17 EXEMPT NIL S.T.C.G. (PMS) (STT PAID) WITH KOTAK SECURITIES A/C HJA 1 7 20767 1 8 S.T.C.G. MUTUAL FUND OTHER THAN STT PAID 232692 2309410 INCOME FROM OTHER SOURCES 5000005 TOTAL INCOME 22228040 9. THE ASSESSEE IS IN EXISTENCE SINCE 1979. THE TO TAL INVESTMENTS SHOWN AS ON 31.3.2008 WERE TO THE EXTEN T OF RS.146.97 4 CRORES AS AGAINST RS.146.93 CRORES SHOWN AS ON 31.3 .2007. THE MAJOR INVESTMENTS MADE BY THE ASSESSEE COMPANY WERE IN ACQUISITION OF SHARES OF GROUP COMPANIES/SHARE APPL ICATION MONEY AND INVESTMENT IN GROUP PARTNERSHIP FIRM. THE MAIN SOURCE OF INCOME OF THE ASSESSEE WAS DIVIDEND INCOME FROM GRO UP COMPANIES, SHARE OF PROFITS FROM GROUP PARTNERSHIP FIRM AND IN TEREST ON LOANS/ADVANCES TO GROUP ENTITIES. THE ASSESSEE HAD TABULATED BREAK-UP OF ITS INCOME FROM VARIOUS SOURCES UNDER P ARA 3.2 AT PAGE 3 OF THE APPELLATE ORDER. THE CLAIM OF THE ASSESSE E WAS THAT ONLY SURPLUS FUND OUT OF INCOME GENERATED BY IT, AFTER M EETING THE REQUIREMENTS OF THE GROUP ENTITIES, WERE INVESTED I N INSTRUMENTS SUCH AS MUTUAL FUNDS/PMS, ETC. DURING THE YEAR UND ER CONSIDERATION THE ASSESSEE HAD RECEIVED TOTAL DIVID END ABOUT RS.32 CRORES. DURING THE YEAR UNDER CONSIDERATION THE AS SESSEE HAD NOT MADE ANY INVESTMENT IN THE MUTUAL FUNDS/PMS OR SHAR ES OF THE GROUP CONCERNS. THE ASSESSEE HAD SHOWN CAPITAL GAI NS ON SALE OF INVESTMENT IN MUTUAL FUNDS/PMS ONLY. THE INVESTMEN T BOTH IN MUTUAL FUNDS AND PMS WAS MADE IN THE EARLIER YEARS AND NO NEW INVESTMENT IN PMS WERE MADE DURING THE YEAR. THE T OTAL INVESTMENT BY THE ASSESSEE IN PMS ACCOUNT WAS WITH M/S KOTAK SECURITIES LIMITED IN EARLIER YEAR. DURING THE YE AR THE SAID ACCOUNT WAS CLOSED AND THE PROFIT EARNED THEREFROM WAS DECLARED BY THE ASSESSEE UNDER THE HEAD INCOME FROM CAPITAL GA INS. FURTHER THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAD SO LD UNITS OF TWO MUTUAL FUNDS WHICH WERE REDEEMED BY THE COMPANY. T HE SAID UNIT OF MUTUAL FUNDS WERE HELD ON LONG TERM BASIS. THE D ETAILED TRANSACTIONS CARRIED OUT BY THE ASSESSEE BY WAY OF SALE OF INVESTMENT BOTH PMS - EQUITY PLAN AND MUTUAL FUNDS ARE AS UNDER: 5 INVESTMENTS PMS -EQUITY PLAN S. NO. PARTICULARS B/F PURCHASED DURING THE YEAR SALE C/S 1 CHOLA MANDAL 20474 - 16639 3835 - 2 KAMANT 16204 - 12475 3729 - 3 MATHER & PLATT 11056 - 9330 1726 - 4 NILCO LTD 42807 - 31732 11075 - 5 PANTALOON 9730 - 7870 1860 - 6 SHRIRAM CITY UNION 38945 - 30064 8881 - 7 S.S.I LTD 17590 - 16223 1367 - 8 GREAT OFF SHORE - 4650 - 4650 - 9 H.T. MEDIA LTD - 29552 - 29552 - 10 MYSORE CEMENTS - 67878 - 67878 - INVESTMENT PMS - M/F S. PARTICULARS B/F PURCHASED SALE C/S NO. DURING THE YEAR I HDFC M/F - GROWTH 6837373 - 6737373 - - 2 RELIANCE FIXED TENNURE 1000000 - 1000000 - - 3 RELIANCE DIVERSIFIED POWER - 1000000 - - 1000000 10. THE CLAIM OF THE ASSESSEE IN RESPECT OF THE MUT UAL FUNDS WERE THAT THE SAID UNITS OF MUTUAL FUNDS WERE NOT TRADAB LE ITEMS AND HENCE THE PROFITS ARISING ON ITS SALE WERE TO BE IN CLUDED AS INCOME FROM CAPITAL GAINS. FURTHER THE ASSESSEE HAS ELABO RATELY BROUGHT ON RECORD THE SYSTEM OF INVESTMENT IN THE MUTUAL FUNDS AND CLAIM OF THE ASSESSEE IN THIS REGARD WAS THAT THE SAID INVES TMENTS WERE MADE BY THE ASSESSEE OUT OF ITS OWN GENERATED INCOME AND NO BORROWED FUNDS WERE UTILIZED FOR THE SAID PURPOSE. ADMITTED LY, THE UNITS OF MUTUAL FUNDS SOLD DURING THE YEAR WERE HELD FROM TH E PRECEDING YEAR AS INVESTMENT BROUGHT FORWARD AS ON 1.4.2007. WE FIND MERIT IN THE CLAIM OF THE ASSESSEE THAT THE GAIN ARISING ON SALE OF UNITS OF MUTUAL FUNDS IS BECAUSE OF THE INVESTMENT MADE BY I T IN THE EARLIER YEAR, WHICH WAS REDEEMED DURING THE YEAR AND TOTAL PROFITS EARNED ON THE SALE OF TWO UNITS OF HDFC AND RELIANCE FIXED TENURE FUNDS OF RS.1,76,57,603/-, AFTER ADJUSTMENT OF BROUGHT LO SSES OF THE EARLIER YEAR OF RS.27,38,978/- AT RS.1,49,18,624/- HAVE BEEN SHOWN 6 AS NET LONG TERM CAPITAL GAIN. THE SAID GAIN ON SA LE OF MUTUAL FUNDS IS TO BE ASSESSED AS INCOME FROM LONG TERM CA PITAL GAINS IN THE HANDS OF THE ASSESSEE. 11. WE FIND THAT SIMILAR ISSUE OF ASSESSABILITY OF GAIN ON SALE OF MUTUAL FUNDS IN THE HANDS OF THE ASSESSEE AROSE BEF ORE THE TRIBUNAL IN ITA NO.910/CHD/2009 IN THE APPEAL FILED BY THE R EVENUE IN THE CASE OF ASSESSEE RELATING TO ASSESSMENT YEAR 2006/- 7 AND THE TRIBUNAL OBSERVED AS UNDER: 24. THE SECOND ISSUE ARISING IN THE PRESENT APPEAL IS THE SALE/REDEMPTION OF MFS. THE ASSESSEE DURING THE YEAR HAD EARNED LONG TERM & SHORT TERM CAPITAL GAIN S ON FOLLOWING TRANSACTION: COMPANY NAME LONG TERM CAPITAL GAIN SHORT TERM CAPITAL GAIN A FRANKLIN INDIA PRIMA FUND 24046833 4325047 B FRANKLIN INDIA FLEXI CAP. FUND 38785452 NIL C HDFC PREMIER MULTI CAP. FUND NIL 5678240 D PRUDENTIAL ICICI POWER DIVIDEND NIL 3320386 E PRINCIPAL FOCUSSED ADVANTAGE FUND NIL -948655 TOTAL 62832285 13275018 25. THE ASSESSEE IN THE WRITTEN SUBMISSIONS FILED BEFORE THE CIT(A) HAD EXTENSIVELY EXPLAINED THE SOU RCES OF INVESTMENT IN THE SAID MUTUAL FUNDS AND DIVIDEND AMOUNT REINVESTED IN THE UNITS OF MFS AND GAIN ARI SING ON ITS SALE. THE LONG TERM CAPITAL GAIN HAS BEEN SH OWN ON SALE OF THE ORIGINAL INVESTMENT MADE IN MFS AND SHORT TERM CAPITAL GAINS IN RELATABLE TO THE REINVE STED DIVIDEND UNITS. THE SAID EXPLANATION OF ASSESSEE IS REPRODUCED AT PAGE 26 TO 29 OF THE APPELLATE ORDER. 26. WE FIND THAT SIMILAR ISSUE IN RELATION TO ASSESSABILITY OF GAINS ON SALE OF MFS AROSE BEFORE THE CHANDIGARH BENCH OF TRIBUNAL IN ACIT VS M/S PUJA INVESTMENT PVT. LTD. (SUPRA) THE TRIBUNAL VIDE ORDE R DATED 29/04/2011 (SUPRA) HAD HELD THAT THE UNITS OF MUTUAL FUND ARE NOT TRADABLE AND THE PURCHASE AND S ALE OF THE SAID UNITS OF MUTUAL FUND ARE TO BE DIRECTLY PURCHASED OR SOLD TO THE COMPANY IN WHICH INVESTMEN T 7 IS MADE AND THE SAME IS NOT COMMODITY WHICH CAN BE TRADED IN OPEN MARKET 27. THE FACTS OF THE PRESENT CASE BEFORE US ARE IDE NTICAL TO THE FACTS BEFORE THE TRIBUNAL (SUPRA) IN M/S PUJ A INVESTMENT PVT. LTD. (SUPRA). THE ASSESSEE IN THE P RESENT CASE HAD MADE INVESTMENT IN MUTUAL FUNDS AND THE SA ID INVESTMENT WAS MADE IN THE EARLIER YEARS OUT OF ITS OWN FUNDS. THE GAIN ARISING ON ITS SALE/REDEMPTION IS T O ASSESSED AS INCOME FROM LONG TERM/SHORT TERM CAPITA L GAINS DEPENDING ON THE PERIOD OF ITS HOLDING. 12. FOLLOWING THE ABOVE SAID RATIO LAID DOWN IN ASS ESSEES OWN CASE WE HOLD THAT INCOME FROM SALE OF MUTUAL FUNDS ARE TO BE ASSESSED AS INCOME FROM LONG TERM CAPITAL GAINS IN THE HANDS OF THE ASSESSEE. 13. THE NEXT TRANSACTION UNDER CONSIDERATION WAS SA LE OF PMS INVESTMENT. THE SCHEDULE ALONGWITH BALANCE SHEET WH ICH EXPLAINED THE POSITION OF INVESTMENT WITH M/S KOTAK SECURITIE S LIMITED WHICH WAS AS UNDER: S. NO. NAME OF COMPANY NO. OF SHARES AS ON 1.4.07 ADDITION DURING THE YEAR SOLD AS LT C/S 1 ASAHI INDIA GLASS LTD 39830 - 39830 - - 2 CHOLA MANDAL 20474 - 16639 3835 - 3 GODREJ IND. LTD 62730 - 62730 - - 4 KAMATH HOTELS 16204 - 12475 3729 - 5 MATHER & PLATT PUMPS LTD 11056 - 9330 1726 - 6 NILCO LTD 42807 - 31732 11075 - 7 PANATOLOON RETAIL INDIA LTD 9730 - 7870 1860 - 8 PYRAMID PVT LTD 23889 - 23889 - - 9 SHRINGAR CINEMA LTD 44790 - 44790 - - 10 SHRIRAM CITY UNION 38945 - 30064 8881 - 1 1 . S.S.I LTD 17590 - 16223 1367 - 12 UTV SOFTWARE COMMUNICATION LTD 9498 - 9498 - - 13 YES BANK LTD 37807 - 37807 - - 8 14. THE PERUSAL OF THE SAID DETAILS REFLECTS THAT T HE TOTAL INVESTMENT IN PMS ACCOUNT WITH M/S KOTAK SECURITIES LIMITED HAD BEEN SOLD DURING THE YEAR UNDER CONSIDERATION, THOU GH THE INVESTMENT IN THE SAID ACCOUNT WAS MADE IN THE EARL IER YEARS AND THE ASSESSEE HAD REFLECTED THE SAME AS OPENING INVE STMENT AS ON 1.4.2007. THE ASSESSEE HAD ALSO DECLARED CERTAIN T RANSACTIONS IN THE PMS ACCOUNT DURING THE YEAR AS SHORT TERM CAPIT AL GAIN WHICH HAD BEEN ACCEPTED BY THE ASSESSING OFFICER WHILE FR AMING THE ASSESSMENT. HOWEVER, WHERE THE PERIOD OF HOLDING W AS MORE THAN 12 MONTHS, THE ASSESSEE HAD TREATED THE GAIN AS LON G TERM CAPITAL GAINS BUT THE SAME WAS TREATED AS INCOME FROM BUSIN ESS BY THE ASSESSING OFFICER. ADMITTEDLY, THE ASSESSEE WAS RE FLECTING THE INVESTMENT TO PMS UNDER THE HEAD INVESTMENT IN THE AUDITED BALANCE SHEET OF THE COMPANY AND THE INVESTMENT IN THE SAID ACCOUNT WAS MADE OUT OF INTERNAL ACCRUALS OF THE AS SESSEE. THE ISSUE ARISING IN THE PRESENT APPEAL IS LIMITED TO T HE EXTENT THAT WHETHER GAIN ARISING ON SUCH SALE OF PMS FUNDS IS A SSESSABLE AS INCOME FROM CAPITAL GAINS OR INCOME FROM BUSINESS. 15. WE FIND THAT SIMILAR TRANSACTION OF PURCHASE/SA LE OF PMS INVESTMENT AROSE BEFORE THE TRIBUNAL IN ITA NO.910/ CHD/2009 IN THE APPEAL FILED BY THE REVENUE RELATING TO ASSESSM ENT YEAR 2006-07 AND THE TRIBUNAL VIDE ORDER DATED 30.12.2011 VIDE P ARAS 32 TO 34 HELD AS UNDER: 32. WE FIND THAT ISSUE OF PMS INVESTMENT WAS BEFORE THE MUMBAI BENCH OF THE TRIBUNAL IN ITO, MUMBAI V RADHU BIRJU PATEL (ITA NO. 5382/MUMBAI/2009) RELATING TO ASSESSMENT YEAR 2006-07 ORDER DATED 30.11.2010 THE TRIBUNAL VIDE ORDER DATED 30/11/20 10 HELD AS UNDER: IN OUR CONSIDERATION VIEW, IN CIRCUMSTANCE, IN WH ICH THE ASSESSEE IS ENGAGED IN A SYSTEMATIC ACTIVITIES OF HOLDING PORTFOLIO 9 THROUGH A PMS MANAGER, IT CANNOT, BY ANY STRETCH OF IMAGINATION , BE SAID THAT THE MAIN OBJECT OF HOLDING THE PORTF OLIO IS TO MAKE PROFIT BY SALE OF SHARES DURING THE COURSE OF MAINTAINING THE PORTFOLIO INVESTMENT OVER THE PERIO D. AS REGARDS THE HIGH NUMBER OF TRANSACTIONS, WHICH HAVE BEEN REFERRED TO BY THE ASSESSING OFFICER, WE HAVE NOTED , ON A PERUSAL OF STATEMENT FILED BEFORE US, THAT THE NUMB ER OF TRANSACTION REFLECTED IN THE STATEMENT DO NOT .CONS TITUTE INDEPENDENT TRANSACTION INASMUCH AS WHEN, IN A COMP UTER BASED TRADING SYSTEM, LET US SAY THE ASSESSEE BUY 1 000 SHARES AND THIS PURCHASE IS SPLIT OVER 10 TRANSACTIONS FRO M DIFFERENT PERSONS, WHILE OVER ALL TRANSACTIONS IS OF ONLY ONE PURCHASE 100 SHARES, THE STATEMENT REFLECT OF THE INDIVIDUAL COMPONENT OF THE TRANSACTION AND WILL THUS SHOW A MISLEADING HIGH FIGURE. KEEPING IT IN MIND ALL THESE FACTORS AS ALSO THE EN TIRETY OF THE CASE, WE ARE IN CONSIDERED AGREEMENT WITH THE CONCL USIONS ARRIVED BY THE C1T (A) WHICH NEEDS NO INTERFERENCE. GRIEVANCES RAISED BY ASSESSING OFFICER ARE THUS RE JECTED. 33. IN THE FACTS OF THE PRESENT CASE, THE FINDINGS OF CIT(A) ARE THAT THE TRANSACTIONS IN PMS INVESTMENT ARE THROUGH D-MAT ACCOUNT OF THE ASSESSEE. THE ASSESSEE IN THE WRITTEN SUBMISSIONS FILED BEFORE THE CIT(A) HAS ELABORATELY EXPLAINED THE POSITION OF SALE OF SHARE S THROUGH PMS, WHICH ARE AT PAGES 31 TO 37 OF THE APPELLATE ORDER. ON CONSIDERATION OF THE SAID FACTU AL ASPECTS, THE CIT(A) VIDE PARAS 5.3 TO 5.5 HAD HELD THAT SUCH GAINS ON SALE OF PMS INVESTMENT IS TO BE ASSES SED AS INCOME FROM CAPITAL GAINS. THE FACTUAL FINDINGS OF CIT(A) HAVE NOT BEEN CONTROVERTED BY THE LD. DR FOR THE REVENUE. IN VIEW OF THE RATIO LAID DOWN IN ITO, MUMBAI V RADHU BIRJU PATEL (ITA NO. 5382/MUMBAI/2009) RELATING TO ASSESSMENT YEAR 2006- 07 ORDER DATED 30.11.2010 AND FACTUAL FINDINGS OF T HE PRESENT CASE, WE HOLD THAT GAINS ARISING ON SALE OF PMS INVESTMENT ARE TO BE ASSESSED AS INCOME FROM LONG TERM/SHORT TERM CAPITAL GAINS, DEPENDING ON THE PER IOD OF HOLDING. 34. ADMITTEDLY THE ASSESSEE DURING THE YEAR HAD INCURRED LOSS OF RS.1456489/- ON SALE OF DERIVATIVE S THROUGH PRU ICICI PMS. THE SAID LOSS CANNOT BE SET OFF AGAINST THE INCOME FROM CAPITAL GAINS ON SALE OF PM S INVESTMENT. THE ASSESSING OFFICER IS DIRECTED TO RECOMPUTE THE INCOME FROM CAPITAL GAINS ACCORDINGLY . THUS, GROUNDS NO. 1 & 2 RAISED BY REVENUE ARE DISMISSED EXCEPT FOR IGNORING THE LOSS ON SALE OF DERIVATIES OF RS.1456489/-. 16. FOLLOWING THE ABOVE SAID PARITY OF REASONING AN D ALSO IN VIEW OF THE FACT THAT THE FACTS OF THE PRESENT CASE ARE IDENTICAL TO THE FACTS IN ASSESSMENT YEAR 2006-07, WE UPHOLD THE ORD ER OF CIT 10 (APPEALS) IN HOLDING THAT THE GAINS ARISING ON SALE OF PMS FUNDS ARE ASSESSABLE AS INCOME FROM LONG TERM CAPITAL GAI NS. THE GROUND OF APPEAL RAISED BY THE REVENUE IS THUS DISMISSED. ITA NO.1247/CHD/2011: 17. BOTH THE AUTHORIZED REPRESENTATIVES FAIRLY ADMI TTED THAT THE ISSUE RAISED VIDE GROUND NO.1 WAS IDENTICAL TO THE ISSUE RAISED IN ITA NO.1246/CHD/2011. THE ASSESSEE HAD DECLARED IN COME FROM CAPITAL GAINS IN ITS RETURN OF INCOME AS UNDER: TAX FREE TAXABLE A LONG TERM CAPITAL GAIN FROM MUTUAL FUNDS [STT PAID EXEMPT U/S 10(38)] 23800000 NIL B LONG TERM CAPITAL GAIN ON MUTUAL FUND OF RELIANCE FIXED TENURE FUNDS PLAN 11403800 LESS: INDEX COST (COST RS. 1 ,00,00,000) 110865 19 317281 LONG TERM GAIN ON MUTUAL FUND OF 'GRINDLAYS FIXED MATURITY PLUS PLAN' 40007600 LESS: INDEX COST (COST RS. 4,00, 00,000) 4246628 1 C (2458681) LONG TERM CAPITAL LOSS CARRIED FORWARD (2141400) D SHORT TERM CAPITAL GAIN ON MUTUAL FUNDS 916201 I INCOME FROM OTHER SOURCES 5250596 TOTAL INCOME 23800000 6166797 18. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN R ESPECT OF THE GAIN RECEIVED ON SALE OF MUTUAL FUNDS AND REDEMPTIO N OF PRUDENTIAL ICICI EQUITY AND DERIVATIVE FUND. THE ASSESSEE DUR ING THE YEAR UNDER CONSIDERATION HAD SHOWN LONG TERM CAPITAL LOS S OF RS.21,41,400/- WHICH IT HAD CLAIMED TO BE CARRY FOR WARD SET OFF IN THE SUBSEQUENT YEARS. THE ASSESSING OFFICER HELD T HE SAID LOSS TO BE BUSINESS LOSS. THE CIT(A) HELD THE PROFIT ON RE DEMPTION OF MUTUAL FUNDS WERE TO BE CONSIDERED AS CAPITAL GAIN. IN VIEW OF OUR FINDINGS IN PARAS HEREINABOVE AND SIMILAR ISSUE DEC IDED BY THE 11 TRIBUNAL IN THE APPEAL FILED BY THE REVENUE IN THE CASE OF ITSELF ASSESSEE IN ITA NO.911/CHD/2009 RELATING TO ASSESSM ENT YEAR 2006- 07 VIDE ORDER DATED 30.12.2011, WE HOLD THAT THE IS SUE IS IDENTICAL TO THE ISSUE RAISED VIDE GROUND NO.1 RAISED BY THE REVENUE IN ITA NO.1246/CHD/2011. FOLLOWING THE ABOVE SAID REASONI NG WE DISMISS GROUND NO.1 RAISED BY THE REVENUE WITH THE DIRECTIO N TO THE ASSESSING OFFICER TO VERIFY WHETHER ANY LOSS FROM D ERIVATIVE HAD BEEN CLAIMED BY THE ASSESSEE, WHICH IS NOT TO BE SE T OFF AGAINST THE INCOME FROM CAPITAL GAINS. 19. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 TH DAY OF MAY, 2012. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 24 TH MAY, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH