ASST CIT 19(3), MUMBAI V. VERNAN P. TRUST, MUMBAI

ITA 5598/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3230 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Appeal Filed On: 05-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ' F ' BENCH, MUMBAI BEFORE SHRI JASON P. BOAZ, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN , JUDICIAL MEMBER ITA NO. 5598 /MUM/201 4 (ASSESSMENT YEAR : 2010 - 11 ) A C I T - 19(3) VS. M/S. VERNAN PRIVATE TRUST ROOM NO. 305, 3 RD FLOOR PIRAMAL CHAMBERS, PAREL MUMBAI 400012 C/0. IL & FS TRUST CO. LTD. PLOT NO. 4 - 22, G - BLOCK IL & FS FINANCIAL CENTRE, BKC BANDRA (E), MUMBAI 400051 PAN - AABTV2381C APPELLANT RESPONDENT APPELLANT BY: SHRI G.M. DOSS RESPONDENT BY: SHRI RONAK DOSHI DATE OF HEARING: 28 .03 .2016 DATE OF PRONOUNCEMENT: 31 .0 3 .2016 O R D E R PER JASON P. BOAZ, A.M . THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) - 30 , MUM BAI DATED 30.06.2014 FOR A.Y. 2010 - 11 . 2 . THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER: - 2.1 THE ASSESSEE, A PRIVATE TRUST, FILED ITS RETURN OF INCOME FOR A.Y. 2010 - 11 ON 31.07.2010 DECLARING TOTAL INCOME AT NIL. THE CASE WAS TAKEN UP FOR SCRUTINY. IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN PROFIT OF ` 14,69,09,814/ - AS PROFIT ON SALE OF SHARES BUT NO TAXES WERE PAID THEREON. WHILE CLAIMING EXEMPTION, THE ASSESSEE HAD NOT INDICATED THE PROVISIONS OF INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') UNDER WHICH THE SAID INCOME WAS CLAIMED EXEMPT. IT IS ONLY AFT ER THE CASE WAS TAKEN UP FOR SCRUTINY THAT THE ASSESSEE TOOK THE PLEA THAT THE LONG TERM CAPITAL GAIN (LTCG) OF ` 14,69,09,814/ - ON SALE OF TECH MAHINDRA LTD. SHARES WAS EXEMPT UNDER SECTION 10(38) OF THE ACT. THE ASSESSING OFFICER (AO) DID NOT ACCEPT THE A SSESSEES CLAIM; HE WAS OF THE VIEW THAT PROFIT DERIVED FROM THE SALE OF ITA NO. 5598 / MUM /2013 M/S. VERNAN PRIVATE TRUST 2 SHARES OF TECH MAHINDRA LTD. WAS NOT LTCG EXEMPT UNDER SECTION 10(38) OF THE ACT AS CLAIMED BY THE ASSESSEE AND HELD THE SAME TO BE BUSINESS INCOME AND AFTER ALLOWING CERTAIN EXPENSES COMPUTED THE TAXABLE BUSINESS INCOME AT ` 14,68,78,084/ - . ACCORDINGLY, THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 12.02.2013, WHEREIN THE TOTAL INCOME OF THE ASSESSEE WAS DETERMINED AT ` 14,68,78,080/ - . 2.2 AGGRIEVED BY TH E ORDER OF ASSESSMENT DATED 12.02.2013 FOR A.Y. 2010 - 11, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) - 30, MUMBAI WHO DISPOSED THE APPEAL VIDE ORDER DATED 05.06.2013 HOLDING THAT THE AO IS DIRECTED TO CHARGE LTCG ON THE PROFIT ON SCALE OF SHARES. IN T HE ORDER DATED 01.08.2013 GIVING EFFECT TO THE ORDER OF THE LEARNED CIT(A), THE AO HOLDING THAT, SINCE IN THE RETURN O F INCOME FILED FOR A.Y. 2010 - 11 NO INCOME IS CLAIMED EXEMPT UNDER SECTION 10(38) OF THE ACT, THE TOTAL INCOME IS DETERMINED AT ` 14,69,09, 814/ - AS DECLARED IN THE RETURN OF INCOME. 2.3 AGGRIEVED BY THE ORDER UNDER SECTION 143(3) R.W.S. 250 OF THE ACT DATED 01.08.2013, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) - 30, MUMBAI. THE LEARNED CIT(A) DISPOSED THE APPEAL VIDE ORDER DATED 30.06.2014 ALLOWING THE ASSESSEE RELIEF BY DIRECTING THE AO TO ASSESS THE INCOME OFFERED BY THE APPELLANT UNDER THE HEAD CAPITAL GAINS SUBJECT TO THE APPELLANTS CLAIM UNDER SECTION 10(38) OF THE ACT, I.E. WHERE STT TAX HAS BEEN PAID, BENEFIT OF SECTION 10(38) SHALL BE ALLOWABLE TO THE APPELLANT. 3.1 AGGRIEVED BY THE ORDER OF THE CIT(A) - 30, MUMBAI DATED 30.06.2014, REVENUE HAS PREFERRED THIS APPEAL RAISING THE FOLLOWING GROUNDS: - (1) O N THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN PASSING THE ORDER DATED 30.06.2014 IN APPEAL NO. CIT(A) - 30/ACIT - 19(3)/ IT - 268/13 - 14 WHICH IS BEYOND JURISDICTION AS THE SAME AMOUNTS TO REVIEW OF THE ORDER PASSED BY HIS PREDECESSOR VIDE ORDER NO. CIT(A) - 30/ADDL. CIT - 19(3)1/IT - 2 01/12 - 13 DATED 05.06.2013 IN THE SAME CASE FOR THE SAME ASSESSMENT YEAR ON THE SAME ISSUE. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT THE INCOME OF RS.16,14,74,624/ - DECLARED BY THE ASSESSEE A S LONG TERM CAPITAL GAIN WAS EXEMPT U/S 10(38) OF THE IT. ACT,1961 WHEN HIS PREDECESSOR VIDE ORDER DATED 05.06.2013 (SUPRA) DIRECTED THE ASSESSING OFFICER TO CHARGE IT TO TAX AS CAPITAL GAIN WHICH ORDER ITA NO. 5598 / MUM /2013 M/S. VERNAN PRIVATE TRUST 3 HAS REMAINED UNASSAILED OR UNCHALLENGED BY THE ASSESS EE BEFORE ANY APPELLATE AUTHORITY. (3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN ALLOWING THE ASSESSEE'S CLAIM OF EXEMPTION U/S 10(38) OF THE IT. ACT, 1961 WITHOUT APPRECIATING THE FACT THAT THE SAID CLAIM WA S NOT THE SUBJECT MATTER OF ORIGINAL APPEAL DISPOSED OFF VIDE HIS PREDECESSOR'S ORDER DATED 05.06.2013 (SUPRA). (4) WITHOUT PREJUDICE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE INCOME ON SALE OF S HARES OF RS.16,14,74,6241 - IS EXEMPT U/S 10(38) OF THE LT. ACT WITHOUT APPRECIATING THAT THE ASSESSEE HAD OFFERED THE SAME AS LONG TERM CAPITAL GAIN FORMING PART OF TOTAL INCOME COMPUTED IN THE RETURN OF INCOME WHEREAS INCOME EXEMPT U/S 10(38) DOES NOT FOR M PART OF TOTAL INCOME AND SHOULD NOT HAVE BEEN INCLUDED IN THE TOTAL INCOME BY THE ASSESSEE AND NO MATERIAL EVIDENCE WAS EITHER AVAILABLE ON RECORD OR VERIFIED BY THE ASSESSING OFFICER TO SHOW THAT THE TRANSACTION LEADING TO THE GAIN OF THE IMPUGNED SUM W AS COVERED BY SECTION 10(38) OF THE L T. ACT. (5) THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AO BE RESTORED. (6) THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY.' 3.2 THE LEARNED D.R. WAS HEARD IN SUPPORT OF THE GROUNDS RAISED AND HE PLACED STRONG RELIANCE ON THE ORDER OF THE AO DATED 01.08.2013 WHEREIN THE ASSESSEES INCOME WAS DETERMINED AT ` 14,69,09,814/ - UNDER THE HEAD LTCG AFTER DENYING THE ASSESSEES CLAIM FOR EXEMPTION UNDER SECTION 10(38) OF THE ACT AS THE SAME WAS NOT PUT FORTH IN THE RETURN OF INCOME FILED FOR A.Y. 2010 - 11 ON 31.07.2010. 3.3 `PER CONTRA, THE LEARNED A.R. FOR THE ASSESSEE SUPPORTED THE IMPUGNED ORDER OF THE LEARNED CIT(A) , WHEREIN THE AO WAS DIRECTED TO ASSESS THE INCOME OFFERED BY THE ASSESSEE UNDER THE HEAD LTCG SUBJECT TO THE ASSESSEES CLAIM FOR EXEMPTION UNDER SECTION 10(38) OF THE ACT WHERE SHARE TRANSACTION TAX (STT) HAS BEEN PAID. THE LEARNED A.R. FOR THE ASSESSEE SUBMITTED THAT THE GROUNDS RAISED BY REVENUE AT S.NOS. 2 & 3 ARE FACTUALLY ERRONEOUS IN STATING THAT THE ASSESSEES CLAIM FOR EXEMPTION UNDER SECTION 10(38) WAS NOT THE SUBJECT MATTER OF THE ORIGINAL APPEAL DISPOSED OFF BY THE LEARNED CIT(A) BY WAY OF ORDE R DATED 05.06.2013. T HE LEARNED A.R. FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE GROUNDS RAISED BEFORE THE CIT(A) IN FORM NO. 35 TO SHOW THAT AT GROUNDS 1 & 4 THE ASSESSEE HAD IN FACT ITA NO. 5598 / MUM /2013 M/S. VERNAN PRIVATE TRUST 4 CHALLENGED THE AOS ACTION IN DENY ING THE ASSESSEES CLAIM F OR THE EXEMPTION UNDER SECTION 10(38) OF THE ACT IN RESPECT OF LTCG ON SALE OF SHARES. IN RESPECT OF REVENUES AVERMENTS IN GROUND NO. 4, THE LEARNED A.R. FOR THE ASSESSEE SUBMITTED THAT THE LEARNED CIT(A), WHILE HOLDING THAT THE ASSESSEES INCOME ON SALE OF SHARES WAS TO BE ASSESSED UNDER THE HEAD LTCG, DIRECTED THE AO TO ALLOW THE ASSESSEE EXEMPTION CLAIMED UNDER SECTION 10(38) OF THE ACT AFTER VERIFYING THAT STT HAD BEEN PAID IN RESPECT OF THESE TRANSACTIONS. IT IS FURTHER CONTENDED THAT FOR THE VERY SAM E YEAR (I.E., A.Y. 2010 - 11) THE VERY SAME ISSUE OF ALLOWING OF EXEMPTION UNDER SECTION 10(38) OF THE ACT HAS BEEN CONSIDERED BY ITAT, MUMBAI AND HELD IN FAVOUR OF THE ASSESSEE IN ITS ORDER IN ITA NO. 5397/MUM/2013 AND ITA NO. 5709/MUM/2012 DATED 31.07.2015 . THE LEARNED A.R. FOR THE ASSESSEE ALSO PRAYED THAT SINCE THE GROUNDS RAISED BY REVENUE (SUPRA) ARE EITHER FACTUALLY ERRONEOUS OR DO NOT CONTROVERT THE FINDINGS OF THE LEARNED CIT(A) IN THE IMPUGNED ORDER OR WERE GENERAL IN NATURE AND DO NOT REQUIRE ADJUDICATIO N, REVENUES APPEAL OUGHT TO BE DISMISSED. 3.3.1 WE HAVE HEARD BOTH PARTIES AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD, INCLUDING THE JUDICIAL PRONOUNCEMENT CITED. ON A PERUSAL OF THE GROUNDS RAISED (SUPRA), WE FIND THAT THE ISSUES RAISED BY THE REVENUE ARE ONLY IN RESPECT OF THE ASSESSEE BEING ALLOWED EXEMPTION UNDER SECTION 10(38) OF THE ACT IN RESPECT OF LTCG OF ` 14,69,09,814/ - ARISING ON SALE OF TECH MAHINDRA LTD. SHARES DURING THE PERIOD UNDER CONSIDERATION. WHILE GROUNDS NOS. 5 & 6 AR E GENERAL IN NATURE, WE OBSERVE AND AGREE THAT , AS CONTENDED BY THE LEARNED A.R. FOR THE ASSESSEE, THE GROUNDS RAISED AT S.NOS. 2 & 3 ARE FACTUALLY ERRONEOUS. 3.3.2 WE FIND THAT THE ISSUE OF WHETHER OR NOT THE ASSESSEE IS TO BE ALLOWED EXEMPTION UNDER SECTI ON 10(38) OF THE ACT HAS BEEN CONSIDERED AND DECIDED IN FAVOUR OF THE ASSESSEE BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR A.Y. 2010 - 11 IN ITA NOS. 5397 & 5709/MUM/2013 DATED 31.07.2015. AT PARAS 13 & 14 THEREOF, THE COORDINATE BENCH HAS HELD AS UNDER: - 13. WE, FOR THE ABOVE DISCUSSION, ARE AD IDEM WITH THE LD. CIT(A), IN ARRIVING AT THE CONCLUSION THAT FROM THE SALE OF SHARES UNDERTAKEN BY THE ITA NO. 5598 / MUM /2013 M/S. VERNAN PRIVATE TRUST 5 ASSESSEE DURING THE YEAR UNDER CONSIDERATION, NO BUSINESS ACTIVITY STANDS MADE OUT. 14. THEREFORE, WE UPHOLD THE ACTION OF THE LD. CIT(A) IN DIRECTING THE A.O. TO TREAT THE GAIN IN QUESTION AS A CAPITAL GAIN. HOWEVER, THIS GAIN WAS CLAIMED BY THE ASSESSEE AS EXEMPT U/S 10(38) OF THE ACT. AS PER THIS PROVISION, ANY INCOME ARISING FROM THE TRANSFER OF A LONG TERM CAPITAL ASSET, BEING AN EQUITY SHARE IN A COMPANY, SHALL NOT BE INCLUDED WHILE COMPUTING THE TOTAL INCOME. THIS HAS NOT BEEN TAKEN INTO CONSIDERATION BY THE LD. CIT(A), THOUGH THIS PROVISION IS CLEARLY APPLICABLE TO THE FACTS OF THE CASE. ACCORDINGLY, THE GRIEVANCE OF THE ASSESSEE IS FOUND TO BE JUSTIFIED AND IS ACCEPTED AS SUCH. WE HOLD THAT THE PROFIT ON THE TRANSFER OF SHARES IS ASSESSABLE AS CAPITAL GAIN E XEMPT U/S 10(38) OF THE ACT. RESPECTFULLY, FOLLOWING THE DECISION OF THE C OORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE (SUPRA), WE HOLD THAT THE ASSESSEE IS ENTITLED TO BE ALLOWED EXEMPTION UNDER SECTION 10(38) OF THE ACT IN RESPECT OF THE LTCG ARISING ON SALE O F SHARES OF TECH MAHINDRA LTD. T HE AO IS ACCORDINGLY DIRECTED. CONSEQUENTLY, REVENUES GROUNDS AT S.NOS. 1 TO 6 ARE DISMISSED. 4 . IN THE RESULT, REVENUE S APPEAL FOR A.Y. 2010 - 11 IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST MARCH, 2016 . SD/ - SD/ - ( SANDEEP GOSAIN ) ( JASON P. BOAZ ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 31 ST MARCH, 2016 COPY TO: 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE CIT(A) 30 , MUMBAI 4 . THE CIT 19, MUMBAI 5 . THE DR, F BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.