SPS CAPITAL & MONEY MANAGEMENT SERVICES P. LTD, MUMBAI V. ACIT 2(3), MUMBAI

ITA 1288/MUM/2010

• Counselvise Citation: 128819914 RSA 2010
• Duration Of Justice: 1 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 22-11-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 17-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income
• Section: 14A; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER, AND SHRI J. SUDHAKAR REDDY, JUDICIAL MEMBER ITA NO. 1288 AND 1289/MUM./2010 (A.YS : 2005-06 AND 2006-07 ) M/S. SPS CAPITAL & MONEY MANAGEMENT SERVICES PVT. LTD. 121/4, AGRA BUILDING M.G. ROAD, FOR, MUMBAI 400 023 PAN AAHCS4980K .. APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX CIRCLE-2(3), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400020 .... RESPONDENT ASSESSEE BY : MR. VIJAY MEHTA REVENUE BY : MR. G.P. TRIVEDI DATE OF HEARING 22.11.2011 DATE OF ORDER 30.11.2011 O R D E R PER BENCH THESE APPEALS PREFERRED BY THE ASSESSEE, ARE DIREC TED AGAINST COMMON IMPUGNED ORDER DATED 15 TH DECEMBER 2009, PASSED BY THE COMMISSIONER (APPEALS)-VI, MUMBAI, FOR ASSESSMENT YEARS 2005-06 AND 2006-07 RESPECTIVELY. AS THE ISSUES ARISING IN THESE APPEAL S ARE COMMON, FOR THE SAKE OF CONVENIENCE, THESE APPEALS WERE HEARD TOGETHER A ND ARE BEING DISPOSED OFF BY WAY OF THIS CONSOLIDATED ORDER. ITA NO.1288/MUM./2010 ITA NO. 1289/MUM./2010 2 2. THERE ARE FOUR ISSUES WHICH ARE REQUIRED TO BE ADJU DICATED BY US VIZ. (I) DISALLOWANCE UNDER SECTION 14A OF THE INCOME TA X ACT, 1961 (FOR SHORT THE ACT ); (II) TREATMENT OF SHORT TERM CAPITAL GAIN UNDER THE HEAD INCOME FROM BUSINESS OF THE ASSESSEE; (III) DISALLOWANCE OF AUCTION COM MISSION UNDER SECTION 37(1) OF THE ACT ON THE GROUND THAT I T IS PENAL IN NATURE; AND (IV) REBATE UNDER SECTION 88E OF THE ACT. 3. WE HAVE HEARD THE LEARNED COUNSEL, MR. VIJAY METHA, ON BEHALF OF THE ASSESSEE AND THE LEARNED DEPARTMENTAL REPRESENTATIV E, MR. G.P. TRIVEDI, ON BEHALF OF THE REVENUE. 4. INSOFAR AS DISALLOWANCE UNDER SECTION 14A OF THE AC T IS CONCERNED, IT ARISES IN ASSESSMENT YEAR 2006-07 ONLY. 5. WE FIND THAT THE COMMISSIONER (APPEALS), WHILE DISP OSING OFF THIS ISSUE, FOLLOWED MUMBAI SPECIAL BENCH DECISION OF TH E TRIBUNAL RENDERED IN ITO V/S DAGA CAPITAL MANAGEMENT P. LTD., (2008) 119 TTJ (MUM.) 289 (SB). THE HON'BLE JURISDICTIONAL HIGH COURT IN GODREJ & B OYCE MFG. CO. LTD. V/S DCIT, (2010), 328 ITR 081 (BOM.), HAS PARTLY REVERS ED THE DECISION OF MUMBAI SPECIAL BENCH OF THE TRIBUNAL IN DAGA CAPITA L MANAGEMENT P. LTD. (SUPRA). UNDER THESE CIRCUMSTANCES, WE DEEM IT APPR OPRIATE TO SET ASIDE THE IMPUGNED ORDER PASSED BY THE COMMISSIONER (APPEALS) AND RESTORE THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER FOR DENOVO AD JUDICATION IN LINE WITH THE PROPOSITIONS LAID DOWN BY THE HONBLE JURISDICTIONA L HIGH COURT IN GODREJ & BOYCE MFG. CO. LTD. (SUPRA). THE ASSESSING OFFICER SHALL NOT APPLY RULE-8D, FOR THE IMPUGNED ASSESSMENT YEAR. CONSEQUENTLY, THI S GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 6. THE FIRST COMMON GROUND IN BOTH THE APPEALS IS ON T HE ISSUE AS TO WHETHER PROFIT ON SALE OF SHARES IS TO BE ASSESSED UNDER THE HEAD CAPITAL GAINS OR UNDER THE HEAD BUSINESS INCOME . ITA NO.1288/MUM./2010 ITA NO. 1289/MUM./2010 3 7. IT CAN BE SEEN THAT THE ASSESSEE, IN ITS BALANCE SH EET, HAS DISCLOSED A CERTAIN AMOUNT AS INVESTMENT IN SHARES. THE ASSESSI NG OFFICER HAS, AS SUBMITTED BY THE LEARNED COUNSEL, MADE GENERAL OBSE RVATIONS AND CAME TO A CONCLUSION THAT THE INCOME FROM SALE OF SHARES CANN OT BE ASSESSED UNDER THE HEAD CAPITAL GAINS BUT HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS . 8. IN OUR CONSIDERED OPINION, THESE ISSUES ARE FACTUAL AND IT IS REQUIRED THAT THE ASSESSING OFFICER SHOULD EXAMINE THE FACTS , SUCH AS THE NUMBER OF DAYS THAT THE ASSESSEE HELD A PARTICULAR SHARE, THE TREATMENT IN THE BOOKS OF ACCOUNT, THE FACT WHETHER THE ASSESSEE HAS INVESTED FROM BORROWED FUNDS OR OWN FUNDS, FREQUENCY OF THESE TRANSACTIONS, ETC. IT IS WELL SETTLED THAT AN ASSESSEE CAN BE A TRADER IN SHARES AS WELL AS AN IN VESTOR. A DETAILED EXERCISE HAS TO BE DONE TO ASCERTAIN AS TO WHICH ARE THE SHA RES HELD AS INVESTMENT AND AS TO WHICH ARE THE SHARES HELD AS STOCK-IN-HAN D. WHEN THE ASSESSEE HAS DISCLOSED CERTAIN SHARES AS HIS INVESTMENT IN T HE BALANCE SHEET, SCRIPT- WISE ANALYSIS HAS TO BE DONE BEFORE COMING TO A CON CLUSION. THE COMMISSIONER (APPEALS) HAS UPHELD THE DECISION OF T HE ASSESSING OFFICER WITHOUT EXAMINING THE FACTS OF THE CASE IN DETAIL. LEARNED COUNSEL SUBMITTED THAT THE ISSUE SHOULD BE RESTORED TO THE FILE OF AS SESSING OFFICER SO AS TO EXAMINE THE FACTS. THE LEARNED DEPARTMENTAL REPRESE NTATIVE, WHILE SUBMITTING THAT THE ISSUE MAY BE RESTORED TO THE FI LE OF ASSESSING OFFICER FOR FACTUAL EXAMINATION, HAS ALSO SUBMITTED THAT THE PA ST RECORD AND CLASSIFICATION MADE BY THE ASSESSEE HAS TO BE TAKEN INTO CONSIDERATION. THUS, WE SET ASIDE THE IMPUGNED ORDERS PASSED BY THE COMM ISSIONER (APPEALS) AND RESTORE THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER FOR DENOVO ADJUDICATION IN ACCORDANCE WITH LAW AND AS PER THE SUBMISSIONS OF BOTH THE SIDES.. THIS, GROUND IS, THUS, ALLOWED FOR STATISTI CAL PURPOSES. 9. THE NEXT COMMON ISSUE IS DISALLOWANCE OF COMMISSION U/S 37(1). OF THE ACT. ITA NO.1288/MUM./2010 ITA NO. 1289/MUM./2010 4 10. AFTER HEARING BOTH THE PARTIES, WE FIND THAT THE AM OUNT IN QUESTION REFLECTS AUCTION COMMISSION CHARGES BY THE STOCK EX CHANGE IN CASES WHERE THE ASSESSEE PURCHASED THE SHARES BUT COULD NOT TAK E DELIVER OF THE SAME. IN OUR OPINION, THE AMOUNT IN QUESTION DEBITED AS CHAR GES BY THE STOCK EXCHANGE, TO THE ASSESSEE IS NOT FOR INFRINGEMENT O F ANY LAW. IT IS NOT INCURRED BY THE ASSESSEE FOR ANY PURPOSE WHICH IS A N OFFENCE OR WHICH IS PROHIBITED BY LAW. THUS, THE EXPLANATION OF SECTION 37(1) IS NOT ATTRACTED IN THIS CASE. CONSEQUENTLY, WE SET ASIDE THE IMPUGNED ORDERS PASSED BY THE COMMISSIONER (APPEALS) AND ALLOW THE GROUND RAISED BY THE ASSESSEE. 11. THE LAST GROUND IS ON THE ISSUE OF REBATE UNDER SEC TION 88E OF THE ACT, IS FOR ASSESSMENT YEAR 2005-06. 12. THIS GROUND IS CONSEQUENTIAL TO THE DECISION ON THE ISSUE WHETHER THE PROFIT ARISING ON SALE OF SHARES IS TO BE ASSESSED UNDER THE HEAD CAPITAL GAINS OR UNDER THE HEAD INCOME FROM BUSINESS . SINCE THIS ISSUE IS RESTORED BACK TO THE FILE OF A.O FOR DENOVO ADJUDIC ATION, THE ISSUE OF REBATE UNDER SECTION 88E IS ALSO RESTORED TO THE FILE OF A SSESSING OFFICER. 13. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER 2011. SD/- D.K. AGARWAL JUDICIAL MEMBER SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI, DATED: 30 TH NOVEMBER 2011 COPY TO : (1) THE ASSESSEE; (2) THE RESPONDENT; (3) THE CIT(A), M UMBAI, CONCERNED; (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, E BENCH, ITAT, MUMBAI. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT, MUMBAI BENCHES, MUMBAI