ASSTT CIT CEN CIR 22, MUMBAI V. PASSIONATE INVESTMENT MANAGEMENT P. LTD, MUMBAI

ITA 6252/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100740 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 25-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Rule of consistency
• Section: 143(3); 153A; 14A; 6

Judgement Text

M/S PASSIONATE INVESTMENT & MANAGEMENT PVT LTD ITA NO. 6252 /MUM/20 1 3 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C , MUMBAI . . , , BEFORE SHRI B R BASKARAN , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , J UDICIAL MEMBER ITA NO. : 6252 /MUM/20 1 3 ( ASSESSMENT YEAR: 2010 - 11 ) DY/ASST . COMMISSIONER OF INCOME TAX CC - 22, ROOM NO. 403, 4 TH FLOOR, AAYAKAR BHAVAN, MUMBAI - 400 020 VS M/S PASSIONATE INVESTMENT & MANAGEMENT PVT LTD , 2 ND FLOOR, PALM SPRING CENTRE, MALA D LINK ROAD, MALAD (WEST), MUMBAI - 400 064 .: PAN: AAAC M 7085 N (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI DURGA DUTT RESPONDENT BY : SHRI VIJAY MEHTA /DATE OF HEARING : 24 - 06 - 201 5 / DATE OF PRONOUNCEMENT : 28 - 08 - 201 5 ORDER , . . : PER AMIT SHUKLA, J M : THE AFORESAID APPEAL FILED BY THE REVENUE A GAINST IMPUGNED ORDER DATED 1 4 . 08 .20 1 2 , PASSED BY CIT (A) - 39 , MUMBAI , FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) FOR THE ASSESSMENT YEAR 20 1 0 - 11, ON THE FOLLOWING GROUNDS : - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN TREATING THE INCOME OF RS. 96,42,246/ - AS CAPITAL GAIN INSTEAD OF BUSINESS INCOME AS THE ASSESSEE IS A TRADER AND NOT AN INVESTOR. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 95,55,129/ - MADE BY THE AO AS PER THE PROVISIONS OF SECTION 14A R.W.R 8D. 2. THE ASSESSEE IS A NON - BANKING FINANCE COMPANY (NBFC) ENGAGED IN THE BUSINESS OF FINANCING. IT HAS SHOWN NIL INCOME M/S PASSIONATE INVESTMENT & MANAGEMENT PVT LTD ITA NO. 6252 /MUM/20 1 3 2 FROM BUSINESS , S HORT - TERM - CAPITAL - GAIN OF RS. 7,26,08,700/ - AND LONG - TERM - CAPITAL - GAIN OF RS. 3,70,66,011/ - . THE LATER WAS CLAIMED AS EXEMPT U/S 10. THE M AIN ISSUE AS RAISED IN GROUND NO. 1 IS THAT THE ASSESSING OFFICER HAS TREATED GAIN/PROFIT OF RS. 96,42,246/ - ON SALE OF INVESTMENTS AS BUSINESS INCOME INSTEAD OF CAPITAL GAIN SHOWN BY THE ASSESSEE. THIS ISSUE HAS BEEN STATED BEFORE US IS SIMILAR TO EAR LIER YEARS. THE LD. ASSESSING OFFICER FOR COMING TO THIS CONCLUSION HAS GIVEN VERY DETAILED ANALYSIS, WHICH HAS BEEN DISCUSSED FROM PAGES 4 TO 8 OF THE ASSESSMENT ORDER. 3. THE LD. CIT(A), FOLLOWING THE DECISION OF THE TRIBUNAL FOR THE AYS 2008 - 09 & 2009 - 10 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 4. IT HAS BEEN ADMITTED BY BOTH THE PARTIES THAT SIMILAR ISSUE HA D ARISEN IN ASSESSEES OWN CASE FOR THE AYS 2008 - 09 & 2009 - 10 WHEREIN, THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL. TO SHOW THE SIMILARITY OF THE FACTS FROM THE EARLIER YEARS, LD. COUNSEL , SHRI VIJAY MEHTA , SUBMITTED THE FOLLOWING FACT - SHEET S HIGHLIGHTING THE DETAILS REGARDING VOLUME OF TRANSACTION, FREQUENCY OF TRANSACTION, PRINCIPLE OF CONSISTENCY AND OTHER FACTORS. FOR THE SAKE OF READY REFERENCE, THESE ARE INCORPORATED HEREIN BELOW : - I) VOLUME OF TRANSACTIONS SR. NO. PARTICULARS AY 2007 - 08 AY 2008 - 09 AY 2010 - 11 1 NUMBER OF SALE TRANSACTIONS 68 161 134 2 NO. OF LTCG TRANSACTIONS 40 116 116 3 NO. OF STCG REGULAR TRANSACTIONS 28 45 18 4 NO. OF SCRIPS DEALT 26 32 20 II) FREQUENCY OF TRANSACTIONS SR. NO. PARTICULARS AY 2007 - 08 AY 2008 - 09 AY 2010 - 11 1 AVERAGE HOLDING PERIOD FOR LTCG SHARES 637 (I.E. 1.75 YEARS) 854 (I.E. 2.34 YEARS) 1450 I.E. 3.97 YEARS 2 AVERAGE HOLDING PERIOD FOR STCG SHARES 217 DAYS 167 DAYS 231 DAYS 3 TURNOVER RATIO = TURNOVER OF INVESTMENTS/[PURCHASES + CLOSING INVESTMENTS AT MARKET VALUE 53,16,16,127/ [47,83,44,951+ 261,33,91,195] =0.17% 112,85,58,886/ [97,88,23,152+ 986,93,01, 173] =0.10% 170,54,65,951/ [82,42,69,537 + 1264,06,25,100] =0.05 M/S PASSIONATE INVESTMENT & MANAGEMENT PVT LTD ITA NO. 6252 /MUM/20 1 3 3 S.NO. AY DATE REMARKS 1 2001 - 02 28.03.2006 ACCEPTED BY ASSESSING OFFICER U/S 143(3) R.W.S. 153A 2 2002 - 03 28.03.2006 ACCEPTED BY ASSESSING OFFICER U/S 143(3) R.W.S. 153A 3 2003 - 04 28.03 .2006 ACCEPTED BY ASSESSING OFFICER U/S 143(3) R.W.S. 153A 4 2004 - 05 28.03.2006 ACCEPTED BY ASSESSING OFFICER U/S 143(3) R.W.S. 153A 5 2005 - 06 29.05.2007 ACCEPTED BY ASSESSING OFFICER U/S 143(3) 6 2006 - 07 09.04.2008 ACCEPTED BY ASSESSING OFFICER U/S 143 (3) 7 2007 - 08 29.05.2013 DECIDED IN FAVOUR OF THE ASSESSEE VIDE ORDER OF HONBLE TRIBUNAL I.E. PROFIT ON SALE OF SHARES ARE TO BE TREATED AS CAPITAL GAINS 8 2008 - 09 29.05.2013 DECIDED IN FAVOUR OF THE ASSESSEE VIDE ORDER OF HONBLE TRIBUNAL I.E. PROFIT ON SALE OF SHARES ARE TO BE TREATED AS CAPITAL GAINS 9 2009 - 10 25.06.2014 DECIDED IN FAVOUR OF THE ASSESSEE VIDE ORDER OF HONBLE TRIBUNAL I.E. PROFIT ON SALE OF SHARES ARE TO BE TREATED AS CAPITAL GAINS 1) CIT V GOPAL PUROHIT [336 ITR 287(BOM)]. THE SUP REME COURT HAS DISMISSED THE SLP FILED BY THE DEPARTMENT AGAINST THE JUDGMENT [334 ITR (ST.) 308] 2) CIT V DARIUS PANDOLE [330 ITR 495 (BOM)] IV) MANNER OF ACCOUNTING THE SHARES HAVE ALWAYS BEEN SHOWN AS INVESTMENTS. THE SAME HAS BEEN TREATED AS INVESTMEN T BY THE AUDITORS IN THEIR REPORTS. V) CAPITAL LOSS SET OFF THE ASSESSEE HAS NEVER TAKEN THE ADVANTAGE OF SET - OFF OF LOSS FROM SHARES HELD ON ACCOUNT OF INVESTMENTS AGAINST THE BUSINESS PROFIT. VI) METHOD OF VALUATION THE SHARES HELD AS INVESTMENTS HAVE AL WAYS BEEN VALUED AT COST AND NOT AT COST OR MARKET PRICE WHICHEVER IS LESS. VII) RECEIPT OF DIVIDEND INCOME THE ASSESSEE HAS RECEIVED SUBSTANTIAL DIVIDEND INCOME OF RS. 10,44,55,156/ - AS COMPARED TO A.Y. 2008 - 09 WHERE THE DIVIDEND INCOME RECEIVED WAS R S. 3,38,82,975/ - . VIII) INVESTMENT OUT OF OWN FUND THE ASSESSEE HAS MADE INVESTMENT IN SHARES OUT OF OWN FUNDS. THE ASSESSEE HAS OWN FUNDS OF 206.12 CRORES AS AGAINST THAT THE INVESTMENT IS OF RS. 198.14 CRORES AS ON 31.03.2010. THE BORROWING AS ON 31.03.2 010 IS OF RS. 4.23 CRORES AND THE ENTIRE AMOUNT IS INTEREST FREE. IX) OBJECT CLAUSE THE OBJECT OF THE COMPANY IS TO TRADE AS WELL AS TO MAKE INVESTMENTS IN SHARES FOR EARNING DIVIDEND INCOME. M/S PASSIONATE INVESTMENT & MANAGEMENT PVT LTD ITA NO. 6252 /MUM/20 1 3 4 X) ABSENCE OF DERIVATIVE/SPECULATIVE/TRADING TRANSACTIONS THE ASSESSEE HAS NOT ENTERED INTO ANY DERIVATIVE/SPECULATIVE/TRADING TRANSACTIONS. XI) DELIVERY OF SHARES ALL THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE ARE DELIVERY BASED AND ARE THROUGH THE DEMAT ACCOUNT OF THE ASSESSEE . XII) MAINTENANCE OF ESTABLISHMENT DURING THE YEAR THE COMPANY HAS INCURRED A TOTAL ADMINISTRATIVE EXPENDITURE OF RS. 2,14,88,753/ - WHICH INCLUDES AUDIT FEES OF RS. 44,120, SECURITY TRANSACTION TAX OF RS. 12,30,417/ - , DONATION OF RS. 2,00,00,000/ - , PROFESSIONAL FEES OF RS. 33,206/ - AND MOTO R CAR EXPENSES (INCLUDING INSURANCE) OF RS. 48,458/ - . THE BALANCE EXPENDITURE OF RS. 1,32,552/ - CONSISTS OF OTHER MISCELLANEOUS ITEMS WHICH ARE ATTRIBUTABLE TOWARDS ASSESSEES BUSINESS ACTIVITY AND NOT TOWARDS INVESTMENT ACTIVITY. ASSESSEE HAS NOT EMPLOYED ANY STAFF. IN ANY CASE, THE FACT REMAINS THE SAME AS IN RESPECT OF OTHER YEARS. 5. AFTER CONSIDERING THE IMPUGNED ORDER, AND ALSO THE FACTS AS DISCUSSED ABOVE, WE FIND THAT THIS ISSUE OF TAXABILITY OR PROFIT/GAIN FROM THAT SALE OF I N V ESTMENT IN THE HAN DS OF THE ASSESSEE , WHETHER TO BE TAXED UNDER THE HEAD BUSINESS INCOME OR CAPITAL GAIN HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE, EXACTLY ON SIMILAR FACTS NOT ONLY IN AY 2009 - 10 BUT ALSO IN THE EARLIER YEARS I.E. AYS 2007 - 08 & 2008 - 09. THUS, CONSISTEN T WITH THE VIEW TAKEN IN THE EARLIER Y EARS AND ON PRINCIPLE OF CONSISTENCY APP L I C ABLE ON SIMILAR FACTS WHICH ARE PERMEAT ING THROUGH IN ALL THE YEARS, WE HOLD THAT THE INCOME/GAIN DERIVED BY THE ASSESSEE FROM THE SALE OF INVESTMENTS/SHAR E S IS TO BE TAXED UN DER THE HEAD CAPITAL GAIN AND NOT INCOME FROM BUSINESS . A CCORDINGLY, GROUND NO. 1, AS RAISED BY THE REVENUE IS DISMISSED. 6. REGARDING DISALLOWANCE U/S 14A AS RAISED VIDE GROUND NO. 2, IT HAS NOTICED THAT THE ASSESSEE HAD SHOWN INCOME FROM LONG - TERM - C APITAL - GAIN AT RS. 3,70,66,011/ - AND DIVIDEND INCOME OF RS. 10,44,55,156/ - . TH E ASSESSING OFFICER AFTER APPLY ING THE FORMULA LAID DOWN IN RULE 8D HAS MADE THE DISALLOWANCE OF RS. 95,55,129/ - . M/S PASSIONATE INVESTMENT & MANAGEMENT PVT LTD ITA NO. 6252 /MUM/20 1 3 5 7. BEFORE THE CIT(A), THE ASSESSEES CASE HAS BEEN THAT, NO INT EREST BEARING FUNDS HAVE BEEN UTILIZED FOR MAKING THE INVESTMENT AND THE EXPENDITURE DEBITED BY THE ASSESSEE IS FAR LESS THAN THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. THE LD. CIT(A) HELD THAT IN THE EARLIER YEARS, THE TRIBUNAL HAS DIRECTED THE ASSES SING OFFICER TO RE STRICT THE DISALLOWANCE TO THE EXTENT OF EXPENDITURE S DEBITED IN THE PROFIT AND LOSS ACCOUNT . THE RELEVANT DIRECTION OF THE TRIBUNAL ARE AS UNDER : - AFTER HEARING BOTH THE PARTIES AND CONSIDERING THE ORDER OF THE LEARNED COMMISSIONER (A PPEALS), WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) AS THE DISALLOWANCE UNDER SECTION 14A, CANNOT EXCEED THE TOTAL ADMINISTRATIVE EXPENDITURE DEBITED BY THE ASSESSEE IN THE PROFIT & LOSS ACCOUNT. EVEN UNDER THE FORMULA G IVEN IN RULE 8D, THE DISALLOWANCE CANNOT EXCEED THE OVERALL EXPENDITURE CLAIMED IN THE PROFIT & LOSS ACCOUNT. THUS, WE DO NOT FIND ANY MERIT IN THE GROUND RAISED BY THE REVENUE AND THE SAME STANDS DISMISSED. 8. THUS, ON SIMILAR LINE WE HOLD THAT DISALLOW ANCE U/S 14A CANNO T EXCEED THE TOTAL ADMINISTRATIVE EXPENDITURE DEBITED BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT IN THE PRESENT CASE . THUS, DIRECTION GIVEN BY THE CIT(A ) I S UPHELD AND THE GROUND RAISED BY THE REVENUE IS TREATED AS DISMISSED. 9. IN THE RESULT, APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH AUGUST , 2015. SD/ - SD/ - ( . . ) ( ) ( B R BASKARAN ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 28 TH AUGUST , 2015 M/S PASSIONATE INVESTMENT & MANAGEMENT PVT LTD ITA NO. 6252 /MUM/20 1 3 6 / COPY TO: - 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) THE CIT (A) - 39 , MUMBAI. 4) THE CIT CENTRAL - II , MUMBAI. 5) , , / THE D.R. C BENCH, MUMBAI. 6) \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS