DCIT, Ludhiana V. M/s Puja Investments Pvt. Ltd., Ludhiana

ITA 211/CHANDI/2013

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5358 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 06-09-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 25-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: SUBHASH AGGARWAL
• Keywords: Business income

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER & MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 211/CHD/2013 ASSESSMENT YEAR: 2009-10 THE DCIT, VS. M/S PUJA INVESTMENTS PVT LTD., CIRCLE V, LUDHIANA G.T. ROAD, HERO NAGAR, LUDHIA NA PAN NO. AAACP9824A (APPELLANT) (RESPONDENT) APPELLANT BY : SH. MANJIT SINGH RESPONDENT BY : SH. SUBHASH AGGARWAL DATE OF HEARING : 08.01.2018 DATE OF PRONOUNCEMENT : 08.01.2018 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENU E AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), [HEREINAFTER REFERRED TO AS CIT(A)]-II, LUDHIANA DATED 14.12.2012. 2. THERE ARE TWO EFFECTIVE GROUNDS RAISED BY THE RE VENUE. THE FIRST GROUND OF APPEAL IS RELATING TO THE INCOME FROM SAL E AND PURCHASE OF MUTUAL FUNDS, WHETHER TO BE TREATED AS SHORT TERM CAPITAL GAIN OR BUSINESS INCOME OF THE ASSESSEE? 3. SHRI MANJIT SINGH, LD. DR HAS RELIED ON THE DECI SION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF THE ASSE SSEE FOR ASSESSMENT 2 YEAR 2006-07 WHEREIN ON SOMEWHAT IDENTICAL TRANSACT IONS IN MUTUAL FUNDS, THE HON'BLE HIGH COURT HAS CATEGORICALLY HELD THAT IT WAS A STRATEGIC MOVE OF THE ASSESSEE TO INVEST AND SELL THESE TRANSACTIO NS DURING THE YEAR AND IT WAS LINKED TO THE BUSINESS ACTIVITY OF THE ASSESSE E OF SALE AND PURCHASE OF SHARES AND INVESTMENT, THE ASSESSEE BEING AN INVEST MENT COMPANY. THOUGH SHRI SUBHASH AGGARWAL, LD. COUNSEL FOR THE ASSESSEE HAS TRIED TO DISTINGUISH THE ABOVE OBSERVATION OF THE HON'BLE HI GH COURT WHILE RELYING ON THE DECISION OF THE CIT(A) FOR SUBSEQUENT ASSESS MENT YEAR 2008-09 WHEREIN THE INCOME OF THE ASSESSEE OF SUCH ACTIVITY HAS BEEN TREATED AS SHORT TERM CAPITAL GAIN AND THAT THE DEPARTMENT H AS NOT GONE INTO THE APPEAL. HOWEVER, THE LD. DR AT THIS STAGE HAS SUBMI TTED THAT THE BENEFIT OF THE DECISION OF HON'BLE HIGH COURT (SUPRA) WAS NOT AVAILABLE TO THE CIT(A) AT THAT POINT OF TIME. THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO RELIED ON THE CIRCULAR OF CBDT NO. 6/2016 DATED 29. 02.2016 WHICH IS PLACED AT PAGE 14 OF THE PAPER BOOK, VIDE WHICH, TH E CBDT HAD ISSUED CERTAIN GUIDELINES FOR THE ASSESSING OFFICERS AS TO HOW TO TREAT THE INCOME FROM SHARES AND MUTUAL FUNDS ETC. DIRECTING TO THE ASSESSING OFFICERS TO FOLLOW THESE GUIDELINES. 4. WE HAVE CONSIDERED THE ABOVE CONTENTIONS. SO FA R THE RELIANCE OF THE LD. COUNSEL OF THE ASSESSEE ON THE SUBSEQUENT DECIS ION OF THE OF CIT(A) IS CONCERNED, WE FIND THAT THE ISSUE IS SQUARELY COVE RED BY THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT. THE SAME HO LDS BINDING PRECEDENT ON THIS TRIBUNAL. THERE IS NO ARGUMENT THAT THE TR ANSACTIONS FOR THE YEAR UNDER CONSIDERATION WERE DIFFERENT IN NATURE FROM T HAT FOR THE YEAR ASSESSMENT YEAR 2006-07, FOR WHICH WE HAVE THE BEN EFIT OF THE FINDINGS OF THE HON'BLE JURISDICTIONAL HIGH COURT. SO FAR AS TH E RELIANCE ON THE 3 CIRCULAR OF CBDT IS CONCERNED, WE FIND THAT THE CAS E OF THE ASSESSEE DOES NOT FIT INTO ANY OF THE CRITERIA LAID DOWN IN THE C IRCULAR SO AS TO HOLD THE INCOME FROM THE SALE OF MUTUAL FUNDS AS SHORT TERM CAPITAL GAIN. WE THEREFORE, ARE NO INCLINED TO INTERFERE WITH THE OR DER OF THE LOWER AUTHORITIES ON THIS ISSUE. THIS ISSUE IS ACCORDING LY DECIDED IN FAVOUR OF THE REVENUE. 5. SO FAR AS THE SECOND ISSUES IS CONCERNED, THE RE VENUE IS AGGRIEVED BY THE ACTION OF THE CIT(A) IN DELETING THE DISALLOWAN CE MADE BY THE ASSESSING OFFICER U/S 36(I)(III) OF THE INCOME-TAX ACT, 1961. THE DEPARTMENT HAS RELIED ON THE JUDGMENT OF THE HON'BL E SUPREME COURT IN THE CASE OF HERO CYCLES (P) LTD VS. CIT [2015] 63 TA XMAN.COM 308 (SC) TO SUBMIT THAT THE BURDEN IS UPON THE ASSESSEE TO SHOW THAT THE ADVANCES WERE GIVEN FOR BUSINESS EXPEDIENCY. THE SUBMISSION OF TH E LD. DR IS THAT IN THIS CASE, THE ASSESSEE COULD NOT ESTABLISH BUSINESS EXP EDIENCY. HOWEVER, MR. SUBHASH AGGARWAL LD. COUNSEL FOR THE ASSESSEE, HAS BROUGHT OUR ATTENTION TO THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) WHICH HAVE BEEN DULY RECORDED IN THE IMPUGNED ORDER. HE HAS SUBMITTED TH AT THE ADVANCES WERE MADE TO THE SISTER CONCERN SO THAT SISTER CONCERN M AY FURTHER USE THESE ADVANCES IN THE JOINT VENTURE. HOWEVER, THE SAID JO INT VENTURE DID NOT MATAURE, AND THE ADVANCES WERE RETURNED BY THE SIST ER CONCERN OF THE ASSESSEE IN THE NEXT YEAR. HE HAS DEMONSTRATED THAT THESE ACTIVITIES OF ADVANCES TOWARDS THE SHARE APPLICATION MONEY TO THE SISTER CONCERN, WERE INTRINSICALLY LINKED TO THE BUSINESS ACTIVITY OF TH E ASSESSEE. THE HON'BLE SUPREME COURT IN THE CASE OF S.A. BUILDERS LTD VS. CIT [2007) 288 ITR 1 (SC) HAS HELD THAT WHERE HOLDING COMPANY HAS A DEEP INTEREST IN ITS SUBSIDIARY, AND THE HOLDING COMPANY ADVANCES BORROW ED MONEY TO A 4 SUBSIDIARY AND THE SAME IS USED BY THE SUBSIDIARY F OR BUSINESS PURPOSES, THE HOLDING COMPANY WOULD ORDINARILY BE ENTITLED TO DEDUCTION OF INTEREST ON ITS BORROWED LOANS. THE ABOVE OBSERVATION OF THE HON'BLE SUPREME COURT SQUARELY COVERS THE CASE OF THE ASSESSEE AS THE LD. COUNSEL FOR THE ASSESSEE HAS DEMONSTRATED THAT THE ADVANCE MADE TO THE SISTE R CONCERN WERE LINKED TO THE BUSINESS ACTIVITY OF THE SUBSIDIARY WHICH WA S FURTHER LINKED TO THE BUSINESS INTEREST OF THE ASSESSEE. IN VIEW OF ABOV E, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) WHILE DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON THIS ISSUE. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS TREA TED AS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 08.01.2018 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR