ACIT, New Delhi V. M/s Dynamic Continental Pvt. Ltd., New Delhi

ITA 214/DEL/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3563 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 24-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 14-01-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B KISHORE
• Keywords: Business income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B NEW DELHI) BEFORE SHRI RAJPAL YADAV AND SHRI K.G. BANSAL ITA NO. 214/DEL/2011 ASSESSMENT YEAR: 2007-08 ASSISTANT CIT, VS. M/S. DYNAMIC CONTINENTAL P.LTD ., CIRCLE-10(1), K-28, GREEN PARK EXTN., NEW DELHI. NEW DELHI (PAN: ) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI B. KISHORE, SR.DR RESPONDENT BY: SHRI UN MAR WAH, FCA ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LEARNED CIT(APPEALS) DATED 13.10.2010 PASSED FOR ASSESSMENT YEAR 2007-08. THE FIRST SUBSTANTIAL GRIEVANCE OF THE REVENUE IS THAT THE LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.96,68,736 WHICH WAS MADE BY THE ASSESSING OFFICER BY TREATING THE RECEIPT OF TRANSF ER OF SHARES AS A BUSINESS INCOME INSTEAD OF SHORT TERM CAPITAL GAIN OFFERED B Y THE ASSESSEE. 2. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE OUTS ET SUBMITTED THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF T HE ASSESSEE BY THE ORDER OF THE ITAT PASSED IN ITA NO.1055/DEL/10 IN ASSESSMENT YEAR 2006-07. LEARNED DR WAS UNABLE TO CONTROVERT THE CONTENTIONS OF THE LEARNED COUNSEL 2 FOR THE ASSESSEE. ON DUE CONSIDERATION OF THE FACT S AND CIRCUMSTANCES, WE FIND THAT ASSESSEE HAS FILED ITS RETURN OF INCOME O N 21.2.2008 DECLARING AN INCOME OF RS.1,79,66,320. THE ASSESSEE HAD PURCHASE D 25000 SHARES OF M/S. STEEL STRIPS WHEEL LTD. DURING ASSESSMENT YEAR 2006 -07 OUT OF WHICH 22500 SHARES WERE SOLD DURING THE SAME YEAR AND THE CLOSI NG BALANCE OF 2500 SHARES WERE BROUGHT FORWARD TO ASSESSMENT YEAR 2007 -08. THESE SHARES HAVE BEEN SOLD DURING THE ACCOUNTING PERIOD RELEVANT TO ASSESSMENT YEAR 2007-08. THE ASSESSEE HAS DISCLOSED THE PROFIT ON SALE OF SU CH SHARES AS SHORT TERM CAPITAL GAIN. ASSESSING OFFICER IN ASSESSMENT YEAR 2006-07, TREATED SIMILAR GAIN AS A BUSINESS INCOME, HOWEVER, LEARNED CIT(APP EALS) HELD THAT IT IS NOT BUSINESS INCOME RATHER IT IS SHORT TERM CAPITAL GAI N. THE REVENUE CARRIED THE MATTER IN APPEAL BEFORE THE ITAT IN ASSESSMENT YEAR 2006-07. THE ITAT HAS DISMISSED THE APPEAL BY OBSERVING AS UNDER: 4. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE FACTS STATED ABOVE, I T IS CLEAR THAT ASSESSING OFFICER HAD NOT BROUGHT ANY MATERIAL ON R ECORD TO PROVE THAT SHARES WERE PURCHASED FOR THE PURPOSE OF TRADI NG. IN CASE OF A COMPANY WHERE TRADING IN SHARES IS UNDERTAKEN SUCH AN ACTIVITY IS TO BE TREATED AS SPECULATION IN NATURE. LEARNED CIT(AP PEALS) HAD RECORDED A FINDING THAT FULL PAYMENT WAS MADE IN RE SPECT OF PURCHASE OF SHARES AND PHYSICAL DELIVERY WAS TAKEN. THE ASSE SSING OFFICER HAD NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT TH IS WAS A BUSINESS 3 TRANSACTION. THEREFORE, WE DO NOT FIND ANY INFIRMIT Y IN THE ORDER PASSED BY THE LEARNED CIT(APPEALS) TREATING THE TRA NSACTION THAT OF INVESTMENT AND BRINGING THE SALE PROCEEDS UNDER THE HEAD SHORT-TERM CAPITAL GAIN. ACCORDINGLY, LEARNED CIT(APPEALS) WAS JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO TREAT THE PROFIT S ARISING ON SALE OF SHARES UNDER THE HEAD SHORT-TERM CAPITAL GAIN. 3. IN THE PRESENT ASSESSMENT YEAR, THE REMAINING SH ARES I.E. 2500 HAVE BEEN SOLD BY THE ASSESSEE. THIS ACTIVITY IS AT PAR WITH THE SHARES SOLD IN EARLIER YEARS. AND IT CANNOT BE TERMED AS A BUSINES S INCOME. LEARNED CIT(APPEALS) HAS DELETED THE ADDITION BY FOLLOWING THE ORDER OF THE ITAT. RESPECTFULLY FOLLOWING THE ORDER OF THE ITAT, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL. IT IS REJECTED. 4. THE NEXT GRIEVANCE OF THE REVENUE IS THAT LEARNE D CIT(APPEALS) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO RECOMPU TE THE DISALLOWANCE UNDER SEC. 14A OF THE ACT. IT EMERGES OUT FROM THE RECORD THAT ASSESSING OFFICER HAS MADE THE DISALLOWANCE UNDER SEC. 14A WITH THE H ELP OF RULE 8D. LEARNED CIT(APPEALS) FOUND THAT HON'BLE MUMBAI HIGH COURT VIDE ITS DECISION DATED 12.8.2010 IN THE CASE OF GODREJ BOYC E MANUFACTURING LTD. VS. DCIT REPORTED IN 328 ITR 81 HAS HELD THAT RULE 8D HAS BEEN NOTIFIED W.E.F. 24.3.2008 AND IT WILL APPLY W.E.F. ASSESSMEN T YEAR 2008-09. IT IS NOT 4 APPLICABLE IN ASSESSMENT YEAR 2007-08. LEARNED CIT( APPEALS), THEREFORE, OBSERVED THAT DISALLOWANCE UNDER SEC. 14A CANNOT BE MADE UNDER RULE 8D IN THE PRESENT ASSESSMENT YEAR. THE GRIEVANCE OF THE R EVENUE IS THAT LEARNED CIT(APPEALS) CANNOT REMIT ANY ISSUE TO THE FILE OF THE ASSESSING OFFICER AFTER 1.6.2001 BECAUSE ITS POWERS TO REMIT ANY ISSU E TO THE ASSESSING OFFICER HAS BEEN OMITTED BY THE FINANCE ACT, 2001. CONSIDER ING THIS ASPECT OF THE MATTER, WE MODIFY THE ORDER OF THE LEARNED CIT(APPE ALS) AND SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR VERI FICATION AND RECOMPUTATION OF THE DISALLOWANCE REQUIRED TO BE MADE, IF ANY, UN DER SEC. 14A OF THE ACT. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED FOR STATISTICAL PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON 08.07.201 1 SD/ SD/- ( K.G. BANSAL ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 08/07/2011 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR