ASST CIT 24(2), MUMBAI V. MITA DIPAK SHAH, MUMBAI

ITA 1391/MUM/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6750 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2012-2013
• Appeal Filed On: 28-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: HIMANS
• Keywords: Capital asset; Business income; Earning of tax free income; Revised return
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI DR. A.L. SAINI , ACCOUNTANT MEMBER ITA NO. 1391 / MUM/2017 ( ASSESSMENT YEAR : 20 12 13 ) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 24(2), MUMBAI . APPELLANT V/S SMT. MITA DIPAK SHAH 31 B, 1 ST FLOOR, LAXMI ESTATE AZAD ROAD, ANDHERI (EAST) MUMBAI 400 069 PAN AFBPS112A . RESPONDENT C.O. NO.137/MUM./2018 ( ARISING OUT OF ITA NO.1391/MUM/2017 ) ( ASSESSMENT YEAR : 2012 13 ) SMT. MITA DIPAK SHAH 31 B, 1 ST FLOOR, LAXMI ESTATE AZAD ROAD, ANDHERI (EAST) MUMBAI 400 069 PAN AFBPS112A . CROSS OBJECTOR (ORIGINAL RESPONDENT) V/S ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 24(2), MUMBAI . RESPONDENT (ORIGINAL APPELLANT) REVENUE BY : SHRI SAURABH KUMAR RAI ASSESSEE BY : SHRI RAJAN VORA A/W SHRI HEMEN CHANDARIYA AND SHRI HIMANSHU AGARWALTO DATE OF HEARING 25 .0 6 .2018 DATE OF ORDER 27.06.2018 2 SMT. MITA DIPAK SHAH O R D E R PER SAKTIJIT DEY, J.M. A FORESAID APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE ARE AGAINST ORDER DATED 26 TH DECEMBER 2016, PASSED BY THE LEARNED COMMISSIONER (APPEALS) 36, MUMBAI, FOR THE ASSESSMENT YEAR 2012 13. ITA NO.1391/MUM/2017 REVENUES APPEAL 2 . T HE GROUND RAISED BY THE DEPARTMENT IS ON THE COMMON ISSUE AS TO WHETHER THE INCOME / LOSS FROM SHARE TRANSACTION SHOULD BE ASSESSED UNDER THE HEAD CAPITAL GAIN OR BUSINESS INCOME . WHILE THE ASSESSING OFFICER HAS TREATED THE INCOME / LOSS FROM SHARE TRA NSACTION AS BUSINESS INCOME / LOSS, THE LEARNED COMMISSIONER (APPEALS) HAS ACCEPTED ASSESSEES CLAIM OF SUCH INCOME / LOSS TO BE TREATED AS CAPITAL GAIN / LOSS. 3 . BRIEF FACTS ARE, THE ASSESSEE , AN INDIVIDUAL , FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSE SSMENT YEAR ON 21 ST JULY 2012, DECLARING TOTAL INCOME OF ` 34,25,305. SUBSEQUENTLY, ASSESSEE FILED A REVISED RETURN OF INCOME ON 23 RD OCTOBER 2013, DECLARING INCOME OF ` 35,54,820. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER WHILE VERIFYING THE RETURN OF INCOME AND COMPUTATION OF TOTAL INCOME 3 SMT. MITA DIPAK SHAH FILED BY THE ASSESSEE FOUND THAT INCOME FROM SALE OF SHARES AMOUNTING TO ` 1,04,51,578, HAS BEEN OFFERED AS LONG TERM CAPITAL GAIN AND SIMULTANEOUSLY, CLAIMED TO BE EXEMPT UNDER SECTION 10(38) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ). SIMILARLY, LOSS FROM SALE OF SHARE AMOUNTING TO ` 25,91,032, HAS BEEN CLAIMED AS SHORT TERM CAPITAL LOSS. THE ASSESSING OFFICER AF TER CALLING FOR DETAILS OF SHARE TRANSACTION AND INCOME DERIVED THEREFROM BY THE ASSESSEE FOUND THAT THE ASSESSEE HAS OFFERED INCOME OF ` 37,255, FROM SHARE TRADING AS BUSINESS INCOME. AFTER VERIFYING THE DETAILS OF SHARE TRANSACTION, THE ASSESSING OFFICER OBSERVED THAT LOOKING AT THE LARGE VOLUME, FREQUENCY, CONTINUITY AND REGULARITY OF TRANSACTIONS RELATING TO PURCHASE AND SALE OF SHARES IT HAS TO BE HELD THAT THE INCOME DERIVED THEREFROM IS BUSINESS INCOME. FURTHER, THE ASSESSING OFFICER REFERRED TO THE ASSESSMENT ORDER PASSED FOR ASSESSMENT YEAR 2010 11 IN ASSESSEES OWN CASE , WHEREIN , SIMILAR INCOME DERIVED BY THE ASSESSEE WAS ASSESSED AS BUSINESS INCOME. ACCORDINGLY, HE CONCLUDED THAT THE GAIN / LOSS DERIVED FROM SALE OF SHARES HAVE TO BE ASSESSED UNDE R THE HEAD INCOME F ROM BUSINESS OR PROFESSION . ACCORDINGLY, HE PASSED THE ASSESSMENT ORDER. BEING AGGRIEVED WITH SUCH DECISION OF THE ASSESSING OFFICER ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4 SMT. MITA DIPAK SHAH 4 . THE LEARNED COMMISSIONER (APPEALS) TAKING NOTE OF THE FACT THAT WHILE DECIDING IDENTICAL DISPUTE IN ASSESSMENT YEAR 2010 11, THE ASSESSEES CLAIM WAS ACCEPTED BY THE FIRST APPELLATE AUTHORITY , FOLLOWED THE SAME AND ALLOWED ASSESSEES CLAIM OF CAPITAL GAIN / LOSS. 5 . THE LEARNED DEPARTMENTAL R EPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER AND THE GROUNDS RAISED. 6 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , WHILE DECIDING IDENTICAL ISSUE ARISING IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010 11, THE TRIBUNAL HAS UPHELD THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) IN ACCEPTING ASSESSEES CLAIM OF GAIN / LOSS FROM SALE OF SHARES TO BE TREATED AS LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL LOSS. IN THIS CONTEXT, HE DREW OUR ATTENTION TO THE ORDER PASSED BY THE TRIB UNAL, MUMBAI BENCH, IN ITA NO.3988/MUM./2016 AND C.O. NO.51/MUM./2018, DATED 15 TH MAY 2018. 7 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. AS COULD BE SEEN FROM THE FACTS ON RECORD AS WELL AS ORDER OF THE DEPARTMENTAL AUTHORITIES , IDENTICAL DISPUTE WAS ALSO INVOLVED IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010 11. WHEN THE DISPUTED ISSUE REACHED THE TRIBUNAL, IT WAS FOUND THAT THE ASSESSEE IS MAINTAINING TWO PORTFOLIOS I.E., INVESTMENT AS WELL AS TRADING AND THE ASSESSEE HAS DULY CLASSIFIED THE SHARES INTO INVESTMENT AND TRADING 5 SMT. MITA DIPAK SHAH SEGMENT. IT WAS ALSO FOUND THAT THE ASSESSEE HAD USED HER OWN FUND FOR INVESTMENT ACTIVITY. THUS, AFTER CONSIDERING THE AFORESAID FACT THE TRIBUNAL ACCEPTED ASSESSEES CLAIM WITH THE FOLLOWING FINDINGS: 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD INCLUDING THE IMPUGNED ORDER. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE IS MAINTAINING TWO PORTFOLIOS I.E., INVESTMENT AS WELL AS TRADING. IN THE INVESTMENT PORTFO LIO THE SHARES ARE HELD AS INVESTMENTS WHEREAS IN THE TRADING PORTFOLIO THE SHARES AND SECURITIES ARE HELD AS STOCK IN TRADE. THE ASSESSEE HAS DULY CLASSIFIED THE SAME IN THE SHARES INTO INVESTMENT PORTFOLIO AND TRADING SEGMENT. WE ALSO NOTE THAT THE ASSES SEE HAS USED HER OWN FUNDS AND NO FUNDS WERE USED FOR THE PURPOSE OF INVESTMENTS. THEREFORE, LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE IN TOTALITY, WE DO NOT FIND ANY DEFECT OR INFIRMITY IN THE ORDER OF LD. CIT(A). MOREOVER, THE CASE OF THE ASSESS EE IS SQUARELY COVERED BY THE DECISION OF THE CO ORDINATE BENCH OF THE TRIBUNAL IN ITA NO.3661/M/2015 FOR A.Y. 2010 11 AND OTHERS. THE RELEVANT PARAS OF THE SAID ORDER ARE REPRODUCED AS UNDER: 18. TO SUM UP, WE FIND THE VIEW OF THE AO IN TREATING THE LT CG AND STCG AS BUSINESS INCOME OF THE ASSESSEE, IS NOT PROPER. CONSIDERING STATUTORY PROVISIONS REGARDING THE DEFINITION OF LTCG WE ARE CONVINCED THAT THE VIEWS OF CIT(A) ARE SUSTAINABLE. SIMILARLY, REGARDING THE CLAIM OF STCG ALSO WE FIND THAT (I) THE CON SISTENCY PRINCIPLES; (II) USE OF OWN FUNDS OF ` 54 CRS; (III) EARNING OF GROSS DIVIDEND INCOME OF ` 1.20 CRS OR ` 30 LAKHS ON ACCOUNT OF SHORT TERM CAPITAL ASSETS; (IV) DETAILS GIVEN IN THE CONTRACT NOTES REGARDING INTENTION OF CERTAIN SHARES IN PHYSICAL F ORM ETC., SUGGEST THAT THE STCG IN QUE4STION CANNOT BE HELD AS BUSINESS INCOME. 19. THEREFORE, IN OUR OPINION, THE DECISION OF THE CIT(A) ON THIS ISSUE IS FAIR AND REASONABLE AND DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUNDS RAISED BY REVENUE W ITH REGARD TO BOTH THE STCG AND LTCG ARE DISMISSED. 20. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. 8. AFTER PERUSING THE ABOVE ORDER OF THE CO ORDINATE BENCH OF THE TRIBUNAL VIS A VIS FACTS OF THE ASSESSEES CASE, WE FIND THAT THE FACTS IN THE S AID CASE ARE SAME AS INVOLVED IN THE PRESENT CASE BEFORE US. THEREFORE, FOLLOWING THE ABOVE ORDER OF THE TRIBUNAL, 6 SMT. MITA DIPAK SHAH WE AFFIRM THE ORDER OF LD. CIT(A) BY DISMISSING THE APPEAL OF THE REVENUE. 8 . THERE BEING NO DIFFERENCE IN FACTS BROUGHT TO OUR NOTICE BY THE LEARNED DEPARTMENTAL REPRESENTATIVE IN THE IMPUGNED ASSESSMENT YEAR , RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE CO ORDINATE BENCH IN ASSESSEES OWN CASE, WE UPHOLD THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) ON THE ISSUE BY DISMISSING THE GROUND RAISED. 9 . IN THE RESULT, REVENUES APPEAL IS DISMISSED. C.O NO.137/MUM./2018 BY ASSESSEE 10 . IN GROUNDS NO.1 AND 2, THE ASSESSEE HAS CHALLENGED DISALLOWANCE OF ` 3,30,071 UNDER SECTION 14A R/W RULE 8D(III). 11 . BRIEF FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICING THAT IN THE RELEVANT PREVIOUS YEAR THE ASSESSEE HAS EARNED DIVIDEND INCOME OF ` 37,02,977, WHICH HAS BEEN CLAIMED AS EXEMPT UNDER SECTION 10(34) OF THE ACT , WHEREAS , THE ASS ESSEE HAS NOT DISALLOWED ANY EXPENDITURE ATTRIBUTABLE TO SUCH EXEMPT INCOME, CALLED UPON THE ASSESSEE TO EXPLAIN WHY DISALLOWANCE OF EXPENDITURE IN TERM S OF SECTION 14A R/W RULE 8D FOR EARNING EXEMPT INCOME SHOULD NOT BE MADE. THOUGH, THE ASSESSEE OBJECTED TO THE PROPOSED DISALLOWANCE , HOWEVER, THE ASSESSING OFFICER REJECTING THE OBJECTIONS OF THE ASSESSEE DISALLOWED ADMINISTRATIVE EXPENDITURE OF ` 3,30,071 7 SMT. MITA DIPAK SHAH UNDER SECTION 14A R/W RULE 8D(2)(III). THE ASSESSEE CHALLENGED THE AFORESAID DISALLOWANCE BEFORE THE FIRST APPELLATE AUTHORITY. 12 . THE LEARNED COMMISSIONER (APPEALS), HOWE VE R, UPHELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 13 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE AT ALL W HILE COMPUTING ITS INCOME . THEREFORE, IN ABSENCE OF ANY EXPENDITURE CLAIMED BY THE ASSESSEE NOTIONAL DISALLOWANCE UNDER SECTION 14A R/W RULE 8D CANNOT BE MADE. IN SUPPORT OF SUCH CONTENTION, HE RELIED UPON THE FOLLOWING DECISIONS: I ) GILLETTE GROUP INDIA PVT. LTD. V/S ACIT, [2010] 16 ITR 057 ; II ) DCIT V/S M/S. TRADE APARTMENT LTD., ITA NO.1277/KOL./ 2011 DATED 30 TH MARCH 2012; AND III ) ACIT V/S IQBAL M. CHAGALA, ITA NO.877/MUM./2013, DATED 30 TH JULY 2014. 14 . T HE LEARNED DEPARTMENTAL REPRESENTATIVE RELYING UPON THE OBSERVATION OF THE LEARNED COMMISSIONER (APPEALS) AND THE ASSESSING OFFICER SUBMITTED THAT WHEN THE ASSESSEE HAS EARNED EXEMPT INCOME, DISALLOWANCE UNDER SECTION 14A R/W RULE 8D HAS TO BE MADE. 15 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. AS COULD BE SEEN FROM THE REVISED COMPUTATION OF INCOME FILED BY THE ASSESSEE ALONG WITH THE REVISED RETURN OF INCOME , A COPY OF 8 SMT. MITA DIPAK SHAH WHICH IS AT PAGE 12 OF THE PAPER BOOK AND THE INCOME AND EXPENDITURE ACCOUNT FOR ASSESSMENT YEAR 2012 13 , THE ASSESSEE HAS OFFERED THE GROSS INC OME EARNED BY HER TO TAX WITHOUT CLAIMING ANY EXPENDITURE WHATSOEVER. THUS, IT IS A FACT ON RECORD THAT THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE AT ALL. THEREFORE, WHEN THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE , THERE IS NO QUESTION OF MAKING DISALL OWANCE UNDER SECTION 14A R/W RULE 8D ON NOTIONAL BASIS. THE DECISIONS RELIED UPON BY THE LEARNED AUTHORISED REPRESENTATIVE CLEARLY SUPPORT THIS VIEW. IN FACT, WHILE DECIDING SIMILAR ISSUE ARISING IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010 11, THE TRIB UNAL ACCEPTED ASSESSEES CLAIM THAT DISALLOWANCE UNDER SECTION 14A R/W RULE 8D(III) CANNOT EXCEED THE ACTUAL EXPENSES CLAIMED BY THE ASSESSEE. SINCE , IN THE IMPUGNED ASSESSMENT YEAR THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE AT ALL, LOGICALLY THERE CANNOT BE ANY DISALLOWANCE UNDER SECTION 14A R/W RULE 8D( 2)(III). ACCORDINGLY, WE DELETE THE DISALLOWANCE OF ` 3,30,071. 16 . IN GROUND NO.3 THE ASSESSEE HAS CHALLENGED LEVY OF INTEREST UNDER SECTION 234C OF THE ACT. 17 . IT IS THE CONTENTION OF THE LEARNED AUTHORISED REPRESENTATIVE THAT INTEREST UNDER SECTION 234C OF THE ACT CAN BE CHARGED ON THE BASIS OF RETURNED INCOME AND NOT ASSESSED INCOME. FOR SUCH PROPOSITI ON, HE HAS RELIED UPON THE FOLLOWING DECISIONS: 9 SMT. MITA DIPAK SHAH I ) BOMBAY GYMKHANA LTD. V/S ITO, [2008], 115 TTJ 639 (MUM.); II ) WIPRO INFORMATION TECHNOLOGY LTD. V/S DCIT, [2004] 88 TTJ 778 (BANG.); III ) MRS. PRABHALAL V/S CIT, 269 ITR 212 (PAT.). 18 . THE LEARNED DEPARTMENTAL REP RESENTATIVE RELIED UPON THE OBSERVATIONS OF THE LEARNED COMMISSIONER (APPEALS) AND THE ASSESSING OFFICER. 19 . HAVING CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD, WE FIND MERIT IN THE SUBMISSIONS OF THE LEARNED AUTHORISED REPRESENTATIVE. A REA DING OF THE PROVISIONS CONTAINED UNDER SECTION 234C OF THE ACT MAKES IT CLEAR THAT THE IN TEREST UNDER THE SAID PROVISION HAS TO BE CHARGED ON THE RETURNED INCOME. THAT BEING THE CASE, WE DELETE THE INTEREST CHARGED UNDER SECTION 234C OF THE ACT. 20 . IN THE RESULT, ASSESSEES CROSS OBJECTION IS ALLOWED. 21 . TO SUM UP, REVENUES APPEAL IS DISMISSED AND ASSESSEES CROSS OBJECTION IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.06.2018 SD/ - DR. A.L. SAINI ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 28.06.2018 10 SMT. MITA DIPAK SHAH COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (SR. PRIVATE SECRETARY) ITAT, MUMBAI