M/s. Blossom Investment Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 5712/DEL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3600 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 20-04-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 07-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BEDOBANI CHAUDHURI
• Assessee Lawyers: D C GARG
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC NEW DELHI BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER ITA NO.5712/DEL/2016 ASSESSMENT YEARS 2012-13 M/S. BLOSSOM INVESTMENT PRIVATE LTD., 54-RING ROAD, LAJPAT NAGAR-III NEW DELHI PAN: AAACB 0197L VS. INCOME TAX OFFICER, WARD-5(1), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE(S) BY : SHRI D.C. GARG, C.A. REVENUE BY : MS. BEDOBANI CHAUDHURI, D.R. / DATE OF HEARING : 20/04/2017 / DATE OF PRONOUNCEMENT: 25/04/2017 ORDER THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF LEARNED CIT(A)- 35, NEW DELHI, VIDE ORDER DATED 1.09.2016 FOR THE A SSESSMENT YEAR 2012-13. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. 1. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN UPHOLDING THE ORDER OF THE INCOME TAX OFFICE R B Y TREATING THE LONG TERM CAPITAL GAINS OF THE APPELLAN T AS PROFIT AND GAINS O F BUSINESS OR PROFESSION BY W RONGL Y APPL Y ING THE PROVISIONS OF THE INCOME TA X ACT , 1961 . 2 . THAT THE COMMISSIONER OF INCOME TAX ( APPEALS) ERRED ON FACTS AND IN LA W IN UPHOLDING THE ORDER OF THE INCOME TAX OFFICER B Y IGNOR I NG THE SUBMISSION AND THE FACTS OF THE CASE , AND ALSO IGNORING THE BINDING CIRCULAR NO.6/ 2016 ISSUED BY CBDT. 3. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON F ACTS AND IN LAW IN UP H OLDING THE ORDER OF THE INCOME TAX OFFICER BY IGNOR ING THE SUBMISSION AND T HE FACTS OF THE CASE , AND ALSO IGNORING THE CLARIFICATION ISSUED ON 2 ND MAY , 2 016 RELATED TO TAXABILIT Y OF INCOME / LOSS ARISING FROM TRANSFER OF UNLISTED S HARES. 4 . THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ER RED ON FACTS AND IN LAW IN UPHOLDING THE ORDER OF INCOME TAX OFFICER IN DEN YING THE BENEFIT OF INDEXATION UN D ER THE PROVISIONS OF SECTION 48 FOR THE COMPUTATION OF LONG TERM CAPITAL GAINS TO THE APPELLANT . ITA NO.5712/DEL/2016 2 5 . THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN UPHOLDING THE ORDER OF THE INCOME TAX OFFICER IN APPLYING THE NORMAL RATE OF TAX @ 30 % ON THE INCOME FROM LONG TERM CAPITAL GAINS BEING EL IGIBLE TO BE TAXED AT SPECIAL RATE OF 20 % UNDER SECTION 112(1) OF THE ACT . 6. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN UPHOLDING THE ORDER OF THE INCOME TAX OFFICER IN APPLYING THE NORMAL RATE OF TAX @ 30% ON THE INCOME FROM LONG TERM CAPITAL GAINS BEIN G ELIGIBLE TO BE TAXED AT SPECIAL RATE OF 10 % UNDER PROVISO TO SECTION 112(1) OF THE ACT . 3. THE BRIEF FACTS OF THE CASE ARE THAT AS PER ASSE SSING OFFICERS ORDER REPRODUCED HEREINBELOW: THE ASSESSEE COMPANY STATED TO BE ENGAGED IN THE BU SINESS RELATING TO INVESTMENT 7' AND FINANCE ACTIVITIES DURING THE YEAR UNDER CON SIDERATION AND DERIVED INCOME UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION. THAT APART FROM THAT THE ASSESSEE COMPANY ALSO STATED TO HOLDING INVESTMENT PORTFOLIO AND INCOME FROM THESE WAS BEING DECLARED UNDER THE HEAD CAPITAL GAI N AND ALSO HAS INCOME FROM OTHER SOURCES 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, O N PERUSAL OF P & L ACCOUNT (IN SCHEDULE 2.9), IT IS NOTICED THAT THE A SSESSEE HAS SHOWN THE FOLLOWING RECEIPTS: PROFIT ON SALE OF INVESTMENTS RS. 45,52,492/- INTEREST ON REC BONDS RS. 3,12,500/- INTEREST FROM PFC LTD. RS. 44,574/- DIVIDEND RS. 3,20,656/- RS.52,30,223/- IN THE P& L ACCOUNT THERE IS NO PURCHASE OR SALE OF ANY SHARE. HOWEVER IN THE COMPUTATION OF INCOME THE ASSESSEE HAS TREATED THE PROFIT ON SALE OF INVESTMENTS OF RS.45,52,492/- AS LONG TERM CAPITAL GAIN OF RS.3 5,30,230/- AND SHORT TERM CAPITAL LOSS OF RS.18544/- AND SHOWN LOSS FROM ALLE GED BUSINESS AT RS.1,33,706/-. AGAINST THE ALLEGED BUSINESS LOSS OF RS.1,33,706/- THE ASSESSEE HAS CLAIMED EXPENSES OF RS.2,18,517/-. DURING THE YEAR, THE AUD ITED FIGURES OF BALANCE SHEET ARE AS FOLLOWS: 31.3.2012 31.3.2011 CLOSING STOCK 1,50,000 1,50,000 CURRENT LIABILITIES 5,95,904 5,95,904 THE SAME FIGURES ARE APPEARING IN THE BALANCE-SHEET FOR ASSESSMENT YEAR 2009-10 AND 2010-11. THESE FACTS CLEARLY REFLECT THAT THE A SSESSEE FOR THE PAST MANY YEARS HAD NOT SHOWN ANY INCOME FROM THE TRADING OF SHARES . DURING THE YEAR ALSO THERE IS NO BUSINESS ACTIVITY, OTHER THAN SALE AND PURCHA SE OF INVESTMENTS. IT IS EVIDENT THAT SALE AND PURCHASE OF INVESTMENT IS THE BUSINES S OF THE ASSESSEE AND PROFIT ARISING OUT OF SUCH SALE OF INVESTMENT IS THE BUSIN ESS. ITA NO.5712/DEL/2016 3 4. LEARNED CIT(A) CONFIRMED THE ACTION OF THE ASSES SING OFFICER BY HOLDING AS UNDER: 4.1 THE ASSESSING OFFICER WAS ASKED TO CONFIRM THE STATUTORY VALIDITY OF THE APPEAL FILED U/S. 249(2)/249(4) OF THE IT ACT, VIDE NOTICE DATED 25.06.2015. HE WAS ALSO GIVEN AN OPPORTUNITY OF HEARING VIDE THE S AID NOTICE. HOWEVER, NO REPLY HAS BEEN RECEIVED BY THE ASSESSING OFFICER. THEREFO RE, IT IS PRESUMED THAT THE ASSESSING OFFICER CONFIRMS THE STATUTORY VALIDLY OF THE APPEAL FILED AND DOES NOT WISH TO REMAIN PRESENT IN THE APPELLATE PROCEEDINGS . 4.2 THE ONLY ISSUE INVOLVED IS REJECTION OF THE AP PELLANTS CLAIM OF LONG TERM CAPITAL AND SHORT TERM CAPITAL GAINS IN RESPECT OF SALE OF SECURITIES ETC. THE ASSESSING OFFICER HAS TAXED THE SAME AS BUSINESS IN COME THE ISSUE IS COVERED AGAINST THE APPELLANT BY THE ORDER OF CIT(A) FOR A. YS. 2010-11 AND 2011-12 FOR REFERENCE THE RECORDS OF PROCEEDINGS DATED 01.09.20 16 ARE REPRODUCED HEREUNDER:- SHREE DEEPCHAND GARG, C.A. ATTENDED. ISSUE IS COVE RED AGAINST THE APPELLANT IN A.Y. 2010-11 AND A.Y.2011-12 BY THE ORDER OF CIT(A) . APPEAL BEFORE THE ITAT IS STATED TO BE PENDING. APPEAL HEARD 5. I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE FACTS OF THE CASE. IT WAS ARGUED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT DURING THE ASSESSMENT YEAR 2010-11 AND 2012-13, THE INVESTMENT S HAVE BEEN DECLARED IN THE BALANCE SHEETS OF M/S. MORGAN STANLEY INDIA CAPITAL AND THAT OF ICICI PRUDENTIAL WHICH ARE LISTED SECURITIES AND UNLISTED SECURITIES. HE POINTED OUT THE CIRCULARS NO.6/16 DATED 29.02.2016 AND LETTER N O.225/12/2016 DATED 2.5.2016 WHERE IT HAS BEEN MENTIONED THAT IF THE LI STED SHARES ARE HELD FOR MORE THAN TWELVE MONTHS, THE SAME SHALL NOT BE PUT TO DISPUTE BY THE ASSESSING OFFICER AND SHALL BE TAXED AS CAPITAL GAI N. THE RELEVANT PART IS REPRODUCED HEREINBELOW. IN RESPECT OF LISTED SHARES AND SECURITIES HELD FO R A PERIOD F MORE THAN 12 MONTHS IMMEDIATELY PRECEDING THE DATE OF ITS TRANSFER, IF THE ASSESSEE DESIRES TO TREAT THE INCOME ARISING FROM THE TRANSFER THEREOF AS CAPITAL GAIN, THE SAME SHALL NOT BE PUT TO DISPUTE BY THE ASSESSING OFFICER. HOWEVER, THIS STAND, ONCE TA KEN BY THE ASSESSEE IN A PARTICULAR ASSESSMENT YEAR, SHALL REMAIN APPLICABLE IN SUBSEQU ENT ASSESSMENT YEARS ALSO AND THE TAXPAYERS SHALL NOT BE ALLOWED TO ADOPT A DIFFERENT /CONTRACT STAND IN THIS REGARD IN SUBSEQUENT YEARS. REGARDING C HA R A C TE RI SAT I ON OF IN C OM E FROM TRANSACTIONS I N LISTED SHAR E S A ND SECURIT I ES , CENTRAL BOARD OF DIRECT TAXES ( ' CBDT) HAD ISSUED A C1ARIFICATORY CIRCULAR NO . 6/2016 DATED 29 TH FEBRUARY , 2016: WHEREIN WITH A VIEW TO REDUC E LI TIGATION AND MAINTAIN CONSISTENCY IN APPROACH IN ASSESSMENTS, IT WAS INST RUCTED THAT INCOME A RI S I NG FROM ITA NO.5712/DEL/2016 4 TRANSFER OF LISTED SHARES AND SECURIT I ES WHICH ARE HELD FOR MORE THAN TWELVE MONTHS WOULD BE TA X ED UNDER THE HEAD 'CAPITAL GAIN ' UNLESS THE TAX-PAYER ITSELF TREATS THESE AS ITS STO CK- IN-TRADE AND T RA NSFE R THEREOF AS ITS BUSINESS INCOME . IT WAS F U RTHER STATED T HAT IN OTHER SITUATIONS , THE ISSUE WAS TO BE DECIDED ON THE BASIS OF EXISTIN G CIRCULARS ISSUED BY THE CBDT ON THIS SUBJECT 2 . S I M I LAR LY, F O R D E T E R M IN I NG THE T A X-TREATM E NT OF I N CO ME AR I SING FRO M TRA NSFE R O F UN L ISTED S HARES FOR WH I CH NO FORMAL MARKE T E XISTS FOR TRADING, A NEED HAS BEEN F ELT TO HAVE A CONSISTENT V I EW IN ASSESSMENTS PERT A INING TO S U C H I NCOME. IT HAS, ACCORDINGLY, BEEN DEC I DED THAT THE INCOME A RI SING FROM TRANSFER OF UNLISTED SHARES W OULD BE CONSIDERED UNDER HEAD 'CAPITAL GAIN', IR R ESPECT I VE OF PE RI OD OF HOLD IN WITH A VIEW TO AVOID DISPUTES/LITIGATION AND TO MAINTAIN UNIFORM APPROAC H . 6. THOUGH THE ASSESSEE HAS NOT CARRIED OUT ANY BUSI NESS ACTIVITIES AS PER THE MAIN OBJECT BUT HE HAS DEALT WITH THE LISTED AN D THE UNLISTED SHARES WHICH ARE HELD FOR MORE THAN TWELVE MONTHS AND WHICH HAVE BEEN SOLD DURING THE YEAR THOUGH THE ASSESSEE HAS NOT CARRIED OUT THE BU SINESS DURING THE PRECEDING YEARS AND IN THE IMPUGNED YEAR AND HAS DE ALT WITH IN THE INVESTMENTS ONLY BUT FOR THE CIRCULAR OF THE CBDT H E GETS THE BENEFIT OF BEING ASSESSED UNDER THE HEAD CAPITAL GAINS. THER EFORE, IN VIEW OF THE CIRCULARS REFERRED TO HEREINABOVE, THE ASSESSEE HAS ESSENTIALLY TO BE ASSESSED UNDER THE HEAD CAPITAL GAINS AND NOT IN THE HEAD BUSINESS OR PROFESSION. ACCORDINGLY, ALL THE GROUNDS OF THE ASSESSEE ARE AL LOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON TH IS DAY 25 TH APRIL, 2017 SD/- (B.P. JAIN) ACCOUNTANT MEMBER DATED: 25/04/2017 PRABHAT KUMAR KESARWANI, SR.P.S. COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(APPEALS) 5.DR: ITAT ASSTT. REGISTRAR, ITAT, NEW DELHI