ITO,Ward-9(3), Kolkata, Kolkata V. M/s. Ivory Consultants(P)Ltd, Kolkata

ITA 1323/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78406 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-10-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 13-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VARINDER MEHTA
• Assessee Lawyers: SUNIL SURANA
• Keywords: Speculation loss

Judgement Text

I.T.A. NO. 1323/KOL./2012 ASSESSMENT YEAR: 2009-10 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI SHAMIM YAHYA (ACCOUNTANT MEMBER), AND SHRI GEORGE MATHAN (JUDICIAL MEMBER) I.T.A. NO. 1323/KOL. / 2012 ASSESSMENT YEAR : 2009-2010 INCOME TAX OFFICER,.................. ...APPELLANT WARD-9(3), KOLKATA, AAYAKAR BHAWAN, 5 TH FLOOR, ROOM NO. 14, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 -VS.- M/S. IVORY CONSULTANTS PVT. LTD.,................ ......RESPONDENT 27, BRABOURNE ROAD, 3 RD FLOOR, ROOM NO. 305, KOLKATA-700 007 [PAN : AAACI 5518 C] APPEARANCES BY: SHRI VARINDER MEHTA, CIT, D.R., FOR THE DEPARTMENT SHRI SUNIL SURANA, C.A., FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : JULY 10, 2014 DATE OF PRONOUNCING THE ORDER : JULY 14, 2014 O R D E R PER GEORGE MATHAN: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-VIII, KOLKATA IN APPEAL NO. 120/CIT(A)-VIII/KOL/11-12 DATED 20.06.2012 FOR THE ASSESSMENT YEAR 2009-10. 2. SHRI VARINDER MEHTA, CIT,D.R. REPRESENTED ON BEH ALF OF THE REVENUE AND SHRI SUNIL SURANA, C.A., REPRESENTED ON BEHALF OF THE ASSESSEE. 3. IT WAS SUBMITTED BY THE LD. CIT,D.R. THAT THE ON LY ISSUE IN THE REVENUES APPEAL WAS AGAINST THE ACTION OF THE LD. CIT(APPEALS) IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER BY INVOKING THE EXPLANATION TO SECTION 73 OF THE INCOME TAX ACT, 19 61. I.T.A. NO. 1323/KOL./2012 ASSESSMENT YEAR: 2009-10 PAGE 2 OF 4 4. LD. CIT (D.R.) VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER. IN REPLY, IT WAS SUBMITTED BY THE LD. A.R. THAT THE ASSESSEES MAIN BUSINESS WAS SHARE TRADING AND GRANTING OF LOANS. I T WAS THE SUBMISSION THAT THE ASSESSEE HAD INCURRED A LOSS OF RS.9,70,89 ,057/- FROM SHARE TRADING AND HAD EARNED AN INCOME FROM SPECULATION T O AN EXTENT OF RS.8,41,01,387/- AND AN INCOME FROM OTHER SOURCES T O AN EXTENT OF RS.55,64,451/-. IT WAS THE SUBMISSION THAT THE ASSE SSEE ALSO HAD INCOME FROM DERIVATIVE TRADING TO AN EXTENT OF RS.80,74,41 7/-. THE ASSESSEE HAD CONSEQUENTLY SET OFF THE LOSSES AGAINST THE SPECULA TIVE AND OTHER INCOME. THE ASSESSING OFFICER HAD INVOKED THE PROVISION OF EXPLANATION TO SECTION 73 AND HAD TREATED THE LOSS ON ACCOUNT OF SHARE TRA DING TO AN EXTENT OF RS.9,70,89,057/- AS DEEMED SPECULATION LOSS. CONSEQ UENTLY HE HAD PERMITTED TO SET OFF THE SAID LOSS AGAINST THE DEEM ED SPECULATIVE INCOME. HE HAD NOT PERMITTED TO SET OFF AGAINST THE BUSINES S OF DERIVATIVE TRADING AS ALSO THE INCOME FROM OTHER SOURCES. IT WAS THE S UBMISSION THAT THE ISSUE WAS SQUARELY COVERED BY THE DECISION OF THE H ONBLE HIGH COURT OF CALCUTTA IN THE CASE OF MIDDLETON INVESTMENT & TRAD ING CO. LTD. IN ITA NO. 196 OF 1999 DATED 15.01.2014, WHEREIN HONBLE HIGH COURT HAS HELD AS FOLLOWS:- THE COURT : THE INCOME OF THE ASSESSEE ARISING FROM DIFFERENT HEADS WAS AS FOLLOWS: 1. LOSS IN THE PURCHASE AND SALE OF SHARES (-) RS.10,83 ,091/- INCLUDING INTEREST LIABILITY ATTRIBUTABLE TO IT. II. INCOME FROM THE BUSINESS OF GRANTING (+) RS.2,10, 218/- LOANS, ADVANCES ETC. III. SHORT TERM CAPITAL GAINS IN SALE OF SHARES (+) RS. 6.425 (AS PER COMPUTATION FILED) IV. INCOME FROM OTHER SOURCES (AS PER (+) RS. 10,13,798 /- COMPUTATION FILED) THE ASSESSEE WAS INTERESTED IN CONTENDING AND, IN FAC T, CONTENDED AS FOLLOWS: THE LOSS IN PURCHASE AND SALE OF SHARES IS TO THE TU NE OF RS.10.83,091/- AND INCOME FROM THE BUSINESS IS RS.2,10,119/-. THE NET LOS S UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION COMES TO RS.8,72,972/- WH EREAS, THE INCOME EARNED UNDER THE HEADS INCOME FROM OTHER SOURCES IS GREATER I.E., TO THE TUNE OF RS.10,13,798/- AND, THEREFORE, THE CASE OF THE ASSE SSEE FALLS OUTSIDE THE PURVIEW OF EXPLANATION TO SECTION 73. THE LEARNED TRIBUNAL HELD AS FOLLOWS: I.T.A. NO. 1323/KOL./2012 ASSESSMENT YEAR: 2009-10 PAGE 3 OF 4 THE NET LOSS UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION WOULD BE RS.8,72,972/- WHEREAS, THE INCOME SHOWN BY T HE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCES IS TO THE TUNE OF RS.10,13,798/-. WE ARE, THEREFORE, OF THE OPINION THAT THE ASSESSEES G ROSS TOTAL INCOME CONSISTED MAINLY OF INCOME ASSESSABLE UNDER THE HEAD INCOME FR OM OTHER SOURCES. IT THEREFORE, FOLLOWS THAT THE LOSS IN SHARE TRADING HAS T O BE TREATED AS BUSINESS LOSS. WE DIRECT THE A.O. ACCORDINGLY. AGGRIEVED BY THE ORDER OF THE LEARNED TRIBUNAL, THE REVENUE HAS COME UP IN APPEAL. AT THE TIME OF HEARING, MR. SARAF, LEARNED ADVOCATE VERY FAIRLY DREW OUR ATTENT ION TO THE JUDGMENT IN THE CASE OF CIT VS. DARSHAN SECURITIES (P) LTD. REPORT ED IN 341 ITR 556 WHEREIN THE FOLLOWING VIEW WAS TAKEN: THE AMBIT OF SUB-SECTION (1) OF SECTION 73 IS ONLY T O PROHIBIT THE SETTING OFF OF A LOSS WHICH HAS RESULTED FROM A SPECULATION BUSINESS, SAVE A ND EXCEPT AGAINST THE PROFITS AND GAINS OF ANOTHER SPECULATION BUSINESS. IN ORDER TO DETERMINE WHETHER THE EXCEPTION THAT IS CARVED OUT BY THE EXPLANATION APPL IES, THE LEGISLATURE HAS FIRST MANDATED A COMPUTATION OF THE GROSS TOTAL INCOME OF THE COMPANY. THE WORDS CONSISTS MAINLY ARE INDICATIVE OF THE FACT THAT THE LEGISLATURE HAD IN ITS CONTEMPLATION THAT THE GROSS TOTAL INCOME CONSISTS PRED OMINANTLY OF INCOME FROM THE FOUR HEADS THAT ARE REFERRED TO THEREIN. OBVIOUSL Y, IN COMPUTING THE GROSS TOTAL INCOME THE NORMAL PROVISIONS OF THE ACT MUST BE APPLIE D AND IT IS ONLY THEREAFTER, THAT IT HAS TO BE DETERMINED AS TO WHETHER THE GROSS T OTAL INCOME SO COMPUTED CONSISTS MAINLY OF INCOME WHICH IS CHARGEABLE UNDER TH E HEADS REFERRED TO IN THE EXPLANATION. CONSEQUENTLY, IN THE PRESENT CASE, THE GROSS TOTAL INCOME OF THE ASSESSEE WAS REQUIRED TO BE COMPUTED, INTER ALIA, BY COMPUTING THE INCOME UNDER THE HEAD OF PROFITS AND GAINS OF BUSINESS OR PROFESSION AS WELL. BOTH THE INCOME FROM SERVICE CHARGES IN THE AMOUNT OF RS.2.25 CRORES AND THE LOSS IN SHARE TRADING OF RS.2.23 CRORES, WOULD HAVE TO BE TAKEN INTO ACCOU NT IN COMPUTING THE INCOME UNDER THAT HEAD, BOTH BEING SOURCES UNDER THE SAME HEA D. THE ASSESSEE HAD A DIVIDEND INCOME OF RS.4.7 LAKHS (INCOME FROM OTHER SOU RCES). THE TRIBUNAL HAS JUSTIFIED, IN COMING TO THE CONCLUSION THAT THE ASSES SEE FELL WITHIN THE PURVIEW OF THE EXCEPTION CARVED OUT IN THE EXPLANATION TO SECTION 73 AND THAT CONSEQUENTLY THE ASSESSEE WOULD NOT BE DEEMED TO BE CARRYING ON A SPE CULATION BUSINESS FOR THE PURPOSE OF SECTION 73(1). THE JUDGMENT CITED BY MR . SARAF IS DIRECTLY ON THE POINT SOUGHT TO BE AGITATED BY THE REVENUE. THERE IS NOTHIN G TO SHOW THAT THE VIEW TAKEN BY THE BOMBAY HIGH COURT IS ERRONEOUS. WE ARE, AS SUCH, OF THE OPINION THAT THE APPEAL MUST FAIL AND IS HEREBY DISMISSED. URGENT PHOTO STAT CERTIFIED COPY OF THIS ORDER, IF APPLIED FOR, BE SUPPLIED TO THE PARTIES SUBJ ECT TO COMPLIANCE WITH ALL REQUISITE FORMALITIES. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PERU SAL OF THE PROFIT & LOSS A/C OF THE ASSESSEE AS ALSO THE TRANSACTIONS C ONDUCTED BY THE ASSESSEE CLEARLY SHOW THAT THE ASSESSEE HAS A DIVID END INCOME OF RS.1,21,000/- AND EARNED INTEREST ON LOANS OF RS.54 ,75,211/-. AS HAS BEEN HELD BY THE HONBLE JURISDICTIONAL HIGH COURT OF CA LCUTTA IN COMPUTING THE GROSS TOTAL INCOME, NORMAL PROVISIONS OF THE TAX MU ST BE APPLIED AND IT IS ONLY THEREAFTER THAT HAS TO BE DETERMINED AS TO WHE THER THE GROSS TOTAL I.T.A. NO. 1323/KOL./2012 ASSESSMENT YEAR: 2009-10 PAGE 4 OF 4 INCOME SO COMPUTED CONSISTS MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS REFERRED TO IN THE EXPLANATION. AS IT IS NOTICED THAT THE ASSESSEE HAS CLEARLY SUBSTANTIAL INCOME UNDER THE HEAD INCO ME FROM OTHER SOURCES, CONSEQUENTLY THE ASSESSEE FALLS WITHIN TH E EXCEPTION CARVED OUT IN THE EXPLANATION TO SECTION 73. CONSEQUENTLY, RES PECTFULLY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT O F CALCUTTA IN THE CASE OF MIDDLETON INVESTMENT & TRADING CO. LTD. (SUPRA), TH E ORDER OF THE LD. CIT(APPEALS) STANDS CONFIRMED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH JULY, 2014. SD/- SD/- SHAMIM YAHYA GEORGE MATHAN (ACCOUNTANT MEMBER) (JU DICIAL MEMBER) KOLKATA, THE 14 TH DAY OF JULY, 2014 COPIES TO : (1) INCOME TAX OFFICER, WARD-9(3), KOLKATA, AAYAKAR BHAWAN, 5 TH FLOOR, ROOM NO. 14, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 (2) M/S. IVORY CONSULTANTS PVT. LTD. 27, BRABOURNE ROAD, 3 RD FLOOR, ROOM NO. 305, KOLKATA-700 007 (3) COMMISSIONER OF INCOME-TAX (APPEALS) (4) COMMISSIONER OF INCOME TAX (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.