VINODINI N PAREKH, MUMBAI V. ASST CIT 12(1), MUMBAI

ITA 3479/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3817 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 25-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 03-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIKRAM BATRA
• Keywords: Capital asset; Business income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI BEFORE SHRI JASON P. BOAZ (AM) AND SHRI SANDEEP GOS AIN (JM) ITA NO. 3479 /MUM/2013 ASSESSMENT YEAR: 2008-09 MRS. VINODINI N. PAREKH . FORTUNE BUILDING, 3 RD FLOOR, 568, L.J.ROAD, FIVE GARDENS, MATUNGA(E), MUMBAI- 4000019. PAN : AACPP6300L VS. THE ACIT - 12(1) , AAYAKAR BHAVAN, M.K.ROAD, MUMBAI- 400020. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI. RAJIV KHANDELWAL RESPONDENT BY : SHRI. VIKRAM BATRA DATE OF HEARING: 17/02/2016 DATE OF PRONOUNCEMENT: 24/02/2016 O R D E R PER JASON P. BOAZ, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER OF THE CIT(APPEALS)- 23, MUMBAI DT. 04/03/2013 FOR ASST. YEAR 2008-09. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER:- 2.1 THE ASSESSEE, AN INDIVIDUAL ENGAGED IN THE SPEC ULATION OF SHARES AND TRADING IN DERIVATIVES IN THE YEAR UNDER CONSIDERATION, FIL ED HER RETURN OF INCOME ON 27/09/2008 DECLARING LOSS OF RS. 23,19,096/-. THE CASE WAS TAKEN UP FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S 143(3 ) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) VIDE ORDER DT. 30/11/2010 ; WHEREIN THE ASSESSEES LOSS WAS DETERMINED AT RS. 22,84,800/- IN VIEW OF THE FO LLOWING:- 2 ITA NO. 3479 /MUM/2013 ASSESSMENT YEAR: 2008-09 I) DISALLOWANCE U/S 14A RS. 34,292/- II) HOLDING SHORT TERM CAPITAL GAINS TO BE BUSINESS INCOME RS. 3,44,303/- 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT DT. 30/11/ 2010 FOR ASST. YEAR 2008-09, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(APP EALS)-23, MUMBAI. THE LD. CIT(A) DISMISSED THE ASSESSEES APPEAL VIDE THE IMP UGNED ORDER DT. 04/03/2013. 3. THE ASSESSEE, BEING AGGRIEVED BY THE ORDER OF TH E CIT(APPEALS)-23, MUMBAI DT. 04/03/2013 FOR ASST. YEAR 2008-09 HAS PREFERRED THI S APPEAL BEFORE THE TRIBUNAL RAISING THE FOLLOWING GROUNDS:- 1. THE COMMISSIONER OF INCOME-TAX (APPEALS)-23, MUM BAI (HEREINAFTER REFERRED TO AS THE CIT(A)) ERRED IN UP HOLDING THE ACTION OF THE ASSISTANT COMMISSIONER OF INCOME-TAX-12(1), MUMBAI(HEREINAFTER REFERRED TO AS THE ASSESSING OFF ICER) IN DISALLOWING A SUM OF RS. 34,292 ON ACCOUNT OF EXPEN SES INCURRED FOR EARNING DIVIDEND INCOME BY INVOKING THE PROVISIONS OF SECTION14A OF THE ACT. THE APPELLANT CONTENDS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) OUGHT NOT TO HAV E UPHELD THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING THE AFORESAID AMOUNT OF RS. 34,292/- INASMUCH AS THE SAME IS NOT IN ACCO RDANCE WITH THE PRESCRIPTION OF SECTION U/S 14A READ WITH RULE 8D. 2. THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN TREATING SHORT-TERM GAINS OF RS. 3,41,303/- AS B USINESS INCOME. THE APPELLANT CONTENDS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) OUGHT NOT TO HA VE UPHELD THE 3 ITA NO. 3479 /MUM/2013 ASSESSMENT YEAR: 2008-09 ACTION OF THE ASSESSING OFFICER IN HOLDING THE CAPI TAL GAINS ARISING ON SALE OF SHORT-TERM CAPITAL ASSETS AS BUSINESS INCOM E AND HENCE, THE SAME IS NOT TENABLE IN LAW. 3. THE CIT(A) ERRED IN NOT ADMITTING THE FOLLOWING ADDITIONAL GROUND OF APPEAL- THE ASSESSING OFFICER ERRED IN OBSERVING THAT LO NG-TERM GAINS IS BUSINESS INCOME. THE APPELLANT CONTENDS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE OBSERVATI ON OF THE ASSESSING OFFICER THAT LONG-TERM CAPITAL GAINS ARIS ING ON SALE OF LONG- TERM CAPITAL ASSETS IS BUSINESS INCOME IS NOT TENAB LE IN LAW. THE CIT(A) OUGHT TO HAVE ADMITTED THE ADDITIONAL GR OUND OF APPEAL AND DECIDED THE SAME. 4. GROUND NO: 3 4.1 AT THE OUTSET OF THE HEARING, THE LD.AR FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS NOT PRESSING THIS GROUND IN THIS APPEAL . IN VIEW OF THIS GROUND NO. 3 BEING NOT PRESSED, THE SAME IS RENDERED INFRUCTUOUS AND IS ACCORDINGLY DISMISSED. 5. GROUND NO. 1- DISALLOWANCE U/S U/S 14A R.W. RULE 8D (2)(III) RS. 34,292/- 5.1.1 IN THIS GROUND, THE ASSESSEE ASSAILS THE IMPU GNED ORDER CONTENDING THAT IN THE FACTUAL MATRIX OF THE CASE, THE LD. CIT(A) OUGH T NOT TO HAVE UPHELD THE ACTION OF THE ASSESSING OFFICER (A.O) IN DISALLOWING THE AMOUNT OF RS. 34,292/- ON ACCOUNT OF EXPENDITURE INCURRED FOR EARNING DIVIDEN D INCOME OF RS. 75,150/- AS THE DISALLOWANCE MADE, WAS NOT IN ACCORDANCE WITH T HE PROVISIONS OF SECTION U/S 14A R.W. RULE 8D. 4 ITA NO. 3479 /MUM/2013 ASSESSMENT YEAR: 2008-09 5.1.2 THE LD. AR FOR THE ASSESSEE SUBMITTED THAT TH E ASSESSEE HAD EARNED DIVIDEND INCOME OF RS. 75,150/- WHICH WAS CLAIMED A S EXEMPT U/S 10(34) OF THE ACT. IT IS SUBMITTED THAT THE ASSESSING OFFICER HAD MADE THE DISALLOWANCE U/S 14A R.W. RULE 8D (2)(III) ON THE ERRONEOUS OBSERVATION THAT THE ASSESSEE HAS NOT SHOWN ANY EXPENDITURE, AS HAVING BEEN INCURRED FOR EARNIN G OF THE SAID DIVIDEND INCOME. IT IS CONTENDED THAT THE ASSESSEE HAD SUBMITTED BEF ORE THE AUTHORITIES BELOW THAT ALL THE EXPENSES RELATED TO THE EARNING OF THE EXEM PT DIVIDEND INCOME WERE DEBITED TO THE ASSESSEES CAPITAL ACCOUNT AND THEREFORE THE SAME WAS NOT DEBITED TO THE PROFIT AND LOSS ACCOUNT WHICH PERTAINED ONLY TO DER IVATIVE TRANSACTIONS OF THE ASSESSEE. IN THIS REGARD THE LD. AR DREW THE ATTENT ION OF THE BENCH TO THE PAPER BOOK (PAGES 1 TO 67) FILED BY THE ASSESSEE AND PART ICULARLY PGS.4 TO 12 THEREOF WHICH WERE COPIES OF THE ASSESSEES FINANCIAL STATE MENT FOR THE PERIOD RELEVANT TO ASST. YEAR 2008-09. OUR ATTENTION WAS DRAWN TO PAGE 7 OF THE PAPER BOOK WHICH IS A COPY OF THE ASSESSEES CAPITAL ACCOUNT; WHEREIN A PART FROM CREDIT OF THE EXEMPT DIVIDEND INCOME OF RS.75,100/- THERETO, THE ASSESSE E HAS CLAIMED EXPENDITURE ON ACCOUNT OF DELIVERY CHARGES OF RS. 1,519/-, DEMAT C HARGES OF RS. 10,621/-, STAMP CHARGES OF RS. 7,577/- AND SECURITY TRANSACTIONS C HARGES OF RS. 72,415/- WHICH IT WAS SUBMITTED ARE TO BE ATTRIBUTED TO THE EARNING OF THE AFORESAID EXEMPT DIVIDEND INCOME. THE LD. AR SUBMITTED THAT IT IS TH E AFORESAID FACTUALLY ERRONEOUS OBSERVATION OF THE AUTHORITIES BELOW THAT LED TO TH E UNWARRANTED DISALLOWANCE OF RS. 34,292/- MADE U/S 14A R.W. RULE 8D(2)(III), WHI CH OUGHT TO BE DELETED. 5.2 PER CONTRA, THE LD. DR FOR REVENUE SUPPORTED TH E ORDERS OF THE AUTHORITIES BELOW. 5.3.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. THE FACTS AS EMANATE FROM THE RECORD ARE THAT THE ASSESSEE EARNED DIVIDEND INCOME OF RS. 75,150/- WHI CH WAS EXEMPT U/S 10(34) OF THE ACT. AS CAN BE SEEN FROM THE IMPUGNED ORDER, TH E ASSESSEE HAD IN FACT 5 ITA NO. 3479 /MUM/2013 ASSESSMENT YEAR: 2008-09 SUBMITTED BEFORE THE LD.CIT(A) THAT SHE CREDITED TH E EXEMPT DIVIDEND INCOME TO HER CAPITAL ACCOUNT FOR THE RELEVANT PERIOD AND HAD CLAIMED EXPENDITURE THEREIN ON ACCOUNT OF DELIVERY CHARGES (RS.1,519/-) , DEMAT CHARGES (RS.10,621/-) , STAMP CHARGES (RS. 7,577/-) AND SECURITIES TRANSACTION (R S. 72,415/-) CHARGES (DETAILS PLACED AT PG. 7 OF PAPER BOOK) AND IT WAS IN THESE CIRCUMSTANCES THAT NO SEPARATE CLAIM WAS PUT FORTH IN THE PROFIT AND LOSS ACCOUNT WHICH REFLECTED THE DERIVATIVE TRANSACTIONS OF THE ASSESSEE. IN THE FACTUAL MATRIX OF THE CASE, AS LAID OUT ABOVE, WE CONCUR WITH THE AVERMENTS OF THE LD. AR THAT THE ASSESSING OFFICER, WITHOUT EXAMINATION OF THE ASSESSEES ACCOUNTS AND RECORDIN G THAT HE IS NOT SATISFIED WITH THE ASSESSEES CLAIM, PROCEEDED ON THE FACTUALLY ER RONEOUS CONCLUSION THAT NO EXPENDITURE WAS DEBITED IN RESPECT OF THE EARNING O F THE ASSESSEES EXEMPT DIVIDEND INCOME, TO MAKE THE DISALLOWANCE U/S 14A R .W. RULE 8D; WHICH WAS NOT WARRANTED. IN THIS FACTUAL VIEW OF THE MATTER, WE A GREE WITH THE PLEA OF THE ASSESSEE THAT SINCE IT HAD ALREADY CLAIMED EXPENDIT URE INCURRED (SUPRA) FOR EARNING THE EXEMPT DIVIDEND INCOME OF RS. 75,150/-, THE FURTHER DISALLOWANCE OF RS. 34,292/- MADE BY THE ASSESSING OFFICER U/S 14A R.W. RULE 8D WAS NOT CALLED FOR IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND ACCORDINGLY DELETE THE SAME. CONSEQUENTLY GROUND NO.1 OF THE ASSESSEES APPEAL I S ALLOWED. 6. GROUND NO. 2 6.1 IN THIS GROUND, THE ASSESSEE ASSAILS THE IMPUG NED ORDER CONTENDING THAT THE LD. CIT(A) OUGHT NOT TO HAVE UPHELD THE ACTION OF T HE ASSESSING OFFICER IN HOLDING THE CAPITAL GAINS OF RS. 3,41,303/- ON SALE OF S HORT TERM CAPITAL ASSETS(I.E.STCG.) AS BUSINESS INCOME ON ACCOUNT OF SHARE TRADING A CTIVITY. IN THIS REGARD, THE LD. AR SUBMITTED THAT THE VERY SAME ISSUE WAS CONSIDERE D BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASST. YEAR 2006-07 AND HELD IN FAVOUR OF THE ASSESSEE. IN ITS ORDER IN ITA NO. 2133/MUM/2 010 DT. 19/09/2014 THE TRIBUNAL AFTER CONSIDERING THE ISSUE AT PARAS 6 TO 11 THEREOF, AT PARA 12 HAS HELD AND DIRECTED THE ASSESSING OFFICER TO ASSESSEE THE GAIN ON SALE/PURCHASE OF 6 ITA NO. 3479 /MUM/2013 ASSESSMENT YEAR: 2008-09 SHARES AT STCG. ONLY AND NOT AS BUSINESS INCOME. THE LD. AR ALSO SUBMITTED THAT THE ASSESSMENT IN THE CASE ON HAND FOR A.Y. 2 003-04 AND 2004-05 WERE COMPLETED U/S 143(3) OF THE ACT WHEREIN THE ASSESSI NG OFFICER HAS ACCEPTED THE STCG. DECLARED BY THE ASSESSEE. IN A.Y. 2005-06, TH E ASSESSEES RETURN WAS ACCEPTED U/S 143(1) OF THE ACT. 6.2 PER CONTRA, THE LD. DR FOR REVENUE PLACED STRO NG RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 6.3.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JUDICIAL PRON OUNCEMENTS CITED. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE HAS CARRIED ON SHARE TRANSACTIONS ON A DAY TO DAY BASIS, IN A WELL PLANN ED, SYSTEMATIC AND ORGANIZED MANNER. ACCORDING TO THE ASSESSING OFFICER, THE ASS ESSEE WAS CARRYING ON SHARE TRANSACTIONS AS BUSINESS ACTIVITY ONLY. THIS VIEW WAS UPHELD BY THE LD. CIT(A). A PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW SHOW S THAT THEY HAVE NOT EXAMINED THE FACTS IN THE CASE ON HAND, BUT HAVE PROCEEDED TO ADJUDICATE THE ISSUE ON THE BASIS THAT THE GUIDELINES PRESCRIBED BY THE CBDT, INSTRUCTION NO. 1827DT. 31/08/1989 AND CBDT, OFFICE MEMORANDUM DT. 13/12/20 05 ARE AUTOMATICALLY APPLICABLE TO THE CASE ON HAND. 6.3.2. WE FIND THAT THIS VERY ISSUE WAS CONSIDERED BY A CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASST. YEAR 2006-07. IN ITS ORDER IN ITA NO. 2133/MUM/2010, THE BENCH AFTER CONSIDERING THE ISSU E IN DETAIL FROM PARAS 6 TO 12 THEREOF HAS SET ASIDE THE ORDERS OF THE AUTHORIT IES BELOW AND DIRECTED THE ASSESSING OFFICER TO ASSESSEE THE CAPITAL GAINS ARI SING ON SALE OF SHARES (I.E. SHORT TERM CAPITAL ASSETS) AS STCG. ONLY AND NOT AS BUSIN ESS INCOME. FOLLOWING THE AFORESAID DECISION OF THE CO-ORDINATE BENCH IN THE ASSESSES OWN CASE FOR ASST. YEAR 2006-07, SINCE THE FACTS OF THE MATTER ARE SIMILAR IN THIS YEAR ALSO, WE SET ASIDE 7 ITA NO. 3479 /MUM/2013 ASSESSMENT YEAR: 2008-09 THE ORDER OF THE LD. CIT(A) AND DIRECT THE ASSESSIN G OFFICER TO ASSESS THE CAPITAL GAINS ARISING FROM SALE OF SHARES (I.E. SHORT TERM CAPITAL ASSETS) AS STCG. ONLY AND NOT AS BUSINESS INCOME. IT IS ORDERED ACCORDINGL Y. 7. IN THE RESULT, THE ASSESSEES APPEAL FOR ASST . YEAR 200-09 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH FEBRUARY, 2016 SD/- SD/- ( SANDEEP GOSAIN ) (JASON P.BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED: 24/02/2016 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. !' , $ !'% , / DR, ITAT, MUMBAI 6. &' ( / GUARD FILE. / BY ORDER, ) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI PRAMILA