BHUKHANVLA HOLDINGS PVT.LTD., MUMBAI V. DCIT-8(1), THANE

ITA 2622/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7357 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 24-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIRENDRA OJHA; S S RANA
• Assessee Lawyers: MRS AARTI VISSANJI
• Keywords: Depreciation; Transactions in derivatives
• Section: 271(1)(c); 43(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI R.K.GUPTA, JM AND SHRI R.S.SYAL, AM ITA NO.2622/MUM/2009 : ASST.YEAR 2005-2006 M/S.BHUKHANVALA HOLDINGS PRIVATE LTD. B/28, 3 RD FLOOR, BHUKHANVALA CHAMBERS VEERA INDUSTRIAL ESTATE, OFF LINK ROAD ANDHERI(WEST), MUMBAI 400 056. PA NO.AAACB4483H.. VS. THE DY.COMMISSIONER OF INCOME-TAX CIRCLE 8(1) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : MRS.AARTI VISSANJI RESPONDENT BY : S/SHRI VIRENDRA OJHA & S.S.RANA O R D E R PER R.S.SYAL (AM) : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDE R PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 2.3.2009 UP HOLDING THE PENALTY OF RS.18,94,790 IMPOSED BY THE ASSESSING OFFICER U/S.2 71(1)(C) OF THE ACT IN RELATION TO THE ASSESSMENT YEAR 2005-2006 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE CLAIMED BUSINESS CENTRE RECEIPTS AMOUNTING TO RS.91,80,000 AS BUSINE SS INCOME. THE ASSESSING OFFICER TREATED THE SAME AS INCOME FROM HOUSE PROPE RTY. PENALTY IMPOSED ON THIS TREATMENT GIVEN BY THE AO CAME TO BE UPHELD IN THE FIRST APPEAL. 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD WE FIND THAT HERE IS A CASE IN WHICH THE ASS ESSEE CLAIMED THAT THE RECEIPTS FROM THE BUSINESS CENTRE SHOULD BE CONSIDERED AS BU SINESS INCOME WHICH WAS TREATED BY THE A.O. AS FALLING UNDER THE HEAD `INCO ME FROM HOUSE PROPERTY. ALL THE NECESSARY PARTICULARS IN THIS REGARD WERE DECLA RED BY THE ASSESSEE IN THE RETURN. SIMPLY BECAUSE A LEGAL CLAIM WAS LODGED BY THE ASSE SSEE WHICH DID NOT FIND FAVOUR WITH THE ASSESSING OFFICER, IT CANNOT BE HELD THAT THE PENALTY U/S.271(1)(C) IS ITA NO.2622/MUM/2009 M/S.BHUKHANVALA HOLDINGS PRIVATE LIMITED. 2 ATTRACTED. RECENTLY THE HONBLE SUPREME COURT IN TH E CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. V IDE ITS JUDGMENT DATED 17.3.2010 IN 2010-TIOL-21-SC - IT HAS HELD THAT THE PENALTY CANNOT BE IMPOSED WHER E LEGAL CLAIM OF THE ASSESSEE IS NOT ACCEPTED. IN THIS JUDGMENT THE HONBLE SUPREME COURT HAS ALSO TAKEN NOTE OF ITS EARLIER JUDGEMENT IN THE CASE OF UNION OF INDIA VS. DHARMENDRA TEXTILE PROCESSORS [(2008) 306 ITR 277 (SC)] . WE, THEREFORE, OVERTURN THE IMPUGNED ORDER ON TH IS SCORE. 4. THE SECOND ISSUE IS THE CLAIM OF DEPRECIATION AM OUNTING TO RS.16,13,602 AGAINST THE INCOME FROM DERIVATIVES TRADING. THE FA CTS APROPOS THIS POINT ARE THAT THE ASSESSEE CLAIMED DEPRECIATION ON BUILDING AT RS .6.39 LAKHS AND ON OTHER ASSETS AT RS.9.73 LAKHS WHICH WAS NOT ALLOWED BY THE A.O. ON THE GROUND THAT THE INCOME FROM DERIVATIVES WAS TAXABLE U/S.73 OF THE ACT BY C ONSIDERING IT AS SPECULATIVE PROFIT AND THE DEPRECIATION IS ADMISSIBLE ONLY AGAI NST THE INCOME FALLING UNDER THE HEAD `PROFITS AND GAINS OF BUSINESS OR PROFESSION. ON THIS ISSUE ALSO THE PENALTY WAS IMPOSED ON ACCOUNT OF DISALLOWANCE OF CLAIM OF DEPRECIATION. THE PENALTY SO IMPOSED WAS UPHELD IN THE FIRST APPEAL. 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD IT IS NOTED THAT THE ASSESSMENT YEAR UNDER C ONSIDERATION IS A.Y. 2005-2006. THE DISPUTE WAS GOING ON BETWEEN THE TREATMENT OF P ROFIT / LOSS ON ACCOUNT OF TRANSACTIONS IN DERIVATIVES. FINALLY THE SPECIAL BE NCH OF THE TRIBUNAL IN SHREE CAPITAL SERVICES LIMITED VS. ACIT [(2009) 124 TTJ 7 40 (KOL.) (SB)] DECIDED THIS ISSUE AGAINST THE ASSESSEE AND HELD IT TO BE SPECUL ATIVE TRANSACTION. IT HAS FURTHER BEEN HELD IN THIS CASE THAT THE INSERTION OF CLAUSE (D) OF PROVISO TO SECTION 43(5) IS PROSPECTIVE AND WILL APPLY FROM ASSESSMENT YEAR 200 6-2007 ONLY. IN VIEW OF THE THEN EXISTING CLEAVAGE OF JUDICIAL OPINION ON THE T REATMENT OF INCOME ON ACCOUNT OF TRANSACTIONS IN DERIVATIVES, WE DO NOT FIND ANY FAU LT WITH THE ASSESSEE IN OPTING FOR THE INTERPRETATION SUITABLE TO IT, BASED ON AN EXI STING LEGAL OPINION. IT WAS ONLY ITA NO.2622/MUM/2009 M/S.BHUKHANVALA HOLDINGS PRIVATE LIMITED. 3 PURSUANT TO SUCH CONFLICTING VIEW THAT THE SPECIAL BENCH WAS CONSTITUTED TO RESOLVE THE VARYING OPINION OF DIFFERENT BENCHES. AGAIN IT BECOMES APPARENT THAT THE ASSESSEE CHOSE THE COURSE OF ACTION IN THIS RESPECT BY ADOPTING A LEGAL INTERPRETATION TO THE PROVISIONS FAVOURABLE TO IT. NOT ACCEPTANCE OF ITS STAND, CAN NEITHER CONSTITUTE CONCEALMENT OF INCOME OR FURNISHING OF I NACCURATE PARTICULARS OF INCOME WITHIN THE MISCHIEF OF SECTION 271(1)(C) AS HAS BEE N HELD BY THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD. (SUPRA) . WE, THEREFORE, ORDER FOR THE DELETION OF THE PENALTY. 6. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED ON THIS 26 TH DAY OF MARCH 2010. SD/- SD/- ( R.K.GUPTA ) ( R.S.SYAL ) JUDICIAL MEMBER ACCOUNTANT M EMBER MUMBAI : 26 TH MARCH, 2010. DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) - VIII, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.