The ACIT, 5(1), Indore V. Shri Jawahar Lal Agrawal, Indore

ITA 361/IND/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1505 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 12-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: MANISH VAIDYA
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : ADSPA1202H I.T.A.NO. 361/IND/2011 A.Y. : 2008 - 09 ACIT, SHRI JAWAHARLAL AGRAWAL, 5(1) , INDORE. VS 10/1, R. S. BHAND ARI MARG, INDORE. APPELLANT RESPONDENT PAN NO. : ADSPA1202H I.T.A.NO. 362/IND/2011 A.Y. : 2008 - 09 SHRI JAWAHARLAL AGRAWAL, ACIT, 10/1, R. S. BHANDARI MARG, INDORE. VS 5(1), INDORE. APPELLANT RESPONDENT DEPARTMENT BY : SH RI R. A. VERMA, SR. DR RESPONDENT BY : SHRI MANISH VAIDYA AND SHRI RANJAN AGARWAL, C. A. DATE OF HEARING : 11 . 0 2 .201 3 DATE OF PRONOUNCEMENT : 13 .02 .201 3 O R D E R -: 2: - 2 PER R. C. SHARMA, A.M. THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE A ND REVENUE AGAINST THE ORDER OF CIT(A) DATED 21 ST SEPTEMBER, 2011, FOR THE ASSESSMENT YEAR 2008-09. 2. AS PER THE GROUND OF APPEAL FILED BY THE REVENUE, THE REVENUE IS AGGRIEVED BY THE ACTION OF THE CIT(A) FO R NOT TREATING PROFIT ARISING ON SALE OF SHARES AS BUSINE SS INCOME RATHER THAN CAPITAL GAINS. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. THE CONTENTION OF THE ASSESSEE BEFORE THE ASSESSING OFFICER WAS THAT THE SHARES ON WHICH LONG TERM CAPI TAL GAINS HAVE BEEN SHOWN HAVE BEEN HELD BY HIM SINCE MANY YE ARS. FURTHER IT WAS STATED HE HAS BEEN CONTINUOUSLY OFFE RING CAPITAL GAINS IN HIS RETURNS FOR MANY YEARS. IT WAS FURTHER STATED THAT IN HIS CASE ASSESSMENTS WERE COMPLETED U/S 143(3) F ROM ASSESSMENT YEAR 03-04 WHEREIN LONG TERM CAPITAL GAI NS WERE ACCEPTED. THAT ONLY IN THE YEAR UNDER CONSIDERATION THE TREATMENT OF LONG TERM CAPITAL HAS BEEN QUESTIONED. IT WAS STATED THAT AS PER RULES OF CONSISTENCY THE LONG TE RM CAPITAL -: 3: - 3 GAIN REFLECTED IN THE RETURN IS REQUIRED TO BE ASSE SSED AS SUCH. THE SUBMISSION MADE HAS BEEN EXAMINED. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT ASSESSEES CONTENT ION AND TAXED THE LONG TERM CAPITAL GAIN AS BUSINESS INCOME . BY THE IMPUGNED ORDER, THE CIT(A) ALLOWED ASSESSEES CLAIM OF TREATMENT OF PROFIT ARISING ON SALE OF SHARES AS CA PITAL GAIN. WE FOUND THAT IN ASSESSEES OWN CASE IN THE IMMEDIATE LY PRECEDING ASSESSMENT YEAR 2006-07 AND 2007-08, SIMI LAR ISSUE HAS BEEN DECIDED BY THE TRIBUNAL VIDE ITS ORD ER DATED 31 ST AUGUST, 2012, WHEREIN AFTER HAVING THE FOLLOWING OBSERVATIONS, ASSESSEES CLAIM OF TREATMENT OF CAPI TAL GAIN WAS ACCEPTED :- 18. WITH REGARD TO THE ISSUE REGARDING TREATMENT OF CAPITAL GAIN AS BUSINESS INCOME, WE FOUND THAT ASSESSEE WAS BUYING SHARES AS AN INVESTMENT. IN ALL THE EARLIER YEARS, THE ASSESSEE S CLAIM FOR SHORT TERM AND LONG TERM CAPITAL GAIN ON SALE OF SHARES WERE ACCEPTED BY THE DEPARTMENT IN THE SCRUTINY ASSESSMENT FRAMED U/S 143(3) DURING THE ASSESSMENT YEAR 2006-07 AND 2007- -: 4: - 4 08, THE ASSESSEE HAS DECLARED LONG TERM CAPITAL GAIN OF RS. 58.35 LAKHS AND IN THE ASSESSMENT YEAR 2007-08 RS. 5.50 LAKHS RESPECTIVELY AND THE SAME HAVE BEEN ACCEPTED BY THE DEPARTMENT UNDER SCRUTINY ASSESSMENT AND THE ASSESSING OFFICER HAS MERELY DISTURBED THE SHORT TERM CAPITAL GAIN SHOWN BY THE ASSESSEE AND TREATED THE SAME AS BUSINESS INCOME. BY GIVING DETAILED FINDINGS, THE LD. CIT(A) HAS FOUND THAT THE ASSESSEE WAS MAKING INVESTMENT IN SHARES, THEREFORE, CAPITAL GAIN ARISING ON SALE OF SHARES WERE LIABLE TO TAX A S SHORT TERM AND LONG TERM CAPITAL GAIN AS PER THE PERIOD OF HOLDING. IN THE INSTANT CASE BEFORE US, W E FOUND THAT INVESTMENT IN SHARES WERE MADE BY THE ASSESSEE OUT OF HIS OWN FUNDS AND NO BORROWING WAS TAKEN FROM THE MARKET AND ASSESSEE WAS ALSO IN RECEIPT OF SUBSTANTIAL AMOUNT OF DIVIDEND INCOME OF RS. 2.30 LAKHS AND RS. 1.90 LAKHS IN THE ASSESSMENT YEAR 2006-07 AN 2007-08 RESPECTIVELY. KEEPING IN VIEW THE INTENTION OF THE -: 5: - 5 ASSESSEE, THE TREATMENT GIVEN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT IN RESPECT OF SHARES SO SOLD, THE STAND TAKEN BY THE DEPARTMENTAL AUTHORITIES IN EARLIER YEARS AND THE FACT OF ASSESSEE HAVING USED OWN FUNDS FOR INVESTMENT IN SHARES, WE ARE INCLINED TO AGREE WITH THE CONTENTION OF LD. AUTHORIZED REPRESENTATIVE THAT PROFIT ARISING OUT OF SALE OF SHARES WERE ESSENTIALLY LIABLE TO BE TAXED AS SHORT TERM AND LONG TERM CAPITAL GAINS DEPENDING ON PERIOD OF HOLDING OF SHARES. THUS, WE CONFIRM THE ACTION OF CIT(A) IN BOTH THE YEARS FOR TREATING THE INCOME OFFERED ON SALE OF SHARES AS CAPITAL GAINS RATHER THAN BUSINESS INCOME. 4. WE HAVE CAREFULLY GONE THROUGH THE ORDER OF THE TRIBUNAL AND FOUND THAT THE FACTS OF THE YEAR UNDER CONSIDERATION ARE IN PARI MATERIA TO THAT OF ASSESS MENT YEAR 2006-07 & 2007-08. HOWEVER, THE FACTS OF THE YEAR U NDER CONSIDERATION ARE EVEN AT A BETTER FOOTINGS IN SO F AR AS CAPITAL GAIN SO OFFERED WAS LONG TERM CAPITAL GAIN, RESPECT FULLY -: 6: - 6 FOLLOWING THE TRIBUNALS ORDER IN ASSESSEES OWN CA SE, WE CONFIRM THE ACTION OF CIT(A) FOR TREATING THE GAIN ARISING ON SALE OF SHARES AS CAPITAL GAINS. 5. IN THE APPEAL FILED BY THE ASSESSEE, GROUND HAS BEE N TAKEN FOR DISALLOWANCE MADE U/S 40(A)(IA) OF THE IN COME-TAX ACT, 1961. 6. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A CIVIL CON TRACTOR WORKING FOR GOVERNMENT AS WELL AS PRIVATE PARTIES. DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER DISALLO WED PAYMENT MADE TO M/S. RISHABH ENTERPRISES ON THE PLE A THAT PAYMENT SO MADE WAS IN THE NATURE OF WORK CONTRACT ON WHICH TAX HAS NOT BEEN DEDUCTED AT SOURCE. THE ASSESSING OFFICER ALSO DISALLOWED PAYMENT MADE TO M/S. ARUN FABRICATO RS AMOUNTING TO RS. 4,376,933/-. BY THE IMPUGNED ORDER , THE LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE U/S 40(A)(IA ) AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. IT WAS CONTENDED BY LD. AUTHORIZED REPRESENTATIVE THAT THE BILLS ISSUED BY THE SUPPLIER M/S. RISHABH ENTERPRIS ES ARE AT PAGE NO. 75 TO PAGE NO. 84 OF PAPER BOOK. FOR EACH MONTH TWO SETS OF BILLS WERE ISSUED. ONE BILL CONTAINED AMOUN T OF -: 7: - 7 EXCAVATION OF STONE FROM MINES, ITS TRANSFER FROM M INES TO THE SUPPLIERS PLANT, LOADING CHARGES OF SUCH MATERIAL AND ROYALTY CHARGES FOR EXCAVATION. THE SECOND BILL CONTAINED C HARGES FOR CRUSHING OF STONES, EXCAVATED ABOVE. CHARGES OF ROY ALTY CHARGED IN THE FIRST BILL AND VAT IN THE SECOND BIL L, ITSELF SUBSTANTIATE THAT THE SUPPLIERS HAVE IN FACT SUPPLI ED MATERIAL. IT WOULD BE SEEN THAT IN BOTH THE SETS OF THE BILLS , THE ASSESSEE HAS NEITHER SUPPLIED ANY MATERIAL FOR PROCESSING NO R WAS INTERESTED IN VARIOUS PROCESSES PERFORMED BY THE SU PPLIER. THE SUPPLIER HAS BROKEN THE SUPPLY OF MATERIAL (GITTI) INTO VARIOUS STEPS UNDERTAKEN BY IT FOR THE REASONS BEST KNOWN TO IT. 7. ON THE OTHER HAND, THE LD. SENIOR DR RELIED ON THE ORDERS OF LOWER AUTHORITIES. 8. WE HAVE CAREFULLY CONSIDERED RIVAL CONTENTIONS AND ALSO GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE HAD ALSO GONE THROUGH THE BILLS ISSUED BY RISHABH ENTER PRISES, WHICH ARE BASICALLY FOR SUPPLY OF GITTI USED BY TH E ASSESSEE IN HIS CONSTRUCTION WORK. THUS, THIS WAS NOT IN THE NA TURE OF WORK CONTRACT. AS PER THE DETAILS MENTIONED ON THE BILL, WE FOUND THAT SUPPLIERS M/S. RISHABH ENTERPRISES HAVE EXCAVATED -: 8: - 8 STONE FROM HIS OWN MINES, TRANSPORTED IT TO ITS WOR K SITE AND AFTER CRUSHING HE HAS SUPPLIED GITTIS TO THE ASSESS EE. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS GIVEN STONE TO RISHABH ENTERPRISES FOR CRUSHING SO AS TO BRING SUC H PAYMENT WITHIN THE MEANING OF PAYMENT FOR JOB WORK. THUS, S UPPLY OF GITTI BY RISHABH ENTERPRISES DOES NOT COME UNDER TH E WORK CONTRACT, BUT IT IS SIMPLY A SUPPLY OF GITTI, WHICH DOES NOT REQUIRE DEDUCTION OF TAX AT SOURCE. ACCORDINGLY, TH E ASSESSING OFFICER IS DIRECTED TO DELETE THE DISALLOWANCE MADE IN RESPECT OF SUPPLY MADE BY RISHABH ENTERPRISES. IN RESPECT OF P AYMENTS MADE FOR FABRICATION WORK UNDERTAKEN BY ARUN FABRIC ATORS AMOUNTING TO RS. 4,39,336/-, THE SAME FALLS UNDER T HE DEFINITION OF WORK CONTRACT ON WHICH TDS IS REQUIRE D TO BE DEDUCTED AND SINCE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE AND CLAIMED THE SAME AS EXPENDITURE, THE DISALLOWAN CE MADE BY THE ASSESSING OFFICER U/S 40(A)(IA) WAS JUSTIFIE D. ACCORDINGLY, WE CONFIRM THE ACTION OF LOWER AUTHORI TIES WITH REGARD TO DISALLOWANCE OF RS. 4,39,336/- PAID TO M/ S. ARUN FABRICATORS. -: 9: - 9 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED WHEREAS THE APPEAL OF THE ASSESSEE IS ALLOWED IN PA RT. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 13 TH FEBRUARY, 2013. SD/ - SD/ - (JOGINDER SINGH) (R. C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 13 TH FEBRUARY , 2013. CPU* 1113