ACIT CC 3(3) CEN RG 3, MUMBAI V. PASSIONATE INVESTMENT MANAGEMENT P.LTD, MUMBAI

ITA 379/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3354 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 14-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AWUNGSHI GIMSON
• Keywords: Business income; Rule of consistency; Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C ,MUMBAI BEFORE SHRI R.C.SHARMA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.379/MUM/2015 (ASSESSMENT YEAR : 2011-12) ACIT, CC-3(3), ROOM NO. 401, 4 TH FLOOR, AAYAKAR BHAVAN, MUMBAI-400020. VS. M/S PASSIONATE INVESTMENT MANAGEMENT P. LTD., NEW LINK ROAD, MALAD (W), MUMBAI-400064. PAN: AAACM7085N (APPELLANT) (RESPONDENT) REVENUE BY : SHRI AWUNGSHI GIMS ON (CIT DR) ASSESSEE BY : SHRI GOVIND JAVE RI (AR) DATE OF HEARING : 24.08.2016 DATE OF PRONOUNCEMENT : 07.09.2016 O R D E R PER PAWAN SINGH, JM: 1. THE PRESENT APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-39, MUMBAI, DATED 03.10.2014. THE REVENUE HAS RAISED TH E FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN TREATING THE SUM OF RS. 27,92,8 4,823/- TAXABLE UNDER THE HEAD CAPITAL GAIN INTEREST OF BUSINESS INCOM E EVEN THOUGH THE NATURE OF BUSINESS OF THE APPELLANT IS AS A TRADER, NOT INVESTOR. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE U/ S 14A TO THE TOTAL ADMINISTRATIVE EXPENDITURE CLAIMED, WHEREAS THE AO MADE DISALLOWANCE OF RS. 1,00,78,426/- U/S 14A OF THE INCOME TAX ACT, 19 61. 2. GROUND NO.1 RAISED IN THE PRESENT APPEAL RELATES TO TREATMENT OF INCOME OF RS. 27,92,84,823/- AS BUSINESS INCOME. AT THE OUTSET OF THE HEARING, LD. AR OF ASSESSEE ARGUED THAT BOTH THE GROUNDS OF APPEAL RAI SED BY REVENUE IS COVERED IN 2 ITA NO. 379/M/2015- M/S PASSIONATE INVESTMENT MANAGEMENT P. LTD. FAVOUR OF ASSESSEE IN ASSESSEES OWN CASE FOR AY 20 07-08 ,2008-09, 3009-10 AND 2010-11. THE APPEAL FOR AY 2007-08 AND 2008-09 WAS DECIDED BY THIS TRIBUNAL IN ITA NO. 6603/MUM/2010 AND ITA NO. 5538/ MUM/2011 RESPECTIVELY VIDE ORDER DATED 29.05.2013. THE ORDE R OF TRIBUNAL FOR AY 2007- 08 & 2008-09 WAS FURTHER CONFIRMED BY HONBLE HIGH COURT VIDE ORDER DATED 27.06.16 IN ITA NOS. 2345 & 2367/2013. COPY OF THE ORDERS OF TRIBUNAL AND HONBLE HIGH COURT IS PLACED ON RECORD. LD. DR FOR THE REVENUE NOT DISPUTED THE CONTENTION OF THE LD. AR OF THE ASSESSEE. 3. WE HAVE NOTICED THAT THE SIMILAR GROUNDS AS RAISED BY THE REVENUE IN THE PRESENT APPEAL WAS AROSE FOR CONSIDERATION BEFORE T HIS TRIBUNAL ON THE APPEAL FILED BY THE REVENUE AGAINST THE ASSESSEE FOR AY 20 07-08 & 2008-09 AND THE FOLLOWING ORDER WAS PASSED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IS AS UNDER: 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE ORDERS OF AUTHORITIES BELOW. THE DISPUTE IS REGARDING THE NAT URE OF INCOME FROM SALE AND PURCHASE OF SHARES BY THE ASSESSEE. THE ISSUE W HETHER THE INCOME FROM SALE AND PURCHASE IN A PARTICULAR CASE SHOULD BE TR EATED AS CAPITAL GAIN OR AS BUSINESS INCOME IS A DEBATABLE ISSUE AND THERE ARE CONFLICTING DECISIONS OF THE TRIBUNAL ON THIS ISSUE. EACH CASE IS, THEREFORE, TO BE BASED ON ITS FACTUAL SITUATION. IN THE PRESENT CASE, THE TOTAL NUMBER OF TRANSACTION IS 68 OUT OF 6 ITA 6603 /MUM/10 & 5838/M/11 WHICH 40 TRANSACTIONS RELATE TO LTCG. 15 TRANSACTIONS RELATE TO STCG AND 30 TRANSACTIONS REL ATE TO CLOSE OUT TRANSACTION OF STCG. THE TOTAL NUMBER OF SCRIPS DEA LT BY THE ASSESSEE IS 26. FURTHER AVERAGE HOLDING PERIOD FOR CAPITAL GAINS IS 37 DAYS OR 1.75 YEARS. THE AVERAGE HOLDING PERIOD FOR STCG IS 217 DAYS. TH ESE FACTS SPEAK FOR THEMSELVES. IN A STOCK MARKET WHERE MORE THAN 5000 COMPANYS SHARES ARE TRADED EVERY DAY, THE TRANSACTION OF THE ASSESSEE C ANNOT BE HELD AS IN THE NATURE OF TRADING. THE PAST HISTORY OF THE ASSESSEE ALSO SHOWS THAT RIGHT FROM ASSESSMENT YEARS 2001-02 TO 2006-07, WHEN THE ASSES SMENTS HAS BEEN MADE AFTER THOROUGH SCRUTINY U/S 143(3) OF THE ACT, THE DEPARTMENT HAS ACCEPTED THE PROFIT UNDER THE HEAD CAPITAL GAIN. EVEN FOR TH E SAKE OF ARGUMENT, IT IS ACCEPTED THAT RESJUDICATA DOES NOT APPLY TO THE INC OME TAX PROCEEDINGS, BUT RULE OF CONSISTENCY IS TO BE FOLLOWED. WHEN THE FAC TS ARE SAME AND THE LAW HAS NOT CHANGED, WE DO NOT FIND ANY REASON TO TAKE A DI FFERENT VIEW AS FROM THE PAST ASSESSMENT OF THE ASSESSEE. WE, THEREFORE, DO NOT FIND ANY MERIT IN REVENUES APPEAL AND ACCORDINGLY THE FINDING OF THE LD. CIT(A) IS CONFIRMED. GROUND NO. 1 OF REVENUES APPEAL IS DISMISSED. 4. IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE MADE 35 TRANSACTIONS OUT OF WHICH 31 TRANSACTIONS ARE RELATED WITH LONG TERM CAPITAL GAIN (LTCG) AND ONLY 4 TRANSACTIONS ARE RELATED WITH SHORT TERM CAPITAL GA IN (STCG) AND TOTAL NUMBER 3 ITA NO. 379/M/2015- M/S PASSIONATE INVESTMENT MANAGEMENT P. LTD. OF SCRIPT DEALT WITH BY ASSESSEE ARE ONLY 10. HENCE , KEEPING IN VIEW THE SIMILARITIES OF THE FACT AND FOLLOWING THE ORDER OF CO-ORDINATE BENCH IN ASSESSEES OWN CASE FOR AY 2007-08 AND 2008-09, THI S GROUND OF APPEAL IS SQUARELY COVERED IN FAVOUR OF ASSESSEE. THUS, KEEPI NG IN VIEW, THE PRINCIPLE OF CONSISTENCY, THE GROUND OF APPEAL RAISED BY REVENUE IS DISMISSED. 5. GROUND NO.2 RELATES TO THE DISALLOWANCE U/S 14A OF THE ACT OF RS. 1,00,78,426/-. LD. AR OF ASSESSEE ARGUED THAT THE SIMILAR GROUNDS OF APPEAL CAME UNDER CONSIDERATION BEFORE THIS TRIBUNAL, IN THE APPEAL F ILED BY REVENUE AGAINST THE ASSESSEE FOR AY 2007-08 & 2008-09. LD. DR FOR REVEN UE HAS NOT DISPUTED THE FACTUAL ARGUMENT ADVANCED BY AR OF THE ASSESSEE. 6. WE FIND THAT THE SIMILAR GROUNDS CAME UNDER CONSIDE RATION BEFORE THE CO- ORDINATE BENCH OF THIS TRIBUNAL FOR AY 2008-09 AND THE CO-ORDINATE BENCH OF THIS TRIBUNAL MADE THE FOLLOWING ORDER: 9. AFTER CONSIDERING THE FACTS OF THE CASE, IN OUR HUMBLE VIEW, IT IS SETTLED THAT RULE 8D IS PROSPECTIVE AS HELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ AND BOYCE MFG. CO. LTD. VS. D CIT (2010) 328 ITR 81 (BOM). HOWEVER, AT THE SAME TIME A REASONABLE DISAL LOWANCE ACCEPTED TO BE MADE SO FAR AS EARNING OF EXEMPT INCOME IS CONCERNE D. WE FIND THAT THE LD. CIT(A) HAS RESTRICTED THE DISALLOWANCE TO THE EXTEN T OF EXPENDITURE CLAIMED. WE THEREFORE DO NOT FIND ANY REASON TO INTERFERE WI TH THE FINDING OF THE LD. CIT(A) AND ACCORDINGLY THE FINDING OF THE LD. CIT(A ) IS CONFIRMED. GROUND NO. 2 OF REVENUES APPEAL IS DISMISSED. 7. IN THIS YEAR ALSO THE FACTS OF THE CASE ARE NOT AT MUCH VARIANCE AND CONSISTENT VIEW IS TAKEN BY THE TRIBUNAL IN ASSESSEES OWN CAS E FOR AY 2007-08 AND 2008- 09 AND FURTHER AY 2009-10. THUS, KEEPING IN VIEW TH E PRINCIPLE OF CONSISTENCY, WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE O RDER PASSED BY THE CIT(A). HENCE, BOTH THE GROUNDS OF APPEAL ARE DISMISSED. 8. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON T HIS 7 TH SEPTEMBER, 2016. SD/- SD/- (R.C.SHARMA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 07/09/2016 4 ITA NO. 379/M/2015- M/S PASSIONATE INVESTMENT MANAGEMENT P. LTD. S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/