VIMAL PRAVIN SHAH (HUF), MUMBAI V. DY.C.I.T., 14(1), MUMBAI

ITA 5640/MUM/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62706 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 01-06-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 16-10-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: NITESH JOSHI
• Keywords: Business income; Speculation loss
• Section: 234B

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH J BENCH BEFORE SHRI B.R. MITTAL (JUDICIAL MEMBER) AND SHRI RAJENDRA (ACCOUNTANT MEMBER) ITA NO.2124/M/08: ASSESSMENT YEAR: 2004-05 ITA NO.5640/M/09: ASSESSMENT YEAR: 2005-06 ITA NO.5639/M/09: ASSESSMENT YEAR: 2006-07 VIMAL P SHAH (HUF) FLAT NO.95B, MEGTHDOOT CHS LTD., 1 ST FLOOR, N.S.ROAD, MARINE DRIVE, MUMBAI-02 PA NO.AAAHV1716L VS. DCIT 14(1), 2 ND FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI-21 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI NITESH JOSHI RESPONDENT BY: SHRI D.S.SUNDER SINGH/SMT. KUSU M INGALE DATE OF HEARING: 10.5.2012 DATE OF PRONOUNCEMENT: 18.7.2012 ORDER PER BENCH: THE ASSESSEE-HUF HAS FILED THESE T HREE APPEALS FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06, 2006-07AGAINST ORDER OF LD CIT(A) DATE D 28.1.2008 & 03.08.2009,03.08.2009 RESPECTIVELY. 2. SINCE IN ALL THE THREE APPEALS,EFFECTIVE GROUNDS O F APPEAL ARE IDENTICAL AND HAVE IDENTICAL FACTS,WE HEARD THESE APPEALS TOGETHER AND DECIDE THE SAME BY A COMMON ORDER AS HEREUNDER. 3. WE TAKE UP APPEAL FOR A.Y. 2004-05 I.E. ITA NO.212 4/M/08 AS A LEAD APPEAL AND, THEREFORE, DISCUSS THE FACTS AND SAME WILL APPLY MU TATIS-MUTANDIS FOR THE APPEAL FOR THE NEXT AY AS FAR AS APPLICABILITY OF THE PROPOSITION AND L AW ARE CONCERNED. 2 4. IN THE APPEAL FOR THE ASSESSMENT YEAR 2004-05,M AIN ISSUE INVOLVED IS AS TO WHETHER CAPITAL GAIN OF RS.10.55 LAKHS ARISING OUT OF SALE OF SHARES,UNITS AND SECURITIES THROUGH PORTFOLIO MANAGEMENT SERVICES(PMS) IS TO BE ASSESSE D UNDER THE HEAD CAPITAL GAINS OR BUSINESS INCOME.THE GROUND OF APPEAL TAKEN BY ASS ESSEE-HUF READS AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ADDITI ON CAPITAL GAINS (ARISING OUT OF SALE OF SHARES, UNITS AND SECURITIES THROUGH PORTFOLIO MANA GEMENT SERVICES) OF RS.10,55,713/- AS PROFIT AND GAINS OF BUSINESS OR PROFESSION. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE L EARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE ACCEPTED THAT A SUM OF RS. 10,15,396/-AS SHORT TERM CAPITAL GAIN, RS.32,760/- AS LONG TERM CAPITAL GAINS AND DIVIDEND INCOME OF RS. 55,392/- AS EXEMPT U/S. 10(34),10(35)AND RS.319/- AS INCOME FROM OTHER SOUR CES. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE LONG TERM CAPITAL LOSS OF RS. 1,08,31,994/- ON TRANSFER OF UNITS OF US-64 ON THE GROUND THAT THE INCOME FROM U S-64 IS EXEMPT U/S. 10(33) AND THE LOSS CLAIMED IS NOTIONAL. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE LONG TERM CAPITAL LOSS OF RS. 1,08,31,994/- OUGHT TO HAVE BEEN COMPUTED AND CARRIED FORWARD. 5. IT IS RELEVANT TO STATE THAT THE ASSESSEE-HUF RECEI VED RS.55,391/-,RS.32,760/-RS.10,02, 773/- AND RS.15,037/- FOR THE YEAR UNDER CONSIDERAT ION UNDER THE HEADS DIVIDEND INCOME, LONG TERM CAPITAL GAINS, SHORT TERM CAPITAL GAINS AND SP ECULATIVE GAINS RESPECTIVELY.AO TREATED THE NET PMS RECEIPTS,I.E. RS.10.55 LAKHS AS PROFITS AND GAINS OF BUSINESS AND PROFESSION. 6. THE ASSESSEE-HUF WAS A PARTNER IN ONE OF THE PART NERSHIP FIRMS WHICH WAS ENGAGED IN THE BUSINESS OF INDENTING AGENT. IN JUNE,2001 AS SESSEE-HUF PLACED RS.15,00,000/- WITH PORTFOLIO MANAGER,KOTAK SECURITIES. 7. DURING THE ASSESSMENT YEAR 2003-04, ASSESSEE-HUF HA D OFFERED THE INCOME DERIVED FROM PMS UNDER THE HEAD BUSINESS AND PROFESSION W HILE FILING THE RETURN.BUT, FOR THE YEAR UNDER CONSIDERATION ASSESSEE-HUF OFFERED THE INCOME FROM THE SAID TRANSACTIONS UNDER THE HEAD CAPITAL GAINS AND VIDE ITS LETTER DATED 15.09. 2006 ADDRESSED TO THE AO REITERATED ITS CLAIM.THE AO DID NOT ACCEPT THE CONTENTION OF THE A SSESSEE-HUF AND TREATED THE INCOME/ EARNING ON PMS ACCOUNT AS BUSINESS INCOME OF THE AS SESSEE-TRUST.THE ASSESSEE-HUF FILED APPEAL BEFORE LD CIT(A).HOWEVER, LD CIT(A) DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE- HUF AND CONFIRMED THE ACTION OF THE AO.LD CIT(A) HE LD THAT THE ASSESSEE-HUF HAD 3 APPOINTED A PORTFOLIO MANAGER ON ITS BEHALF FOR DOI NG BUSINESS OF SHARES AND SECURITIES WITH AN INTENTION FOR PURCHASE AND SALE OF SHARES. HENCE , APPELLANT IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 8. AT THE TIME OF HEARING LD.AR SUBMITTED THAT DIVIDEN D INCOME WAS EXEMPT FROM TAX U/S.10(34) OF THE ACT,THAT, SPECULATION INCOME WAS TO BE TAXED AS INCOME FROM BUSINESS. BEFORE US, AR AND THE DR MADE THE SAME SUBMISSIONS THAT WERE MADE IN THE CASE OF MANAN NALIN SHAH(ITA NOS.6166/MUM/2008, 2125/ MUM/2008AND 4126/MUM/2008 AY.2003-04, 2004-05,2005-06). 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSIN G THE MATERIAL PRODUCED BEFORE US WE HAD DECIDED IN THOSE APPEALS(IN THE CASE OF MANA N NALIN SHAH) THAT INCOME EARNED BY THE ASSESSEE -HUF THROUGH PMS HAS TO BE ASSESSED UNDER THE HEAD CAPITAL GAINS AND NOT UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION (PARAGRAPHS 15-16 OF THE ORDER DTD.06.07.2012). FOLLOWING THE SAID ORDER GROUND NO.1 IS DECIDED IN PART IN FAVOUR OF THE ASSESSEE. 10. AT THE TIME OF HEARING, LD.COUNSEL FOR THE ASSESSE E-HUF SUBMITTED THAT HE DID NOT WANT TO PRESS GROUND NO.2.THEREFORE,THE SAME IS DISMISSE D AS NOT PRESSED. 11. NOW WE TAKE UP APPEAL FOR ASSESSMENT YEAR 2005-06 BEING I.T.A. NO.5640/M/08. 12. GROUNDS OF APPEAL ARE AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ADDITI ONAL CAPITAL GAINS (ARISING OUT OF SALE OF SHARES, UNITS AND SECURITIES THROUGH PORTFOLIO MANA GEMENT SERVICES) OF RS.5,14,630/- AS PROFIT AND GAINS OF BUSINESS OR PROFESSION. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE L EARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE ACCEPTED THAT A SUM OF RS.4 ,12,120/- AS SHORT TERM CAPITAL GAIN, RS.1,30,733/-LONG TERM CAPITAL GAIN,AND RS.16,426/- AS SPECULATION LOSS AS DISCLOSED BY THE APPELLANT IN THE RETURN OF INCOME. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE I NCOME FROM PMS OUGHT TO HAVE BEEN COMPUTED AS CAPITAL GAINS AND DIVIDEND. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FURTHER ERRED IN CONFIRMING THE INTEREST CHARGED U/S. 234B & 234C OF THE I.T. ACT. THE ASSESSEE FURTHER PRAYS THAT INTEREST CHARGED U/ S. 234B & 234C BE DELETED. 4 13. IN RESPECT OF GROUND NO.1 OF APPEAL,LD A.R. SUBMITT ED THAT SPECULATION LOSS WAS TO BE TAXED UNDER THE HEAD BUSINESS AND PROFESSION.IN RES PECT OF PROFITS AND GAINS FROM PMS, LD. A.R.SUBMITTED THAT ASSESSEE-HUF HAD APPOINTED KOTAK SECURITIES AS ITS PORTFOLIO MANAGER AND PLACED RS.15,00,000/- WITH IT.HE FURTHER SUBMIT TED THAT FOR A.Y. 2005-06 ASSESSEE-HUF ALSO MADE DIRECT INVESTMENT FOR PURCHASE AND SALE O F SHARES/UNITS AND HAD SHORT TERM CAPITAL GAIN OF RS.7.83LAKHS AND LONG TERM CAPITAL GAIN OF RS.31.45 LAKHS AND THE DEPARTMENT ACCEPTED THE SAME AS CAPITAL GAIN AND THE DISPUTE I S ONLY IN RESPECT OF CAPITAL GAIN TO THE ASSESSEE-HUF IN RESPECT OF TRANSACTIONS THROUGH POR TFOLIO MANAGER.LD D.R. DID NOT DISPUTE THE ABOVE FACTS. 14. WE HAVE CONSIDERED SUBMISSIONS OF LD. R EPRESENTATIVES OF PARTIES. FOLLOWING THE REASONING GIVEN BY US WHILE DECIDING THE APPEAL S OF MANAN NALIN SHAH(ITA NOS.6166/ MUM/2008,2125/MUM/2008 AND 4126/MUM/2008 FOR THE AY 2003-04, 2004-05 AND 2005-06 VIDE ORDER DATED 06.07.2012)WE HOLD THAT THE PROFIT TO THE ASSESSEE-HUF IN RESPECT OF TRANSACTIONS THROUGH PMS IS AN INVESTMENT AND IS TO BE ASSESSED UNDER THE HEAD CAPITAL GAIN. HENCE, GROUND NO.1 OF THE APPEAL IS ALLOWED IN PART AS INDICATED ABOVE. 15. GROUND NO.2 OF APPEAL IS IN RESPECT OF INTEREST U/ S. 234B & 234C OF THE ACT, WHICH IS CONSEQUENTIAL AND DOES NOT REQUIRE ANY SPECIFIC ADJ UDICATION. 16. NOW WE TAKE UP APPEAL FOR ASSESSMENT YEAR 2006-07 BEING I.T.A. NO.5640/M/09. GROUNDS OF APPEAL ARE AS UNDER: 1.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ADDITI ON CAPITAL GAINS (ARISING OUT OF SALE OF SHARES, UNITS AND SECURITIES THROUGH PORTFOLIO MANA GEMENT SERVICES) OF RS.13,72,779/- AS PROFIT AND GAINS OF BUSINESS OR PROFESSION. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE L EARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE ACCEPTED THAT A SUM OF RS.13,91,503/- AS SHORT TERM CAPITAL GAIN & RS.8,78,483/- AS LONG TERM CAPITAL GAIN. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FURTHER ERRED IN CONFIRMING ADDITION OF S PECULATION LOSS OF RS.1,11,454 /-AS BUSINESS INCOME. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE I NCOME FROM PMS OUGHT TO HAVE BEEN COMPUTED AS CAPITAL GAINS AND DIVIDEND. 2.ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LE ARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE INTEREST CHARGED U/S.234B & 234C OF THE I.T. ACT. THE ASSESSEE FURTHER PRAYS THAT INTEREST CHARGED U/ S. 234B & 234C BE DELETED. 5 17. BEFORE US, SUBMISSIONS MADE BY THE AR AND THE DR WE RE SAME AS WERE MADE FOR THE EARLIER AYS.AND AS WERE MADE IN THE CASE OF MANAN S HAH(SUPRA).FOLLOWING THE REASONING GIVEN BY US WHILE DECIDING THE APPEALS OF MANAN NA LIN SHAH (ITA NOS.6166/ MUM/2008, 2125/ MUM/2008 AND 4126/MUM/2008 FOR THE AY 2003-04 ,2004-05 AND 2005-06 VIDE ORDER DATED 06.07.2012)WE DECIDE GROUND NO.1 OF THE APPEA L, IN PART, IN FAVOUR OF THE ASSESSEE- HUF. 18. BEFORE WE PART WITH, WE MAY STATE THAT AT THE TIME OF HEARING, IT WAS POINTED OUT THAT THE AMOUNT OF INCOME THROUGH PMS AS MENTIONED IN TH E GROUNDS OF APPEAL, ARE NOT CORRECTLY STATE AND, ACCORDINGLY,THE AO WHILE GIVING EFFECT T O OUR AFORESAID ORDER,WILL TAKE THE CORRECT AMOUNT OF INCOME ARISING FROM PMS AS PER EVIDENCES/ DETAILS AS MAY BE FURNISHED BY THE ASSESSEE-TRUST. 19. IN THE RESULT, ALL THE THREE APPEALS OF THE ASS ESSEE-HUF ARE ALLOWED IN PART AS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON 18 TH JULY ,2012. SD/- (B.R. MITTAL) JUDICIAL MEMBER SD/- (RAJENDRA) ACCOUNTANT MEMBER MUMBAI, DATED : 18 TH JULY, 2012 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),XIV, MUMBA I 4. COMMISSIONER OF INCOME TAX, 14 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH J MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI