M/s. FALCON BROKERAGE P. LTD., MUMBAI V. ACIT - 4(1), MUMBAI

ITA 3328/MUM/2007

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9071 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 30-04-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Speculation loss

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI I. P. BANSAL, J.M. AND SHRI SANJAY AROR A, A.M. ITA NO. : 495/MUM/2006 ASSESSMENT YEAR: 2002-03 ITA NOS. : 3328 & 3329/MUM/2007 ASSESSMENT YEARS: 2003-04 & 2004-05 ITA NO. : 6247/MUM/2008 ASSESSMENT YEAR: 2005-06 & ITA NO. : 361/MUM/2009 ASSESSMENT YEAR: 2006-07 FALCON BROKERAGE PRIVATE LIMITED 1101, STOCK EXCHANGE PLAZA, DALAL STREET, MUMBAI-400 001 [PAN NO.: AAACF 2220 J] VS. THE INCOME TAX OFFICER, 4(1)(2), AAYKAR BHAVAN, M.K. ROAD, MUMBAI-400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIPUL JOSHI RESPONDENT BY : SHRI RAKESH RANJAN DATE OF HEARING : 27.11.2012 DATE OF PRONOUNCEMENT : 21.12.2012 ORDER PER BENCH : THESE ARE A SET OF FIVE APPEALS BY THE ASSESSEE DIR ECTED AGAINST THE ORDERS BY THE COMMISSIONER OF INCOME TAX (APPEALS)-IV, MUMBAI (C IT(A) FOR SHORT) DATED 22.11.2005, 28.02.2007, 28.02.2007, 13.08.2008 & 18 .11.2008 FOR THE FIVE CONSECUTIVE YEARS, BEING ASSESSMENT YEARS (AYS) 2002-03 TO 2006 -07, DISPOSING THE ASSESSEES APPEALS FOR THE RELEVANT YEARS CONTESTING ITS RESPE CTIVE ASSESSMENTS U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER). ITA NOS. : 495/M/06,3328 & 3329/M/07, 6247/M/08 & 36 1/M/09 ASSESSMENT YEARS: 2002-03 TO 2006-07 2 2. THIS IS THE SECOND ROUND BEFORE THE TRIBUNAL; TH E INSTANT APPEALS (OTHER THAN FOR AY 2006-07) HAVING BEEN DECIDED BY IT ON AN EARLIER OCCASION VIDE ITS ORDER DATED 23.12.2010 (COPY ON RECORD). HOWEVER, AS ONE OF THE ITEMS OF LOSS, WHICH STOOD CONFIRMED BY THE TRIBUNAL AS A SPECULATIVE LOSS U/S .73 OF THE ACT VIDE ITS SAID ORDER, RELATED TO VANDHA PROFIT, WHICH HAD NOT BEEN SEPA RATELY CONSIDERED BY THE TRIBUNAL, THE ASSESSEE MOVED IT IN THIS REGARD, IN CONSEQUENCE TO WHICH THE SAID ORDER STOOD RECALLED BY THE TRIBUNAL FOR ADJUDICATING THE SAME, VIDE ITS OR DER DATED 23/9/2011 (IN MA NOS. 252- 255/MUM/2011/COPY ON RECORD), ALSO DETAILING THE AM OUNT OF LOSS ON SHARE VANDHA TRANSACTIONS SEPARATELY. 3.1 OPENING THE ARGUMENTS FOR AND ON BEHALF OF THE ASSESSEE, IT WAS EXPLAINED BY THE LD. AR, ITS COUNSEL, THAT THE SHARE VANDHA TRANSACT IONS ARE THOSE THAT, THOUGH STAND UNDERTAKEN BY THE STOCK BROKER FOR AND ON BEHALF OF ITS CLIENTS, WERE REQUIRED TO OWNED BY IT ON ACCOUNT OF THE FAILURE BY THE CLIENT TO HONOU R THE SAME, WHO FAILS TO DO SO ON ACCOUNT OF THE LOSS INVOLVED OR FOR ANY OTHER REASON. IT IS THE PROFIT OR LOSS ARISING ON SUCH SHARE TRANSACTIONS WHICH THE ASSESSEE AS A BROKER IS COMP ELLED TO OWN UP, THAT IS BOOKED UNDER THE HEAD VANDHA PROFIT/LOSS. THE SAME IS, THUS, I NCIDENTAL AND AN INTEGRAL PART OF THE PROFITS OF THE BROKERAGE BUSINESS. THE SAID BUSINES S HAS BEEN, PER A SERIES OF THE DECISIONS BY THE TRIBUNAL, HELD TO BE A SEPARATE BUSINESS FRO M THAT OF PURCHASE AND SALES OF SHARES WHICH THE ASSESSEE UNDERTAKES ON ITS OWN, I.E., AS ON PRINCIPAL TO PRINCIPAL BASIS. THE PROFITS OF THE BROKERAGE BUSINESS ARE PRINCIPALLY D ERIVED ONLY FROM THE BROKERAGE INCOME BY UNDERTAKING TRANSACTIONS FOR PURCHASE AND SALE O F SHARES FOR AND ON BEHALF OF THE CUSTOMERS. THE BUSINESS PROFITS OF SUCH BUSINESS WO ULD, THOUGH ASSESSABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS AND PROFESSION, CAN NOT BY ANY COUNT BE CONSIDERED AS A PART OF THE ASSESSEES OWN BUSINESS OF PURCHASE AND SALE OF SHARES, WHICH IS DEEMED AS SPECULATIVE IN VIEW OF THE DEEMING PER EXPLANATION TO SECTION 73 OF THE ACT. FURTHER, THOUGH FOR THE FIRST YEAR, I.E., A.Y. 2002-03, THER E IS NO LOSS BUT ONLY A PROFIT ON THE VANDHA TRANSACTIONS, AT RS.53,084/-, SO THAT IT WOU LD BE OF NO CONSEQUENCE INASMUCH AS IT ITA NOS. : 495/M/06,3328 & 3329/M/07, 6247/M/08 & 36 1/M/09 ASSESSMENT YEARS: 2002-03 TO 2006-07 3 WOULD ONLY TO INCREASE THE PROFIT OF THE BROKERAGE BUSINESS AND, RESULTANTLY, REDUCE THE LOSS DEEMED SPECULATIVE FOR THE SAID YEAR ON SET OF F, THE SAID YEAR STANDS INCLUDED FOR THE SAKE OF UNIFORMITY OF A APPROACH. RELIANCE WAS PLAC ED BY HIM ON THE FOLLOWING DECISIONS:- 1. ACIT VS. M/S. KNP SECURITIES PVT. LTD. (IN ITA NO.4412/MUM/2003, VIDE ORDER DATED 26.03.2010.) 2. PARKAR SECURITIES LTD. VS. DCIT [2006] 8 SOT 257 (AHD.). 3. ITO VS. JPS SHARE BROKERS (P.) LTD. [2007] 163 TAXMAN 89 (DEL) (MAG.). 4. ACIT VS. SUBHASH CHAND SHOREWALA [2004] 91 TTJ (DEL) 57. 3.2 THE LD. DR, ON THE OTHER HAND, RELIED ON THE OR DERS OF THE AUTHORITIES BELOW. 4. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERI AL ON RECORD. BY ITS VERY NATURE THE INGREDIENTS AND INCIDENTS THAT GOVERN AND IMPIN GE ON A BROKERAGE BUSINESS, INCLUDING ITS RISK PROFILE, ARE VASTLY DIFFERENT FROM THAT OF THE PURCHASE AND SALE OF THE SHARES/SECURITIES WHERE UNDERTAKEN ON OWN ACCOUNT. THIS HAS FORMED THE SUM AND SUBSTANCE OF THE SEVERAL DECISIONS OF TRIBUNAL RELI ED UPON BY THE ASSESSEE (SUPRA), HOLDING SUCH (BROKERAGE) BUSINESS TO BE A SEPARATE AND DIST INCT BUSINESS. WITHOUT DOUBT, THE EXPLANATION TO SECTION 73 WOULD HAVE NO APPLICATION IN RESPECT OF SUCH BUSINESS, SO THAT THE VANDHA LOSS WOULD NECESSARILY HAVE TO BE EXCLUD ED IN COMPUTING THE LOSS DEEMED SPECULATIVE UNDER THE SAID PROVISION. SO, HOWEVER, WHILE AGREEING WITH THE ASSESSEE IN PRINCIPLE, THERE HAVING BEEN NO DETERMINATION OF SU CH LOSS AT THE END OF THE A.O., WHO, WITHOUT DRAWING ANY SUCH DISTINCTION PROCEEDED IN T ERMS OF ALL SUCH LOSSES AS BEING ONLY A PART OF THE ASSESSEES ONE BUSINESS OF PURCHASE A ND SALE OF SHARES, AND DID NOT EXAMINE THE SAME. THIS MATTER WOULD THEREFORE REQUIRE BEING RESTORED BACK TO HIS FILE FOR THE PURPOSE, I.E., TO DETERMINE THE NATURE AND QUANTUM OF THE LOSSES CLAIMED AS SHARE VANDHA TRANSACTIONS BY THE ASSESSEE. THE AO SHALL ADJUDICA TE THE SAME BY ISSUING DEFINITE ITA NOS. : 495/M/06,3328 & 3329/M/07, 6247/M/08 & 36 1/M/09 ASSESSMENT YEARS: 2002-03 TO 2006-07 4 FINDINGS OF FACT, IN ACCORDANCE IN THE MATTER, KEEP ING OUR AFORE-STATED OBSERVATIONS IN VIEW. WE DECIDE ACCORDINGLY. ITA NO. 361/M/2009 (A.Y. 2006-07) 5. THE ASSESSEES APPEAL FOR THIS YEAR, AS APPARENT FR OM THE GROUNDS RAISED BEFORE US, STANDS SQUARELY COVERED BY THE ORDER DATED 23/12/20 10 BY THE TRIBUNAL IN ITS CASE FOR THE PRECEDING YEARS, REFERRED TO SUPRA. FURTHER, TO THE EXTENT THE LOSS CLAIMED RELATES TO SHARE VANDHA TRANSACTIONS, THE MATTER, AS FOR THE SAID YE ARS, WOULD REQUIRE, AND IS BEING ACCORDINGLY, RESTORED BACK TO THE FILE OF THE A.O. FOR THE PURPOSE, WITH LIKE DIRECTIONS. WE DECIDE ACCORDINGLY. 6. IN THE RESULT THE ASSESSEES APPEALS FOR ALL THE YEARS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSED. ORDER PRONOUNCED ON THIS 21 ST DAY OF DECEMBER, 2012 ( I. P. BANSAL ) ( SANJAY ARORA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT: 21 /12/2012 COPY FORWARDED TO: 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE C.I.T. 4. CIT (A) 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI