Asst. Commissioner of Income Tax, Circle-2, Margao., V. M/s Pyramid Finance Pvt. Ltd., Vasco

ITA 376/PAN/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1421 (ITAT-PANAJI)
• Duration Of Justice: 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 10-08-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 27-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K M MAHESH
• Keywords: Speculation loss

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI N.S. SAINI , HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NO. 376 /PNJ/201 4 (ASST. YEAR : 200 5 - 0 6 ) ACIT, CIRCLE - 2, MARGAO GOA. VS. M/S. PYRAMID FINANCE PVT. LTD., SALGAOCAR HOUSE, F.L. GOMES ROAD, VASCO - DA - GAMA, GOA. PAN NO. AABCP 1043 L (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI GIRISH DAVE ADV. DEPARTMENT BY : SHRI K.M. MAHESH - D R DATE OF HEARING : 10 / 0 8 /2015 . DATE OF PRONOUNCEMENT : 1 0 / 0 8 /201 5 . O R D E R PER N.S. SAINI , ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) , PANAJI , DATED 14 /0 8 /201 4 . 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS UNDER: - 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. THE HONBLE CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW SET OFF OF LOSS OF RS.88,36,270/ - ARISING FROM SHARE TRADING ACTIVITIES AGAINST THE BUSINESS PROFIT OF THE ASSESSEE COMPANY, EVEN THOUGH THE LOSS FROM SHARE TRADING ACTIVITIES IS A SPECULATION LOSS WITHIN THE MEANING OF EXPLANATION TO SECTION 73 OF THE IT ACT. 3. THE HONBLE CIT(A) HAS ERRED IN STATING THAT THAT THE ASSESSEE, BEING A NON BANKING FINANCIAL COMPANY, IS NOT COVERED WITHIN THE EXPLANATION TO SECTION 73 OF THE IT ACT. 2 ITA NO. 376 /PNJ/201 4 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY OF THE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF HEA RING. 5. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT ORDER OF THE ASSESSING OFFICER RESTORED. 3 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CLAIMED SET OFF OF L OSS ES OF SHARE TRADING ACTIVIT Y OF 88,36,270/ - AGAINST THE INCOME FROM BUSINESS & PROFESSION. ACCORDING TO THE ASSESSING OFFICER , THE SHARE TRADING ACTIVITY IS INCIDENTAL TO THE BUSINESS ACTIVITY OF THE ASSESSEE. THEREFORE, LOSS FROM SHARE TRADING ACTIVITY IS TO BE TREATED AS A SPECULATION LOSS AND THE SAME CAN BE SET OFF OF ONLY AGAINST THE SPECULATION GAINS, IF ANY, AS PER THE E XPLANATION UNDER SEC. 73 OF THE ACT. THEREFORE, HE DISALLOWED THE SET OFF OF SPECULATION LOSS ON ACCOUNT OF SHARE TRADING ACTIVITY OF 88,36,270/ - UNDER SEC. 73 OF THE ACT. 4 . ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING AS UNDER: - I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE SUBMISSION OF THE APPELLANT. THERE IS NO DISPUTE ABOUT THE FACT THAT THE APPELLANT IS A NON - BANKING FINANCE COMPANY (NBFC), AND ITS PRINCIPAL BUSINESS IS THAT OF GRANTING OF FINANCIAL LOANS AND ADVANCES. IN THE ASS ESSMENT ORDER, THE A.O. CONCLUDED THAT SHARE - TRADING ACTIVITY IS INCIDENTAL TO THE BUSINESS ACTIVITY OF THE ASSESSEE AND NOT ITS MAIN ACTIVITY AND THEREFORE THE LOSS FROM THE SHARE - TRADING ACTIVITY HAS TO BE TREATED AS SPECULATIVE LOSS WITHIN THE SCOPE AND MEANING OF EXPLANATION TO S.73 OF THE I .T. ACT. THE PROVISIONS OF S.73 DEAL WITH CARRY FORWARD AND SET - OFF OF LOSS FROM THE BUSINESS OF SPECULATI ON. EXPLANATION TO SECTION 73 IS A DEEMING PROVISION WHEREIN ON FULFILMENT OF SPECIFIED CONDITIONS; PURCHASE AND SALE OF SHARES ARE DEEMED TO BE SPECULATIVE IN NATURE. PLAIN READING OF EXPLANATION TO SECTION 73 EXPLAINS THAT IF ANY OF THE FOLLOWING CONDITI ONS ARE SATISFIED, THEN THE DEEMING PROVISION SHALL NOT BE APPLICABLE. I) IF THE GROSS TOTAL INCOME OF THE COMPANY INCLUDES INCOME MAINLY FROM THE HEADS I.E. INTEREST ON SECURITIES, INCOME FROM 3 ITA NO. 376 /PNJ/201 4 HOUSE PROPERTY, CAPITAL GAINS AND INCOME FROM OTHER SOURCES; OR II) THE PRINCIPAL BUSINESS OF THE COMPANY IS THE BUSINESS OF BANKING OR THE GRANTING OF LOANS AND ADVANCES. IN THE INSTANT CASE, ADMITTEDLY, THE APPELLANT IS A NBFC, I.E. NON - BANKING FINANCIAL COMPANY AND ITS MAIN BUSINESS IS GRANTING OF LOANS AND AD VANCES. TO SUPPORT ITS CLAIM, THE APPELLANT HAS PLACED RELIANCE ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: I) DCIT VS. VENKATESHWAR INVESTMENT AND FINANCE (P). LTD. 93 I TD 177 KOLKATA TRIB. II) ITO VS. VIJAY PAPER TRADERS & INVESTMENTS LTD. 38 SOT 578, DELHI TRIB. III) PUNJAB LEASE FINANCING LTD. VS. ITO 20 SOT 281, AHMADABAD TRIB. IV) PCBL INDUSTRIAL LTD. VS. CIT, 337 ITR 536, CALCUTTA H.C. V) ITO VS. ALOSHA MARKETING PVT. LTD. 20 12 - ITD - GJX - 3594 - CAL. TRIBUNAL. I HAVE ALSO GONE THROUGH THE ABOVE MENT IONED JUDICIAL PRONOUNCEMENTS. IN THE INSTANT CASE, 93.97% OF THE TOTAL INCOME COMES FROM FINANCING OPERATIONS AND FROM THE DETAILS SUBMITTED BY THE APPELLANT COMPANY, IT CAN BE SEEN THAT MAJOR DEPLOYMENT OF CAPITAL OF THE COMPANY IS IN INVESTMENT ACTIVITI ES. THUS, IN VIEW OF THE PROVISIONS OF THE ACT, FACTS OF THIS CASE AND VARIOUS JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE APPELLANT, IN MY OPINION, THE ASSESSEE IS NOT COVERED WITHIN THE EXPLANATION TO S.73. THE A.O. IS DIRECTED TO ALLOW SET - OFF OF LOSS AR ISING FROM SHARE TRANSACTION AMOUNTING TO RS.88,36,270/ - . 5. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE ASSESSING OFFICER WHEREAS AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUPPORTED THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS). 6 . AFTER CONSIDERING THE RIVAL SUBMISSION S AND PERUSING THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE UNDISPUTED FACTS OF THE CASE ARE THAT AS STATED IN THE ASSESSMENT ORDER , THE ASSESSEE IS A NON - BANKING FINANCE COMPANY . ACCORDING TO THE COMMISSIONER O F INCOME TAX (APPEALS) , THE ASSESSEE HAS SHOWN INTEREST INCOME OF 6.04 CORES AND INCOME FROM TRADING IN SHARES/ MUTUAL FUNDS OF 14.99 LAC. AND OTHER INCOME OF 19.90 LAC. THUS, OUT OF TOTAL INCOME OF 6.39 CRORES, 4 ITA NO. 376 /PNJ/201 4 6.04 CRORES IS FROM ACTIVITY OF GRANTING LOANS AND ADVANCES WHICH WORKS OUT TO 94.55% OF THE TOTAL INCOME OF THE ASSESSEE. FURTHER, ACCORDING TO THE COMMISSIONER OF INCOME TAX (APPEALS), ASSESSEE HAS GRANTED LOANS AND ADVANCES OF 29.49 CRORES AND AMOUNT UTILIZED FOR ADVANCE TAX IS 30.46 LAC AND INVESTMENT IN OTHER ASSETS IS 27.45 LAC. THUS, OUT OF TOTAL FUNDS OF 30.07 CRORES, ASSESSEE HAS INVESTED 29.49 CRORES IN GIVING LOANS AND ADVANCES WHICH WORKS OUT TO 98.07% OF THE TOTAL AVAILABLE FUNDS WIT H THE ASSESSEE. THEREFORE, PRINCIPAL BUSINESS OF THE ASSESSEE IS OF GRANTING LOANS AND ADVANCES, HENCE, ASSESSEE - COMPANY IS COVERED BY THE EXCEPTIONS CARVED OUT IN SEC. 73 OF THE ACT. THEREFORE, PROVISIONS OF SEC. 73 ARE NOT APPLICABLE TO THE ASSESSEE. CONSEQUENTLY, WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) WHICH IS CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 7 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON MONDAY , THE 1 0 TH DAY OF AUGUST , 201 5 AT GOA . S D / - S D / - (GEORGE MATHAN) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER D ATED : 1 0 RD AUGUST , 201 5 . VR/ - COPY TO: 1 . THE ASSESSEE. 2 . THE REVENUE. 3 . THE CIT 4 . THE CIT(A) 5 . THE D.R . 6 . GUARD FILE. BY ORDER 5 ITA NO. 376 /PNJ/201 4 ASSISTANT REGISTRAR I.T.A.T., PANAJI DATE INITIAL ORIGINAL DICTATION PAD & DRAFT ARE ENCLOSED IN THE FILE 1. DRAFT DICTATED ON 1 0 .0 8 .2015 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 11 .08 .2015 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 11 /08 /2015 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 11 /0 8 /2015 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 11 /08 /2015 SR.PS 6. DATE OF PRONOUNCEMENT 10 /0 8 /2015 SR.PS 7. FILE SENT TO THE BENCH CLERK 11 /08 /2015 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER