DCIT 2(3), MUMBAI V. SUBHKAM HOLDING P. LTD, MUMBAI

ITA 6059/MUM/2010

• Counselvise Citation: 605919914 RSA 2010
• Duration Of Justice: 3 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 09-07-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 06-08-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRADEEP SHOURYA ARYA
• Assessee Lawyers: K SHIVRAM; RAHUL K HAKANI
• Keywords: Business income; Opportunity of being heard; Additional evidence
• Section: 143(3); 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE HONBLE S/SHRI H.L. KARWA, PRESIDENT AND B. R.BASKARAN (AM) . . , . . , ./I.T.A. NO.5492/MUM/2010 ( / ASSESSMENT YEAR : 2007-08) SUBHKAM VENTURES (I) PVT.LTD., (FORMERLY SUBHKAM HOLDING PVT LTD., THE INTERNATIONAL HOUSE, 4 TH FLOOR, 16 TH M.K.ROAD, CHURCHGATE, M K ROAD, MUMBAI-400020 / VS. A DDL . COMMISSIONER OF INCOME TAX (OSD) 2(3), 5 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 ( / APPELLANT) .. ( !' / RESPONDENT) ./I.T.A. NO.6059/MUM/2010 ( / ASSESSMENT YEAR : 2007-08) DY. COMMISSIONER OF INCOME TAX-2(3), ROOM NO.555, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 / VS. M/S SUBH K AM HOLDING PVT LTD., 15, ONLOOKER BUILDING, 2 ND FLOOR, 14, SIR P M ROAD, FORT, MUMBAI- 400001 . ( / APPELLANT) .. ( !' / RESPONDENT) ./ # $ ./PAN/GIR NO. : AABCS3565L % / ASSESSEE BY : S/ SHRI K SHIVRAM & RAHUL K HAKANI !' & % /REVENUE BY : SHRI PRADEEP SHOURYA ARYA ' & ( ) / DATE OF HEARING : 9.7.2014 *+ & ( ) /DATE OF PRONOUNCEMENT : 18.7.2014 I.T.A. NO.5492 & 6059/MUM/2010 2 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 28.05.2010 PASSED BY LD CIT(A)-6, MUMBAI AND THEY RELATE TO TH E ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE DISALLOWANCE MADE U/S 14A OF THE INCOME TAX ACT, 19 61 (THE ACT) R.W. RULE 8D OF THE I.T RULES, 1962 (THE RULES). 3. THE REVENUE IS IN APPEAL BEFORE US ASSAILING THE DECISION OF LD CIT(A) IN HOLDING THAT THE PURCHASE AND SALE OF SHARES RESULT ING IN AN INCOME OF RS.7.73 CRORES IS ASSESSABLE AS SHORT TERM CAPITAL GAIN AND NOT ASSESSABLE AS BUSINESS INCOME. 4. THE FACTS RELATING TO THE CASE IS STATED IN BRIE F. THE ASSESSEE COMPANY IS PREVIOUSLY KNOWN AS SUBHKAM HOLDING PVT LTD HAVIN G P.A.NO. AABCS3565L. BEFORE THAT IT WAS HAVING THE NAME OF SUBHKAM MONE TARY SERVICES PVT LTD. THE NAME OF THE COMPANY IS AGAIN CHANGED AND IT IS PRES ENTLY KNOWN AS SUBHKAM VENTURES (I) PVT. LTD. THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATION WAS COMPLETED BY THE AO ON 29.12.2009 U/S 143(3) OF THE ACT UNDER THE NAME SUBHKAM HOLDING PVT LTD, WHEREIN HE MADE DISALLOW ANCE U/S 14A OF THE ACT BY FOLLOWING RULE 8D OF THE I.T RULES AND ALSO TREATED INCOME ARISING ON SALE OF SHARES AMOUNTING TO RS.7.73 CRORES AS BUSINESS INCO ME OF THE ASSESSEE AS AGAINST THE CLAIM OF THE ASSESSEE THAT IT WAS SHORT TERM CAPITAL GAIN. THE LD CIT(A) CONFIRMED THE DISALLOWANCE MADE U/S 14A, BUT REVERSED THE DECISION OF I.T.A. NO.5492 & 6059/MUM/2010 3 THE AO IN RESPECT OF PROFIT ARISING ON SALE OF SHAR ES, I.E., HE HELD THAT THE SAME IS ASSESSABLE UNDER THE HEAD SHORT TERM CAPITAL GAINS. AGGRIEVED BY THE DECISION OF LD CIT(A), BOTH THE PARTIES ARE IN APPEAL BEFORE US ON THE ISSUE DECIDED AGAINST EACH OF THEM. 5. IN THE APPEAL FILED BY THE ASSESSEE, THE ONLY IS SUE URGED IS ABOUT THE DISALLOWANCE MADE U/S 14A OF THE ACT. THE LD A.R S UBMITTED THAT THE HONBLE JURISDICTIONAL BOMBAY HIGH COURT HAS RENDERED ITS D ECISION IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD (194 TAXMAN 203), WHEREIN IT H AS BEEN HELD THAT THE PROVISIONS OF RULE 8D IS APPLICABLE FROM AY 2008-09 ONWARDS AND NOT TO THE YEAR UNDER CONSIDERATION. ACCORDINGLY, HE SUBMITTED THA T THE TAX AUTHORITIES ARE NOT JUSTIFIED IN APPLYING RULE 8D TO THE YEAR UNDER CON SIDERATION. HE SUBMITTED THAT THE TRIBUNAL HAS CONSIDERED AN IDENTICAL ISSUE IN T HE IMMEDIATELY PRECEDING YEAR AND IT HAS SET ASIDE THE SAME TO THE FILE OF THE AO WITH THE DIRECTION TO RECOMPUTE THE DISALLOWANCE THAT IS REQUIRED TO BE M ADE U/S 14A OF THE ACT BY FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH C OURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD (SUPRA). THE LD D.R DID NOT CON TROVERT THE FACTUAL ASPECTS OF THE MATTER STATED ABOVE. 6. WE HEARD THE PARTIES ON THIS ISSUE AND PERUSED T HE RECORD. WE NOTICE THAT THE IDENTICAL ISSUE WAS CONSIDERED BY THE TRIB UNAL IN THE ASSESSEES OWN CASE IN ITA NO.5902/MUM/2009 & ITA NO.6018/MUM/2009 RELATING TO ASSESSMENT YEAR 2006-07 AND THE TRIBUNAL, VIDE ITS ORDER DATED 30.11.2011, HAS SET ASIDE THE MATTER TO THE FILE OF THE AO WITH THE DIRECTION TO COMPUTE DISALLOWANCE TO BE MADE U/S 14A OF THE ACT ON A REA SONABLE BASIS BY FOLLOWING I.T.A. NO.5492 & 6059/MUM/2010 4 THE DECISION RENDERED BY HONBLE JURISDICTIONAL HIG H COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LTD (SUPRA). THERE IS NO DISPUTE BETWEEN THE PARTIES THAT THE PROVISIONS OF RULE 8D IS NOT APPLI CABLE TO THE INSTANT YEAR, IN VIEW OF THE DECISION OF JURISDICTIONAL HIGH COURT R EFERRED ABOVE. HENCE, CONSISTENT WITH THE VIEW TAKEN BY THE TRIBUNAL IN T HE IMMEDIATELY PRECEDING YEAR, WE SET ASIDE THIS ISSUE TO THE FILE OF THE AO WITH THE DIRECTION TO COMPUTE THE DISALLOWANCE TO BE MADE U/S 14A OF THE ACT ON A REASONABLE BASIS BY FOLLOWING THE DECISION RENDERED BY HONBLE JURISDIC TIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LTD (SUPRA). 7. IN THE APPEAL FILED BY THE REVENUE, THE ONLY ISS UE CONTESTED RELATES TO THE HEAD OF INCOME UNDER WHICH THE GAIN ARISING ON SALE OF SHARES IS ASSESSABLE. THE LD A.R SUBMITTED THAT THE IDENTICAL ISSUE WAS A LSO CONSIDERED BY THE TRIBUNAL IN THE IMMEDIATELY PRECEDING YEAR AND THE SAME WAS DECIDED AGAINST THE ASSESSEE, I.E., THE TRIBUNAL HAS CONFIRMED THE VIEW TAKEN BY THE AO ON THIS ISSUE. THE LD A.R SUBMITTED THAT THERE IS MATERIAL DIFFERE NCE IN FACTS IN THE CURRENT YEAR VIS--VIS THE FACTS THAT PREVAILED IN THE IMMEDIATE LY PRECEDING YEAR. HE SUBMITTED THAT THE ASSESSEE HAS MOVED A PETITION BE FORE THE TRIBUNAL FOR ADMITTING CERTAIN ADDITIONAL EVIDENCES AND THEY ARE PLACED AT PAGES 102 TO 113 OF THE PAPER BOOK. ACCORDINGLY, THE LD A.R PLEADED THAT THIS ISSUE MAY BE SET ASIDE TO THE FILE OF THE AO FOR CONSIDERATION OF TH E SAME AFRESH BY DULY CONSIDERING THE ADDITIONAL EVIDENCES FILED BY THE A SSESSEE. 8. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE O RDER PASSED BY THE TRIBUNAL IN THE IMMEDIATELY PRECEDING YEAR MAY BE F OLLOWED IN THIS YEAR ALSO. I.T.A. NO.5492 & 6059/MUM/2010 5 9. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD . WE NOTICE THAT THE LD CIT(A), DURING THE INSTANT YEAR, HAS REVERSED THE D ECISION OF THE ASSESSING OFFICER BY FOLLOWING HIS ORDER PASSED FOR THE IMMEDIATELY P RECEDING YEAR. HOWEVER, IN THE IMMEDIATELY PRECEDING YEAR (AY 2006-07), THE TR IBUNAL HAS REVERSED THE DECISION OF LD CIT(A) AND HAS RESTORED THAT OF THE AO. HENCE, NORMALLY THE DECISION TAKEN BY THE ITAT IN THE IMMEDIATELY PRECE DING YEAR IS REQUIRED TO BE FOLLOWED IN THIS YEAR ALSO. HOWEVER, THE CONTENTIO N OF THE ASSESSEE IS THAT THE FACTS THAT PREVAILED IN THE IMMEDIATELY PRECEDING Y EAR ARE MATERIALLY DIFFERENT FROM THE FACTS AVAILABLE IN THE INSTANT YEAR. ACCO RDINGLY IT WAS CONTENDED THAT THE DECISION GIVEN BY THE TRIBUNAL FOR THE IMMEDIAT ELY PRECEDING YEAR SHOULD NOT BE FOLLOWED. TO SUBSTANTIATE ITS CONTENTION, THE A SSESSEE HAS MOVED A PETITION BEFORE US SEEKING ADMISSION OF ADDITIONAL EVIDENCES . 10. THERE SHOULD NOT BE ANY DISPUTE THAT THE QUESTI ON WHETHER THE INCOME ARISING ON SALE OF SHARES IS ASSESSABLE AS CAPITAL GAINS OR BUSINESS INCOME MAY BE REQUIRED TO BE EXAMINED EVERY YEAR BY FOLLOWING VARIOUS CRITERION ILLUSTRATED BY THE COURTS. HENCE, WE FIND MERIT IN THE CONTENT IONS OF THE ASSESSEE. SINCE THE ASSESSEE HAS FILED ADDITIONAL EVIDENCES, THEY A RE REQUIRED TO BE EXAMINED AT THE END OF THE AO. ACCORDINGLY, WE ARE OF THE VIEW THAT THIS ISSUE SHOULD BE EXAMINED AFRESH AT THE END OF THE AO. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FI LE OF THE AO WITH THE DIRECTION TO EXAMINE THIS ISSUE AFRESH BY CONSIDERING THE ADD ITIONAL EVIDENCES AND ALSO BY GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE A ND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH THE LAW. I.T.A. NO.5492 & 6059/MUM/2010 6 11. IN THE RESULT, THE APPEALS FILED BY THE REVENUE AS WELL AS THE ASSESSEE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 18TH JULY, 2014 . *+ ' , -. / 0 18TH JULY, 2014 + & 2 3 SD SD ( . . / H.L. KARWA) ( . . , / B.R. BASKARAN ) / PRESIDENT / ACCOUNTANT MEMBER - ' MUMBAI: 18TH JULY,2014. . . ./ SRL , SR. PS ! ' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT. 3. ' 5( ( ) / THE CIT(A)- CONCERNED 4. ' 5( / CIT CONCERNED 5. 67 2 !(8 , ) 8 , - ' / DR, ITAT, MUMBAI CONCERNED 6. 2 9 : / GUARD FILE. ; ' / BY ORDER, TRUE COPY < # (ASSTT. REGISTRAR) ) 8 , - ' /ITAT, MUMBAI