DCIT, Circle 1(1), Pune V. Better Value Holding Pvt. Ltd., Pune

ITA 2034/PUN/2012

• Counselvise Citation: 203424514 RSA 2012
• Duration Of Justice: 1 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 19-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MODI
• Keywords: Business income; Advance ruling; Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 2034/PN/2012 (ASSTT.YEAR : 2008-09) DCIT, CIRCLE-1(1), PUNE .. APPELLANT VS. BETTER VALUE HOLDING PVT. LTD., KIRLOSKAR KISAN PREMISES, 13A, KARVE ROAD, PUNE 411029 PAN NO. AAACB7594H .. RESPONDENT APPELLANT BY : SHRI A.K, MODI RESPONDENT BY : SHRI C.H. NANIWADEKAR DATE OF HEARING : 24-10-2013 DATE OF PRONOUNCEMENT : 29-10-2013 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 15-03-2012 OF THE CIT(A)-I, PUNE RELATING TO ASSESS MENT YEAR 2008-09. 2. GROUNDS RAISED BY THE REVENUE ARE AS UNDER : 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME- TAX (APPEALS) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) G ROSSLY ERRED IN ALLOWING THE ASSESSEE'S APPEAL INSTEAD OF CONFIRMING T HE ASSESSING OFFICER'S ORDER. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) G ROSSLY ERRED IN NOT APPRECIATING THAT THE GAINS EARNED FROM TRADI NG IN SHARES AND UNITS OF THE MUTUAL FUNDS HAD BEEN RIGHTLY ASSESSED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GROSSLY ERRED IN NOT APPRECIATING THAT THE ASSESSEE HAD CARRIED OUT THE IMPUGNED TRANSACTIONS IN HIGH VOLUMES, FREQUENCY AND IN AN ORGA NIZED MANNER WHICH WOULD CLEARLY ESTABLISH THAT THE IMPUGNED ACTIV ITY WAS IN THE NATURE OF 'BUSINESS' AND NOT 'INVESTMENT' AS CLAIMED BY THE ASSESSEE; AND, THEREFORE, THE PROFITS DERIVED FROM SUCH TRANSACT IONS WERE TAXABLE UNDER THE HEAD 'INCOME FROM 'BUSINESS'. IN THIS CONNECT ION RELIANCE IS PLACED ON THE DECISION OF THE AUTHORITY FOR ADVANCE RULING (AAR) (288 ITR 641). 2 5. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) G ROSSLY ERRED IN DECIDING THE APPEAL MERELY BY FOLLOWING THE DECI SION OF THE HON'BLE ITAT FOR THE A.YS. 2004-05 AND 2005-06 INSTEAD OF CON SIDERING AND EXAMINING THE FACTS BROUGHT OUT BY THE ASSESSING OFFICER IN PARA4.9 OF THE ASSESSMENT ORDERS. 6. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) G ROSSLY ERRED IN FAILING TO APPRECIATE THAT THE RATIO LAID DOWN B Y THE HON'BLE SUPREME COURT IN CIT VS. SUTLEJ COTTON MILLS SUPPLY AGENCY LT D., 100 ITR 706 WHEREIN SIMILAR TRANSACTIONS HAD BEEN HELD AS CONSTITUTI NG BUSINESS BEING ADVENTURE IN THE NATURE OF TRADE CLEARLY APPL IES TO THE INSTANT CASE. 7. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED A T THE TIME OF HEARING, THE ORDER OF THE LEARNED CIT (APPEALS) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 8. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY OR ALL THE GROUNDS OF APPEAL. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A COMPANY. IT FILED ITS RETURN OF INCOME ON 29-09-2008 DISCLOSING TOTAL INCOME AT RS.28,53,70,984/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS EARNE D IN THE FORM OF CAPITAL GAINS AS FOLLOWS : I. SHORT TERM CAPITAL GAINS ` 1,38,81,063/- II. LONG TERM CAPITAL GAINS ` 24,76,28,578/- III. EXEMPT CAPITAL GAINS ` 19,50,86,380/- 3.1 HE NOTED THAT THE SHARES AVAILABLE WITH THE ASS ESSEE HAVE BEEN SHOWN AS INVESTMENTS. HE FURTHER OBSERVED THAT THE ASSES SEE HAS BEEN DEALING IN VARIOUS NUMBERS OF SCRIPS AND THE FREQUENCY OF ACTI VITY OF PURCHASING AND SELLING THE SHARES IS REGULAR AND RECURRING. HE NO TED THAT THE ASSESSEE HAS NOT EFFECTED THE SHARES PURCHASED AND SALE TRANSACT ION THROUGH ANY PORTFOLIO MANAGER, DISCRETIONARY OR NON-DISCRETIONARY. HE CA ME TO THE CONCLUSION THAT THE ONLY BUSINESS CARRIED ON BY THE ASSESSEE D URING THE RELEVANT YEAR HAS BEEN TO DEAL IN SHARES AND SECURITIES AND EFFEC TING TRANSACTIONS AT THE RIGHT TIME SO AS TO ACHIEVE HANDSOME GAINS. CONSID ERING THE HIGH VOLUME, FREQUENCY, CONTINUITY AND REGULARITY OF THE TRANSAC TIONS WHICH ARE BEING 3 DONE WITH A PROFIT MOTIVE IN AN ORGANISED MANNER AN D RELYING ON VARIOUS DECISIONS THE ASSESSING OFFICER REJECTED THE EXPLAN ATION GIVEN BY THE ASSESSEE AND TREATED THE PROFIT FROM CAPITAL GAIN A T RS.54,09,14,791/- AS BUSINESS INCOME. IN APPEAL THE LD.CIT(A) FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2004-05 AN D 2005-06 VIDE ITA NO.1417 AND 1418/PN/2008 DATED 16-12-2010 ALLOWED T HE CLAIM OF THE ASSESSEE. 3.2 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 4. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET S UBMITTED THAT THE MATTER HAS TRAVELLED TO THE HIGH COURT AFTER THE OR DER OF THE TRIBUNAL AND THE HONBLE HIGH COURT HAS DISMISSED THE APPEAL FIL ED BY THE REVENUE. FURTHER, THE TRIBUNAL IN ASSESSEES OWN CASE FOR A. Y. 2007-08 HAS ALSO DISMISSED THE APPEAL FILED BY THE REVENUE ON THIS V ERY ISSUE. HE ACCORDINGLY SUBMITTED THAT THIS BEING A COVERED MAT TER IN FAVOUR OF THE ASSESSEE THE GROUNDS RAISED BY THE REVENUE SHOULD B E DISMISSED. 5. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND FAIRLY CONCEDED THAT THE ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE JURISDICTIONAL HIGH COURT AND TH E TRIBUNAL. 6. AFTER HEARING BOTH THE SIDES, WE FIND NO INFIRMI TY IN THE ORDER OF THE LD.CIT(A) WHO WHILE ALLOWING THE CLAIM OF SHORT TER M AND LONG TERM CAPITAL GAIN HAS FOLLOWED THE ORDER OF THE TRIBUNAL FOR A.Y. 2004-05 AND 2005-06. WE FURTHER FIND THAT WHEN THE MATTER TRAV ELLED UPTO THE HIGH COURT, THE HONBLE HIGH COURT VIDE ORDER DATED 08-0 8-2011 IN ITA 4 NO.703/2011 DISMISSED THE APPEAL FILED BY THE REVEN UE BY HOLDING AS UNDER : 1. IN THIS APPEAL, THE QUESTION OF LAW RAISED BY THE REVENUE IS, WHETHER THE INCOME TAX APPELLATE TRIBUNAL WAS JUSTIFIED IN HO LDING THAT THE INCOME EARNED FROM SALE AND PURCHASE OF SHARES WERE LIABLE TO BE ASSESSED UNDER THE HEAD INCOME FROM CAPITAL GAINS AND NOT UNDER T HE HEAD INCOME FROM BUSINESS. 2. IN PARA-18 OF ITS JUDGMENT, THE INCOME TAX APPELL ATE TRIBUNAL HAS RECORDED A FINDING OF FACT THE TRANSACTION OF SALE OF SHARES OF KIRLOSKAR BROTHERS LIMITED HAS BEEN UNDERTAKEN AS A PART OF ASSESSE ES OVERALL ACTIVITIES OF NURSING THE INVESTMENTS OF PROMOTER FAMIL Y IN THE KIRLOSKAR GROUP OF COMPANIES AND TO ACQUIRE AND EXERCISE CONTRO L ON SUCH COMPANIES. THEREFORE, SURPLUS ARISING THEREFROM CANNOT CONSTITUTE INCOME ASSESSABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS. 3. IN OUR VIEW, THE DECISION OF THE TRIBUNAL IS BASED ON FINDING OF FACT. NO QUESTION OF LAW ARISES FROM THE ORDER OF THE INCOM E TAX APPELLATE TRIBUNAL. THE APPEAL IS THUS DISMISSED WITH NO ORDER AS TO COSTS. 6.1 FURTHER, THE TRIBUNAL IN ASSESSEES OWN CASE FO R A.Y. 2007-08 HAS ALSO DISMISSED THE APPEAL FILED BY THE REVENUE ON T HIS VERY ISSUE. RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINA TE BENCHES OF THE TRIBUNAL AS WELL AS THE DECISION OF THE JURISDICTIO NAL HIGH COURT, WE FIND NO INFIRMITY IN THE ORDER OF THE LD.CIT(A) HOLDING THE GAINS EARNED FROM TRADING IN SHARES AND UNITS OF THE MUTUAL FUNDS AS INCOME FROM CAPITAL GAIN AND NOT INCOME FROM PROFITS AND GAINS OF BUSINESS OR PROFESSION. THE GROUNDS RAISED BY THE REVENUE ARE ACCORDINGLY DISMI SSED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 29 TH DAY OF OCTOBER 2013. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PA NDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED : 29 TH OCTOBER, 2013 SATISH 5 COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A)-I, PUNE 4. THE CIT-I, PUNE 5. D.R. B BENCH, PUNE 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE