The Assistant Commissioner of Income Tax, Srinagar V. M/s Travel Inn (India ) Pvt. Ltd, Srinagar

ITA 630/ASR/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7765 (ITAT-AMRITSAR)
• Duration Of Justice: 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 31-07-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 13-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S KANWAL LD
• Assessee Lawyers: SATISH BANSAL LD
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH.T.S. KAPOOR, ACCOUNTANT MEMBER AND SH.N.K.CHOUDHRY, JUDICIAL MEMBER I.T.A NO.632 & 630(ASR)/2016 ASSESSMENT YEARS:2011-12 & 2012-13 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-3, SRINAGAR. VS. M/S TRAVEL INN (INDIA) PVT. LTD., KALRA COTTAGE, MIR LANE SHIVPORA, SRINAGAR, KASHMIR. PAN:AAACT-6570B (APPELLANT) (RESPONDENT) APPELLANT BY: SH. S.S.KANWAL (LD. DR.) RESPONDENT BY: SH. SATISH BANSAL (LD. CA. ) DATE OF HEARING:05.10.2017 DATE OF PRONOUNCEMENT:24.10.2017 ORDER PER N. K. CHOUDHRY: BOTH THE APPEALS HAVE BEEN PREFERRED BY THE REVENUE DEPARTMENT, ON FEELING AGGRIEVED AGAINST THE ORDER D ATED 19.07.2016 PASSED BY THE LD. CIT(A), FOR ASST YEARS: 2011-12 & 2012 -13. 2. THESE APPEALS WERE HEARD TOGETHER AND COMMON AND IDEN TICAL ISSUE IS INVOLVED IN THESE APPEALS, THEREFORE, THE SAME A RE BEING DISPOSED OFF THROUGH A COMMON AND CONSOLIDATED ORDER. 3. FACTS OF ITA NO.632(ASR)/2016 HAVE BEEN TAKEN INTO CONSIDERATION FOR DISPOSAL OF APPEALS, BRIEF FACTS OF WHICH ARE AS UNDE R: THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF TH E TRAVEL SERVICES SINCE 1989. THE ASSESSEE COMPANY FILED ITS RET URN OF INCOME FOR THE ASST. YEAR UNDER CONSIDERATION DECLARI NG TOTAL INCOME OF RS.1,22,21,950/- UNDER THE HEAD BUSINESS INCOME , CAPITAL GAINS AND FROM OTHER SOURCE OF INCOME. THE A.O HAS ITA NO.63 2 & 630(ASR)/2016 ASST. YEAR: 2011-12 & 2012-13 2 ASSESSED THE TOTAL INCOME AT RS.1,99,71,006/- BY TREATING THE INCOME FROM CAPITAL GAINS AS BUSINESS INCOME. BESIDES, THE AO MADE DISALLOWANCE ON ACCOUNT OF TELEPHONE EXPENSES, VEHICLE RUNNING EXPENSES AND BUSINESS PROMOTION EXPENSES A ND ALSO U/S 40(A)(IA) OF THE ACT. THE MAIN ISSUE INVOLVED I N THESE CASES IS WHETHER THE INCOME SHOWN BY THE ASSESSEE AS CAPITAL GAINS IS IN THE NATURE OF INVESTMENT OR A BUSINESS INCOME. THE AO HAS HELD IN EARLIER ASST. YEARS: I.E., A.Y 2009-10, 2010-11, 2011-12 & 2012-1 3, THIS INCOME AS BUSINESS INCOME WHICH WAS DULY CONFIRMED BY THE LD. CIT(A). HOWEVER, THE HON'BLE I TAT AMRITSAR BENCH, VIDE ITA NO.174/ASR/12-13 DATED 17/12/2016 FOR THE ASST. YEAR: 2009-10 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY TREATING THE SAI D INCOME AS BUSINESS INCOME. DURING THE ASST. YEAR UNDER CONSIDERATION, THE AO HAS AGAIN TREATED THE INCOME FROM CAPITAL GAINS AS BUSINESS INCOME. 4. ON FEELING AGGRIEVED AGAINST THE ORDER PASSED BY THE ASSESSING OFFICER, THE ASSESSEE PREFERRED THE FIRST APPEAL BEFORE T HE LD. CIT(A). THE LD. CIT(A) RELYING UPON THE ORDER PASSED BY THE H ONBLE ITAT, AMRITSAR BENCH IN ITA NO.174/ASR/12-13 DATED 17/12/20 16, FOR ASST. YEAR: 2009-10 DECIDED THAT THE INCOME SHOWN BY THE ASSESSEE AS CAPITAL GAINS IS IN THE NATURE OF THE INVESTMENT OR I S A BUSINESS INCOME. THE LD. CIT(A) ALSO GIVEN OTHER RELIEFS WHILE ADJUDICATING THE APPEALS OF THE ASSESSEE. [ 5. ON FEELING AGGRIEVED AGAINST THE ORDER PASSED BY THE LD. CIT(A), THE REVENUE DEPARTMENT PREFERRED THE INSTANT APPEALS AND RAISED THE COMMON GROUNDS IN BOTH APPEALS EXCEPT THE DIFFERENCES IN AMOUNTS WHICH ARE REPRODUCED AS UNDER: ITA NO.63 2 & 630(ASR)/2016 ASST. YEAR: 2011-12 & 2012-13 3 WHETHER THE LD. CIT(A) WAS RIGHT IN LAW AND FACT IN DELETING THE ADDITION OF RS.75,24,418/- ON ACCOUNT OF SHARE TRAD ING BY TREATING IT AS CAPITAL GAIN INSTEAD OF BUSINESS INCOME. WHETHER THE LD. CIT(A) WAS RIGHT IN LAW AND FACT IN REVERSING THE ORDER OF LD. CIT(A), JAMMU FOR THE A.Y.2009-10 IN W HICH HE HAS UPHELD THE ORDER OF ASSESSING OFFICER BY TREATING T HE INCOME AS BUSINESS INCOME. 6. WE HAVE GONE THROUGH WITH THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FEEL IT APPROPRIATE TO REPRODUCE THE CONCLUDING PART OF THE ORDER PASSED BY THE HONBLE ITAT, AMRITSAR BENCH, IN ITA NO.174(ASR)/2013 RELEVANT TO ASST. YEAR:2009-10 DECIDED ON 17.02.2016 BY THE CO-ORDINATION BENCH OF ITAT AT AM RITSAR. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ON. THE BRIEF FACTS OF THE CASE IS THAT THE ASSESSEE HAS EARNED C APITAL GAIN ON LONG TERM INVESTMENT ON DEBT FUNDS AMOUNTING TO RS. 10354230, LONG TERM LOAN AND EQUITY SHARES OF RS.210552/-, SHORT T ERM CAPITAL GAIN ON DEBT FUNDS OF RS.496320/- AND SHORT TERM CAPITAL GAIN ON EQUITY FUNDS INVESTMENT OF RS.232912/-. THEREFORE, TOTAL L ONG TERM CAPITAL GAIN EARNED BY THE ASSESSEE IS RS.10143668/-. THE S HORT TERM CAPITAL GAIN OF RS.729232/-. WE ARE OF THE VIEW THA T INCOME OF ASSESSEE IS CHARGEABLE TO TAX UNDER THE HEAD CAPITA L GAINS AND NOT AS BUSINESS INCOME FOR FOLLOWING REASONS:- (I) THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRAVEL SERVICES AND ACCORDING TO THE MEMORANDUM OF OBJECTS ; IT IS NOT A TRADER IN SHARES AND SECURITIES. (II) THE AMOUNT OF INVESTMENT SHOWS IN SCHEDULE 4 OF TH E BALANCE SHEET SHOWS THAT AS ON 31.03.2009 IS RS.21. 31 CRORE. THIS IS BEING CONSISTENTLY DISCLOSED IN THE BALANCE SHEET OF THE COMPANY AS INVESTMENT AND NOT AS STOCK IN TRADE. (III) AS ON 31.03.2008 IT IS RS.21.95 CRORES. THE LONG-TE RM CAPITAL- GAIN EARNED BY THE ASSESSEE ON RS.10354229 /- IS IN 9 MUTUAL FUNDS AND IN EQUITY FUNDS. THE ASSESSEE HA S TRADED IN THREE FUNDS. THE NUMBER OF TRANSACTIONS ARE ALSO NEITHER FREQUENT AND NOR NUMEROUS. (IV) ON PERUSAL OF THE BALANCE SHEET IT IS APPARENT THAT THE ASSESSEE HAS OWNED FUNDS IN THE FORM OF SHARE CAPIT AL AND RESERVE SURPLUS BUT IN BORROWINGS. THEREFORE, THE A SSESSEE HAS NOT BORROWED ANY AMOUNT FOR THE PURPOSE OF INVE STMENT IN MUTUAL FUNDS. (V) AS SUBSTANTIAL PART OF THE CAPITAL GAIN HAS BEEN EA RNED ON ACCOUNT OF LONG TERM CAPITAL GAIN WE FAILED TO U NDERSTAND ITA NO.63 2 & 630(ASR)/2016 ASST. YEAR: 2011-12 & 2012-13 4 THAT WHEN THE ASSESSEE HAS PUT HIS MONEY FOR MORE T HAN 365 DAYS IN SECURITIES ON WHAT BASIS THE REVENUE CAN CO NTEND THAT IT IS NOT CHARGEABLE TO TAX UNDER HEAD CAPITAL GAIN . THE HOLDING PERIOD IS MORE THAN ONE YEAR, WHICH ALSO PR OVES THAT THE INCOME IS NOT CHARGEABLE TO TAX AS BUSINESS INC OME. (VI) FURTHERMORE, HON'BLE DELHI HIGH COURT HAS A OCCASI ON TO CONSIDER THAT THE INVESTMENT IN MUTUAL FUNDS CAN BE SAID TO BE RESULTING INTO BUSINESS INCOME. HON'BLE DELHI HI GH COURT IN THE CASE OF YAMA FINANCE LTD. VS. ACIT IN 1658/2010 HAS HELD THAT WHEN THE MUTUAL FUNDS ARE KEPT IN A SEPAR ATE INVESTMENT ACCOUNT FOR MORE THAN 2 YEARS, GAIN GENE RATED THEREON IS LONG TERM CAPITAL GAIN. (VII) FURTHERMORE WHEN THE REVENUE ITSELF HAS ACCEPTED A NY BASIS IN ASSESSMENT YEAR 2008-09 THE STAND OF THE A SSESSEE THAT CAPITAL GAIN GENERATED SALE ON MUTUAL FUND ETC IS CHARGEABLE TO TAX UNDER HEAD OF CAPITAL GAIN AND NO T BUSINESS INCOME. HENCE, WE ARE NOT INCLINED TO UPHOLD THE ORDER OF A O AS WELL AS THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). IN VI EW OF ABOVE FACTS WE REVERSE THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND HOLD THAT AMOUNT OF SURPLUS GENERATED OF RS.1087290 9/- ON MUTUAL FUNDS AND SECURITIES IS CHARGEABLE TO TAX UNDER THE HEAD CAPITAL GAIN ACCORDING TO PROVISIONS OF INCOME TAX ACT. THEREFORE, THESE C UMULATIVE GROUNDS OF APPEAL NO.1 TO 7 OF THE ASSESSEE ARE ALLOWED. CONSIDERING THE AFORESAID ORDER PASSED BY THE CO-ORDIN ATION BENCH OF AMRITSAR, WE DO NOT FIND ANY PLAUSIBLE REASON TO INTERFERE WITH THE ORDER PASSED BY THE LD. CIT(A) AS THE SAME IS BASED UPON THE DECISION RENDERED BY ITAT BENCH, AMRITSAR ON SIMILAR AN D IDENTICAL ISSUES. HENCE, THE SAME IS CONFIRMED. 7. IN THE RESULT, THE APPEALS FILED BY THE REVENUE DEPA RTMENT STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.10.2017. SD/- SD/- (T. S. KAPOOR) (N.K.CHOUD HRY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:24.10.2017. /PK/ PS. ITA NO.63 2 & 630(ASR)/2016 ASST. YEAR: 2011-12 & 2012-13 5 COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A) (4) THE CIT, ASR. (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER