The ITO, Ward-8(4), Ahmedabad V. Upkar Retail Pvt. Ltd., Ahmedabad

ITA 2237/AHD/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8078 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 31-07-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 05-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Assessee Lawyers: MEHUL K PATEL HEARING CONCLUD
• Keywords: Deemed to accrue or arise in india; Speculation loss
• Section: 143(3); 234B; 43(5)

Judgement Text

ITA NO.2237/AHD/2014 ASSESSMENT YEAR: 2011-12 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND MAHAVIR PRASAD JM] ITA NO.2237/AHD/2014 ASSESSMENT YEAR: 2011-12 INCOME TAX OFFICER, WARD 8(4), AHMEDABAD. .....APPELLANT VS. UPKAR RETAIL PVT. LTD., .RESPONDENT SHOP NO.213-214, AKTA SHOPPING CENTRE, NARANPURA, AHMEDABAD 680 013. [PAN : AABCU 0432 E] APPEARANCES BY V.K. SINGH FOR THE APPELLANT MEHUL K. PATEL FOR THE RESPONDENT HEARING CONCLUDED ON: 28.03.2018 ORDER PRONOUNCED ON : 18.06.2018 O R D E R PER PRAMOD KUMAR, AM: 1. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS CHALLENGED CORRECTNESS OF THE LD. CIT(A)S ORDER DATED 27 TH MAY, 2014 IN THE MATTER OF ASSESSMENT UNDER SECTIO N 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSM ENT YEAR 2011-12, ON THE FOLLOWING GROUNDS :- 1) THE LD. CIT(A)-XIV, AHMEDABAD HAS ERRED IN LAW A ND ON FACTS IN DELETING THE ADDITION OF RS.45,11,271 MADE ON ACCOU NT OF TREATMENT OF FUTURE & OPTIONS TRADINGS DERIVATIVE LOSSES OF ASS ESSEE COMPANY AS SPECULATION LOSS UNDER SECTION 73 OF THE ACT. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A)-XIV, AHMEDABAD OUGHT TO HAVE UPHELD THE ORDER OF THE ASS ESSING OFFICER. 3) IT IS THEREFORE, PRAYED THAT THE ORDER OF THE LD . CIT(A)-XIV, AHMEDABAD MAY BE SET-A-SIDE AND THAT OF THE ORDER O F THE ASSESSING OFFICER BE RESTORED. ITA NO.2237/AHD/2014 ASSESSMENT YEAR: 2011-12 PAGE 2 OF 5 2. WHEN THIS APPEAL WAS CALLED OUT FOR HEARING LEA RNED REPRESENTATIVES FAIRLY AGREE THAT THE ISSUE IN APPEAL IS COVERED, IN FAVOUR OF T HE ASSESSEE, BY HONBLE CALCUTTA HIGH COURTS JUDGEMENT IN THE CASE OF ASIAN FINANCIAL SERVICES LTD. VS. CIT, [(2017) 293 CTR 240 (CAL)] WHEREIN IT IS HELD THAT THE LOSS INCURRED ON ACCOUNT OF DERIVATIVES WOULD BE DEEMED BUSINESS LOSS UNDER PROVISO TO SECT ION 43(5) AND NOT SPECULATION LOSS AND, ACCORDINGLY EXPLANATION TO SE CTION 73 COULD NOT BE APPLIED . THEIR LORDSHIPS HAVE FURTHER HELD THAT THAT THE LOSS (ON ACCOUNT OF SALE OF DERIVATIVES) WOULD BE ALLOWED TO BE SET OFF AGAINST INCOME ARISI NG OUT OF PROPER BUSINESS BECAUSE DERIVATIVES WERE TREATED DIFFERENTLY WITHIN MEANING OF EXPLANATION TO SECTION 73(4) AND NOT AT PAR WITH THE SHARES . THE VERY FOUNDATION OF THE GRIEVANCE RAISED BY THE APPELLANT ASSESSING OFFICER THUS CEAS ES TO HAVE A LEGALLY SUSTAINABLE BASIS. THERE IS NO CONTRARY DECISION, OR ANY OTHER BINDING JUDICIAL PRECEDENT, FROM HONBLE JURISDICTIONAL HIGH COURT. 3. IN ALL FAIRNESS, HOWEVER, IT IS ALSO NOTICED, FR OM THE TEXT OF HONBLE CALCUTTA HIGH COURTS JUDGMENT IN THE CASE OF ASIAN FINANCIAL SER VICES (SUPRA) ITSELF, THAT HONBLE DELHI HIGH COURT HAD TAKEN A DIFFERENT VIEW ON THIS MATTER AND DECIDED THE SAME, IN PRINCIPLE, AGAINST THE ASSESSEE. THERE ARE THUS CO NFLICTING LEGAL VIEWS OF HONBLE NON- JURISDICTIONAL HIGH COURT AND THAT, BEYOND ANY DISP UTE OR CONTROVERSY, THERE IS NO JUDICIAL PRECEDENTS ARE AVAILABLE FROM HONBLE JURISDICTIONA L HIGH COURT. WE HAVE NOTED THAT HONBLE SUPREME COURT HAS ADMITTED SLP AGAINST THE ASIAN FINANCIAL SERVICES DECISION REFERRED TO ABOVE, VIDE JUDGMENT REPORTED IN [2016] 75 TAXMANN.COM 68 (SC)/[2016] 243 TAXMAN 147 (SC) , BUT, AS IS THE SETTLED LEGAL POSITION, MERE PENDE NCY OF APPEAL IN A HIGHER JUDICIAL FORUM DOES NOT DILUT E THE BINDING NATURE OF A JUDICIAL PRECEDENT. THERE IS ALSO NO REQUEST FROM THE REVEN UE AUTHORITIES TO KEEP THE MATTER PENDING TILL ADJUDICATION ON THE AFORESAID APPEAL B Y HONBLE SUPREME COURT. 4. AS TO WHAT SHOULD BE THE VIEW TO BE TAKEN IN THE SE CIRCUMSTANCES, I.E. WHEN THERE ARE CONFLICTING DECISIONS OF HONBLE COURTS A BOVE AND WHEN WE DONOT HAVE THE BENEFIT OF THE GUIDANCE BY HONBLE JURISDICTIONAL H IGH COURT, WE FIND GUIDANCE FROM THE DECISION OF A CO-ORDINATE BENCH IN THE CASE OF TEJ INTERNATIONAL PVT LTD VS DCIT [(2000) 69 TTJ 650 (DEL)] WHEREIN THE COORDINATE BENCH HAS, INTER ALIA, OBSE RVED AS FOLLOWS:- ITA NO.2237/AHD/2014 ASSESSMENT YEAR: 2011-12 PAGE 3 OF 5 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUS ED THE RECORDS. IT IS NOT IN DISPUTE THAT TWO HIGH COURTS, NAMELY, GAUHATI HIGH COURT AND KARNATAKA HIGH COURT, HAVE EXPRESSED CONFLICTING VIEWS REGARDING L EVY OF INTEREST UNDER SECTIONS 234B AND 234C ON DEEMED INCOME UNDER SECTION 115J. HONBLE GAUHATI HIGH COURT HAS OPINED THAT WHEN LEGAL FICTION IS TO BE C REATED FOR AN OBVIOUS PURPOSE, FULL EFFECT TO IT SHOULD BE GIVEN. QUOTING LORD ASQ UITH WHO SAID, 'THE STATUTE SAYS THAT YOU MUST IMAGINE A CERTAIN STATE OF AFFAIRS, I T DOES NOT SAY THAT HAVING DONE SO, YOU MUST CAUSE OR PERMIT YOUR IMAGINATION TO BO GGLE WHEN IT COMES TO INEVITABLE COROLLARIES OF THAT STATE OF AFFAIRS', H ONBLE GAUHATI HIGH COURT HAS HELD THAT THERE IS NO STATUTORY EXCEPTION EXCLUDING THE OPERATIONS OF SECTION 115J OF THE ACT. HONBLE KARNATAKA HIGH COURT, ON THE OTHER HAND, HAS HELD THAT THE WORDS FOR THE PURPOSES OF THIS SECTION IN EXPLANA TION TO SECTION 115J(1A) ARE RELEVANT AND CANNOT BE CONSTRUED TO EXTEND BEYOND T HE COMPUTATION OF LIABILITY TO TAX. IN THE OPINION OF THE HONBLE KARNATAKA HIGH C OURT, WHEN A DEEMING FICTION IS BROUGHT UNDER THE STATUTE, IT IS TO BE CARRIED T O ITS LOGICAL CONCLUSIONS BUT WITHOUT CREATING FURTHER DEEMING FICTION SO AS TO I NCLUDE OTHER PROVISIONS OF THE ACT WHICH ARE NOT MADE SPECIFICALLY APPLICABLE. IT IS THUS EVIDENT THAT VIEWS OF THESE TWO HIGH COURTS ARE IN DIRECT CONFLICT WITH E ACH OTHER. CLEARLY, THEREFORE, THERE IS NO MEETING GROUND BETWEEN THESE TWO JUDGME NTS AND WE ARE ALSO USABLE TO ACCEPT THE SUGGESTION THAT WE CAN FOLLOW EARLIER DECISIONS OF THIS TRIBUNAL, OR SUCH VIEWS, WHICHEVER SEEM MORE REASONABLE OF ONE O F THESE HIGH COURTS. 7. IT MAY BE MENTIONED THAT SOME BENCHES OF THE TRIBU NAL HAVE EITHER TAKEN INDEPENDENT VIEW ON THE ISSUE IN THIS APPEAL OR HAV E LATER ON FOLLOWED HONBLE GAUHATI HIGH COURT, REFERRED TO ABOVE. HOWEVER, WIT H THE LATEST JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN KWALITY BISCUITS LTD.S CASE ( SUPRA ) THE SITUATION IS MATERIALLY DIFFERENT. IN THE HIERARCHICAL JUDICI AL SYSTEM THAT WE HAVE, BETTER WISDOM OF THE COURT BELOW HAS TO YIELD TO HIGHER WI SDOM OF THE COURT ABOVE AND, THEREFORE, ONE A AUTHORITY HIGHER THAN THIS TRIBUNA L HAS EXPRESSED AN OPINION ON THAT ISSUE, WE ARE NO LONGER AT LIBERTY TO RELY UPO N EARLIER DECISIONS OF THIS TRIBUNAL EVEN IF WE WERE A PARTY TO THEM. SUCH A HI GH COURT BEING A NON- JURISDICTIONAL HIGH COURT DOES NOT ALTER THE POSITI ON AS LAID DOWN BY HONBLE BOMBAY HIGH COURT IN THE MATTER OF CIT V. GODAVARI DEVI SARAF [1978] 113 ITR 589 (BOM.). THEREFORE, WE DO NOT CONSIDER IT PERMISSIB LE TO RELY UPON THE EARLIER DECISIONS OF THIS TRIBUNAL EVEN IF ONE OF THEM IS B Y A SPECIAL BENCH. IT WILL BE WHOLLY INAPPROPRIATE TO CHOOSE VIEWS OF ONE OF THE HIGH COURTS BASED ON OUR PERCEPTIONS ABOUT REASONABLENESS OF THE RESPECTIVE VIEWPOINTS AS SUCH AN EXERCISE WILL DE FACTO AMOUNT TO SITTING IN JUDGMENT OVER THE VIEWS OF TH E HIGH COURTS SOMETHING DIAMETRICALLY OPPOSED TO THE VERY BASIC PRINCIPLES OF HIERARCHICAL JUDICIAL SYSTEM. WE HAVE TO, WITH OUR HIGHEST RESPECT OF BOTH THE HONBLE HIGH COURTS, ADOPT AN OBJECTIVE CRITERION F OR DECIDING AS TO WHICH OF THE HONBLE HIGH COURT SHOULD BE FOLLOWED BY US. 8. WE FIND GUIDANCE FROM THE JUDGMENT OF HONBLE SUPR EME COURT IN THE MATTER OF CIT V. VEGETABLE PRODUCTS LTD. [1973] CTR (SC) 177 : [1972] 88 ITR 192 (SC) HONBLE SUPREME COURT HAS LAID DOWN A PRINCIPLE THA T 'IF TWO REASONABLE CONSTRUCTIONS OF A TAXING PROVISION ARE POSSIBLE, T HAT CONSTRUCTION WHICH FAVOURS THE ASSESSEE MUST BE ADOPTED. THIS PRINCIPLE HAS BE EN CONSISTENTLY FOLLOWED BY THE VARIOUS AUTHORITIES AS ALSO BY THE HONBLE SUPR EME COURT ITSELF. IN ANOTHER SUPREME COURT JUDGMENT, PETRON ENGG. CONSTRUCTION (P.) LTD. & ANR. V. CBDT & ORS. [1988] 75 CTR (SC) 20 : [1989] 175 ITR 523 (SC), IT HAS BEEN REITERATED ITA NO.2237/AHD/2014 ASSESSMENT YEAR: 2011-12 PAGE 4 OF 5 THAT THE ABOVE PRINCIPLE OF LAW IS WELL ESTABLISHED AND THERE IS NO ADOPT ABOUT THAT. HONBLE SUPREME COURT HAD, HOWEVER, SOME OCCA SION TO DEVIATE FROM THIS GENERAL PRINCIPLE OF INTERPRETATION OF TAKING STATU TE WHICH CAN BE CONSTRUED AS EXCEPTION TO THIS GENERAL RULE. IT HAS BEEN HELD TH AT THE RULE OF RESOLVING AMBIGUITIES IN FAVOUR OF TAX PAYER DOES NOT APPLY T O DEDUCTIONS, EXEMPTIONS AND EXCEPTIONS WHICH ARE ALLOWABLE ONLY WHEN PLAINLY AU THORISED. THIS EXCEPTION, LAID DOWN IN LITTMAN V. BARRON 1952 (2) AIR 393 AND FOLLOWED BY APEX COURT IN MANGALORE CHEMICALS & FERTILIZERS LTD. V. DY. COMMR. OF CCT [1992] SUPPL. (1) SCC 21 AND NOVOPA INDIA LTD. V. CCE & C 1994 (73) ELT 769 (SC), HAS BEEN SUMMED UP IN THE WORDS OF LORD LOHEN, 'IN CASE OF AMBIGUITY, A TAXING STATUTE SHOULD BE CONSTRUED IN FAVOUR OF A TAX-PAYE R DOES NOT APPLY TO A PROVISION GIVING TAX-PAYER RELIED IN CERTAIN CASES FROM A SEC TION CLEARLY IMPOSING LIABILITY'. THIS EXCEPTION, IN THE PRESENT CASE, HAS NO APPLICA TION. THE RULE OF RESOLVING AMBIGUITY IN FAVOUR OF THE ASSESSEE DOES NOT ALSO A PPLY WHERE THE INTERPRETATION IN FAVOUR OF ASSESSEE WILL HAVE TO TREAT THE PROVIS IONS UNCONSTITUTIONAL, AS HELD IN THE MATTER OF STATE OF M.P. V. DADABHOYS NEW CHIRMIRY PONRI HILL COLLIERY CO. LTD. AIR 1972 (SC) 614. THEREFORE, WHAT FOLLOWS IS THAT IN THE PECULIAR CIRCUMSTANCES OF THE CASE AND LOOKING TO THE NATURE OF THE PROVISIONS WITH WHICH WE ARE PRESENTLY CONCERNED, THE VIEW EXPRESSED BY T HE HONBLE KARNATAKA HIGH COURT IN THE CASE OF KWALITY BISCUITS LTD. CASE ( SUPRA ), WHICH IS IN FAVOUR OF ASSESSEE, DESERVES TO BE FOLLOWED BY US. WE, THEREF ORE, ORDER THE DELETION OF INTEREST UNDER SECTIONS 234B AND 234C IN THIS CASE. 5. IN VIEW OF THE ABOVE DISCUSSION, QUITE CLEARLY, EVEN WHEN THE DECISION OF HONBLE NON-JURISDICTIONAL HIGH COURTS ARE IN CONFLICT WITH EACH OTHER, THE ONLY OBJECTIVE CRITERIA WHICH FOLLOWED BY US IS TO TAKE A VIEW FAVOURABLE T O THE ASSESSEE. HONBLE CALCUTTA HIGH COURTS DECISION IN THE CASE OF ASIAN FINANCIA L SERVICES LTD (SUPRA) , THEREFORE, IS REQUIRED TO BE FOLLOWED BY US. RESPECTFULLY FOLLOW ING THE SAME, WE UPHOLD THE CONCLUSIONS ARRIVED AT BY THE LEARNED CIT(A) AND RE JECT THE GROUNDS RAISED BY THE REVENUE. 6. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF JUNE, 2018. SD/- SD/- MAHAVIR PRASAD PR AMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: 18 TH JUNE, 2018. PBN/* ITA NO.2237/AHD/2014 ASSESSMENT YEAR: 2011-12 PAGE 5 OF 5 COPIES TO: (1) THE APPELLANT (2) THE RESPONDE NT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD