Rishi Sehdev, New Delhi V. ACIT, New Delhi

ITA 1447/DEL/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7157 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 14-09-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 11-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: F R MEENA
• Assessee Lawyers: TAPAS RAM MISRA
• Keywords: Business income; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : F : NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER ITA NO.1447/DEL/2013 ASSESSMENT YEAR : 2008-09 RISHI SEHDEV, 33, CHANDER NAGAR, JANAKPURI, NEW DELHI. PAN: AARPS2889Q VS. ACIT, RANGE-10, NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI TAPAS RAM MISRA, ADVOCATE DEPARTMENT BY : SHRI F.R. MEENA, SR. DR DATE OF HEARING : 15.09.2016 DATE OF PRONOUNCEMENT : 16.09.2016 ORDER PER R.S. SYAL, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER PASSED BY THE CIT(A) ON 17.1.2013 IN RELATION TO TH E ASSESSMENT YEAR 2008-09. ITA NO.1447/DEL/2013 2 2. THE FIRST ISSUE AGITATED IN THIS APPEAL IS AGAIN ST TREATMENT OF RS.78,99,513/-, BEING THE AMOUNT OF SHORT-TERM CAP ITAL GAIN ARISING FROM SALE OF SHARES AS BUSINESS INCOME AS AGAINST `CAP ITAL GAINS SHOWN BY THE ASSESSEE. 3. BRIEFLY STATED, THE FACTS OF THIS ISSUE CASE ARE THAT THE ASSESSEE EARNED SHORT-TERM CAPITAL GAIN OF RS.78,99,513/- FR OM PURCHASE AND SALE OF CERTAIN SHARES THROUGH PORTFOLIO MANAGEMENT SCHE ME (PMS). THE SAME WAS TREATED BY THE ASSESSEE AS INCOME CHARGEAB LE UNDER THE HEAD CAPITAL GAINS. THE AO, DURING THE COURSE OF ASSES SMENT PROCEEDINGS OBSERVED THAT THE SHARES OF M/S RELIANCE LIQUIDITY FUND WERE PURCHASED 7 TIMES IN THE MONTH OF JANUARY AND SOLD ON TWO OCC ASIONS IN THE MONTH OF FEBRUARY. THIS SCRIP WAS PURCHASED 15 TIMES AND SOLD ON 26 OCCASIONS. SIMILARLY IN THE MONTH OF MARCH, THE AS SESSEE PURCHASED THE SHARES OF THIS SCRIP 8 TIMES AND SOLD THEM ON 9 OC CASIONS. THE DETAILS FILED BY THE ASSESSEE DIVULGED THAT THE ASSESSEE P URCHASED SHARES OF M/S RELIANCE LIQUIDITY FUND ALMOST EVERY MONTH. SIMILAR LY, THE ASSESSEE ALSO TRADED THROUGH THE YEAR IN THE EQUITY OF ALFA TRANSFORMERS LTD., ITA NO.1447/DEL/2013 3 APOLLO TYRES LTD. ARRO WEBTEX ECE INDUSTRIES LTD., EIH LTD., ELECTRONOTHERM LTD., ELPRO INTERNATIONAL LTD., HIMA LAYA INTERNATIONAL LTD. IL &FS INVESTMENT MANAGERS LTD., INDIA INFOLIN E LIMITED, JMC PROJECTS INDIA LTD., MODISON METAL, NONNET ISPAT LT D., NIIT LTD. IN THE LIKE MANNER, THE SHARES OF M/S PROVOGUE (INDIA) LTD . WERE SOLD IN THE MONTH OF JANUARY ON 16 OCCASIONS. SIMILARLY, THE SH ARES OF RPG CABLES LTD., WERE SOLD IN THE MONTH OF JANUARY ON 13 OCCAS IONS AND PURCHASED IN THE MONTH OF AUGUST, 2007 ON 13 OCCASIONS. IN TH E LIGHT OF THE ABOVE FACTUAL SCENARIO, THE AO CAME TO HOLD THAT THE ASSE SSEE WAS DOING SHARES TRADING LIKE BUSINESS DEALINGS. HE FURTHER OBSERVED THAT THOUSANDS OF SHARES WERE PURCHASED AND SOLD BY PORTFOLIO MANAGER S ON BEHALF OF THE ASSESSEE IN A VERY SHORT SPAN OF TIME. CONSIDERING ALL THESE FACTS, THE AO REFUSED TO ACCEPT THE STAND OF THE ASSESSEE IN T REATING THE INCOME AS SHORT TERM CAPITAL GAIN. HE TREATED THIS AMOUNT AS `BUSINESS INCOME. NO RELIEF WAS ALLOWED IN THE FIRST APPEAL. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT CONFLICTIN G VIEWS WERE PREVALENT ITA NO.1447/DEL/2013 4 IN THE TRIBUNAL ON THE TREATMENT OF INCOME FROM PMS . WHEREAS SOME BENCHES WERE HOLDING THE SAME AS CAPITAL GAINS, THE OTHERS WERE TREATING IT AS BUSINESS INCOME. A SPECIAL BENCH WAS CONSTITU TED TO RESOLVE THE CONFLICT IN THE CASE OF SURAJ OVERSEAS (P) LTD. VS. ACIT . THE SPECIAL BENCH OF THE TRIBUNAL HAS RENDERED ITS DECISION ON 14.10.2015 IN ITA NO.3827/DEL/2009 . A COPY OF SUCH ORDER HAS BEEN PLACED ON RECORD B Y THE LD. AR. THERE IS HARDLY ANY NEED TO ACCENTUATE THAT THE VIEW TAKEN BY A SPECIAL BENCH IS BINDING ON THE DIVISION BENCH ES ACROSS THE COUNTRY UNLESS THERE IS A CONTRARY DECISION AVAILAB LE FROM THE HONBLE JURISDICTIONAL HIGH COURT. NO DIVISION BENCH IS CO MPETENT TO RE-VISIT THE LEGAL POSITION DECIDED BY THE SPECIAL BENCH SO LONG AS THE FACTS AND CIRCUMSTANCES REMAIN THE SAME. AS THE LD. AR COULD NOT SPECIFICALLY POINT OUT ANY DISTINGUISHING FEATURE IN THE FACTS O F THE SPECIAL BENCH VIS- -VIS THE INSTANT CASE AND ALSO THE LEGAL POSITION, WE RE FUSE TO ENTERTAIN ANY ARGUMENT CONTRARY TO THE DECISION OF THE SPECIA L BENCH. UNDER THESE CIRCUMSTANCES, WE SET ASIDE THE IMPUGNED ORDER AND REMIT THE MATTER TO THE FILE OF THE AO FOR DECIDING THIS ISSUE IN CONFO RMITY WITH THE VIEW TAKEN BY THE SPECIAL BENCH IN THIS CASE. ITA NO.1447/DEL/2013 5 5. THE ONLY OTHER ISSUE IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF RS.84,526/- MADE BY THE AO U/S 14A OF THE ACT. THE FACTS APROPOS THIS ISSUE ARE THAT THE ASSESSEE EARNED EXEMPT DIVIDEND INCOME OF RS.4,04,100/-. THE AO COMPUTED THE DISALLOWANCE U/S 14A AT % OF THE AVERAGE VALUE OF INVESTMENT AT RS.84,526/-. THE LD. CIT(A) SUSTAINED THE DISALLOWANCE. THE ASSESSEE IS AGGRIEVED BEFORE US. 6. HAVING REGARD TO THE FACTS OF THE INSTANT CASE, WE FIND THAT THE LD. AR FAILED TO POINT OUT ANY REASONS FOR NOT MAKING A DDITION U/S 14A WHEN THE EXEMPT INCOME WAS ADMITTEDLY EARNED BY THE ASSE SSEE. WE, THEREFORE, HOLD THAT THE AUTHORITIES BELOW WERE JU STIFIED IN MAKING AND SUSTAINING THIS DISALLOWANCE. THE IMPUGNED ORDER I S UPHELD ON THIS SCORE. 7. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON 16.09.201 6. SD/- SD/- [BEENA A. PILLAI] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 16 TH SEPTEMBER, 2016. ITA NO.1447/DEL/2013 6 DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.