M/s Kemfin Services Pvt. Ltd., Bangalore V. Asst.C.I.T., Bangalore

ITA 1450/BANG/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0356 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-06-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 10-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Opportunity of being heard; Cost of acquisition
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B, BANGALORE BEFORE SHRI A.K.GARODIA, AM (SMC) ITA NOS.1450 & 1451(B)/2015 (ASSESSMENT YEARS: 2008-09 & 2009-10) M/S KEMFIN SERVICES PVT.LTD., KEMWELL HOUSE, 11, TUMKUR ROAD, BANGALORE-560 022 PAN NO.AAACK6926E APPELLANT VS THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-7(1), BANGALORE RESPONDENT ASSESSEE BY : SHRI TATA KRISHNA, ADVOCATE REVENUE BY : SHRI V. SREENIVASAN, JCIT DATE OF HEARING : 07-06-2016 DATE OF PRONOUNCEMENT : - 06-2016 O R D E R PER SHRI A.K.GARODIA, AM: BOTH THESE APPEALS ARE FILED BY THE ASSESSEE WHICH ARE DIRECTED AGAINST A COMBINED ORDER OF CIT(A)-4, BANGALORE DAT ED 30-09-2015 FOR THE ASSESSMENT YEARS 2008-09 & 2009-10. BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CO MMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NOS.1450 & 1451(BANG)2015 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THE ASSESSMENT YEAR 2008-09: 1. THE ORDER OF THE LD. CIT(A) IS NOT JUSTIFIED IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD. AO IS NOT JUSTIFIED IN TREATING THE LONG TERM CAPITAL GAINS ARISING FROM SALE OF SHARES AS BUSINE SS INCOME, WITHOUT APPRECIATING THOSE SHARES WERE HELD AS INVESTMENTS IN THE BOOKS OF THE APPELLANT SINCE INCEPTION. 3. THE LD. AO HAS FAILED TO APPRECIATE THAT THE SH ARES HELD IN PORTFOLIO MANAGEMENT SCHEME AT KOTAK FINANC E AS STOCK-IN-TRADE WAS CONVERTED INTO INVESTMENTS ON 01 -04- 2004 AND THE SHARES SOLD DURING THE IMPUGNED YEAR D ID NOT RELATE TO THE CONVERTED STOCKS. 4. THE LD.AO HAS FAILED TO APPRECIATE THAT SHARES OF COLGATE PALMOLIVE WERE PURCHASED ON 03-09-1998 AND SINCE THEN THE SAME WERE HELD AS INVESTMENTS IN THE BOOKS OF THE APPELLANTS AND WAS NEVER CONVERTED INT O STOCK-IN-TRADE. 5. THE LD. AO HAS FAILED TO APPRECIATE THAT SHARES OF RELIANCE ENERGY, RELIANCE NATURAL RESOURCES AND MONSANTO INDIA LTD., WERE PURCHASED SUBSEQUENT TO CONVERTING STOCK IN-TRADE TO INVESTMENTS AND THE S AME WERE HELD AS INVESTMENTS FROM THE BEGINNING. 6. THE LD. LOWER AUTHORITIES HAVE FAILED TO APPREC IATE THAT WHEN TREATMENT ACCORDED BY THE APPELLANT TO TH E SHARES SOLD DURING THE IMPUGNED YEAR AS INVESTMENT WAS NOT DISTURBED, THE GAIN FROM THE SALE COULD NOT HAV E BEEN HELD AS PROFITS OF BUSINESS. 7. THE LD. LOWER AUTHORITIES HAVE UNJUSTLY FOLLOWE D THE DECISIONS OF THE HON.ITAT OF THE EARLIER YEARS WITHOUT ITA NOS.1450 & 1451(BANG)2015 3 APPRECIATING THE VITAL CHANGE IN FACTS DURING THE C URRENT YEAR. 8. THE LOWER AUTHORITIES ARE NOT JUSTIFIED IN LEVY ING INTEREST U/S234B OF RS.51,088/- AND SEC.234D OF RS.13,809/- WHEN THE VERY ADDITION TO THE TOTAL IN COME IS NOT TENABLE. FOR THE ABOVE REASONS AND FOR SUCH OTHER REASONS WHICH MAY BE ALLOWED BY THE HONBLE MEMBERS TO BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE AFORESAID APPEAL BE ALLOWED. 3. SIMILARLY, THE GROUNDS RAISED BY THE ASSESSEE I N THE ASSESSMENT YEAR 2009-10 ARE AS UNDER: 1. THE ORDER OF THE LD. CIT(A) IS NOT JUSTIFIED IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD. AO IS NOT JUSTIFIED IN TREATING THE SHOR T/LONG TERM CAPITAL GAINS ARISING FROM SALE OF SHARES AS B USINESS INCOME, WITHOUT APPRECIATING THOSE SHARES WERE HELD AS INVESTMENTS IN THE BOOKS OF THE APPELLANT SINCE INC EPTION. 3. THE LD. AO HAS FAILED TO APPRECIATE THAT THE SHARES HELD IN PORTFOLIO MANAGEMENT SCHEME AT KOTAK FINANCE AS STOCK-IN-TRADE WAS CONVERTED INTO INVEST MENTS ON 01-04-2004 AND THE SHARES SOLD DURING THE IMPUGN ED YEAR DID NOT RELATE TO THE CONVERTED STOCKS. 4. THE LD.AO HAS FAILED TO APPRECIATE THAT SHARES OF TATA IRON & STEELS CO.LTD AND MONSANTO INDIA LTD., WERE PURCHASED SUBSEQUENT TO CONVERTING STOCK-IN-TRADE T O INVESTMENTS AND THE SAME WERE HELD AS INVESTMENTS F ROM THE BEGINNING. 5. THE LD. AO HAVE FAILED TO APPRECIATE THAT WHEN THE TREATMENT ACCORDED BY THE APPELLANT TO THE SHAR ES ITA NOS.1450 & 1451(BANG)2015 4 SOLD DURING THE IMPUGNED YEAR AS INVESTMENT WAS NOT DISTURBED, THE GAIN FROM THE SALE COULD NOT HAVE BE EN HELD AS PROFITS OF BUSINESS. 7. THE LD. LOWER AUTHORITIES HAVE UNJUSTLY FOLLOW ED THE DECISIONS OF THE HON.ITAT OF THE EARLIER YEARS WITHOUT APPRECIATING THE VITAL CHANGE IN FACTS DURING THE C URRENT YEAR. 8. THE LOWER AUTHORITIES ARE NOT JUSTIFIED IN LEVY ING INTEREST U/S 234B OF RS.12,184/- AND SEC.234D OF RS.4,564/- WHEN THE VERY ADDITION TO THE TOTAL INC OME IS NOT TENABLE. FOR THE ABOVE REASONS AND FOR SUCH OTHER REASONS WHICH MAY BE ALLOWED BY THE HONBLE MEMBERS TO BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE AFORESAID APPEAL BE ALLOWED. 4. IT WAS SUBMITTED BY THE LD. AR OF THE ASSESSEE THAT EARLIER THE ASSESSSE WAS DEALING IN SHARES BUT FROM THE ASSESSM ENT YEAR 2005-06, THE ASSESSEE HAS CONVERTED EVEN THE OLD STOCK-IN-TR ADE OF SHARES INTO INVESTMENTS AND IN SUPPORT OF HIS CONTENTION, HE SU BMITTED THAT THE TRIBUNALS ORDER IN ASSESSEES OWN CASE FOR THE ASS ESSMENT YEAR 2005- 06 IN ITA NO.380(B)/2010 DATED 07-10-2010 IS AVAILA BLE ON PAGES 1 TO 6 OF THE PAPER BOOK. HE SUBMITTED THAT THE DETAILS OF THE CAPITAL GAIN IN FINANCIAL YEAR 2007-08 RELEVANT TO ASSESSMENT YEAR 2008-09 IS AVAILABLE ON PAGE NO.9 OF THE PAPER BOOK WHICH INCLUDES SHARE S OF COLGATE PALMOLIVE WHICH WAS ACQUIRED IN FINANCIAL YEAR 1998 -99. HE ALSO SUBMITTED THAT THE SHARES OF RELIANCE NATURAL RESOU RCES WERE ACQUIRED ON 19-08-2006 AND SIMILARLY, SHARES OF MONSANTO IND IA LTD., WERE ITA NOS.1450 & 1451(BANG)2015 5 ACQUIRED ON 06-10-2005 AND THESE SHARES WERE SOLD D URING FINANCIAL YEAR 2007-08 AND THEREFORE, THE INCOME ARISING FROM THE SALE OF THESE SHARES IS LONG TERM CAPITAL GAIN. AT THIS JUNCTURE , THE BENCH WANTED TO KNOW THE EVIDENCE REGARDING THE STATED DATE OF PURC HASE AND DATE OF SALE OF THESE SHARES AND ENQUIRED ABOUT THE EVIDEN CE IN SUPPORT OF THE STATED DATE AND COST OF ACQUISITION ETC. IN REPLY, IT WAS SUBMITTED BY THE LD. AR OF THE ASSESSEE THAT THE SAME IS NOT READILY AVAILABLE AND FOR THE PURPOSE OF FACTUAL VERIFICATION REGARDING DATE OF P URCHASE, COST OF PURCHASE AND DATE OF SALE TO FIND OUT THE PERIOD OF HOLDING, THE MATTER MAY BE RESTORED BACK TO THE FILE OF THE AO. AS AGA INST THIS, THE LD.DR OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. I FIN D THAT THIS IS THE CLAIM OF THE ASSESSEE THAT AFTER ASSESSMENT YEAR 20 05-06 WHEN THE ASSESSEE CONVERTED ALL ITS STOCK-IN-TRADE OF SHARES INTO INVESTMENTS, THE ASSESSEE IS NOT ENGAGED IN DEALING OF SHARES AND WH ATEVER SHARES ARE HELD BY THE ASSESSEE WHETHER ACQUIRED PRIOR TO ASSE SSMENT YEAR 2005- 06 OR THEREAFTER, THESE ARE ON ACCOUNT OF INVESTMEN TS AND THEREFORE, ANY GAIN ARISING ON SALE OF SUCH SHARES HELD BY THE ASS ESSEE AS INVESTMENTS IS LIABLE TO BE TAXED AS CAPITAL GAIN AND NOT AS BU SINESS INCOME. TO THIS EXTENT, I FIND FORCE IN THE SUBMISSION OF THE LD.AR OF THE ASSESSEE BECAUSE AS PER TRIBUNALS ORDER FOR THE ASSESSMENT YEAR 2005-06, ALL THE SHARES WHICH WERE HELD BY THE ASSESSEE AS STOCK -IN-TRADE UP TO THAT YEAR WERE CONVERTED INTO INVESTMENTS AND NOTHING HA S BEEN BROUGHT ON ITA NOS.1450 & 1451(BANG)2015 6 RECORD BY THE REVENUE TO ESTABLISH THAT AFTER THIS ASSESSMENT YEAR, ANY PURCHASE OF SHARES BY THE ASSESSEE WAS FOR THE PURP OSE OF DEALING IN SHARES. UNDER THESE FACTS, I HOLD THAT THE SHARES WERE HELD BY THE ASSESSEE AS INVESTMENTS AND THEREFORE, THE GAIN ARI SING TO THE ASSESSEE IN THE PRESENT TWO YEARS ON SALE OF SHARES IS LIABL E TO TAX AS CAPITAL GAINS AND NOT AS BUSINESS INCOME, BUT WHETHER SUCH CAPITAL GAIN IS SHORT TERM CAPITAL GAINS OR LONG TERM CAPITAL GAINS , IT DEPENDS UPON THE HOLDING PERIOD OF SHARES AND FOR THAT, IT IS REQUIR ED TO EXAMINE THE DATE OF PURCHASE AND DATE OF SALE OF THE SHARES. SINCE THIS ASPECT WAS NEVER EXAMINED BY THE LOWER AUTHORITIES AND FACTS ARE NOT AVAILABLE BEFORE ME ON THIS ASPECT, I FEEL IT FIT AND PROPER TO RESTORE BACK THIS FACTUAL ASPECT TO THE FILE OF THE AO AND ACCORDINGLY, I RESTORE TH IS MATTER BACK TO THE FILE OF THE AO FOR THE LIMITED PURPOSE OF EXAMINING THE DATE OF ACQUISITION OF SHARES AND DATE OF SALE OF SHARES TO DECIDE AS TO WHETHER THE GAIN ARISING ON SALE OF SUCH SHARES IS SHORT TE RM CAPITAL GAINS OR LONG TERMS CAPITAL GAINS. I WANT TO MAKE IT CLEAR THAT THE BURDEN IS ON THE ASSESSEE TO BRING EVIDENCE ON RECORD REGARDING THE DATE OF PURCHASE AND DATE OF SALE OF THESE SHARES AND THEREAFTER, TH E AO SHOULD PASS NECESSARY ORDER AS PER LAW IN THE LIGHT OF THE ABOV E DISCUSSION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO TH E ASSESSEE IN BOTH YEARS. ITA NOS.1450 & 1451(BANG)2015 7 6. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES IN THE TERMS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MEN TIONED IN CAPTION PAGE. (A.K.GARODIA) ACCOUNTANT MEMBER D A T E D : .06.2016 PLACE: BANGALORE AM* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER AR, ITAT, BANGALORE ITA NOS.1450 & 1451(BANG)2015 8 1. DATE OF DICTATION .. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P. S. .. 4 DATE ON WHICH THE ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT .. 5. DATE ON WHICH THE ORDER COMES BACK TO THE SR. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE .. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO . 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER DOES FOR XEROX & ENDORSEMENT . 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK. 11 THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER. 12 THE DATE ON WHICH THE FILE GOES TO THE DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER 13 DATE OF DISPATCH OF ORDER