M/s J S Trading Company Pvt. Ltd., Kolkata V. ITO, WARD-6(2), KOLKATA, Kolkata

ITA 1548/KOL/2014

• Counselvise Citation: 154823514 RSA 2014
• Duration Of Justice: 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 21-07-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: RAVI TULSIYAN F
• Keywords: Speculation loss

Judgement Text

I .T.A. NO . 1 548 / KOL ./201 4 ASSESSMENT YEAR: 200 6 - 20 0 7 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA SMC BENCH, KOLKATA BEFORE SHRI GEORGE MATHAN , JUDICIAL MEMBER I.T.A. NO. 1 548 / KOL / 20 1 4 ASSESSMENT YEAR : 200 6 - 20 0 7 M/S. J.S. TRADING COMPANY PVT. LTD., ...... .... ............. .. .APP ELL ANT 2 ND FLOOR, 91 , NETAJI SUBHAS ROAD, KOLKATA - 700 001 [PAN : A ABCJ 2551 R ] - VS. - INCOME TAX OFFICER , ........................... ................... ... . RESPONDENT WARD - 6 ( 2 ), KOLKATA APPEARANCES BY: S HRI RAVI TULSIYAN, F.C.A. , FOR THE ASSESSEE S MT. RANU BISWAS , J CIT, SR. D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : NOVEMBER 2 8 , 2 01 4 DATE OF PRONOUNCING THE ORDER : NOVEMBER 28 , 201 4 O R D E R PER GEORGE MATHAN : THIS IS AN APPEAL FILED BY THE ASSESSE E AGAINST THE ORDER OF LD. COMMISSIONER O F INCOME TAX (APPEALS) - V I , KOLKATA IN APPEAL NO. 659 / CIT(A) - V I / 08 - 09 / WD - 6(2)/KOL D ATED 24 . 0 3 .201 4 FOR THE ASSESSMENT YEAR 200 6 - 0 7 . 2. S HRI RAVI TULSIYAN, F.C.A. , REPRESENTED ON BEHALF OF THE ASSESSEE AND SMT. RANU BISWAS, JCIT, SR. D.R. REPRESENTED ON BEH ALF OF THE REVENUE. 3. IT WAS SUBMITTED BY THE LD. A.R THAT THE ONLY ISSUE IN THE ASSESSEE S APPEAL WAS AGAINST THE ACTION OF THE LD. CIT(APPEALS) IN TREATING THE LOSS ON THE PURCHASE AND SALES OF SHARES AND SECURITIES AS SPECULATION LOSS BY APPLYING THE EXPLANATION TO SECTION 73 OF THE INCOME TAX ACT. IT WAS THE SUBMISSION THAT THE ASSESSEE HAD INCURRED LOSS OF RS.4,47,500/ - ON THE I .T.A. NO . 1 548 / KOL ./201 4 ASSESSMENT YEAR: 200 6 - 20 0 7 PAGE 2 OF 4 PURCHASE AND SALE OF SHARES OF PRIVATE LIMITED COMPANIES. IT WAS THE SUBMISSION THAT THE ASSESSING OFFICER HAD TREATED THE L OSS AS BOGUS LOSS. IT WAS THE SUBMISSION THAT ON APPEAL, LD. CIT(APPEALS) HELD THAT THE LOSS ON ACCOUNT OF THE PURCHASE AND SALE OF SHARES BY THE ASSESSEE CANNOT BE TREATED AS BOGUS. IT WAS THE SUBMISSION THAT THE LD. CIT(APPEALS) COMPARED THE TRADING TURN OVER I N CLOTH OF THE ASSESSEE TO THE INTEREST INCOME AS ALSO CONSIDERED THE TOTAL ASSETS OF THE COMPANY AS PER THE BALANCE - SHEET FOR COMPARISON AGAINST THE LOANS AND ADVANCES TO HOLD THAT GIVING OF LOANS AND ADVANCES WAS NOT THE PRINCIPAL BUSINESS OF THE A SSESSEE. LD. A.R. SUBMITTED THAT THE LD. CIT(APPEALS) ERRED IN CONSIDERING THE TRADING TURNOVER TO INTEREST INCOME IN THE FIRST PLACE , AS , IF AT ALL INCOME WAS TO BE CONSIDERED, THEN THE INCOME FROM THE TRADING OF CLOTH WAS TO BE COMPARED AGAINST INTEREST INCOME. HE PLACED BEFORE ME A CHART SHOWING THE INCOME FROM TRADING IN CLOTH TO INTEREST INCOME TO SUBMIT THAT FOR THE PAST THREE YEARS THE INTEREST INCOME WAS HIGHER THAN THE INCOME FROM TRADING IN CLOTH. THE CHART IS EXTRACTED HEREIN BELOW: - 2003 - 04 200 4 - 05 2005 - 06 SALES 1162231 1236439 3211210 ADD.: CLOSING STOCK 0 245621 0 TOTAL 1162231 1482060 3211210 LESS: PURCHASES 1016379 2550511 2856250 LESS: OPENING STOCK 0 0 0 PROFIT/LOSS FROM TRADING IN CLOTH 145852 ( - )1 068451 109339 INTEREST (NET) 185457 238587 423831 4. IN RESPECT OF THE DEPLOYMENT OF FUNDS, IT WAS SUBMITTED THAT THE TOTAL ASSETS OF THE BALANCE - SHEET COULD NOT BE CONSIDERED AND ONLY DEPLOYMENT OF FUNDS IN RESPECT OF THE BUSINESS OF TRADING I N CLOTH WAS TO BE CONSIDERED. HE PLACED BEFORE ME THE FOLLOWING CHART TO SUBMIT THAT THE LOANS EXCLUDING THE ADVANCES WERE SUBSTANTIAL PORTION OF THE TOTAL FUNDS: - I .T.A. NO . 1 548 / KOL ./201 4 ASSESSMENT YEAR: 200 6 - 20 0 7 PAGE 3 OF 4 FINANCIAL YEAR 2003 - 04 2004 - 05 2005 - 06 LOANS (EXCLUDING ADVANCES) 3717265 4757111 5191805 TOTAL FUNDS 4615421 4911132 4993658 PERCENTAGE(%) 80.54 96.86 103.97 IT WAS THUS THE SUBMISSION THAT THE GRANTING OF LOANS AND ADVANCES WAS LIABLE TO BE CONSIDERED AS PRINCIPAL BUSINESS OF THE ASSESSEE AND CONSEQUENTLY THE EXPLANATION TO SECTION 73 OF THE ACT WOULD NOT APPLY. HE PLACED RELIANCE ON THE DECISION OF THE HON BLE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF DCIT VS. - VENKATESWWAR INVESTMENT & FINANCE PVT. LTD. REPORTED IN (2005) 277 ITR (A.T.) 20 (SB) (CAL.) IT WAS THE SUBMISSION TH AT THE LOSS AS CLAIMED BY THE ASSESSEE WAS LIABLE TO BE ALLOWED AS BUSINESS LOSS. 5. IN REPLY, LD. SR. D.R. SUBMITTED THAT THE ISSUE OF SPECULATION LOSS AND THE DETAILS REGARDING THE DEPLOYMENT OF FUNDS AS ALSO THE INCOME COMPARISON WAS NOT BEFORE THE ASS ESSING OFFICER. IT WAS THE SUBMISSION THAT THE ISSUE MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION AND RE - ADJUDICATION. 6. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. ADMITTEDLY AS MENTIONED BY THE LD. SR. D.R. THE ISSUE OF APPLICABIL ITY OF EXPLANATION TO SECTION 73 WAS NOT BEFORE THE ASSESSING OFFICER. THIS ISSUE WAS NEWLY RAISED BY THE LD. CIT(APPEALS). CONSEQUENTLY I AM OF THE VIEW THAT THIS ISSUE IS LIABLE TO BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR RE - ADJUDICATION IN L INE WITH THE DECISION OF THE HON BLE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF VENKATESWAR INVESTMENT & FINANCE PVT. LTD. R EFERRED TO SUPRA AND I DO SO. THE ISSUE HELD BY THE ASSESSING OFFICER WAS THAT THE LOSS WAS BOGUS. THIS HAS BEEN REVERSED BY THE LD. CIT(APPEALS) AND THE REVENUE IS NOT IN APPEAL AGAINST THAT FINDING OF THE LD. CIT(APPEALS). CONS E QUENTLY THE ASSESSING OFFICER SHALL VERIFY AS TO WHETHER THE COMPUTATION AS SHOWN BY THE ASSESSEE IN ITS CHART IN RESPECT OF THE TABLE SHOWING NET INCOME O F I .T.A. NO . 1 548 / KOL ./201 4 ASSESSMENT YEAR: 200 6 - 20 0 7 PAGE 4 OF 4 CLOTH TRADING AND INTEREST FOR THE RELEVANT FINANCIAL YEARS AS ALSO THE TABLE SHOWING THE PERCENTAGE OF LOANS AND ADVANCES TO THE TOTAL FUNDS DEPLOYED ARE CORRECT AND IF IT IS FOUND TO BE CORRECT, THEN ADMITTEDLY THE PRINCIPAL BUSINESS OF THE ASSESSEE WO ULD HAVE TO BE HELD TO BE GRANTING OF LOANS AND ADVANCES AND THE EXPLANATION TO SECTION 73 OF THE ACT WOULD NOT APPLY AND THE LOSS WOULD HAVE TO BE HELD TO BE BUSINESS LOSS AS CLAIMED BY THE ASSESSEE. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH NOV EMBER , 2014. SD/ - GEORGE MATHAN ( JUDICIAL MEMBER) KOLKATA, THE 28 TH D AY OF NOVE MBER , 201 4 COPIES TO : (1 ) M/S. J.S. TRADING COMPANY PVT. LTD., 2 ND FLOOR, 91, NETAJI SUBHAS ROAD, KOLKATA - 700 001 (2) INCOME TAX OFFICER, WARD - 6(2), KOLKATA (3) COMMISSIONER OF INCOME - TAX (APPEALS) (4) COMMISSIONER OF INCOME TAX ( 5 ) THE DEPARTMENTAL REPRESENT ATIVE ( 6 ) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S .