JM FINANCIAL COMMTRADE LTD, MUMBAI V. ITO 3(2)(1), MUMBAI

ITA 4255/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71907 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 07-11-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 20-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHOK SURI
• Assessee Lawyers: SANJAY R PARIKH; K SHIVARAM
• Keywords: Speculation loss; Capital expenditure
• Section: 37(1); 43(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ./I.T.A. NO.4255/M/2012 ( / ASSESSMENT YEAR: 2007 - 2008 ) M/S. JM FINANCIAL COMMTRADE LIMITED, 141 - MAKER CHAMBERS III, NARIMAN POINT, MUMBAI 400 021. / VS. ITO - 3(2)(1), MUMBAI. ./ PAN : AABCJ 5602 K ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI K. SHIVARAM & MR. SANJAY R. PARIKH / RESPONDENT BY : SHRI ASHOK SURI, CIT - DR / DATE OF HEARING : 04.12.2013 / DATE OF PRONOUNCEMENT : 11 .12.2013 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL WAS FILED BY THE ASSESSEE ON 20.6.2012 IS AGAINST THE ORDER OF THE CIT (A) - 4, MUMBAI DATED 27.4.2012 FOR THE ASSESSMENT YEAR 2007 - 2008. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: DISALLOWANCE OF FILING FEES AN D STAMP DUTY FOR INCREA SING AUTHORIZED SHARE CAPITAL OF THE COMPANY RS. 4,42,000/ - 1. THE LD CIT (A) ERRED ON FACTS AND IN LAW IN UPHOLDING THE ORDER OF THE AO DISALLOWING THE FILING FEES PAID TO REGISTRAR OF COMPANIES AND STAMP DUTY PAID FOR INCREASING AUTHORIZED SHARE CAPITAL OF THE COMPANY AMOUNTING TO RS. 4,42,000/ - . 2. THE APPELLANT PRAYS THAT YOUR HONOURS HOLD THAT THE FILING FEES PAID TO REGISTRAR OF COMPANIES AND STAMP DUTY PAID AGGRE GATING TO RS. 4,42,000/ - ARE ALLOWABLE EXPENSES AND HENCE, THE DISALLOWANCE AS MADE BY THE AO AND AS CONFIRMED BY THE CIT (A) MAY BE DELETED. NOT ALLOWING 1/5 TH OF FILING FEES AND STAMP DUTY UNDER SETION 35D OF THE ACT. 2 3. WITHOUT PREJUDICE TO GROUNDS 1 AND 2 ABOVE, THE LD CIT (A) ERRED IN HOLDING THAT THE FILING FEES PAID TO REGISTRAR OF COMPANIES AND STAMP DUTY PAID AGGREGATING TO RS. 4,42,000/ - COULD NOT BE ALLOWED U/S 35D OF THE ACT. 4. THE APPELLANT PRAYS THAT IF YOUR HONOURS HOLD THAT FILING FEES PAID TO RE GISTRAR OF COMPANIES AND STAMP DUTY PAID AGGREGATING TO RS. 4,42,000/ - IS NOT ALLOWABLE AS REVENUE EXPENSES, THE SAME MAY BE HELD TO BE ALLOWABLE U/S 35D OF THE ACT. TREATING LOSS FROM TRADING INC COMMODITY EXCHANGES AS SPECULATIVE LOSS RS. 1,77,67,373/ - 5. T HE LD CIT (A) ERRED ON FACTS AND IN LAW IN UPHOLDING THE ORDER OF THE AO TREATING THE PROPRIETARY LOSS INCURRED IN TRADING OF COMMODITIES FUTURES ON MCX AND NCDEX EXCHANGES AMOUNTING TO RS. 1,77,67,373/ - AS SPECULATIVE IN NATURE ON THE ALLEGED GROUND THAT COMMODITY FUTURE TRANSACTIONS THROUGH COMMODITY EXCHANGES ARE NOT COVERED UNDER CLAUSE (D) TO SECTION 43(5) OF THE ACT. 6. THE APPELLANT PRAYS THAT YOUR HONOURS HOLD THAT THE PROPRIETARY LOSS INCURRED IN TRADING IN COMMODITIES FUTURES ON MCX AND NCDEX AMOUNT ING TO RS. 1,77,67,373/ - IS NOT A SPECULATIVE LOSS AND HENCE, THE LOSS BE TREATED AS NORMAL BUSINESS LOSS. 3. AT THE OUTSET, SHRI K. SHIVARAM, LD COUNSEL FOR THE ASSESSEE BROUGHT TO OUR NOTICE THE FACT THAT THE AO TREATED THE FILING FEES AND STAMP DUTY, INCURRED FOR INCREASING SHARE CAPITAL OF THE ASSESSEE - COMPANY, AS CAPITAL IN NATURE. IN THIS REGARD, LD COUNSEL FAIRLY MENTIONED THAT THE ISSUES RAISED IN GROUND N OS. 1 TO 4 IN THIS APPEAL HAVE TO BE DECIDED IN ACCORDANCE WITH THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF BOOKE BOND INDIA LTD VS. CIT 225 ITR 798. 4. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 5. WE HAVE HEAR D BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE CITED JUDGMENTS OF THE HONBLE SUPREME COURT IN THE CASE OF BOOKE BOND INDIA LTD (SUPRA). ON PERUSAL OF THE SAID JUDGMENT OF THE APEX COURT (SUPRA), WE FIND THAT IT IS REL EVANT FOR THE PROPOSITION THAT EXPENDITURE INCURRED BY A COMPANY IN CONNECTION WITH ISSUE OF SHARES, WITH A VIEW TO INCREASE ITS SHARE CAPITAL, IS DIRECTLY RELATED TO THE EXPANSION OF THE CAPITAL BASE OF THE COMPANY, AND IS CAPITAL EXPENDITURE, EVEN THOUG H IT MAY INCIDENTALLY HELP IN THE BUSINESS OF THE C OMPANY AND IN THE PROFIT - MAKING. CONSIDERING THE SETTLED NATURE OF THE ISSUE AT THE LEVEL OF APEX COURT, WE ARE OF THE OPINION THAT THE FILING FEES AND STAMP DUTY CONNECTED WITH INCREASE IN THE SHARE CAP ITAL CONSTITUTES CAPITAL IN NATURE, WHICH IS ALLOWABLE EITHER U/ S 35D OR U/S 37(1) OF THE ACT. THE ORDER OF THE CIT (A) DOES NOT CALL ANY INTERFERENCE. ACCORDINGLY, WE DISMISS THE GROUND NOS. 1 TO 4 RAISED BY THE ASSESSEE ARE DISMISSED . 3 6. REFERRING TO THE GROUND NOS. 5 AND 6, LD REPRESENTATIVES OF BOTH THE PARTIES FAIRLY MENTIONED THAT THE ISSUES INVOLVED IN THESE GROUNDS SHOULD BE REMANDED TO THE FILES OF THE AO CONSIDERING THE CRYPTIC ORDER OF THE CIT (A), WHICH CANNOT BE CATEGORIZED AS A SPEAKING ORDER. WE HAVE ALSO CONSIDERED THE SUBMISSIONS MADE BY THE LD COUNSEL IN THIS REGARD, ESPECIALLY WITH REGARD TO THE DEFINITION OF DERIVATIVE IN CLAUSE (IA) OF SECTION 2 OF SECURITIES CONTRACTS (REGULATION) ACT, 1956, THE NOTIFICATION OF THE CB DT NO. S.O.3513 (E) DATED 27.11.2013 AND THE DECISIONS FILED BEFORE US I.E., (I) CIT VS. NASAFINELEASE P. LTD (2013) 358 ITR 305 (DEL.) ; (II) ACIT VS. ARNAV AKSHAY MEHTA (2012) 53 SOT 581 (MUM.) (TRIB.); AND (III) G.K. ANAND BROS. BULDWEL (P.) LTD VS. ITO (2009) 34 SOT 439 (DEL.) (TRIB). 7. AFTER CONSIDERING THE CONCURRENCE OF BOTH THE LD REPRESENTATIVES TO REMAND THE ISSUES INVOLVED IN GROUND NOS.5 AND 6 TO THE FILES OF CIT (A) AS WELL AS CONSIDERING THE NON - SPEAKING NATURE OF THE ORDER OF THE CIT (A), WE REMAND THESE TWO GROUNDS TO THE FILES OF THE CIT (A) TO EXAMINE AND DECIDE THE ISSUES AFRESH IN THE LIGHT OF THE ABOVE CITED DECISIONS AND ALSO IN ACCORDANCE WITH LAW. CIT (A) IS ALSO DIRECTED TO WRITE A SPEAKING ORDER IN THE SET ASIDE PROCEEDINGS AFTER GR ANTING A REASONABLE ORDER OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, GROUND NOS. 5 AND 6 RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 1 1 T H DECEMBER, 2013. S D / - S D / - (VIJAY PAL RAO) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 11. 12 .2013 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI