New Arena Holdings Pvt. Ltd., Kolkata V. CIT, KOLKATA -3, KOLKATA, Kolkata

ITA 348/KOL/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4566 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 09-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 06-04-2015
• Court: TRIBUNAL
• Department Lawyers: NIRAJ KUMAR
• Assessee Lawyers: V N PUROHIT; H N B HARADWAJ
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA [BEFORE SHRI N. V. VASUDEVAN, JM & SHRI M. BALAGAN ESH, AM] I.T.A NO.348/KOL/2015 ASSESSMENT YEAR: 2010-11 NEW ARENA HOLDINGS PVT. LTD. VS. COMMISSIONER OF INCOME-TAX-3 (PAN:AAACN9664J) KOLKATA. ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 09.06.2016 DATE OF PRONOUNCEMENT: 08.07.2016 FOR THE APPELLANT: SHRI V. N. PUROHIT & SHRI H.N.B HARADWAJ FOR THE RESPONDENT: SHRI NIRAJ KUMAR, CIT, DR ORDER PER SHRI M. BALAGANESH, AM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF REVISION ORDER OF CIT-3, KOLKATA VIDE M. NO. CIT-3/KOL/263/2014-15/NEW ARENA HOLDINGS/6487-8 9 DATED 25.03.2015. ASSESSMENT WAS FRAMED BY ITO, WD-8(2), KOLKATA U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR AY 2010-11 VIDE HIS ORDER DATED 18.03.2013. 2. THE SOLE GROUND TO BE DECIDED IS AS TO WHETHER T HE LD. CIT IS JUSTIFIED IN INVOKING THE REVISIONARY JURISDICTION U/S. 263 OF T HE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSE E COMPANY IS A NON-BANKING FINANCE COMPANY (NBFC) DULY REGISTERED WITH RESERVE BANK OF INDIA (RBI). THE ASSESSMENT FOR AY 2010-11 WAS COMPLETED BY THE LD. AO U/S. 143 (3) OF THE ACT ON 18.03.2013 DETERMINING THE TAXABLE INCOME AT RS.27,95,549/-. LATER, THE LD. CIT SOUGHT TO INVOKE REVISIONARY JURISDICTION U/S. 263 OF THE ACT AND IS SUED SHOW CAUSE NOTICE DATED 06.01.2015 WHICH IS REPRODUCED HEREINBELOW FOR THE SAKE OF CONVENIENCE: 2 ITA NO.348/K/2015 NEW ARENA HOLDINGS PVT. LTD. AY 2010-11 3 ITA NO.348/K/2015 NEW ARENA HOLDINGS PVT. LTD. AY 2010-11 THE ASSESSEE REPLIED TO THE SHOW CAUSE NOTICE STATI NG THAT THE PROVISIONS OF SECTION 94(8) OF THE ACT APPLIES ONLY TO UNITS AND NOT SHARES AND ACCORDINGLY, OBJECTED TO THE 4 ITA NO.348/K/2015 NEW ARENA HOLDINGS PVT. LTD. AY 2010-11 REVISIONARY JURISDICTION U/S. 263 OF THE ACT. THE LD. CIT NOT BEING CONVINCED WITH THE REPLY PASSED AN ORDER U/S. 263 OF THE ACT STATING T HAT THE ASSESSEE HAD INVOLVED IN BONUS STRIPPING U/S. 94(8) AND ACCORDINGLY, COMPLETED THA T THE ORDER PASSED BY THE AO U/S. 143(3) DATED 18.03.2013 IS ERRONEOUS AND PREJUDICIA L TO THE INTEREST OF THE REVENUE IN SO FAR AS THAT THE LD. AO HAD NOT EXAMINED THE ENTIRE FACTS AND DETAILS WHILE ALLOWING THE CLAIM OF SHORT TERM CAPITAL LOSS TO THE ASSESSEE BA SED ON INCORRECT APPLICATION OF LAW AND WRONG ASSUMPTION OF FACTS. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND: THAT THE ORDER PASSED BY CIT-3, KOLKATA U/S. 263 O F THE I. T. ACT, 1961 (THE ACT) HOLDING THAT ORDER PASSED U/S. 143(3) ON 18.03.2013 AFTER D UE SCRUTINY IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE IS BAD IN LA W AND ALSO ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CASE AND IS LIABLE TO BE HELD AS A NULLITY. 4. THE LD. AR ARGUED THAT THE PROVISIONS OF SECTION 94(8) OF THE ACT IS NOT APPLICABLE TO SHARES AND THE SAME IS APPLICABLE ONL Y FOR UNITS. IN SUPPORT OF THE SAME HE PLACED RELIANCE ON THE COORDINATE BENCH DECISION O F BANGALORE TRIBUNAL IN THE CASE OF DCIT VS. B. G. MAHESH (2014) 43 TAXMANN.COM 158 (BA N). THE LD. DR VEHEMENTLY RELIED ON THE ORDER OF THE LD. CIT. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE AND THE CASE LAW CITED BY LD. AR. WE FIND THA T THE ISSUE INVOLVED IS SQUARELY COVERED BY THE DECISION OF BANGALORE BENCH IN THE C ASE OF B. G. MAHESH, SUPRA, WHEREIN IT HAS BEEN HELD AS UNDER: SECTION 94(8) STATES THAT THE LOSS, IF ANY, ARISIN G TO A PERSON ON ACCOUNT OF PURCHASE AND SALE OF ORIGINAL 'UNITS' SHALL BE IGNORED FOR THE P URPOSE OF COMPUTING HIS INCOME CHARGEABLE TO TAX IF THE FOLLOWING CONDITIONS ARE SATISFIED: (I) THE PERSON BUYS OR ACQUIRES ANY UNITS WITHIN A PERIOD OF 3 MONTHS PRIOR TO RECORD DATE; (II) HE IS ALLOTTED ADDITIONAL UNITS (BONUS UNITS) WITHOUT ANY PAYMENT, ON THE BASIS OF HOLDING SUCH UNITS ON SUCH DATE; (III) HE SELLS OR TRANSFERS ALL OR ANY OF THE UNITS EXCLUDING BONUS UNITS WITHIN A PERIOD OF NINE MONTHS FROM SUCH DATE; (IV) ON THE DATE OF SUCH TRANSFER HE CONTINUES TO H OLD ALL OR ANY (AT LEAST ONE) OF THE ADDITIONAL UNITS (VIZ., BONUS UNITS); THEN THE AMOUNT OF LOSS SO IGNORED SHALL BE DEEMED TO BE THE COST OF PURCHASE OR ACQUISITION OF SUCH ADDITIONAL UNITS AS ARE HELD BY HIM ON THE DATE OF SUCH SALE OR TRANSFER. 5 ITA NO.348/K/2015 NEW ARENA HOLDINGS PVT. LTD. AY 2010-11 THE COMMISSIONER (APPEALS), HOWEVER, HAS OBSERVED THAT THE PROVISIONS OF SECTION 94(8) ARE APPLICABLE ONLY TO 'UNITS' WHICH MEANS UNITS OF MUTUAL FUNDS ONLY. THERE IS NO AMBIGUITY IN THE MATTER AS THE EXPLANATION IN SECTI ON 94(8) CLEARLY DEFINES 'SECURITIES' AS INCLUDING 'STOCKS AND SHARES' AND DEFINES 'UNITS' T O HAVE THE SAME MEANING AS ASSIGNED IN EXPLANATION TO SECTION 115AB; WHEREIN 'UNITS' ARE D EFINED AS UNITS OF MUTUAL FUNDS ONLY. IN THIS VIEW OF THE MATTER, THE PROVISIONS OF SECTI ON 98(4) HAVE NO APPLICABILITY TO SECURITIES, WHICH INCLUDES SHARES. THE COMMISSIONER (APPEALS) ALSO OBSERVED THAT IN A SIMILAR PROVISION INTRODUCED TO CURB DIVIDEND STRIPPING I.E. SECTION 94(7), BOTH UNITS A ND SECURITIES ARE INCLUDED. SECTION 94(7) FOR 'BONUS STRIPPING' WAS INTRODUCED BY FINANCE ACT , 2001 W.E.F. 1-1-2003 WHEREAS SECTION 94(8) FOR 'BONUS STRIPPING' WAS INTRODUCED IN FINAN CE ACT, 2004 W.E.F. 1-4-2005. HENCE IT CAN BE INFERRED THAT THE INTENTION OF LEGISLATURE W AS TO EXCLUDE THE SHARES OF COMPANIES FROM THE AMBIT OF PROVISIONS OF SECTION 94(8). IN VIEW OF THE ABOVE, THE FINDING OF THE COMMISSION ER (APPEALS) WAS JUSTIFIED THAT THERE IS LEGISLATIVE AUTHORITY TO DENY THE LOSS INTENTIONALL Y CREATED BY THE ASSESSEE; FOR WHAT THE LAW HAS ENVISAGED AND HAS SPECIFICALLY EXCLUDED CANNOT BE READ INTO THE SAME BY THE ASSESSING OFFICER. THEREFORE, THE ORDER OF THE COMMISSIONER ( APPEALS) IS UPHELD. IN THE RESULT, REVENUE'S APPEAL IS DISMISSED. RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF CO -ORDINATE BENCH OF BANGALORE TRIBUNAL, WE CONCLUDE THAT THE PROVISIONS OF SECTIO N 94(8) OF THE ACT CANNOT BE MADE APPLICABLE TO THE FACTS OF THE INSTANT CASE AND ACC ORDINGLY, THE LD. CIT PASSING AN ORDER U/S. 263 OF THE ACT BY INVOKING THE PROVISIONS OF S ECTION 263 OF THE ACT IS BAD IN LAW AND THE ORDER PASSED BY HIM IS HEREBY QUASHED. 6. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED . 7. ORDER IS PRONOUNCED IN THE OPEN COURT ON 08.07.2 016 SD/- SD/- (N. V. VASUDEVAN) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED : 8 TH JULY, 2016 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT NEW ARENA HOLDINGS PVT. LTD., 7/1, LORD SINHA ROAD, KOLKATA-700 071. 2 RESPONDENT CIT-3, KOLKATA. 3 . THE CIT(A), KOLKATA 4. 5. ACIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .