ACIT 10(2), MUMBAI V. KALPANA MADHANI SECURITIES P.LTD, MUMBAI

ITA 4734/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71568 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 02-09-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 16-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Assessee Lawyers: K SHIVARAM

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI . . , , BEFORE SHRI I. P. BANSAL, JM AND SHRI SANJAY ARORA , AM ./ I.T.A. NO. 4734/MUM/2012 ( / ASSESSMENT YEAR: 2009-10) THE ASST. CIT-10(2), ROOM NO.432, 4 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400 020 / VS. KALPANA MADHANI SECURITIES PVT. LTD. 11/1102, SHANTI TOWER SHANTI PATH, NEAR GARODIA NAGAR, GHATKOPAR (E), MUMBAI-400 077 ./ ./PAN/GIR NO. AABCK 2968 H ( /APPELLANT ) : ( !' / RESPONDENT ) # / APPELLANT BY : SHRI S. S. RANA !' $ # / RESPONDENT BY : SHRI K. SHIVARAM % &'( $ )* / DATE OF HEARING : 02.09.2013 +,- $ )* / DATE OF PRONOUNCEMENT : 23.10.2013 . / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-21, MUMBAI (CIT(A) FOR SH ORT) DATED 09.04.2012, PARTLY ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSES SMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMEN T YEAR (A.Y.) 2009-10 VIDE ORDER DATED 20.12.2011. 2 ITA NO.4734/MUM/2012 (A.Y. 2009-10) ASST.CIT VS. KALPANA MADHANI SECURITIES PVT. LTD. 2.1 THE APPEAL RAISES A SINGLE ISSUE PER ITS FIRST AND SOLE EFFECTIVE GROUND, I.E., THE MAINTAINABILITY IN LAW OF THE ASSESSEES CLAIM IN S ETTING OFF THE INCOME FROM ITS REGULAR BUSINESS ACTIVITIES, VIZ. SHARE TRADING, FUTURES & OPTIONS, COMMODITY TRADING, AND SUB- BROKERS AT BOMBAY STOCK EXCHANGE (BSE), RETURNED AN D ASSESSED AT RS.8,62,48,086/- AND RS.8,53,92,860/- RESPECTIVELY, AGAINST THE SPECULAT IVE LOSS OF RS.9,04,05,576/-. THE LOSS OF RS.9.04 CRORES, BEING IN RESPECT OF INTRADAY, I. E., NON-DELIVERY BASED, TRANSACTIONS SO THAT THEY WERE SPECULATIVE BY DEFINITION (S.43(5)), THE SAID TRANSACTIONS WERE CONSIDERED BY THE ASSESSING OFFICER (A.O.) TO CONSTITUTE A SEP ARATE BUSINESS ACTIVITY IN TERMS OF EXPLANATION 2 TO SECTION 28. THE SAME WOULD, THUS, HAVE TO BE REGARDED SEPARATELY IN VIEW OF SECTION 73 OF THE ACT. THE ASSESSEES CLAIM OF THE APPLICABILITY OF EXPLANATION TO SECTION 73, SO THAT ITS REGULAR BUSINESS, IN-SO-FAR AS IT RELATES TO PURCHASE AND SALE OF SHARES OF OTHER COMPANIES, IS ALSO TO BE DEEMED AS A SPECU LATIVE BUSINESS, DID NOT FIND FAVOUR WITH THE A.O. INASMUCH AS THE SAID EXPLANATION WAS A DEEMING PROVISION, AND WOULD HAVE EFFECT ONLY FOR THE LIMITED PURPOSE FOR WHICH IT WAS CREATED, I.E., COULD NOT EXTEND BEYOND ITS LEGITIMATE FIELD. SECTION 73 OF THE ACT WOULD IN ANY CASE APPLY ONLY TO THE LOSSES OF THE SPECULATIVE BUSINESS AND NOT TO THE I NCOME ARISING THERE-FROM, SO THAT EVEN IF THE PROFIT FROM ITS REGULAR BUSINESS WAS REGARDED A S A SPECULATIVE BUSINESS, AS CONTENDED, BENEFIT THEREOF COULD NOT BE EXTENDED TO THE ASSESS EE. THE RELIANCE BY THE ASSESSEE ON THE DECISION IN THE CASE OF CIT VS. LOKMAT NEWSPAPERS PVT. LTD. (IN ITA(L) NO. 3005 OF 2009 DATED 16.02.2010), WAS ALSO CONSIDERED BY HIM AS DI STINGUISHABLE ON FACTS AND CIRCUMSTANCES OF THE CASE. 2.2 IN FURTHER APPEAL, THE ASSESSEE FOUND FAVOUR WI TH THE LD. CIT(A), RELYING ON THE SAID DECISION BY THE HON'BLE JURISDICTIONAL HIGH CO URT, SINCE REPORTED AT [2010] 322 ITR 43 (BOM). THE HONBLE HIGH COURT HAD CLARIFIED THAT WHERE EXPLANATION TO SECTION 73 IS ATTRACTED, THE SAME WOULD APPLY REGARDLESS OF WHETH ER THE RESULT OF THE SAID TRANSACTIONS IS A PROFIT OR LOSS. HE, ACCORDINGLY, DIRECTED THE A.O . TO TREAT THE INCOME AS COVERED BY EXPLANATION TO SECTION 73 AS SPECULATIVE INCOME, AND APPLY THE PROVISION OF SECTION 73 ACCORDINGLY. AGGRIEVED, THE REVENUE IS IN APPEAL. 3 ITA NO.4734/MUM/2012 (A.Y. 2009-10) ASST.CIT VS. KALPANA MADHANI SECURITIES PVT. LTD. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 3.1 AS CLARIFIED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PRASAD AGENTS (P.) LTD. V. ITO [2009] 333 ITR 275 (BOM), RELIED UPON BY THE ASSESS EE BEFORE US, THE LANGUAGE OF EXPLANATION TO SECTION 73 IS CLEAR, PROVIDING NO SCOPE FOR ANY AMBIGUITY. ALLUDING TO THE OBJECT OF THE SECTION, AS THE A.O. DOES, WOULD BE TO NO CONSEQUENCE, EVEN AS THE HONBLE COURT FOUND NO REFERENCE THERETO IN CIRCULAR NO. 204 BY THE CBDT CONTAINING THE EXPLANATORY NOTES TO THE TAXATION LA WS (AMENDMENT) ACT, 1975. WHERE AND TO THE EXTENT THE ASSESSEES BUSINESS CONSISTS OF PURCHASE AND SALE OF SHARES OF OTHER COMPANIES, THE SAME IS TO BE REGARDED AS SPECULATIO N BUSINESS. WHETHER THE SAME RESULTS IN A PROFIT OR LOSS, WHICH IS EVEN OTHERWISE A MATT ER SUBSEQUENT, IS IRRELEVANT. IN FACT, NOBODY DOES BUSINESS FOR A LOSS, WHICH IS ONLY THRU ST UPON ONE UNDER THE GIVEN FACTS AND CIRCUMSTANCES. THAT LOSS IS ONLY NEGATIVE INCOME IS TRITE LAW, FOR WHICH WE MAY REFER TO THE DECISIONS BY THE APEX COURT IN THE CASE OF CIT VS. J. H. GOTLA [1985] 156 ITR 323 (SC) AND CIT VS. HARPRASAD & CO. (P.) LTD . [1975] 99 ITR 118 (SC). LOSS, IT MAY BE APPRECIATED, ARISES FROM THE SAME COMPUTATION PROCE SS AND MECHANISM THAT RESULTS IN AN INCOME, SO THAT THE TWO CLEARLY BEAR THE SAME CHA RACTER. AS SUCH, THEREFORE, NOT ONLY IS THE ASSESSEES BUSI NESS OF PURCHASE AND SALE OF SHARES A SPECULATIVE BUSINESS, IT IS THE SAME SPECU LATIVE BUSINESS WHICH HAS RESULTED IN A LOSS OF RS.9.04 CRORES FOR THE YEAR, I.E., IN TERMS OF EXPLANATION 2 TO SECTION 28, BEING ONLY ON ACCOUNT OF INTRA-DAY TRANSACTIONS IN PURCHA SE AND SALE OF SHARES. THIS IDENTITY OF BUSINESS THOUGH IS OF LITTLE CONSEQUENCE, AS THE LO SS FROM ONE SPECULATIVE BUSINESS CAN, IN TERMS OF S. 73 OF THE ACT, BE FREELY ADJUSTED AGAIN ST THE INCOME FROM ANOTHER. 3.2 CONTINUING FURTHER, TRUE, THE DEEMING PER EXPLANATION TO SECTION 73 IS ONLY FOR THE PURPOSE OF THE SAID SECTION, AND CANNOT BE EXTENDED BEYOND ITS LEGITIMATE FIELD AND SCOPE. BUT THAT IS PRECISELY WHAT THE ASSESSEES CLAIM IS, I.E., THAT THE INCOME OF ITS BUSINESS, IN- SO-FAR AS IT IS COVERED BY THE SAID EXPLANATION , IS TO BE FOR THE PURPOSES OF SECTION 73 CONSIDERED AS SPECULATION INCOME. THE REVENUES STA ND IS MISCONCEIVED. IN FACT, IN OUR CLEAR VIEW, THE ASSESSEES CASE IS FULLY COVERED IN ITS FAVOUR BY THE DECISIONS BY THE 4 ITA NO.4734/MUM/2012 (A.Y. 2009-10) ASST.CIT VS. KALPANA MADHANI SECURITIES PVT. LTD. HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PRASAD AGENTS (P.) LTD . (SUPRA) AND LOKMAT NEWSPAPERS PVT. LTD . (SUPRA). WE MAY, HOWEVER, CLARIFY THAT IT IS ONLY THAT PART OF THE ASSESSEES BUSINESS THAT CONSISTS OF PURCHASE A ND SALE OF SHARES AND, AS SUCH, COVERED BY THE EXPLANATION TO SECTION 73, THAT IS TO BE REGARDED AS SPECULATI VE. WE STATE SO AS WE OBSERVE THE ASSESSEE TO BE ALSO DERIVING INCOME FRO M BROKERAGE, DERIVATIVE SEGMENT, ETC. WE DECIDE ACCORDINGLY. 4. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED IN THE ABOVE GIVEN TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON OCTOBER 23, 2 013 SD/- SD/- (I. P. BANSAL) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER % ( MUMBAI; /& DATED : 23.10.2013 '.&../ ROSHANI , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. % 0) ( ) / THE CIT(A) 4. % 0) / CIT - CONCERNED 5. 3'45 !)&67 , * 67- , % ( / DR, ITAT, MUMBAI 6. 589 :( / GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , % ( / ITAT, MUMBAI