M/s Zenith Info Tele Services, New Delhi V. ITO, New Delhi

ITA 4952/DEL/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0286 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 09-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 11-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BANITA DEVI NAOREM
• Assessee Lawyers: R K SINGAL
• Keywords: Speculation loss; Capital expenditure

Judgement Text

ITA NO. 4952/DEL/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 4952/DEL/2010 A.Y. : 2006-07 M/S ZENITH INFO TELE SERVICES, E-226, SARITA VIHAR, NEW DELHI 110 044 (PAN/GIR NO. : AAACZ1239R) VS. INCOME TAX OFFICER, WARD 18(4), NEW DELHI (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : SH. R.K. SINGAL, CA DEPARTMENT BY : MS. BANITA DEVI NAOREM, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: PER SHAMIM YAHYA: PER SHAMIM YAHYA: PER SHAMIM YAHYA: AM AMAM AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 31.8.2 010 PERTAINING TO ASSESSMENT YEAR 2006-07. 2. THE ISSUE RAISED IS THAT LD. COMMISSIONER OF INC OME TAX (APPEALS) ERRED IN HOLDING THE SALE AND PURCHASE OF SHARES BY THE ASSESSEE COMPANY AS SPECULATIVE BUSINESS IN TERMS O F EXPLANATION OF SECTION 73 OF INCOME TAX ACT, 1961. 3. IN THIS CASE THE ASSESSING OFFICER NOTED THAT D URING THE YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY WAS RUNNING BUSINESS OF REPAIR, MAINTENANCE, SALE, PURCHASE OR OTHERWISE DEA L IN ALL TYPES OF TELEPHONE INSTRUMENTS ETC. AND ALSO SHOWN SHORT TER M CAPITAL GAINS ON SALE OF SHARES OF ` 171559/-. ASSESSING OFFICER WAS OF THE OPINION THAT ITA NO. 4952/DEL/2010 2 EXPLANATION TO SECTION 73 IS APPLICABLE AND THE TRA NSACTION OF SALE AND PURCHASE SHOULD BE TREATED AS SPECULATIVE BUSINESS. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ASSESSING OFFICERS ACTION. 5. AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL BEF ORE US. 6. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT ASSE SSEE IS NOT COVERED BY SECTION 73 OF THE IT ACT. AS THE SAID SECTION IS RELEVANT ONLY FOR LOSSES IN SPECULATION BUSINESS. FURTHER, H E CLAIMED THAT ASSESSEES CASE WOULD NOT FALL UNDER THE EXPLANAT ION, BECAUSE THE GROSS TOTAL INCOME MAINLY CONSISTS OF CAPITAL GAIN. FURTHER, LD. COUNSEL OF THE ASSESSEE REFERRED TO THE DECISION OF THE 3 RD MEMBER OF THE TRIBUNAL IN THE CASE OF DCIT VS. JINDAL EXPORTS 101 ITD 129(DEL), WHEREIN IT WAS HELD (HEADS NOTES ONLY THAT LOSS SPECULATIVE LOSS LOSS ON SALE OF SHARES HELD AS INVESTMENT IN SPIT E OF INCLUSION OF ADVENTURE OR CONCERN IN NATURE OF TRADE IN THE DE FINITION OF BUSINESS UNDER S. 2(13) IT IS NOT POSSIBLE TO HOLD THAT EVER Y TRANSACTION OF PURCHASE AND SALE WOULD BE AN ADVENTURE IN NATURE O F TRADE THIS VIEW IS FURTHER SUPPORTED BY THE LANGUAGE OF EXPLANATION TO S. 73 EVERY TRANSACTION CARRIED ON BY THE ASSESSEE RELATING TO ITS ASSETS COULD NOT BE TREATED AS A TRANSACTION LIABLE TO BE ASSESSED UNDER THE HEAD BUSINESS BOTH THE MEMBERS HAVING HELD THAT SHARE S WERE HELD BY THE ASSESSEE AS AN INVESTMENT, LOSS ON SALE THEREOF ACCRUING TO THE ASSESSEE WAS ASSESSABLE AS SHORT TERM CAPITAL LOSS A ND COULD NOT BE DISALLOWED AS SPECULATIVE LOSS BY INVOKING EXPLANAT ION TO S. 73. 7. LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER REL IED UPON THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. ITA NO. 4952/DEL/2010 3 8. WE CAN GAINFULLY REFER THE PROVISION OF SECTION 73 IN THIS REGARD WHICH READS AS UNDER:- LOSSES IN SPECULATION BUSINESS. 73. (1) ANY LOSS, COMPUTED IN RESPECT OF A SPECULATION BUSINESS CARRIED ON BY THE ASSESSEE, SHALL NOT BE SET OFF EXCEPT AGAINST P ROFITS AND GAINS, IF ANY, OF ANOTHER SPECULATION BUSINESS. (2) WHERE FOR ANY ASSESSMENT YEAR ANY LOSS COMPUTED IN RESPECT OF A SPECULATION BUSINESS HAS NOT BEEN WHOLLY SET OFF UNDER SUB-SECT ION (1), SO MUCH OF THE LOSS AS IS NOT SO SET OFF OR THE WHOLE LOSS WHERE THE ASSES SEE HAD NO INCOME FROM ANY OTHER SPECULATION BUSINESS, SHALL, SUBJECT TO THE O THER PROVISIONS OF THIS CHAPTER, BE CARRIED FORWARD TO THE FOLLOWING ASSESSMENT YEAR , AND ( I ) IT SHALL BE SET OFF AGAINST THE PROFITS AND GAINS , IF ANY, OF ANY SPECULATION BUSINESS CARRIED ON BY HIM ASSESSABLE F OR THAT ASSESSMENT YEAR ; AND ( II ) IF THE LOSS CANNOT BE WHOLLY SO SET OFF, THE AMOU NT OF LOSS NOT SO SET OFF SHALL BE CARRIED FORWARD TO THE FOLLOWING ASSES SMENT YEAR AND SO ON. (3) IN RESPECT OF ALLOWANCE ON ACCOUNT OF DEPRECIAT ION OR CAPITAL EXPENDITURE ON SCIENTIFIC RESEARCH, THE PROVISIONS OF SUB-SECTION (2) OF SECTION 72 SHALL APPLY IN RELATION TO SPECULATION BUSINESS AS THEY APPLY IN R ELATION TO ANY OTHER BUSINESS. (4) NO LOSS SHALL BE CARRIED FORWARD UNDER THIS SEC TION FOR MORE THAN [FOUR] ASSESSMENT YEARS IMMEDIATELY SUCCEEDING THE ASSESSM ENT YEAR FOR WHICH THE LOSS WAS FIRST COMPUTED. [ EXPLANATION. WHERE ANY PART OF THE BUSINESS OF A COMPANY ( [OTHER THAN A COMPANY WHOSE GROSS TOTAL INCOME CONSISTS MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS INTEREST ON SECURITIES, INCOME F ROM HOUSE PROPERTY, CAPITAL GAINS AND INCOME FROM OTHER SOURCES], OR A COMPA NY THE PRINCIPAL BUSINESS OF WHICH IS THE BUSINESS OF BANKING OR THE GRANTING OF LOANS AND ADVANCES) CONSISTS IN THE PURCHASE AND SALE OF SHARES OF OTHER COMPANIES, SUCH COMPANY SHALL, FOR THE PURPOSES OF THIS SECTION, BE DEEMED TO BE CARRYING ON A SPECULATION BUSINESS TO THE EXTENT TO WHICH THE BUSINESS CONSISTS OF THE PURCHA SE AND SALE OF SUCH SHARES.] 9. A READING OF THE ABOVE MAKES IT CLEAR THAT SECT ION 73 INCLUDING THE EXPLANATION WOULD BE APPLICABLE WHERE THERE IS LOSS IN SPECULATION BUSINESS. IN THIS CASE ASSESSEE HAS RETURNED CAPI TAL GAIN IN SHARES TRANSACTIONS. HENCE THIS SECTION WOULD NOT BE APP LICABLE ON THE ASSESSEE. SECONDLY, WE ALSO FIND CONSIDERABLE COG ENCY IN THE ASSESSEES SUBMISSIONS THAT WHAT THE ASSESSEE HAS DO NE WAS ONLY SALE ITA NO. 4952/DEL/2010 4 OF TWO INVESTMENTS IN SHARES AND THE SAME CANNOT BE TREATED AS BUSINESS OF PURCHASE AND SALE OF SHARES ON THE STRE NGTH OF 3 RD MEMBER DECISION AS ABOVE. ACCORDINGLY, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09/3/2011 UPO N CONCLUSION OF HEARING. SD/- SD/- [ [[ [I.P. BANSAL I.P. BANSAL I.P. BANSAL I.P. BANSAL] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 09/3/2011 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES