DCIT 2(2) (OSD), MUMBAI V. ONE UP FINANCIAL CONSULTANTS P. LTD, MUMBAI

ITA 4506/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7211 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 30-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M ANISH DESAI
• Keywords: Capital Gains

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C ,MUMBAI BEFPRE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI R.K. PANDA, ACCOUNTANT MEMBER I.T.A.NO.4506/MUM/09) (A.Y. 2005-06) DY.COMMR. OF INCOME-TAX-2(2)(OSD), R.NO.545, 5 TH FLOOR, AAYKAR BHAVAN, M.K.RD.,MUMBAI-400 020. VS. ONE UP FINANCIAL CONSULSTATS P.LTD., 14, LAKSHMI NIWAS, CHURCH RD., VILE PARLE(W), MUMBAI-400 056. PAN: AAACO1036F APPELLANT RESPONDENT APPELLANT BY SHR I S.M. KESHKAMAT. RESPONDENT BY SHRI M ANISH DESAI. O R D E R PER D. MANMOHAN, VICE PRESIDENT: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 20-5-2009 PASSED BY THE CIT(A)-II, MUMBAI, AND IT PERTAINS TO THE ASSESSMENT YEAR 2005- 06. FACTS CONCERNING THE ONLY ISSUE IN DISPUTE ARE AS UNDER. 2. THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF SHARES. IN THE MEMORANDUM OF ASSOCIATION OF THE COMPANY, IT WAS STATED THAT THE ASSESSEE COMPANY IS AUTHORIZED TO INVEST IN AND ACQUIRE AND HOLD, SELL/BUY IN SHARES AND DEBENTURES. THE COMPANY HAS BEEN ENGAGED IN THE ACTIVITY OF INVESTING IN SHARES AND SECURITIES SINCE INCEPTION. THE CASE OF THE ASSESSEE IS THAT WHENEVER SHARES WERE PURCHASED WITH AN INTENTION TO HOLD THE SAME AS INVESTMENT, THE SAME WAS SHOWN AS INVESTMENT, IN TH E BOOKS OF ACCOUNT AS WELL AS IN THE BALANCE-SHEET. WHENEVER SUCH SHARES ARE S OLD OFF, RESULTANT PROFIT/LOSS HAS BEEN SHOWN UNDER THE HEAD CAPITAL GAINS. DUR ING THE YEAR UNDER IT 4506/M/09 ONE UP FINANCIAL CONSULTANTS P.LTD. 2 CONSIDERATION, THE ASSESSEE SOLD CERTAIN SHARES HEL D AS INVESTMENT. THE CASE OF THE A.O. WAS THAT THE INCOME THEREON HAS TO BROUGHT TO TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS, WHEREAS THE CASE O F THE ASSESSEE IS THAT IT HAS TO BE ASSESSED TO TAX AS SHORT-TERM/LONG-TERM CAPITAL GAINS. THE A.O. REJECTED THE CONTENTION OF THE ASSESSEE AND TREATED THE SAME AS INCOME FROM BUSINESS. ON AN APPEAL FILED BY THE ASSESSEE, THE LD. CIT(A) DEC IDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING IN PARAS 13 & 14 OF HIS ORDE R AS UNDER : 13. THE DECISION OF ITAT, MUMBAI AS CITED BY THE A .R. HAVE BEEN PLACED ON RECORD AND VERIFIED. ALL THE DECISIONS NA MELY SHRI JANAK S. RANGAWALA VS. ACIT-12(2) (ITA NO.1163/MUM/2004), TH E ADDL. C.I.T., SR-49, MUMBAI VS. SHRI MOTILAL OSWAL (ITAS NO.3860, 3861, 3862 & 3863/MUM/2001) AND SHRI GOPAL PUROHIT VS. JC IT (ITA NO.4854/MUM/2008) ARE ON THE SAME ISSUE WHEREIN, HO NBLE ITAT MUMBAI HAS CATEGORICALLY HELD THAT IT IS THE INTENTION OF THE APPELLANT WHICH IS TO B E SEEN TO DETERMINE THE NATURE OF TRANSACTION CONDUCTED BY TH E APPELLANT. THOUGH THE INVESTMENT IN SHARES IS OF LA RGE MAGNITUDE, BUT THE SAME SHALL NOT DECIDE THE NATURE OF TRANSACTION. THE TRANSACTIONS OF SALE AND PURCHASES OF SHARES IN THE PRECEDING YEARS HAVE BEEN HELD AS INCOME FRO M CAPITAL GAINS, BOTH ON LONG TERM AND SHORT TERM BAS IS, THE TRANSACTIONS IN THE YEAR UNDER CONSIDERATION ON ACC OUNT OF SALE AND PURCHASE OF SHARES IS THE SAME AS IN THE P RECEDING YEARS AND ON THE SAME MERITS TO BE ACCEPTED AS SHOR T TERM CAPITAL GAINS. THERE IS ALSO NO BASIS FOR TREATING THE APPELLANT AS TRADER IN SHARES WHEN HIS INTENTION WAS TO HOLD THE SHARES IN INDIAN COMPANIES AS AN INVESTMENT AND NOT AS STOCK-IN-TRADE. THE MAGNITUDE OF THE TRANSACTIONS D OES NOT CHANGE THE NATURE OF THE TRANSACTION, WHICH ARE BEI NG ASSESSED AS INCOME FROM CAPITAL GAINS FROM PAST SEV ERAL YEARS. ACCORDINGLY, THE HONBLE ITAT, MUMBAI DIRECTED TO H OLD THE INCOME INVESTMENT IN SHARES AS CAPITAL GAINS AN D ALSO DIRECTED TO ALLOW THE SET OFF THE BROUGHT FORWARD CAPITAL LO SSES AGAINST THE CAPITAL GAINS OF THE YEAR UNDER CONSIDERATION. 14. CONSIDERING THE ABOVE, I AM OF THE VIEW THAT TH E CASE OF THE APPELLANT IS FAIRLY CLEAR AND SQUARELY COVERED BY T HE AFORESAID DECISIONS OF ITAT, MUMBAI. SINCE THE ITAT, MUMBAI I S HAVING TERRITORIAL JURISDICTION I RESPECTFULLY FOLLOWING T HE DECISION OF ITAT, MUMBAI HOLD THAT IN THE PRESENT CASE, THE SHARES WE RE HELD BY THE APPELLANT AS INVESTMENT FROM YEAR- TO -YEAR AND THE STAND HAS BEEN CONSISTENTLY FOLLOWED BY THE APPELLANT. THE ASSESSI NG OFFICER HAS ALSO ACCEPTED THE SAME STAND IN PAST. THUS, THE INC OME FROM SALE OF INVESTMENTS IS TO BE TREATED AS CAPITAL GAINS, LON G TERM OR SHORT- IT 4506/M/09 ONE UP FINANCIAL CONSULTANTS P.LTD. 3 TERM AS THE CASE MIGHT BE, AND NOT AS BUSINESS INCO ME. THE ASSESSING OFFICER IS THEREFORE DIRECTED TO TREAT TH E INCOME FROM SALE OF INVESTMENTS IN THE YEAR UNDER CONSIDERATION AS C APITAL GAINS AND ALSO ALLOW THE APPELLANT TO SET OFF THE BROUGHT FOR WARD-UNABSORBED CAPITAL LOSSES AS A RESULT GROUND NO.1 TO 4 ARE ALL OWED IN FAVOUR OF THE APPELLANT. 3. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. N O MATERIAL WHATSOEVER WAS PLACED BEFORE US BY THE REVENUE TO CONTRADICT THE FINDINGS OF THE FIRST APPELLATE AUTHORITY. UNDER TH ESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ORDER PASSED BY THE LD. CIT(A) DOES NOT SUFFER FROM ANY INFIRMITY SINCE THE ISSUE WAS DISPOSED OF ON TH E STRENGTH OF THE FACTS AVAILABLE ON RECORD AND BY APPLYING THE DECISIONS O F ITAT, MUMBAI BENCHES. UNDER THE CIRCUMSTANCES, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THE 30TH DAY OF MARCH, 2 010. SD/- (R.K. PANDA) ACCOUNTANT MEMBER SD/- (D. MANMOHAN) VICE PRESIDENT MUMBAI: 30TH MARCH, 2010. IT 4506/M/09 ONE UP FINANCIAL CONSULTANTS P.LTD. 4 COPY TO : 1. ASSESSEE. 2.DEPARTMENT. 3 CIT(A)-II,,MUMBAI. 4 CIT-II,MUMBAI. 5.DR,C BENCH,MUMBAI. 6. GUARD FILE. (TRUE COPY) BY ORDER, NG: ASST.REGISTRAR, ITAT, MUMBAI. IT 4506/M/09 ONE UP FINANCIAL CONSULTANTS P.LTD. 5 + DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 29-3-10 SR.PS/ 2 DRAFT PLACED BEFORE AUTHOR 29-3-10 SR.PS/ 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER