ADDL CIT 9(2), MUMBAI V. THE BOMBAHY OIL INDUSTRIES P. LTD, MUMBAI

ITA 6712/MUM/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4003 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 01-10-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 05-10-2011
• Court: TRIBUNAL
• Department Lawyers: U B JAKKE
• Keywords: Business income

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI PAWAN SINGH , JM ./ ITA NO. 6712 / MUM/20 1 1 ( / ASSESSMENT YEAR : 20 0 8 - 09 ) ADL.CIT(9)(2 ) , MUMBAI - 400020 VS. M/S THE BOMBAY OIL INDUSTRIES PVT. LTD., 411, SHAH AND NAHAR INDL. ESTATE DR. E. MOSES RD., WORLI NAKA, MUMBAI - 400018 ./ ./ PAN/GIR NO. : A A A CT 1392 D ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI U.B.JAKKE /ASSESSEE BY : SHRI NITESH JOSHI / DATE OF HEARING : 05 / 04 /201 6 / DATE OF PRONOUNCEMENT 13 / 04 /201 6 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED B Y THE REVENUE AGAINST THE ORDER OF CIT(A) - MUMBAI, DATED FOR THE ASSESSMENT YEAR 20 0 8 - 20 09 , IN THE MATTER OF ORDER PASSED U/S. 143 ( 3 ) OF THE I.T.ACT, WHEREIN THE REVENUE IS AGGRIEVED BY THE ACTION OF THE CIT(A) FOR TREATING THE PROFIT ON SALE OF SHARES AS CAPITAL GAINS IN PLACE OF BUSINESS PROFIT AS TREATED BY THE AO. 2. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT THE AO HAS TREATED THE SHORT TERM AND LONG TERM CAPITAL GAIN SO EARNED BY THE ASSESSEE ON SALE OF SHARES AS BUSINESS INCOME. THE CIT(A) HAS DELETED THE SAME AFTER OBSERVING THAT ASSESSEE HAS BEEN CONSISTENTLY SHOWING ITA NO. 6712 /1 1 2 THE SHARES WHICH HAVE LED TO LONG TERM AND SHORT TERM CAPITAL GAIN AS INVESTMENTS IN ITS BOOKS OF ACCOUNTS. THE ASSESSEE HAS ALSO MADE PROFIT OUT OF SHARES HELD BY PORTFOLIO MANAGERS. IT WAS ALSO BROUGHT TO OUR NOTICE THAT THE AO HIMSELF HAS ACCEPTED PROFIT ON SALES OF SHARES UNDER THE HEAD CAPITAL GAINS WHILE FRAMING THE ASSESSMENT U/S .143(3) FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. RECENTLY THE CBDT HAS ALSO BROUGHT CIRC ULAR NO.6/2016, DATED 29 - 2 - 2016 FURTHER CLARIFY THE POSITION THAT SHARES HELD FOR MORE THAN 12 MONTHS AND PROFIT ARISING THEREFROM SHOULD BE TREATED AS CAPITAL GA IN INSTEAD OF BUSINESS PROFIT . WITH REGARD TO THE SHARES HELD AS INVESTMENT AND PROFIT ACCRUING THEREON WAS ALLOWABLE TO CAPITAL GAIN TAX, THE CIT(A) GIVEN ITS FINDING AS UNDER : - 4. I HAVE PERUSED THE ASSESSMENT ORDER AND WRITTEN SUBMISSIONS OF THE APPEL LANT. IN THIS CASE ASSESSING OFFICER HAS NOT ONLY TREATED THE SHORT TERM CAPITAL GAINS AS BUSINESS BUT ALSO TREATED THE LONG TERM CAPITAL GAIN AS BUSINESS ACTIVITY. IN DOING, SO HE FAILED TO TAKE INTO ACCOUNT THE MATERIAL FACT, THE APPELLANT HAS BEEN CONSI STENTLY SHOWING THE SHARES WHICH HAVE LED TO LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAINS AS INVESTMENTS IN ITS BOOKS OF ACCOUNTS. MOREOVER, THE APPELLANT HAD APPOINTED TWO COMPANIES AS PORTFOLIO MANAGERS. THE HON'BLE ITAT PUNE IN KRA HOLDING AND TR ADING P.LTD VS DCLT (ITA.NO.500/PN/2008) HAS HELD THAT GAINS MADE BY THE ASSESSEE ON TRANSACTIONS MADE THROUGH PORTFOLIO MANAGERS ARE TO BE TAXED AS CAPITAL GAINS AND NOT INCOME FROM BUSINESS AS THE OBJECT OF PORTFOLIO MANAGEMENT SERVICES (PMS) WAS TO MAXI MIZE THE VALUE OF PORTFOLIO. APPELLANT HAS EFFECTIVELY AND COMPREHENSIVELY REBUTTED EACH AND EVERY POINT OF THE ASSESSING OFFICER IN TREATING THE LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAINS AS BUSINESS INCOME AND HAS MADE A CONVINCING CASE OF TREA TING THE SALE OF SHARES AS LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAINS. IT IS ALSO RELEVANT TO ADD THAT IN IMMEDIATE PRECEDING YEAR, THE ASSESSING OFFICER HAD ACCEPTED THE GAINS AS CAPITAL GAINS U/S.143(3). EVEN THOUGH THE PRINCIPLES OF RES - JUDIC ATA DO NO STRICTLY APPLY IN INCOME - TAX PROCEEDINGS, IT IS WELL SETTLED LAW THAT PRINCIPLES OF CONSISTENCY CANNOT BE IGNORED. THE PRESENT CASE IS ALSO COVERED BY THE DECISION OF HON'BLE MUMBAI TRIBUNAL IN GOPAL PURHOIT WHICH HAS BEEN SUBSEQUENTLY UPHELD BY THE HON'BLE BOMBAY HIGH COURT ITA NO. 6712 /1 1 3 AS WELL AS APEX COURT. TO SUM UP, TAKING INTO ACCOUNT THE APPELLANT'S COMPREHENSIVE REBUTTAL, THE CONSISTENT TREATMENT IN THE BOOKS OF ACCOUNTS OF THE APPELLANT, THE UTILIZATION OF PMS MANAGERS AS WELL AS THE DECISION OF GOPAL PUROHIT IT IS HELD THAT THERE IS NO CASE FOR TREATING LONG TERM CAPITAL GAIN OF RS.,42,03,798/ - AND SHORT TERM CAPITAL GAINS OF RS.76,43,652/- ON SALES OF SHARES AND MUTUAL FUND UNITS AS INCOME FROM BUSINESS & PROFESSION. THIS GROUND IS IN FAVOUR OF APPEL LANT. THE ABOVE FINDING OF THE CIT(A) HAS NOT BEEN CONTROVERTED, ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) FOR TREATING THE PROFIT ARISING ON SALE OF SHARES AS CAPITAL GAINS IN PLACE OF BUSINESS PROFIT AS HELD BY THE AO. 3 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 1 3 /0 4 / 201 6 . SD/ - ( PAWAN SINGH ) SD/ - ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 13/04 /201 6 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//