Sak Industries Private Limited, CHENNAI V. DCIT Company Circle VI(1), CHENNAI

ITA 2166/CHNY/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5144 (ITAT-CHENNAI)
• Duration Of Justice: 4 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 05-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G JOHNSON
• Assessee Lawyers: SANJEEV ADITYA M
• Keywords: Business income
• Section: 143(3); 115JB; 143(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: CHENNAI , , % BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./ ITA NO.2166/CHNY/2017 /ASSESSMENT YEAR: 2010-11 M/S. SAK INDUSTRIES PVT. LTD., 27-F, RANJITH ROAD, KOTTURPURAM, CHENNAI 600 085. [PAN: AAGCS 3326Q] VS. THE DY. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-VI(1), CHENNAI. ( /APPELLANT) ( '() /RESPONDENT) ) / APPELLANT BY : MR. SANJEEV ADITYA M, CA '() /RESPONDENT BY : MR. G. JOHNSON, ADDL. CIT /DATE OF HEARING : 06.09.2021 / DATE OF PRONOUNCEMENT : 24.09.2021 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-15 , CHENNAI IN I.T.A NO.749/A.Y 2010-11/CIT(A)-15/2013-14 DATED 19 .06.2017 RELEVANT TO THE ASSESSMENT YEAR 2010-11. 2. THE APPEAL FILED BY THE ASSESSEE IS DELAYED BY 0 1 DAY, FOR WHICH, THE ASSESSEE HAS FILED AFFIDAVIT FOR CONDONATION OF THE DELAY, TO WHICH, THE LD. DR HAS NOT RAISED ANY SERIOUS OBJECTION. C ONSEQUENTLY, SINCE I.T.A NO.2166/CHNY/2017 :- 2 -: THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE, THE DELAY IN FILING OF THE APPEAL STANDS CONDONED AND THE APPEAL IS ADMITT ED FOR ADJUDICATION. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PRIVATE LIMITED COMPANY AND FILED RETURN OF INCOME DECLARIN G TOTAL INCOME OF RS. 2,95,09,720/- UNDER THE NORMAL PROVISIONS AND RS. 6 ,22,75,168/- U/S. 115JB OF THE INCOME TAX ACT, 1961 (HEREINAFTER AS THE ACT) ON 25.09.2010. THE RETURN OF INCOME FILED BY THE ASSE SSEE WAS PROCESSED U/S. 143(1) OF THE ACT AFTER FOLLOWING THE PROCEDUR E ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT ON 28.02.2013. IN THE ASSESSMENT ORDER, THE A.O HAS NOTED THAT THE ASSESSEE HAS PURC HASED 1,25,000/- EQUITY SHARES FOR OF ING VYSYA BANK DURING THE MONT H OF JANUARY, FEBRUARY, 2009 ON VARIOUS DATES AND SOLD THE SAME D URING THE DURING THE MONTH OF SEPTEMBER, 2009. THE A.O WAS ASKED THE ASSESSEE WHY THE ABOVE TRANSACTIONS CANNOT BE CONSIDERED AS A BU SINESS INCOME. THE ASSESSEE HAS SUBMITTED BEFORE THE A.O THAT THE ABOVE SHARES DECLARED AS INVESTMENT IN THE BALANCE SHEET AND THE ASSESSEE IS ALSO SELL AND PURCHASE OF THE SHARES IN THE LAST SO MANY YEARS. IN THE EARLIER YEARS ALSO, THE SALE AND PURCHASE OF THE SHARES BY THE ASSESSEE TREATED AS BUSINESS INCOME WHICH HAS BEEN DISPUTED BY THE ASSESSEE IN APPEAL FOR A.Y 2007-08 & 2008-09. THE HOLDING O F THE SHARES BY THE I.T.A NO.2166/CHNY/2017 :- 3 -: ASSESSEE IS ONLY APPROXIMATELY SEVEN MONTHS, IF THE SAME WOULD HAVE BEEN AN INVESTMENT, THE ASSESSEE COULD NOT HAVE BEE N SOLD THE SAME WITHIN SUCH A SHORT SPAN OF TIME. THIS IS THE TRIT E LAW THAT THE TREATMENT BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT IS NOT DECI SIVE BUT THE SUBSTANCE OF THE TRANSACTION IS THE ASSESSEE HAS TR ANSACTED IN THESE SHARES IN THE MONTH OF JANUARY, FEBRUARY, 2009 AND SOLD THEM IN THE MONTH OF SEPTEMBER, 2009, SO THAT IT HAS ENOUGH TIM E TO DECIDE WHETHER TO AVAIL THE SET-OFF OF BROUGHT FORWARD CAP ITAL LOSS AND GIVE THE COLOUR TO THE ENTRIES AS PER ITS WISH. THE SHORT H OLDING OF THE SHARES AND THE CONDUCT OF THE ASSESSEE IN THE PAST SHOWS T HAT THE TRANSACTIONS ARE BUSINESS IN NATURE. ACCORDINGLY, THE PROFIT EA RNED ON SALE OF SHARES OF RS. 1,74,75,789/- IS BEING TREATED AS BUSINESS I NCOME OF THE ASSESSEE AND ACCORDINGLY THE ASSESSEE IS NOT ENTITL ED TO SET IT OFF WITH THE BROUGHT FORWARD CAPITAL LOSS FROM EARLIER YEARS . 4. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ORDER OF THE A.O BY OBSERVING THAT THE SHORT HOLDING OF SHARES AND THE CONDUCT OF THE ASSESSEE IN DISPOSING OF THE SAME WITHIN THE SHORT PERIOD OF SEVEN MONTHS THAT THE INTENTION OF THE ASSESSEE WAS NOT T O MAKE INVESTMENT BUT TO VENTURE INTO TRADE. ON BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFORE THE TRIBUNAL. I.T.A NO.2166/CHNY/2017 :- 4 -: 5. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE PURCHASED THE SHARES FOR THE YEAR UNDER CONSIDERATI ON. EQUITY SHARES OF ING VYSYA BANK SHOWS IN THE BOOKS OF ACCOUNT AS AN INVESTMENT AND SUBSEQUENTLY, THE SAME WERE SOLD AND SUBMITTED THAT THE INTENTION OF THE ASSESSEE IS ONLY IN INVESTMENT NOT IN DOING BUSINESS IN SHARES. HE FURTHER SUBMITTED THAT THE ASSESSEE ONLY PURCHAS ED SHARES FROM ONE COMPANY AND SOLD IT SUBSEQUENTLY AFTER SEVEN MO NTHS IN A SINGLE TRANSACTION THEREFORE, IT MAY NOT BE SAID THAT IT I S A BUSINESS TRANSACTION. 6. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE STRONGLY SUPPORTED THE ORDERS PASSED BY THE AUTHORITIES BELO W. 7. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERI ALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. WE FIND THAT THE ASSESSEE HAS PURCHASED 1,25,000/- EQUITY S HARES OF ING VYSYA BANK DURING THE MONTH OF JANUARY AND FEBRUARY , 2009 AND SUBSEQUENTLY DURING THE MONTH OF SEPTEMBER, 2009 AL L THE SHARES ARE SOLD. THE ASSESSEE ALSO SHOWS THE ABOVE TRANSACTIO N IN ITS BOOKS OF ACCOUNTS AS AN INVESTMENT. THE A.O IS OF THE OPINIO N THAT THE HOLDING PERIOD IS ONLY SEVEN MONTHS THEREFORE, IT HAS TO BE TREATED AS A BUSINESS INCOME AND THE SAME VIEW HAS BEEN CONFIRME D BY THE LD. CIT(A). FURTHER, WE FIND THAT THE ASSESSEE HAS PUR CHASED EQUITY I.T.A NO.2166/CHNY/2017 :- 5 -: SHARES OF ING VYSYA BANK, THE SAME WERE SOLD SUBSEQ UENTLY IT IS ONLY A SINGLE TRANSACTION SIMPLY BECAUSE THE ASSESSEE HA S SOLD SHARES WITHIN A PERIOD OF SEVEN MONTHS, IT CANNOT BE SAID THAT THE INTENTION OF THE ASSESSEE TO CARRY THE PURCHASE AND SHARES AS A BUSINESS ACTIVITY. IT HAS TO BE SEEN THE TOTAL ACTIVITIES OF THE ASSES SEE I.E., WHETHER THE ASSESSEE IS BUYING SOME SHARES SELLING AGAIN AND PU RCHASING THE SAME, IF THE ACTIVITY IS CONTINUED ACTIVITY BUYING AND SELLING IT MAY BE INFERRED THAT THE ASSESSEES INTENTION IS TO DO BUS INESS IN SHARES. IN THIS CASE, THE SINGLE TRANSACTION HAS BEEN DONE BY THE ASSESSEE. IN OUR VIEW, THE ACTIVITY CARRIED BY THE ASSESSEE I.E. , BUYING AND PURCHASE OF SHARES OF ING VYSYA BANK IS AN INVESTMENT NOT A BUSINESS ACTIVITY. ACCORDINGLY, WE REVERSE THE ORDER PASSED BY THE CIT (A) AND THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 24 TH SEPTEMBER, 2021 IN CHENNAI. SD/ - SD/ - ( ) (G. MANJUNATHA) /ACCOUNTANT MEMBER ( ) (V. DURGA RAO) /JUDICIAL MEMBER /CHENNAI, /DATED: 24 TH SEPTEMBER, 2021 . EDN/- /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( )/CIT(A) 4. /CIT 5. /DR 6. /GF