ILA DEEPAK MEHTA, MUMBAI V. ADDL CIT RG 13(3), MUMBAI

ITA 6663/MUM/2009

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9381 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 12-09-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 31-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIVIN KUMAR
• Assessee Lawyers: S V JOSHI
• Keywords: Business income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I, MUMBAI BEFORE SHRI DINESH KUMAR AGARWAL (J.M.) AND SHRI N.K. BILLAIYA (A.M.) ITA NO. 6663/MUM /2009 ASSESSMENT YEAR : 2006-07 ILA DEEPAK MEHTA, KEJRIWAL HOUSE, 7-N GAMADIA ROAD, MUMBAI 400 026. PAN AAFPM0621C VS. ADDL. COMMISSIONER OF INCOME- TAX- RANGE 13(3), ROOM NO. 426, 4 TH FLOOR, AAYAKAR BHAVAN, MUMBAI - - 400 020 (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI S.V. JOSHI DEPARTMENT BY : SHRI PRIVIN KUMAR DATE OF HEARING 08-11-2012 DATE OF PRONOUNCEMENT 21-11-2012 O R D E R PER DINESH KUMAR AGARWAL, J.M. THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DTD. 26-11-2009 PASSED BY THE LD. CIT(A) 24, MUMB AI FOR THE A.Y. 2006-07. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE A SSESSEE AN INDIVIDUAL DERIVES INCOME FROM CAPITAL GAIN AND OTHER SOURCES. THE RETURN WAS FILED DECLARING TOTAL INCOME OF RS. 96,38,500/-. DURING T HE COURSE OF ASSESSMENT PROCEEDING, THE A.O. OBSERVED THAT THE A SSESSEE HAS SHOWN SHORT TERM CAPITAL GAIN THROUGH PORTFOLIO MANAGEMEN T SCHEME (PMS) ACTIVITIES AT RS. 95,23,525/- AND LONG TERM CAPITAL GAIN OF RS. ITA NO.6663/MUM/2009 2 12,33,685/-. HE FURTHER OBSERVED THAT THE LONG TER M CAPITAL GAIN WAS CLAIMED AS EXEMPT U/S 10(38) OF THE INCOME TAX ACT, 1961 (THE ACT). SINCE THE INCOME FROM SHORT TERM CAPITAL GAIN AND L ONG TERM CAPITAL GAIN AROSE FROM THE TRANSACTIONS IN SHARES, THE A.O., CO NSIDERING THE VOLUME, MAGNITUDE, FREQUENCY OF TRANSACTIONS, PERIOD OF HOL DING, HELD THAT INCOME FROM SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN SHOWN BY THE ASSESSEE AS BUSINESS INCOME. ON APPEAL, THE LD. CI T(A) OBSERVED THAT THE ASSESSEE BORROWED FUNDS TO THE EXTENT OF RS. 177 LA CS TO INDULGE IN THE TRANSACTIONS OF SALE AND PURCHASE THROUGH PMS, HELD THAT THE INCOME FROM SHARE TO THE EXTENT OF BORROWINGS OF RS. 177 L ACS SHOULD BE TAKEN AS BUSINESS INCOME AND NOT SHORT TERM CAPITAL GAIN. T HIS AMOUNT WAS WORKED OUT BY THE LD. CIT(A) AT RS. 43,25,884/- AND THE BALANCE AMOUNT OF RS. 56,99,113/- WAS HELD TO BE SHORT TERM CAPITA L GAIN AND ALSO RS. 12,33,685/- AS LONG TERM CAPITAL GAIN. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL TAKING FOLLOWING GROUNDS OF APPEAL :- 1) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) , 24 MUMBAI (HEREINAFTER REFERRED TO AS THE LEARNED CIT(A) ERRE D IN HOLDING THAT INCOME OF RS. 43,25,884/- RECEIVED BY APPELLANT FROM INVES TMENT IN J.M. MORGAN STANLEY PORTFOLIO MANAGEMENT SCHEME (CORE AND VOYAG ER SCHEMES) WAS CORRECTLY ASSESSED AS BUSINESS INCOME BY THE ASSE SSING OFFICER. 1.1) THE LEARNED CIT(A) ERRED IN HOLDING THAT AS TH E INVESTMENT OF RS. 200 LACS MADE BY THE APPELLANT IN J.M. MORGAN STANL EY SCHEMES (CORE AND VOYAGER) WAS MAINLY OUT OF FUNDS BORROWED BY TH E APPELLANT FROM HER HUSBAND AND FATHER-IN-LAW, THE INCOME ARISING FROM SUCH SCHEMES WAS ASSESSABLE AS BUSINESS INCOME. 1.2) THE LEARNED CIT(A) FAILED TO APPRECIATE THAT T HE INVESTMENT IN PORTFOLIO MANAGEMENT SCHEMES WERE ALWAYS TREATED IN THE BOOKS OF ITA NO.6663/MUM/2009 3 ACCOUNT BY THE APPELLANT AS INVESTMENTS AND NEVER AS STOCK IN TRADE AND THAT THE APPELLANT HAS NEVER CARRIED ON ANY BUS INESS, NEITHER IN SHARES NOR IN ANY OTHER COMMODITIES. 4. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE SUBMITS THAT THE TRIBUNAL IN ASSESSEES OWN CASE IN THE APP EAL FILED BY THE REVENUE FOR THE SAME ASSESSMENT YEAR IN ITA NO. 206 /PN/2010 FOR A.Y. 2006-07 ORDER DTD. 17-4-2012 HELD THAT THE INCOME F ROM SHARES THROUGH PMS IS TO BE TREATED AS CAPITAL GAIN AND NOT BUSINE SS INCOME AND, HENCE, UPHELD THE ORDER OF THE LD. CIT(A) IN TREATING THE BALANCE AMOUNT OF RS. 56,99,113/- AS SHORT TERM CAPITAL GAIN AND RS. 12,3 3,683/- AS LONG TERM CAPITAL GAIN. HE, THEREFORE, SUBMITS THAT FOLLOWIN G THE SAME, THE ADDITION SUSTAINED BY THE LD. CIT(A) OF RS. 43,25,884/- AS B USINESS INCOME BE ALSO TREATED AS SHORT TERM CAPITAL GAIN. HE ALSO P LACED ON RECORD THE COPY OF THE SAID ORDER OF THE TRIBUNAL. 5. ON THE OTHER HAND, THE LD. D.R. SUPPORTS THE ORD ER OF THE A.O. AND TO THE EXTENT THE LD. CIT(A). 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FI ND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUT E THAT THE INCOME FROM SALE OF SHARES HAS BEEN EARNED BY THE ASSESSEE THRO UGH PMS ACTIVITIES. THE TRIBUNAL IN ASSESSEES OWN CASE HAS HELD VIDE P ARA NO. 4 OF ITS ORDER AS UNDER:- 4. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATI VE AND PERUSED THE RELEVANT MATERIAL. THERE IS NO APPEARANCE FROM THE SIDE OF THE ITA NO.6663/MUM/2009 4 ASSESSEE DESPITE NOTICE. INSOFAR AS THE QUESTION OF EARNING INCOME THROUGH PMS IS CONCERNED, WE FIND THAT THE SAME HAS BEEN ANSWERED BY THE MUMBAI BENCH OF THE TRIBUNAL IN ITO VS. RADHE B IRJU PATEL IN ITA NO. 5382/MUM/2009 IN FAVOUR OF THE ASSESSEE. VIDE ORDE R DT. 30 TH NOVEMBER, 2010, THE TRIBUNAL IN THE AFORE-NOTED CASE HAS HELD THAT THE TRANSACTIONS IN SHARES CARRIED OUT BY THE ASSESSEE THROUGH PMS A RE MEANT FOR MAXIMIZATION OF WEALTH RATHER THAN ENCASHING THE PR OFIT ON APPRECIATION IN VALUE OF SHARES. THUS IT HAS BEEN HELD IN THIS CAS E THAT INCOME FROM SHARES THROUGH PMS IS TO BE TREATED AS CAPITAL GAIN AND NOT BUSINESS INCOME. THE IMPUGNED ORDER, BEING IN CONFORMITY WI TH THE ORDER OF THE MUMBAI BENCH OF THE TRIBUNAL, DOES NOT REQUIRE ANY INTERFERENCE. WE, THEREFORE, UPHOLD THE SAME. 7. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BRO UGHT ON RECORD BY THE REVENUE TO SHOW THAT THE EARNING OF INCOME WAS NOT THROUGH PMS, WE RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL (SUPRA) AND THE CONSISTENT VIEW OF THE TRIBUNAL HOLD THAT THE TRANS ACTIONS IN SHARES CARRIED OUT BY THE ASSESSEE THROUGH PMS ARE TO BE T REATED AS SHORT TERM CAPITAL GAIN AND NOT BUSINESS INCOME AND ACCORDINGL Y WE WHILE REVERSING THE ORDER PASSED BY THE LD. CIT(A) ON THIS ACCOUNT, ALLOW THE GROUNDS TAKEN BY THE ASSESSEE. 8. GROUND NO. 2 AND 2.1 ARE AGAINST THE SUSTENANCE OF ADDITION U/S 14A R.W. RULE 8-D OF THE ACT. 9. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE DOES NOT PRESS THE ABOVE GROUND WHICH WAS NOT OBJECTED TO BY THE LD. D.R. 10. THAT BEING SO AND IN THE ABSENCE OF ANY SUPPORT ING MATERIAL BROUGHT ON RECORD BY THE LD. COUNSEL FOR THE ASSESS EE, THE GROUNDS TAKEN BY THE ASSESSEE ARE, THEREFORE, REJECTED BEING NOT PRESSED. ITA NO.6663/MUM/2009 5 11. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED . ORDER PRONOUNCED ON 21-11-2012. SD/- (N.K. BILLAIYA ) ACCOUNTANT MEMBER SD/- (DINESH KUMAR AGARWAL) JUDICIAL MEMBER MUMBAI, DATED : 21-11-2012. RK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- 33, MUMBA I 4. COMMISSIONER OF INCOME TAX 22, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH I, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI