MR. CHETAN KANTILAL MEHTA, MUMBAI V. ACIT 25(3), MUMBAI

ITA 637/MUM/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3746 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 26-03-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 21-01-2011
• Court: TRIBUNAL
• Assessee Lawyers: P P SAGAR
• Keywords: Business income; Depreciation; Business expenditure; Salary income; Rule of consistency; Transactions in derivatives; Earning of tax free income; Question of law; Wrong claim; Revised return
• Section: 143(3); 14A; 32

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO.637/MUM/2011 ASSESSMENT YEAR: 2007-08 MR. CHETAN K. MEHTA, 2-3, KOTHARI HOUSE, 1 ST FLOOR, OAK LANE, FORT, MUMBAI-400001 / VS. ACIT-25(3), C-11, R. NO.308, PRATYAKSH KAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI-400051 ( ! /ASSESSEE) ( ' / REVENUE) PAN. NO . AAIPM2802J ITA NO.915/MUM/2011 ASSESSMENT YEAR: 2007-08 ACIT-25(3), C-11, R. NO.308, PRATYAKSH KAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI-400051 / VS. MR. CHETAN K. MEHTA, 2-3, KOTHARI HOUSE, 1 ST FLOOR, OAK LANE, FORT, MUMBAI-400001 ( ' / REVENUE ) ( ! /ASSESSEE) PAN. NO. AAIPM2802J ITA NO.637 & 915/MUM/2011, ITA NO.5310/MUM/2010 & C.O. NO.227/MUM/2014 SHRI CHETAN K. MEHTA 2 ITA NO.5310/MUM/2013 ASSESSMENT YEAR: 2010-11 ACIT-25(3), C-11, R. NO.308, PRATYAKSH KAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI-400051 / VS. MR. CHETAN K. MEHTA, 2-3, KOTHARI HOUSE, 1 ST FLOOR, OAK LANE, FORT, MUMBAI-400001 ( ' / REVENUE ) ( ! /ASSESSEE) PAN. NO. AAIPM2802J CROSS OBJECTION NO.227/MUM/2014 (ARISING OUT OF ITA NO.5310/MUM/2013) ASSESSMENT YEAR: 2007-08 MR. CHETAN K. MEHTA, 2-3, KOTHARI HOUSE, 1 ST FLOOR, OAK LANE, FORT, MUMBAI-400001 / VS. ACIT-25(3), C-11, R. NO.308, PRATYAKSH KAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI-400051 ( ! /ASSESSEE) ( ' / REVENUE) PAN. NO.AAIPM2802J ! / ASSESSEE BY SHRI P.P. SAGAR ' / REVENUE BY SHRI LOVE KUMAR-DR $ '% & ! ' / DATE OF HEARING : 11/05/2016 & ! ' / DATE OF ORDER: 16/05/2016 ITA NO.637 & 915/MUM/2011, ITA NO.5310/MUM/2010 & C.O. NO.227/MUM/2014 SHRI CHETAN K. MEHTA 3 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE AS WELL AS THE REVENUE IS IN CROSS APP EAL FOR ASSESSMENT YEAR 2007-08, WHEREAS, THE REVENUE IN AP PEAL FOR ASSESSMENT YEAR 2010-11 AND THE ASSESSEE HAS FILED CROSS OBJECTION. 2. FIRST, WE SHALL TAKE UP THE APPEAL OF THE REVE NUE (ITA NO.915/MUM/2011) FOR ASSESSMENT YEAR 2007-08, WHEREIN, FIRST GROUND PERTAINS TO DIRECTION TO THE ASSESSING OFFICER TO ACCEPT THE CLAIM OF SHORT TERM CAPITAL G AIN AND LONG TERM CAPITAL GAIN FROM PURCHASE OF SALE OF SHARES A GAINST BUSINESS INCOME TREATED BY THE ASSESSING OFFICER. 2.1. SHRI LOVE KUMAR, LD. DR, STRONGLY DEFENDED TH E CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER BY ARGU ING THAT THE TOTAL SCRIPS ARE 38 AND SINCE THE ASSESSEE IS A WHOLE TIME DIRECTOR, THEREFORE, ENGAGED IN THE BUSINESS ACTIVI TIES IN A SYSTEMATIC WAY AND THE MAIN ACTIVITY OF THE ASSESSE E IS TRADING IN SHARES. IT WAS ALSO CONTENDED THAT THE ASSESSEE USED BORROWED FUNDS IN THE TRADE AND TOTAL SHARE TRADED BY THE ITA NO.637 & 915/MUM/2011, ITA NO.5310/MUM/2010 & C.O. NO.227/MUM/2014 SHRI CHETAN K. MEHTA 4 ASSESSEE WERE 12,27,496/- AND THERE ARE REPETITIVE TRANSACTION ALSO, THUS, IT WAS A CLEARLY BUSINESS INCOME. 2.2. ON THE OTHER HAND, THE LD. COUNSEL FOR THE AS SESSEE, SHRI P. P. SAGAR, CLAIMED THAT THE IMPUGNED ISSUE H AS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE FOR ASSESSME NT YEAR 2006-07 AND 2008-09, WHEREIN, FACTS ARE IDENTICAL. OUR ATTENTION WAS INVITED TO THE ORDER OF THE TRIBUNAL BY EXPLAINING THAT ASSESSEE HAD BEEN REGULARLY SAYING THE SAME AS INVESTMENT AND BORROWED FUNDS WERE ALSO INVESTED IN EARLIER ASSESSMENT YEARS, THEREFORE, THE FACTS ARE IDENTICA L. 2.3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION F ROM THE ORDER OF THE TRIBUNAL DATED 25/06/2014 FOR ASSESSME NT YEAR 2008-09 (ITA NO.6529/MUM/2011), WHEREIN, THE ORDER FOR ASSESSMENT YEAR 2006-07 PASSED IN ITA NO.5662/MUM/2 009 ORDER DATED 23/03/2011 HAS BEEN DISCUSSED FOR READY REFERENCE AND ANALYSIS:- ITA NO.637 & 915/MUM/2011, ITA NO.5310/MUM/2010 & C.O. NO.227/MUM/2014 SHRI CHETAN K. MEHTA 5 THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE, CHALLENGING THE IMPUGNED ORDER DATED 11 TH JULY 2011, PASSED BY THE LEARNED COMMISSIONER (APPEALS)XXXV, MUMBAI, FO R THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143(3) O F THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) FOR THE ASSESSMENT YEAR 2008 09. THE GROUNDS RAISED BY THE REVENUE, READ AS UNDER: 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE A.O. TO ACCEPT THE CLAIM OF SHORT TERM CAPITAL GAIN OF RS,2,47,89,694/- AND LONG TERM CAPITAL GAIN OF RS.5,04, 16,024/- ON PROFIT ARRIVING FROM PURCHASE & SALE OF SHARES INSTEAD OF BUSINESS INCOME TREATED B Y THE A.O. WITHOUT APPRECIATING THE FACT THAT THE ASS ESSEE IS DEALING IN LARGE VOLUME OF SHARES, MOST OF THE SHAR ES ARE BOUGHT AND SOLD WITHIN SHORT PERIOD, WHILE SOME ARE NOT SOLD DUE TO MARKET CONDITIONS AND THEIR HOLDING WITH THE ASSESSEE REMAINS BEYOND FEW DAYS, AND IT WILL NOT CHANGE THE NATURE OF TRANSACTIONS AND THE ASSESSEE IS VERY WELL ENGAGED IN THE BUSINESS OF SHARE TRADING, WHICH DENOTE THAT THE MO TIVE OF THE ASSESSEE IS TO CARRY ON BUSINESS IN SHARES TO BOOK PROFIT RATHER THAN INVESTMENT IN SHARES. THE CASE IS COVERED BY T HE DECISION OF ITAT MUMBAI IN THE CASE OF SMT. SADHANA NABERA VIS ACIT (ITA NO 2586/MUM/2009), JAYSHREE P. SHAH VIS ACIT (ITA NO. 3608/MUM/07) AND THE CASE OF ACIT VIS V. NAGESH (ITA NO 5410/MUM/2008)'. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, AND IN LAW, THE ID. CIT(A) ERRED IN DIRECTING THE ASSESSIN G OFFICER TO ALLOW DEDUCTION OF RS. 1,50,000/- UNDER THE HEAD HOUSE PROPERTY EVEN THOUGH ASSESSEE HAS NEITHER RAISED THIS GROUND DURING THE ASSESSMENT PROCEEDINGS NOT FILED A REVISED RETURN.' 2. THE LEARNED COUNSEL FOR THE ASSESSEE, AT THE OUTSET , SUBMITTED THAT INSOFAR AS THE GROUND NO.1, IS CONCE RNED, THE SAME IS SQUARELY COVERED BY THE DECISION OF THE TRI BUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006 07, PASSED IN ITA NO.5662/MUM./2009. 3. FACTS IN BRIEF : THE ASSESSEE IS AN INDIVIDUAL HAVING INCOME FROM SALARY IN THE CAPACITY OF A DIRECTOR IN C.M. S ECURITIES PVT. LTD., BUSINESS INCOME FROM CONSULTANCY FEES AND ALS O TRADING IN ITA NO.637 & 915/MUM/2011, ITA NO.5310/MUM/2010 & C.O. NO.227/MUM/2014 SHRI CHETAN K. MEHTA 6 FUTURE AND OPTIONS. BESIDES THIS, THE ASSESSEE HAS ALSO SHOWN INCOME FROM THE HEAD CAPITAL GAINS AND INTEREST INCOME . BREAK UP OF VARIOUS HEADS OF INCOME SHOWN BY THE ASSESSEE WERE AS UNDER: SALARY BUSINESS INCOME 5,97,500 CONSULTANCY FEE 20,00,000 PROFIT FROM F&O TRANSACTIONS 2,84,80,530 PROFIT FROM INTRADAY TRANSACTIONS 11,29,056 INTEREST ON FDS 1,04,537 3,17,14,123 EXPENSES CLAIMED 89,30,640 2,27,83,483 SHORT TERM CAPITAL GAIN (STT PAID) 2,47,89,694 INCOME FROM OTHER SOURCES 13,28,275 THE APPELLANT ALSO ADMITTED LONG TERM CAPITAL GAIN OF 5,04,16,024 WHICH WAS CLAIMED AS EXEMPT. 4. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE IS MAINLY ENGAGED IN DAY TO DAY ACTIVITIES IN THE COMPANY IN WHICH HE WAS WHOLE TIME DIRECTOR I.E., IN C.M. SECURITIES PVT. L TD. THE ASSESSEES ENTIRE INCOME IS DERIVED FROM ACTIVITIES CONNECTED WITH SALE AND PURCHASE AND ALL SHARES AND SECURITIES. THE ASSESSI NG OFFICER NOTED THE TRANSACTIONS OF THE SHARES SHOWN UNDER THE HEAD SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN IN THE FOLLOWING MANNER: NO. OF SCRIPS 75 NO. OF TRANSACTIONS 120 PURCHASE AMOUNT 34,64,73,161 SALE AMOUNT 37,71,88,117 PROFIT / GAIN 7,56,29,607 EXPENSES CLAIMED 89,30,640 NET PROFIT / GAIN 2,47,89,694 ITA NO.637 & 915/MUM/2011, ITA NO.5310/MUM/2010 & C.O. NO.227/MUM/2014 SHRI CHETAN K. MEHTA 7 5. AFTER ANALYSING THE ABOVE TRANSACTIONS, HE CAME TO THE CONCLUSION THAT PROFIT ON SALE OF SUCH SHARES IS TO BE ASSESSED UNDER THE HEAD BUSINESS INCOME . THE REASON BEING THAT THE ASSESSEE HAS BORROWED MONEY TO THE TUNE OF 39,93,017, PART OF WHICH HAS BEEN UTILISED FOR SHARE TRANSACTIONS, THE ASSESSEE HAS ALSO CLAIMED EXPENDITURE OF 89,30,640, AND CLAIM OF INTEREST OF 60,71,893, AGAINST F&O TRANSACTION. THE ASSESSEE HAS BEEN MAINTAINING FULL OFFICE INFRASTRUCTURE FOR THE PURPOSE CARRYING OF BUSINESS OUT OF SHARE TRADING. HE ALSO FOUND THAT THE ASSESSEE HAS RECEIVED DIVIDEND FROM SHARE TRANSACTI ONS INTO TWO CATEGORIES WHERE THE SHARES HAVE BEEN DELIVERED TO THE ASSESSEE AND SHARES WHERE NO DELIVERY WAS REQUIRED TO BE TAK EN. THE FIRST CATEGORY HAS BEEN SHOWN AS INCOME FROM CAPITAL GAIN AND THE SECOND CATEGORY HAS BEEN SHOWN AS BUSINESS INCOME . HE HAS ALSO ANALYSED THE PERIOD OF HOLDING ON THE NUMBER O F SHARES BROUGHT IN THE FOLLOWING MANNER: NO. OF SHARES HOLDING PERIOD PERCENTAGE OF TOTAL UPTO 1 WEEK 47.66% 11,24,636 UPTO 1 MONTH 31.11% 7,62,504 UPTO 6 MONTHS 21.09% 5,098 MORE THAN 6 MONTHS 0.14% 36,15,374 6. THE MAIN CONTENTION OF THE ASSESSEE BEFORE THE ASSE SSING OFFICER WERE AS UNDER: 1. THAT THE APPELLANT IS A WHOLE TIME DIRECTOR OF T HE COMPANY AND IS INVOLVED IN DAY TO DAY AFFAIRS OF THE COMPAN Y; 2. THAT DUE TO HIS ACTIVE PARTICIPATION IN DAY TO D AY AFFAIRS OF ITA NO.637 & 915/MUM/2011, ITA NO.5310/MUM/2010 & C.O. NO.227/MUM/2014 SHRI CHETAN K. MEHTA 8 THE COMPANY, THE PROFITABILITY OF THE COMPANY HAS IMPROVED CONSIDERABLY; 3. THAT NEITHER THERE IS LARGE SCALE ACTIVITY NOR R EGULARITY OF ACTIVITY; 4. THAT THE APPELLANT DID ONLY 120 TRANSACTIONS WHE N THE STOCK EXCHANGE WAS OPEN FOR TRANSACTIONS ALMOST 250 DAYS DURING THE YEAR; 5. THAT THE APPELLANT HAS APPLIED HIS KNOWLEDGE AND THERE BY MADE INVESTMENT IN SHARES OF COMPANIES WHICH WERE POTENTIALLY SOUND COMPANIES; 6. THAT SALES OF SHARES WAS MAINLY OF THE NATURE OF SWITCH OVER TRANSACTION; 7. THAT SHARES INVOLVED IN SALE TRANSACTIONS INCOME WHEREFROM IS OFFERED FOR TAX UNDER THE HEAD 'CAPITA L GAINS' WERE GIVEN DELIVERY OUT OF DEMAT ACCOUNT; 8. THAT PURCHASE OF SHARES WAS ALSO DONE BY GETTING CREDIT FOR SUCH SHARES IN DEMAT ACCOUNT; 9. THAT THE APPELLANT HAS EARNED RS. 9,96,887 BY WA Y DIVIDEND INCOME; 10. THAT IN RESPECT OF SHORT TERM GAIN, SIZABLE GAI N (111 % TO 254% APPRECIATION) WAS MADE BY THE APPELLANT SHARES OF ONLY 5 COMPANIES. 7. THE ASSESSEES CONTENTION HAS BEEN REJECTED BY THE ASSESSING OFFICER AFTER DETAIL DISCUSSION AND RELYI NG UPON THE VARIOUS CASE LAWS, WHICH HAS BEEN DEALT BY THE ASSE SSING OFFICER FROM PAGES 7 TO 17 OF THE ASSESSMENT ORDER. 8. BEFORE THE LEARNED COMMISSIONER (APPEALS), THE ASSESSEES MAIN CONTENTION HAS BEEN THAT IN THE EAR LIER ASSESSMENT YEAR 2006 07 AND 2007 08, THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE LEARNED CO MMISSIONER (APPEALS) WHICH HAS BEEN CONFIRMED BY THE TRIBUNAL IN THE APPEAL FILED BY THE REVENUE. THAT APART, RELIANCE W AS ALSO PLACED ON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT V/S GOPAL PUROHIT, [2011] 228 CTR 582 (BOM.), BESID ES OTHER ITA NO.637 & 915/MUM/2011, ITA NO.5310/MUM/2010 & C.O. NO.227/MUM/2014 SHRI CHETAN K. MEHTA 9 VARIOUS TRIBUNAL DECISIONS. THE LEARNED COMMISSIONE R (APPEALS), FOLLOWING THE EARLIER YEARS PRECEDENCE RIGHT FROM THE ASSESSMENT YEAR 2005 06 TO 2007 08, HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AFTER APPLYING THE RULE OF C ONSISTENCY. BESIDES THIS, THE LEARNED COMMISSIONER (APPEALS) HA S ALSO GIVEN DETAIL REASONS AFTER DISCUSSING THE VARIOUS JUDICIA L DECISIONS. 9. AFTER HEARING BOTH THE PARTIES, WE FIND THAT THIS I SSUE HAD COME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN TH E ASSESSMENT YEAR 2006 07 AND 2007 08. THE LEARNED COUNSEL ALSO BROUGHT TO OUR NOTICE THAT IN THE ASSESSMENT YEAR 2005 06, SIMILAR TRANSACTIONS SHOWN UNDER THE HEAD SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN , HAS BEEN ACCEPTED BY THE ASSESSING OFFICER IN THE SCRUTINY PROCEEDINGS UNDER SECTION 1 43(3) AND BESIDES THIS, IN THE SUBSEQUENT ASSESSMENT YEAR 200 9 10, THE ASSESSING OFFICER AGAIN HAS ACCEPTED THE SIMILAR TR ANSACTIONS TO BE TAXED UNDER THE HEAD CAPITAL GAINS UNDER SECTION 143(3). IN THE ASSESSMENT YEAR 2006 07 AND 2007 08, THE LEARNED COMMISSIONER (APPEALS) HAS ALSO DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE WHICH HAS BEEN CONFIRMED BY THE TRIBUN AL. THE RELEVANT OBSERVATIONS AND THE CONCLUSION DRAWN BY T HE TRIBUNAL ARE AS UNDER: 17. WE HAVE CONSIDERED THE RIVAL SUBMISSION. WE HAV E CONSIDERED THE RIVAL SUBMISSIONS. THE ISSUE TO BE DECIDED IS AS TO WHETHER THE STCG ON TRANSACTION OF PURCHASE AND SALE OF SHARES UNDER TAKEN BY THE ASSESSEE DURING THE PREVIOUS YEAR IS TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS AS CLAIMED BY THE REVENUE OR INCOME UNDER THE HEAD CAPITAL GAIN AS CONTENDED BY THE ASSESSEE. B EFORE WE DEAL WITH THE FACTS OF THE CASE OF THE ASSESSEE, WE WILL BRIE FLY NARRATE THE PRINCIPLES APPLICABLE IN DECIDING THE ABOVE ISSUE A S LAID DOWN IN SEVERAL JUDICIAL PRONOUNCEMENTS :- (A) WHETHER A TRANSACTION OF SALE AND PURCHASE OF S HARES WERE TRADING TRANSACTIONS OR WHETHER THEY WERE IN T HE NATURE OF INVESTMENTS IS MIXED QUESTION OF LAW AND FACT. CIT VS. HOLCK LARSEN, 60 ITR 67 (SC). ITA NO.637 & 915/MUM/2011, ITA NO.5310/MUM/2010 & C.O. NO.227/MUM/2014 SHRI CHETAN K. MEHTA 10 (B) IT IS POSSIBLE FOR AN ASSESSEE TO BE BOTH AN IN VESTOR AS WELL AS A DEALER IN SHARES. WHETHER A PARTICULAR HOLDING IS BY WAY OF INVESTMENT OR FORMED PART OF S TOCK IN TRADE IS A MATTER WHICH IS WITHIN THE KNOWLEDGE OF THE ASSESSEE AND IT IS FOR THE ASSESSEE TO PRODUCE EVID ENCE FROM HIS RECORDS AS TO WHETHER HE MAINTAINED ANY DISTINCTION BETWEEN SHARES WHICH WERE HOLD BY HIM A S INVESTMENTS AND THOSE HOLD AS STOCK IN TRADE. (CIT V/S ASSOCIATED INDUSTRIAL DEVELOPMENT CO. LTD., 82 ITR 586 (SC). (C) TREATMENT IN THE BOOKS BY AN ASSESSEE WILL NOT BE CONCLUSIVE. IF THE VOLUME, FREQUENCY AND REGULARITY WITH WHICH TRANSACTIONS ARE CARRIED OUT INDICATE SYSTEMA TIC AND ORGANIZED ACTIVITY WITH PROFIT MOTIVE, THEN IT WOULD BE A CASE OF BUSINESS PROFITS AND NOT CAPITAL GAIN. CIT VS. MOTILAL HIRABHAI SPG. AND WVG. CO. LTD., 113 IT R 173 (GUJ); RAJA BAHADUR VISWSHWARA SINGH VS. CIT, 4 1 ITR 685 (SC). (D) PURCHASE WITHOUT AN INTENTION TO RESELL WHERE T HEY ARE SOLD UNDER CHANGED CIRCUMSTANCES WOULD BE CAPIT AL GAINS. CIT V/S PKN, 60 ITR 65 (SC). PURCHASE WITH AN INTENTION TO RESELL WOULD RENDER THE GAIN PROFIT ON SALE BUSINESS PROFIT DEPENDING ON THE CIRCUMSTANCES OF T HE CASE LIKE NATURE AND QUANTITY OF ARTICLE PURCHASED, NATURE OF THE OPERATION INVOLVED. SAROJ KUMAR MAZUMDAR VS. CIT, 37 ITR 242 (SC). (E) NO SINGLE FACT HAS ANY DECISIVE SIGNIFICANCE AN D THE QUESTION MUST DEPEND UPON THE COLLECTIVE EFFECT OF ALL THE RELEVANT MATERIALS BROUGHT ON RECORD. JANKI RAM BAHADUR RAM VS. CIT, 57 ITR 21 (SC). 12. THE ABOVE TESTS HAVE AGAIN BEEN REITERATED BY T HE CBDT IN ITS CIRCULAR REFERRED TO BY THE AO IN THE ORDER OF ASSE SSMENT. KEEPING IN MIND, THE ABOVE BROAD PRINCIPLES, WE SHALL NOW EXAM INE THE CASE OF THE ASSESSEE. THE ASSESSEE DURING THE PREVIOUS YEAR HAD ENTERED INTO TRANSACTIONS OF PURCHASE OF SHARES OF ABOUT 38 COMP ANIES TOTALING TO RS.31,51,52,676 AND ALL THOSE SHARES WERE SOLD FOR A VALUE OF RS.37,89,50,348. THE ABOVE TRANSACTIONS WERE EFFECT ED BY ACTUAL DELIVERY OF SHARES AT THE TIME OF PURCHASE AND SALE . BESIDES SUCH TRANSACTIONS, THE ASSESSEE HAD ALSO ENTERED INTO TR ANSACTIONS OF PURCHASE AND SALE OF SHARES WHERE THERE WAS NO ACTU AL DELIVERY. THE NET PROFIT AFTER EXPENSES ON SUCH TRANSACTIONS WAS RS.40,77,711. BOTH THE AFORESAID TRANSACTIONS WERE IN RESPECT OF TRANS ACTION OF PURCHASE AND SALE OF SHARES WHERE THE HOLDING PERIOD WAS LES S THAN 12 MONTHS. THE PROFIT ON TRANSACTION AND SALE OF SHARES WHERE THERE WAS NO DELIVERY WAS OFFERED TO TAX BY THE ASSESSEE AS SPEC ULATIVE INCOME UNDER THE HEAD BUSINESS INCOME. THE INCOME FROM OTH ER TRANSACTIONS WHERE THERE WAS ACTUAL DELIVERY WAS CLAIMED BY THE ASSESSEE TO BE STCG. SUCH TRANSACTIONS WERE ABOUT 142 IN NUMBER DU RING THE ITA NO.637 & 915/MUM/2011, ITA NO.5310/MUM/2010 & C.O. NO.227/MUM/2014 SHRI CHETAN K. MEHTA 11 PREVIOUS YEAR. THE NUMBER OF SHARES DEALT WITH BY T HE ASSESSEE WAS 30,79,124. THE HOLDING PERIOD WAS AS FOLLOWS: NO. OF SHARES HOLDING PERIOD % OF TOTAL 770317 UPTO 1 WEEK 25% 874619 UPTO 1 MONTH 28% 1275061 UPTO 6 MONTHS 42% 159127 MORE THAN 6 MONTHS 5% THE FACTORS WHICH GO IN FAVOUR OF THE ASSESSEE THAT THE INCOME IN QUESTION IS SHORT TERM CAPITAL GAIN (STCG) ARE AS F OLLOWS: 1. THE FACT THAT IN THE EARLIER AY I.E., AY 05-06, ON IDENTICAL VOLUME OF TRANSACTION, THE AO IN ASSESSMENT U/S.143(3) OF THE ACT, ACCEPTED THE CASE OF THE ASSESSEE THAT INCOME FROM PURCHASE AND SALE OF SHARES IS STCG AND NOT BUSINESS INCOME. THE FACTS AS IT PREVA ILED IN THE EARLIER YEAR WERE AS FOLLOWS: A.Y. 05 06 A.Y. 06 07 NO. OF SCRIPS DEALT WITH BY THE ASSESSEE 23 38 NO. OF DAYS ON WHICH TRANSACTIONS CARRIED OUT 92 DAYS 96 DAYS VOLUME NO. OF SHARES 6,18,984 30,79,124 PURCHASE VALUE 4,29,24,768 31,51,52,676 SALE VALUE 4,73,44,028 37,89,50,348 GAIN 44,19,260 6,37,97,673 NO. OF TRANSACTIONS 128 148 2. THE ASSESSEE IN AY 05-06 HAD USED BORROWED FUNDS TO MAKE INVESTMENT IN SHARES. 3. THE ASSESSEE CARRIED OUT TRANSACTION OF PURCHASE AND SALE OF SHARES WITHOUT DELIVERY IN AY 05-06 ALSO. 4. THE VOLUME AND FREQUENCY OF THE TRANSACTIONS ARE SUBSTANTIALLY THE SAME AS IT WAS IN AY 05-06 EXCEPT FOR THE VALUE, WH ICH HAS GONE UP SUBSTANTIALLY AND WHICH HAS BEEN EXPLAINED BY THE A SSESSEE AS OWING TO RAISE IN THE SENSEX WHICH WERE ABOUT 800 IN NUMB ER WHERE THE HOLDING PERIOD WAS BETWEEN MINIMUM OF 1 DAY TO MAXI MUM OF 6 MONTHS. ITA NO.637 & 915/MUM/2011, ITA NO.5310/MUM/2010 & C.O. NO.227/MUM/2014 SHRI CHETAN K. MEHTA 12 5. PURCHASE AND SALE OF SHARES WAS NOT THE ONLY ACT IVITY OF THE ASSESSEE. 6. THE PERIOD OF HOLDING ON AN AVERAGE WAS 24 DAYS IN AY 05-06 WHEREAS IN AY 06-07 IT WAS 86 DAYS. 7. THE ASSESSEE ALSO INVESTED SHARES OF PRIVATE LIM ITED COMPANIES AND UNLISTED COMPANIES. 8. THE ASSESSEE DID RECEIVE SUBSTANTIAL DIVIDEND IN COME ON SHARES. 9. THE ASSESSEE HELD THE SHARES AS INVESTMENT IN IT S BOOKS OF ACCOUNTS AND NOT AS STOCK-IN-TRADE. FACTORS WHICH MAY GO AGA INST THE ASSESSEE IN ACCEPTING THE PLEA THAT THE INCOME IS QUESTION I S STCG AND THE REPLY OF THE ASSESSEE ON THE SAME ARE AS FOLLOWS: 1. THE CONDUCT OF THE ASSESSEE IN SHOWING INCOME FR OM DELIVERY BASED TRANSACTIONS AS STCG AND NON-DELIVER Y BASED TRANSACTION AS BUSINESS INCOME ONLY SHOWS THA T BUT FOR ACTUAL DELIVERY EVEN INCOME FROM THOSE TRANSACTIONS WOULD HAVE BEEN CONSIDERED AS SPECULAT IVE INCOME AND BUSINESS INCOME. THE INCOME FROM DELIVER Y BASED TRANSACTIONS ARE SOUGHT TO BE PROJECTED AS ST CG ONLY BECAUSE THERE WAS ACTUAL DELIVERY AND BECAUSE THEY WERE SHOWN AS INVESTMENTS IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THE SUBMISSION OF THE ASSESSEE ON THI S ASPECT IS THAT ON THE SAME SET OF FACTS, THE REVENU E IN AY 05-06 ACCEPTED THE PLEA OF ASSESSEE THAT GAIN ON PURCHASE AND SALE OF SHARES IS STCG THOUGH IN THAT YEAR ALSO, THE ASSESSEE INDULGED IN NON-DELIVERY BASED TRANSACTIONS. 2. THE HOLDING PERIOD BEING VERY SHORT IT IS REASON ABLE TO PRESUME THAT THE PURCHASE WAS MADE WITH AN INTENTIO N TO RESELL. THE SUBMISSION OF THE ASSESSEE ON THIS A SPECT IS THAT THE HOLDING PERIOD IS MUCH LONGER THAN AY 0 5-06 3. THE SCALE OF ACTIVITY IS SUBSTANTIAL. THE SUBMIS SION OF THE ASSESSEE IS THAT THE SAME IS BECAUSE OF INCREAS E IN SENSEX FROM 6000 POINTS TO 11000 POINTS. 4. THE TRANSACTIONS WERE CONTINUOUS AND REGULAR BES IDES BEING SYSTEMATIC. THE SUBMISSION OF THE ASSESSEE IS THAT THERE WERE O NLY 148 TRANSACTIONS CARRIED OUT ON 96 DAYS DURING THE PREVIOUS YEAR. 5. BORROWED FUNDS HAD BEEN USED FOR PURCHASE OF SHARES. THE SUBMISSION OF THE ASSESSEE HAS BEEN THA T THERE IS NO BAR TO USE BORROWED FUNDS TO MAKE INVESTMENTS. BESIDES THE ABOVE, ON THE SAME SET OF FACTS, THE REVENUE ALLOWED THE CLAIM OF THE ASSESSE E IN AY 05-06. ITA NO.637 & 915/MUM/2011, ITA NO.5310/MUM/2010 & C.O. NO.227/MUM/2014 SHRI CHETAN K. MEHTA 13 6. SUBSTANTIAL TIME DEVOTED BY THE ASSESSEE TO THE ACTIVITY OF PURCHASE AND SALE. THE ASSESSEE DID NOT DEVOTE TIME BECAUSE THE KNOWLEDGE WHICH GAINED IN THE COURSE OF HIS SERVICE WAS USED. 7. THE SHARES SOLD AND PURCHASED ARE OF LISTED COMPANIES. THE ASSESSEE ALSO HELD SHARES OF PRIVATE LIMITED COMPANIES AND UNLIST ED COMPANIES. 8. COMPOSITION OF THE DIVIDEND INCOME IS MEAGER, WH ICH GOES TO SHOW THAT THE ASSESSEE NEVER LOOKED FOR RET URNS FROM INVESTMENTS. AS AN INVESTOR ONE NEED NOT LOOK ONLY FOR RETURNS IN THE FORM OF DIVIDEND BUT ALSO APPREC IATION OF CAPITAL. 13. IN THE LIGHT OF THE ABOVE CIRCUMSTANCES PREVAIL ING IN THE CASE OF THE ASSESSEE, WE ARE OF THE VIEW THAT T HE CONCLUSION OF THE CIT(A) THAT THE INCOME FROM SALE OF SHARES DECLARED BY THE ASSESSEE AS STCG HAS TO BE ACCEPTED IS CORRECT AND CALLS FOR NO INTERFERENCE. 14. IN CIT VS. GOPAL PUROHIT 228 CTR 582 (BOM), THE QUESTION OF LAW RAISED WAS REGARDING WHETHER STCG DECLARED BY THE A SSESSEE WAS TO BE ASSESSED AS BUSINESS INCOME OR NOT. QUEST ION (B) CONSIDERED BY THE HONBLE BOMBAY HIGH COURT WAS AS FOLLOWS: (B) WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE ITAT WAS JUSTIFIED IN HOLDING THAT PRINCIPLE OF CONSISTENCY MUST BE APPLIED HERE AS AUTHORITIES DID NOT TREAT THE ASSESSEE AS A SHARE T RADER IN PRECEDING YEAR, IN SPITE OF EXISTENCE OF SIMILAR TRANSACTION, WHICH CANNOT IN ANY WAY OPERATE AS RESJUDICATA TO PRECLUDE THE AUTHORITIES FROM HOLDIN G SUCH TRANSACTIONS AS BUSINESS ACTIVITIES IN CURRENT YEAR ? THE HONBLE BOMBAY HIGH COURT HELD AS FOLLOWS: 3. IN SO FAR AS QUESTION (B) IS CONCERNED, THE TRI BUNAL HAS OBSERVED IN PARAGRAPH 8.1 OF ITS JUDGMENT THAT THE ASSESSEE HAS FOLLOWED A CONSISTENT PRACTICE IN REGARD TO THE NATURE OF THE ACTIVITIES, THE MANNER OF KEEPING RECORDS AND THE PRESENTATION OF SHARES A S INVESTMENT AT THE END OF THE YEAR, IN ALL THE YEARS. THE REVENUE SUBMITTED THAT A DIFFERENT VIEW SHOULD BE TAKEN FOR THE YEAR UNDER C ONSIDERATION, SINCE THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE TO ASSESSMENT PROCEEDINGS. THE TRIBUNAL CORRECTLY ACCEPTED THE PO SITION, THAT THE PRINCIPLE OF RES JUDICATA IS NOT ATTRACTED SINCE EA CH ASSESSMENT YEAR IS SEPARATE IN ITSELF. THE TRIBUNAL HELD THAT THERE OU GHT TO BE UNIFORMITY IN TREATMENT AND CONSISTENCY WHEN THE FACTS AND CIR CUMSTANCES ARE IDENTICAL, PARTICULARLY IN THE CASE OF THE ASSESSEE . THIS APPROACH OF THE TRIBUNAL CANNOT BE FAULTED. THE REVENUE DID NOT FUR NISH ANY ITA NO.637 & 915/MUM/2011, ITA NO.5310/MUM/2010 & C.O. NO.227/MUM/2014 SHRI CHETAN K. MEHTA 14 JUSTIFICATION FOR ADOPTING A DIVERGENT APPROACH FOR THE ASSESSMENT YEAR IN QUESTION. QUESTION (B), THEREFORE, DOES NOT ALSO RAISE ANY SUBSTANTIAL QUESTION. 15. THE ABOVE DECISION OF THE HONBLE BOMBAY HIGH C OURT IS CLEARLY APPLICABLE IN THIS CASE. AS WE HAVE ALREADY SEEN TH AT THE AO IN AY 05- 06 RAISED A SPECIFIC QUERY ON THE ISSUE WHETHER THE STCG DECLARED BY THE ASSESSEE HAS TO BE ASSESSED AS BUSINESS INCOME AND THE AO AFTER DISCUSSION ACCEPTED THE PLEA OF THE ASSESSEE AND AS SESSED INCOME DECLARED ON PURCHASE AND SALE OF SHARES AS GIVING R AISE TO STCG. WE HAVE ALSO SEEN THAT THE FACTS AND CIRCUMSTANCES IN THE AY 05-06 ARE IDENTICAL. THOUGH THE RULE OF RES JUDICATA IS NOT A PPLICABLE BUT THE PRINCIPLE OF CONSISTENCY WILL DEFINITELY APPLY AND ON THAT BASIS THE CLAIM OF THE ASSESSEE SHOULD BE HELD TO BE PROPER. IF AT ALL THE ONLY FACTOR WHICH MAY GO AGAINST THE ASSESSEE IS THE FACT THAT THE VOLUME OF SHARES TRANSACTED AND THEIR VALUE IS HIGH IN THE PR ESENT A.Y. ON THIS ASPECT, WE FIND THAT THE CIT(A) HAD RELIED ON THE D ECISION OF THE HONBLE ITAT MUMBAI BENCH DECISION IN THE CASE OF J ANAK S.RANGWALA VS. ACIT 11 SOT 627 (MUM) WHEREIN IT HAS BEEN HELD THAT MAGNITUDE OF THE TRANSACTION DOES NOT ALTER THE NATURE OF THE TRANSACTION. 16. FOR THE REASONS GIVEN ABOVE, WE CONFIRM THE ORD ER OF CIT(A) AND DISMISS THE APPEAL BY THE REVENUE. 10. THUS, CONSISTENT WITH THE VIEW TAKEN BY THE TRIBUNA L IN ASSESSEES OWN CASE FOR THE EARLIER YEAR ON SIMILAR SET OF FACTS AND CIRCUMSTANCES, WHICH ARE ALSO PERMEATING THROUGH IN THIS YEAR, WE HOLD THAT THE INCOME SHOWN BY THE ASSESSEE FROM THE SALE OF SHARES IS TO BE TAXED UNDER THE HEAD SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN . THUS, GROUND NO.1, RAISED BY THE REVENUE STANDS DISMISSED. 11. IN GROUND NO.2, THE REVENUE IS AGGRIEVED BY THE DIR ECTION OF THE LEARNED COMMISSIONER (APPEALS) IN ALLOWING D EDUCTION OF 1.50 LAKHS UNDER THE HEAD INCOME FROM HOUSE PROPERTY . 12. THE ASSESSEE HAD ACQUIRED RESIDENTIAL PREMISES PART LY WITH THE BORROWED FUNDS ON WHICH THE ASSESSEE HAS PAID I NTEREST OF 15 LAKHS. THE ASSESSEE HAS CLAIMED THE ENTIRE AMOUN T OF INTEREST AS DEDUCTIBLE BUSINESS EXPENDITURE IN THE RETURN OF INCOME AND NO INCOME WAS SHOWN UNDER THE HEAD INCOME FROM HOUSE PROEPRTY . ITA NO.637 & 915/MUM/2011, ITA NO.5310/MUM/2010 & C.O. NO.227/MUM/2014 SHRI CHETAN K. MEHTA 15 AT THE TIME OF THE ASSESSMENT, THE ASSESSEE FILED R EVISED STATEMENT OF COMPUTATION OF INCOME CLAIMING INTERES T INCOME OF 1.50 LAKHS ALLOWABLE UNDER SECTION 24(B) AND DISAL LOWED THE CLAIM OF INTEREST OF 15 LAKHS AS BUSINESS INCOME. THUS, THE CLAIM OF 15 LAKHS WAS WITHDRAWN AND INSTEAD INTEREST OF 1.50 LAKHS WAS CLAIMED UNDER SECTION 24(B). THE ASS ESSING OFFICER HAS DISALLOWED THE CLAIM MAINLY ON THE GROU ND THAT THIS CLAIM FOR DEDUCTION WAS NOT MADE IN THE ORIGINAL RE TURN OF INCOME AND ANY REVISED CLAIM CAN ONLY BE MADE BY WAY OF RE VISED RETURN OF INCOME IN VIEW OF THE DECISION OF THE HON'BLE SU PREME COURT IN GOETZE INDIA LTD., [2006] 284 ITR 323 (SC). 13. BEFORE THE LEARNED COMMISSIONER (APPEALS), IT WAS B ROUGHT TO THE NOTICE OF THE LEARNED COMMISSIONER (APPEALS) THAT IN THE EARLIER ASSESSMENT YEAR I.E., 2007 08, THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE AFTER OBTAINING T HE REMAND REPORT FROM THE ASSESSING OFFICER. APART FROM THAT, IT WAS SUBMITTED THAT THERE WAS NO NEW CLAIM FOR DEDUCTION BUT WRONG CLAIM OF DEDUCTION UNDER SECTION 36(1)(III) WAS GIV EN UP AND CORRECT CLAIM UNDER SECTION 24(B), WAS MADE. IT WAS FURTHER SUBMITTED THAT SUCH A CLAIM IS NOT ENTERTAINED AT T HE STAGE OF ASSESSING OFFICER, THEN THE SAME CAN BE DONE AT THE APPELLATE STAGE IN VIEW OF THE DECISION OF THE HONBLE DELHI HIGH COURT IN CIT V/S JAI PARABOLIC SPRINGS LTD., [2008] 306 ITR 42 AND THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN CIT V/S RAMCO INTERNATIONAL, IN ITA NO.417 OF 2008, JUDGMEN T DATED 8 TH DECEMBER 2008, WHEREIN THE HIGH COURTS HAVE DULY CO NSIDERED THE DECISION OF THE HON'BLE SUPREME COURT IN GOETZE INDIA LTD. (SUPRA). THE LEARNED COMMISSIONER (APPEALS) ALLOWED THE ASSESSEES CLAIM FOR DEDUCTION OF 1.50 LAKHS FROM THE INCOME FROM HOUSE PROPERTY ON THE GROUND THAT FIRSTLY, SIM ILAR ISSUE WAS ITA NO.637 & 915/MUM/2011, ITA NO.5310/MUM/2010 & C.O. NO.227/MUM/2014 SHRI CHETAN K. MEHTA 16 DECIDED IN THE EARLIER YEAR I.E., IN THE ASSESSMENT YEAR 2007 08 AND, SECONDLY ALL THE NECESSARY DECISIONS FOR ALLOW ING SUCH CLAIM IS AVAILABLE ON THE RECORD AND SUCH A CLAIM CAN BE ENTERTAINED AT THE APPELLATE STAGE. 14. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT T HE CLAIM CAN ONLY BE MADE BY WAY OF REVISED RETURN OF INCOME AND NOT OTHERWISE AND IF SUCH A CLAIM CANNOT BE ENTERTAINED BY THE ASSESSING OFFICER, THEN THE SAME CANNOT BE MAD IN T HE APPELLATE STAGE. 15. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSE SSEE RELIED UPON THE ORDER OF THE LEARNED COMMISSIONER ( APPEALS). 16. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS, PERUSED THE RELEVANT FINDINGS OF THE AUTHORITIES BELOW AND THE MATERIAL AVAILABLE ON RECORD. FIRST OF ALL, IT IS NOTED THAT THE ASSESSEE HAS MADE INITIAL CLAIM OF DEDUCTION OF INTEREST OF 15 LAKHS ON THE BORROWINGS WHICH WERE UTILISED FOR ACQUIRING RESIDE NTIAL PREMISES AS DEDUCTIBLE BUSINESS EXPENDITURE UNDER SECTION 36 (1)(III). THEREAFTER, THE ASSESSEE FILED REVISED STATEMENT OF COMPUTATION OF INCOME WHEREBY THE CLAIM OF 15 LAKHS WAS GIVEN UP AND WAS DISALLOWED BY THE ASSESSEE HIMSELF AND INSTEAD INTE REST CLAIMED OF 1.50 LAKHS WAS MADE UNDER SECTION 24(B) WHICH WAS THE LEGALLY CORRECT CLAIM WHILE COMPUTING THE INCOME FR OM HOUSE PROPERTY. EVEN IF SUCH A CLAIM HAS BEEN REJECTED BY THE ASSESSING OFFICER ON THE GROUND THAT THE SAME SHOULD HAVE BEE N MADE BY WAY OF REVISED RETURN OF INCOME, HOWEVER, THE SAME DOES NOT PUT ANY FETTERS ON THE POWERS OF THE APPELLATE AUTHORIT IES TO ENTERTAIN SUCH A LEGAL CLAIM IF ALL THE FACTS NECESSARY FOR T HE ADJUDICATION ARE AVAILABLE ON RECORDS. THIS HAS BEEN CLARIFIED B Y THE HON'BLE ITA NO.637 & 915/MUM/2011, ITA NO.5310/MUM/2010 & C.O. NO.227/MUM/2014 SHRI CHETAN K. MEHTA 17 SUPREME COURT IN THE DECISION IN GOETZE INDIA LTD. (SUPRA) ITSELF. THE HONBLE DELHI HIGH COURT AND HONBLE PUNJAB AND HARYANA HIGH COURT HAVE ALSO CLARIFIED THIS ISSUE AS REFERR ED ABOVE. APART FROM THIS, IT IS SEEN FROM THE RECORD THAT NO NEW C LAIM OF INTEREST HAS BEEN MADE EXCEPT FOR THE FACT THAT THE RIGHT AM OUNT OF INTEREST HAS BEEN CLAIMED UNDER THE HEAD INTEREST AND THE AMOUNT OF CLAIM MADE IN THE EARLIER RETURN OF INCOM E. ON THESE FACTS, IT CANNOT BE HELD THAT SUCH A CLAIM CANNOT B E ENTERTAINED AS IT IS A TRITE LAW THAT IT IS THE DUTY OF THE ASSESS ING OFFICER TO ALLOW DEDUCTIONS AS PER THE STATUTE UNDER THE RIGHT PROVI SIONS OF THE ACT. IF A WRONG CLAIM HAS BEEN MADE THEN, IT IS THE DUTY CAST UPON THE ASSESSING OFFICER TO RECTIFY. THUS, WE DO NOT F IND ANY REASON TO DEVIATE FROM THE FINDINGS OF THE LEARNED COMMISS IONER (APPEALS). GROUND NO.2, IS THUS, DISMISSED. 17. IN THE RESULT, REVENUES APPEAL IS DISMISSED. 2.4. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, CONCLUSION DRAWN IN TH E ORDER OF THE TRIBUNAL DATED 25/06/2014 FOR ASSESSMENT YEA R 2008- 09 (ITA NO.6529/MUM/2011) AND FACTUAL FINDING RECOR DED THEREIN, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF KEPT IN JUXTAPOSITION AN D ANALYZED, WE FIND THAT AN ELABORATE DISCUSSION HAS BEEN MADE BY THE TRIBUNAL IN THE AFORESAID ORDER, WHEREIN, FACTS ARE IDENTICAL, BORROWED FUNDS WERE ALSO UTILIZED AND FOLLOWING THE ORDER OF ITA NO.637 & 915/MUM/2011, ITA NO.5310/MUM/2010 & C.O. NO.227/MUM/2014 SHRI CHETAN K. MEHTA 18 EARLIER YEAR HELD THAT INCOME SHOWN BY THE ASSESSEE FROM SALE OF SHARES IS TO BE TAXED UNDER THE HEAD SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN. THUS, FOLLOWING THE AFORESAID ORDER OF THE TRIBUNAL AND THE CASES RELIED THEREUPO N, WE FIND NO INFIRMITY IN THE CONCLUSION OF THE LD. COMMISSIO NER OF INCOME TAX (APPEAL), THEREFORE, THIS GROUND OF THE REVENUE IS DISMISSED. 3. THE NEXT GROUNDS I.E. GROUND NO.2 AND 3 PERTAIN S TO ALLOWING DEDUCTION OF RS.1,50,000/- UNDER THE HEAD HOUSE PROPERTY AND RS.3,38,040/- TOWARDS INTEREST PAID ON MONEY BORROWED FOR ACQUIRING TENANCY RIGHTS IN RESPECT OF OFFICE PREMISES. THE CRUX OF ARGUMENT ON BEHALF OF THE REV ENUE IS THAT THIS GROUND WAS NEVER RAISED BY THE ASSESSEE D URING ASSESSMENT PROCEEDINGS. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE DEFENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER. 3.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT DURING FIRST APPELLATE STAGE, THE ASSESSEE RAISED ADDITION AL GROUND, ITA NO.637 & 915/MUM/2011, ITA NO.5310/MUM/2010 & C.O. NO.227/MUM/2014 SHRI CHETAN K. MEHTA 19 WHEREIN, THE LD. ASSESSING OFFICER DISALLOWED A SUM OF RS.14,63,040/- ON THE GROUND THAT SAME REPRESENT IN TEREST ON LOAN TAKEN FOR PURCHASE OF FLAT AND TENANCY RIGHT. THE STAND OF THE ASSESSEE WAS THAT DEPRECIATION AT THE RATE OF 2 5% ON TENANCY RIGHT ACQUIRED AT A COST OF RS.37,56,000/- IN RESPECT OF OFFICE PREMISES SHOULD HAVE BEEN ALLOWED. THIS A DDITIONAL GROUND WAS REFERRED TO THE ASSESSING OFFICER AND IN TURN REMAND REPORT DATED 24/09/2010 WAS SENT BY THE ASSE SSING OFFICER. THE WRITTEN SUBMISSIONS OF THE ASSESSEE WE RE CONSIDERED. THE ASSESSING OFFICER RAISED A TECHNICA L ISSUE BY CITING DECISION IN GOETZE (INDIA) LTD. 204 CTR 182 (SC). THE TOTALITY OF FACTS WAS CONSIDERED AND IT WAS FOUND T HAT NO ADVERSE COMMENTS WERE MADE BY THE ASSESSING OFFICER . THUS, WE FIND NO INFIRMITY IN THE DIRECTION OF THE LD. CO MMISSIONER OF INCOME TAX (APPEAL) TO ALLOW RS.1,50,000/- AS DEDUC TION UNDER THE HEAD HOUSE PROPERTY AND ANOTHER RS.3,38,0 40/- TOWARDS INTEREST PAID ON MONEY BORROWED FOR ACQUIRE D TENANCY RIGHTS IN RESPECT OF OFFICE PREMISES. THESE GROUNDS OF THE REVENUE ARE, THEREFORE, DISMISSED. ITA NO.637 & 915/MUM/2011, ITA NO.5310/MUM/2010 & C.O. NO.227/MUM/2014 SHRI CHETAN K. MEHTA 20 4. GROUNDS NO.4 & 5 WERE NOT ARGUED BY THE REVENUE BEING GENERAL IN NATURE, THEREFORE, DISMISSED AS NO T PRESSED. 5. THE APPEAL OF THE REVENUE IS, THEREFORE, DISMIS SED. 6. NOW, WE SHALL TAKE UP THE APPEAL OF THE ASSESSE E (ITA NO.637/M/2011) FOR ASSESSMENT YEAR 2007-08, WH EREIN, FIRST GROUND PERTAINS TO CONFIRMING THE DISALLOWANC E U/S 14A, WORKED OUT ON THE BASIS OF RULE-8D, WHICH WAS AGAIN ST THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN GODREJ & BOYCE MFG. CO. LTD. VS DCIT, WHEREIN, IT WAS HELD THAT RU LE 8D IS APPLICABLE FROM ASSESSMENT YEAR 2008-09. 6.1. THE CRUX OF ARGUMENT ADVANCED IS THAT RULE 8D WAS APPLIED BY THE ASSESSING OFFICER, THEREFORE, THE AS SESSMENT YEAR INVOLVED IS 2007-08, THEREFORE, RULE 8D IS NOT APPLICABLE. ON QUESTIONING FROM THE BENCH WITH RESPECT TO SUO M OTO DISALLOWANCE, IF ANY, MADE BY THE ASSESSEE. THE LD. COUNSEL EXPLAINED THAT NO SUCH DISALLOWANCE WAS MADE AND CO NTENDED THAT A REASONABLE DISALLOWANCE MAY BE MADE. THE LD. DR PLACE RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER/CI T(A) AND ITA NO.637 & 915/MUM/2011, ITA NO.5310/MUM/2010 & C.O. NO.227/MUM/2014 SHRI CHETAN K. MEHTA 21 HAD NO OBJECTION IF A REASONABLE DISALLOWANCE IS MA DE BY THE TRIBUNAL. 6.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTE T HAT IN PARA 7.1 OF THE IMPUGNED ORDER, THERE IS A MENTIONING TH AT THIS GROUND WAS NOT PRESSED AT THE TIME OF HEARING BEFOR E THE LD. COMMISSIONER OF INCOME TAX (APPEAL). HOWEVER, IT IS SEEN THAT THE LD. ASSESSING OFFICER APPLIED THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES. BROADLY, WE ARE OF THE VIEW THAT IN VIEW OF THE DECISION FROM HONBLE JURI SDICTIONAL HIGH COURT IN GODREJ AND BOYCE MFG. LTD. (SUPRA), R ULE 8D IS NOT APPLICABLE TO THE PRESENT APPEAL BEING THE ASSE SSMENT YEAR INVOLVED IS 2007-08. THE ASSESSEE EARNED A SU M OF RS.5,52,200/- BY WAY OF DIVIDEND WHICH WAS CLAIMED EXEMPT U/S 10(34) OF THE ACT. NO SUO MOTO DISALLOWANCE WA S MADE BY THE ASSESSEE. TO PUT AN END TO THE LITIGATION AND C ONSIDERING THE TOTALITY OF FACTS AND THE FINDING IN THE IMPUGN ED ORDER THAT THIS GROUND WAS NOT PRESSED BY THE ASSESSEE, WE MAK E A ITA NO.637 & 915/MUM/2011, ITA NO.5310/MUM/2010 & C.O. NO.227/MUM/2014 SHRI CHETAN K. MEHTA 22 DISALLOWANCE AT 4% OF THE EXEMPT INCOME, THUS, THIS GROUND IS PARTLY ALLOWED. 7. THE NEXT GROUND RAISED BY THE ASSESSEE PERTAINS TO NOT ALLOWING CLAIM OF DEPRECIATION U/S 32(1)(II) OF THE ACT ON TENANCY RIGHT IN RESPECT OF OFFICE PREMISES BEING I NTANGIBLE ASSET FALLING WITHIN THE TERM BUSINESS OR COMMERCI AL RIGHTS. THE LD. COUNSEL RELIED UPON THE DECISION OF THE HYD ERABAD BENCH IN TIRUMALA MUSIC CENTRE PVT. LTD. VS ACIT (3 9 TAXMAN.COM) 196 (HYD). HOWEVER, WE FIND THAT THE MU MBAI BENCH OF THE TRIBUNAL IN THE CASE OF M. M. NISHIM & CO. VS ACIT (18 SOT 274) ORDER DATED 19/11/2007 HELD THAT THE ASSESSEE IS NOT ELIGIBLE OF DEPRECIATION BY OBSERVI NG THAT THE TENANCY RIGHT, ACQUIRED BY THE ASSESSEE CANNOT BE E QUATED WITH THE LICENSE PROVIDED U/S 32 SO AS TO QUALIFY T HAT IT IS INTANGIBLE ASSET ELIGIBLE FOR DEPRECIATION. IT IS A LSO NOTED THAT THE HYDERABAD BENCH OF THE TRIBUNAL IN ITS ORDER DA TED 28/06/2013 DID NOT CONSIDER THE DECISION OF THE MUM BAI BENCH. FOLLOWING THE DECISION OF THE MUMBAI BENCH O F THE TRIBUNAL AND IN THE ABSENCE OF ANY OTHER DECISION, WE FIND NO ITA NO.637 & 915/MUM/2011, ITA NO.5310/MUM/2010 & C.O. NO.227/MUM/2014 SHRI CHETAN K. MEHTA 23 MERIT IN THE GROUNDS OF THE ASSESSEE, CONSEQUENTLY, DISMISSED. THUS, THIS APPEAL OF THE ASSESSEE IS PARTLY ALLOWED . 8. SO FAR AS, THE APPEAL OF THE REVENUE FOR ASSESS MENT YEAR 2010-11 (ITA NO.5310/MUM/2013) IS CONCERNED, T HE FIRST GROUND RAISED BY THE REVENUE PERTAINS TO HOLDING TH E INCOME OF THE ASSESSEE FROM SHARE TRANSACTION AS PROFIT FR OM CAPITAL GAIN AND NOT AS BUSINESS. THE LD. DR RELIED UPON T HE ASSESSMENT ORDER. ON THE OTHER HAND, THE LD. COUNSE L FOR THE ASSESSEE DEFENDED THE IMPUGNED ORDER. 8.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT FOR ASSESSMENT YEAR 2005-06, THE ASSESSING OFFICER HIMS ELF HAS ACCEPTED THE ASSESSEE TO BE INVESTOR WHILE FRAMING THE ASSESSMENT U/S 143(3) OF THE ACT AND THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. THE TRIBUNAL HA S ALSO DECIDED THE CASE OF THE ASSESSEE FOR ASSESSMENT YEA R 2007-08 AND DISMISSED THE APPEAL OF THE REVENUE, THUS, WE F IND NO MERIT IN THIS GROUND, CONSEQUENTLY, THE APPEAL IS D ISMISSED. ITA NO.637 & 915/MUM/2011, ITA NO.5310/MUM/2010 & C.O. NO.227/MUM/2014 SHRI CHETAN K. MEHTA 24 9. IN ITS CROSS OBJECTION NO.227/MUM/2014 (ASSESSMENT YEAR 2010-11), THE ASSESSEE HAS CHALLEN GED DEPRECIATION U/S 32(1)(II) OF THE ACT ON TENANCY RI GHT IN OFFICE PREMISES. WE HAVE ALREADY ADJUDICATED THIS ISSUE A GAINST THE ASSESSEE IN ITA NO.637/MUM/2011, THEREFORE, THE CRO SS OBJECTION OF THE ASSESSEE IS DISMISSED. FINALLY, APPEAL IN I. ITA NO.915/MUM/2011, FILED BY THE REVENUE IS DISMISSED. II. ITA NO.637/MUM/2011, FILED BY THE ASSESSEE IS PARTL Y ALLOWED. III. ITA NO.5310/MUM/2013, FILED BY THE REVENUE IS DISMISSED. IV. C.O. NO.227/MUM/2014, FILED BY THE ASSESSEE IS DISMISSED . THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 11/05/2016. SD/- SD/- ( RAJENDRA ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER $ % MUMBAI; ) DATED :16/05/2016 F{X~{T? P.S/. .. ITA NO.637 & 915/MUM/2011, ITA NO.5310/MUM/2010 & C.O. NO.227/MUM/2014 SHRI CHETAN K. MEHTA 25 %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. +,-. / THE APPELLANT 2. /0-. / THE RESPONDENT. 3. 1 1 $ 2! ( +, ) / THE CIT, MUMBAI. 4. 1 1 $ 2! / CIT(A)- , MUMBAI 5. 3'4 /! , 1 +,' + 5 , $ % / DR, ITAT, MUMBAI 6. 6 7% / GUARD FILE. / BY ORDER, 03,! /! //TRUE COPY// / (DY./ASSTT. REGISTRAR) , $ % / ITAT, MUMBAI