DCIT, New Delhi V. M/s Interface Communication Pvt. Ltd., New Delhi

ITA 1630/DEL/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3917 (ITAT-DELHI)
• Duration Of Justice: 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 02-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 04-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTY
• Keywords: Capital asset
• Section: 56

Judgement Text

ITA NO. 1630/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 1630/DEL/2011 A.Y. : 2006-07 DCIT, CIRCL E - 11(1), NEW DELHI ROOM NO. 312, CR BUILDING, NEW DELHI VS. M/S INTERFACE COMMUNICATION PRIVATE LIMITED, CHANDIWALA ESTATE, RESTAURANT BLOCK, 3 RD FLOOR, MAA ANANDMAI MARG, KALKAJI, NEW DELHI (PAN/GIR NO. : AAACI4796B) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : SH. S.K. AGGARWAL, SH. AMIT GUPTA, MS. JYOTI ARORA, CAS DEPARTMENT BY : SMT. MONA MOHANTY, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 25.1.2 011 PERTAINING TO ASSESSMENT YEAR 2006-07. 2. THE ISSUE RAISED IS THAT LD. COMMISSIONER OF INC OME TAX (APPEALS) ERRED IN DELETING THE ADDITION OF ` 10,56 ,674/- ON ACCOUNT OF INCOME FROM OTHER SOURCES. 3. IN THIS CASE THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF ADVERTISING AGENCY. DURING THE COURSE OF ASSESSME NT PROCEEDINGS, ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS SHOWN DIVIDEND INCOME ITA NO. 1630/DEL/2011 2 TO THE EXTENT OF ` 10,56,675/-. THE DETAILS IN THI S REGARD WAS ASKED FOR AND THE ASSESSEE SUBMITTED AS UNDER:- THE COMPANY HAD PURCHASED 9,73,624.512 UNITS OF TAT A DYNAMIC BOND FUND OPTION GROWTH ON 31.10.2003 AT A PRICE OF ` 10.2709 PER UNIT, AGGREGATING TO ` 1,00, 00,000/-. THESE UNITS WERE REDEEMED BY THE COMPANY FOR ` 1,10,65,437.30 ON 8.3.2006 AT THE RATE OF 11.3652 PER UNIT. DURING THE YEAR UNDER CONSIDERATION, THE INCOME OF ` 1,065,437 FROM SALE/REDEMPTION OF UNITS WAS INADVE RTENTLY OFFERED BY THE COMPANY AS INCOME FROM DIVIDENDS AND W AS CLAIMED EXEMPT IN THE RETURN OF INCOME. ACCORDINGL Y, INCOME FROM REDEMPTION OF UNITS IS TAXABLE AS LONG TERM CAPITAL GAINS IN THE HANDS OF THE COMPANY @20%. ON REALIZING THE INADVERTENT ERROR, THE COMPANY IS S UE MOTTO OFFERING THE SAME FOR TAX. DETAILS OF CALCULAT ION OF CAPITAL GAINS IN THIS REGARD ARE GIVEN IN ANNEXURE 5 OF THE SUBMISSION. THEREFORE, THE COMPANY REQUESTS YOU KINDLY CONSIDER THE AFORESAID CAPITAL GAINS AS TAXABLE @20% DURING THE YEAR UNDER CONSIDERATION. 3.1 ASSESSING OFFICER, HOWEVER, WAS NOT SATISFIED. HE OBSERVED THAT THE CLAIM OF THE ASSESSEE CANNOT BE ACCEPTED, BECAUS E THE UNITS HAVE BEEN PURCHASED ON 31.10.2003 AND REDEEMED ON 08.3. 2006 EARNING AN INCOME OF ` 10,56,674/-. HE FURTHER OBSERVED TH AT THE INCOME OF THE GROWTH FUND I.E. TDBG TATA DYNAMIC BOND FUND OPTIO N B GROWTH ITA NO. 1630/DEL/2011 3 IS TAXABLE AND THE DIFFERENCE OF PURCHASE AND SALE PRICE HAS TO BE BROUGHT TO TAX AS INCOME OF THE ASSESSEE FROM OTHER SOURCES. HENCE, THE CLAIM OF TREATING THE INCOME AS CAPITAL GAIN OR E XEMPTED AS DIVIDEND INCOME IS NOT ALLOWED. 4. BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ASSESSEE SUBMITTED THAT THE MUTUAL FUNDS UNITS HELD BY THE A SSESSEE ARE IN THE NATURE OF CAPITAL ASSET AS PER SECTION 2(14A) OF TH E ACT. THE SAME WERE REFLECTED AS INVESTMENT IN THE BOOKS OF ACCOUNTS. FURTHER, THE SALES OF SUCH UNITS CONSTITUTES TRANSFER WITHIN THE MEAN ING OF SECTION 2(47) OF THE ACT. ACCORDINGLY, IT WAS SUBMITTED THAT THE S URPLUS GENERATED FROM THE TRANSFER OF THE UNITS OF MUTUAL FUND IS TAXA BLE UNDER THE HEAD CAPITAL GAIN AS PER THE PROVISIONS OF SECTION 45 OF THE ACT. RELIANCE WAS ALSO PLACED ON THE FOLLOWING JUDICIAL PRECEDENT S, WHEREIN IT WAS HELD THAT INCOME FRO OTHER SOURCES IS A RESIDUARY HEAD AND UNTIL THE INCOME ESCAPES CLASSIFICATION IN ANY OF THE OTHER H EADS AS SPECIFIED IN SECTION 14 OF THE ACT, NO RESORT IS TO BE MADE TO SE CTION 56 OF THE IT ACT I.E. INCOME FROM OTHER SOURCES. - C.I.T., WEST BENGAL VS. NAWN ESTATES PRIVATE LTD. (1968) 70 ITR 784 (CAL) - S.G. MERCANTILE CORPORATION P. LTD. VS. C.I.T. (19 72) (83 ITR 700) [SC] 4.1 IN VIEW OF THE ABOVE, THE ASSESSEE CLAIMED TH AT THE INCOME EARNED BAY THE ASSESSEE GETS COVERED UNDER THE HEAD CAPITAL GAINS AND THE PERIOD OF HOLDING BEING MORE THAN 12 MONTHS, THE SAME IS FURTHER CHARACTERIZED AS LTCG AND BENEFIT OF INDEXA TION IS TO BE ALLOWED. LD. COMMISSIONER OF INCOME TAX (APPEALS) AC CEPTED THE ASSESSEES CLAIM AND HELD THAT THE VIEW OF THE ASSE SSING OFFICER TO ITA NO. 1630/DEL/2011 4 CHARACTERIZE THE INCOME FROM SALE OF UNITS OF MUTUAL FUND AS INCOME FROM OTHER SOURCES CANNOT BE SUSTAINED. 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEA L BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENTS RELIED UPON. AS AMPLY CLEA R HEREINABOVE, THE ASSESSEE WAS HOLDING MUTUAL FUNDS UNITS WHI CH WERE IN THE NATURE OF CAPITAL ASSET, AS PER SECTION 2(14A) OF THE ACT. THE TRANSFER OF SUCH UNITS COMES UNDER THE AMBIT OF SECTION 2(47) OF THE ACT. THE SURPLUS GENERATED FROM THE TRANSFER OF THE UNITS OF MUTUAL FUNDS IS TAXABLE UNDER THE HEAD CAPITAL GAINS AS PER SECTI ON 45 OF THE ACT. MOREOVER THE UNITS WERE HELD FOR MORE THAN 1 YEAR. HENCE, THE GAIN WOULD BE CLASSIFIED ON LONG TERM CAPITAL GAIN. UNDE R THE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY OR ILLEGALITY IN THE O RDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). ACCORDINGLY, WE UPHOLD THE SAME. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/6/2011. SD/ SD/ SD/ SD/- -- - SD/ SD/ SD/ SD/- -- - [ [[ [I.P. BANSAL I.P. BANSAL I.P. BANSAL I.P. BANSAL] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 03/6/2011 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES