ITO- (INTERNATION TAXATION), Nagpur V. SMT. URMILA SHARAN RAMPAL, Nagpur

ITA 63/NAG/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9669 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 25-02-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A R NINAWE
• Keywords: Capital asset; Business income
• Section: 143(3); 54F; 148; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI P.K. BANSAL, VICE PRESIDENT AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO.63/NAG./2015 ( ASSESSMENT YEAR : 200708 ) INCOME TAX OFFICER (I.T), NAGPUR APPELLANT V/S SMT. URMILA SHARAN RAMPAL 401, DRARKAMAI, 133, FARMLAND RAMDASPETH, NAGPUR 440 010 ALBPR6823Q .... RESPONDENT C.O. NO.21/NAG./2015 (ARISING OUT OF ITA NO.63/NAG./2015 ) ( ASSESSMENT YEAR : 200708 ) SMT. URMILA SHARAN RAMPAL 401, DRARKAMAI, 133, FARMLAND RAMDASPETH, NAGPUR 440 010 ALBPR6823Q CROSS OBJECTOR V/S INCOME TAX OFFICER (I.T), NAGPUR .... RESPONDENT ASSESSEE BY : SHRI MANOJ MORYANI A/W SHRI MAHESH TORANI REVENUE BY : SHRI A.R. NINAWE DATE OF HEARING 22.06.2017 DATE OF ORDER 27.06 .2017 O R D E R PER AMARJIT SINGH, J.M. THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST TH E IMPUGNED ORDER DATED 18 TH NOVEMBER 2014, PASSED BY THE LEARNED COMMISSIONER (APPEALS)I, NAGPUR, RELEVANT TO THE ASSESSMENT YEA R 200708. 2. THE GROUNDS RAISED BY THE REVENUE IS REPRODUCED BEL OW: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASSESS EE DERIVED LONG TERM CAPITAL GAIN ON SALE OF SHARES. 2. ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-II, NA GPUR ERRED IN ALLOWING DEDUCTION UNDER SECTION 54F OF THE ACT TO THE ASSESSEE. 2 SMT. URMILA SHARAN RAMPAL 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HER RETURN OF INCOME ON 31 ST JULY 2007, DECLARING TOTAL INCOME AT ` 69,04,360. THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1) ON 5 TH NOVEMBER 2008. THEREAFTER, NOTICE UNDER SECTION 148 OF THE A CT WAS ISSUED ON 27 TH MARCH 2012. IN RESPONSE TO THE NOTICE, THE ASSESSE E SUBMITTED THE RETURN OF INCOME. NOTICE UNDER SECTION 143(2) O F THE ACT WAS ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE H AS SHOWN HER INCOME FROM CAPITAL GAIN DURING THE YEAR. THE NOTIC E UNDER SECTION 148 WAS DISPOSED OF AFTER GETTING THE REPLY OF THE ASSE SSEE. IN THE PREVIOUS YEAR, THE ASSESSEE SOLD 29131 SHARES OF UNIQUE WAST E PLASTIC MANAGEMENT & RESEARCH PVT. LTD. FOR ` 1,94,94,000 TO SMT. USHA S. SHAH (SHAH GROUP). THE SHARES WERE PURCHASED IN THE MONTH OF FEBRUARY 2006 @ ` 10 PER SHARE TOTALING TO THE TUNE OF ` 2,91,310. THE ASSESSEE SOLD THE SHARES ON 29 TH MARCH 2009 (IN THE 13 TH MONTH), THEREFORE, THE ASSESSEE SHOWN GAIN FROM THE SALE OF SHARES AS LONG TERM CAPITAL GAIN. THE ASSESSEE CLAIMED EXEMPTION U NDER SECTION 54F OF THE ACT ON ACCOUNT OF PURCHASE OF FLAT IN SUM OF ` 1.25 CRORE. THE OTHER MEMBERS OF THE FAMILY (DAUGHTER MS. NISHI RAM PAL AND HUSBAND SHRI SHARAN RAMPAL) ALSO ENTERED INTO SIMILAR TRANS ACTION IN RESPECT OF UNIQUE WASTE PLASTIC MANAGEMENT & RESEARCH PVT. LTD. , WITH SMT. USHAL S. SHAH. AGREEMENT TO SELL THE SHARES DATED 21 ST NOVEMBER 2006 WAS TAKEN INTO CONSIDERATION AND ACCORDINGLY T HE SALE WAS 3 SMT. URMILA SHARAN RAMPAL TREATED WITHIN THE PERIOD OF NINE MONTHS. INCOME FR OM THE SALE OF SHARES WAS ASSESSED AS BUSINESS INCOME, THEREFORE, THE CLAIM OF SECTION 54F FO THE ACT WAS DECLINED AND THE INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF ` 1,92,22,192 AND ACCORDINGLY TAXED. FEELING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEF ORE THE LEARNED COMMISSIONER (APPEALS) WHO ALLOWED THE APPEAL OF TH E ASSESSEE. THEREFORE, THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO.1 AND 2 3. THESE ISSUES ARE INTERCONNECTED, THEREFORE, ARE TA KEN UP TOGETHER FOR ADJUDICATION. LEARNED DEPARTMENTAL REP RESENTATIVE HAS ARGUED THAT THE ASSESSING OFFICER HAS RIGHTLY DECID ED THE MATTER OF CONTROVERSY AND THE INCOME OF THE ASSESSEE WAS TREA TED AS BUSINESS INCOME, THEREFORE, THE ASSESSEE WAS NOT ENTITLED TO GET EXEMPTION UNDER SECTION 54F OF THE ACT BUT THE LEARNED COMMIS SIONER (APPEALS) HAS WRONGLY CONSIDERED THE INCOME OF THE ASSESSEE A S LONG TERM CAPITAL GAIN AND ALLOWED THE CLAIM OF THE ASSESSEE UNDER SECTION 54F OF THE ACT. THEREFORE, THE FINDING OF THE LEARNED COMM ISSIONER (APPEALS) IS WRONG AGAINST LAW AND FACT AND IS LIABLE TO BE S ET ASIDE. 4. THE LEARNED COUNSEL FOR ASSESSEE HAS ARGUED THAT TH E CASE OF THE ASSESSEE IS DULY COVERED BY THE DECISION OF THE CO ORDINATE BENCH OF THE TRIBUNAL, NAGPUR BENCH, IN THE CASE OF NISHI RA MPAL V/S CIT, ITA 4 SMT. URMILA SHARAN RAMPAL NO.71/NAG./2012, DATED 30 TH NOVEMBER 2012, THEREFORE, FINDING OF THE LEARNED COMMISSIONER (APPEALS) ON THIS ISSUE IS QUI TE CORRECT AND IN ACCORDANCE WITH LAW WHICH IS NOT LIABLE TO BE DISTU RBED AT THE STAGE OF APPEAL. IT IS ALSO ARGUED THAT THE SAID ORDER OF TH E TRIBUNAL WAS CHALLENGED BY THE REVENUE BUT THE HONBLE JURISDICT IONAL HIGH COURT, NAGPUR BENCH, DECIDED THE MATTER OF CONTROVERSY IN FAVOUR OF THE ASSESSEE BY VIRTUE OF ORDER DATED 25 TH AUGUST 2016, THEREFORE, FINDING OF THE LEARNED COMMISSIONER (APPEALS) IS QUITE CORR ECT. IT IS ALSO ARGUED THAT SINCE THE CASE OF THE ASSESSEE IS FULLY COVERED WITH THE ABOVE MENTIONED CASE, THEREFORE, IN THE SAID CIRCUM STANCES, THE LEARNED COMMISSIONER (APPEALS) HAS RIGHTLY DECIDED THE MATTER OF CONTROVERSY IN FAVOUR OF THE ASSESSEE AND REQUESTED TO DISMISS THE APPEAL OF THE REVENUE. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE GOING FURTHER, IT IS NE CESSARY TO ADVERT THE FINDINGS OF THE LEARNED COMMISSIONER (APPEALS) ON T HE SAID ISSUE. 9.0 I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT O RDER, THE SUBMISSIONS OF THE AR OF THE APPELLANT, THE AFORESA ID DECISION RELIED ON BY THE AR OF THE APPELLANT AND THE MATERIAL ON R ECORD. 9.1 THE APPELLANT HAS CONTENDED THAT THE AO GROSSLY ERRED IN HOLDING THE DIFFERENCE REALIZED AS A RESULT OF SALE OF PART OF THE SHARES AS AN ADVENTURE IN NATURE OF TRADE / BUSINES S INCOME INSTEAD OF LONG TERM CAPITAL GAINS WITHOUT APPRECIA TING THE VITAL FACTS THAT THE APPELLANT HAD ALL ALONG HELD HER INT EREST IN UNIQUE AS AN INVESTMENT ONLY AND THE INVESTMENT THUS QUALI FIED AS A CAPITAL ASSET. THE APPELLANT IS A DOCTOR BY PROFESS ION RESIDING IN US FOR THE LAST MANY YEARS. MOREOVER, THE APPELLANT'S FAMILY HAD 5 SMT. URMILA SHARAN RAMPAL ADVANCED AN AMOUNT OF RS.10,50,000/- IN THE YEAR 20 03 TO M/S. UNIQUE WASTE PLASTIC MANAGEMENT & RESEARCH PVT. LTD . HEREINAFTER REFERRED TO AS UNIQUE) A PRIVATE LIMITED COMPANY PR OMOTED BY ZADGAONKAR FAMILY. THE LADY OF THE FAMILY SMT. ALKA ZADGAONKAR IS A PROFESSOR OF CHEMISTRY AND AFTER MUCH SCIENTIFIC RESEARCH HAD WORKED OUT A FORMULA FOR CONVERSION OF WASTE PLASTI C INTO HYDROCARBONS LIKE PETROL, DIESEL ETC. THE AMOUNT AD VANCED BY THE APPELLANT WAS AN INVESTMENT AND ALSO WAS WITH THE I NTENTION OF SUPPORTING ZADGAONKAR'S IN A NOBLE PROJECT WHICH CO NSERVES AND PROTECTS THE ENVIRONMENT. THERE IS SUBSTANTIAL FORC E IN THE SUBMISSIONS OF THE AR OF THE APPELLANT. 9.2 THE APPELLANT, AGAINST THE ADVANCE SO GIVEN ACQ UIRED THE SHARES OF M/S UNIQUE IN THE MONTH OF FEBRUARY 2006 AND THE SHARES WERE ALLOTTED AS A CONSEQUENTIAL EQUITY IN T HE PROJECT. THUS THE APPELLANT HELD SHARES PURELY AS INVESTMENT. SUR ESH SHAH GROUP OF MUMBAI, LOOKING AT THE BRIGHT PROSPECTS OF M/S. UNIQUE, DECIDED TO ACQUIRE CONTROLLING INTEREST IN M/S UNIQUE WITH A PURPOSE OF REFINING THE RESEARCH AND DEVELOPING ITS MARKETABIL ITY. THE PROPOSAL WAS ACCEPTED BY THE MANAGEMENT AND SHAREHOLDERS OF M/S UNIQUE AND ACCORDINGLY AN AGREEMENT WAS ENTERED INTO ON 21 .11.2006 (COPY AT PAGE 67-91 OF THE PAPER BOOK) SETTING THE TERMS AND CONDITIONS OF THE TRANSFER OF PART OF THE SHARES OF ALL SHAREHOLDERS. 9.3 THE APPELLANT THUS, ALL ALONG HELD THE INITIAL INVESTMENT AND RESULTANT SHARES AS INVESTMENT AND NOW ALSO RETAINS BALANCE SHARES AND ACCRETIONS THEREON BY WAY OF DILUTION OF EQUITY AS AN INVESTMENT ONLY. THE AR HAS PLACED RELIANCE ON THE FOLLOWING JUDGEMENTS: RELIANCE PLACED ON : > CIT VS. GOPAL PUROHIT 228 CTR 582 (BOMBAY HC) > CIT V CONSOLIDATED FINVEST AND HOLDING LTD. (2011 ) 337 ITR 264 (DELHI) 10.0 KEEPING IN VIEW OF THE SUBMISSIONS OF THE AR O F THE APPELLANT AND THE DECISION OF THE HON'BLE HIGH COURT OF MUMBA I CITED SUPRA, THE TRANSACTIONS IN SHARES ARE TREATED AS INVESTMEN T IN SHARES. 10.1 THE HON'BLE ITAT, NAGPUR BENCH, IN THE CASE OF MS. NISHI RAMPAL, DAUGHTER OF THE APPELLANT AS CITED SUPRA HA S QUASHED THE ORDER PASSED U/S 263 BY THE CIT-I, NAGPUR. THE CIT- I, NAGPUR SET ASIDE THE ORDER PASSED U/S 143(3) BY THE AO BY INVO KING THE PROVISIONS OF SECTION 263 OF THE ACT. THE ISSUE INV OLVED IN THAT CASE WAS IDENTICAL AND PERTAINS TO THE TRANSACTIONS OF S HARES OF THE SAME COMPANY. THE SECTION 263 DOES NOT EMPOWER THE CIT T O THRUST UPON HIS VIEW ON THE ASSESSING OFFICER. BASED ON SU CH FINDING, THE 6 SMT. URMILA SHARAN RAMPAL HON'BLE ITAT SET ASIDE THE ORDER PASSED U/S 263 BY THE CITI, NAGPUR. 10.2 THE CONTENTIONS OF THE AR OF THE APPELLANT THA T, THE HON'BLE ITAT, NAGPUR BENCH IN THE CASE OF MS.NISHI RAMPAL, HAS HELD THE TRANSACTIONS IN SHARES AS LTCG IS FOUND TO BE CORRE CT. THE HON'BLE ITAT IN THAT CASE HAS DELIVERED ITS JUDGEMENT ON ME RITS ON THE ISSUE OF REVISIONARY POWER OF THE CIT U/S 263 OF TH E ACT AND TRANSACTIONS IN SHARES AFTER EXAMINATION OF THE MAT ERIAL FACTS, THE ITAT HAS GIVEN A VERDICT THAT THE REVISIONARY POWER S EXERCISED BY THE CIT U/S 263 ARE BEYOND JURISDICTION FOR THE REA SON THAT THE AO HAS TAKEN ONE OF THE POSSIBLE VIEWS, HOLDING THE TR ANSACTION IN SHARES AS INVESTMENT. 10.3 IT IS, THUS SEEN FROM THE ABOVE THAT THE ISSUE WHETHER THE TRANSACTION OF - SALE OF SHARES AMOUNTS THE LTCG OR STCG WAS THERE BEFORE THE HON'BLE ITAT, NAGPUR BENCH FOR ADJ UDICATION. THE EXTRACTS OF DECISION OF THE HON'BLE ITAT ON IDENTIC AL ISSUE OF TRANSACTION OF SHARES, IN THE CASE OF MS. NISHI RAM PAL, ARE REPRODUCED BELOW FOR BETTER APPRECIATION OF FACTS: THE SHARES WERE HANDED OVER BY THE ESCROW AGENT TO THE PURCHASER ON 30.03.2007 AND THE FULL CONSIDERATION HAS ALSO BEEN RECEIVED BY THE ASSESSEE BY THAT DATE. IN OUR OPINI ON, ESCROW AGENT SHAH & SINGHVI ASSOCIATES, ADVOCATES, SOLICIT OR AND NOTARY WAS REPRESENTING AS AN AGENT OF THE ASSESSEE AND TH E SALE OF THE SHARE HAS ACTUALLY TAKEN PLACE ON 30.03.2007 WHEN T HE SHARES WERE HANDED OVER BY THE ESCROW AGENT TO THE SELLER' S ACCOUNT AGAINST THE RECEIPT OF THE TOTAL CONSIDERATION. ACC ORDINGLY, RECEIVING OF AN ADVANCE, IN OUR OPINION, WILL NOT TANTAMOUNT TO SALE OF SHARES. THUS, THE SHARES WERE HELD BY THE ASSESSEE FOR MORE THAN 12 MONTHS AND CIT, IN OUR OPINION, WAS NOT CORRECT IN LAW IN HOLDING THAT THE PROFIT ON SALE OF SHARES COULD HAV E BEEN ASSESSED AS SHORT TERM CAPITAL GAIN UNDER PARA 19.2. TO THAT EXTENT WE DO NOT FIND ANY ERROR IN THE ORDER OF THE ASSESSING OF FICER. EVEN WE MAY MENTION THAT WHERE THERE ARE TWO VIEWS POSSIBLE AS TO THE INTERPRETATION OF ANY TRANSACTION AND THE ASSESSING OFFICER HAS TAKEN ONE OF THE VIEW FAVOURABLE TO THE ASSESSEE, T HE ORDER CANNOT BE SAID TO BE ERRONEOUS UNLESS THE VIEW TAKEN BY TH E ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. SAME VIEW HAS BEEN TAKEN BY THE HON'BLE SUPREME COURT IN CASE OF MALABAR INDUSTRIAL CO. LTD. VS. COMMISSIONER OF INCOME TAX 243 ITR 8. WE NOTED ON T HE BASIS OF THE EVIDENCE AND THE FACTS ON RECORD AND THE ENCLOS URES TO THE ORDER OF CIT PASSED U/S 263, THE SHARES WERE HELD B Y THE ASSESSEE FOR 13 MONTHS AND SALES HAS TAKEN PLACE THEREAFTER. ' 10.4 THE DECISION OF THE HON'BLE ITAT, NAGPUR IN TH E CASE OF MS.NISHI RAMPAL, THE DAUGHTER OF THE APPELLANT RELA TING TO THE TRANSACTION OF SALE OF SHARES IS SQUARELY APPLICABL E TO THE PRESENT 7 SMT. URMILA SHARAN RAMPAL CASE OF THE APPELLANT. THEREFORE, RESPECTFULLY FOLL OWING THE DECISION OF HON'BLE ITAT, NAGPUR, THE INVESTMENT IN SHARES I S HELD TO BE LONG TERM INVESTMENT, AND ACCORDINGLY THE APPELLATE IS ELIGIBLE TO CLAIM DEDUCTION U/S 54F AS THE APPELLANT HAS INVEST ED RS.1.25 CRORES IN PURCHASE OF A RESIDENTIAL HOUSE OUT OF TO TAL SALE CONSIDERATION. HENCE, ' THE AO IS DIRECTED TO TREAT THE SALE OF SHARES AS LTCG AND ALLOW THE DEDUCTION U/S 54F OF THE ACT. HENCE, THIS GROUND IS ALLOWED. 6. IN VIEW OF THE SAID FINDING, IT IS QUITE CLEAR THAT THE CASE OF THE ASSESSEE IS SIMILAR TO THE CASE OF NISHI RAMPAL (SU PRA), DAUGHTER OF THE APPELLANT. IN THE CASE OF NISHI RAMPAL (SUPRA), THE ORDER PASSED UNDER SECTION 263 OF THE ACT BY THE CITI, NAGPUR, WAS QUASHED BY THE TRIBUNAL BY VIRTUE OF ORDER DATED 30 TH NOVEMBER 2012, IN ITA NO.71/NAG./2012. IN THE CASE OF NISH RAMPAL (SUPRA) , IT WAS HELD THAT THE ASSESSING OFFICER HAS TAKEN ONE POSSIBLE VIEW, THEREFORE, THE CASE OF NISHI RAMPAL (SUPRA) WAS NOT REQUIRED TO BE TAKE N UP IN VIEW OF THE PROVISIONS OF SECTION 263 OF THE ACT BY TAKING ANOT HER POSSIBLE VIEW BY THE CIT. THE MATTER OF CONTROVERSY IS IN CONNECTION WITH TREATING THE LONG TERM CAPITAL GAIN / SHORT TERM CAPITAL GAIN OR INCOME FROM BUSINESS WAS DULY DECIDED IN THE CASE OF NISHI RAMP AL (SUPRA), IN WHICH THE INCOME FROM THE SALE OF SHARE WAS TREATED AS LONG TERM CAPITAL GAIN. THE FINDING OF THE TRIBUNAL IN THE CA SE OF NISH RAMPAL (SUPRA) WAS DULY UPHELD BY THE HONBLE JURISDICTION AL HIGH COURT IN CASE OF ITA NO.33/2013 DATED 25 TH AUGUST 2016. ON THE BASIS OF THE FINDING OF THE TRIBUNAL AND THE FINDING CONFIRMED B Y THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF NISHI RAMP AL (SUPRA), THE PRESENT APPEAL OF THE ASSESSEE WAS ALLOWED BY THE L EARNED 8 SMT. URMILA SHARAN RAMPAL COMMISSIONER (APPEALS). NO DISTINGUISHABLE MATERIAL HAS BEEN PLACED BEFORE US TO DEVIATE THE FINDING OF THE LEARNED COM MISSIONER (APPEALS) IN QUESTION. IN VIEW OF THE AFORESAID, WE ARE OF TH E VIEW THAT THE LEARNED COMMISSIONER (APPEALS) HAS DECIDED THE MATT ER OF CONTROVERSY JUDICIOUSLY AND CORRECTLY WHICH IS NOT REQUIRED TO BE INTERFERED WITH AT THIS APPELLATE STAGE. WE CONFIRM THE FINDINGS OF TH E LEARNED COMMISSIONER (APPEALS) ON THE ABOVE SAID ISSUE. ACC ORDINGLY, THESE ISSUES ARE DECIDED IN FAVOUR OF THE ASSESSEE AND AG AINST THE REVENUE. 7. IN THE RESULT, REVENUES APPEAL IS DISMISSED. C.O. NO.91/NAG./2015 8. BEFORE US, THE LEARNED COUNSEL FOR ASSESSEE SUBMITTE D THAT HE DID NOT WISH TO PRESS THIS CROSS OBJECTION TO WHICH THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS NOT RAISED ANY OBJE CTION. CONSEQUENTLY, THIS CROSS OBJECTION FILED BY THE ASS ESSEE IS DISMISSED AS NOT PRESSED . 9. IN THE RESULT, ASSESSEES CROSS OBJECTION IS DISMIS SED. 10. TO SUM UP, REVENUES APPEAL AND ASSESSEES CROSS OB JECTION ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.06.2017 SD/ - P.K. BANSAL VICE PRESIDENT SD/ - AMARJIT SINGH JUDICIAL MEMBER NAGPUR, DATED: 27.06.2017 9 SMT. URMILA SHARAN RAMPAL COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, NAGPUR CITY CONCERNED; (5) THE DR, ITAT, NAGPUR; (6) GUARD FILE. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (DY./ASSTT. REGISTRAR) ITAT, NAGPUR