M/S Sachot Investment(merged with Aasman Inv Ltd), Ahmedabad V. The Dy Cit Cir-1, Ahmedabad

ITA 2666/AHD/2002

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0348 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 year(s) 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 06-10-2009
• Assessment Year: 1997-1998
• Appeal Filed On: 19-08-2002
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH
• Assessee Lawyers: P M MEHTA
• Keywords: Business income; Speculation loss; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH B BB B BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI T.K.SHARMA T.K.SHARMA T.K.SHARMA T.K.SHARMA, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER AND AND AND AND SHRI N.S. SAINI, ACCOUNTANT MEMBER SHRI N.S. SAINI, ACCOUNTANT MEMBER SHRI N.S. SAINI, ACCOUNTANT MEMBER SHRI N.S. SAINI, ACCOUNTANT MEMBER DATE OF HEARING:6.10.2009 DRAFTED ON:6.10.2009 ITA NO.2666/AHD/2002 ASSESSMENT YEAR : 1997-1998 SACHOT INVESTMENTS LIMITED (SINCE MERGED WITH ASMAN INVESTMENTS LTD.) ARVIND MILLS PREMISES, NARODA ROAD, AHMEDABAD-380 025. VS. DY. COMMISSIONER OF I-TAX, AHMEDABAD, CIRCLE-1, AHMEDABAD. PAN/GIR NO. : AABCA 5965R (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI P.M.MEHTA RESPONDENT BY: SMT. NEETA SHAH, SR. D.R. O R D E R O R D E R O R D E R O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) XIV, AHMEDABAD DATED 15. 07.2002. 2. GROUND NO.I AND IV OF THE APPEAL READS AS FOLLOWS: ITA NO. 2666/AHD/2002 M/S.SAHOT INVESTMENT LTD. ASST.YEAR -1997-1998 - 2 - 3. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSE E AT THE TIME OF THE HEARING SUBMITTED THAT HE IS NOT PRESSING THE ABOV E GROUNDS OF APPEAL AND THEREFORE, THEY ARE DISMISSED AS NOT PRESSED. 4. GROUND NO.III (A) READS AS FOLLOWS:- ITA NO. 2666/AHD/2002 M/S.SAHOT INVESTMENT LTD. ASST.YEAR -1997-1998 - 3 - 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEALING IN SHARES AND IN THE COURSE OF THAT BUSINESS CERTAIN SHARES ARE ACQUIRED ON WHICH DIVIDEND IS EARNED. TH EREFORE, THE LOSS INCURRED IN THE COURSE OF BUSINESS OF DEALING IN SHARES HAVE TO BE ADJUSTED AGAINST DIVIDEND INCOME. THE LEARNED ASSESSING OFFICER HAS HO WEVER HELD THAT THE DIVIDEND IS TREATED AS INCOME FROM OTHER SOURCES AND TH E INTEREST PAID ON THE BORROWINGS IS CONSIDERED AS EXPENDITURE FOR THE BUSIN ESS OF THE ASSESSEE OF TRADING IN SHARES. 6. IN APPEAL, LEARNED COMMISSIONER OF INCOME TAX(APPEAL S) OBSERVED THAT SINCE THE ASSESSEE IS DOING BUSINESS IN PURCHASE AND SALE OF SHARES AND HAS SHOWN A SPECULATION LOSS AND IN VIEW OF THE EXPLA NATION 73, IT IS VERY CLEAR THAT THE SPECULATION LOSS CANNOT BE SET-OFF AGAINST ANY OTHER INCOME, EXCEPT THE SPECULATION INCOME. THEREFORE, IN THE ABSENCE OF ANY SPECULATION ITA NO. 2666/AHD/2002 M/S.SAHOT INVESTMENT LTD. ASST.YEAR -1997-1998 - 4 - PROFIT DURING THE YEAR, THE LEARNED ASSESSING OFFICER WAS VERY WELL WITHIN HIS RIGHT TO CARRY FORWARD THE SAID SPECULATION LOSS TO THE SUBSEQUENT YEAR TO BE SET OFF AGAINST THE SPECULATION PROFIT, IF ANY, AND CONFIRMED THE ORDER OF THE LEARNED ASSESSING OFFICER. 7. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSE E FILED BEFORE US COPY OF ORDER OF THE AHMEDABAD A BENCH OF THE TRIB UNAL, IN THE CASE OF ACIT, AHMEDABAD VS. SPHERE STOCK HOLDING PVT. LTD. IN ITA NO.3488/AHD/2003 WITH C.O. 332/AHD/2004 FOR ASSESSMENT YE AR 1997-98 DATED 24.07.2009 AND SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE SAID ORDER OF THE TRIBUNAL. THEREFORE, FOL LOWING THE SAME, THE GROUND OF APPEAL OF THE ASSESSEE SHOULD BE ALLOWED. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON TH E ORDERS OF THE LOWER AUTHORITIES. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD . WE FIND THAT IN THE INSTANT CASE, THE ASSESSEE IN THE RETURN OF INCOME DECLA RED NIL INCOME AND IN DOING SO THE ASSESSEE ADJUSTED THE DIVIDEND INCOME OF RS.44,99,466/- AGAINST THE SHARE TRADING LOSS OF RS.34,60,871/-. THE LEARN ED ASSESSING OFFICER BY INVOKING EXPLANATION TO SECTION 73 TREATED THE SHARE TRADING LOSS OF ITA NO. 2666/AHD/2002 M/S.SAHOT INVESTMENT LTD. ASST.YEAR -1997-1998 - 5 - RS.34,60,871/- AS SPECULATION LOSS AND ALLOWED THE SAME TO BE CARRIED FORWARD FOR ADJUSTMENT AGAINST SPECULATION PROFIT IN THE SU BSEQUENT YEAR AND ASSESSED THE DIVIDEND INCOME OF RS.44,99,466/- AS INCO ME FROM OTHER SOURCES AND ALSO NOT ALLOWED SET-OFF OF BROUGHT FORWARD LOSS. THE SAME WAS CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX(APP EALS). THE ASSESSEE BEFORE US RELIED UPON THE DECISION IN THE CA SE OF SPHERE STOCK HOLDING PVT. LTD WHEREIN IT WAS HELD AS UNDER :- ITA NO. 2666/AHD/2002 M/S.SAHOT INVESTMENT LTD. ASST.YEAR -1997-1998 - 6 - ITA NO. 2666/AHD/2002 M/S.SAHOT INVESTMENT LTD. ASST.YEAR -1997-1998 - 7 - ITA NO. 2666/AHD/2002 M/S.SAHOT INVESTMENT LTD. ASST.YEAR -1997-1998 - 8 - ITA NO. 2666/AHD/2002 M/S.SAHOT INVESTMENT LTD. ASST.YEAR -1997-1998 - 9 - 10. WE THUS FIND THAT THE EXPLANATION TO SECTION 73 REQUIR ES TO CONSIDER THE BUSINESS OF SHARE AS A WHOLE. THE BUSINESS CANNOT BE C ONFINED TO ONLY PURCHASE AND SALE; INCIDENTAL EXPENDITURE AND RECEIPTS ARE ALSO TO BE CONSIDERED AS PART OF THE BUSINESS. IN FACT, THE LEARNE D ASSESSING OFFICER HIMSELF HAS CONSIDERED THE EXPENDITURE AGGREGATING TO RS .1,16,70,717/- WHICH INCLUDES INTEREST EXPENDITURE OF RS.1,16,51,244/- AS EXPENDITURE INCIDENTAL TO THE SHARE BUSINESS AND HAS ARRIVED AT S PECULATION LOSS OF RS.34,60,671/-. HAVING DONE SO, HE CANNOT SAY THAT DIVIDEN D INCOME WHICH ARE INCIDENTAL TO THE SHARE BUSINESS CANNOT BE CONSIDE RED PART OF THE BUSINESS INCOME. THEREFORE, THE DIVIDEND INCOME EARNED ON SHARES WAS INCIDENTAL TO THE SHARE BUSINESS AND PART OF THE SPECULA TION BUSINESS EVEN THOUGH IT IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. THUS IN OUR CONSIDERED VIEW THE LOSS OF SPECULATIVE BUSINESS HAS TO BE DETERMINED AFTER CONSIDERING DIVIDEND INCOME OF RS.44,99,466/-AND TH US, IN THE INSTANT CASE, THERE WILL NOT BE ANY SPECULATIVE LOSS RATHER THE RE WILL BE PROFIT FROM THE BUSINESS OF RS.10,38,585/- WHICH IS TO BE TREATED AS SP ECULATIVE BUSINESS INCOME. FURTHER, AS PER THE PROVISION OF SECTION 72, IT IS CLEAR THAT BROUGHT FORWARD BUSINESS LOSS IS TO BE SET-OFF AGAINST THE PROFI T AND GAINS OF BUSINESS OF THE CURRENT YEAR. IT IS TO BE NOTED THAT PROFITS AND GAINS OF THE BUSINESS IS ITA NO. 2666/AHD/2002 M/S.SAHOT INVESTMENT LTD. ASST.YEAR -1997-1998 - 10 - NOT THE SAME AS INCOME ASSESSABLE UNDER THE HEAD PROFI TS AND GAINS OF BUSINESS OR PROFESSION. DIVIDEND INCOME ARISES OUT OF THE SHARES WHICH ARE BUSINESS ASSETS OF THE ASSESSEE AND ARE ESSENTIALLY THE PROFITS AND GAINS OF THE BUSINESS THOUGH IT MAY NOT BE ASSESSABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. THEREFORE, IN OUR CONS IDERED VIEW BROUGHT FORWARD BUSINESS LOSS ARE TO BE ADJUSTED AGAINST SUCH DIVIDEND INCOME WHICH IS BUSINESS INCOME OF THE ASSESSEE THOUGH ASSESSABLE U NDER THE HEAD INCOME FROM OTHER SOURCES. WE THEREFORE, SET ASIDE TH E ORDERS OF THE LOWER AUTHORITIES AND DIRECT THE LEARNED ASSESSING OFFICER TO COMPUTE SPECULATIVE BUSINESS INCOME OF THE ASSESSEE AFRESH AFTER CONSIDERI NG THE DIVIDEND RECEIVED BY THE ASSESSEE FROM THE SHARES. FURTHER, THE LEA RNED ASSESSING OFFICER IS ALSO DIRECTED TO ALLOW SET-OFF OF BROUGHT FORWARD BUSINESS LOSS AGAINST THE DIVIDEND INCOME WHICH ARE ARISING OUT OF BU SINESS TRANSACTION OR BUSINESS ASSETS OF THE ASSESSEE IN LIGHT OF THE DISCUSSI ONS MADE HEREINABOVE AFTER ALLOWING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSE E. 11. WE WOULD LIKE TO CLARIFY HERE THAT NO EVIDENCE ABOU T THE NATURE AND QUANTUM OF BROUGHT FORWARD LOSS WAS FILED BEFORE US BY THE ASSESSEE AND THEREFORE, WE ARE ENABLE TO EXPRESS ANY OPINION IN RES PECT OF THE SAME AND THE LEARNED ASSESSING OFFICER IS DIRECTED TO VERIFY THE SA ME FROM THE RECORDS ITA NO. 2666/AHD/2002 M/S.SAHOT INVESTMENT LTD. ASST.YEAR -1997-1998 - 11 - AND DECIDE ACCORDINGLY. THUS, THIS GROUND OF APPEAL OF TH E ASSESSEE IS ALLOWED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 9/10/2009 . SD/- SD/- ( T. ( T. ( T. ( T.K. SHARMA ) K. SHARMA ) K. SHARMA ) K. SHARMA ) ( N.S. SAINI ) ( N.S. SAINI ) ( N.S. SAINI ) ( N.S. SAINI ) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 9/10/2009 PARAS # COPY OF THE ORDER FORWARDED TO COPY OF THE ORDER FORWARDED TO COPY OF THE ORDER FORWARDED TO COPY OF THE ORDER FORWARDED TO : :: : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-XIV, AHMEDABAD. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD