M/s. Sucon India Ltd., New Delhi V. JCIT, Faridabad

ITA 6203/DEL/2015

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 0791 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2012-2013
• Appeal Filed On: 24-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K TIWARI
• Assessee Lawyers: DR RAKESH GUPTA
• Keywords: Business income; Opportunity of being heard; Speculation loss
• Section: 43(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.A. NO.6203/DEL/2015 (ASSESSMENT YEARS 2012-13) M/S. SUCON INDIA LTD. VS. JCIT FF-9, VISHNU PALACE, RANGE-II SECTOR-20B, AJRONDA, FARIDABAD FARIDABAD PAN :AAPPM8352G ASSESSEE BY : SH. DR. RAKESH GUPTA, ADV. REVENUE BY : SH. K. TIWARI, SR. DR DATE OF HEARING: 27.09.2018 DATE OF PRONOUNCEMENT: 05 .10.2018 ORDER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, M/S. SUCON INDIA LTD. (HEREINAFTER REFER RED TO AS THE ASSESSED), BY FILING PRESENT APPEAL SOUGHT TO S ET ASIDE THE IMPUGNED ORDER DATED 06.10.2015 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-FARIDABAD QUA THE ASSESSMENT YEAR 2012-13 ON THE GROUNDS INTER ALIA THAT :- 1. THAT HAVING REGARD TO THE FACTS AN D CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ACTION OF THE LD. A.O. IN MAKING AN ADDITION OF RS. 29,84,052/- BY 2 ITA NO. 6203/D EL/2015 (SUCON INDIA LTD.) DENYING THE CLAIM OF SET OFF OF LOSS OF SHARE BUSIN ESS ALLEGEDLY IN VIEW OF EXPLANATION TO SECTION 73 OF THE INCOME TAX ACT, 1961. 2) THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACTION OF LD. CIT(A) IN CONFIRMING THE ADDITION OF RS. 29,84,052/- IS BAD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 3) THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS IN CONFIRMING THE ACTION OF LD. A.O. IN PASSING THE IMPUGNED ORDER WITHOUT GIVING ADEQUATE OPPORTUNITY OF BEING HEARD. 4) THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACTION OF LD. CIT(A) IN CONFIRMING THE ACTION OF LD . A.O. IN MAKING THE IMPUGNED ADDITION IS BAD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE . 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJ UDICATION OF ISSUES AT HAND ARE ; THE ASSESSEE IS ENGAGED IN THE BUSINES S OF TRADING IN SHARES & SECURITIES AND BUILDING MATERIAL. ASSESSEE FILED RETURN OF INCOME FOR THE YEAR UNDER ASSESSMENT DECLARING LOSS OF RS. 4,52,39,210/-. DECLINING THE CONTENTION RAISED BY THE ASSESSEE , AO MADE ADDITION OF RS. 29,84,052/- BY DENYING THE CL AIM OF SET OFF OF LOSS OF SHARE BUSINESS AND THEREBY ASSESSED THE TOT AL INCOME AT RS. 4,09,25,082/-. 3. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) BY WAY OF FILING THE APPEAL WHO IS PARTLY ALLOWED THE SAME. F EELING AGGRIEVED 3 ITA NO. 6203/D EL/2015 (SUCON INDIA LTD.) THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIV E OF THE ASSESSEE GONE THROUGH THE DOCUMENTS RELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN THE LIGH T OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. UNDISPUTEDLY, ASSESSING OFFICER HAS MADE T HE ADDITION OF RS. 29,84,052/- BY DENYING THE CLAIM OF SETOFF OF SH ARE BUSINESS BY APPLYING THE EXPLANATION TO SECTION 73 OF THE INCOM E TAX ACT. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS DECLARED LOSS OF RS. 4,52,39,210/- . 6. THE LD. AR FOR THE ASSESSEE BY RELYING U PON DECISION RENDERED BY CO-ORDINATE BENCH OF TRIBUNAL IN ASSESS EES OWN CASE ITA NO. 4519/DEL/2013, A.Y.2009-10, M/S. SUCON INDI A LTD. VS. ACIT, CONTENDED THAT THE ISSUE IN CONTROVERSY IS CO VERED IN FAVOUR OF THE ASSESSEE COMPANY. THE LD. CIT(A) HAS DENIED THE CLAIM OF SET OFF OF LOSS OF SHARE BUSINESS TO THE ASSESSEE B Y RELYING UPON DECISION RENDERED BY HONBLE DELHI HIGH COURT IN CA SE OF 4 ITA NO. 6203/D EL/2015 (SUCON INDIA LTD.) COMMISSIONER OF INCOME TAX DELHI VS. DLF COMMERCIAL DEVELOPERS LIMITED (218 TAXMAN 0045). 7. HOWEVER THE CO-ORDINATE BENCH OF TRIBUNA L IN ASSESSEES OWN CASE FOR 2009-10 HAS DISTINGUISHED THE JUDGMENT OF DLF COMMERCIAL (SUPRA) FOLLOWED BY LD. CIT(A) AND ALLOW ED THE CLAIM OF SET OFF OF TO THE ASSESSEE ON ACCOUNT OF LOSS OF SHARE BUSINESS BY RELYING UPON DECISION RENDERED BY HIGH COURT OF CAL CUTTA CITED AS ASIAN FINANCIAL SERVICES LTD. VS. COMMISSIONER OF INCOME TAX ACT, CALCUTTA BY RETURNING THE FOLLOWING FINDINGS :- 3.7.2 ON THE OTHER HAND, THE LEARNED COUNSEL OF THE ASSESSEE RELIED ON THE DECISION OF THE HON'BLE HIGH COURT OF CALCUTTA IN THE CASE OF ASIAN FINANCIAL SERVICES LTD. VS. COMMI SSIONER OF INCOME TAX-3, KOLKATA (SUPRA). IN THE SAID CASE ONE OF THE QUESTIONS RAISED WAS THAT, WHETHER ON THE TRUE AND PROPER INTERPRETATION OF THE EXPLANATION TO SECTION 73 OF THE INCOME- TAX ACT, 1961, THE TRIBUNAL WAS JUSTIFIED IN LAW IN HOLDING THAT LOSS OF RS.3,24,76,185/- INCURRED IN ELIGIBLE TRANS ACTION WITHIN THE MEANING OF PROVISO (D) TO SECTION 43(5) NOT INVOLVING ANY PURCHASE/SALE OF SHARES AS SUCH WAS SPECULATION LOS S ? 3.7.3 THE HON'BLE HIGH COURT OF CALCUTTA DISAGREED WITH THE DECISION OF THE HON'BLE DELHI HIGH COURT AND HELD A S UNDER: 'IT WOULD APPEAR THAT THE ACTIVITIES APPEARING IN C LAUSES (A) TO (E) ARE NOT TO BE DEEMED TO BE SPECULATIVE TRANSACT IONS. THEREFORE, THIS COMES WITHIN THE CATEGORY OF DEEMED BUSINESS WHICH IS HOWEVER DISTINCT AND SEPARATE FROM ANY OTH ER BUSINESS. NOW, THE QUESTION IS, WHETHER LOSS ARISING OUT OF S UCH DEEMED BUSINESS CAN BE SET OFF AGAINST THE PROFIT ARISING OUT OF OTHER BUSINESS OR BUSINESSES WHICH MAY FOR CLARITY BE CAL LED PROPER 5 ITA NO. 6203/D EL/2015 (SUCON INDIA LTD.) BUSINESS. UNDER SECTION 70 OF THE ACT, THE ASSESSEE IS ENTITLED TO HAVE THE LOSS SET OFF AGAINST HIS INCOME FROM ANY O THER SOURCE UNDER THE SAME HEAD UNLESS OTHERWISE PROVIDED. THER EFORE ANSWER TO THE QUESTION IS THAT THE ASSESSEE IS ENTI TLED TO HAVE THE LOSS ARISING OUT OF DEEMED BUSINESS SET OFF AGAINST THE INCOME ARISING OUT OF BUSINESS PROPER UNLESS OTHERWISE PRO VIDED. THE QUESTION HOWEVER REMAINS WHETHER THE EXPLANATION TO SUB- SECTION (4) OF SECTION 73 RELIED UPON BY MR. LODH PROVIDES OTHERWISE. A PLAIN READING OF THE EXPLANATION QUOTE D ABOVE CANNOT BE SAID TO HAVE PROVIDED OTHERWISE. IN THAT CASE THE IRRESISTIBLE CONCLUSION IS THAT THE ASSESSEE IS ENT ITLED TO SET OFF SUCH LOSS ARISING OUT OF DEEMED BUSINESS AGAINST TH E INCOME ARISING OUT OF BUSINESS PROPER. THE LEARNED TRIBUNAL HAS SUPPORTED THE CONTENTION O F THE REVENUE RELYING UPON THE JUDGMENT OF THE DELHI HIGH COURT QUOTED ABOVE. THE VIEWS EXPRESSED BY THE HON'BLE DE LHI HIGH COURT ARE CONTAINED IN A PART OF THE SENTENCE, WHIC H IS AS FOLLOWS: ITA NO.4519/DEL/2013 AY: 2009-10 'BY ALL ACCOUNTS T HE DERIVATIVES ARE BASED ON STOCKS AND SHARES, WHICH F ALL SQUARELY WITHIN THE EXPLANATION TO SECTION 73(4) ' WE ARE INCLINED TO THINK THAT THE CLAUSE OF THE SEN TENCE WHICH FALL SQUARELY....', QUALIFIES THE WORD 'SHARES' AND NOT THE WORD 'DERIVATIVES'. WE HAVE NO DIFFICULTY IN ACCEPTING T HE VIEWS OF THE DELHI HIGH COURT WHEN THEY SAY THAT SHARES FALL SQU ARELY WITHIN THE EXPLANATION TO SECTION 73(4) BUT WE ARE UNABLE TO AGREE WHEN DERIVATIVES ARE TREATED AT PAR WITH THE SHARES BECAUSE THE LEGISLATURE HAS TREATED THEM DIFFERENTLY.' 3.7.4 IN THE CASE OF ASIAN FINANCIAL SERVICES LTD. (SUPRA), THE HON'BLE CALCUTTA HIGH COURT ACCORDINGLY ANSWERED TH E QUESTION IN NEGATIVE. 3.7.5 THE LEARNED COUNSEL SUB MITTED BEFORE US THAT BOTH THE DECISION ARE OF THE HIGH COURT OTH ER THEN JURISDICTIONAL HIGH COURT, WHICH IS THE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF THE ASSESSEE. THE LEARNED COUNSEL RELYING ON THE DECISION OF THE HON'BLE SUPREME COUR T IN THE CASE OF VEGETABLE PRODUCT LTD., REPORTED IN 88 ITR 192 SUBMITTED THAT WHERE CONTRARY DECISION OF THE HON'B LE HIGH COURTS OTHER THAN THE JURISDICTIONAL HIGH COURT ARE AVAILABLE, THEN IN SUCH A SITUATION, DECISION FAVOURABLE TO TH E ASSESSEE 6 ITA NO. 6203/D EL/2015 (SUCON INDIA LTD.) SHOULD BE FOLLOWED. THE HON'BLE SUPREME COURT IN TH E CASE OF VEGETABLE PRODUCT LTD (SUPRA) HELD AS UNDER: '4. THERE IS NO DOUBT THAT THE ACCEPTANCE OF ONE OR THE OTHER INTERPRETATION SOUGHT TO BE PLACED ON S. 271(1)(A)(I) BY THE PARTIES WOULD LEAD TO SOME INCONVENIENT RESULT, BUT THE DUTY OF THE COURT IS TO READ THE SECTION, UNDERSTAND ITS LA NGUAGE AND GIVE EFFECT TO THE SAME. IF THE LANGUAGE IS PLAIN, THE FACT THAT THE CONSEQUENCE OF GIVING EFFECT TO IT MAY LEAD TO SOME ABSURD RESULT IS NOT A FACTOR TO BE TAKEN INTO ACCOUNT IN INTERPR ETING A PROVISION. IT IS FOR THE LEGISLATURE TO STEP IN AND REMOVE THE ABSURDITY. ON THE OTHER HAND, IF TWO REASONABLE CON STRUCTIONS OF A TAXING PROVISION ARE POSSIBLE, THAT CONSTRUCTION WHICH FAVOURS THE ASSESSEE MUST BE ADOPTED. THIS IS A WELL-ACCEPT ED RULE OF CONSTRUCTION RECOGNISED BY THIS COURT IN SEVERAL OF ITS DECISIONS. HENCE, ALL THAT WE HAVE TO SEE IS, WHAT IS THE TRUE EFFECT OF THE LANGUAGE EMPLOYED IN S. 271(1)(A)(I) . IF WE FIND THAT ITA NO.4519/DEL/2013 AY: 2009-10 LANGUAGE TO BE AMBIGUO US OR CAPABLE OF MORE MEANINGS THAN ONE, THEN WE HAVE TO ADOPT THAT INTERPRETATION WHICH FAVOURS THE ASSESSEE, MORE PAR TICULARLY SO BECAUSE THE PROVISION RELATES TO IMPOSITION OF PENA LTY.' 3.7.6 RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF VEGETABLE PRODUCT LTD. (SUPRA), WE ARE INCLINED TO FOLLOW THE DECISION OF THE HON'B LE CALCUTTA HIGH COURT ON THE ISSUE IN DISPUTE. ACCORDINGLY, WE HOLD THAT THE LOSS INCURRED ON DERIVATIVE TRANSACTION WAS NOT A SPECULATIVE LOSS AND IS ALLOWED TO BE ADJUSTED AGAINST BUSINESS INCOME. 8. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOV E AND FOLLOWING DECISION OF THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE FOR AY 2008-09 WHICH IS SQUARELY APPLICABLE TO THE ISSUE I N CONTROVERSY, LOSS SUFFERED BY ASSESSEE ON DERIVATIVE TRANSACTION IS NOT SPECULATIVE LOSS AND AS SUCH ELIGIBLE TO BE ADJUSTED AGAINST BU SINESS INCOME AND EXPLANATION 73 OF THE INCOME TAX ACT IS NOT ATTRACT ED. SO THE 7 ITA NO. 6203/D EL/2015 (SUCON INDIA LTD.) ADDITION MADE BY AO AND AFFIRMED BY LD. CIT(A) IS O RDERED TO BE DELETED. CONSEQUENTLY PRESENT APPEAL IS ALLOWED . O RDER PRONOUNCED IN THE OPEN COURT ON 5 TH OCTOBER, 2018. SD/- SD/- (PRASHANT MAHARISHI) (KULDIP SIN GH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 5 TH OCTOBER, 2018 BINITA COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER AR, ITAT DATE OF DICTATION 27 .09.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 28 .09.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER 0 5 . 10 .2018 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS 0 5 .10 .2018 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 0 5 .10 .2018 DA TE ON WHICH THE FAIR ORDER COMES BACK TO THE 0 5 .10 .2018 8 ITA NO. 6203/D EL/2015 (SUCON INDIA LTD.) SR. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 0 5 .10 .2018 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 0 5 .10 .2018 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER