ITO, New Delhi V. M/s. HGI Finance & Leasing Ward Ltd., New Delhi

ITA 3435/DEL/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65318 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 28-05-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 14-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DIVENDER SINGH
• Keywords: Business income; Charitable institution; Rule of consistency; Earning of tax free income; Question of law
• Section: 143(3); 14A

Judgement Text

ITA NO.3435/DEL/2010 ASSTT. YEAR: 2006-07 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `C NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.NO.3435/DEL/2010 ASSESSMENT YEAR : 2006-07 INCOME TAX OFFICER, VS M/S HGI FINANCE & LEASING WARD LTD. 12(4), NEW DELHI. 1512-A, CHIRANJ IV TOWER, 43, NEHRU PLACE, NE W DELHI-110019 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI DIVENDER SINGH, SR.DR RESPONDENT BY : SHRI SANJIV SAPRA O R D E R PER CHANDRAMOHAN GARG, JUDICIAL MEMBER THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAIN ST THE ORDER OF COMMISSIONER OF INCOME TAX(A)-XV, NEW DELHI DATED 1 7.05.2010 FOR A.Y. 2006- 07. 2. THE GROUNDS RAISED IN THIS APPEAL READ AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO TREAT THE INCOME OF RS.31,70,049/- AS INCOME UNDER THE HEAD CAPITAL GAINS INSTEAD OF INCOME FROM BUSINESS WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE WAS INVOLVE D IN FREQUENT TRADING OF SHARES AND NO SEPARATE BOOKS OF ACCOUNTS WERE MAINTAINED. ITA NO.3435/DEL/2010 ASSTT. YEAR: 2006-07 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT SINCE THE ASSESSE E HOLDING THE SHARES UNDER THE CATEGORY OF INVESTMENT AND HENCE THE INCOME ARISING IS TO BE TREATED AS INCOME FROM CAPITAL GAINS IS CONTRARY TO THE INTENTION OF THE A SSESSEE. THE ASSESSEES INTENTION WAS TO GAIN PROFITS FROM T RADING OF SHARES AND NOT BY INVESTING IN IT. THE SUPREME C OURT IN THE CASE OF RESERVE BANK OF INDIA VS PEERLESS GENER AL FINANCE AND INVESTMENT CO. LTD. (1987) 61 COMP CASE 663, OBSERVED: INTERPRETATION MUST DEPEND ON THE T EXT AND THE CONTEXT. THEY ARE THE BASIS OF INTERPRETAT ION. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO TO ASSESS RS.31,70,049 AS INCOME UNDER THE HEAD CAPITAL GAINS WITHOUT APPRECIATING THE GUIDELINES ISSUED BY THE C BDT AND LEGAL POSITION SETTLED BY VARIOUS COURTS INCLUD ING THE APEX COURT OF INDIA. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT THE ASSESSEE I N CLAIMING EXPENSES TO THE TUNE OF RS.22,28,392/- WIT HOUT ANY BUSINESS OTHER THAN TRADING OF THE SHARES. STI LL THE ASSESSEE IS CLAIMING THE SAME AS CAPITAL GAINS. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN ALLOWING THE DEDUCTION OF RS.1,57,197/- U/S 35D WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO JUSTIFY AND TO PROVIDE DETAI LS OF THESE EXPENSES. 3. BRIEFLY STATED, THE FACTS OF THE CASE GIVING R ISE TO THIS APPEAL ARE THAT BEFORE THE AUTHORITIES BELOW IT WAS NOT IN DISPUTE THAT THE AP PELLANT ASSESSEE COMPANY WAS REGISTERED AS NON-BANKING FINANCIAL CO.(NBFC) AND S UCH REGISTRATION CONTINUED ITA NO.3435/DEL/2010 ASSTT. YEAR: 2006-07 3 TO BE VALID DURING THE YEAR UNDER CONSIDERATION. A S PER THE AUDITORS REPORT FILED BEFORE THE ASSESSING OFFICER DURING THE COURSE OF A SSESSMENT, A NOTE OF BUSINESS EXPERTISE OF THE ASSESSEE COMPANY WAS GIVEN. AS PE R THE SAME NOTE, THE ASSESSEE COMPANY WAS INCORPORATED ON 9/11/1992 AS A PRIVATE LIMITED COMPANY WHICH WAS LATER CONVERTED INTO A PUBLIC LIMITED COMPANY W.E.F . 27.3.1995. SINCE THEN THE MAIN BUSINESS ACTIVITY PURSUED BY THE COMPANY INCLU DED: I) INVESTMENT IN SHARES, DEBENTURES, SECURITIES AN D GOVERNMENT SECURITIES ETC. II) INTER CORPORATE DEPOSITS (ICDS) AND SHORT TERM FINANCING III) LEASING ACTIVITIES AND HIRE PURCHASE ACTIVITI ES IV) TO ACQUIRE INFRASTRUCTURE FACILITIES MEANING THEREBY THAT THE COMPANY HAD CONTINUED TO C ARRY OUT ONLY THOSE ACTIVITIES INCLUDING INVESTMENT ACTIVITIES WHICH WERE PERMITTE D BY RBI FOR AN NBFC COMPANY. 4. THE ASSESSEE COMPANY FILED A RETURN DECLARING AN INCOME OF RS.4,63,845/- WHICH WAS PROCESSED U/S 143(1) OF THE INCOME TAX AC T, 1961(HEREINAFTER REFERRED TO AS THE ACT). THE CASE OF THE ASSESSEE WAS SELEC TED FOR SCRUTINY THROUGH CASS AND STATUTORY NOTICES WERE ISSUED AND DULY SERVED O N THE ASSESSEE COMPANY. AFTER DUE DISCUSSION WITH ASSESSEES REPRESENTATIVE, THE ASSESSING OFFICER HELD THAT THE ASSESSEE DELIBERATELY SHOWED ITS TRANSACTION OF SHA RES AS AN INVESTMENT AND ITA NO.3435/DEL/2010 ASSTT. YEAR: 2006-07 4 PROPOSED TO BE TAXED UNDER THE HEAD OF CAPITAL GAIN WHICH WAS FACTUALLY AND CONCEPTUALLY INCORRECT AND REJECTING THE SUBMISSION S OF ASSESSEE, THE ASSESSING OFFICER TREATED THE INCOME OF RS. 31,70,049 AS BUSI NESS INCOME EARNED FROM SALE AND PURCHASE OF SHARES. 5. THE ASSESSING OFFICER ALSO HELD THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE EARNED DIVIDEND INCOME OF RS.4,10,936 AS A N EXEMPTED INCOME. WHEN THE ASSESSEE WAS ASKED TO FURNISH DETAILS IN RESPEC T OF EXPENSES ATTRIBUTED TO THE EXEMPT INCOME UNDER THE HEAD DIVIDEND INCOME, THE A SSESSEE SUBMITTED A WORKING STATEMENT SHOWING DISALLOWANCE OF EXPENDITURE U/S 1 4A OF THE ACT IN ACCORDANCE WITH RULE 8D OF THE INCOME TAX RULES 1962 AT RS. 1, 62,607. THE ASSESSING OFFICER HELD THAT AS THE CBDT HAS LAID DOWN METHOD OF CALCULATION OF EXPENSES ATTRIBUTED TO EXEMPT INCOME IN RULE 8D OF THE RULES , THEREFORE, THE ASSESSING OFFICER DISALLOWED THE ABOVE EXPENDITURE U/S 14A OF THE ACT. 6. THE ASSESSING OFFICER ALSO NOTED THAT THE ASSESS EE HAD CLAIMED PRELIMINARY AND OTHER MISCELLANEOUS EXPENDITURE OF RS.1,57,197/ -. AFTER CONSIDERING THE REPLY, THE ASSESSING OFFICER HELD THAT AS THE ASSESSEE FAI LED TO EXPLAIN MISCELLANEOUS EXPENSES FOR WHICH AMORTIZATION U/S 35D OF THE ACT WAS CLAIMED, THE ASSESSING OFFICER DISALLOWED THE SAME AND ADDED TO THE INCOME OF THE ASSESSEE. 7. THE AGGRIEVED ASSESSEE FILED AN APPEAL BEFORE TH E COMMISSIONER OF INCOME TAX(A) WHICH WAS PARTLY ALLOWED. LD. COMMISSIONER OF INCOME TAX(A) HELD THAT ITA NO.3435/DEL/2010 ASSTT. YEAR: 2006-07 5 THE INCOME HAS BEEN DERIVED FROM THE SALE OF INVEST MENT WHICH HAS BEEN DULY REFLECTED IN THE ACCOUNTS OF THE ASSESSEE UNDER THE HEAD OF INVESTMENT. THE COMMISSIONER OF INCOME TAX(A) ALSO HELD THAT THE AS SESSEE WAS CONSISTENTLY FOLLOWING THE PRACTICE OF HOLDING SOME SHARES AS ST OCK-IN-TRADE AND SOME SHARES AS INVESTMENT AND BOTH ARE REFLECTED SEPARATELY IN THE FINAL ACCOUNTS OF THE ASSESSEE. ACCORDINGLY, THE PROFIT AND SALE OF SUCH SHARES SHO WN AS INVESTMENT HAS TO BE ASSESSED AS CAPITAL GAIN. ACCORDINGLY, THE COMMISS IONER OF INCOME TAX(A) ALLOWED THIS GROUND OF APPEAL IN FAVOUR OF THE ASSE SSEE. 8. THE COMMISSIONER OF INCOME TAX(A) ALSO CONSIDERE D THE GROUND PERTAINING TO DISALLOWANCE OF RS.1,57,197 AS AMORTIZATION OF 1 /10 TH EXPENSES AS CLAIMED BY THE ASSESSEE IN EARLIER NINE YEARS CONSISTENTLY. A CCORDINGLY, THE COMMISSIONER OF INCOME TAX(A) FOLLOWING THE PRINCIPLE OF CONSISTENC Y AS LAID DOWN BY HONBLE SUPREME COURT IN THE CASE OF BERGER PAINTS INDIA L TD. VS COMMISSIONER OF INCOME TAX(2004) 266 ITR 99(SC) AND IN THE CASE OF COMMISSIONER OF INCOME TAX VS J.K. CHARITABLE TRUST (2009) 1SCC 196 HELD THAT ONCE A SIMILAR PROPOSITION HAS BEEN ACCEPTED BY THE REVENUE IN RES PECT OF EARLIER ASSESSMENT YEAR, IT IS NOT OPEN TO THE REVENUE TO DEVIATE FROM ITS E ARLIER STAND AND TO CHALLENGE THAT FINDING. CONSEQUENTLY, THE COMMISSIONER OF INCOME TAX(A) ALSO ALLOWED THIS GROUND OF APPEAL OF THE ASSESSEE AND DELETED THE AD DITION. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US. ITA NO.3435/DEL/2010 ASSTT. YEAR: 2006-07 6 GROUNDS NO. 1 TO 3 9. WE HAVE HEARD THE RIVAL ARGUMENTS OF BOTH THE PARTIES IN THE LIGHT OF MATERIAL PLACED BEFORE US. THE LD. DR SUBMITTED THAT THE AC TION OF THE ASSESSING OFFICER WAS JUSTIFIED AND AS PER PRINCIPLES LAID DOWN BY HO NBLE APEX COURT AND HIGH COURT BUT THE COMMISSIONER OF INCOME TAX(A) FAILED TO APPRECIATE THE FACTS AND CIRCUMSTANCES OF THE CASE IN ACCORDANCE WITH LAW AN D CITATIONS BEFORE HIM. THE DR FURTHER SUBMITTED THAT THE COMMISSIONER OF INCOM E TAX(A) WAS NOT JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO TREAT THE INCOME OF RS.31,70,049 AS INCOME UNDER THE HEAD CAPITAL GAINS INSTEAD OF INCOME FROM BUSINESS WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE COMPANY WAS INVOLVED IN FREQUENT TRADING OF SHARES AND NO SEPARATE BOOKS OF ACCOUNTS WERE MAINTAINED FOR S HARES IN STOCK-IN-TRADE AND SHARES AS INVESTMENT. HE ALSO SUBMITTED THAT THE C OMMISSIONER OF INCOME TAX(A) WAS NOT JUSTIFIED IN HOLDING THAT THE ASSESSEE COMP ANY HELD THE SHARES UNDER THE CATEGORY OF INVESTMENT, THEREFORE, THE INCOME ARISI NG FROM INVESTMENT WAS TO BE TREATED AS INCOME FROM CAPITAL GAINS WHICH WAS CONT RARY TO THE INTENTION OF THE ASSESSEE. THE DR VEHEMENTLY SUBMITTED THAT THE INT ENTION OF THE ASSESSEE COMPANY WAS TO EARN PROFITS FROM TRADING OF SHARES AND NOT BY INVESTING IN IT. THEREFORE, THE COMMISSIONER OF INCOME TAX(A) GROSSL Y ERRED IN DIRECTING THE ASSESSING OFFICER TO ASSESS INCOME OF RS.31,70,049 UNDER THE HEAD OF CAPITAL ITA NO.3435/DEL/2010 ASSTT. YEAR: 2006-07 7 GAINS, IGNORING THE GUIDELINES ISSUED BY CBDT AND L EGAL POSITION SETTLED BY HONBLE SUPREME COURT AND HONBLE HIGH COURT. 10. THE ASSESSEES REPRESENTATIVE SUPPORTED THE IMPUGNED ORDER AND REPLIED THAT THE CONTENTIONS OF LD. DR ARE BASELESS AND IMAGINAR Y. PER CONTRA THE LD. COMMISSIONER OF INCOME TAX(A) RIGHTLY APPRECIATED T HE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO PROPERLY CONSIDERED THE SUBMIS SIONS AND DOCUMENTS SUBMITTED BEFORE HIM AND THE LD. COMMISSIONER OF INCOME TAX(A ) RIGHTLY HELD THAT INCOME SHOWN BY THE ASSESSEE COMPANY HAD ARISEN FROM THE S HARES KEPT BY THE ASSESSEE COMPANY AS INVESTMENT AND NOT AS STOCK-IN-TRADE. T HE AR ALSO SUBMITTED THAT THE ASSESSEE COMPANY HAS A RIGHT TO KEEP TWO SEPARATE P ORTFOLIOS OF SHARES: I) AS INVESTMENT II) AS STOCK-IN-TRADE. THEREFORE, IF TH E PROFIT SHOWN BY THE ASSESSEE IS RELATED TO THE INVESTMENT SHARES, THEN THE PROFITS OR INCOME FROM INVESTMENT WOULD BE CONSIDERED FOR TAX UNDER THE HEAD CAPITAL GAINS . 11. ON BARE READING OF THE IMPUGNED ORDER, WE OBSER VE THAT THE LD. COMMISSIONER OF INCOME TAX(A) CONSIDERING THE EVIDE NCE, SUBMISSIONS AND CITATIONS PLACED BEFORE HIM FINALLY HELD THAT THE B ALANCE SHEET OF THE ASSESSEE REFLECTED SOME SHARES AS STOCK-IN-TRADE AND SOME SH ARES AS INVESTMENT, THEN PROFIT ON SALE OF INVESTMENT SHARES DESERVES TO BE ASSESSE D AS CAPITAL GAIN. THE RELEVANT OPERATING PARAS OF IMPUGNED ORDER ARE BEING REPRODU CED AS UNDER:- I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, ORDER OF THE AO AND SUBMISSIONS MADE BY THE AR. THE CENTR AL ITA NO.3435/DEL/2010 ASSTT. YEAR: 2006-07 8 POINT OF DISPUTE IN THIS GROUND OF APPEAL IS REGARD ING THE HEAD OF INCOME UNDER WHICH THE PROFIT EARNED ON SAL E OF SHARES/MUTUAL FUNDS IS TAXABLE. THE APPELLANT HAS VEHEMENTLY CLAIMED THAT AS PER THE POLICY OF THE COMPANY, THE APPELLANT HAD CERTAIN SHARE PORTFOLIO UNDER THE CATEGORY OF INVESTMENTS ON WHICH LONG TERM AND SHORT TERM CAPITAL GAINS HAVE BEEN DISCLOSED AS CAPITAL G AINS. ON THE OTHER HAND THE AO IS OF THE VIEW THAT THE EN TIRE INCOME EARNED BY THE APPELLANT ON SALE OF SHARES IS TAXABLE AS BUSINESS INCOME. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND VARIOUS CASE LAWS QUOTED BY THE AO AS WELL AS RELIE D UPON BY THE AR, I AM OF THE CONSIDERED VIEW THAT IN THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE THE VIE W TAKEN BY THE AO DOES NOT APPEAR CORRECT. IT IS SEEN FROM THE RECORD OF THE APPELLANT THAT THE APPELLANT COMPANY HAD DISTINCT PORTFOLIO OF SHARES UNDER THE CATEGORY OF INVESTMENTS. THE CONTENTION OF THE AR, THAT IT IS N OT OPEN FOR THE AO SUMMARILY REJECT THE DECISIONS OF THE BO ARD OF DIRECTORS OF THE COMPANY AS IT IS THEIR PREROGATIVE TO DECIDE AS TO WHETHER THE COMPANY WOULD EARN INCOME UNDER THE HEAD CAPITAL GAINS OR BUSINESS INCOME FRO M SALE OF SHARES, ALSO APPEARS CORRECT. IN THE INSTAN T CASE DURING THE LAST FEW YEARS TOO, THE APPELLANT COMPAN Y HAD FOLLOWED THE SAME PRACTICE OF HOLDING ALL SHARES UN DER THE HEAD INVESTMENTS. THE APPELLANT HAS NEVER HELD ANY SHARE AS STOCK IN TRADE EITHER DURING THE YEAR OR F OR THE PAST 5 YEARS. IT IS ALSO SEEN THAT FOR A.Y. 01-02, 04-05, 05-06 WHEN THE APPELLANT WAS ASSESSED U/S 143(3) TH E APPELLANT'S CONTENTION THAT THE INCOME DERIVED FROM THE SALE OF INVESTMENTS WAS TO BE TAXED AS CAPITAL GAIN AND NOT BUSINESS INCOME HAS BEEN REGULARLY ACCEPTED BY THE DEPARTMENT. THE HON'BLE MUMBAI HIGH COURT IN THE CA SE OF CIT VS GOPAL PUROHIT ITA NO. 1121 OF 2009 VIDE ORDER DATED 06.01.2010 HAS HELD AS UNDER: '2. THE TRIBUNAL HAS ENTERED A PURE FINDING OF FACT THAT THE ASSESSEE WAS ENGAGED IN TWO DIFFERENT TYPES OF TRANSACTIONS. THE FIRST SET OF TRANSACTIONS INVOLVE D ITA NO.3435/DEL/2010 ASSTT. YEAR: 2006-07 9 INVESTMENT IN SHARES. THE SECOND SET OF TRANSACTION S INVOLVED DEALING IN SHARES FOR THE PURPOSES OF BUSI NESS (DESCRIBED IN PARAGRAPH 8.3 OF THE JUDGMENT OF THE TRIBUNAL AS TRANSACTIONS PURELY OF JOBBING WITHOUT DELIVERY). THE TRIBUNAL HAS CORRECTLY APPLIED THE P RINCIPLE OF LAW IN ACCEPTING THE POSITION THAT IT IS OPEN TO AN ASSESSEE TO MAINTAIN TWO SEPARATE PORT FOLIOS, ONE RELATING TO INVESTMENT IN SHARES AND ANOTHER RELATING TO BUS INESS ACTIVITIES INVOLVING DEALING IN SHARES. THE TRIBUNA L HELD THAT THE DELIVERY BASED TRANSACTIONS IN THE PRESENT CASE, SHOULD BE TREATED AS THOSE IN THE NATURE OF INVESTM ENT TRANSACTIONS AND THE PROFIT RECEIVED THEREFROM SHOU LD BE TREATED EITHER AS SHORT TERM OR, AS THE CASE MAY BE , LONG TERM CAPITAL GAIN, DEPENDING UPON THE PERIOD OF THE HOLDING. A FINDING OF FACT HAS BEEN ARRIVED AT BY T HE TRIBUNAL AS REGARDS THE EXISTENCE OF TWO DISTINCT T YPES OF TRANSACTIONS NAMELY, THOSE BY WAY OF INVESTMENT ON ONE HAND AND THOSE FOR THE PURPOSES OF BUSINESS ON THE OTHER HAND. QUESTION (A) ABOVE, DOES NOT RAISE ANY SUBSTA NTIAL QUESTION OF LAW'. THE HON'BLE ITAT MUMBAI IN THE CASE OF J.M. SHARES AND STOCK BROKERS LTD. VS JCIT ITA NO. 2801 I MUM.L2000 HAS HELD THAT WHERE THE ASSESSEE WAS CONSISTENTLY FOLLO WING THE PRACTICE OF HOLDING SOME SHARES AS STOCK IN TRADE A ND OTHER SHARES AS INVESTMENT AND IF THEY WERE BEING REFLECT ED IN THE BALANCE SHEET OF THE ASSESSEE AS INVESTMENT THEN TH E PROFIT ON SALE OF SUCH SHARES HAS TO BE ASSESSED AS CAPITA L GAIN. IN VIEW OF THE DISCUSSION ABOVE AND CONSIDERING THE FACT THAT THE INCOME HAS BEEN DERIVED FROM THE SALE OF I NVESTMENTS WHICH HAVE BEEN DULY REFLECTED IN THE ACCOUNTS UNDE R THE HEAD INVESTMENTS, AND THE JUDICIAL DECISIONS ON THE SUBJ ECT, AND FOLLOWING THE PRINCIPLE OF JUDICIAL CONSISTENCY AS LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF BERGER PAI NTS INDIA LTD. VS CIT 266 ITR 99, THE ACTION OF THE AO IN TRE ATING THE ENTIRE INCOME AS BUSINESS INCOME IS NOT JUSTIFIED, HENCE ADDITION MADE BY HIM ON THIS ACCOUNT IS DELETED. T HIS GROUND OF APPEAL IS ALLOWED. ITA NO.3435/DEL/2010 ASSTT. YEAR: 2006-07 10 12. AT THE OUTSET, WE OBSERVE THAT LD. COMMISSION ER OF INCOME TAX(A) RELIED ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE O F BURGER PAINTS INDIA LTD. (SUPRA) WHEREIN THEIR LORDSHIPS HELD THAT IF THE DE CISION IN THE CASE OF ONE ASSESSEE HAS BEEN ACCEPTED BY THE REVENUE AND NEVER CHALLENGED THE CORRECTNESS, THEN IT IS NOT OPEN TO THE REVENUE TO CHALLENGE THE SAME JUDGMENT IN THE CASE OF OTHER ASSESSEE WITHOUT MAKING A JUST CASE . 13. FROM THE IMPUGNED ORDER, WE ALSO OBSERVE TH AT THE LD. COMMISSIONER OF INCOME TAX(A) ALSO RELIED ON THE JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME TAX(CENTRAL), CALCUT TA VS ASSOCIATED INDUSTRIAL DEVELOPMENT CO.(P) LTD. REPORTED AS (197 1) 82 ITR 586 (SC) WHEREIN THEIR LORDSHIPS HELD AS UNDER:- WHETHER A PARTICULAR HOLDING OF SHARES IS BY WAY O F INVESTMENT OR FORMS PART OF THE STOCK-IN-TRADE IS A MATTER WHICH IS WITHIN THE KNOWLEDGE OF THE ASSESSEE WHO H OLDS THE SHARES AND HE SHOULD, IN NORMAL CIRCUMSTANCES, BE IN A POSITION TO PRODUCE EVIDENCE FROM HIS RECORDS AS TO WHETHER HE HAS MAINTAINED ANY DISTINCTION BETWEEN T HOSE SHARES WHICH ARE HIS STOCK-IN-TRADE AND THOSE WHICH ARE HELD BY WAY OF INVESTMENT. 14. LD. COMMISSIONER OF INCOME TAX(A) ALSO FOLLO WED THE PRINCIPLE LAID DOWN BY HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS GIRISH MOHAN REPORTED AS (2003) 260 I TR 417(P&H) WHEREIN THEIR LORDSHIPS HELD THAT ON CONSIDERATION OF ENTIR E MATERIAL ON RECORD, IF THE ITA NO.3435/DEL/2010 ASSTT. YEAR: 2006-07 11 AUTHORITIES BELOW HAD FOUND THAT THE SHARES HELD BY THE ASSESSEE WERE BY WAY OF INVESTMENT ONLY AND HE WAS NOT DEALING IN THEM, THE N THE PROFIT FROM SALES OF SUCH SHARES IN THE ASSESSMENT YEAR UNDER CONSIDERATION W AS ASSESSABLE AS CAPITAL GAINS. IN THE JUDGEMENT, THE HONBLE PUNJAB & HARYANA HIGH COURT CONSIDERED THE JUDGEMENT OF HONBLE APEX COURT IN THE CASE OF COMMISSIONER OF I NCOME TAX VS H.HOLCK LARSEN (1986) 160 ITR 67 (SC) WHEREIN THE HONBLE APEX COURT HELD AS UNDER:- IN ORDER TO DETERMINE WHETHER ONE WAS A DEALER IN SHARES OR AN INVESTOR, THE REAL QUESTION WAS NOT WHETHER THE TRANSACTION OF BUYING AND SELLING THE S HARES LACKS THE ELEMENT OF TRADING, BUT WHETHER THE LATER STAGES OF THE WHOLE OPERATION SHOW THAT THE FIRST STEP-THE PURCHASE OF THE SHARES-WAS NOT TAKEN AS, OR IN THE COURSE OF, A TRADING TRANSACTION. THE TOTALITY OF ALL THE FACTS WILL HAVE TO BE BORNE IN MIND AND THE CORRECT LEGAL PRIN CIPLES APPLIED TO THESE. IF ALL THE RELEVANT FACTORS HAVE BEEN TAKEN INTO CONSIDERATION AND THERE HAS BEEN NO MISAPPLICATION OF THE PRINCIPLES OF LAW, THEN THE CONCLUSION ARRIVED AT BY THE TRIBUNAL CANNOT BE INTERFERED WITH BECAUSE THE INFERENCE IS A QUESTION OF LAW, IF SUCH AN INFERENCE WAS A POSSIBLE ONE, SUBJECT, H OWEVER, THAT ALL THE RELEVANT FACTORS HAVE BEEN DULY WEIGHE D AND CONSIDERED BY THE TRIBUNAL, THE INFERENCE REACHED B Y THE TRIBUNAL SHOULD NOT BE INTERFERED WITH. 15. THE ASSESSEES REPRESENTATIVE SUBMITTED A COPY OF SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER IN THE PROCEEDINGS U/S 143(3) OF THE ACT WHERE THE ASSESSEE SUBMITTED THE LIST OF SHARES KEPT AS INVESTMENT BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WHICH CLEARLY SHOWS THE INTENTI ON OF THE ASSESSEE COMPANY THAT ITA NO.3435/DEL/2010 ASSTT. YEAR: 2006-07 12 THE SHARES AS SHOWN IN THE LIST HAS BEEN KEPT BY TH E ASSESSEE FOR THE PURPOSE OF INVESTMENT AND PROFIT ARISING FROM THEM DESERVES TO BE ASSESSED UNDER THE HEAD OF CAPITAL GAIN. ACCORDINGLY, WE ARE UNABLE TO SEE AN Y INFIRMITY OR PERVERSITY IN THE IMPUGNED ORDER IN THIS REGARD. THEREFORE, THESE GR OUNDS OF APPEAL ARE NOT SUSTAINABLE AND HENCE WE DISMISS THE SAME. GROUND NO. 4 16. ON BARE READING OF THE ORDERS OF THE AUTHORITIE S BELOW, WE ARE UNABLE TO SEE ANY ISSUE AS MENTIONED IN GROUND NO.4. THEREFO RE, WE OBSERVE THAT GROUND NO. 4 IS IRRELEVANT WHICH NEEDS NO ADJUDICATION AND WE DISMISS THE SAME. GROUND NO.5 17. LD. DR SUBMITTED THAT THE COMMISSIONER OF I NCOME TAX(A) DELETED THE ADDITION OF RS.1,57,197 ON BASELESS GROUNDS. THE DR SUPPORTED THE ACTION OF THE ASSESSING OFFICER BY SUBMITTING THAT THE ASSESSEE C OMPANY FAILED TO EXPLAIN MISCELLANEOUS EXPENDITURE FROM WHICH 1/10 TH OF AMORTIZATION WAS CLAIMED. THEREFORE, THE ASSESSING OFFICER RIGHTLY DISALLOWE D THIS CLAIM OF THE ASSESSEE AND ADDED TO THE INCOME OF THE ASSESSEE. 18. THE ASSESSEES REPRESENTATIVE CONTENDED THAT AS PER PRINCIPLE OF CONSISTENCY LAID DOWN BY HONBLE SUPREME COURT IN THE CASE OF B ERGER PAINTS INDIA LTD. (SUPRA) AND J.K. CHARITABLE TRUST (SUPRA), WHEN ONCE SIMILA R PROPOSITION HAS BEEN ACCEPTED BY THE REVENUE IN RESPECT OF PREVIOUS ASSESSMENT YE AR, THEN IT IS NOT OPEN TO THE ITA NO.3435/DEL/2010 ASSTT. YEAR: 2006-07 13 REVENUE TO CHALLENGE A SIMILAR FINDING AND TO DEVIA TE FROM ITS EARLIER STAND. THE AR SUPPORTED THE IMPUGNED ORDER AND FINALLY SUBMITT ED THAT THE APPEAL OF THE REVENUE IS BASELESS AND MISCONCEIVED. 19. FOR THE SAKE OF CLARITY IN THE FINDINGS, WE FIND IT JUST AND PROPER TO REPRODUCE THE FINDINGS OF THE LD. COMMISSIONER OF INCOME TAX( A) AS BELOW:- ' GROUND NO. 2 IS REGARDING THE DISALLOWANCE MADE BY THE AO OF RS. 157197/- WHICH WAS CLAIMED BY THE APPELLANT U/S 350 OF THE 1.1. ACT, WHILE MAKING THE ABOVE DISALLOWANCE THE AO HAS OBSERVED AS UNDER: 'IT IS ALSO OBSERVED THAT THE ASSESSEE CLAIMED PREL IMINARY & OTHER MISCELLANEOUS OF RS. 157197/-. THE AR OF TH E ASSESSEE WAS ASKED TO FURNISH THE REASON FOR CLAIMI NG OF THIS EXPENSES ALONGWITH NATURE AND JUSTIFICATION. T HE AR OF THE ASSESSEE VIDE LETTER DATED 07.11.2008 THAT MISC . EXPENSES WERE INCURRED IN EARLIER YEAR AND DURING T HE YEAR ON 1/10 OF SUCH EXPENSES HAS BEEN AMORTIZED IN ACCORDANCE WITH SECTION 350 OF THE 1.1. ACT, 1961. THE SUBMISSIONS OF THE ASSESSEE WAS CONSIDERED AND FOUN D ON SUBSTANCE AS ASSESSEE FAILED TO EXPLAIN OF MISC. EX PENSES WHICH AMORTIZED U/S 350 AS ALL EXPENSES U/S 350 CAN NOT BE ALLOWED TO BE AMORTIZED. IN THESE CIRCUMSTANCES THE EXPENSES CLAIMED BY ASSESSEE ON ACCOUNT OF PRELIMIN ARY AND MISC. EXPENSES AMOUNTING TO RS. 157197/- ARE DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. DURING THE COURSE OF APPELLATE PROCEEDINGS THE APPE LLANT HAD SUBMITTED MISC. EXPENDITURE OF RS. 15,71,970/- WAS INCURRED IN EARLIER YEARS AND ACCORDINGLY, 1/10TH O F SUCH EXPENSES HAVE BEEN AMORTIZED OVER THE YEARS IN ACCORDANCE WITH SECTION 350 OF THE 1.1. ACT. IN FAC T, THE YEAR UNDER CONSIDERATION WAS THE LAST YEAR OF SUCH AMORTIZATION AND ACCORDINGLY, RS. 1,57,197/- BEING 1/10TH OF SUCH EXPENDITURE DESERVED TO BE ALLOWED U/S 350 AS HAD BEEN ACCEPTED IN THE PAST 9 YEARS BY THE INCOME-TAX DEPT. ITA NO.3435/DEL/2010 ASSTT. YEAR: 2006-07 14 THESE EXPENSES WERE INCURRED IN FINANCIAL YEAR 1996 -97 IN CONNECTION WITH THE PUBLIC ISSUE OF THE APPELLANT C O. AND WERE THEREFORE DEDUCTIBLE OVER 10 YEARS U/S 35D. IT HAS BEEN FURTHER SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION, THERE WAS NO CHANGE IN THE FAC TS AND CIRCUMSTANCES OF THE CASE WHEN COMPARED WITH EARLIE R 9 YEARS AND NEITHER THE AO HAS BROUGHT ON RECORD ANY NEW FACT FOR JUSTIFYING THE DENIAL OF SUCH DEDUCTION U/ S 350 OF THE 1.1. ACT. HENCE, RULE OF CONSISTENCY DOES APPLY TO THE FACTS OF THIS CASE FOR WHICH RELIANCE IS PLACED ON THE CASE LAWS IN THE CASE OF BERGER PAINTS VS CIT 266 ITR 99 (SC), RADHASOAMI SATSAND VS CIT 193 ITR 321 (SC). IT HAS, THEREFORE, BEEN SUBMITTED THAT THE DISALLOWANCE OF RS.1,57,197/- AS MADE MAY KINDLY BE DELETED. 20. AFTER CAREFUL CONSIDERATION OF SUBMISSIONS O F BOTH THE PARTIES AND FINDINGS OF LD. COMMISSIONER OF INCOME TAX(A), WE OBSERVE THAT THIS POINT HAS NOT BEEN DISPUTED BY THE REVENUE THAT THE APPELLANT COMPANY HAD INCURRED EXPENDITURE OF RS.15,71,970 IN THE FINANCIAL YEAR 1996-97 IN CONNE CTION WITH THE PUBLIC ISSUE OF THE APPELLANT COMPANY AND THESE EXPENSES HAD BEEN A MORTIZED BY THE ASSESSEE BY WAY OF CLAIMING DEDUCTION OF 1/10 TH OF EXPENDITURE EVERY YEAR. LD. DR ALSO DID NOT DISPUTE THE FACT THAT THE ABOVE DEDUCTION WAS A LLOWED TO THE ASSESSEE IN THE PRECEDING NINE YEARS AND NO DISALLOWANCE WAS MADE B Y THE DEPARTMENT IN THESE EARLIER YEARS. FROM THE ASSESSMENT ORDER, WE OBSER VE THAT THE AO HAS NOT BROUGHT ANY FACT ON RECORD TO SHOW THAT THESE EXPENSES ARE NOT ALLOWABLE. THE ASSESSING OFFICER SIMPLY MENTIONED THAT THE ASSESSEE FAILED T O EXPLAIN MISCELLANEOUS ITA NO.3435/DEL/2010 ASSTT. YEAR: 2006-07 15 EXPENSES FOR WHICH AMORTIZATION OF 1/10 TH PART U/S 35D HAS BEEN CLAIMED. THERE IS NO DETAILED DISCUSSION OR FINDING REGARDING ALLOWAB ILITY OF THIS CLAIM IN THE EARLIER NINE YEARS TO THE ASSESSEE. ACCORDINGLY, WE ARE IN CLINED TO HOLD THAT THE ACTION OF THE ASSESSING OFFICER AND ITS FINDING WERE BASELESS AND WHICH WERE RIGHTLY CORRECTED BY LD. COMMISSIONER OF INCOME TAX(A) FOLL OWING THE WELL-ACCEPTED PRINCIPLE OF CONSISTENCY. THEREFORE, WE HAVE NO RE ASON TO INTERFERE WITH THE FINDINGS OF THE LD. COMMISSIONER OF INCOME TAX(A) I N THIS REGARD. IN VIEW OF ABOVE, GROUND NO. 5 OF THE REVENUE IS ALSO DISMISSE D. 21. IN THE LIGHT OF FINDINGS HEREINABOVE, WE ARR IVE TO THE CONCLUSION THAT THIS APPEAL BY THE REVENUE IS DEVOID OF MERIT AND DESERV ES TO BE DISMISSED AND WE DISMISS THE SAME. 22. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.08.2012 SD/- SD/- (G.D. AGRAWAL) (CHANDRAMOHAN GARG) VICE PRESIDENT JUDICIAL MEMBER DT. 28TH AUGUST 2012 GS ITA NO.3435/DEL/2010 ASSTT. YEAR: 2006-07 16 COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR