Aaspas Investment Pvt.Ltd., Ahmedabad V. The Income tax Officer, Ward-1(1), Ahmedabad

ITA 2409/AHD/2007

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 7765 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 10-06-2009
• Assessment Year: 2002-2003
• Appeal Filed On: 04-06-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Assessee Lawyers: VIJAY RANJAN
• Keywords: Business income; Capital Gains
• Section: 143(1); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BEFORE SHRI D.T.GARASIA, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER DATE OF HEARING : 10.06.09 DRAFTED ON:13.07. 09 ITA NO.2409/AHD/2007 ASSESSMENT YEAR : 2002-03 AASPAS INVESTMENT PVT.LTD. 607, 6 TH FLOOR SAKAR-I NR. GANDHIGRAM RLY STATION AHMEDABAD VS. THE INCOME TAX OFFICER WARD-1(1) AHMEDABAD PAN/GIR NO. : AABCA 3153 A (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI VIJAY RANJAN RESPONDENT BY: SHRI AVINASH KUMAR O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS APPEAL IS BY THE ASSESSEE AGAINST THE ORDER OF THE LD.CIT(APPEALS)-V, AHMEDABAD DATED 07/03/2007 P ASSED FOR ASSESSMENT YEAR 2002-03. 2. GROUND NOS.1 &2 OF ASSESSEES APPEAL READS AS UN DER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN NOT ALLOWING THE ASSESSEES CLAIM OF CARRY FORWARD OF LOSS UNDER THE HEAD CAPIT AL GAINS IN A SUM OF RS.44,38,017. ITA NO.2409/AHD /2007 M/S.AASPAS INVESTMENT PVT.LTD. VS. ITO ASST.YEAR 2002-03 - 2 - 2. WITHOUT PREJUDICE, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN HOLDING THAT FROM THE RELEVANT TRANSACTIONS THE ASSESSEE HAD INCURRED A BUSINESS LOSS O FRS.4,28,00 0 AND NO LOSS UNDER THE HEAD CAPITAL GAINS IN A SUM OF RS.44,38,017. 3. SINCE THE FACTS INVOLVED IN BOTH THE GROUNDS OF APPEALS ARE COMMON THEY ARE BEING DISPOSED OFF TOGETHER. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE- COMPANY IS ENGAGED IN THE BUSINESS OF INVESTMENT AN D TRADING IN SHARES AND FILED ITS RETURN OF INCOME ON 31/10/2002 DECLARING TOTAL INCOME AT LOS OF RS.2,50,677/-, THE SAME WAS PROCESSED UNDER SECTION 143(1) ON 28/01/2003 AT TOT AL INCOME OF RS.2,50,680/-. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE-COMPANY IN ITS COMPUTATION OF INCOME H AD COMPUTED THE INCOME FROM SALE OF SHARES UNDER THE H EAD INCOME FROM CAPITAL GAIN. HE FURTHER NOTICED THA T THE ASSESSEE-COMPANY HAD COMPUTED LONG TERM CAPITAL GA IN ON SUCH SHARES WHICH HAD BEEN SOLD AFTER HOLDING FO R A PERIOD OF MORE THAN ONE YEAR AND HAD CALCULATED SH ORT ITA NO.2409/AHD /2007 M/S.AASPAS INVESTMENT PVT.LTD. VS. ITO ASST.YEAR 2002-03 - 3 - TERM CAPITAL GAIN ON SALE OF SUCH SHARES WHICH HAD BEEN SOLD BEFORE THE END OF ONE YEAR FROM THE DATE OF PU RCHASE. ACCORDINGLY, SHORT TERM CAPITAL GAIN HAD BEEN COM PUTED AT RS.78,27,741/- AND LONG TERM CAPITAL LOSS WAS COMPUTED AT RS.1,22,57,582/-. THE ASSESSING OFFICER OBSERV ING THAT THE SHARES WERE STOCK-IN-TRADE OF THE ASSESSEE HELD T HAT THE SAME WERE BUSINESS ASSET AND PROFIT/LOSS ARISING ON SALE ARE ASSESSABLE UNDER THE HEAD BUSINESS INCOME WHICH W AS ALSO CONFIRMED BY THE LD. CIT(APPEALS). 5. BEING AGGRIEVED BY THE SAID ORDER OF THE LD. CIT(APPEALS), THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSE E CONTENDED THAT CERTAIN SHARES WHICH WERE SOLD DURIN G THE YEAR WERE HELD BY THE ASSESSEE FOR QUITE A LONG PER IOD OF MORE THAN 2 TO 3 YEARS AND, THEREFORE, THEY WERE IN VESTMENTS OF THE ASSESSEE AND PROFIT/LOSS ON SALE THEREOF SHO ULD HAVE ITA NO.2409/AHD /2007 M/S.AASPAS INVESTMENT PVT.LTD. VS. ITO ASST.YEAR 2002-03 - 4 - BEEN TREATED AS CAPITAL GAINS. HE ALSO EXPLAINED THAT THE SHARES WERE CLASSIFIED AS STOCK-IN-TRADE IN THE BAL ANCE SHEET FOR PROPER MANAGEMENT. 7. THE LD. DEPARTMENTAL REPRESENTATIVE HAS RELIED O N THE ORDERS OF THE LOWER AUTHORITIES. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS A VAILABLE ON RECORD. THE UNDISPUTED FACTS OF THE CASE ARE THAT T HE ASSESSEE HAS SHOWN SHARES AS STOCK-IN-TRADE IN ITS AUDITED BALANCE SHEET. SUCH SHARES WERE SOLD DURING THE YEA R UNDER CONSIDERATION AND THE PROFIT/LOSS ON SUCH SHARES W ERE DECLARED UNDER THE HEAD CAPITAL GAIN. THE ASSESSI NG OFFICER OBSERVING THAT THE SHARES WERE STOCK-IN-TRA DE OF THE ASSESSEE HELD THAT THE SAME WERE BUSINESS ASSET AND PROFIT/LOSS ARISING ON SALE ARE ASSESSABLE UNDER TH E HEAD BUSINESS INCOME WHICH WAS ALSO CONFIRMED BY THE L D. ITA NO.2409/AHD /2007 M/S.AASPAS INVESTMENT PVT.LTD. VS. ITO ASST.YEAR 2002-03 - 5 - CIT(APPEALS). THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE OF THE ASSESSEE, BEFORE US, CONTENDED THAT CERTAIN SHARES WHICH WERE SOLD DURING THE YEAR WERE HELD BY THE ASSESSEE FOR QUITE A LONG PERIOD OF MORE THAN 2 TO 3 YEARS AND, THEREFORE, THEY WERE INVESTMENTS OF THE ASSESS EE AND PROFIT/LOSS ON SALE THEREOF SHOULD HAVE BEEN TREATE D AS CAPITAL GAINS. HE ALSO EXPLAINED THAT THE SHARES WERE CLASSIFIED AS STOCK-IN-TRADE IN THE BALANCE SHEET F OR PROPER MANAGEMENT. WE FIND NO FORCE IN THE ABOVE SUBMISSIO N OF THE ASSESSEE. IN OUR CONSIDERED OPINION, WHETHER A N ASSET ACQUIRED BY THE ASSESSEE CONSTITUTES A CAPITAL ASSE T AS INVESTMENT OR BUSINESS ASSET AS STOCK-IN-TRADE DEPE NDS UPON THE INTENTION OF THE ASSESSEE AT THE TIME OF ACQUIS ITION OF SUCH ASSET. THE SAID INTENTION IS TO BE GATHERED FR OM THE CONDUCT OF THE ASSESSEE INCLUDING TREATMENT GIVEN B Y THE ASSESSEE TO THE SAID ASSET. SIMPLY BECAUSE A BUSIN ESS ASSET OR STOCK-IN-TRADE IS HELD BY THE ASSESSEE FOR A C ONSIDERABLE TIME, IT DOES NOT CONVERT THE STOCK-IN-TRADE INTO A CAPITAL ITA NO.2409/AHD /2007 M/S.AASPAS INVESTMENT PVT.LTD. VS. ITO ASST.YEAR 2002-03 - 6 - ASSET. FURTHER, THE EXPLANATION OF THE ASSESSEE T HAT THE SHARES WERE CLASSIFIED UNDER THE HEAD STOCK-IN-TRA DE FOR BETTER MANAGEMENT ALSO DOES NOT STAND TO REASON AS IT COULD NOT BE APPRECIATED HOW A SHARE CLASSIFIED AS INVESTMENT COULD NOT BE MANAGED IN THE SAME MANNER IN WHICH SHARES WAS MANAGED WHEN CLASSIFIED UNDER THE HEAD STOCK-IN-TRADE. FURTHER, IT IS OBSERVED THAT IN THE CASE OF THE ASSESSEE ITSELF THE ITAT AHMEDABAD BENCH C I N ITA NOS.874 & 875/AHD/2001 FOR THE ASSESSMENT YEAR 199 7-98, VIDE ITS ORDER DATED 30.9.2003 THE TRIBUNAL HAS HE LD AS UNDER :- 10.1. THE ASSESSING OFFICER HAS HELD THAT EVEN IF THE LOSS IS TO BE TREATED AS GENUINE, SINCE THE LOS S IS UNDER THE HEAD CAPITAL GAINS\, IT CANNOT BE SET OF F AGAINST ANY OTHER INCOME. TO SUPPORT SUCH CONTENTI ON, THE ASSESSING OFFICER HELD THAT IF THE BUSINESS OF THE ASSESSEE IS THAT OF INVESTMENT IN SHARES, THEN THE INCOME FROM BUSINESS OF INVESTMENTS WILL BE DIVIDEN D INCOME AND THE LOSS ARISING OUT OF SUCH SALE IS CONSIDERED AS CAPITAL LOSS. THE LEARNED CIT(A) HAS FURTHER HELD THAT IN VIEW OF EXPLANATION TO SECTION 73 OF THE ACT, THE LOSS IS NOT ADMISSIBLE. 10.2. IN OUR OPINION, THERE IS CLEAR ERROR ON PAR T OF BOTH THE LOWER AUTHORITIES. THE NATURE OF INCOME/LOSS WILL BE ITA NO.2409/AHD /2007 M/S.AASPAS INVESTMENT PVT.LTD. VS. ITO ASST.YEAR 2002-03 - 7 - DETERMINED FROM THE CONDUCT OF THE ASSESSEE. IF T HE SHARES ARE HELD AS STOCK-IN-TRADE, ANY PROFIT OR LO SS ARISING ON SALE THEREOF WILL BE COMPUTED UNDER THE HEAD BUSINESS INCOME. HOWEVER, IF THE INTENTION AT THE TIME OF PURCHASE WAS TO HOLD THE SAME AS INVESTMENT, THE PROFIT/LOSS ON TRANSFER THEREOF WIL L BE TAXABLE UNDER THE HEAD CAPITAL GAINS. THUS, IT IS NOT INCORRECT TO HOLD THAT IN ALL THE CASES OF INVESTME NT COMPANIES, THE LOSS ON SHARE TRANSACTION WILL BE TAXABLE UNDER THE HEAD CAPITAL GAINS ONLY. THE S AME IN WITH REFERENCE TO THE INTENTION AT THE TIME OF PURCHASE TO HOLD IT AS STOCK IN TRADE OR AS AN INVESTMENT. THE CONTENTION O THE LEARNED CIT(A) IS THAT THE LOSS IS NOT ADMISSIBLE IN VIEW OF THE EXPLANATI ON TO SEC. 73 OF THE ACT. EXPLANATION TO SEC. 73 IS NOT APPLICABLE TO AN ASSESSEE BEING A COMPANY WHOSE PRINCIPLE BUSINESS IS GRANTING OF LOANS AND ADVANCE S. SINCE THE ASSESSEE BEFORE US IS ALSO IN BUSINESS OF GRANTING LOANS AND ADVANCES, EXPLANATION TO SECTION 73 IS NOT APPLICABLE. ALSO EXPLANATION TO SEC. 73 WILL BE INVOKED ONLY AT THE TIME WHEN THE LOSS ON ACCOUNT O F SPECULATIVE BUSINESS IS TO BE CARRIED FORWARD. IN THE PRESENT CASE, THE ASSESSEE IS CARRYING ON THE ACTIV ITIES LIKE DEALING IN SHARES AS WELL AS FINANCIER AND BOT H THESE BUSINESS ARE SO INTERCONNECTED AND HENCE IS T O BE CONSIDERED AS SINGLE BUSINESS. THUS, THE INCOM E OF BOTH THESE BUSINESS WILL BE COMPUTED TOGETHER AS PE R THE PROVISION OF SECTIONS 28 TO 44 OF THE ACT. THE REFORE PROVISIONS OF SEC. 73 OF THE ACT ARE NOT BE INVOKED AS NO PART OF THE SAID LOSS IS CLAIMED TO BE CARRIED F ORWARD FOR SET OFF. SINCE WE HAVE HELD THE LOSS AS GENUI NE AND ON TRADING ACCOUNT, THE SAME IS PART OF BUSINESS LO SS AND IS TO BE SET OFF AGAINST THE BUSINESS INCOME. HENCE, THIS GROUND OF APPEAL IS ACCORDINGLY ALLOWED . ITA NO.2409/AHD /2007 M/S.AASPAS INVESTMENT PVT.LTD. VS. ITO ASST.YEAR 2002-03 - 8 - 9. THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE ITS CLAIM THAT THE SHARES IN QUESTION WERE ACQUIRED AS INVEST MENT AND NOT AS STOCK-IN-TRADE, AFTER REFLECTING SUCH SHAR ES AS STOCK- IN-TRADE IN THE AUDITED BALANCE SHEET. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE FIND NO GOOD REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT (APPEALS). FURTHER AS WE HAVE UPHELD THE VIEW OF THE LD. CIT(APPEALS) THAT T HE LOSS INCURRED BY THE ASSESSEE ON SALE OF SHARES ARE BUSI NESS LOSS IN ITS HANDS AND NOT LOSS ARISING UNDER THE HEAD CAPIT AL GAINS QUESTION OF ALLOWING OF CARRY FORWARD OF ANY AMOUNT AS LOSS UNDER THE HEAD CAPITAL GAINS DOES NOT ARISE. HENCE WE CONFIRM THE ORDER OF THE LD. CIT(APPEALS) ON THIS I SSUE ALSO. THEREFORE THE GROUNDS OF APPEAL OF THE ASSESSEE AR E DISMISSED. 10. GROUND NO.3 OF ASSESSEES APPEAL READS AS UNDER :- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN NOT DELETING THE WHOLE DISALLOW ANCE OF ENTERTAINMENT EXPENSES CLAIMED AT RS.19,742 AND HE HAS ERRED IN ALLOWING ONLY PART RELIEF IN A SUM OF ITA NO.2409/AHD /2007 M/S.AASPAS INVESTMENT PVT.LTD. VS. ITO ASST.YEAR 2002-03 - 9 - RS.12,242 AND THEREBY CONFIRMING DISALLOWANCE TO TH E EXTENT OF RS.7,500. 11. THE ABOVE GROUND HAS NOT BEEN PRESSED BY THE LD . AUTHORISED REPRESENTATIVE OF THE ASSESSEE AND, THER EFORE, THE SAME IS DISMISSED. 12. THE FOURTH GROUND OF APPEAL READS AS UNDER:- 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR WITHDRAW ANY GROUND OR GROUNDS OF APPEAL EITHER BEFORE OR DURING THE COURSE OF HEARING OF TH E APPEAL. 13. THIS GROUND OF APPEAL IS GENERAL IN NATURE REQU IRES NO ADJUDICATION BY US. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 24/07/2009. SD/- SD/- ( D.T.GARASIA ) ( N.S. SAINI ) JUDICIAL MEMBER A CCOUNTANT MEMBER AHMEDABAD; DATED / /2009 T.C. NAIR ITA NO.2409/AHD /2007 M/S.AASPAS INVESTMENT PVT.LTD. VS. ITO ASST.YEAR 2002-03 - 10 - COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE R ESPONDENT 3. THE CIT CONCERNED. 4. THE LD. CI T(APPEALS)-V, AHMEDABAD 5. THE DR, AHMEDABAD BENCH. 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD ORDER PRONOUNCED IN THE COURT ON 24/07/2009 SD/- SD/- (MAHAVIR SINGH) (N.S .SAINI) JM AM