ITO 13(2)3, MUMBAI V. G.S. & CO., MUMBAI

ITA 6024/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9068 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 10-12-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 29-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S SATYA MOORTHY
• Assessee Lawyers: M M GOLWALA
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G , MUMBAI BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. 6024/MUM/2011 ASSESSMENT YEAR : 2008-09 THE INCOME TAX OFFICER WARD 13(2)(3) ROOM NO.425/477, 4 TH FLOOR AAYAKAR BHAVAN MUMBAI-400 020. VS. M/S. G.S. AND COMPANY 93/95, KAZI SAYED STREET SUGAR HOUSE MUMBAI-400 003. PAN NO. AADFG 6600 K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S. SATYA MOORTHY RESPONDENT BY : SHRI M.M. GOLWALA DATE OF HEARING : 10.12.2012 DATE OF PRONOUNCEMENT : 21.12.2012 O R D E R PER RAJENDRA SINGH, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDE R DATED 21.6.2011 OF CIT(A) FOR THE ASSESSMENT YEAR 2008-09. TH E DISPUTE RAISED IN THIS APPEAL IS REGARDING COMPUTATION OF INCOME FROM SALE OF SHARES. 2. FACTS IN BRIEF ARE THAT THE AO FOR THE RELEVANT ASSE SSMENT YEAR HAD DECLARED NET LONG TERM CAPITAL GAIN OF RS.1,45,01, 728/- AFTER SETTING OFF OF SHORT TERM CAPITAL LOSS ON SALE OF SHARES OF SIEMENS LTD. ITA NO.6024/M/11 A.Y. 08-09 2 THE COMPUTATION OF NET LONG TERM CAPITAL GAIN BY THE ASSESSEE IS REPRODUCED BELOW :- NAME OF THE COMPANY LTCG (RS.) GREAT EASTERN SHIPPING CO.LTD. 60,79,501 GREAT OFFSHORE LTD. 1,25,76,790 PROCTER & GAMBLE HYGIENE & HEALTHCARE LTD. 17,87,611 TOTAL 2,22,77,862 NAME OF THE CO. STCL PERIOD OF HOLDING SIEMENS LTD. (77,76,133) 105 DAYS AVERAGE LONG TERM CAPITAL GAIN RS.2,22,77,862 LESS: SHORT TERM CAPITAL LOSS RS. 77,76,133 NET LONG TERM CAPITAL GAIN RS.1,45,01,728 2.1 THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY LONG T ERM CAPITAL GAIN DECLARED SHOULD NOT BE TREATED AS BUSINESS IN COME. THE ASSESSEE SUBMITTED THAT IT HAD ALWAYS BEEN AN INVESTOR AND HAD HELD INVESTMENTS FOR MORE THAN 15 YEARS. IT WAS SUBMITTED THA T IN THREE OUT OF PAST FOUR YEARS, ASSESSMENTS HAD BEEN MADE UNDER SCRUTIN Y AND CLAIM OF THE ASSESSEE HAD BEEN ACCEPTED. THE ASSESSEE HAD USED ITS OWN FUNDS FOR INVESTMENT IN SHARES. IT WAS ACCORDINGLY RE QUESTED THAT THE CLAIM OF LONG TERM CAPITAL GAIN SHOULD BE ACCEPTED. THE AO HOWEVER DID NOT ACCEPT THE EXPLANATION GIVEN. HE ONLY ACCEPTED THE LONG TERM CAPITAL GAIN IN RESPECT OF SHARES OF GREAT EAST ERN SHIPPING COMPANY AS ASSESSEE WAS PART OF THE PROMOTER FAMILY AND THE ITA NO.6024/M/11 A.Y. 08-09 3 REMAINING GAIN FROM OTHER SHARES WAS TREATED AS BUSINESS I NCOME. THE AO THUS ASSESSED NET BUSINESS INCOME OF RS.65,88,268/- IN RESP ECT OF SALE OF SHARES OF GREAT OFFSHORE LTD., PROCTER & GAMBLE HYGIENE & HEALTHCARE LTD. AND SIEMENS LTD. 2.1 IN APPEAL, CIT(A) OBSERVED THAT AO HAD NOT GIVEN ANY REASONS FOR TREATING THE LOSS FROM SALE OF SHARES OF SIEMENS LTD . AS BUSINESS LOSS. HE, THEREFORE, OBSERVED THAT THE ACTION OF AO COULD NOT BE UPHELD. AS REGARD SHARES OF GREAT EASTERN SHIPPING LTD. , CIT(A) OBSERVED THAT THE ASSESSEE HAD BEEN ALLOTTED SHARES ON DE- MERGER OF GREAT EASTERN SHIPPING COMPANY. THESE SHARES HAD BEEN H ELD FOR LAST SEVERAL YEARS ALONG WITH THOSE OF PROCTER & GAMBLE HYGI ENE & HEALTHCARE LTD. CIT(A) ALSO OBSERVED THAT DEPARTMENT HA D ACCEPTED THE SAME AS INVESTMENT IN EARLIER ASSESSMENT YEARS. HE, THER EFORE HELD THAT CLAIM OF THE ASSESSEE OF LONG TERM CAPITAL GAI N HAD TO BE ACCEPTED. AGGRIEVED BY THE DECISION OF CIT(A) REVENUE I S IN APPEAL BEFORE THE TRIBUNAL ONLY IN RELATION TO ORDER OF CI T(A) ACCEPTING THE GAIN IN RESPECT OF GREAT OFFSHORE LTD. AND PROCTER & GA MBLE HYGIENE & HEALTHCARE LTD. AS LONG TERM CAPITAL GAIN. 3. BEFORE US, THE LD. AR SUBMITTED THAT LOSS ARISING FR OM SALE OF SHARES OF SIEMENS LTD. IN WHICH CASE THE AVERAGE HOLDING PERIOD WAS ONLY 105 DAYS HAD BEEN ACCEPTED BY THE DEPARTMENT AS SHO RT TERM ITA NO.6024/M/11 A.Y. 08-09 4 CAPITAL LOSS AS NO APPEAL HAS BEEN FILED. THE APPEAL H AS BEEN FILED ONLY IN RELATION TO SHARES OF GREAT OFFSHORE LTD. AND PROCT ER & GAMBLE HYGIENE & HEALTHCARE LTD. WHICH HAD BEEN SOLD AFTER HOL DING THEM FOR SEVERAL YEARS. THESE GAINS WERE OBVIOUSLY LONG TERM CAPI TAL GAINS. IT WAS ACCORDINGLY URGED THAT THE ORDER OF CIT(A) SHOULD BE UPHELD. THE LD. DR ON THE OTHER HAND PLACED RELIANCE ON THE ORDE R OF AO. 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE ASSESSEE HAD SHOWN LONG TERM CAPITAL GAIN FROM SALE OF SHARES OF GREAT EASTERN SHIPPING LTD., GREAT OFFSHORE S HIPPING LTD. AND PROCTER & GAMBLE HYGIENE & HEALTHCARE LTD. THESE SHAR ES HAD BEEN SHOWN AS INVESTMENT IN THE BOOKS AND HAD BEEN SOLD AFTER HOLDING THEM FOR MORE THAN SIX YEARS. THE AO HAS ACCEPTE D LONG TERM CAPITAL GAIN IN RESPECT OF GREAT EASTERN SHIPPING COMPA NY LTD. BUT CAPITAL GAIN IN RESPECT OF OTHER TWO SHARES HAS BEEN TREA TED AS BUSINESS INCOME. SIMILARLY SHORT TERM CAPITAL LOSS FROM SALE OF SHARES OF SIEMENS LTD. HAS ALSO BEEN TREATED AS BUSINESS LOSS WITH OUT ANY REASON. CIT(A) HAS ACCEPTED THE CLAIM OF THE ASSESSEE SHOWING CAPITAL GAIN/LOSS IN RESPECT OF ALL THREE SHARES WHICH WERE TREATE D BY AO AS BUSINESS. WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) . THE ASSESSEE HAS NOT FILED APPEAL AGAINST THE ORDER OF CIT(A) TREATIN G LOSS FROM SALE OF SHARES OF SIEMENS LTD. AS SHORT TERM CAPITAL LOSS THOUGH THESE SHARES WERE SOLD AFTER HOLDING THEM FOR ONLY ABOUT 105 DAYS. THE DEPARTMENT ITA NO.6024/M/11 A.Y. 08-09 5 IS IN APPEAL ONLY IN RESPECT OF SHARES OF GREAT OFF SHORE LTD. AND PROCTER & GAMBLE HYGIENE & HEALTHCARE LTD. THESE SHARES H AVE BEEN HELD FOR SEVERAL YEARS AND HAVE BEEN ACCEPTED AS INVESTME NT IN THE EARLIER YEARS. WE DO NOT SEE ANY JUSTIFICATION TREATING THE SAME AS BUSINESS INCOME. THE ORDER OF CIT(A) IS ACCORDINGLY UPHELD . 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.12.2012. SD/- SD/- ( VIVEK VARMA ) JUDICIAL MEMBER (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 21.12.2012. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.