ACIT, CIR-1, KALYAN V. SISTON INDIA PVT.LTD., DOMBIVALI

ITA 2609/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5715 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 11-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Assessee Lawyers: RAGHUTTAMA RAJEEV HABBU
• Keywords: Business income; Rule of consistency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR , ACCOUNTANT MEMBER ITA NO. 2609 / MUM./2016 ( ASSESSMENT YEAR : 20 11 12 ) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 1 , KALYAN, DIST. THANE . APPELLANT V/S M/S. SITSON INDIA PVT. LTD. W 76, MIDC, PHASE II DOMBIVALI (EAST), THANE PAN AADCS9489D . RESPONDENT REVENUE BY : SHRI RAM TIWARI ASSESSEE BY : SHRI RAGHUTTAMA RAJEEV HABBU DATE OF HEARING 0 3 .0 7 .2018 DATE OF ORDER 11.07.2018 O R D E R PER SAKTIJIT DEY, J.M. AFORESAID APPEAL BY THE REVENUE IS AGAINST ORDER DATED 1 8 TH JANUARY 201 6 , PASSED BY THE LEARNED COMMISSIONER (APPEALS) 2 , THANE , FOR THE ASSESSMENT YEAR 20 11 1 2 . 2 . GROUNDS NO.1 AND 2, ARE THE EFFECTIVE GROUNDS IN THE PRESENT APPEAL. IN GROUND NO.1, THE REVENUE HAS CHALLENGED DELETION OF ADDITION OF ` 26,54,640, MADE UNDER SECTION 36(1)(III) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ). 2 M/S. SITSON INDIA PVT. LTD. 3 . BRIEF FACTS ARE, THE ASSESSEE COMPANY , AS STATED BY THE ASSESSING OFFICER, IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF BOILERS FOR SUGAR INDUSTRY WITH DIVERSIFYING INTEREST IN POWER GENERATION / CO GENERATION PROJECTS. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FIL ED ITS RETURN OF INCOME ON 29 TH SEPTEMBER 2011, DECLARING TOTAL INCOME OF ` 6,79,72,467. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICING THAT THE ASSESSEE HAS CLAIMED DEDUCTION ON ACCOUNT OF INTEREST EXPENDITURE AMOUNTING TO ` 26,54,640, CALLED FOR THE NECESSARY DETAILS. AFTER EXAMINING THE DETAILS FURNISHED BY THE ASSESSEE, HE FOUND THAT THE INTEREST EXPENDITURE IS ON ACCOUNT OF UNSECURED LOAN OF 2,21,22,000 AVAILED FROM THE DIRECTORS FOR INVESTING AN AMOUNT OF ` 3,25,00 , 0 00 IN M/S. HASSA N BIOMASS POWER CO. PVT. LTD. NOTICING THIS FACT, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE WAS DELIBERATELY DIVERTING FUND FOR NON BUSINESS PURPOSE TO UNJUSTLY ENRICH THE DIRECTORS BY PAYING THEM INTEREST AGAINST THE UNSECURED LOAN. THEREFOR E, HE CALLED UPON THE ASSESSEE TO EXPLAIN WHY THE INTEREST EXPENDITURE SHOULD NOT BE DISALLOWED IN TERMS OF SECTION 36(1)(III) OF THE ACT. THOUGH, THE ASSESSEE OBJECTED TO THE PROPOSED DISALLOWANCE AND ALSO SUBMITTED BEFORE THE ASSESSING OFFICER THAT SIMIL AR DISALLOWANCE MADE IN ASSESSMENT YEAR 2008 09, WAS DELETED BY THE TRIBUNAL, HOWEVER, THE ASSESSING OFFICER REJECTING THE SUBMISSIONS OF THE ASSESSEE PROCEEDED TO DISALLOW THE INTEREST PAID OF 3 M/S. SITSON INDIA PVT. LTD. ` 26,54,640 UNDER SECTION 36(1)(III) OF THE ACT BY OPINING THA T IT DOES NOT QUALIFY FOR DEDUCTION UNDER SECTION 36(1)(III) OF THE ACT. AS REGARDS ASSESSEES CONTENTION THAT THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN ASSESSMENT YEAR 2008 09, THE ASSESSING OFFICER OBSERVED THAT THE DEPARTMENT HA S PREFERRED APPEAL AGAINST THE ORDER OF THE TRIBUNAL. BEING AGGRIEVED OF THE DISALLOWANCE MADE BY THE ASSESSING OFFICER THE ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4 . THE LEARNED COMMISSIONER (APPEALS) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE AND NOTICING THAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR S 2008 09 TO 2010 11, SIMILAR DISALLOWANCE MADE BY THE ASSESSING OFFICER HAVE BEEN DELETED BY THE APPELLATE AUTHORITIES , FOLLOWED THE SAME AND ACCORDINGLY DELETED THE ADDITION MA DE IN THE IMPUGNED ASSESSMENT YEAR AS WELL. 5 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. AT THE OUTSET, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT IDENTICAL DISPUTE ARISING IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 20 08 09, 2009 10 AND 2010 11 HAVE BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE UNDER SIMILAR FACTS AND CIRCUMSTANCES. HE SUBMITTED , THERE BEING NO DISSIMILARITY IN FACT S, THE DECISIONS OF THE TRIBUNAL IN THE PRECEDING ASSESSMENT YEARS WOULD SQUAREL Y APPLY TO THE FACTS OF THE PRESENT CASE. 4 M/S. SITSON INDIA PVT. LTD. 6 . THE LEARNED DEPARTMENTAL REPRESENTATIVE FAIRLY SUBMITTED THAT IDENTICAL DISPUTE ARISING IN EARLIER ASSESSMENT YEARS HAVE BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL. 7 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. AS COULD BE SEEN FROM THE FACTS AND MATERIAL ON RECORD, THE INVESTMENT OF ` 3.25 CRORE IN M/S. HASSAN BIOMASS POWER CO. PVT. LTD. WAS MADE IN THE FINANCIAL YEAR 2007 08 CORRESPONDING TO THE ASSESSMENT YEAR 2008 09. WHILE COMPLETING THE ASSESSMENT FOR A.Y. 2008 09, THE ASSESSING OFFICER MADE DISALLOWANCE OF INTEREST EXPENDITURE AMOUNTING TO ` 26,54,640 UNDER SECTION 36(1)(III) OF THE ACT STATING THAT THE ASSESSEE HAD DELIBERATED DIVERTED I NTEREST BEARING FUND FOR NON PRODUCTIVE PURPOSES. HOWEVER, THE LEARNED COMMISSIONER (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. BEING AGGRIEVED OF THE AFORESAID DECISION OF THE LEARNED COMMISSIONER (APPEALS), THE REVENUE CAME IN APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL, WHILE DECIDING THE APPEAL IN ITA NO.4540/MUM./2012, DATED 14 TH FEBRUARY 2016, AFTER CONSIDERING THE SUBMISSIONS MADE FROM BOTH THE SIDES, HELD THAT THE INVESTMENT OF ` 3 .25 CRORE IN M/S. HASSAN BIOMASS POWER CO. PVT. LTD., CANNOT BE SAID TO BE FOR NON BUSINESS PURPOSE AND ACCORDINGLY UPHELD THE DECISION OF THE LEARNED COMMISSIONER (APPEALS). THE AFORESAID DECISION OF THE CO ORDINATE 5 M/S. SITSON INDIA PVT. LTD. BENCH WAS FOLLOWED BY THE TRIBUNAL WHIL E DECIDING IDENTICAL ISSUE ARISING IN REVENUES APPEAL IN ITA NO. 5386/MUM./2013, DATED 29 TH FEBRUARY 2016 AND ITA NO.7239/MUM./2014, DATED 8 TH AUG UST 2017 FOR ASSES SMENT YEARS 2009 10 AND 2010 11 RESPECTIVELY. THERE BEING NO DIFFERENCE IN FACT S BROUGHT TO OUR NOTICE BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, RESPECTFULLY FOLLOWING THE CONSISTENT VIEW OF THE TRIBUNAL IN ASSESSEES OWN CASE AS REFERRED TO ABOVE, WE UPHOLD THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) ON THE ISSUE BY DISMISSING THE GROUND RAISED. 8 . IN GROUND NO.2, THE REVENUE HAS CHALLENGED THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) IN ACCEPTING ASSESSEES CLAIM OF INCOME DERIVED FROM SHARE TRANSACTION AS SHORT TERM CAPITAL GAIN AND ADJUSTMENT OF LONG TERM CAPITAL LOSS AGAINST SUCH INCOME. 9 . BRIEF FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ON VERIFYING THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE FOUND THAT IN THE RELEVANT PREVIOUS YEAR THE ASSESSEE HAS DERIVED INCOME OF ` 16,62,716 FROM SHARE TRANSACTION AND AFTER SETTING OFF LONG TERM CAPITAL LOSS OF ` 5,64,067 AGAINST THE SAID INCOME THE ASSESSEE HAS OFFERED NET SHORT TERM CAPITAL GAIN OF ` 10,98,649. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE INCOME DERIVED FROM SHA RE TRANSACTION HAS TO BE TREATED AS BUSINESS INCOME AS WAS HELD BY HIM IN ASSESSMENT YEAR 2008 09 AND SUBSEQUENT ASSESSMENT YEAR S . 6 M/S. SITSON INDIA PVT. LTD. ACCORDINGLY, HE HELD THAT THE AMOUNT OF ` 16,62,716, SHOWN AS SHORT TERM CAPITAL GAIN HAS TO BE TREATED AS BUSINESS INCOME. F URTHER, THE ASSESSING OFFICER ALSO ADDED BACK THE LONG TERM CAPITAL LOSS OF ` 5,64,087, TO THE INCOME OF THE ASSESSEE. THE ASSESSEE CHALLENGED THE AFORESAID ADDITION BEFORE THE FIRST APPELLATE AUTHORITY. 10 . THE LEARNED COMMISSIONER (APPEALS) AFTER CONSIDERIN G THE SUBMISSIONS OF THE ASSESSEE REVERSED THE DECISION OF THE ASSESSING OFFICER BY ACCEPTING ASSESSEES CLAIM OF SHORT TERM CAPITAL GAIN. THE OBSERVATIONS OF THE LEARNED COMMISSIONER (APPEALS) IN THIS REGARD ARE REPRODUCED AS UNDER: 7.3 FROM THE ABOVE DISCUSSION IT IS SEEN THAT THE HOLDING PERIOD OF MORE THAN 90% OF PORTFOLIO IS FOR PERIOD OF MORE THAN 1 YEAR, 6% FROM 3 MONTHS TO 1 YEAR AND 4% LESS THREE MONTHS. THESE ASPECTS CLEARLY ESTABLISH THE FACTS THAT THE APPELLANT IS NOT TRADER IN THE SHARES, AS HAS BEEN HELD BY THE A.O., THEREFORE, THE GAIN FROM SALE OF SHARES CANNOT BE ASSESSED AS BUSINESS INCOME. IN THE IDENTICAL FACTS, IN A.Y. 2009 10 AND 2010 11, MY PREDECESSORS HAVE DECIDED THE ISSUE IN FAVOUR OF THE APPELLANT, THEREFORE, RESPECTFULLY FOLLO WING THE ABOVE FINDNGS, IN MY CONSIDERED OPINION THE ACTION OF THE A.O. TREATING THE CAPITAL GAIN AMOUNTING TO ` 1,98,649 (SHORT TERM CAPITAL GAIN ` 16,62,716 LTCL OF ` 5,64,067) AS BUSINESS INCOME, IS NOT IN ORDER, HENCE, NOT ACCEPTABLE. THE A.O. IS, THEREFORE, DIRECTED ACCORDINGLY. BOTH THE GROUNDS OF APPEAL ARE ALLOWED. 11 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER AND GROUNDS RAISED. 12 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , SIMILAR DECISION OF THE ASSESSING OFFICER TO ASSESS THE INCOME FROM SHARE 7 M/S. SITSON INDIA PVT. LTD. TRANSACTION AS BUSINESS INCOME WAS REVERSED BY THE FIRST APPELLATE AUTHORITY IN ASSESSMENT YEAR S 2008 09 AND 2009 1 0 AND 2010 11. HE SUBMITTED , WHEN THE ISSUE RELATING TO ASSESSMENT YEAR 2008 09 WAS AGITATED BY THE DEPARTMENT BEFORE THE TRIBUNAL , THE TRIBUNAL RESTORED THE ISSUE TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION. HE SUBMITTED , WHILE RE ADJUDICATING THE ISS UE , THOUGH , THE ASSESSING OFFICER AGAIN MADE SIMILAR ADDITION AS WAS MADE IN THE ORIGINAL ASSESSMENT ORDER, HOWEVER, THE LEARNED COMMISSIONER (APPEALS) DELETED SUCH ADDITION WHILE DECIDING THE APPEAL FILED BY THE ASSESSEE. IN SUPPORT , LEARNED AUTHORISED RE PRESENTATIVE SUBMITTED A COPY OF THE ORDER DATED 1 ST MARCH 2018 OF COMMISSIONER OF INCOME TAX (APPEALS) II, PUNE, FOR ASSESSMENT YEAR 2008 09. THUS, HE SUBMITTED , THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) ON THE ISSUE DESERVES TO BE UPHELD. 13 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. THE SHORT ISSUE ARISING FOR CONSIDERATION IS , WHETHER THE INCOME DERIVED FROM SHARE TRANSACTION IS TO BE TREATED AS CAPITAL GAIN AS C LAIMED BY THE ASSESSEE OR BUSINESS INCOME AS HELD BY THE ASSE SSING OFFICER. ON A PERUSAL OF MATERIAL ON RECORD, IT IS NOTICED THAT THIS IS A RECURRING DISPUTE BETWEEN THE PARTIES FROM ASSESSMENT YEAR 2008 09 ONWARDS. WHILE DECIDING THE DEPARTMENTS APPEAL ON IDENTICAL ISSUE IN ASSESSMENT YEAR 2008 09, THE TRIBUNAL R ESTORED THE ISSUE TO THE 8 M/S. SITSON INDIA PVT. LTD. ASSESSING OFFICER TO EXAMINE WHETHER THE ASSESSEE HAS CARRIED ON THE SHARE TRANSACTION AS INVESTMENT ACTIVITY OR AS A BUSINESS VENTURE. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT IN PUR SUANCE TO THE DIRECTIONS OF THE TRI BUNAL , AGAIN TREATED THE INCOME FROM SHARE TRANSACTION AS BUSINESS INCOME. HOWEVER, WHILE DECIDING ASSESSEES APPEAL AGAINST SUCH DECISION OF THE ASSESSING OFFICER IN ASSESSMENT YEAR 2008 09, THE LEARNED COMMISSIONER (APPEALS) OBSERVED THAT THE ASSESSEE HA S NOT USED ANY BORROWED FUND FOR INVESTMENT IN SHARES AND MUTUAL FUND. FURTHER, OVER 88% OF SHARES AND MUTUAL FUNDS CONTINUED TO BE MEDIUM AND LONG TERM INVESTMENT AND ONLY 11.87% IS HELD FOR LESS THAN THREE MONTHS. MOREOVER, THE ASSESSEE HAS EARNED CONSID ERABLE AMOUNT OF DIVIDEND INCOME. FURTHER, THE LEARNED COMMISSIONER (APPEALS) OBSERVED THAT THE PREDOMINANT ACTIVITY OF THE ASSESSEE IS MANUFACTURING OF ENGINEERING GOODS AND RENEWABLE ENERGY PROJECTS. THUS, CONSIDERING THE AFORESAID FACTS LEARNED COMMISSI ONER (APPEALS) ULTIMATELY HELD THAT THE ASSESSEE HAS CARRIED ON THE SHARE TRANSACTION AS INVESTMENT ACTIVITY AND ACCORDINGLY ACCEPTED ASSESSEES CLAIM OF TAXABILITY OF INCOME FROM SHARE TRANSACTION AS SHORT TERM CAPITAL GAIN. AS COULD BE SEEN FROM THE OBSE RVATIONS OF THE LEARNED COMMISSIONER (APPEALS) IN THE IMPUGNED ASSESSMENT YEAR , 90% OF THE SHARES HELD BY THE ASSESSEE IS FOR A PERIOD OF MORE THAN ONE YEAR, 6% FROM THREE MONTHS TO ONE YEAR AND 4% IS FOR LESS THAN THREE MONTHS . THUS, FROM THE AFORESAID FA CT IT IS CLEAR THAT THERE IS NO CHANGE IN THE 9 M/S. SITSON INDIA PVT. LTD. MODE AND MANNER OF SHARE TRANSACTION CARRIED ON BY THE ASSESSEE FROM THE PRECEDING ASSESSMENT YEARS. IT IS ALSO A FACT ON RECORD THAT IN ASSESSMENT YEAR S 2009 10 AND 2010 11 THE FIRST APPELLATE AUTHORITY HAS UP HELD ASSESSEES CLAIM OF TREATING THE INCOME FROM SHARE TRANSACTION AS CAPITAL GAIN. THERE BEING NO DIFFERENCE IN FACT S IN THE IMPUGNED ASSESSMENT YEAR , APPLYING THE RULE OF CONSISTENCY WE HOLD THAT THE INCOME FROM SHARE TRANSACTION HAS TO BE ASSESSED UNDE R THE HEAD CAPITAL GAIN. THAT BEING THE CASE, THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) ON THE ISSUE DESERVES TO BE UPHELD. THE GROUND RAISED IS DISMISSED. 14 . IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11.07.2018 SD/ - RAMIT KOCHAR ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 11.07.2018 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ( SR. PRIVATE SECRETARY ) ITAT, MUMBAI