DCIT, New Delhi V. M/s. Indiabulls Securities Ltd., New Delhi

ITA 2857/DEL/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2724 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 11-12-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 09-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T VASANTHAN
• Assessee Lawyers: DA
• Keywords: Business income
• Section: 143(3); 37(1)

Judgement Text

ITA NO.2857/DEL/2013 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER I.T.A. NO. 2 857 /DEL/201 3 A.Y. : 20 0 8 - 0 9 DCIT, CIRCLE 11(1), ROOM NO. 312, C.R. BUILDING, NEW DELHI VS. M/S INDIABULLS SECURITIES LTD., F-6, MALHOTRA BUILDING, 2 ND FLOOR, CONNAUGHT PLACE, NEW DELHI 110001 (PAN:AAACO0870B) (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) DEPARTMENT BY : SH. T. VASANTHAN, SR. DR ASSESSEE BY : SH. G.C. SRIVASTAVA, ADV. ; SH. ANUBHAV JAIN, ADV. & SH. DAKSH S. BHARDWAJ, ADV. DATE OF HEARING : DATE OF HEARING : DATE OF HEARING : DATE OF HEARING : 11 1111 11- -- -12 1212 12- -- -201 201 201 2015 55 5 DATE OF ORDER : DATE OF ORDER : DATE OF ORDER : DATE OF ORDER : 04 0404 04- -- -1 11 1- -- -201 201 201 2016 66 6 ORDER ORDER ORDER ORDER PER PER PER PER H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU : : : : J JJ JM MM M THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XV, NEW DELHI DATED 11.2.2013 PERTAINING TO ASSESSMENT YEAR 2008-09 ON THE FOLLOW ING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF R S. 12,34,704/- ON ACCOUNT OF SALE OF SHARES AS NORMAL BUSINESS INCOME INSTEAD OF SHORT TERM CAPITAL GAIN. ITA NO.2857/DEL/2013 2 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 11,78,761/- MADE ON ACCOUNT OF ADVERTISEMENT EXPENS ES. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND A NY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARI NG. IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A)-XV, B EING CONTRARY TO THE FACTS ON RECORD AND THE SETTLED PO SITION OF LAW, BE SET ASIDE AND THAT OF THE AO BE RESTORED. 2. THE BRIEF FACTS OF THE CASE ARE THE ASSESSEE COM PANY HAS BEEN ENGAGED IN THE BUSINESS OF STOCK AND SHARE BROKER IN THE NATIO NAL STOCK EXCHANGE OF INDIA LTD. AND BOMBAY STOCK EXCHANGE LTD., DEPOSITORY OF NSD: AND GDSL AND OTHER ANCILLARY SYSTEM. THE ASSESSEE FILED ITS E-RETURN OF INCOME ON 29.9.2008 DECLARING TOTAL INCOME AT RS. 359,40,18,194/-. THE RETURN WAS ACCOMPANIED BY THE COPIES OF FINAL ACCOUNTS AND TAX AUDIT REPROT U /S. 44AB OF THE I.T. ACT. THE RETURN WAS PROCESSED U/S. 143(1) OF THE ACT. THE C ASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE U/S. 143(2) OF THE ACT WAS IS SUED ON 24.8.2009 WHICH IS DULY SERVED ON THE ASSESSEE. IN RESPONSE THEREOF, THE AUTHORISED REPRESENTATIVE ALONGWITH OTHER OFFICIALS OF THE COMPANY ATTENDED T HE PROCEEDINGS AND FILED THE DETAILED ASKED FOR, PRODUCED BOOKS OF ACCOUNTS WHIC H IS EXAMINED ON TEST CHECKED BASIS; WRITTEN SUBMISSIONS OF VARIOUS DATES WERE FILED BY THE AUTHORISED REPRESENTATIVE. THEREAFTER, AFTER CONSIDERING T HE ABOVE, THE ASSESSING OFFICER ASSESSED THE INCOME OF THE ASSESSEE AT RS. 359,64,2 6,158/- VIDE HIS ORDER DATED 21.12.2010 PASSED U/S. 143(3) OF THE I.T. AC T, 1961, AS AGAINST THE RETURNED INCOME OF RS. 3,59,40,18,194/-. ITA NO.2857/DEL/2013 3 3. AGAINST THE AFORESAID ASSESSMENT ORDER, THE ASSE SSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 11.2.201 3 HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE AND DELETED THE ADDITIIONS IN DISPUTE. 4. AGGRIEVED WITH THE IMPUGNED ORDER, THE REVENUE I S IN APPEAL BEFORE THE TRIBUNAL. 5. LD. DR RELIED UPON THE ORDER OF THE AO AND REITE RATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL. 6. ON THE CONTRARY, LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS RELIED UPON THE ORDER OF THE LD. CIT(A) AND STATED THAT TH E ORDER OF THE LD. CIT(A) IS A WELL REASONED ORDER AND THEREFORE, THE SAME MAY BE UPHELD AND REVENUES APPEAL MAY BE DISMISSED ACCORDINGLY. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E RELEVANT RECORDS, ESPECIALLY THE ORDERS OF THE AUTHORITIES BELOW AND THE CASE LAW CITED BY THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE. WE FIND THAT LD. FIRST APPELLATE AUTHORITY HAS ELABORATELY DISCUSSED THE ISSUE NO. 1 IN DISPUTE BY CONSIDERING THE SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESSEE AN D ADJUDICATED THE ISSUE NO. 1 IN DISPUTE AS UNDER VIDE PARA NO. 5.2 AT PAGE 8 & 9 OF HIS IMPUGNED ORDER. 5.2 REGARDING THE GROUND NO.1 OF THE APPEAL, I FIN D THAT THE APPELLANT IS A REGISTERED STOCK BROKER IN NSE AND B SE, AND PRIMARILY IT IS NATURE OF BUSINESS TO TRADE IN SHARES ON BEHA LF OF ITS CLIENTS. THE APPELLANT HAS APPLIED FOR ALLOTMENT OF SHARES M/S O MAXE LIMITED THROUGH ITS INITIAL PUBLIC OFFER (LPO). THE SAME WA S ENTERED INTO THE INVESTMENT REGISTER AS REQUIRED UNDER THE COMPANIES ACT. THE APPELLANT HELD ON THE INVESTMENT FOR OVER ONE MONTH AFTER WHICH THE ITA NO.2857/DEL/2013 4 SAME WAS SOLD. OTHER THAN THIS TRANSACTION, THE APP ELLANT HAS NOT PURCHASED AND SOLD SHARES FOR ITSELF IN THE EARLIER YEARS ALSO. THE APPELLANT HAS NOT ENGAGED INTO TRADING IN SHARES IN ITS OWN ACCOUNT ON REGULAR BASIS EVEN IN EARLIER YEARS. THE VOLUME, FREQUENCY AND THE MANNER OF SOLITARY TRANSACTION SHOWS THAT APPEL LANT DOES NOT TRADE IN SHARES AS A REGULAR BUSINESS ACTIVITY. KEE PING IN VIEW THE ABOVE FACTS, I FIND THAT IN TERMS OF THE CIRCULAR N O. 1/2007 OF CBDT ALSO, NEITHER THE FREQUENCY OF TRADING IN SHARES NO R THE VOLUME INDICATE THAT THE APPELLANT HAD BEEN ENGAGED IN REG ULAR AND SIGNIFICANT TRADING IN SHARES FOR ITSELF. THE RULIN G OF THE AAR IN THE CASE OF M/S FIDELITY GROUP CLEARLY SHOWS THAT AN IN VESTOR MAY HAVE TWO PORTFOLIOS, ONE FOR TRADING PURPOSE AND ANOTHER FOR INVESTMENT. EVIDENTLY, THE APPELLANT HAD NOT MADE TRANSACTIONS EXCEPT THE SINGLE TRANSACTION OF SALE AND PURCHASE OF SHARES M /S OMAXE LIMITED, WHICH WERE ALLOTTED TO IT ON ALL APPLICATI ON AT THE TIME OF IPO. THEREFORE, KEEPING IN VIEW THE ABOVE FACTS, TH E AFORESAID TRANSACTION IS HEJD TO BE INVESTMENT IN NATURE, WHI CH HAS BEEN RIGHTLY SHOWN AS CAPITAL IN NATURE. THIS GROUND IS ACCORDINGLY, ALLOWED IN FAVOUR OF THE APPELLANT. 7.1 ON GOING THROUGH THE AFORESAID FINDING OF THE L D. CIT(A) ON THE ISSUE IN DISPUTE AND THE CASE LAW, THE CBDT CIRCULAR NO.1/20 07 CITED IN THE IMPUGNED ORDER, WE ARE OF THE VIEW THAT CIT(A) HAS RIGHTLY DELETED THE ADDITION IN DISPUTE. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE WELL REASONED ORDER PASSED BY THE LD. CIT(A) ON THE ISSUE NO. 1, AND UPHOLD THE FIND ING OF THE LD. CIT(A) ON THIS ISSUE. THEREFORE, THE GROUND NO. 1 RAISED BY THE RE VENUE STANDS DISMISSED. ITA NO.2857/DEL/2013 5 8. WE FIND THAT LD. FIRST APPELLATE AUTHORITY HAS ELABORATELY DISCUSSED THE ISSUE NO. 2 IN DISPUTE BY CONSIDERING THE SUBMISSIONS O F THE LD. COUNSEL OF THE ASSESSEE AND ADJUDICATED THE ISSUE NO. 2 IN DISPU TE AS UNDER VIDE PARA NO. 7 & 7.2 AT PAGE 9 & 10 OF HIS IMPUGNED ORDER. 7. REGARDING THE GROUND NO.3 OF THE APPEAL, I FIND THAT THE LD. AO HAS MADE THE DISALLOWANCE BY OBSERVING THAT THE APPELLANT HAD NOT CLAIMED SUCH EXPENDITURE IN THE IMMEDIATELY PRECEDING YEAR. THE LD. AO HAS DISALLOWED THE SAME BY HOLDING THAT SINCE THE APPELLANT COMPANY IS ONE OF THE MAIN COMPANIES HAVI NG THE BRAND NAME 'INDIA BULLS' AND THEREFORE, IT WAS NOT ASCERT AINABLE AS TO WHETHER THE EXPENDITURE PERTAINED TO THE APPELLANT ONLY AND TO WHAT EXTENT, THE APPELLANT HAS BEEN BENEFITED BY TH E ABOVE EXPENDITURE. 7.2 ON CAREFUL CONSIDERATION, I FIND THAT THE APPE LLANT HAD MADE A FULL PAGE ADVERTISEMENT, ON 24 MARCH 2008 IN THE 'BUSINESS STANDARDS' NEWSPAPER, WHICH WAS CLEARLY IN THE NAME OF APPELLANT COMPANY ONLY AND THEREFORE THE SUSPICION OF THE APP ELLANT THAT IT MAY HAVE BEEN FOR THE PURPOSE OF THE ENTIRE GROUP A ND NOT FOR THE APPELLANT COMPANY ONLY, WAS BASED ON INCORRECT FACT S. THE APPELLANT COMPANY THEREFORE, MEETS ALL THE REQUIREM ENTS UNDER SECTION 37(1) OF THE ACT IN MAKING CLAIM OF THE ADV ERTISEMENT EXPENSES, WHICH WERE FOR THE PURPOSE OF BUSINESS P ROMOTION OF THE APPELLANT COMPANY. KEEPING IN VIEW THE SAME, THE CL AIM OF THE APPELLANT IS ACCORDINGLY ALLOWED. 8.1 ON GOING THROUGH THE AFORESAID FINDING OF THE L D. CIT(A) ON THE ISSUE IN DISPUTE, WE ARE OF THE VIEW THAT CIT(A) HAS RIGHT LY DELETED THE ADDITION IN ITA NO.2857/DEL/2013 6 DISPUTE. THEREFORE, WE DO NOT FIND ANY INFIRMITY I N THE WELL REASONED ORDER PASSED BY THE LD. CIT(A) ON THE ISSUE NO. 2, AND U PHOLD THE FINDING OF THE LD. CIT(A) ON THIS ISSUE. THEREFORE, THE GROUND NO. 2 R AISED BY THE REVENUE STANDS DISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 04/1/2016. SD/- SD/- [ [[ [O.P. KANT O.P. KANT O.P. KANT O.P. KANT] ]] ] [ [[ [H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU] ]] ] ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER DATE 04/1/2016 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED COPY FORWARDED COPY FORWARDED COPY FORWARDED TO: TO: TO: TO: - -- - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES