ACIT 4(2), MUMBAI V. SHREENIDHI STOCK & BROKING, MUMBAI

ITA 1637/MUM/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3513 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 28-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B V JHAVERI; FORUM MEHTA
• Keywords: Speculation loss; Speculative transactions
• Section: 43(5); 2

Judgement Text

. , IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI , BEFORE SHRI R. K. GUPTA , JM ITA NO. 1 637 / MUM/ 20 1 3 ( ASSESSMENT Y EAR : 200 9 - 20 10 ) ACIT 4(2), MUMBAI - 400 020 VS. M/S SHREENIDHI STOCK & BROKING, A4, SHANTI NAGAR CO - OP, HOUSING LTD., S.V.ROAD, MALAD (W), MUMBAI - 400 064 PAN/GIR NO. : A A KFS 0438 C ( APPELLANT ) .. ( RESPOND ENT ) /REVENUE BY : SHRI ARUN KUMAR /ASSESSEE BY : SHRI B.V.JHAVERI & MS. FORUM MEHTA DATE OF HEARING : 2 1 ST MAY , 201 3 DATE OF PRONOUNCEMENT : 12 TH JUNE, 2013 O R D E R TH IS APPEAL HAS BEEN PREFERRED BY THE DEPARTMENT AGAINST THE ORDER DATED 3 - 12 - 2012 OF CIT(A) - 8 , MUMBAI RELA TING TO THE ASSESSMENT YEAR 200 9 - 10 . 2 . THE DEPARTMENT IN ITS APPEAL HAS RAISED THE FOLLOWING GROUNDS : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE AO TO TREAT THE LOSS IN THE INTRADAY SHARE TRADING ACTIVITY AS BUSINESS LOSS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DIRECTING THE AO THAT SECTION 43(5) IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DIRECTING THE AO NOT TO ALLOCATE ANY INDIRECT EXPENSE FOR SPECULATION ACTIVITY AS THE ASSESSEE IS NOT ENGAGE D IN SPECULATION BUSINESS. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE IMPUGNED ORDER OF THE LD. CIT(A) IS CONTRARY TO LAW TO BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. ITA NO. 1 637 /20 1 3 2 5. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROU ND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 3 . THE AO DID NOT ALLOW THE LOSS INCURRED BY THE ASSESSEE FROM THE INTRA - DAY TRADING TRANSACTIONS OF RS.35,64,455/ - AGAINST SHARE TRADING PROFIT OF THE ASSESSEE FIRM OF RS.39,91,378/ - . THE AO NOTICED THAT T HE ASSESSEE IS ENGAGED IN TRADING SHARE BREAKING AND TRADING BUSINESS OF SHARES AND SECURITIES AND PROVIDING OF CONSULTANCY SERVICES. ON THE BASIS OF DETAILS FILED, SUBMISSION MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE DISCUSSION WITH THE ASS ESSEES AUTHORIZED REPRESENTATIVE, THE AO FOUND THAT THE ASSESSEE IS INVOLVED INTRA - DAY TRADING TRANSACTION, WHICH ARE SPECULATIVE IN NATURE. THE AO NOTICED THAT ASSESSEE IS NOT CARRYING FORWARD ANY SPECULATION LOSS FOR THE CURRENT YEAR AND THE SAME HAS BEEN SET OFF AGAINST THE INCOME FROM DELIVERY BASED SHARE TRADING UNDER SECTION 43(5), BY WHICH THE SPECULATIVE TRANSACTIONS ARE DEFINED. THE AO OBSERVED THAT IN CASE OF INTRA - DAY TRADING NO DELIVERY OF SHARE IS TAKEN BY THE SHARE TRADER, THEREFORE, THE LO SS INCURRED ON INTRA DAY TRADING IS TREATED TO BE SPECULATIVE IN NATURE . FURTHER AS PER THE PROVISION OF SECTION 73, ANY SPECULATION LOSS CANNOT BE SET OFF AGAINST ANY OTHER PROFIT OR GAIN THAN THAT ARISING ON SPECULATION BUSINESS. ACCORDINGLY , HE DID NOT ALLOW THE LOSS SET OFF AGAINST TRADING PROFIT. 4 . DETAILED SUBMISSIONS WERE FILED BEFORE THE LEARNED CIT(A), WHICH ARE TABULATED IN PARA 2.2 AT PAGES 3 TO 7 OF THE ORDER OF THE LEARNED CIT(A) . RELIANCE WAS PLACED ON VARIOUS CASE LAWS ON BEHALF OF THE ASS ESSEE. AFTER CONSIDERING THE ORDER OF THE AO AND THE SUBMISSION, THE CIT(A) FOUND THAT THE ISSUE IS SQUARELY COVERED BY THE VARIOUS DECISIONS ITA NO. 1 637 /20 1 3 3 INCLUDING THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. SHANTILAL P. LTD., REPORTED IN 144 ITR 57 . THE CIT(A) FURTHER NOTED THAT THE ISSUE IS ALSO COVERED BY THE DECISION IN THE CASE OF CIT VS. LAKSHMINARAYANA TRADING CO., REPORTED IN (1996) 219 ITR 90 (AP) . ACCORDINGLY, HE ALLOWED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING IN PARA 2.10 , WHICH IS AS UNDER : - 2.10 IN THE INSTANT CASE TO THE APPELLANT COMPANY TRANSFER THE SHARES THROUGH A VALID CONTRACT NOTE BEFORE THE SETTLEMENT DATE SOME OTHER PURCHASER SAND THIS IS IN ACCORDANCE WITH SEBI GUIDELINES, THEREFORE, ACCORDING TO THE DECISIONS OF T HE HON BLE SUPREME COURT THE CONSTRUCTIVE DELIVERY HAS TAKEN PLACE IN THIS CASE AND THEREFORE THE CASE OF THE APPELLANT DOES NOT FALL WITHIN THE MISCHIEF OF THE PROVISION OF SECTION 43(5) OF THE ACT. IT IS A CASE WHERE APPELLANT CONTRACTING TO PURCHASE SHA RES FROM A, A PARTING WITH THE SHARES, APPELLANT SELLING THE SHARES IN TRANSIT TO B BEFORE TAKING DELIVERY AND SHARES HAVING BEEN ULTIMATELY DELIVERED TO B, THE TRANSACTION WAS THEREFORE, OUT OF PALE OF SPECULATIVE TRANSACTION AS CONTEMPLATED UNDER S. 43(5 ). IN VIEW OF THE FOREGOING, THE LD. AO HAS ERRED IN INVOKING THE PROVISIONS OF SECTION 43(5) OF THE ACT IS DIRECTED TO TREAT THE LOSSES AS BUSINESS LOSS. THIS GROUND OF APPEAL IS ACCORDINGLY ALLOWED IN FAVOUR OF THE APPELLANT. 5 . NOW, THE DEPARTMENT IS IN APPEAL HERE BEFORE THE TRIBUNAL. 6 . LEARNED DR PLACED RELIANCE ON THE ORDER OF AO. ON THE OTHER HAND, LEARNED COUNSEL OF THE ASSESSEE PLACED RELIANCE ON THE ORDER OF LEARNED CIT(A) . RELIANCE WAS ALSO PLACED IN THE CASE OF M/S R.P.TRADERS, DECIDED I N ITA NO.2080/MUM/2005, VIDE ORDER DATED 2 - 1 - 2008 AND IN THE CASE OF C.BHARATH KUMAR VS. DCIT, REPORTED IN [2005] 4 SOT 593 (BANG) , WHERE THE SIMILAR ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. 7 . AFTER CONSIDERING THE ORDER OF THE AO, CIT(A) AND THE SUBM ISSION OF BOTH THE PARTIES, I FOUND NO INFIRMITY IN THE FINDINGS OF THE LEARNED CIT(A) . LEARNED CIT(A) HAS DISCUSSED THE PROVISION S OF SECTION 43(5) AND FOUND ITA NO. 1 637 /20 1 3 4 THAT THESE ARE NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE AS THE COMPANY TRANSFER S THE SHARE THROUGH A VALID CONTRACT NOTE BEFORE THE SETTLEMENT DATE. THE SALE AND PURCHASES WERE MADE IN ACCORDANCE WITH THE SEBI GUIDELINES. THE DECISION OF THE HO NBLE SUPREME COURT IS SQUARELY APPLICABLE ON THE FACTS OF THE PRESENT CASE. I FURTHER NOTED THAT ON S IMILAR ISSUE, THE TRIBUNAL IN THE CASE OF M/S R.P.TRADERS (SUPRA) AND IN THE CASE OF C.BHARATH KUMAR (SUPRA), HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THEREFORE, I SEEN NO REASON TO INTERFERE IN THE FINDINGS OF THE LEARNED CIT(A) . ACCORDINGLY, I CO NFIRM THE ORDER OF THE LEARNED CIT(A) . 8 . IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF JUNE 2013 201 3 ( ) ( R.K.GUPTA ) / JUDICIAL MEMBER MUMBAI; DATED : 12/06 /2013 /PKM , PS C OPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) , MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI