ITO 2(1)(1), MUMBAI V. AMU INVESTMENTS & FINANCE P. LTD, MUMBAI

ITA 3285/MUM/2010

• Counselvise Citation: 328519914 RSA 2010
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2006-2007
• Appeal Filed On: 27-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G BEFORE SHRI D. MANMOHAN (VP) & SHRI R.K. PANDA (AM) I.T.A.NO. 3285/MUM/2010 (ASSESSMENT YEAR : 2006-07 ) ITO 2(1)(1) AAYAKAR BHAVAN ROOM NO. 575, 5 TH FLOOR M.K. ROAD MUMBAI-400 020. VS. M/S. AMU INVESTMENTS & FINANCE PVT. LTD. GROUND FLOOR, CRESCENT CHAMBERS HOMI MODI CROSS STREET NO. 2 FORT, MUMBAI-400 023. APPELLANT RESPONDENT PAN/GIR NO. : AAACA3776E ASSESSEE BY : NONE DEPARTMENT BY : SHRI A.K. NAYAK ORDER PER SHRI D.MANMOHAN VP :- THIS IS AN APPEAL BY THE REVENUE AND IT IS DIRECTE D AGAINST THE ORDER DATED 9.2.2010 OF LEARNED CIT(A)-4, MUMBAI. 2. THOUGH THE NOTICE WAS SENT TO THE ASSESSEE WELL IN ADVANCE (VIDE ACK. CARD ON RECORD) NONE APPEARED ON BEHALF OF TH E ASSESSEE. WE THEREFORE PROCEED TO DISPOSE OF THE APPEAL EX-PARTE , QUA THE ASSESSEE. THE ONLY GROUND OF THE REVENUE IS THAT LEARNED CIT( A) ERRED IN HOLDING THAT THE TRANSACTIONS OF PURCHASE AND SALE OF SHARE S HAVE TO BE TREATED AS PART OF THE INVESTMENT ACTIVITY, OVERLOOKING THE TURNOVER INVOLVED IN THE PURCHASE AND SALE OF SHARES AND UTILIZATION OF BORROWED FUNDS WHICH DENOTES THAT THE SAID ACTIVITY IS AN ADVENTURE IN T HE NATURE OF TRADE AND NOT AN INVESTMENT ACTIVITY. 3. WE HAVE HEARD LEARNED DR AND CAREFULLY PERUSED T HE RECORD. ASSESSEE-COMPANY IS ADMITTEDLY AN INVESTMENT COMPAN Y I.E. CARRYING ON BUSINESS OF INVESTMENT IN SHARES AND FINANCING. DUR ING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS THE ASSESSING OFFIC ER NOTICED THAT THOUGH THE COMPANY HAD PAID SHARES CAPITAL OF ` 26,00,000/- IT HAD 2 OPENING UNSECURED LOAN AMOUNTING TO ` 2.90 CRORES. THE COMPANY BORROWED HUGE FUNDS AND UTILIZED THE SAME FOR PURCH ASE OF SHARES. ACCORDING TO THE ASSESSING OFFICER, MAJOR SOURCE OF INCOME COMPRISES OF SALE PROCEEDS OF SHARES. HE ALSO NOTICED THAT THERE WAS HIGH FREQUENCY OF TRANSACTIONS, WHICH WAS CARRIED ON THROUGH OUT THE YEAR. UNDER THE CIRCUMSTANCES HE ARRIVED AT THE CONCLUSION THAT THE PROFIT ON SALE OF SHARES IS ASSESSABLE TO TAX AS BUSINESS INCOME. 4. ON AN APPEAL FILED BY THE ASSESSEE, LEARNED CIT( A) OBSERVED THAT THE ASSESSEE PURCHASED SHARES OF ONLY FIVE COMPANIE S I.E. (A) LUPIN LABS (B) NCC FINANCE (C) STATE BANK OF BIKANER (D) SHIR M.M. SOFTEK LTD. & (E) TATA FINANCE LTD. 4.1 DURING THE YEAR UNDER CONSIDERATION, COMPANY S OLD THESE SHARES. IT WAS FURTHER SUBMITTED THAT THE SHARES WERE HELD FOR A VERY LONG TIME I.E. FOR SIX YEARS. EVEN IN THE PAST THE ASSESSEE O WNED SHARES WHICH WERE HELD AS INVESTMENT AND PROFIT THEREON WAS DECLARED AS LONG TERM CAPITAL GAIN WHICH WAS ACCEPTED BY THE ASSESSING OFFICER. 5. HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE, LEARNED CIT(A) DIRECTED THE ASSESSING OFFICER TO TREAT THE PROFITS ON PURCHASE AND SALE OF SHARES AS LONG/SHORT TERM CAPITAL GAIN. IN THIS REG ARD HE OBSERVED AS UNDER :- I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE AUTH ORIZED REPRESENTATIVE AND I FIND THAT THE ASSESSING OFFICE R IS NOT JUSTIFIED IN CONSIDERING LONG TERM CAPITAL GAIN AS BUSINESS I NCOME OF THE ASSESSEE. IT IS EVIDENT FROM THE FACTS OF THE CASE THAT THE ASSESSEE HAS BEEN SHOWING THE PURCHASE AND SALE OF SHARES AN D SECURITIES IN THE BALANCE SHEET AS INVESTMENT AND NOT AS STOCK IN TRADE. HENCE FROM THE SALE OF THESE SECURITIES WHICH ARE D ELIVERY BASED CANNOT BE TREATED AS BUSINESS INCOME OF THE ASSESSE E. IN THE CASE OF JANAK S. RANGWALA (11 SOT 627 MUMBAI) HON'BLE. I TAT, MUMBAI HELD THAT THE MAGNITUDE OF TRANSACTION DO NO T CHANGE THE NATURE OF THE TRANSACTION. IN THIS CASE IT IS TO BE NOTED THAT THE ASSESSEE HAS PURCHASED JUST SHARES OF 5 COMPANIES A ND SOLD SHARES OF 5 COMPANIES. IT IS ALSO NOT DISPUTED THAT PURCHASE AND SALE OF SHARES FALL UNDER THE CATEGORY OF LONG TERM CAPITAL GAIN. THE ASSESSING OFFICER HAS TREATED THESE TRANSACTIONS AS BUSINESS INCOME ON THE GROUND THAT THE INTENTION OF THE ASSE SSEE WAS TO SELL THESE SHARES AT PROFIT AND THE TRANSACTIONS ARE FRE QUENT IN NATURE. 3 SINCE, THE AUTHORIZED REPRESENTATIVE HAS SHOWN THAT THE INTENTION OF THE ASSESSEE WAS TO MAKE INVESTMENT AND EARN CAP ITAL GAIN AS IS EVIDENT FROM THE BALANCE SHEET OF THE ASSESSEE. EVE N THE TRANSACTIONS ARE NOT FREQUENT AS ALLEGED BY THE ASS ESSING OFFICER. HENCE THE LONG TERM CAPITAL GAIN SHOWN BY THE ASSES SEE IS REQUIRED TO BE ACCEPTED. THE ASSESSING OFFICER IS D IRECTED TO DELETE THIS ADDITION AND ACCEPT THE LONG TERM CAPITAL GAIN SHOWN BY THE ASSESSEE IN THE RETURN OF INCOME. IN THE RESULT THI S GROUND OF APPEAL IS ALLOWED. 6. NO EVIDENCE WHATSOEVER WAS BROUGHT ON RECORD TO CONTRADICT THE FINDINGS OF LEARNED CIT(A). UNDER THESE CIRCUMSTANC ES, WE ARE OF THE VIEW THAT THE ORDER PASSED BY LEARNED CIT(A) DOES NOT CA LL FOR ANY INTERFERENCE. AS DECLARED IN THE OPEN COURT, APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED ACCORDINGLY IN THE OPEN COURT ON 6.4.20 11. SD/- (R.K. PANDA) ACCOUNTANT MEMBER SD/- (D.MANMOHAN) VICE-PRESIDENT DATED : 6 TH APRIL, 2011. COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-CONCERNED. 4. THE CIT, CONCERNED. 5. THE DR CONCERNED, MUMBAI 6. GUARD FILE BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI PS