AMOL FINANCIAL SERVICES P.LTD, MUMBAI V. DCIT 2(1), MUMBAI

ITA 2319/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8641 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Assessment Year: 2010-2011
• Appeal Filed On: 22-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANU KRISHNA AGGARWAL
• Assessee Lawyers: VENUGOPAL C NAIR
• Keywords: Business income; Earning of tax free income
• Section: 143(3); 14A; 12

Judgement Text

, TS TSTS TS INCOME TAX APPELLATE TRIBUNAL,MUMBAI - J BENCH , IOU IOUIOU IOU , BEFORE S/SH. RAJENDRA, ACCOUNTANT MEMBE R & PAWAN SINGH, JUDICIAL MEMBER /.ITA NO.2319/MUM/2015, /ASSESSMENT YEAR-2010-11 M/S AMOL FINANCIAL SERVICES P. LTD. 106, MOTABAI WADIA BLDG, 1 ST FLOOR, 22D, S A BRELVI ROAD, FORT, MUMBAI-20. PAN: AAACA5679A VS. DCIT (2(1), ROOM NO. 561, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400020 ( / APPELLANT) ( / RESPONDENT) ! / ASSESSEE BY : SHRI VENUGOPAL C. NAIR (AR) / REVENUE BY : MS. ANU KRISHNA AGGARWAL ( DR) ' / DATE OF HEARING : 02 -01-2017 ! '( / DATE OF PRONOUNCEMENT : 10 -02-2017 , 1961 ' 254(1) #$ ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER PAWAN SINGH, J.M. IOU IOUIOU IOU : 1. THIS APPEAL BY ASSESSEE U/S 253 OF THE INCOME TAX A CT (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-4, MUMBAI DATED 13.01.2015 FOR ASSESSMENT YEARS (AYS) 2010- 11.THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT(A) ERRED IN FACTS AND CIRCUMSTANCES AND IN LAW IN CONFIRMING THE ACTION OF AO HOLDING ST CAPITAL GAINS AS BUSINESS INCOME O VERLOOKING CONSISTENT TREATMENT OF THE APPELLANT OF THE GAINS MADE ON INVESTMENTS. 2. THE LEARNED CIT(A) ERRED IN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN CONFIRMING DISALLOWANCE MADE BY AO UNDER SECTION 14A OF THE IN COME TAX ACT 1961 3. THE LEARNED CIT(A) ERRED IN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN NOT ADJUDICATING GROUND SEEKING REBATE U/S 88E IN THE E VENT STCG DECLARED BY THE APPELLANT IS HELD AS BUSINESS INCOME. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR RELEVANT AY ON 04.10.2010 DECLARING TOTAL INCOME AT RS. 98,82,190/ -. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 24.02.2014. THE ASSESSING OFFI CER (AO) WHILE PASSING THE ASSESSMENT ORDER BESIDES THE OTHER ADDITION AND DIS ALLOWANCE TREATED THE SHORT TERM CAPITAL GAIN (STCG) OF RS. 99,15,619/- AND LONG TER M CAPITAL GAIN (LTCG) OF RS. 40,781/- AS BUSINESS INCOME. THE AO FURTHER DISALL OWED A SUM OF RS. 6,41,507/- U/S 14A OF THE ACT. ON APPAL BEFORE THE LD. CIT(A), THE ACT ION OF AO WAS CONFIRMED, THUS, FURTHER AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE FILED TH E PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE AN D PERUSED THE MATERIAL AVAILABLE ON 2 ITA NO.2319/M/2015 M/S AMOL FINANCIAL SERVICES P. L TD. RECORD. THE LD.AR OF THE ASSESSEE ARGUED THAT DURIN G THE YEAR UNDER CONSIDERATION, THE ASSESSEE DEALT WITH IN 14 SECURITIES. OUT OF 14 SEC URITIES, THE ASSESSEE EARNED 97% OF ITS GAIN FROM TWO SECURITIES I.E. JAIN IRRIGATION AND R EC LTD. AND IN REST OF THE STATE, THERE WAS A SHORT TERM CAPITAL LOSS (STCL). THE LD. AR OF THE ASSESSEE FURTHER ARGUED THAT IN EARLIER YEARS THE SIMILAR INCOME WAS ACCEPTED BY AO AS A STCG IN THE ORDER PASSED U/S 143(3) OF THE ACT. THE LD. AR OF THE ASSESSEE IN SUPPORT OF HIS SUBMISSION RELIED UPON THE DECISION OF CO-ORDINATE BENCH IN PARESH D. SHAH VS. JCIT IN ITA NO. 6602/MUM/2009 DATED 20.08.2010. ON THE OTHER HAND, LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF AUTHORITIES BELOW. 4. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND PERUSED THE ORDER OF AUTHORITIES BELOW. DURING THE ASSESSMENT PROCEEDING, THE AO OBS ERVED THAT ASSESSEE DISCLOSED STCG OF RS. 99,15,619/-. OUT OF THE TOTAL AVAILABLE CAPI TAL OF RS. 2.06 CRORE, THE ASSESSEE INVESTED RS. 1.48 CRORE IN SHARE AND SECURITIES. TH E ASSESSEE HAD DEALT WITH 14 SECURITIES. AFTER CONSIDERING THE PERIOD OF HOLDING, FREQUENCY OF TRANSACTION, QUANTUM OF TURNOVER, THE AO CONCLUDED THAT THE ASSESSEE IS INDULGE IN TRADIN G OF SHARE AND THE PROFIT DERIVED FROM SUCH TRADING INCLUDING SALE OF LTCG AND STCG WAS TR EATED AS BUSINESS INCOME. ON APPEAL BEFORE THE LD. CIT(A), THE ACTION OF AO WAS CONFIRMED, THE LD. CIT(A) ALSO CONCLUDED THAT ASSESSEE IS INVOLVED IN THE TRADING OF SHARE AND NOT INVESTOR AND THE TRANSACTION ARE CLEARLY IN THE NATURE OF BUSINESS T RANSACTION. WE HAVE SEEN THAT THE ASSESSEE HAS FILED THE BREAKUP OF STCG FOR RELEVANT AY. THE ASSESSEE HAS TRANSACTED IN THE FOLLOWING SCRIPTS: AMOL FINANCIAL SERVICES PVT. LTD. BREAK UP OF STCG FOR A Y 2010-11 SR N O NAME OP BAL 0-30 30-60 60-90 90-120 120-150 150-180 >180 TOTAL 1 AIA ENG 183610 0 0 0 0 0 0 0 183610 2 DISHAMAN 35929 0 0 0 0 0 0 0 35929 3 JAIN IRRIGATIO N 6353664 -231576 1375027 197509 939923 267771 8902 318 4 NHPC 0 410 303 2060 13375 0 0 0 16148 5 PIR GLASS 36621 0 0 0 0 0 168160 759 205540 6 PNB GILTS 0 -2160 -16751 -12157 40979 0 0 0 -7204 7 7 POCHIRAJU 0 240 -30869 184 0 0 0 0 -30445 8 RAMA PUL 0 0 -5772 0 0 0 0 0 -5772 9 RECLTD 984893 0 0 0 0 0 0 0 984893 10 RENUKA 0 -39813 0 0 0 0 0 0 -39813 3 ITA NO.2319/M/2015 M/S AMOL FINANCIAL SERVICES P. L TD. 11 SHREE PRECO 0 0 0 0 0 0 0 0 0 12 VIMTALAB S 0 4860 -19835 0 0 0 0 0 -14975 13 VOLTAS 0 0 0 6743 0 0 0 0 6743 14 WELSPUNI ND 0 0 -233 0 0 0 0 0 -233 15 WINDSOR 0 0 186 0 0 0 0 0 0186 7594716.74 -268039.00 1302056.25 -3170.00 169905.42 939922.76 435931.17 759.00 10172082.34 DEMAT CHGS TAXABLE STCG (256,465) 9,915,617 OF 15 SCRIPTS ON THREE NO NEW PURCHSAE HAS BEN MADE AT ALL DURING THE YEAR 5. THE PERUSAL OF ABOVE TABLE REVEALS THAT ASSESSEE EA RNED STCG OF RS. 89.02 LAKHS ON JAIN IRRIGATION AND RS. 9.84 LAKHS FROM REC LTD., WHICH CONSIST OF TOTAL ABOUT 97% OF STCG. WE HAVE FURTHER NOTICED THAT OUT OF THE CLAIM RS. 99 LAKHS , THE ASSESSEE HAS OPENING BALANCE OF RS. 73.39 LAKH IS OUT OF OPENING BALANCE OF STCG. THE ASSESSEE TRANSACTED ONLY IN 15 SCRIPTS. THE LD DR NOT DISPUTED THE THAT IN EARLIER YEAR THE SIMILAR INCOME WAS ACCEPTED AS STCG. THE CO-ORDINATE BENCH IN PARESH D . SHAH (SUPRA) WHILE CONSIDERING THE SIMILAR ISSUE HELD AS UNDER: 5. WE HAVE ALSO NOTED THAT IT IS AN ADMITTED POSITI ON - BOTH BY THE ASSESSING OFFICER AS ALSO BY THE CIT(A) - THAT THE MATERIAL FACTS OF THE PRESENT ASSESSMENT YEAR ARE THE SAME AS OF THE IMMEDIATELY PRECEDING ASSESSMENT YEAR WHI CH HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE COORDINATE BENCH. AS A MATTER O F FACT, THE SHARES SOLD IN THE CURRENT YEAR ARE CARRIED FORWARD FROM THE EARLIER YEAR, AND , VIDE TRIBUNAL'S ORDER FOR THE SAID YEAR, THESE SHARES WERE HELD AS INVESTMENTS. IN THI S VIEW OF THE MATTER, THE SALE OF THESE SHARES CANNOT GIVE RISE TO AN INCOME TAXABLE UNDER THE HEAD 'PROFIT AND GAINS FROM BUSINESS AND PROFESSION'; THE SAID INCOME CAN ONLY BE TAXED AS 'CAPITAL GAINS'. IN VIEW OF THESE DISCUSSIONS, AND BEARING IN MIND ENTI RETY OF THE CASE, WE DEEM IT FIT AND PROPER TO DIRECT THE ASSESSING OFFICER TO TAX THE I NCOME ON SALE OF SHARES AS CAPITAL GAINS. WE DIRECT SO. 6. CONSIDERING THE DECISION OF COORDINATE BENCH, WHEN THE SHARE SOLD IN THE CURRENT YEAR WAS CARRIED FORWARD AND THE SUBSTANTIAL GAIN WAS EARNED BY THE ASSESSEE ONLY FROM SALE OF TWO SCRIPTS. AND FOR EARLIER YEARS THE REVENUE HAS ACC EPTED THE STCG ON SIMILAR TRANSACTION, IN OUR CONSIDERED OPINION, THE INCOME EARNED BY ASS ESSEE CAN ONLY BE TAXED AS CAPITAL GAIN. HENCE, THE GROUND NO.1 RAISED BY ASSESSEE IS ALLOWED. 7. GROUND NO.2 RELATES TO DISALLOWANCE U/S 14A OF THE ACT. THE LD. AR OF THE ASSESSEE ARGUED THAT NO INTEREST DISALLOWANCE WAS REQUIRED R ATHER THE ASSESSEE HAS EARNED INTEREST INCOME WHICH WERE SHOWN IN THE P&L A/C AT RS. 7,66, 288/- AND THE ASSESSEE HAS ONLY PAID 4 ITA NO.2319/M/2015 M/S AMOL FINANCIAL SERVICES P. L TD. INTEREST OF RS. 3,55,692/-. THE LD. AR OF THE ASSES SEE ARGUED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE EARNED THE EXEMPT INCOM E OF RS. 1,10,518/-. THE ASSESSEE HAS NOT MADE ANY VOLUNTARY DISALLOWANCE AS THE ASSESSEE HAS NOT MADE ANY EXPANSES FOR EARNING SUCH INCOME. THE ASSESSEE HAS OWNED SUFFICI ENT INTEREST FREE FUNDS AVAILABLE WITH IT. THE LD AR SUBMITTED THAT THE DISALLOWANCE MAY BE RESTRICTED TO THE EXEMPT INCOME. THE LD AR FOR ASSESSEE IN SUPPORT OF HIS SUBMISSION THE LD AR FOR ASSESSEE RELIED UPON THE DECISION OF M/S VAHANVATI CONSULTANTS P. LTD. VS. D CIT IN ITA NO. 8700/MUM/2011 AND ON SANGHVI APPORVA LALUBHAI (HUF) VS. ACIT IN ITA NO. 7767/MUM/2014. ON THE OTHER HAND THE LD DR FOR THE REVENUE SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 8. WE HAVE CONSIDERED RIVAL CONTENTION OF THE PARTIES AND GONE THROUGH THE ORDER OF AUTHORITIES BELOW. DURING THE ASSESSMENT THE AO OB SERVED THAT THE ASSESSEE EARNED THE EXEMPT INCOME OF RS. 1,10,518/-. THE ASSESSEE HAS N OT MADE ANY VOLUNTARY DISALLOWANCE. THE AO ASKED THE ASSESSEE AS TO WHY THE DISALLOWANC E U/S 14A R.W. RULE 8D SHOULD NOT BE MADE. THE ASSESSEE CONTENDED THAT NO EXPENSES WERE INCURRED BY THE ASSESSEE TO EARN THE EXEMPT INCOME. THE CONTENTION OF THE ASSESSEE WAS N OT ACCEPTED AND THE AO INVOKE THE PROVISIONS OF RULE 8D AND MADE THE DISALLOWANCE OF RS. 6,41,507/-. ON APPEAL BEFORE THE LD. CIT(A), THE SIMILAR CONTENTION WAS RAISED. THE LD. CIT(A) CONCLUDED THAT ASSESSEE COULD NOT ESTABLISH THE NEXUS BETWEEN THE CAPITAL I NVESTED IN SECURITIES AND THE BORROWED LOAN. ALL THE FUNDS WERE HOTCHPOTCH AND CONFIRMED T HE DISALLOWANCE. CONSIDERING THE PECULIARITY OF THE FACT THAT THE ASSESSEE EARNED ON LY A SUM OF RS. 1,10,518/- AS EXEMPT INCOME. THE ASSESSEE HAS SUFFICIENT FUNDS AND EARNE D INTEREST INCOME OF RS. 3,55,692/-. THUS, WE RESPECTFULLY FOLLOWING THE DECISION OF COO RDINATE BENCH IN VAHANVATI CONSULTANTS P. LTD. VS. DCIT (SUPRA), RESTRICT THE DISALLOWANCE U/S 14A TO RS. 1,10,518/-. WE ORDER ACCORDINGLY. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH FEBRUARY 2017. + ! , - 10 QJ ( , 201 7 ! 12 3 SD/- SD/- ( / RAJENDRA ( IOU IOUIOU IOU / PAWAN SINGH)) ( / ACCOUNTANT MEMBER # ( / JUDICIAL MEMBER 2 /MUMBAI, - /DATE: 10.02.2017 SK 5 ITA NO.2319/M/2015 M/S AMOL FINANCIAL SERVICES P. L TD. ' )*+ ,+ / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ 45 ( 6' , 4. THE CONCERNED CIT / 45 6' 5. DR J BENCH, ITAT, MUMBAI / 781 '95 TS TSTS TS , . . . 2 6. GUARD FILE/ 1 2 7' /TRCOPY// + / BY ORDER, / DY./ASST. REGISTRAR ( 95 , 2 /ITAT, MUMBAI