DCIT 4(2)(1), MUMBAI V. S I INVESTMENT & BROKING P.LTD, MUMBAI

ITA 3156/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0748 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 19-04-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 26-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA SINGLA
• Keywords: Capital asset; Business income
• Section: 2(14)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO.3156/M/2015 ASSESSMENT YEAR: 2010-11 THE DCIT - 4(2)(1), ROOM NO.642, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 VS. M/S. SI INVESTMENT & BROKING PVT. LTD., 402, ROTUNDA BLDG., B.S. MARG, FORT, MUMBAI 400 001 PAN: AABCS 5547A (APPELLANT) (RESPONDENT) CO NO.221/M/2015 (ARISING OUT OF ITA NO.3156/M/2015) ASSESSMENT YEAR: 2010-11 M/S. SI INVESTMENT & BROKING PVT. LTD., 402, ROTUNDA BLDG., B.S. MARG, FORT, MUMBAI 400 001 PAN: AABCS 5547A VS. THE DCIT-4(2)(1), ROOM NO.642, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI SUBHASH S. SHETTY, A.R. REVENUE BY : MISS ANUPAMA SINGLA, D.R. DATE OF HEARING : 19.04.2017 DATE OF PRONOUNCEMENT : 18.05.2017 O R D E R PER D.T. GARASIA, JUDICIAL MEMBER: THE PRESENT APPEAL BY THE REVENUE AND THE CROSS OB JECTION BY THE ASSESSEE HAVE BEEN PREFERRED AGAINST THE ORDER DATE D 27.03.2015 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER R EFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEAR 2010-11. FIRST WE TAKE UP THE REVENUES APPEAL I.E. ITA NO.3156/M/2015 ITA NO.3156/M/2015 CO NO.221/M/2015 M/S. SI INVESTMENT & BROKING PVT. LTD. 2 ITA NO. 3156/M/2015 2. THE ONLY GROUND IN THE DEPARTMENTAL APPEAL IS TO TREAT THE SHORT TERM CAPITAL GAIN AMOUNTING TO RS.2,41,92,131/- AS BUSIN ESS INCOME. 3. THE SHORT FACTS OF THE CASE ARE THAT ASSESSEE IS THE MEMBER OF BOMBAY STOCK EXCHANGE WHICH IS ENGAGED IN STOCK BROKING BU SINESS. ASSESSEE COMPANY CHARGES FOR BROKERAGE ON TRANSACTIONS EXECU TED ON BEHALF OF CLIENT. ASSESSEE COMPANY ALSO INVESTS SURPLUS MONEY IN SHAR ES AND PROFIT OR LOSS ON INVESTMENT IS OFFERED AS CAPITAL GAIN OR LOSS. PRO FIT OR LOSS ON TRADING IS TREATED AS BUSINESS INCOME. THE ASSESSEE COMPANYS SOURCE OF INCOME DURING THE YEAR UNDER CONSIDERATION WAS THE INCOME FROM CAPITAL GAI N AND INCOME FROM OTHER SOURCE. DURING THE COURSE OF ASSESSMENT PROCEEDING S, THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) TRIED TO VERIFY THE ASSESSEE COMPANYS LONG TERM CAPITAL GAIN TO TALLY WITH THE DATE OF SUCH SA LE OF SHARES SUBMITTED BY THE ASSESSEE. THE AO HAS GIVEN SHOW CAUSE NOTICE AS TO WHY THE LONG TERM CAPITAL LOSS OF RS.3,15,77,417/- WHICH THE ASSESSEE HAS SET UP AGAINST SHORT TERM CAPITAL GAIN SHOULD NOT BE TREATED AS NIL AND SHORT TERM CAPITAL GAIN OF RS.2,41,92,131/- SHOULD NOT BE TREATED AS ASSESSEE COMPANYS BUSINESS INCOME AND TO BE TAXED ACCORDINGLY. THE ASSESSEE HAS STAT ED THAT THE AO HAS REFERRED TO AN ANALYSIS STATEMENT ON THE BASIS OF WHICH AO C ONCLUDED THAT MOVEMENT OF SHARES DAY WISE, WEEK WISE AND MONTH WISE DOES NOT TALLY WITH THE DATE OF SALE OF SHARES. THE ASSESSEE SUBMITTED THAT THE ANALYSI S STATEMENT WHICH WAS REFERRED TO BY THE AO WAS NOT ATTACHED TO THE LETTE R SENT BY THE AO. THE AO, THEREAFTER, HELD THAT THE LETTER WITH THE STATEMENT WAS PROVIDED TO THE ASSESSEE BUT ASSESSEE DENIED TO HAVE RECEIVED THIS LETTER TO AVOID RECONCILIATION REGARDING DATE OF HOLDING PERIOD OF SHARES. THEREF ORE, AO HAS TREATED LONG TERM CAPITAL LOSS AS NIL AND SHORT TERMS CAPITAL GA IN OF RS.2,41,92,131/- WAS BROUGHT TO TAX. ITA NO.3156/M/2015 CO NO.221/M/2015 M/S. SI INVESTMENT & BROKING PVT. LTD. 3 4. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING THAT S IMILAR ISSUE WAS INVOLVED IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10 WHICH WAS DECIDED IN FAVOUR OF THE ASSESSEE BY HIS PREDECESSOR WHEREIN T HE LD. CIT(A) HAD OBSERVED AS UNDER: 'I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPE LLANT CAREFULLY. IT IS SEEN THAT SIMILAR ISSUE WAS INVOLVED IN APPELLANT'S OWN CASE IN A. Y 2006-07. MY PREDECESSOR WHILE DECIDING APPEAL OF THE APPELLA NT FOR A. Y. 2006-07 IN APPEAL NO.IT/CI7'(A)-IV/CIR.41360108-09, DTD. 14.09 .2009 HAS MADE FOLLOWING OBSERVATIONS :- THE APPELLANT IS TREATING THE SHARES AS 'INVESTMEN T' AS THE BOOKS OF ACCOUNTS AND THE INCOME OF RS.3,92,84,6031- IN RESP ECT OF ONE SCRIPT SESA GOA LTD. IS AFTER BONUS SHARE ISSUED BY THE COMPANY OF 36000 SHARES. THE ACTIVITY OF THE APPELL ANT IS NOT DIFFERENT THAN THAT OF A.Y. 2005-06 WHERE THE AO HA S ACCEPTED THE APPELLANT TO BE AN 'INVESTOR' SO FAR AS LONG TE RM CAPITAL GAIN IS CONCERNED. THE APPELLANT HAD CONVERTED ITS STOCK IN TRADE INTO INVESTMENT AND HAD ALREADY PAID TAX ON CONVERSION W HICH WAS TREATED AS BUSINESS INCOME OF RS.1,33,28,497/- THE FACTUAL POSITION OF THE APPELLANT IS SIMILAR TO THAT OF A. Y. 2005- 06, EXCEPT FOR THE CONSIDERABLE INCREASE IN THE QUA NTUM WHICH IS DUE TO GOOD RUN IN THE STOCK EXCHANGE. THE APPEL LANT IS MAINTAINING AN INVESTMENT PORTFOLIO AND HAS NOT TRE ATED THE SHARES AS STOCK IN TRADE, THEREFORE, THE SHARES HAV E BEEN HELD AS INVESTMENT AND NOT AS STOCK IN TRADE. THE SHARES, T HEREFORE, ARE CAPITAL ASSETS AS DEFINED IN SECTION 2(14) OF THE I .T. ACT AND TRANSFER OF THE CAPITAL ASSETS ARE ASSESSED AS LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAIN U/S. 229B AND 242B RESPECTIVELY. THERE IS NO REASON, WHATSOEVER, TO TREAT THE STCG A ND LTCG AS BUSINESS INCOME. THE AO IS DIRECTED NOT TO TREAT TH E STCG & LTCG AS DECLARED BY THE APPELLANT AS BUSINESS INCOM E. THIS GROUND IS THUS ALLOWED.' AS THE FACTS AND CIRCUMSTANCES OF THE CASE ARE IDEN TICAL TO THAT OF A. Y. 2006-07, FOLLOWING MY PREDECESSOR'S ORDER IN THE CASE OF APP ELLANT FOR A.Y. 2006-07 MENTIONED IN PRECEDING PARA, THE AO IS DIRECTED NOT TO TREAT THE SHORT TERM CAPITAL GAIN AS BUSINESS INCOME. THIS GROUND OF APP EAL IS THUS ALLOWED.' 5. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE RE VENUE HAS PREFERRED APPEAL BEFORE US. ITA NO.3156/M/2015 CO NO.221/M/2015 M/S. SI INVESTMENT & BROKING PVT. LTD. 4 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. DURING THE COURSE OF HEARING, THE LD. A.R. POINTED OUT THAT SI MILAR ISSUE HAD ARISEN IN ASSESSMENT YEARS 2005-06 AND 2007-08 AND IN BOTH TH E YEARS ASSESSEES APPEAL WAS DECIDED IN FAVOUR OF THE ASSESSEE, HENCE, THIS APPEAL OF THE REVENUE MAY BE DISMISSED. 7. HAVING HEARD BOTH THE PARTIES, WE FIND THAT THE ISSUE IN CONTROVERSY IS COVERED BY THE DECISIONS OF THE TRIBUNAL IN ITA NO. 1497/M/2009 AND IN ITA NOS.7695 & 7483/M/2010. FOR THE SAKE OF CONVENIENC E, THE RELEVANT PARA OF THE TRIBUNALS DECISION IN ITA NOS.7695 & 7483/M/20 10 IS REPRODUCED AS UNDER: BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT IN EARLIER YEARS, THIS ISSUE TRAVELLED UPTO THE TRIBUNAL AND THE TRIB UNAL HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST TH E REVENUE IN ITA NO. 1497/M/09. ONCE AGAIN THIS ISSUE AROSE IN A.Y. 2006 -07 AND THE TRIBUNAL IN ITA NO. 644/M/09 FOLLOWING THE EARLIER ORDER OF THE TRIBUNAL IN AY 2005- 06 DIRECTED THE AO TO TREAT THE CAPITAL GAINS UNDER THE HEAD 'CAPITAL GAINS'. AS NO DISTINGUISHING DECISION HAS BEEN BROU GHT ON RECORD BY THE DR, RESPECTFULLY FOLLOWING THE DECISION OF THE CO-O RDINATE BENCH IN ASSESSEE'S OWN CASE (SUPRA), WE DIRECT HE AO TO TRE AT THE SHORT TERM CAPITAL GAIN AS SUCH. GROUND NO. 2 IS ACCORDINGLY ALLOWED. 8. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBU NAL, WE DISMISS THE DEPARTMENTAL APPEAL. NOW WE TAKE UP THE ASSESSEES CROSS OBJECTION I.E. CO NO.221/M/2016. CO NO.221/M/2016 9. IN THIS CROSS OBJECTION, THE ISSUE RELATES TO DI SALLOWANCE OF TRANSACTION CHARGES OF RS.4,90,415/- ON ACCOUNT OF NON DEDUCTI ON OF TDS UNDER SECTION 40A(IA) OF THE ACT. THE AO HAS DISCUSSED THIS ISSU E ON PAGE 7 & 8 OF THE ASSESSMENT ORDER. THE AO HAS DISALLOWED AND THE LD . CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE. 10. DURING THE COURSE OF HEARING, THE LD. A.R. HAS POINTED OUT THAT THE ASSESSEE HAS ALREADY DEDUCTED AND PAID THE TDS ON T HE IMPUGNED TRANSACTION. ITA NO.3156/M/2015 CO NO.221/M/2015 M/S. SI INVESTMENT & BROKING PVT. LTD. 5 THEREFORE, WE ARE OF THE VIEW THAT THIS REQUIRES VE RIFICATION AT THE END OF THE AO. THEREFORE, WE RESTORE THIS ISSUE TO THE FILE O F THE AO TO VERIFY WHETHER THE ASSESSEE HAS DEDUCTED THE TDS OR NOT. IF THE PAYEE HAS ALREADY ACCOUNTED THIS INCOME IN HIS BOOKS OF ACCOUNT, THEN NO DISALLOWANC E CAN BE MADE UNDER SECTION 40A(IA) OF THE ACT. THEREFORE, WE RESTORE THIS ISSUE TO THE FILE OF THE AO WITH LIMITED OBSERVATION AS STATED ABOVE. ACCORDIN GLY, CROSS OBJECTION IS ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED AND THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT ON 18.05.2017. SD/- SD/- (N.K. PRADHAN) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 18.05.2017. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.