DCIT circle 18 (1), V. Wood Packers Holdings (P) LTd,

ITA 1662/DEL/2007

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9833 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 12-08-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 04-04-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS PRATIMA KAUSHIK
• Assessee Lawyers: DEEP AK TEHLAN
• Keywords: Business income; Capital Gains

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH `I : NEW DELHI) BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.1662/DEL./2007 (ASSESSMENT YEAR : 2004-05) DCIT, CIRCLE 18(1), VS. M/S WOODPACKER HOLDINGS P VT. LTD., NEW DELHI. 12 TH FLOOR, VIDEOCON TOWER BLOCK, E-1, JHANDEWALAN EXTN., NEW DELHI. (PAN/GIR NO.AAACW0442R) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI DEEPAK TEHLAN, CA. REVENUE BY : MRS. PRATIMA KAUSHIK, CIT(DR) ORDER PER A.K. GARODIA: AM THIS IS A REVENUES APPEAL DIRECTED AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-XXI, NEW DELHI DATED 29.01. 07 FOR THE ASSESSMENT YEAR 2004-05. 2. GROUND NO.1 OF THE APPEAL READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN HOLDING THE PROFIT OF RS.21,32,762 ON SALE OF SECURITIES AS CAPITAL GAIN INSTEAD OF INCOME FROM BUSINESS AS HELD BY THE ASSESSING OFFICER. 3. BRIEFLY STATED, THE FACTS ARE THAT IT IS NOTED B Y THE ASSESSING OFFICER ON PAGE NO.1 OF THE ASSESSMENT ORDER THAT THE ASSESSEE COMPANYS MAIN BUSINESS IS REAL ESTATE DEVELOPMENT. IT IS ALSO NOTED THAT IN THIS YEAR, NO SUCH BUSINESS ACTIVITY WAS CARRIED OUT. THE ASSESSEE HAS DECLAR ED INCOME FROM AGRICULTURE AND FROM INVESTMENT IN MUTUAL FUNDS. THE ASSESSING OFFICER ASKED THE ASSESSEE TO GIVE FULL DETAILS OF LONG TERM AND SHORT TERM CA PITAL GAINS DECLARED BY THE ASSESSEE AND ALSO TO SHOW-CAUSE AS TO WHY THE SAME SHOULD NOT BE ASSESSED AS BUSINESS INCOME INSTEAD OF INCOME UNDER THE HEAD CAPITAL GAINS. IN REPLY, IT I.T.A. NO.1662/DEL./2007 (A.Y. : 2004-05) 2 WAS SUBMITTED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER THAT TRADING IN SECURITIES IS NOT A BUSINESS OF THE ASSESSEE AND TH E SECURITIES ARE HELD AS INVESTMENT AND NOT STOCK IN TRADE. IT WAS ALSO SUB MITTED THAT THE INVESTMENTS ARE HELD FOR A LONG PERIOD AND NOT FREQUENTLY TRANSACTE D. IT WAS HELD BY THE ASSESSING OFFICER THAT INCOME ON PURCHASE AND SALE OF UNITS OF MUTUAL FUND IS INCOME FROM BUSINESS AND NOT CAPITAL GAIN. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS). IT WAS HELD BY THE COMMISSIONER OF INCOME-TAX (APPEALS) THAT ON A CAREFUL CONSIDERATIO N OF FACTS AND THE CIRCUMSTANCES OF THE CASE, HE IS OF THE OPINION THA T INCOME ON SALE OF UNITS OF MUTUAL FUNDS IS ASSESSABLE AS CAPITAL GAIN AND NOT AS PROFIT OF BUSINESS. NOW, THE REVENUE IS IN APPEAL BEFORE US. 5. LD.DR OF THE REVENUE SUPPORTED THE ASSESSMENT OR DER WHEREAS THE LD.AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE CO MMISSIONER OF INCOME-TAX (APPEALS). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTH ORITIES BELOW. WE FIND THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS EXAMIN ED THE ISSUE IN GREAT DETAILS AND HE HAS CONSIDERED ALL THE JUDGMENTS WHI CH WERE FOLLOWED BY THE ASSESSING OFFICER AND IT IS NOTED BY HIM THAT ALL T HE JUDGMENTS ARE DISTINGUISHABLE ON FACTS AND THE JUDGMENTS ARE NOT APPLICABLE IN TH E PRESENT CASE BECAUSE THE FACTS ARE DIFFERENT. WE FIND NO INFIRMITY IN THE O RDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) ON THIS ASPECT. CONSIDERING T HE FACTS OF THE PRESENT CASE, WE FIND NO REASON TO INTERFERE IN THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) ON THIS ISSUE AND HENCE WE UPHOLD THE SAM E. THIS GROUND OF THE REVENUE IS REJECTED. I.T.A. NO.1662/DEL./2007 (A.Y. : 2004-05) 3 7. GROUND NO.2 OF THE APPEAL READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.3,65,078 MADE BY THE ASSESSING OFFICER U/S 94(7) OF THE I.T. ACT, 1961. 8. BRIEFLY STATED, THE FACTS ARE THAT IT IS NOTED B Y THE ASSESSING OFFICER ON PAGE NO.6 OF THE ASSESSMENT ORDER THAT THE ASSESSEE WAS ASKED AS TO WHETHER ANY SALE OF MUTUAL FUND UNITS WAS COVERED U/S 94(7) OF THE INCOME-TAX ACT, 1961. THE ASSESSING OFFICER HAS ALSO NOTED THAT THE ASSES SEE WAS ASKED TO GIVE FULL DETAILS REGARDING PURCHASES, PURCHASE AMOUNT, RECOR D DATE, SALE DATE, DIVIDEND AND ACTUAL LOSS. IT IS NOTED BY THE ASSESSING OFFI CER THAT IN THE REPLY GIVEN BY THE ASSESSEE, INSTEAD OF RECORD DATE WHICH IS THE DATE FIXED FOR ENTITLING TO ALLOW ALL UNITS FOR DIVIDEND, THE ASSESSEE HAS FURNISHED THE DATE OF WHICH DIVIDEND WAS RECEIVED AND HENCE THE SAME IS NOT CORRECT. IT IS HELD BY THE ASSESSING OFFICER THAT IN THE ABSENCE OF RECORD DATE, THE CALCULATION OF LOSS COVERED U/S 94(7) IS NOT POSSIBLE AND SINCE THE ASSESSEE HAS NOT DISCHARGED THE ONUS IN THIS REGARD, THE CLAIM OF LOSS ON SALE OF MUTUAL FUND UNITS IS NOT A LLOWABLE. 9. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS). THE COMMISSI ONER OF INCOME-TAX (APPEALS) HAS DECIDED THIS ISSUE IN FAVOUR OF THE A SSESSEE AND NOW THE REVENUE IS IN APPEAL BEFORE US. LD.DR OF THE REVENUE SUPPO RTED THE ASSESSMENT ORDER WHEREAS THE LD.AR OF THE ASSESSEE SUPPORTED THE ORD ER OF THE COMMISSIONER OF INCOME-TAX (APPEALS). 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HA VE GONE THROUGH HE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT IN P ARA.4.1 OF HIS ORDER, THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS DECIDED T HIS ISSUE, AND HENCE, WE REPRODUCE PARA.4.1 OF HIS ORDER:- 4.1 THE A.O. BY APPLYING PROVISIONS OF SECTION 94( 7) OF THE INCOME-TAX ACT, 1961 HAS DISALLOWED A SUM EQUIVALENT TO RS.3,6 5,078 BEING THE LOSS INCURRED BY THE ASSESSEE COMPANY. AFTER GOING THRO UGH THE FACTS OF THE CASE IT IS NOTICED THAT THE ASSESSEE COMPANY HAD PR OVIDED COPY OF STATEMENT OF ACCOUNT OF INVESTMENTS IN UNITS OF ALL SCHEMES OF MUTUAL FUNDS WHEREIN IT HAD INVESTED ITS MONEY AND ALSO S UBMITTED WITH THE A.O. I.T.A. NO.1662/DEL./2007 (A.Y. : 2004-05) 4 A STATEMENT OF THE LOSS RESULTING TRANSACTIONS IN T HE FORMAT AS DESIRED BY HIM. THE A.O. NEVER RAISED ANY QUERY AFTER RECEIPT OF SUCH STATEMENT AND PROCEEDED BY DISALLOWING A LOSS OF RS.3,65,078. TH E A.O. FAILED TO APPRECIATE FROM THE INFORMATION CLEARLY AVAILABLE B EFORE HIM THAT IN RESPECT OF SALE OF UNITS OF ALLIANCE 95 FUND AND ALLIANCE E QUITY FUND, THERE WAS NO DIVIDEND INCOME AT ALL AND HENCE SECTION 94(7) COUL D NOT AT ALL BE APPLIED IN SUCH CASE. THE A.O. HAS DONE NOTHING TO ESTABLI SH, AS REQUIRED BY LAW, THAT THE LOSS CLAIMED BY THE ASSESSEE WAS UNJUSTIFI ED. THE A.O. HAS FAILED TO VERIFY THE COMPLETE INFORMATION AVAILABLE ON REC ORD BEFORE ARRIVING AT HIS DECISION WHICH CLEARLY SUPPORTS THE CONTENTIONS OF THE ASSESSEE FOR ALLOWING HE SAID LOSS. 11. FROM THE ABOVE, WE FIND THAT IT IS NOTED BY THE COMMISSIONER OF INCOME- TAX (APPEALS) THAT IN RESPECT OF SALE OF UNITS OF A LLIANCE 95 FUND AND ALLIANCE EQUITY FUND, THERE WAS NO DIVIDEND INCOME AT ALL AN D HENCE SECTION 94(7) COULD NOT AT ALL BE APPLIED IN SUCH CASE. REGARDING THE LOSS OF RS.2,38,500 ON ACCOUNT OF SALE OF TATA EQUITY OPPORTUNITY FUND, WE FIND TH AT AS NOTED BY THE ASSESSING OFFICER, TOTAL LOSS WAS OF RS.723750 FROM WHICH, LO SS OF RS.485250 WAS REDUCED ON ACCOUNT OF SECTION 94(7) AND ONLY THE LOSS OF BA LANCE AMOUNT OF RS.2,38,500 WAS CLAIMED AS LOSS. THERE ARE ONLY TWO MORE MUTUA L FUND OF BIRLA DIVIDEND UNIT FUNDS AND HSBC EQUITY FUND. IN THIS REGARD, IT IS NOTED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) THAT THE ASSESSING OFFICER HAS DONE NOTHING TO ESTABLISH AS REQUIRED BY LAW THAT THE LOSS CLAIMED BY THE ASSESS EE WAS UNJUSTIFIED. CONSIDERING ALL THESE FACTS, WE FIND NO REASON TO I NTERFERE IN THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) ON THIS ISSUE ALSO. THIS GROUND OF TRHE REVENUE IS ALSO REJECTED. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. 13. ORDER PRONOUNCED IN OPEN COURT ON 21.08.2009. (A.D. JAIN) (A.K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: AUG. 21, 2009. *SKB* I.T.A. NO.1662/DEL./2007 (A.Y. : 2004-05) 5 COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A)-XXI, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. AR/ITAT