The DCIT, Co Circle-7(2), Ahmedabad V. M/S Baroda Brokers P Ltd, Ahmedabad

ITA 49/AHD/2001

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67961 (ITAT-AHMEDABAD)
• Duration Of Justice: 12 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 11-10-2013
• Assessment Year: 1995-1996
• Appeal Filed On: 02-01-2001
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Assessee Lawyers: MEHUL K PATEL
• Keywords: Capital asset; Business income; Cost of acquisition; Fair market value
• Section: 143(3)

Judgement Text

ITA NO 49/AH D/2001 . A.Y. 1995- 96 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NO.49 /AHD/2001 (ASSESSMENT Y EAR: 1995-96) THE D.C.I.T, CO. CIRCLE 7(2), AHMEDABAD (APPELLANT) VS. BARODA BROKERS PVT. LTD. 2 ND FLOOR, KLASSIC CHAMBER, NAVRANGPURA, AHMEDABAD PAN/GIR NO. 31-100-CV-5944 ( RESPONDENT) APPELLANT BY : SHRI P.L. KUREEL, SR. D.R. RESPONDENT BY : SHRI MEHUL K. PATEL ( )/ ORDER DATE OF HEARING : 11-10-20 13 DATE OF PRONOUNCEMENT : 22 -11-2013 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF CIT(A), AHMEDABAD DATED 05.10.2000 FOR A.Y. 1995-96. 2. THE FACTS AS CULLED OUT FROM THE ORDER OF LOWER AUT HORITIES ARE AS UNDER. 3. ASSESSEE IS A FINANCE COMPANY DERIVING INCOME FROM INTEREST, DIVIDEND AND PROFIT ON SALE OF SHARES. ASSESSEE FILED ITS RE TURN OF INCOME FOR A.Y. 95-96 ON 30.11.1995 DECLARING TOTAL LOSS OF RS. 5,1 3,345/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER ITA NO 49/AH D/2001 . A.Y. 1995- 96 2 SECTION 143(3) VIDE ORDER DATED 31.01.1997 AND THE TOTAL INCOME WAS DETERMINED AT RS. 46,070/-. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 05.10.2010 PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVE D BY THE AFORESAID ORDER OF CIT(A) THE REVENUE IS NOW IN APPEAL BEFORE US AND THE EFFECTIVE GROUND RAISED BY THE REVENUE READS AS UNDER:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THAT THE INCOME FROM SALE OF SHARES SHOULD BE TREATED AS CAPITAL GAIN INSTEAD OF INCOME FROM BUSINESS. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON PER USAL OF THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE, A.O. NOTICED THAT ASS ESSEE HAS EARNED PROFIT ON SALE OF SHARES AMOUNTING TO RS. 17,27,616 /- BUT IN THE STATEMENT OF INCOME, THE AFORESAID PROFIT ON SALE OF SHARES W AS OFFERED AS LONG TERM CAPITAL GAIN OF RS. 11,69,482/-. THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS AND JUSTIFY ITS CLAIM. THE ASSESSEE INTERA LIA SUBMITTED THAT THE PROFIT HAS ARISEN OUT OF SALE OF SHARES OF ATUL PRO DUCTS LTD. WHICH WERE HELD BY IT BY WAY OF INVESTMENTS AND THEREFORE THE ASSESSEE HAS RIGHTLY CONSIDERED THE SAME TO BE LONG TERM CAPITAL GAINS I N STEAD OF BUSINESS INCOME. THE ASSESSEE FURTHER SUBMITTED THAT THE INC OME FROM SALE OF SHARES OF ATUL PRODUCTS LTD. WAS BY MISTAKE SHOWN A S BUSINESS INCOME IN EARLIER YEARS, THOUGH THE SHARES WERE ACTUALLY HELD AS INVESTMENTS. THE SUBMISSIONS OF THE ASSESSEE WAS NOT FOUND ACCEPTABL E TO THE A.O. FOR THE REASON THAT THE INCOME FROM SALE OF SHARES OF ATUL PRODUCTS LTD. WAS SHOWN AS BUSINESS INCOME IN A.Y. 1994-95 AND EARLIE R ASSESSMENT YEARS. ACCORDING TO A.O., THE ASSESSEE HAD CLAIMED THE LOS S ON SALE OF SHARES OF RS. 17,51,481/- AS BUSINESS LOSS WHICH WAS DEBITED IN THE PROFIT AND LOSS ACCOUNT AND THUS ACCORDING TO THE A.O, THE ASSESSEE WAS GIVING DIFFERENT ITA NO 49/AH D/2001 . A.Y. 1995- 96 3 TREATMENT TO THE PROFIT AND LOSS TRANSACTION IN THE ACCOUNT. HE ACCORDINGLY DISALLOWED THE CLAIM OF THE ASSESSEE. A GGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER:- 3. I HAVE VERY CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LEARNED A.R. AND ALSO HAVE GONE THROUGH THE FACTS OF THE CASE. I FIND THAT THE APPELLANT HAS BEEN SHOWING THE HOLDING OF SHARES OF ATUL PRODUCTS LIMITED AS ITS I NVESTMENT RIGHT FROM A.Y.74-75 AND HAD BEEN FURTHER CONSOLIDATING ITS HOLDING IN THE S AID COMPANY BY WAY OF PURCHASES, RIGHTS, BONUS AND ALLOTMENT OF FCDS. NO DOUBT, THE APPELLANT DID NOT CLAIM THE BENEFIT OF LONG-TERM CAPITAL GAIN ON SALE OF 2600 S HARES OF ATUL PRODUCTS LIMITED IN A.Y. 94-95. BUT A SINGLE MISTAKE OF THE APPELLANT C OULD NOT LEAD THE DEPARTMENT TO DENY THE LEGITIMATE CLAIM OF TREATING THE INCOME ON SALE OF SHARES OF ATUL PRODUCTS LTD., WHICH WAS NOTHING BUT THE INVESTMENT OF THE A PPELLANT, AS LONG-TERM CAPITAL GAIN AND THEREBY NOT ALLOWING THE BENEFIT OF INDEXATION AS PROVIDED IN THE STATUTE. I FIND THAT THE SECTION 55(2)(B)(I) OF THE ACT DEFINES THE COST OF ACQUISITION AS UNDER:- WHERE THE CAPITAL ASSET BECAME THE PROPERTY OF THE ASSESSEE BEFORE THE 1 ST DAY OF APRIL, 1981, MEANS THE COST OF ACQUISITION OF THE A SSET TO THE ASSESSEE OR THE FAIR MARKET VALUE OF THE ASSET ON THE 1 ST DAY OF APRIL, 1981, AT THE OPTION OF THE ASSESSEE . (PRIOR TO ITS AMENDMENT BY FINANCE ACT, 1992, WITH EFFECT FROM 1.04.1993, THE YEAR WAS 1974). 3.1 SINCE THE SHARES OF THE APPELLANT WERE ACQUIRE D BEFORE 1.04.1981, THE APPELLANT WAS FULLY JUSTIFIED TO SUBSTITUTE THE MARKET VALUE OF THE SHARES OF ATUL PRODUCTS LTD. AS ITS COST OF ACQUISITION. SECONDLY, SUCH COST OF ACQ UISITION OF THE SHARES SOLD DURING THE YEAR HAS TO BE INDEXED AS PROVIDED IN THE ACT FOR A RRIVING AT THE LONG-TERM CAPITAL GAIN. THE ASSESSING OFFICER IS DIRECTED TO ACCEPT THE CLAIM OF THE APPELLANT AND WORK OUT THE LONG-TERM CAPITAL GAIN BY TAKING THE COST O F ACQUISITION OF THE SHARES OF ATUL PRODUCTS LTD. (FACE VALUE RS. 100/-) AT RS. 299/- A S ON 1.04.1981. THIS WOULD MEAN THAT THE COST OF ACQUISITION AS ON 1.04.1981 OF SHA RES OF ATUL PRODUCTS LTD. (FACE VALUE RS. 10/-) WOULD BE RS. 29.90. THE ASSESSING OFFICE R IS ALSO DIRECTED TO WORK OUT THE BENEFIT OF INDEXATION AVAILABLE TO THE APPELLANT ON THE SALE OF 12400 SHARES WHOSE COST OF ACQUISITION @ RS. 29.90 WOULD BE RS. 3,70,7 60/- THE ASSESSING OFFICER SHOULD NOT GIVE ANY BENEFIT OF INDEXATION IN RESPECT OF 10 00 SHARES SOLD BY THE APPELLANT BECAUSE THEY WERE BONUS SHARES AND AS SUCH THERE CO ULD NOT BE ANY COST OF ACQUISITION. IN THIS WAY, THE INDEXED COST OF ACQUI SITION OF 13400 SHARES WOULD BE RS. 9,60,268/-. SINCE THE APPELLANT HAD RECEIVED RS. 2 1,29,750/- ON SALE OF 13400 SHARES OF ATUL PRODUCTS LTD, THE RESULTANT LONG-TERM CAPIT AL GAIN WOULD BE (RS. 21,29,750/- - RS. 9,60,268/-) RS. 11,69,482/-. THIS CAPITAL GAIN HAS TO BE ALLOWED TO BE SET OFF AGAINST THE BUSINESS LOSS OF THE APPELLANT AND THE RESULTANT BUSINESS LOSS HAS TO BE CARRIED FORWARD TO NEXT YEAR IN ACCORDANCE WITH THE LAW . ITA NO 49/AH D/2001 . A.Y. 1995- 96 4 5. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. BEFORE US, THE LEARNED D.R. SUPPORTED THE ORDER OF A.O. THE LD. A.R. ON THE OTHER HAND SUBMITTED THAT THE SHARES OF ATUL PR ODUCTS LTD. WERE PURCHASED IN THE FINANCIAL YEAR 73-74 & 74-75. THE INCREASE IN NUMBER OF SHARES WAS ON ACCOUNT OF BONUS SHARES RECEIVED A ND THE SPLITTING OF THE SHARES. HE PLACED ON RECORD AT PAGE 4 THE DETAILS OF PURCHASES OF SHARES MADE. HE FURTHER SUBMITTED THAT THE SHARES WERE SH OWN AS INVESTMENTS IN BALANCE SHEET AND THE ENTIRE SHARES WERE SOLD ON 12 .06.1997 AFTER HOLDING IT FOR MORE THAN 20 YEARS. HE THEREFORE SU BMITTED THAT SINCE THE PROFIT ARISING ON SALE OF SHARES WHICH WERE HELD BY IT FOR MORE THAN 20 YEARS CANNOT BE CONSIDERED AS BUSINESS INCOME. HE THUS SUPPORTED THE ORDER OF CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. BEFORE US, THE LD. A.R. HAS SUBMITTED THAT THE SHAR ES OF ATUL PRODUCTS LTD. WERE PURCHASED BY IT IN F.Y. 74-75. IT WAS DISCLOSE D AS INVESTMENTS IN ITS BALANCE SHEET IN ALL THE YEARS AND THE SHARES WERE SOLD AFTER MORE THAN 20 YEARS. THE AFORESAID SUBMISSIONS OF THE LD.A.R. HAS NOT BEEN CONTROVERTED BY REVENUE BY BRINGING ANY CONTRARY MATERIAL ON REC ORD. CIT(A) IN HIS ORDER HAS ALSO GIVEN A FINDING THAT THE ASSESSEE WA S SHOWING ITS HOLDING IN THE SHARES OF ATUL PRODUCTS LTD. AS ITS INVESTME NTS RIGHT FROM A.Y. 74- 75. HE HAS FURTHER NOTED THAT NOT CLAIMING BENEFIT OF LONG TERM CAPITAL GAIN ON SALE OF 206 SHARES OF ATUL PRODUCTS LTD. IN A.Y. 94-95 CANNOT BE HELD AGAINST THE ASSESSEE SO AS TO DENY THE LEGITIM ATE CLAIM OF TREATING THE INCOME ON SALE OF SHARES AS CAPITAL LOSS. BEFOR E US, THE REVENUE COULD NOT CONTROVERT THE FINDING OF CIT(A),NOR COULD BRIN G ANY CONTRARY MATERIAL ON RECORD. WE FURTHER FIND THE CIT(A) BY A REASONED ORDER HAS ITA NO 49/AH D/2001 . A.Y. 1995- 96 5 DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. IN VIEW O F THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CI T(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN OPEN COURT ON 22 - 11 - 2013. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT, AHMEDABAD