DCIT Cir - 30/Kolkata, Kolkata V. M/s Color Magic, Kolkata

ITA 1650/KOL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91952 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2015
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 09-11-2012
• Court: TRIBUNAL
• Department Lawyers: K L KANAK
• Assessee Lawyers: N O N E
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOLKATA [BEFORE SHRI P. K. BANSAL, AM & SHRI MAHAVIR SINGH, JM ] I.T.A NO. 1650 /KOL/201 2 ASSESSMENT YEAR : 200 3 - 0 4 DEPUTY COMMISSIONER OF INCOME - TAX, VS. M/S. COLOR MAGIC CIRCLE - 30, KOLKATA. (PAN :AADFC0256B) ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 20 .0 5 .2015 DATE OF PRONOUNCEMENT: 22 . 0 5 . 2015 FOR THE APPELLANT: SHRI K . L. KANAK , JCIT , SR. DR FOR THE RESPONDENT: N O N E ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER PASSED BY CIT (A) - X I V , KOLKATA VIDE APPEAL NO. 371 /CIT(A) - X I V / 08 - 09 DATED 29 . 0 8 .201 2 . ASSESSMENT WAS FRAMED BY DCIT, CIRCLE - 30, KOLKATA U/S. 14 3(3) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) FOR ASSESSMENT YEAR 200 3 - 0 4 VIDE HIS ORDER DATED 3 0 . 12 .20 0 8 . 2. T HE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAINST THE ORDER OF CIT(A) DIRECTING THE AO TO TREAT THE PROFIT FROM SALE OF SHARES AS LONG TERM CAPITAL GAIN INSTEAD OF BUSINESS INCOME . FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.1: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN TREATING THE GAIN OF RS.30,22,500/ - AS LONG TERM CAPITAL GAIN INSTEAD OF BUSINESS INCOME AS DONE BY THE AO WHILE PASSING AN ORDER U/S. 143(3) ON 30.12.2008. 3. BRIEFLY STATED FACTS ARE THAT THE AO WHILE FRAMING ASSESSME NT U/S. 143(3) OF THE ACT TREATED THE PROFIT FROM SALE OF SHARES AS BUSINESS INCOME BY OBSERVING AS UNDER: T HE ASSESSEE S MAIN BUSINESS IS REPROGRAPHIC SERVICES. BUT THE ASSESSEE FIRM EMPLOYER SRI DESHABRATA DASGUPTA TO MAKE PURCHASE AND SALE OF SHARES I N HIS NAME ON BEHALF OF THE FIRM. IN THE POWER OF ATTORNEY IT WAS MENTIONED THAT THE ASSESSEE FIRM EMPOWERED DESHABRATA DASGUPTA TO MAKE PURCHASE AND SALE OF SHARES IN HIS NAME. PURCHASE & SALE OF SHARES TANTAMOUNT TO BUSINESS ACTIVITY, NOT TO BE TREATE D AS INVESTMENT. AS SUCH, PROFIT TO THE TUNE OF RS.30,22,500/ - MADE FROM PURCHASE AND SALE SHARES IS TREATED AS BUSINESS INCOME OF THE ASSESSEE. 4. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO AFTER GOING THROUGH THE ACCOUNTS OF THE ASSESSEE AND OTHER DETAILS AND RELYING ON THE DECISION OF HON BLE 2 ITA NO . 1650 /K/201 2 COLOR MAGIC AY 200 3 - 0 4 BOMBAY HIGH COURT IN THE CASE OF CIT VS. GOPAL PUROHIT (2011) 336 ITR 287 (BOM.) DIRECTED THE A O TO TREAT THE PROFIT FROM SALE OF SHARES AS CAPITAL GAINS BY OBSERVING IN PARA 6 AS UNDER: 6. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSION OF THE A PPELLANT . I FIND THAT THE ASSESSEE HAS PURCHASED AND SOLD SHARES OF ONLY ONE SCRIPT. THE APPELLANT HAD SHOWN PROFIT ON SALE PROCEEDS UNDER THE HEAD LONG TERM CAPITAL GAIN. HOWE VER, THE A. O . TAXED IT UNDER THE HEAD BUSINESS INCOME. THE A. O . HAS NOT GIVEN ANY COGENT REASON FOR HIS ACTION. HE HAS MERELY STATED THAT MR. DESHABRATA DASGUPTA WAS AUTHORIZED TO MAKE PURCHASE AND SALE OF SHARES ON BEHALF OF THE FIRM. THE A/R HAS CLARIFIE D THAT MR. DESHABRATA DASGUPTA IS THE PARTNER OF THE ASSESSEE FIRM. NO OTHER REASON HAS BEEN GIVEN BY THE A. O . FOR HIS ACTION. FURTHER IT IS SEEN FROM THE BALANCE SHEET THAT THE IN THE EARLIER YEAR THE SHARES WERE SHOWN AS INVESTMENT AND NOT AS STOCK - IN - TR ADE IN THE BALANCE SHEET. THE APPELLANT HAS USED ITS OWN FUNDS FOR INVESTMENT IN SHARE. FURTHER, THE SHARES WERE ALSO HELD FOR CONSIDERABLY LONG PERIOD AND IT IS NOT DISPUTED THAT THESE WERE LONG TERM ASSETS. SINCE THE ASSESSEE HAD PURCHASED ONLY ONE SCRIP T AND THE VOLUME IS ALSO NOT CONSIDERABLY HIGH, IT CANNOT BE SAID THAT THE APPELLANT WAS DEALING IN SHARES. KEEPING IN VIEW ALL THESE FACTS IT APPEARS THAT THE INTENTION OF THE APPELLANT WAS TO I NVEST IN SHARES AND T O MAXIMIZE ITS WEALTH. AGGRIEVED, REVE NUE PREFERRED APPEAL BEFORE US. 5 . WE HAVE HEARD LD. SR. DR AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE AO HAS TAXED THE PROFIT FROM SALE OF SHARES AS BUSINESS INCOME INSTEAD OF LONG TERM CAPITAL GAIN DECLARED BY THE ASSESSEE. WE FIND FROM THE FINDINGS OF THE AO AS REPRODUCED ABOVE THAT THERE IS NO REASON GIVEN BY HIM FOR CHANGING HEAD OF INCOME I.E. INCOME FROM LONG TERM CAPITAL GAIN TO BUSINESS INCOME. ACCORDING TO AO, THE PURCHASE AND SALE OF SHARE TANTAMOUNT TO BUSINESS AC TIVITY, AND NOT TO BE TREATED AS INVESTMENT. WE FIND THAT THE ASSESSEE HAS DEPUTED ONE OF THE PARTNERS SHRI DESHABRATA DASGUPTA TO TRANSACT SHARE S IN THE NAME OF THE FIRM. THE TOTAL PURCHASES WERE MADE WITH THE INTENTION OF INVESTMENT AND THE SAME WERE DECLARED IN THE BALANCE SHEET AS AN INVESTMENT. THE ASSESSEE HAS FILED COPY OF BALANCE SHEET BEFORE THE AO AS WELL AS BEFORE CIT(A) AND CIT(A) AFTER GOING THROUGH THE BALANCE SHEET NOTED THAT SHARE HAS BEEN SHOWN AS INVESTMENT IN THE BALANCE SHEET OF THE ASSESSEE FIRM IN EARLIER YEARS. THIS FACT HAS NOT BEEN CONTROVERTED BY LD. SR. DR AT THE TIME OF HEARING. ACCORDING TO CIT(A), SHARES WERE HELD BY ASSESSEE FIRM FOR PETTY LONG TIME AND THE SAME WAS SOLD AND PROFIT WAS TREATED AS LONG TERM CAPITAL GAINS AND THIS FACT HAS ALSO NOT BEEN DISPUTED BY LD. SR. DR. WE FIND THAT NO BORROWED FUNDS WERE INVESTED FOR PURCHASE OF THESE SHARES 3 ITA NO . 1650 /K/201 2 COLOR MAGIC AY 200 3 - 0 4 RATHER ASSESSEE FIR M HAS USED ITS OWN FUNDS FOR PURCHASE OF THESE SHARES. WE FURTHER FIND FROM THE FACTS OF THE CASE AS RECORDED BY CIT(A) THAT SALE OF ONLY ONE SCRIP WAS USED FOR INVESTMENT AND THE SALE PROCEEDS WAS TREATED AS CAPITAL GAINS. IN THE CIRCUMSTANCES, WE FIND THAT CIT(A) HAS RIGHTLY RELIED ON THE DECISION OF HON BLE BOMBAY HIGH COURT IN THE CASE OF GOPAL PUROHIT, SUPRA, WHEREIN HON BLE HIGH COURT HAS OBSERVED AS UNDER: THE ASSESSEE IS ENGAGED IN TWO DIFFERENT TYPES OF TRANSACTIONS NAMELY, INVESTMENT IN SHARES AND DEALING IN SHARES FOR THE PURPOSES OF BUSINESS AND HELD THAT THE DELIVERY BASED TRANSACTIONS ARE TO BE TREATED AS INVESTMENT TRANSACTIONS AND THE PROFIT RECEIVED THEREFROM IS TO BE TREATED AS SHORT TERM OR LONG TERM CAPITAL GAIN DEPENDING ON THE PERIO D OF HOLDING OF SHARES AND THAT TH E RE OUGHT TO BE UNIFORMITY IN TREATMENT AND CONSISTENCY IN VARIOUS YEARS. IN VIEW OF OUR ABOVE SUBMISSIONS, YOU HONOUR IS REQUESTED TO PLEASE DIRECT THE ASSESSING OFFICER TO ACCEPT THE PROFIT AGGREGATING TO RS.8767934 DE RIVED BY THE APPELLANT ON TRANSFER OF INVESTMENTS IN SHARES AS CAPIT AL GAINS AND NO T SAME TO BE A BUSINESS LNCOME. IN VIEW OF THE ABOVE, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND HENCE, THE SAME IS CONFIRMED. THIS ISSUE OF REVENUE S APPEAL IS DISMISSED. 6 . IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. 7 . ORDER IS PRONOUNCED IN THE OPEN COURT ON 22.05.2015 SD/ - SD/ - ( P. K. BANSAL ) (MAHAVIR SINGH) ACCOUNTANT MEMBER J UDICIAL MEMBER DATED : 22ND MAY , 201 5 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . A PPELLANT DCIT, CIRCLE - 30, KOLKATA . 2 RESPONDENT M/S. COLOR MAGIC, 34, DR. SARAT BANERJEE ROAD, KOL - 29 . 3 . THE CIT (A), KOLKATA 4. 5. THE CIT, KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .