SHRI VIMAL PRAVIN SHAH HUF, MUMBAI V. DCIT CIR 14(1), MUMBAI

ITA 2134/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1691 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 18-02-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 15-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: OM PRAKASH MEENA
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTAT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER I.T.A. NO.2134/M/2011 ASSESSMENT YEAR: 2007-2008 SHRI VIMAL PRAVIN SHAH, HUF , 95/B, MEGHDOOT, FLAT NO.5, MARINE DRIVE, MUMBAI 400 020. PAN:AAAHV 1716 L VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 14(1), 2 ND FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI 400 0021. (APPELLANT) (RESPONDENT) I.T.A. NO.2135/M/2011 ASSESSMENT YEAR: 2007-2008 SHRI VIMAL PRAVIN SHAH , 95/B, MEGHDOOT, FLAT NO.5, MARINE DRIVE, MUMBAI 400 020. PAN:AAAHV 1716 L VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 14(1), 2 ND FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI 400 0021. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI NITESH JOSHI, AR RESPONDENT BY : SHRI OM PRAKASH MEENA, DR DATE OF HEARING: 18.2.2013 DA TE OF ORDER: 8.3.2013 O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE TWO APPEALS OF THE ASSESSEES ARE UNDER CONSIDERATION. APPEAL I.T.A. NO.2134/M/2011 IS FILED BY SHRI VIMAL P. SHAH , HUF AND ANOTHER APPEAL BY SHRI VIMAL P. SHAH INDLL AGAINST TWO SEPARATE ORDERS OF CIT (A)-25, MUMBAI COMMONLY DATED 5.1.2011 FOR THE AY 2007-2008. THE ADJUDICATION OF BOTH THE APPEALS IS GIVEN IN THIS COMMON ORDER. APPEAL WISE AND GROUND WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAGRAPHS. I.T.A. NO.2135/M/2011 (SHRI VIMAL PRAVIN SHAH, IN DLL) 2. FIRSTLY, WE SHALL TAKE UP APPEAL I.T.A. NO.2135/M /2011 WHEREIN, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDE R: 2 1. LD CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF AO IN TREATING LONG TERM CAPITAL GAINS OF RS. 27,44,584/- ARISING OUT OF TRA NSACTIONS CARRIED OUT UNDER PORTFOLIO MANAGEMENT SERVICES OF KOTAK SECURITIES, AS BUISINE SS INCOME. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE SAID RS. 27,44,584/- AMOUNT OUGHT TO BE TREATED AS INCOME FROM LONG TERM CAPITAL GAIN EXEMP T U/S 10(38) AND NOT AS BUSINESS INCOME. 2. LD CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN TREATING SHORT TERM CAPITAL GAINS OF RS. 15,24,909 /- ARISING OUT OF TRANSACTIONS CARRIED OUT UNDER PORT FOLIO MANAGEMENT SERVICES OF KOTAK SECURITIES AS BUSINESS INCOME. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE SAID RS. 15,24,909/- OUGHT TO BE TREATED AS INCOME FROM SHORT TERM CAPITAL GAIN AND NOT AS BUSINESS INCOME. 3. BRIEFLY STATED, RELEVANT FACTS OF THE CASE ARE T HAT THE ASSESSEE IS AN INDIVIDUAL AND FILED RETURN DECLARING INCOME OF RS.32,44,665/- . AO SCRUTINISED THE SAME U/S 143(3) OF THE ACT AND DETERMINED THE ASSESSED INCOM E AT RS.59,89,250/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO FOUND THAT ASSESSEE HAD CLAIMED SHORT TERM CAPITAL GAIN OF RS. 15,24,909/- AND LONG TERM CAPITAL GAIN OF RS.27,44,584/- FROM TRANSACTIONS CARRIED OUT BY M/S. KOTAK SECURIT IES LTD, WHO IS THE PORTFOLIO MANAGEMENT SERVICES (PMS) FOR THE ASSESSEE. SINCE THE SAID TRANSACTIONS WERE CARRIED OUT BY PMS AND NOT BY THE ASSESSEE HIMSELF, AO HELD THAT THE GAINS IN QUESTION CONSTITUTE BUSINESS INCOME . AGGRIEVED ASSESSEE WENT ON APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4. DURING THE PROCEEDINGS BEFORE FIRST APPELLATE AU THORITY, CIT (A) UPHELD THE ORDER OF THE AO BY HOLDING THAT THE INTENTION TO RE SELL WOULD, IN CONJUNCTION WITH THE CONDUCT OF THE ASSESSEE AND OTHER CIRCUMSTANCES, PO INT TO THE BUSINESS NATURE OF THE TRANSACTION AND NOT THE INVESTMENT ACTIVITY AND ACC ORDINGLY, THE PROFIT EARNED FROM SAID PMS ACTIVITY CARRIED BY THE KOTAK SECURITIES L TD OUT OF CORPUS GIVEN BY THE ASSESSEE IS TREATED AS BUSINESS INCOME. AGGRIEVED WITH THE ORDER OF THE CIT (A), ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. DURING THE PROCEEDINGS BEFORE US, AT THE VERY OU TSET, SHRI NITESH JOSHI, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT AN IDENTICA L ISSUE CAME UP FOR ADJUDICATION BEFORE THE ITAT IN ASSESSEES OWN CASE FOR THE AYS 2004-05 TO 2006-07 VIDE ITA NOS. 2123/M/2008; 4123/M/2008 AND 5638/M/2009 DATED 11.7.2012. LD COUNSEL BROUGHT OUR ATTENTION TO THE GROUNDS ADJUDICATED IN THAT CASE TO DEMONSTRATE THE 3 COMMONALITY OF THE ISSUES WITH REGARD TO BOTH SHORT TERM AND LONG TERM CAPITAL GAINS EARNED THROUGH PORTFOLIO MANAGEMENT SERVICES . PARA 12 OF THE ORDER OF THIS TRIBUNAL IS RELEVANT IN THIS REGARD WHICH READS AS UNDER: 12. WE HAVE CONSIDERED SUBMISSIONS OF LEARNED REPRE SENTATIVES OF PARTIES. FOLLOWING THE REASONING GIVEN BY US WHILE DECIDING THE APPEAL OF MANAN NALIN SHAH (ITA NO. 6166/MUM/2008, 2125/MUM/2008 AND 4126/MUM/200 8 AY 2003-04, 2004- 05 AND 2005-06 PARA 15-16 OF ORDER DATED 6.7.2012) WE HOLD THAT THE PROFIT TO THE ASSESSEE IN RESPECT OF TRANSACTIONS THROUGH PMS IS AN INVESTMENT AND IS TO BE ASSESSED UNDER THE HEAD CAPITAL GAIN. 6. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE ORDE RS OF THE REVENUE AUTHORITIES AS WELL AS THE ORDERS OF THIS TRIBUNAL AS CITED BY THE LD COUNSEL. CONSIDERING THE ABOVE SETTLED NATURE OF THE MATTER, WE ARE OF THE OPINION THAT THE PROFIT, BOTH LONG TERM AND SHORT TERM GAINS, EARNED BY THE ASSESSEE, THROUGH THE TRANSACTIONS CARRIED OUT BY PORTFOLIO MANAGEMENT SE RVICES (PMS) MUST BE ASSESSED AS CLAIMED BY THE ASSESSEE IE UNDER THE HEAD CAPIT AL GAINS INSTEAD OF BUSINESS INCOME. THEREFORE, THE ORDER OF THE CIT(A) HAS TO BE SET ASIDE AND ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED AND IN FAVOUR OF THE ASSESSEE . ACCORDINGLY, THE BOTH THE GROUNDS RAISED BY THE ASS ESSEE STAND ALLOWED. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED . I.T.A. NO.2134/M/2011 (AY: 2007-2008) (SHRI VIMAL PRAVIN SHAH, HUF) 9. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GRO UNDS WHICH READ AS UNDER: 1. LD CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF AO IN TREATING LONG TERM CAPITAL GAINS OF RS. 5,98,159/- ARISING OUT OF TRAN SACTIONS CARRIED OUT UNDER PORTFOLIO MANAGEMENT SERVICES OF KOTAK SECURITIES, AS BUSINESS INCOME. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE SAID RS. 5,98,159/- OUGHT TO BE TREATED AS INCOME FROM LONG TERM CAPITAL GAIN EXEMPT U/S 10(38 ) AS NOT AS BUSINESS INCOME. 2. LD CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF AO IN TREATING SHORT TERM CAPITAL GAINS OF RS. 3,59,923/- ARISING OUT OF TRAN SACTIONS CARRIED OUT UNDER PORTFOLIO MANAGEMENT SERVICES OF KOTAK SECURITIES AS BUSINESS INCOME. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE SAID RS. 3,59,923/- OUGHT TO BE TREATED AS INCOME FROM SHORT TERM CAPITAL GAIN AND NOT AS BUSI NESS INCOME. 10. FROM THE COMPARISON BOTH THE SETS OF THE GROUND S ABOVE, IT IS EVIDENT THAT THE GROUNDS RAISED IN THIS APPEALS IN PRINCIPLE A RE IDENTICAL TO THE GROUNDS 4 ADJUDICATED BY US IN THE ABOVE DECIDED APPEAL ITA N O.2135/M/2011. THUS, THE BOTH THE SHORT AND LONG TERM CAPITAL GAINS OUGHT NOT TO BE TAXED AS BUSINESS INCOME. ACCORDINGLY, GROUNDS 1 AND 2 RAISED BY THE ASSESSEE IN THIS APPEAL ARE ALLOWED . 11. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 8 TH DAY OF MARCH, 2013. SD/- SD/- (VIVEK VARMA) (D. KARUNAKARA R AO) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 8.3.2013 AT :MUMBAI OKK COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (A), CONCERNED. 4. THE CIT CONCERNED. 5. THE DR F, BENCH, ITAT, MUMBAI. 6. GUARD FILE. // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI