DCIT, New Delhi V. M/s Bracknell Investment Pvt. Ltd., New Delhi

ITA 5520/DEL/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1289 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 10-12-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 07-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BHIM SINGH
• Keywords: Business income; Opportunity of being heard; Capital expenditure

Judgement Text

ITA NO. 5520/DEL/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 5520/DEL/2010 A.Y. : 2007-08 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 3(1), NEW DELHI VS. M/S BRACKNELL INVESTMENT PVT. LTD., 35, ANAND LOK, NEW DELHI 110 049 (PAN/GIR NO. : AAACB5230G) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSESSEE BY : SH. PRATAP GUPTA, CA DEPARTMENT BY : SH. BHIM SINGH, D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-VI, NEW DEL HI DATED 19.10.2010 PERTAINING TO ASSESSMENT YEAR 2007-08. 2. THE GROUNDS RAISED READ AS UNDER:- I) THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED O N FACTS AND IN LAW IN DIRECTING THE ASSESSING OFFICER NOT TO TREAT OTHERWISE THE INCOME DECLARED UNDER THE HEA D SHORT TERM CAPITAL GAIN IGNORING THE FACT THAT DURI NG THE YEAR UNDER CONSIDERATION THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING OF SHARES. II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN DELETING ITA NO. 5520/DEL/2010 2 ADDITION OF ` 1,00,710/- ON ACCOUNT OF CAPITALIZAT ION OF DEMAT CHARGES, IGNORING THE FACT THAT BENEFIT OF ENDURING NATURE WAS DRAWN BY THE ASSESSEE. III) THE APPELLANT CRAVES LEAVE FOR RESERVING THE R IGHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) O F APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 3. APROPOS GROUND NO. (I) BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSE SSEE COMPANY HAS SHOWN TOTAL INCOME OF ` 3,24,43,328/- INCLUDIN G SHORT TERM CAPITAL GAIN OF ` 42,62,735/-. DURING THE ASSESSMENT PROCE EDINGS THE ASSESSING OFFICER RAISED THE QUERY AS TO WHY THE S HORT TERM CAPITAL GAIN BE NOT TREATED AS BUSINESS INCOME. AFTER CO NSIDERING THE ASSESSEES REPLY, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING AND INVESTMENT O F SHARES AND SECURITIES AND BOUGHT SHARES OF VARIOUS LISTED COMPA NIES DURING THE PREVIOUS YEAR AND SOLD IN THE SAME PREVIOUS YEAR MO STLY OVER A PERIOD OF FEW MONTHS. NO DIVIDEND HAS BEEN RECEIVED ON ANY OF THE SHARES SOLD ON WHICH ASSESSEE EARNED SHORT TERM CAPITAL GA IN EXCEPT IN VERY FEW CASES. NO DIVIDEND WAS RECEIVED BY THE ASSESS EE ON THESE SHARES STILL IT PREFERRED TO SELL THE SHARES HOLDIN G THEM FOR A PERIOD AS LESS AS 2 DAYS. HE ALSO MENTIONED THAT DURING TH E F.Y. 2004-05, W.E.F. FROM 1.4.2004, LTCG HAS BEEN EXEMPTED FROM TAX AND STC G IS TO BE TAXED AT 10% (PROVIDED THE TRANSACTIONS ARE THROUGH RECOGNIZED STOCK EXCHANGE AND STT HAS BEEN PAID ON SAME). THUS THE RE IS MAJOR DEVELOPMENT DURING THE YEAR WITH REGARD TO THE TAXA BILITY OF SALE OF SHARES AND UNITS OF MUTUAL FUND AND GIVEN THE CBDT CIRCULAR DATED ITA NO. 5520/DEL/2010 3 15.6.2007 (4/2007), IT IS VERY CRUCIAL TO ASCERTAIN FROM FACTS AND CIRCUMSTANCES OF THE CASE THAT THE SHARES WERE HELD IN THE NATURE OF STOCK-IN-TRADE OR INVESTMENT. CONSIDERING THE FACT S OF THE CASE, HE WAS OF THE VIEW THAT THE CLAIM OF THE ASSESSEE FOR SALE OF SHARE SHOWN AS INVESTMENT AND ACCORDINGLY BEING TREATED AS SHORT T ERM CAPITAL GAIN DOES NOT HOLD GROUND. HENCE, THE INCOME SHOWN BY T HE ASSESSEE COMPANY AS CAPITAL GAINS AT ` 42,62,735/- WAS TREATE D AS BUSINESS INCOME. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (A) CONSIDERED THE SUBMISSIONS OF THE ASSESSEE, SHE NOTE D THAT IT IS AN ADMITTED FACT THAT THE SHARES ON WHICH SHORT TERM CA PITAL GAIN HAS BEEN SHOWN WERE APPEARING AS INVESTMENT IN THE BOOK S OF ACCOUNTS. LD. COMMISSIONER OF INCOME TAX (A) FURTHER NOTED THA T DURING THE COURSE OF ASSESSMENT PROCEEDINGS ASSESSEE HAD EXPLAI NED BEFORE THE ASSESSING OFFICER THAT THE COMPANY HAS REALIZED SHO RT TERM CAPITAL GAIN ON 3 SHARES NAMELY RELIANCE INDUSTRIES LTD., I NFOSYS LTD., MAHINDRA & MAHINDRA LTD. AND INCURRED SHORT TERM CA PITAL LOSS ON TISCO. THAT THE SHARES OF RELIANCE INDUSTRIES LTD. AND PART OF THE SHARES OF INFOSYS LTD. WERE PURCHASED LAST YEAR AND APPEARING AS INVESTMENT IN THE BALANCE SHEET AS ON 31.3.2006. T HAT OTHER SHARES WERE PURCHASED DURING THE YEAR WITH THE INTENTION O F MAKING INVESTMENT BUT DUE TO MANAGEMENT DECISION THEY WERE SOLD AS THE PRICES REACHED AT AN OPTIMUM LEVEL. LD. COMMISSIONE R OF INCOME TAX (A) FURTHER NOTED THAT ASSESSING OFFICER HAS NOT C ONTRADICTED THESE SUBMISSIONS OF THE ASSESSEE, BUT HE HAS TREATED THE WHOLE OF THE SHORT TERM CAPITAL GAIN AS BUSINESS INCOME BY GIVING GENE RAL REMARKS ABOUT THE VOLUME OF TRANSACTIONS, DIVIDEND RECEIPTS, CHANG E IN LAW ETC. LD. COMMISSIONER OF INCOME TAX (A) NOTED THAT NO SPECIFI C MATERIAL OR ITA NO. 5520/DEL/2010 4 EVIDENCE HAS BEEN BROUGHT ON RECORD TO SHOW THAT HO W THE PARTICULAR TRANSACTION OF SHORT TERM CAPITAL GAINS IS, IN FACT, TRADING TRANSACTION. SHE FURTHER NOTED THAT ASSESSING OFFICER HAS NOT EVEN GIVEN SPECIFIC DETAILS OF THE DIVIDEND OR HOLDING PERIOD OF EACH SHARE ON WHICH SHORT TERM CAPITAL GAIN IS SHOWN. LD. COMMISSIONER OF INC OME TAX (A) FURTHER REFERRED TO THE DECISION OF THE DELHI BENCH , ITAT IN THE CASE OF BMW HOLDING PVT. LTD. IN I.T.A. NO. 1570/DEL/2008 VID E ORDER DATED 12.3.2010. IN VIEW OF THE AFORESAID DISCUSSION, LD . COMMISSIONER OF INCOME TAX (A) FOUND THAT ASSESSING OFFICER WAS NO T JUSTIFIED IN CHANGING THE TREATMENT GIVEN TO SHORT TERM CAPITAL GAINS WITHOUT SPECIFIC MATERIAL ON RECORD. HENCE, SHE DIRECTED T HAT ADDITION MADE IN THIS REGARD BE DELETED. 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. LD. DEPARTMENT AL REPRESENTATIVE SUBMITTED THAT BASIS OF DIFFERENTIATION BETWEEN T HE SHARES HELD AS INVESTMENT AND THAT HELD FOR TRADING HAS NOT BEEN MA DE CLEAR. HE CLAIMED FOR THE SAME SHARES, ASSESSEE IS CLAIMING TRA DING AS WELL AS INVESTMENT ACTIVITY. LD. COUNSEL OF THE ASSESSEE ON THE OTHER HAND SUBMITTED THAT ALL THE NECESSARY DETAILS WERE FURNI SHED BEFORE THE ASSESSING OFFICER AS WELL AS LD. COMMISSIONER OF INC OME TAX (A). HE PLEADED THAT ASSESSING OFFICER IS WRONG IN MENTI ONING THAT NO DIVIDEND HAS BEEN RECEIVED ON SHARES WHICH WERE KE PT AS INVESTMENT. HE FURTHER PLEADED THAT ORDER OF THE LD. COMMISSIONE R OF INCOME TAX (A) TO BE UPHELD. 6.1 WE FIND THAT IN THIS CASE ASSESSING OFFICER N OTED THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING AND INVESTMEN T OF SHARES AND ITA NO. 5520/DEL/2010 5 SECURITIES AND BOUGHT SHARES OF VARIOUS LISTED COMPA NIES DURING THE PREVIOUS YEAR AND SOLD IN THE SAME PREVIOUS YEAR MO STLY OVER A PERIOD OF FEW MONTHS. ASSESSING OFFICER FURTHER NOTE THA T NO DIVIDEND HAS BEEN RECEIVED ON ANY OF THE SHARES SOLD ON WHICH AS SESSEE EARNED SHORT TERM CAPITAL GAIN EXCEPT IN VERY FEW CASES. ASSESSING OFFICER HAS FURTHER NOTED THAT NO DIVIDEND WAS RECEIVED BY THE ASSESSEE ON THESE SHARES STILL IT PREFERRED TO SELL THE SHARES HOLDING THEM FOR A PERIOD AS LESS AS 2 DAYS. 6.2 AS AGAINST ABOVE ASSESSING OFFICERS ORDER, L D. COMMISSIONER OF INCOME TAX (A) ACCEPTED THE ASSESSEES SUBMISSIONS T HAT ASSESSEE COMPANY HAS RECEIVED THE DIVIDEND ON SHARES HELD AS INVESTMENT AND SOLD DURING THE YEAR. LD. COMMISSIONER OF INCOME TAX (A) GAVE A FINDING THAT ASSESSEE COMPANY HAD RECEIVED THE DIVID END ON ALL THE SHARES WHICH WERE SOLD AS INVESTMENT AND NOT ON FEW SHARES. LD. COMMISSIONER OF INCOME TAX (A) HAS FURTHER NOTED THA T RECEIPT OF DIVIDEND IN ITSELF ALSO PROVES THAT SHARES WERE PUR CHASED BY THE ASSESSEE COMPANY AS INVESTMENT. IT WAS FURTHER SUBMI TTED BEFORE THE LD. COMMISSIONER OF INCOME TAX (A) THAT THE ASSESSEE COMPANY HAS NOT SOLD ANY INVESTMENT ON WHICH SHORT TERM CAPITAL GAINS IS EARNED WITHIN 2 DAYS OF PURCHASE. 6.3 WE FIND THAT THE ASSESSING OFFICER AND LD. COM MISSIONER OF INCOME TAX (A) HAS GIVEN CONTRADICTORY FINDING IN THIS CASE PERTAINING TO RECEIPT OF DIVIDEND AND THE PERIOD OF HOLDING OF SHARES AND THE CAPITAL GAIN THEREON. IN OUR CONSIDERED OPINION, INTEREST OF JUSTICE WILL BE SERVED, IF THE MATTER IS REMITTED TO THE FILE OF T HE ASSESSING OFFICER. ASSESSING OFFICER IS DIRECTED TO EXAMINE THE ISSUE IN LIGHT OF THE DETAILS AND SUBMISSION MADE BEFORE THE LD. COMMISSIONER OF IN COME TAX (A). ITA NO. 5520/DEL/2010 6 NEEDLESS TO ADD THAT THE ASSESSEE SHOULD BE GIVEN ADEQUATE OPPORTUNITY OF BEING HEARD. 7. APROPOS GROUND NO. (II) ON THIS ISSUE ASSESSING OFFICER NOTED THAT ASSESS EE COMPANY HAS CLAIMED ` 100,710/- AS DEMAT AND HOLDING CHARGES B Y DEBITING IT TO THE PROFIT AND LOSS ACCOUNT UNDER THE HEAD ADMINI STRATIVE EXPENSES. HE HELD THAT THE EXPENSES CLAIMED BY THE ASSESSEE A RE NOT ALLOWABLE BEING CAPITAL EXPENDITURE AND PROVIDING ENDURING BE NEFIT TO THE ASSESSEE. HENCE, ASSESSING OFFICER DISALLOWED TH E EXPENDITURE AMOUNTING TO ` 100,710/- ON THIS ACCOUNT. 8. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (A) NOTED THAT THERE IS NO DISCUSSION BY THE ASSESSING OFFICER, NOR ANY MATERIAL HAS BEEN BROUGHT ON RECORD TO SHOW THAT HOW THE ASSESSEE HAS ACQUIRED BENEFIT OF ENDURING NATURE BY INCURRIN G THIS EXPENDITURE. ACCORDINGLY, LD. COMMISSIONER OF INCOME TAX (A) HE LD THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER WITHOUT ANY BASIS WAS NOT JUSTIFIED. 9. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 10. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. WE FIND THAT LD. COMMISSIONER OF INCOME TAX (A) IS CORRECT IN OBSERVING THAT ASSE SSING OFFICER HAS NOT DISCUSSED THE ISSUE IN DETAIL IN THIS REGARD, NOR H E HAS BROUGHT ANYTHING ON RECORD TO PROVE THAT BENEFIT OF ENDURI NG NATURE WAS OBTAINED BY THE ASSESSEE WHILE INCURRING THIS EXPEN DITURE. THE LD. DEPARTMENTAL REPRESENTATIVE ALSO COULD NOT GIVE ANY C OGENT SUBMISSION AS TO HOW THESE EXPENSES ARE OF CAPITAL NATURE. UNDER THE ITA NO. 5520/DEL/2010 7 CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE OR DER OF THE LD. COMMISSIONER OF INCOME TAX (A) ON THIS ISSUE. ACC ORDINGLY, WE UPHOLD THE SAME. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 04/1/2013. SD/- SD/- [ [[ [RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV] ]] ] [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 04/1/2013 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR 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, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES