ACIT 8(3), MUMBAI V. LALITMANI P. LTD, MUMBAI

ITA 5398/MUM/2009

• Counselvise Citation: 539819914 RSA 2009
• Duration Of Justice: 2 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-10-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 25-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K B MENON
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHIRI R. S. PADVEKAR, J.M. AND SHRI RAJENDRA SINGH, A.M. ITA NO. : 5398/MUM/2009 ASSESSMENT YEAR : 2006-07 ACIT - 8(3)(OSD), R. NO. 204, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400 020 VS. M/S. LALITMANI PVT. LTD. C/O. SWIFT ELECTRICALS LARAM CENTRE, SHOP NO.32, ANDHERI (W), MUMBAI-400 058 PAN NO: AAACL 0786 H (APPELLANT) (RESPONDENT) & CO NO. : 53/MUM/2010 ASSESSMENT YEAR : 2006-07 M/S. LALITMANI PVT. LTD. C/O. SWIFT ELECTRICALS LARAM CENTRE, SHOP NO.32, ANDHERI (W), MUMBAI-400 058 PAN NO: AAACL 0786 H VS. ACIT - 8(3)(OSD), R. NO. 204, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400 020 ( CROSS OBJECTOR ) (RESPONDENT) DEPARTMENT BY : SHRI P.K.B. MENON ASSESSEE BY : SHRI HARESH SHAH DATE OF HEARING : 29.12.2011 DATE OF PRONOUNCEMENT : 04.01.2012 ORDER PER RAJENDRA SINGH (AM) : ITA NO. : 5398/MUM/2009 (ASSESSMENT YEAR : 2006-07) THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 09.07.2009 OF CIT(A) FOR THE ITA NO : 5398/MUM/2009 & CO NO.53/MUM/2010 M/S. LALITMANI PVT. LTD. 2 ASSESSMENT YEAR 2006-07. THE ONLY DISPUTE RAISED IN THESE APPEALS IS REGARDING THE NATURE OF INCOME EARNED BY THE ASSESS EE FROM SALE AND PURCHASE OF SHARES. 2. THE FACTS IN BRIEF ARE THAT THE AO DURING THE AS SESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAD DECLARED LO NG TERM CAPITAL GAIN OF `. 71,25,424/- AND SHORT TERM CAPITAL GAIN OF `. 39,42,985/- FROM SALE AND PURCHASES OF SHARES. THE AO ALSO NOTE D THAT THE ASSESSEE HAD MADE PURCHASES AND SALES IN 94 SCRIPTS WITH A CONSIDERABLE VOLUME. IT WAS ALSO NOTED BY HIM THAT THE ASSESSEE HAD TAKEN UNSECURED LOAN OF `. 8,68,504/- FROM THE DIRECTORS AS INTEREST FREE. HE, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE INCOME SHOWN AS CAPITAL GAIN SHOULD NOT BE ASSESSED AS BUSINESS INCOME. THE ASSESSEE SUBMITTED THAT IT WAS INCORPOR ATED IN 1954 WITH THE MAIN OBJECT OF INVESTMENT IN SHARES. THE ASSESS EE HAS BEEN INVESTING IN SHARES SINCE 1954 WITH THE MOTIVE OF E ARNING DIVIDEND. THE BUYING AND SELLING OF SHARES WAS NOT REGULAR AN D CONTINUOUS, BUT WAS OF OCCASIONAL NATURE. THE ASSESSEE HAD ALSO USE D OWNED FUNDS AND NOT BORROWED FUNDS. IT WAS POINTED OUT, THAT TH E PAID UP CAPITAL OF THE ASSESSEE WAS `. 8,66,750/- AND THERE WERE FREE RESERVES OF `. 2.84 CRORES WHICH HAD BEEN INVESTED IN SHARES. THE ASSESSEE HAD ALSO TAKEN A SMALL LOAN FROM THE DIRECTORS AS INTER EST FREE. IT WAS ALSO SUBMITTED THAT THE HOLDING PERIOD IN RESPECT OF LON G TERM CAPITAL GAIN IN MANY CASES WAS UPTO 10 YEARS. SOME OF THE SHARES HAD BEEN SOLD WITHIN A YEAR TO ACQUIRE NEW INVESTMENT SCRIPTS. IT WAS POINTED OUT THAT THE INVESTMENT PORTFOLIO OF THE ASSESSEE HAD I NCREASED FROM 2.93 CRORES TO 3.63 CRORES DURING THE YEAR. IT WAS ACCOR DINGLY, URGED THAT THE CLAIM OF THE ASSESSEE SHOULD BE ALLOWED. THE AO , HOWEVER, DID NOT ACCEPT THE CONTENTION RAISED AND CONCLUDED THAT THE ASSESSEE HAD ITA NO : 5398/MUM/2009 & CO NO.53/MUM/2010 M/S. LALITMANI PVT. LTD. 3 SHOWN THE SALES AND PURCHASES AS INVESTMENT, ONLY T O GAIN TAX ADVANTAGE. HE, THEREFORE, REJECTED THE CLAIM AND AS SESSED THE ENTIRE INCOME AS BUSINESS INCOME. 2.1 IN APPEAL, CIT(A) OBSERVED THAT ON THE SAME SET OF FACTS IN ASSESSEES OWN CASE IN THE ASSESSMENT YEARS 2003-04 AND 2005-06, THE APPEAL OF THE ASSESSEE HAD BEEN ALLOWED AND IN THE ASSESSMENT YEAR 2003-04, THE TRIBUNAL HAD ALSO CONFIRMED THE O RDER OF CIT(A), TREATING THE PURCHASE OF SHARES AS INVESTMENT ACTIV ITY. CIT(A) ACCORDINGLY, DIRECTED THE AO TO ASSESS THE INCOME D ECLARED BY THE ASSESSEE AS CAPITAL GAIN, AGGRIEVED BY WHICH THE RE VENUE IS IN APPEAL BEFORE THE TRIBUNAL. 3. BEFORE US, THE LD. AR FOR THE ASSESSEE REITERATE D THE SUBMISSIONS AS MADE BEFORE THE LOWER AUTHORITIES BE LOW THAT THE ASSESSEE HAD BEEN AN INVESTOR SINCE 1954 AND THE CA PITAL GAIN DECLARED BY THE ASSESSEE HAD BEEN ACCEPTED EARLIER. IT WAS ALSO POINTED OUT THAT ON IDENTICAL FACTS IN THE ASSESSME NT YEAR 2003-04, THE TRIBUNAL UPHELD THE ORDER OF CIT(A) DISMISSING THE APPEAL OF THE REVENUE AND, THEREFORE, THE CASE OF THE ASSESSEE WA S COVERED BY THE SAID DECISION. THE LD. DR, ON THE OTHER HAND, PLACE D RELIANCE ON THE ORDER OF THE AO. 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE R IVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING THE NATURE OF INCOME EARNED BY THE ASSESSEE FROM PURCHASE AND SALE OF SH ARES. THE ISSUE IS WHETHER THE SHARE TRANSACTIONS IN A PARTICULAR CASE SHOULD BE TREATED AS INVESTMENT ACTIVITY OR TRADING ACTIVITY, HAS BEE N HIGHLY A DEBATABLE ISSUE. THERE ARE VARIOUS DECISIONS OF THE TRIBUNAL ON BOTH THE SIDES. EACH CASE, THEREFORE, HAS TO BE DECIDED ON ITS OWN FACTS AND ITA NO : 5398/MUM/2009 & CO NO.53/MUM/2010 M/S. LALITMANI PVT. LTD. 4 CIRCUMSTANCES. IN THE PRESENT CASE, THE ASSESSEE HA D BEEN HOLDING SHARES FOR MORE THAN ONE YEAR AND UPTO 10 YEARS IN MANY CASES. IT HAS BEEN SUBMITTED THAT SHARES HAD BEEN SOLD ON SHO RT HOLDING IN SOME CASES IN ORDER TO RESHUFFLE PORTFOLIO FOR BETT ER INVESTMENT. THE INVESTMENTS HAVE BEEN MADE MOSTLY FROM OWNED FUNDS. ON SIMILAR FACTS, THE INCOME FROM SALE AND PURCHASES OF SHARES DECLARED BY THE ASSESSEE AS CAPITAL GAIN HAS BEEN ACCEPTED BY THE T RIBUNAL IN ASSESSEES OWN CASE IN THE ASSESSMENT YEAR 2003-04 IN ITA NO.4255/MUM/2007. NO MAJOR DISTINCTIVE FEATURES HA VE BEEN BROUGHT TO OUT NOTICE BY THE LD. DR. THE ASSESSEE H AS BEEN AN INVESTOR FOR A LONG TIME AND THE MAIN OBJECT BEHIND THE INCORPORATION OF THE ASSESSEE COMPANY WAS TO MAKE INVESTMENTS. CO NSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE SEE NO INFI RMITY IN THE ORDER OF THE CIT(A) ACCEPTING THE CLAIM OF THE ASSESSEE. THE ORDER OF CIT(A) IS ACCORDINGLY, UPHELD AND THE APPEAL OF THE REVENUE I S DISMISSED. CO NO. : 53/MUM/2010 (ASSESSMENT YEAR : 2006-07) 5. THE CROSS OBJECTION OF THE ASSESSEE HAS BEEN FIL ED ONLY IN SUPPORT OF THE ORDER OF CIT(A). SINCE WE HAVE ALREA DY UPHELD THE ORDER OF THE CIT(A), THE CROSS OBJECTION IS DISMISSED AS HAVING BECOME INFRUCTUOUS. 6. IN THE RESULT, BOTH, THE APPEAL OF THE REVENUE A ND THE CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON THIS 4 TH DAY OF JANUARY, 2012. S D/ - S D/ - ( R. S. PADVEKAR ) ( RAJENDRA SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT: 04.01.2012 ITA NO : 5398/MUM/2009 & CO NO.53/MUM/2010 M/S. LALITMANI PVT. LTD. 5 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI