ACIT 19(1), MUMBAI V. ASHOK K SHAH, MUMBAI

ITA 3278/MUM/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8013 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 11-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 29-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 11A

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI , ! ! ! ! , ' ' ' ' BEFORE SHRI B R BASKARAN, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER . : . : . : . : 32 3232 327 77 78 88 8/ // / / // / 2013, * ! +! 2008-09 ITA NO. : 3278/MUM/2013 , AY 2008-09 ACIT -11(1), ROOM NO. 439, AAYAKAR BHAVAN, M K MARG, MUMBAI -400 020 VS SHRI ASHOK K SHAH, 401, ANAND HOUSE, 4TH FLOOR, 13TH ROAD, OFF LINK ROAD, KHAR (WEST), MUMBAI -400 052 / .: PAN: AAHPS 3202 L /0 (APPELLANT) 12/0 (RESPONDENT) APPELLANT BY : SHRI MANVENDRA GOYAL RESPONDENT BY : SHRI ANUJ KISNADWALA *345 /DATE OF HEARING : 04-08-2014 67+ 345/ DATE OF PRONOUNCEMENT : 08-08-2014 8 8 8 8 O R D E R ! ! ! ! , . . . . . .. . PER VIVEK VARMA, J.M. : INSTANT APPEAL IS FILED BY THE DEPARTMENT AGAINST T HE ORDER OF CIT(A) 30, MUMBAI, DATED 01.02.2013, WHEREIN, THE S OLITARY GROUND, BEING AGITATED IS: (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING SET OFF THE S HORT TERM CAPITAL LOSS (TRANSACTIONS WITH STT PAID) AGAINST T HE SHORT TERM CAPITAL GAIN (TRANSACTIONS WITHOUT STT PAID) IGNORI NG THE FACT THAT SECTION 70(2) OF THE I.T. ACT STATES THAT SET O FF OF SHORT TERM CAPITAL LOSS CAN BE DONE ONLY AGAINST SIMILAR COMPU TATION OF SHORT TERM CAPITAL GAIN, HOWEVER, THE ASSESSEE HAS SET OFF THE SHORT TERM CAPITAL LOSS (TRANSACTIONS WITH STT PAID ) WITH THE SHORT TERM CAPITAL GAIN (TRANSACTIONS WITHOUT STT P AID) WHICH IS DEFINITELY NOT A SIMILAR COMPUTATION OF SHORT TERM CAPITAL GAIN/LOSS AS THE TAX RATES ARE DIFFERENT FOR BOTH T HE TRANSACTION IN VIEW OF SECTION 111A OF THE I.T. ACT. SHRI ASHOK K SHAH ITA NO. 3278/MUM/2013 2 2. THE ASSESSEE IS A TECHNICAL CONSULTANT AND PROVI DES LIAISON SERVICES AND ACTS AS AGENT AND EARNS COMMISSION INC OME. IN THE RETURN OF INCOME FILED, THE ASSESSEE SET OFF BROUGH T FORWARD SHORT TERM CAPITAL LOSS OF RS. 19,22,326/-, BECAUSE OF WHICH T HE ASSESSEE COMPUTED NET STCG AT RS. 4,98,817/-. THE AO CALLED FOR AN EXPLANATION AND AFTER MUCH DELIBERATION, THE AO HEL D, 5.6 THE ASSESSEE HAS GAIN ON OFF MARKET TRANSACTIO NS AND ALSO ON TRANSACTIONS THROUGH STOCK EXCHANGE. BUT WH AT IS THE ASSESSEE IS DOING, HE IS ARBITRARILY CLAIMING THAT PART OF LOSSES TO BE ADJUSTED AGAINST OFF MARKET TRANSACTIONS AND INC REASING THE GAIN ON WHICH TAX RATE IS LESS. ONCE SHARE TRANSACT IONS ARE MADE THERE MAY BE A SCRIP WHERE SOME GAIN AROSE AND IN SOME SCRIP THERE MAY BE A LOSS. AS REGARDS TO PART OF THE LOSS AMOUNTING TO RS. 39,36,840/- WHICH ASSESSEE HAS ADJU STED AGAINST STCG ON OFF MARKET TRANSACTION, THE ASSESSE E HAS NOT GIVEN ANY BASIS AS TO WHY ONLY THIS AMOUNT IS ADJUS TED AND WHAT IS THE BASIS OF ARRIVING THIS VALUE OF LOSS; N OT MORE AND NOT LESS. FROM THE DETAILS FILED DURING THE COURSE OF A SSESSMENT PROCEEDINGS, IT IS SEEN THAT THE ASSESSEE HAS STCG TAXABLE @30% FROM THE FOLLOWING SCRIP (BUY BACK SHARE) I.E. OFF MARKET TRANSACTIONS: SR. NO. NAME OF SCRIP GAIN/LOSS 1 ALFA LAVEL 24,65,454 2 PUNJAB TRACTORS 2,03,221 3 DECCAN AVIATION 1,82,100 4 MICO 83,287 5 LUMAX INDUSTRIES 20,48,253 6 GOKALDAS EXPORTS 14,70,869 64,53,184 5.7 THE ASSESSEE HAS NOT SURRENDERED ALL THE SHARE OF M/S PUNJAB AND M/S LUMAX INDUSTRIES FOR BUY BACK BY THE COMPANIES. SOME SHARES OF THESE TWO COMPANIES WERE HELD BACK BY THE ASSESSEE, MAY BE IN ANTICIPATION OF FUR THER PRICE RISE. FROM THE SHARE PRICE MOVEMENT OF THESE SCRIPT S (AS AVAILABLE ON BSE AND OTHER SITES), IT IS SEEN THAT AFTER CLOSURE OF BUY BACK OFFERS SHARE PRICES STARTED DECLINING. SEE ING SHARP FALL OF PRICES, THE ASSESSEE SOLD SHARES OF M/S PUNJAB T RACTORS AND M/S LUMAX INDUSTRIES THROUGH STOCK EXCHANGE AND THU S INCURRED LOSSES DETAILED AS UNDER: SR.NO. NAME OF SCRIP DATE OF SALE GAIN/LOSS 1 PUNJAB TRACTO RS 18 - JUL - 07 (24,495) 2 LUMAX INDUSTRIES 21 - JAN - 08 (1,21,214) 3 LUMAX INDUSTRIES 23 - JAN - 08 (9,77,020) 4 LUMAX INDUSTRIES 23 - JAN - 08 (28,14,111) TOTAL (3936,840) SHRI ASHOK K SHAH ITA NO. 3278/MUM/2013 3 5.8 FROM THE ABOVE WORKING, IT IS SEEN THAT THE AS SESSEE HAS ADJUSTED ONLY THAT PART OF THE LOSSES WHICH PERTAIN S TO SHARES SOLD THROUGH OFF MARKET TRANSACTION AS WELL AS PART OF EACH WHICH HAS BEEN SOLD THROUGH RECOGNIZED STOCK EXCHAN GE. BALANCE LOSS HAS BEEN ADJUSTED AGAINST STCG TAXABLE @ 10%. SCRIPWISE CALCULATION OF SHORT TERM CAPITAL GAINS/L OSS IS NOT MANDATED BY THE PROVISIONS OF THE ACT FOR ADJUSTING LOSSES. NET SHORT TERM CAPITAL GAIN SHOULD BE WORKED SEPARATELY FOR EACH CATEGORY OF CAPITAL GAINS. HENCE, THE ASSESSEES TR EATMENT IS DEVOID ANY MERITS AND HENCE REJECTED. STCG ARISING OUT OF OFF MARKET TRANSACTIONS TAXABLE @ 30% SHOULD BE RS. 64, 53,184/- AND STCG ON STT PAID TRANSACTIONS MADE THROUGH RECO GNIZED STOCK EXCHANGE AS PER THE DETAILS GIVEN BY THE ASSE SSEE SHOULD BE RS. 22,37,707/- SUBJECT TO OTHER ADJUSTMENTS IF A NY. 3. AGGRIEVED, THE ASSESSEE APPROACHED THE CIT(A), B EFORE WHOM, THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AO, WHO HAS ALSO REITERATED THE SAME IN THE ASSESSMENT ORDER. 4. THE CIT(A) AFTER CONSIDERING THE ISSUE AND THE S UBMISSIONS MADE BEFORE HIM, HELD, 12. I HAVE PERUSED THE FACTS OF THE CASE AND ALSO ARGUMENTS TAKEN UP BEFORE ME. AN ANALYSIS OF THE FRAME WORK OF THE INCOME TAX ACT CLEARLY SUGGESTS THAT APPLICABILITY O F TAX RATE IS SUBSEQUENT TO DETERMINATION OF TOTAL INCOME. SEC. 1 11A IS AN EXTENSION OF TAX RATE APPLICABLE, MODIFYING THE SAM E. THEREFORE, IN THE PROCESS OF DETERMINATION OF INCOME CHARGEABL E UNDER THE HEAD CAPITAL GAINS AND CONSEQUENTLY DETERMINATION OF TOTAL INCOME, THE APPLICABILITY OF SEC. 111A CANNOT BE BRO UGHT INTO PLAY. THAT MEANS THAT THE FACT OF A PARTICULAR CAPI TAL GAIN BEING CHARGEABLE TO TAX AT LOWER RATE OF TAX HAS TO BE IG NORED. THE SAME POSITION IS APPLICABLE TO SET OFF OF INTRA HEA D LOSS AS ALSO SET OFF OF UNABSORBED LOSS. THEREFORE, WHETHER A PA RT STCL HAS ARISEN FROM STT TRANSACTION OR NON STT TRANSACTION IS IMMATERIAL IN COMPUTATION OF TOTAL INCOME. IT IS HE LD THAT THE CORRECT WAY OF COMPUTATION OF STCG IS TO BE AGGREGA TE ALL INCOMES UNDER THE STCG AND ALL LOSSES, CURRENT OR O THERWISE, UNDER THE STCG AND FIND THE NET CAPITAL GAIN CHARGE ABLE TO TAX. IT GOES WITHOUT SAYING, IN THE ABSENCE OF ANY EXCLU SIVE PROVISION OF WHICH LOSS HAS TO BE SET OFF AGAINST WHICH INCOM E, THE METHOD BENEFICIAL TO THE APPELLANT WILL HAVE TO BE FOLLOWE D. THEREFORE, IN THE FACTS OF THE APPELLANTS CASE, THE STCL ARISING FROM STT TRANSACTIONS AT RS. 63,88,271/- SHOULD BE FIRST SET OFF AGAINST STCG ON OFF MARKET TRANSACTIONS AT RS. 66,33,390/- B EING SUM OF STCG IN SHARE TRANSACTIONS AND IN SALE OF UNITS. THIS RESULTS INTO THE FOLLOWING POSITION: SHRI ASHOK K SHAH ITA NO. 3278/MUM/2013 4 STCG (ON NON STT TRANSACTIONS) STCG ON SALE OF SHARES 64,53,184 STCG ON SALE OF MUTUAL FUNDS 1,80,206 66,33,390 LESS: STCL(WITH STT PAYMENTS) 63,88,271 BALANCE 2,45,119 THE BALANCE CALCULATED ABOVE IS ELIGIBLE FOR SET OF F AGAINST BROUGHT FORWARD CAPITAL GAIN/LOSS AND THE BALANCE O F THIS BROUGHT FORWARD LOSS WILL THEN BE ELIGIBLE FOR SET OFF AGAINST STCG ARISING FROM STT TRANSACTIONS AT RS. 86,25,978/ - RESULTING IN THE FOLLOWING POSITION: STCG (WITH STT PAYMENTS) STCG ON SALE OF SHARES 86,25,978 LESS: SET OFF OF B/F STCL OF A.Y. 07-08 (WITH STT PAYMENTS) 19,22,326 67,03,652 LESS: SET OFF OF NON STT STCG AS ABOVE 2,45,119 BALANCE 16,77,207 16,77,207 BALANCE CHARGEABLE STCG(STT PAID) 50,26,445 NEEDLESS TO SAY THAT INTEREST WILL BE AVAILABLE FOR DEDUCTION AGAINST THE BALANCE STCG CHARGEABLE AT LOWER RATE O F TAX. THE ISSUE IS DECIDED ACCORDINGLY. 5. AGAINST THIS ORDER OF THE CIT(A), THE DEPARTMENT IS IN APPEAL BEFORE THE ITAT. 6. BEFORE US, THE DR RELIED ON THE ORDER OF THE AO, WHEREAS, THE AR RELIED ON THE ORDER OF THE CIT(A) AND SUBMITTED THA T THE LANGUAGE OF SECTION 70(2) SAYS SIMILAR COMPUTATION MADE . THE AR ALSO PLACED RELIANCE ON THE DECISION OF FIRST STATE INVESTMENT (HONGKONG) LTD. VS ASST. DIT, REPORTED IN 33 SOT 26 (MUM), WHEREIN IT WAS HELD, IN THE INSTANT CASE, THE DISPUTE WAS ONLY ABOUT TH E CHOICE OF SETTING OFF OF SHORT-TERM CAPITAL LOSS SUFFERED AFT ER THE CUT-OFF DATE AGAINST THE SHORT-TERM CAPITAL GAIN EARNED PRI OR TO THE CUT- OFF DATE. THIS POSITION HAD ARISEN DUE TO THE INTRO DUCTION OF SECTION 111A FOR THE FIRST TIME FROM 1-4-2005 ONLY, PROVIDES WHICH FOR LOWER RATE OF TAX ON SHORT-TERM CAPITAL A GAINST ARISING ON THE TRANSACTIONS WHICH HAVE SUFFERED SECURITIES TRANSACTION TAX. SUCH DISPUTE IS RELEVANT ONLY FOR THE FIRST YE AR OF THE OPERATION OF THE OPERATION OF THIS PROVISION AND CA NNOT CROP UP IN THE LATER YEARS. THE SETTING OFF OF SHORT-TERM CAPI TAL LOSS IS GOVERNED BY SUB-SECTION (2) OF SECTION 70. PRIMA FA CIE THERE IS A CUE IN THE LANGUAGE OF SUB-SECTION (2) OF SECTION 7 0 THAT THE OPTION IS WITH THE ASSESSEE AND HE WILL DECIDE AS T O WHETHER THE SHRI ASHOK K SHAH ITA NO. 3278/MUM/2013 5 SHORT-TERM CAPITAL LOSS FROM THE FIRST TRANSACTION OUGHT TO BE SET OFF AGAINST THE SHORT-TERM CAPITAL GAIN OF THE TRAN SACTION NO. 2, 3 OR 4, ETC., AS THE CASE MAY BE. THE SAID VIEW ABOUT THE VESTING OF THE DISCRETION IN THE ASSESSEE FOR THE PURPOSES OF SET-OFF OF SHORT-TERM CAPITAL LOSS AGAINST ANY SHORT-TERM CAPI TAL GAIN IS FORTIFIED WHEN THE LANGUAGE OF SUB-SECTION (3) OF S ECTION 70 IS CONSIDERED, WHICH SPECIFICALLY PROHIBITS THE SETTIN G OFF OF LONG- TERM CAPITAL LOSS AGAINST SHORT-TERM CAPITAL GAIN . THE AR ALSO RELIED ON THE DECISION OF ACIT VS T. RO WE PRICE INTERNATIONAL DISCOVERY FUND, ITA NO. 7627/MUM/2011 (WHEREIN ONE OF US WAS A PARTY) ON THE GROUND RAISED BY THE DEPA RTMENT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEES CLAIM OF SET OFF OF SHORT TERM CAPITAL LOSS (STT PAID) CHARGEABL E TO TAX U/S 111A @ 10% AGAINST SHORT TERM CAPITAL GAINS (NON ST T PAID) CHARGEABLE TO TAX AT NORMAL RATE @ 30% IS CORRECT. IT WAS DECIDED, 1. 2. 3. AT THE TIME OF HEARING, THE AR POINTED OUT AT THE IMPUGNED ORDER, THE CIT(A) HAS PLACED RELIANCE ON THE DECISI ONS OF (I) FIRST STATE INVESTMENT (HONG KONG) LTD. REPORTED IN 33 SO T 26, (II) FIDELITY INVESTMENT TRUST FIDELITY OVERSEAS FUND R EPORTED IN 2009-TIOL-595-ITAT-MUM AND (III) AMERICAN CENTURY TWE NTIETH CENTURY INTERNATIONAL DISCOVERY FUND, ITA NO. 3602/MUM/2009, WHERE IDENTICAL ISSUE HAS BEEN ADJUD ICATED. THE AR ALSO PLACED ON RECORD ANOTHER DECISION IN THE CASE OF DDIT(IT) VS DWS INDIA EQUITY FUND, ITA NO. 5055/MUM /2010, WHERE ALSO, THE ISSUE HAS BEEN ADJUDICATED IN THE F AVOUR OF THE ASSESSEE. 4. .. 5. WE HAVE GONE THROUGH THE IMPUGNED ORDER WHEREIN THE CIT(A) HAS EXTRACTED THE RELEVANT PORTION OR THE DE CISION RENDERED IN THE CASE OF FIRST INVESTMENT (HONG KONG ) LTD, WHICH READS AS UNDER, : 6. TAKING INTO CONSIDERATION THE ABOVE CITED CASES AND AS PER THE EXTRACTED PORTION OF FIRST INVESTMENT (HONG KON G) LTD. (SUPRA), THE CIT(A) ALLOWED THE ASSESSEES CONTENTI ON. AS MENTIONED ABOVE, AR ALSO PLACED THE DECISION OF DWS INDIA EQUITY FUND, ITA NO. 5055/MUM/2010, WHERE (SUPRA) WH EREIN THE COORDINATE BENCH HELD, . 7. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT T HE FACTS BEING IDENTICAL IN THE INSTANT CASE WITH THAT OF THE CASE S CITED BEFORE US, RESPECTFULLY THE FOLLOWING THE DECISIONS, AS CI TED BY THE CIT(A) IN THE IMPUGNED ORDER AND REFERRED TO BY THE AR AT THE SHRI ASHOK K SHAH ITA NO. 3278/MUM/2013 6 TIME OF HEARING, WE SUSTAIN THE ORDER OF CIT(A) AS THERE IS NO INFIRMITIES IN THE IMPUGNED ORDER. 7. THE AR, THEREFORE, SUBMITTED THAT THE ISSUE IS S ETTLED IN FAVOUR OF THE ASSESSEE AND IN THAT VIEW, THE APPEAL, AS FILED BY THE DEPARTMENT DESERVES TO BE DISMISSED. 8. WE HAVE HEARD THE ARGUMENTS AND HAVE PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AND THE CASES CITED BEFORE US. THE IMPUGNED ISSUE HAS BEEN THE SUBJECT MATTER OF DISPUTE BEFORE VARIOUS COORDINATE BENCHES OF THE ITAT AND COORDINATE BENCHES HAVE CON SISTENTLY INTERPRETED THE PROVISIONS OF SECTION 111A IN FAVOU R OF THE ASSESSEE. RESPECTFULLY, THEREFORE, FOLLOWING THE DECISIONS AL READY IN PLACE AND WITH IDENTICAL FACTS IN HAND, WE DO NOT FIND ANY RE ASON EITHER TO DISTINGUISH THE CASES CITED BEFORE US OR TO DISTURB THE FINDINGS OF THE CIT(A) ON THE IMPUGNED ISSUE. 9. CONSEQUENTLY, WE REJECT THE GROUND OF APPEAL, AS FILED BY THE DEPARTMENT THEREBY, DISMISS THE APPEAL AS SUCH, GRO UNDS NO. 2 & 3 BEING GENERAL IN NATURE. 10. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH AUGUST, 2014. SD/- SD/- ( ) ( ! ! ! !) (B R BASKARAN) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 8 TH AUGUST, 2014 SHRI ASHOK K SHAH ITA NO. 3278/MUM/2013 7 14/ COPY TO:- 1) /0/ THE APPELLANT. 2) 12/0/ THE RESPONDENT. 3) THE CIT (A)-30, MUMBAI. 4) ; CITY-19 , MUMBAI / THE CIT-CITY-19, MUMBAI. 5) <=14* , , THE D.R. A BENCH, MUMBAI. 6) =>!? COPY TO GUARD FILE. 8* / BY ORDER / / TRUE COPY / / [ @/AB , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *DEA* .*. * CHAVAN, SR. PS