DCIT 1(1), MUMBAI V. DHARMAYUG INVESTMENTS LTD, MUMBAI

ITA 5257/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56096 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 29-11-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 25-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A R BAIWAR
• Assessee Lawyers: V MOHAN
• Keywords: Capital asset; Business income; Rule of consistency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH J,MUMBAI BEFORE SHRI D.K. AGARWAL (JM) & SHRI B. RAMAKOTAIAH (AM) I.T.A. NO.5257/MUM/2010 (A.Y. 2006-07) DY. COMMR. OF INCOME-TAX-1(1), ROOM.NO. 579, AAYKAR BHAVAN, M.K. ROAD, MUMBAI-400 020. VS. M/S.DHARMAYUG INVESTMENTS LTD., THE TIMES OF INDIA BLDG., DR. D.N. ROAD, MUMBAI-400 001. PAN:AAACD1346D APPELLANT RESPONDENT APPELLANT BY SHRI A.R. BAIWAR. RESPONDENT BY SHRI V . MOHAN. DATE OF HEARING 29 - 11 - 2011 DATE OF PRONOUNCEMENT 0 9 - 12 - 2011 O R D E R PER D.K. AGARWAL, JM: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AG AINST THE ORDER DATED11-02-2010 PASSED BY THE LD. CIT(A) FOR THE AS SESSMENT YEAR 2006-07. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE COMPANY IS ENGAGED IN THE BUSINESS OF INVESTMENT & LEASING, BROKING BU SINESS FOR SALE OF MUTUAL FUNDS. THE ASSESSEE COMPANY IS WHOLLY OWNED SUBSID IARY OF M/S. BENNETT COLEMAN & CO. LTD. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO, INTER ALIA, OBSERVED THAT THE ASSESSEE COMPANY HAS SHOWN PROFIT ON SALE OF INVESTMENTS OF RS. 1,72,14,175/- AND CLAIMED THE SA ME AS SHORT-TERM CAPITAL ITA NO.5257/M/2010 DHARMAYUG INVESTMENTS LTD. 2 GAIN AND LONG-TERM CAPITAL GAIN IN THE COMPUTATION OF INCOME. THE AO FURTHER OBSERVED THAT IN THE ASSESSEES CASE FOR THE ASSESS MENT YEAR 2005-06, THE PROFIT ON SALE OF INVESTMENTS HAS BEEN TREATED AS BUSINESS INCOME OF THE ASSESSEE. SINCE THE FACTS OF THE ASSESSEES CASE FOR THE ASSE SSMENT YEARS 2005-06 AND 2006-07 ARE SIMILAR, THE ASSESSEE WAS ASKED TO SHOW AS TO WHY THE PROFIT ON SALE OF INVESTMENTS BE NOT TREATED AS BUSINESS INCOME OF THE ASSESSEE AS DONE IN THE ASSESSEES CASE FOR ASSESSMENT YEAR 2005-06. IN RES PONSE, THE ASSESSEE, VIDE LETTER DATED 08-10-2008, FILED DETAILED SUBMISSIONS AND REQUESTED NOT TO TREAT THE CAPITAL GAIN INCOME AS BUSINESS OF THE ASSESSEE COMPANY. HOWEVER, THE AO DID NOT ACCEPT THE SAME. THE AO, WHILE OBSERVING TH AT THE FACTS OF THE CASE ARE SIMILAR TO THE FACTS OF THE ASSESSEES CASE FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07, AFTER RELYING ON THE SAME REASONS, TREATED THE ENTIRE PROFIT ON SALE OF INVESTMENTS AGGREGATING TO RS.1,72,14,475/- (COMPR ISING OF PROFIT ON SALE OF LONG-TERM INVESTMENTS OF RS.1,61,55,500/- AND PRO FIT ON SALE OF CURRENT INVESTMENTS OF RS.10,58,675/- APPEARING IN P & L AC COUNT) UNDER THE HEAD PROFITS & GAINS OF BUSINESS AND THEREBY DID NOT G RANT DEDUCTION U/S.54EC IN RESPECT OF INVESTMENTS OF RS.1,62,00,000/- IN THE B ONDS OF NHAI. 3. ON APPEAL, THE LD. CIT(A), FOLLOWING THE APPELLA TE ORDER FOR THE ASSESSMENT YEARS 2003-04 AND 2004-05 IN THE ASSESSEES OWN CAS E, DIRECTED THE AO TO TREAT THE GAINS ON SALE OF EQUITY SHARES AND SALE/REDEMPT ION OF UNITS AS CAPITAL GAINS AND ALLOW DEDUCTION U/S.54EC IN RESPECT OF INVESTME NTS MADE IN THE BONDS OF NHAI. 4. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US TAKING THE FOLLOWING GROUNDS OF APPEAL : 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, AND IN LAW THE CIT(A) ERRED IN DIRECTING TO TREAT THE S ALE OF ITA NO.5257/M/2010 DHARMAYUG INVESTMENTS LTD. 3 EQUITY SHARES AND SALE/REDEMPTION OF UNIT AS CAPITA L GAINS AS AGAINST BUSINESS PROFITS TREATED BY THE A.O. 2. THE LD. CIT(A) HAS FURTHER ERRED IN DIRECTING T HE AO TO ALLOW DEDUCTION U/S.54EC IN RESPECT OF INVESTMENTS MADE TO BUNDS OF NHAI. 5. AT THE TIME OF HEARING, THE LD. D.R. SUPPORTS TH E ORDER OF THE AO. 6. ON THE OTHER, THE LD. COUNSEL FOR THE ASSESSEE, WHILE RELYING ON THE ORDER OF THE LD. CIT(A), SUBMITS THAT THE ISSUE IS FULLY COV ERED IN FAVOUR OF THE OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE ASS ESSEES OWN CASE IN ACIT(OSD)-1(3), MUMBAI, VS. DHARMAYUG INVESTMENTS L TD. IN ITA NO.3383/M/2009 FOR ASSESSMENT YEAR 2005-06 DATED 28 -5-2010. HE ALSO PLACED ON RECORD COPY OF THE SAID ORDER OF THE TRIBUNAL. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT THE FACTS ARE NOT IN DISPUTE INASMUCH IT IS ALSO NOT IN DISPUTE THAT THE AO, FOL LOWING THE ASSESSMENT ORDERS FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07, HAS T REATED THE ENTIRE PROFIT ON SALE OF INVESTMENTS AGGREGATING TO RS.1,72,14,475/- AS BUSINESS INCOME OF THE ASSESSEE AND DISALLOWED THE DEDUCTION U/S.54EC IN RESPECT OF INVESTMENTS OF RS.1,62,00,000/- IN BONDS OF NHAI. ON APPEAL, THE L D. CIT(A), FOLLOWING THE APPELLATE ORDER FOR THE ASSESSMENT YEARS 2003-04 AN D 2004-05, WHEREIN IT HAS BEEN HELD THAT THE UNITS ARE CAPITAL ASSET AND THE PROFIT ON SALE/REDEMPTION OF UNITS SHOULD BE ASSESSED UNDER THE HEAD CAPITAL G AIN, DIRECTED THE AO TO TREAT THE GAINS ON SALE OF EQUITY SHARES AND SALE/REDEMPT ION OF UNITS AS CAPITAL GAINS AND ALLOW DEDUCTION U/S.54EC. WE FURTHER FIND THAT THE TRIBUNAL IN THE ASSESSEES OWN CASE (SUPRA) OBSERVED AND HELD VIDE PARA 16 OF ITS ORDER AS UNDER : ITA NO.5257/M/2010 DHARMAYUG INVESTMENTS LTD. 4 THE ASSESSEE HAS BEEN TREATING THE INVESTMENT IN UNITS AS INVESTMENTS IN ITS BOOKS OF ACCOUNTS ALL THESE YEARS. SALE OF SOME OF THESE UNITS HAVE BEEN CONSID ERED AS CAPITAL GAIN AND ACCEPTED BY THE DEPARTMENT IN EARL IER YEARS. THE FACTS AND CIRCUMSTANCES BEING IDENTICAL IN THE CASE OF THE SAME ASSESSEE IN THE SUBSEQUENT YEAR, T HE PRINCIPLE OF CONSISTENCY IS TO BE FOLLOWED. THEREFO RE, WE UPHOLD THE ORDER OF THE LD. CIT(A) TREATING THE HOL DING OF THE UNITS AS INVESTMENTS AND PROFIT ON SALE OF THE UNITS SHOULD BE ASSESSED AS CAPITAL GAINS. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGH T ON RECORD BY THE REVENUE, WE, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNA L IN THE ASSESSEES OWN CASE (SUPRA) AND THE PRINCIPLE OF CONSISTENCY, UPHOLD TH E ORDER OF THE LD. CIT(A) IN DIRECTING THE AO TO TREAT THE GAINS ON SALE OF EQUI TY SHARES AND SALE/REDEMPTION OF UNITS AS CAPITAL GAINS AND ALLOW DEDUCTION U/S.5 4EC IN RESPECT OF INVESTMENTS MADE IN BONDS OF NHAI. THE GROUNDS TAKEN BY THE REV ENUE ARE, THEREFORE, REJECTED. 8. IN THE RESULT, THE REVENUES APPEAL STANDS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 09TH DA Y OF DECEMBER, 2011. SD/- SD/- (B. RAMAKOTAIAH) (D.K. AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI: 09TH DECEMBER , 2011. NG: COPY TO : 1. DEPARTMENT. 2.ASSESSEE. 3 CIT(A)-1,MUMBAI. 4 CIT-1,MUMBAI. 5.DR,J BENCH,MUMBAI. 6.MASTER FILE. (TRUE COPY) ITA NO.5257/M/2010 DHARMAYUG INVESTMENTS LTD. 5 BY ORDER, ASST.REGISTRAR, ITAT, MUMBAI. ITA NO.5257/M/2010 DHARMAYUG INVESTMENTS LTD. 6 DETAILS DATE INITIALS DESIGNA TION 1. DRAFT DICTATED ON 29-11-2011 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 30-11-2011 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 ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER