UTI SECURITIES LTD ( NOW KNOWN AS STANDARD CHARTERED -STCI CAPITAL MARKETS LTD ), MUMBAI V. ADDL CIT RG 4(2), MUMBAI

ITA 1873/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7566 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 23-01-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 10-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DIPAK RIPOTE
• Keywords: Business income; Double taxation relief; Speculation loss; Bad and doubtful debts

Judgement Text

ITA NO 1873 OF 2010 UTI SECURITIES LTD NOW KNOWN AS STCI CAPITAL MUMBAI PAGE 1 OF 9 IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH, MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 1873/MUM/2010 (ASSESSMENT YEAR: 2006-07) UTI SECURITIES LTD (NOW KNOWN AS ADDL.CIT, RANGE 4(2) STANDARD CHARTERED STIC ROOM NO.669,6 TH FLOOR, CAPITAL MARKETS LTD. DHEERAJ ARMA AAYAKAR BHAVAN, 1 ST FLOOR,ANANT KANEKAR MARG, VS NEW MARINE LINES BANDRA(E) MUMBAI 400001 PAN NO:AAACU 0622 M MUMBAI 400020 APPELLANT RESPONDENT APPELLANT BY: MR. NITESH JOSHI RESPONDENT BY: MR.DIPAK RIPOTE, DR DATE OF HEARING: 12/03/2012 DATE OF PRONOUNCEMENT: 21/03/2012 O R D E R PER B. RAMAKOTAIAH, A.M. THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER S OF THE CIT (A)-8 MUMBAI DATED 20.01.2012. THE ASSESSEE HAS RAI SED THE FOLLOWING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX APPEALS VIII MUMBAI HAS CONFIRMED THE ADDITIONS MADE BY THE ADDL . COMMISSIONER OF INCOME TAX, RANGE 4(2), MUMBAI (HEREINAFTER REFERRED TO AS THE A.O) ON THE FOLLOWI NG ITEMS WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143(3 ) OF THE INCOME TAX ACT, 1961. AMOUNT ( ` ) 1.1 BAD DEBTS 13,70,139 1.2 PAYMENTS MADE TO NON-RESIDENTS DISALLOWED UNDER SECTION 40(A)(I) OF THE INCOME TAX ACT, 1961 31,77,416 45,47,555 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE COMMISSIONER OF INCOME TAX APPEALS VIII ITA NO 1873 OF 2010 UTI SECURITIES LTD NOW KNOWN AS STCI CAPITAL MUMBAI PAGE 2 OF 9 MUMBAI HAS CONFIRMED THE TREATMENT ADOPTED BY THE ASSESSING OFFICER IN RESPECT OF THE GAINS OF ` .69,56,813/- ARISING FROM THE SALE OF SHARES/UNITS, THE TRANSACT IONS WHEREOF WERE ENTERED THROUGH RECOGNIZED STOCK EXCHANGE AS BUSINESS INCOME INSTEAD OF SHORT TERM CAPITAL GAIN AND THEREBY LEVYING TAX AT THE RATE OF 30% INSTEAD OF CONCESSIONAL RATE OF 10% AS ELIGIBLE UND ER SECTION 111A OF THE INCOME TAX ACT, 1961. 2. IN THE COURSE OF THE PROCEEDINGS THE ASSESSEE HAS ALSO RAISED AN ADDITIONAL GROUND WHICH IS AS UNDER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE APPELLANT SHALL BE ALLOWED TO ADJUST THE DEEMED SPECULATION LOSS DETERMINED UNDER EXPLANATION 2 SEC TION 73 OF THE INCOME TAX ACT, 1961 FOR THE EARLIER PERI ODS AGAINST THE CURRENT INCOME UNDER SHARE TRADING ACCO UNT DETERMINED AS BUSINESS INCOME ARISING FROM THE TRANSACTION IN SHARES. 3. WE HAVE HEARD THE LEARNED COUNSEL SHRI NITIN JOSHI AND THE LEARNED DEPARTMENTAL REPRESENTATIVE SHRI DIPAK RIPO TE IN DETAIL. 4. GROUND NO.1: THIS GROUND HAS TWO COMPONENTS. GROUND NO.1.1: BAD DEBTS. THE ASSESSEE CLA IMED BAD DEBTS TO THE TUNE OF ` .13,70,139/- IN THE PROFIT & LOSS A/C. THE DETAILS WERE EXTRACTED BY THE ASSESSING OFFICER IN PARA 4.2 OF THE ASSESSMENT ORDER. ON INQUIRY FROM THE ASSESSING OFF ICER THE ASSESSEE ALSO EXPLAINED THE NATURE OF THE BAD DEBTS WRITTEN OFF UNDER SECTION 36(1)(VII) R.W.S. 36(2). THE ASSESSIN G OFFICER HOWEVER, WAS OF THE VIEW THAT THE AMOUNTS CANNOT BE ALLOWED AS BAD DEBTS ON THE REASON THAT THE ASSESSEE WAS OFFERING ONLY T HE BROKERAGE INCOME AND DEBTS WITH REFERENCE TO THE AMOUNTS NOT RECOVERABLE FROM THE CLIENTS DOES NOT SATISFY THE CONDITION PRE SCRIBED UNDER SECTION 36(2). HE ALSO HELD THAT ANY DEBT CANNOT BE ALLOWED, ONLY THE BAD DEBT CAN ONLY BE ALLOWED UNDER SECTION 36(1 )(VII). HE MADE ELABORATE DISCUSSION FROM PAGE 17 TO PAGE 25 OF THE ORDER CONSIDERING VARIOUS CASE LAW ON THE ISSUE AND DISAL LOWED THE CLAIM. BEFORE THE CIT (A) THE ASSESSEE MADE SAME SUBMISSIO NS WITHOUT SUCCESS. ITA NO 1873 OF 2010 UTI SECURITIES LTD NOW KNOWN AS STCI CAPITAL MUMBAI PAGE 3 OF 9 5. BEFORE US THE LEARNED COUNSEL SUBMITTED, REFERRING TO THE TABLE EXTRACTED IN THE ASSESSMENT ORDER THAT ITEM N OS.15 AND 16 ARE IN THE NATURE OF SERVICE CHARGES RECOVERABLE BEING DEPOSITORY/WDM RECEIPTS OFFERED AS INCOME IN THE EARLIER YEARS. HE REFERRED TO PAGE NO.3 IN THE PAPER BOOK ABOUT THE DETAILS FILED BEFO RE THE ASSESSING OFFICER EXPLAINING THAT THESE TWO CHARGES WERE INCL UDED AS INCOME IN THE PREVIOUS YEARS. THEREFORE, THEY SATISFY THE CONDITIONS OF SECTION 36(2). IT WAS FURTHER SUBMITTED WITH REFERE NCE TO THE BALANCE AMOUNTS, THE ASSESSEE HAS TAKEN NECESSARY STEPS TO RECOVER AND WHEN THE MANAGEMENT FELT THAT THERE IS NO POSSIBILI TY OF RECOVERY THE AMOUNTS WERE WRITTEN OFF AND THESE ARE ALLOWABL E EITHER AS BAD DEBTS OR AS A BUSINESS LOSS. THE LEARNED COUNSEL HO WEVER, SUBMITTED THAT THE ISSUE OF BAD DEBT CLAIM OF THE C LIENTS DEBTS, WHEN THE ASSESSEE WAS ONLY A BROKER HAS BEEN DECIDE D BY THE SPECIAL BENCH OF THE ITAT IN THE CASE OF DCIT VS SH REYAS S. MORAKHIA 5 ITR(TRIB) 1WHICH IN TURN WAS UPHELD BY T HE HON'BLE BOMBAY HIGH COURT IN ITA NO.89 OF 2011 DATED 28 TH FEBRUARY, 2012. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE HOWEVER, SU BMITTED THAT THE ASSESSEE HAS NOT JUSTIFIED WHETHER THE DEB TS BECAME BAD OR NOT AND REFERRED TO THE STATEMENTS FILED TO SUBMIT THAT THE DETAILS OF VARIOUS BAD DEBTS WERE NOT FURNISHED BEFORE THE ASS ESSING OFFICER AND THEREFORE, THE ASSESSING OFFICER WAS JUSTIFIED IN DISALLOWING THE AMOUNT. 7. WE HAVE CONSIDERED THE ISSUE. UNDER SECTION 36(1)(V II), THE AMOUNT OF ANY BAD DEBT OR PART THEREOF WHICH WAS WR ITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE HAS T O BE ALLOWED AS DEDUCTION IN COMPUTING THE INCOME UNDER SECTION 28. IN VIEW OF THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F TRF LTD VS. CIT 323 ITR 397 (SC), IT IS NOW SETTLED POSITION OF LAW THAT AFTER 1 ST APRIL, 1989 IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT HAS BECOME IRRECOVERABLE AND IT WOULD BE SUFFI CIENT IF IT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. ITA NO 1873 OF 2010 UTI SECURITIES LTD NOW KNOWN AS STCI CAPITAL MUMBAI PAGE 4 OF 9 THEREFORE, THE ASSESSING OFFICERS CONTENTION THAT THE ASSESSEE HAS NOT PROVED THAT THE DEBT HAS BECAME BAD DOES NOT SU RVIVE AS THE LAW HAS BEEN AMENDED TO ALLOW THE BAD DEBTS ONCE IT IS HELD AS IRRECOVERABLE AND WRITTEN OFF. AS FAR AS THE AMOUNT S WRITTEN OFF OF DEPOSITORY RECEIPTS OF ` .5,26,505/- AND WDM OF ` .1,73,119/- THESE ARE STATED TO BE THE CHARGES RECOVERABLE WHICH ARE OFFERED AS INCOME IN THE EARLIER YEARS. EVEN THOUGH THE ASSESSEE HAS SUBMITTED THE SAME, AO HAS NOT CONSIDERED THIS ASPECT. AMOUNTS TO THE ABOVE EXTENT CERTAINLY SATISFIES THE CONDITIONS UNDER SEC TION 36(2) AS INCOME WAS OFFERED AS RECEIVABLE IN AN EARLIER YEAR WHICH WAS SUBSEQUENTLY NOT RECOVERED AND THEREFORE WRITTEN OF F. ASSESSING OFFICERS ELABORATE DISCUSSION ON THE APPLICABILITY OF THE SECTION 36(2) HOWEVER, DOES NOT APPLY TO THE ABOVE TWO AMOU NTS. WITH REFERENCE TO THE BALANCE OF THE AMOUNTS, THE CONTRO VERSY IS WHETHER THE REQUIREMENT OF SECTION 36(2) HAVE BEEN FULFILLE D OR NOT. THIS ISSUE WAS DECIDED BY THE SPECIAL BENCH IN THE CASE OF SHREYAS S. MORAKHIA (SUPRA) HOLDING THAT EVEN IF ACCRUAL OF BR OKERAGE INCOME AND ACCRUAL OF DEBT AGAINST THE CLIENTS IN RESPECT OF SHARE PURCHASE ARE TWO DIFFERENT EVENTS WHICH HAPPEN AT TWO DIFFER ENT TIMES, THE AMOUNT RECEIVABLE BY THE ASSESSEE ON ACCOUNT OF BRO KERAGE IS A PART OF DEBT RECEIVABLE BY THE SHARE BROKERS AGAINST ITS CLIENTS AGAINST THE PURCHASE OF SHARES AND ONCE SUCH BROKERAGE IS C REDITED TO THE PROFIT & LOSS A/C OF THE BROKER AND THE SAME IS TAK EN INTO ACCOUNT IN COMPUTING HIS INCOME, THE CONDITION STIPULATED I N SECTION 36(2)(I) GETS SATISFIED. THIS ISSUE WAS ELABORATELY CONSIDE RED, DISCUSSED AND APPROVED BY THE HON'BLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS. SHREYAS S. MORAKHIA (SUPRA). SIMILAR ISSUE WHICH WA S BEFORE THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. BON ANZA PORTFOLIO LTD 320 ITR 178 (DEL.) WAS ALSO FOLLOWED IN THE ABO VE CASE. THEREFORE, WE ARE OF THE OPINION THAT THE ASSESSEE SATISFIES THE CONDITIONS STATED UNDER SECTION 36(2) AND ACCORDING LY THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE AMOUNTS. GROUND NO .1.1 IS ACCORDINGLY ALLOWED. ITA NO 1873 OF 2010 UTI SECURITIES LTD NOW KNOWN AS STCI CAPITAL MUMBAI PAGE 5 OF 9 8. GROUND NO.1.2 IS WITH REFERENCE TO DISALLOWANCE UND ER SECTION 40(A)(I) OF THE INCOME TAX ACT. BRIEFLY STATED THE ASSESSEE MADE PAYMENT OF ` .31,77,416/- AS PROFESSIONAL FEES PAID TO FOREIGN P ARTY AURBACH GRAYSON & CO (AGC) RESIDENT OF NEW YORK, US A. ON THE BASIS OF CERTIFICATE ISSUED BY THE CA THAT THE AMOU NTS WRE COVERED UNDER ARTICLE 7 OF THE DTAA BETWEEN INDIA AND USA, THE ASSESSEE HAD NOT DEDUCTED TAX WHILE REMITTING THE AMOUNT. TH E ASSESSING OFFICER WAS OF THE OPINION THAT IN VIEW OF THE JUDG MENT OF THE HON'BLE SUPREME COURT IN THE CASE OF TRANSMISSION C ORPORATION OF INDIA 239 ITR 587, THE AMOUNT IS COVERED BY SECTION 195 AND THE ASSESSEE SHOULD HAVE DEDUCTED THE TAX. THEREFORE, T HE PROVISIONS OF SECTION 40(A)(I) ARE APPLICABLE AND ACCORDINGLY THE AMOUNT WAS DISALLOWED. THE ASSESSING OFFICER MADE DISCUSSION I N PARA 7 FROM PAGE 33 TO 38 OF THE ORDER. 9. BEFORE THE CIT (A) IT WAS SUBMITTED THAT THE PAYMEN TS TO OVERSEAS NON-RESIDENT WERE MADE AS PER THE TERMS AN D CONDITIONS AND THEY WERE PAID FOR THE SERVICES RENDERED OVERSE AS WHICH WERE NOT UTILIZED IN INDIA. IT WAS FURTHER SUBMITTED THA T THE SAID CONCERN DOES NOT HAVE ANY PE IN INDIA. THEREFORE, NO PART O F INCOME PAYABLE TO THEM IS LIABLE TO TAX IN INDIA. HENCE NO TDS WAS MADE WHILE EFFECTING THE PAYMENTS TO THEM. THE ASSESSEE RELIED UPON THE DECISION OF THE ITAT, IN THE CASE OF VENKAT SHOES P VT LTD, MADRAS (CITATION NOT MENTIONED IN ORDER).THE CIT (A) HOWEV ER, WITHOUT EXAMINING THE MERITS OF THE CASE UPHELD THE ACTION OF THE ASSESSING OFFICER BY STATING AS UNDER: 4.2 IT IS NOT FOR THE APPELLANT TO DECIDE WHETHER THE INCOME IS TAXABLE IN INDIA OR NOT. THE APPELLANT SH OULD HAVE MADE APPLICATION BEFORE THE ASSESSING OFFICER AND OBTAINED APPROVAL UNDER SECTION 195(2) OF THE INCOM E- TAX ACT. THE APPELLANT MADE NO APPLICATION TO THE ASSESSING OFFICER UNDER SECTION 195 AND ON ITS OWN DECIDED NOT TO DEDUCT TDS WHICH IS CLEAR VIOLATION OF SECTION 195 OF THE INCOME TAX ACT AS HAS BEEN HELD IN CASE OF SAMSUNG ELECTRONICS 320 ITR 209 BY THE KARNATAKA HIGH COURT THAT IT IS NOT OPEN TO PAYER T O ARGUE THAT THE PAYMENT DOES NOT RESULT IN TAXABLE I NCOME ITA NO 1873 OF 2010 UTI SECURITIES LTD NOW KNOWN AS STCI CAPITAL MUMBAI PAGE 6 OF 9 IN THE HANDS OF THE NON-RESIDENT RECIPIENT, REFERRI NG TO SUPREME COURT JUDGMENT IN CASE OF TRANSMISSION CORPORATION OF INDIA 239 ITR 587 THAT THE MOMENT TH ERE IS A PAYMENT TO A NON-RESIDENT, THERE IS AN OBLIGAT ION ON THE PAYER TO DEDUCT TAX UNDER SECTION 195(1). 10. BEFORE US THE LEARNED COUNSEL SUBMITTED THAT THE CI T (A) DID NOT EXAMINE THE MERITS OF THE ASSESSEES CONTENTION THAT THE AMOUNTS ARE NOT COVERED BY TDS PROVISIONS BUT ONLY DECIDED THE ISSUE ON THE BASIS OF THE HON'BLE KARNATAKA HIGH CO URT IN THE CASE OF SAMSUNG ELECTRONICS 320 ITR 209. IT WAS SUBMITTE D THAT THE HON'BLE SUPREME COURT IN THE CASE OF GE INDIA TECHN OLOGY CENTRE (P) LTD 327 ITR 456 REVERSED THE DECISION OF THE HO N'BLE KARNATAKA HIGH COURT (SUPRA) AND HELD THAT THE EXPRESSION CH ARGEABLE UNDER THE PROVISIONS OF THE ACT IN SECTION 195(1) SHOWS THAT THE REMITTANCE HAS GOT TO BE OF TRADING RECEIPTS, THE W HOLE OR PART OF IT IS LIABLE TO TAX IN INDIA. IF TAX IS NOT SO ASSESSABLE , THERE IS NO QUESTION OF TAX AT SOURCE BEING DEDUCTED. IT WAS SUBMITTED T HAT THE ASSESSEE IS COVERED BY THE PROVISIONS OF THE DTAA AS THERE W AS NO PE IN INDIA. ON THE BASIS OF THE CA CERTIFICATE, THE AMOU NT WAS REMITTED WITHOUT ANY TDS. HOWEVER, IT WAS FAIRLY SUBMITTED T HAT ARGUMENTS OF THE ASSESSEE ARE NOT EXAMINED BY THE CIT (A) AS HE FOLLOWED THE DECISION OF THE KARNATAKA HIGH COURT IN THE CASE OF SAMSUNG ELECTRONICS 320 ITR 209 TO CONFIRM THE ADDITIONS SO MADE. 11. THE LEARNED DEPARTMENTAL REPRESENTATIVE WHILE ADMIT TING THAT THE ABOVE DECISION OF THE HON'BLE KARNATAKA HI GH COURT WAS REVERSED BY THE HON'BLE SUPREME COURT SUBMITTED THA T THE ISSUE ON MERITS REQUIRES EXAMINATION. 12. CONSIDERING THE ARGUMENTS OF THE RIVAL PARTIES AND EXAMINING THE RECORD, WE ARE OF THE OPINION THAT THE ISSUE RE QUIRES DETAILED EXAMINATION BY THE CIT (A). THE CIT (A) HAS NOT ADJ UDICATED WHETHER THE AMOUNT PAID BY THE ASSESSEE WAS CHARGEABLE UNDE R THE PROVISIONS OF THE ACT SO AS TO ATTRACT THE PROVISIO NS OF SECTION 195 AND CONSEQUENTLY 40(A)(I). THE CONTENTIONS OF THE A SSESSEE WITH REFERENCE TO THE NATURE OF THE PAYMENT, APPLICABILI TY OF VARIOUS ITA NO 1873 OF 2010 UTI SECURITIES LTD NOW KNOWN AS STCI CAPITAL MUMBAI PAGE 7 OF 9 PROVISIONS OF THE ACT AND THE DTAA BETWEEN INDIA AN D USA REQUIRE DETAILED CONSIDERATION. SINCE THESE ASPECTS WERE NO T EXAMINED, WE ARE OF THE OPINION THAT THE ISSUE IS TO BE RESTORED TO THE FILE OF THE CIT (A) WITH A DIRECTION TO ADJUDICATE THE ISSUE ON MERITS ACCORDINGLY. THEREFORE, WE SET ASIDE HIS ORDER TO T HAT EXTENT AND RESTORE THE ISSUE IN GROUND NO.1.2 TO THE FILE OF T HE CIT (A). GROUND NO.1.2 IS CONSIDERED AS ALLOWED FOR STATISTICAL PUR POSES. 13. WITH REFERENCE TO GROUND NO.2, THE LEARNED COUNSEL SUBMITTED THAT THE GAINS ARISING OUT OF SALE OF SHA RES/UNITS ARE TREATED AS BUSINESS INCOME INSTEAD OF SHORT TERM CA PITAL GAIN. IT WAS SUBMITTED THAT IN THE EARLIER YEARS THE ASSESSEE HA D SUFFERED LOSSES ON THE SAME ACCOUNT AND THE ASSESSING OFFICER TREAT ED AS SPECULATION LOSS BY VIRTUE OF INVOKING THE PROVISIO NS OF SECTION 73 EXPLANATION (2) AND THEREFORE, THE ASSESSEE HAS RAI SED THE ADDITIONAL GROUND THAT IN CASE THE AMOUNTS ARE TREATED AS SPEC ULATION BUSINESS, THE SAME IS REQUIRED TO BE SET OF TO THE LOSSES DETERMINED BY THE ASSESSING OFFICER IN THE EARLIER YEARS. HE R EFERRED TO THE SUBMISSIONS BEFORE THE ASSESSING OFFICER VIDE LETTE R DATED 25/02/2008, MORE SO ITEM NO.24 TO SUBMIT THAT AN AM OUNT OF ` .73,79,000/- AND ` .35,93,025/- WERE DISALLOWED BEING LOSS INCURRED IN SHARE TRADING AS DEEMED SPECULATION LOS S IN ASSESSMENT YEARS 2001-02 AND 2002-03. IT WAS FURTHER SUBMITTED THAT BY APPLYING THE SAME PRINCIPLES THE ASSESSEE REQUESTED THE ASSESSING OFFICER THE BENEFIT OF ADJUSTING SPECULATION LOSS A GAINST THE SHARE TRADING INCOME OF THE CURRENT ASSESSMENT YEAR. IT W AS SUBMITTED THAT THE ASSESSING OFFICER EVEN THOUGH WAS SPECIFIC ALLY REQUESTED, DID NOT CONSIDER THIS CLAIM OF THE ASSESSEE AND SIM PLY TREATED SHORT TERM CAPITAL GAIN AS BUSINESS INCOME WITHOUT ADJUST ING THE LOSS DETERMINED BY THE ASSESSING OFFICER IN THE EARLIER YEARS. IT WAS SUBMITTED THAT IF THIS ADDITIONAL GROUND IS ALLOWED , THE ASSESSEE WOULD NOT PREFER GROUND NO.2. THE LEARNED DEPARTMEN TAL REPRESENTATIVE, HOWEVER, SUBMITTED THAT AS PER THE PROVISIONS OF THE ACT, THE EARLIER YEARS DETERMINATION AS SPECULATIO N LOSS HAS NO ITA NO 1873 OF 2010 UTI SECURITIES LTD NOW KNOWN AS STCI CAPITAL MUMBAI PAGE 8 OF 9 BEARING ON THE ISSUE AND FURTHER SUBMITTED THAT THE ORDERS IN EARLIER YEARS WERE NOT ON RECORD. THEREFORE, HE IS NOT IN A POSITION TO OFFER HIS COMMENTS ON THE CLAIM OF THE ASSESSEE. IT WAS S UBMITTED THAT THE ASSESSING OFFICER AND THE CIT (A) CORRECTLY TRE ATED THE SHORT TERM CAPITAL GAIN SHOWN BY THE ASSESSEE AS BUSINESS INCOME AS THE ASSESSEE WAS TRADING IN THE SHARES AND UNITS. 14. IN REPLY THE LEARNED COUNSEL SUBMITTED THAT HE HAS NO OBJECTION IF THE MATTER IS REMITTED BACK TO THE CIT (A) FOR CONSIDERATION OF THE ADDITIONAL GROUND AS THE HON'B LE BOMBAY HIGH COURT IN THE CASE OF LOKMAT HOLDINGS 322 ITR 43 HAS CONSIDERED THE SCOPE OF SECTION 73 EXPLANATION (2) AND THEREFO RE, IN VIEW OF THE JURISDICTIONAL HIGH COURT JUDGMENT THE ASSESSEES C ONTENTION MADE BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT SHOULD BE ALLOWED AND IF THAT IS CONSIDERED, THERE IS NO CASE FOR ADJUDICATING THE GROUND NO.2 AS SUCH. 15. WE HAVE CONSIDERED THE ISSUE. THE MAIN DISPUTE IS W ITH REFERENCE TO TREATMENT GIVEN TO SHARE TRANSACTIONS. ASSESSEE TREATED THEM AS INVESTMENTS WHERE AS AO TREATED THEM AS TRA DING TRANSACTIONS. WE WERE INFORMED THAT IN EARLIER YEAR S WHEN ASSESSEE SUFFERED CAPITAL LOSS THE AO TREATED THEM AS BUSINE SS LOSS AND SPECULATION LOSS. AS SEEN FROM THE PAPER BOOK PLACE D, THE ASSESSEE HAD MADE SPECIFIC REQUEST TO THE ASSESSING OFFICER TO SET OFF SPECULATION LOSSES DETERMINED IN EARLIER YEARS CON SEQUENT TO CHANGE OF HEAD FROM SHORT TERM CAPITAL LOSS TO SPEC ULATION LOSS ON THE SAME SET OF TRANSACTIONS. THEREFORE, WE ARE OF THE OPINION THAT THIS ASPECT OF THE CLAIM HAS TO BE EXAMINED BY THE AUTHORITIES, SINCE EARLIER YEAR ORDERS WERE NOT AVAILABLE ON RECORD. W ITHOUT GOING INTO MERITS OF RIVAL CONTENTIONS, WE ARE OF THE OPINION THAT THE ADDITIONAL GROUND BEING A LEGAL GROUND CAN BE ADMITTED AND WE ORDER ACCORDINGLY. THE ISSUE IN GROUND NO.2 AND ADDITIONA L GROUND NOW ADMITTED ARE INTER-LINKED. IN CASE THE ASSESSING OF FICER TREATED THE SHORT TERM CAPITAL LOSS IN EARLIER YEARS AS BUSINES S INCOME AND CONSEQUENTLY AS SPECULATION LOSS BY VIRTUE OF PROVI SIONS OF SECTION ITA NO 1873 OF 2010 UTI SECURITIES LTD NOW KNOWN AS STCI CAPITAL MUMBAI PAGE 9 OF 9 73 EXPLANATION (2), SIMILAR TREATMENT IS ALSO REQUI RED IN THIS YEAR. RESPECTFULLY FOLLOWING THE PRINCIPLES LAID DOWN BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF LOKMAT HOLDINGS 32 2 ITR 43, THE ASSESSEES CONTENTIONS PRIMA FACIE ARE TO BE ALLOWE D. SINCE IT REQUIRES EXAMINATION OF THE TREATMENT GIVEN BY AO I N EARLIER YEARS, WE ARE OF THE OPINION THAT THE MATTER CAN BE RESTOR ED TO THE FILE OF THE CIT (A) WHO AFTER GIVING DUE OPPORTUNITY TO THE ASSESSING OFFICER AND THE ASSESSEE, SHOULD EXAMINE AND CONSIDER THE C LAIM AFRESH. WITH THESE REMARKS, THE ISSUE IN THESE GROUNDS IS R ESTORED TO THE FILE OF THE CIT (A) FOR FRESH ADJUDICATION. GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSES. 16. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS PART LY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST MARCH, 2012. SD/- SD/- (R.S.PADVEKAR) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 21 ST MARCH, 2012. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI