M/s Sudera Services (P) Ltd., Kolkata V. The ITO, WD-8(4), KOLKATA, Kolkata

ITA 724/KOL/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1872 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Next Hearing Date: 06-09-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 25-05-2015
• Court: TRIBUNAL
• Assessee Lawyers: RAVI TULSIYAN LD
• Keywords: Gift; Business income; Charitable institution; Share purchase agreement; Speculation loss; Avoidance of tax; Scheme of amalgamation
• Section: 143(3)

Judgement Text

ITA NO. 724/KOL/15 M/S. SUDERA SERVICES PVT.LTD IN THE INCOME TAX APPELLATE TRIBUNAL,D BENCH, KOLKATA BEFORE: SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO. 724/KOL/2015 A.Y 2011-12 M/S. SUDERA SERVICES VS. INCOME TAX OFFICER PVT. LTD WARD 8(4), KOLKATA PAN: AADCS8060J (APPELLANT) (RESPONDENT) APPEARANCES BY : SHRI RAVI TULSIYAN, ADVOCATE, LD.AR FOR THE ASSESSEE SHRI RAJAT KUMAR KUREEL, JCIT, LD.SR.D R FOR THE REVENUE DATE OF HEARING : 20-01-2017 DATE OF PRONOUNCEMENT : 19-04-2017 O R D E R SHRI S.S. VISWANETHRA RAVI, JM :- THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DT : 20- 03-2015 PASSED BY THE COMMISSIONER OF INCOME TAX (A PPEALS), 3, KOLKATA FOR THE ASSESSMENT YEAR 2011-12. 2. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL:- 1. THE ORDERS PASSED BY THE LOWER AUTHORITIES ARE ARBITRARY, ERRONEOUS, WITHOUT PROPER REASONINGS, INVALID AND B AD IN LAW, TO THE EXTENT TO WHICH THEY ARE PREJUDICIAL TO THE INTERES TS OF THE APPELLANT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN SUSTAINING THE DISALLOWANCE OF LOSS OF RS.2,70,000/- FROM SPECULATION BUSINESS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN SUSTAINING THE ORDER OF THE A.O IN REJECTING THE CLAIM OF THE APPELLANT FOR TREATMENT OF INTEREST INCOME A S BUSINESS INCOME AND IN CONFIRMING THE TREATMENT OF THE SAME AS INCO ME FROM OTHER SOURCES. ITA NO. 724/KOL/15 M/S. SUDERA SERVICES PVT.LTD 4. THE APPELLANT CRAVES LEAVE TO AMEND, ALTER, MODI FY, SUBSTITUTE, ADD TO, ABRIDGE AND/ OR RESCIND ANY OR ALL OF THE A BOVE GROUNDS. 3. GROUND NO.1 RAISED BY THE ASSESSEE IS GENERAL IN NATURE. THEREFORE, IT NEEDS NO ADJUDICATION. 4. GROUND NO.2 IS RELATING TO SUSTENANCE OF DISALLO WANCE OF LOSS OF RS.2,70,00,000/- FROM SPECULATION BUSINESS. 5. THE FACTS RELATING TO THIS ISSUE ARE THAT THE AS SESSEE ON RECEIVING INVITATION FROM THE PROMOTERS, M/S. GCS C HEMICALS PVT. LTD TO INVEST IN THE REALTY BUSINESS WAS ALLOT TED 6,00,000/- SHARES, WHICH WAS PURCHASED AT A PREMIUM OF RS.40/- PER SHARE BEING FACE VALUE OF RS.10/- PER SHARE ON 27/3, 29/3 AND 30/03/2010. DUE TO SOME REASON SAID GCS CHEMICALS ABANDONED THE VENTURING INTO THE REAL ESTATE AND IM MEDIATELY DECIDED TO SELL OFF THE SHARES. ACCORDINGLY, THE AS SESSEE SOLD THE SAID 6,00,000 SHARES TO THREE GROUP COMPANIES OF M/S. GCS CHEMICALS P.LTD, M/S. SUDHIR CREDIT PVT. LTD, NAVNI TA TRADEFIN PVT. LTD AND M/S. RIDHIMA HOLDINGS PVT. LTD AT A TO TAL CONSIDERATION OF RS.30,00,000/-. THEREBY ACCORDING TO ASSESSEE THAT IT HAD SUFFERED LOSS TO THE TUNE OF RS.2,70,00 ,000/- AND CARRIED FORWARD THE SAME TO SUCCEEDING ASSESSMENT Y EAR FOR THE PURPOSE OF SETTING OFF THE SAME AGAINST SPECULATION PROFIT. THE AO DISALLOWED THE SAME ALLEGING THE SAME TO BE BOGU S AND TO THAT EFFECT AN ORDER U/S. 143(3) OF THE ACT WAS PAS SED ON 27- 01-2014. 6. THE CIT-A CONFIRMED THE VIEW OF THE AO IN DENYIN G THE CLAIM OF CARRY FORWARD THE LOSS BY THE ASSESSEE. ITA NO. 724/KOL/15 M/S. SUDERA SERVICES PVT.LTD 7. BEFORE US THE LD.AR SUBMITS AS UNDER:- 8. THE LD.AR SUBMITS THAT BOTH THE PURCHASE AND SAL E OF SHARES OF M/S. GCS CHEMICALS PVT. LTD. ARE DULY SUP PORTED BY ADEQUATE DOCUMENTARY EVIDENCES AND DREW OUR ATTENTI ON TO THE COPY OF RELEVANT BANK STATEMENT OF THE ASSESSEE COM PANY FOR THE RELEVANT PERIOD AS ENCLOSED AT PAGE NOS. 1-9 OF THE PAPER BOOK WHICH EVIDENCES THE FACT THAT BOTH THE PURCHAS E AND SALE OF SHARES OF M/S. GCS CHEMICALS PVT. LTD. HAS BEEN EFFECTED THROUGH ACCOUNT PAYEE CHEQUES. FURTHER IN SUPPORT O F THE GENUINENESS OF THE AFORESAID TRANSACTIONS OF PURCHA SE AND SALE OF SHARES OUR ATTENTION IS FURTHER INVITED TO RELEV ANT COPIES OF SHARE APPLICATION FORM, ALLOTMENT LETTER AND COPIES OF SALE BILL AS ENCLOSED AT PAGE NOS. 10-16 OF THE PAPER BOOK AN D ARGUED THAT THERE IS NO RESTRICTION IN THE INCOME TAX ACT THAT SALE OF SHARES CANNOT BE EFFECTED WITH A GROUP COMPANY OR T HAT IN EVERY CASE WHERE SALE OF SHARES HAS BEEN MADE TO GR OUP COMPANIES. 9. IN THIS REGARD, THE LD.AR PLACED RELIANCE ON A D ECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF BIRAJ INVESTMENT PVT. LTD., TAX APPEAL NO. 260 OF 2000. THE HON 'BLE HIGH COURT HELD AS UNDER: '17. WE ARE NOT INCLINED TO ACCEPT THE REVENUE'S CO NTENTION THAT THIS WAS A COLOURABLE DEVICE AND THAT THE ENTIRE AR RANGEMENT WAS A PAPER ARRANGEMENT. FIRSTLY, THERE IS NO PROVI SION IN THE ACT WHICH WOULD PREVENT THE ASSESSEE FROM SELLING L OSS MAKING SHARES. SIMPLY BECAUSE SUCH SHARES WERE SOLD DURING THE PREVIOUS YEAR WHEN THE ASSESSEE HAD ALSO SOLD SOME SHARES AT PROFIT BY ITSELF WOULD NOT MEAN THAT THIS IS A CASE OF COLOURABLE DEVICE OR THAT THERE IS A CASE OF TAX AVOIDANCE. FU RTHER, THERE IS NO RESTRICTION THAT SUCH SALE OR TRANSACTION CANNOT BE EFFECTED WITH A GROUP COMPANY....... ... ... ... ... ... UNDER ORDINARY CIRCUMSTANCES, I T IS ALWAYS OPEN TO THE ASSESSEE IN HIS OWN WISDOM TO EITHER HOLD ON TO CERTAIN BUNCH OF SHARES OR TO SELL THE SAME TO AVOID FURTHE R LOSS, IF HE FINDS THAT MARKET VALUE OF THE SHARES IS FAST DIMIN ISHING. IT IS EQUALLY OPEN FOR THE ASSESSEE TO EFFECT SUCH SALE D URING THE SAME YEAR WHEN HE ALSO CHOOSES TO DISPOSE OF CERTAI N PROFIT MAKING SHARES.... ITA NO. 724/KOL/15 M/S. SUDERA SERVICES PVT.LTD 18. IN THE CASE OF COMMISSIONER OF INCOME TAX V. SA KARLAL BALABHAI, 69ITR 186, A DIVISION BENCH OF THIS COURT OBSERVED THAT AVOIDANCE OF TAX CANNOT INCLUDE EVERY CASE OF REDUCTION OF TAX LIABILITY OF AN ASSESSEE. THE ASSESSEE MAY ENTE R INTO A TRANSACTION WHICH HAS THE EFFECT OF DIMINISHING HIS INCOME AND CONSEQUENTLY REDUCING HIS TAX LIABILITY. IN SUCH A CASE, THERE WOULD BE NO AVOIDANCE OF TAX, FOR EXAMPLE, A CASE W HERE THE ASSESSEE MAKES A GIFT OF SHARES TO HIS SON. BY REAS ON OF GIFT IN COME FROM THE SHARES WOULD NOT ACCRUE TO THE ASSESS EE BUT WOULD ACCRUE TO THE SON AND TO THAT EXTENT THE INCO ME OF THE ASSESSEE WOULD BE DIMINISHED AND HIS TAX LIABILITY REDUCED. THIS CANNOT BE REGARDED AS A CASE OF TAX AVOIDANCE EVEN IF THE MOTIVE OF THE ASSESSEE IN MAKING THE GIFT WAS TO SA VE TAX ON THE INCOME FROM SHARES AT A HIGHER RATE APPLICABLE TO H IM. UNDER THE CIRCUMSTANCES, EVEN WITHOUT REFERRING TO THE DECISION OF THE APEX COURT IN THE CASE OF AZADI BACHAO ANDOL AN (SUPRA) AND THE OBSERVATIONS MADE IN THE LATER DECISION IN THE CASE OF VODAFONE (SUPRA), WE DO NOT FIND THAT THIS A CASE W HICH WOULD FALL WITHIN THE PARAMETERS OF THE DECISION IN THE C ASE OF ME DO WELL & COMPANY LTD (SUPRA).' 10. THE LD.AR ARGUED THAT IT IS EVIDENT THAT ASSESS EE'S CASE IS ON AN EVEN BETTER FOOTING SINCE SALE HAS NOT BEEN M ADE TO ASSESSEE'S GROUP COMPANY. IN THE INSTANT CASE, GCS CHEMICALS PVT. LTD. AND ITS GROUP COMPANIES ARE NOT RELATED T O THE ASSESSEE AND HENCE, IT CANNOT BE SAID THAT THE ASSE SSEE DERIVED ANY BENEFIT FROM THE SAID TRANSACTIONS AND FURTHER, SUBMITTED THAT EVEN THE CIT-A HAS ACCEPTED THE ABOVE CONTENTI ON. THE LD.AR ARGUES THAT IT IS APPARENT THAT THE OBSERVATI ON OF THE CIT-A IS ITSELF CONTRADICTORY. ON ONE HAND HE IS AC CEPTING THE ASSESSEE'S CONTENTION THAT SHARES MAY BE SOLD TO AN Y PERSON AND THAT TOO AT A LOSS AT THE WILL OF THE HOLDER OF SHARES, YET, ON THE OTHER HAND HE IS HOLDING THAT THE TRANSACTION O F PURCHASE AND SALE OF SHARES OF M/S. GCS CHEMICALS PVT. LTD. LEADING TO LOSS IS BOGUS. FURTHER, THAT THE ASSESSEE BY ENTERI NG INTO THE ABOVE TRANSACTION OF PURCHASE AND SALE OF SHARES HA S NOT DERIVED ANY TAX BENEFIT NEITHER IN THE RELEVANT ASS ESSMENT YEAR NOR IN SUBSEQUENT ASSESSMENT YEARS. 11. OUR ATTENTION IS INVITED TO THE SCHEDULE OF 'DE TAILS OF LOSSES TO BE CARRIED FORWARD TO FUTURE YEARS' AS CO NTAINED IN THE INCOME TAX RETURN FOR THE RELEVANT A.Y.2011-12, COPY OF ITA NO. 724/KOL/15 M/S. SUDERA SERVICES PVT.LTD WHICH IS ENCLOSED AT PAGE NOS. 56-86 OF THE PAPER B OOK AND THAT SPECULATION LOSS TO THE TUNE OF RS.2,70,00,000 /- BELONGING TO THE CURRENT YEAR HAS BEEN CARRIED FORWARD TO SUC CEEDING ASSESSMENT YEAR FOR THE PURPOSE OF SETTING OFF THE SAME AGAINST SPECULATION INCOME. AGAIN, IN THE SUCCEEDING ASSESS MENT YEAR, THE ASSESSEE HAS NOT CLAIMED ANY SET OFF OF THE ABO VE-SAID LOSS OWING TO THE FACT THAT THERE WAS NO PROFIT FROM SPE CULATION BUSINESS IN THAT YEAR. REFERENCE IS INVITED TO COPY OF INCOME TAX RETURN FOR THE SUCCEEDING A.Y.2012-13, COPY OF WHICH IS ENCLOSED AT PAGE NOS. 88-132 OF THE PAPER BOOK. THE LD.AR SUBMITS THAT THE PERUSAL OF THE RELEVANT SCHEDULE D EPICTING THE DETAILS OF CARRY FORWARD OF LOSSES TO FUTURE YEARS REVEALS THAT THE ABOVE CLAIM OF SPECULATION LOSS WHICH HAS BEEN CARRIED FORWARD FROM RELEVANT ASSESSMENT YEAR HAS BEEN FURT HER CARRIED FORWARD TO NEXT ASSESSMENT YEAR I.E. A.Y. 2013-14. 12. THE LD.AR SUBMITS THAT THE ASSESSEE COMPANY WAS AMALGAMATED WITH M/S. ABL INTERNATIONAL LTD. (PRESE NTLY KNOWN AS SUDERA REALTY PVT. LTD.) W.E.F. 01/04/2012. IN T HE SCHEME OF AMALGAMATION, THE SAID LOSS WAS NOT CARRIED FORWARD AND AS A RESULT THE SAME GOT LAPSED. COPY OF THE SCHEME OF AMALGAMATION OF THE ASSESSEE COMPANY WITH MLS.ABL INTERNATIONAL LTD. ENCLOSED AT PAGE NOS. 195-219 OF THE PAPER BOOK. THE LD.AR ARGUED THAT THERE WAS NO ULTERIOR M OTIVE BEHIND ENTERING INTO THE ALLEGED TRANSACTION OF PUR CHASE AND SALE OF SHARES OF M/S. GCS CHEMICALS PVT. LTD., AS CLAIMED BY THE AO AND THE CIT-A AND SUBMITS THAT IT CANNOT BE INFERRED THAT THE CLAIM OF SPECULATION LOSS AS A RESULT OF T HE AFORESAID TRANSACTIONS OF PURCHASE AND SALE OF SHARES IS BOGU S. ITA NO. 724/KOL/15 M/S. SUDERA SERVICES PVT.LTD 13. IN THIS REGARD PLACED RELIANCE ON THE DECISION OF THE HONBLE HIGH COURT OF CALCUTTA IN THE CASE OF CIT V . LAKSHMANGARH ESTATE & TRADING CO. LTD. REPORTED IN (2014) 220 TAXMAN 122 (MAG.)(CAL.)(HC). IN THE SAID CASE, THE ASSESSEE HAD PURCHASED SHARE S OF HINDUSTAN DEVELOPMENT CORPORATION LTD. FROM TWO SELLERS, ONE OF THEM WAS A SEAM TAINTED COMPANY. THE ASSESSEE SOLD THE SHARES AT A LOSS OF RS. 4,50,04,414 TO ONE OF ITS GROUP COMPANIES. THE AFORESAID LOSS W AS SOUGHT TO BE SET OFF AGAINST THE LONG TERM CAPITAL GAINS. THE AO DISALLOWED THE CLAIM OF SETTING OFF. ON APPEAL, THE CIT(A) HELD THAT THE PURCHASE OF THE SHARES WAS GENUINE, BUT THE SALE WAS A COLOURABLE TRANSACTION CONSIDERI NG THE FACT THAT THE ASSESSEE PURCHASED THE SAME SCRIP AFTER SOMETIME AN D THE SALE TO THE GROUP COMPANY WAS FINANCED BY THE ASSESSEE HIMSELF. HE THEREFORE UPHELD THE ORDER OF THE AD. ON SECOND APPEAL, THE TRIBUNAL HAD GIVEN THE FINDIN GS OF FACT THAT THE TRANSACTION OF PURCHASE AND SALE WAS SUPPORTED BY C ONTRACT NOTES AND BILLS. BOTH THE SALE AND PURCHASE TOOK PLACE AT THE PREVAL ENT MARKET RATE AND PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES. THESE TRANSACTIONS WERE DULY CONFIRMED NOT ONLY BY THE BROKERS, BUT ALSO BY THE INSPECTOR APPOINTED BY THE A. FURTHERMORE, THE ALLEGED FINANCING BY THE SELLER FO R PURCHASE OF THE SHARES WAS AN INSIGNIFICANT PART OF THE TOTAL PURCHASE PRI CE. THE TOTAL PURCHASE PRICE WAS RS. 18.99 CRORE, WHEREAS THE FINANCING WA S RESTRICTED TO RS. 2.60 CRORE ON INTEREST ON COMMERCIAL RATES. THE TRIBUNAL HELD THAT BOTH THE SALE AND PURCHASE OF SHARES WERE GENUINE TRANSACTIONS. THE HIGH COURT HELD THAT BASIS OF SUSPICION, HOWSOE VER STRONG, IT IS NOT POSSIBLE TO RECORD ANY FINDING OF FACT. AS A MATTER OF FACT, SUSPICION CAN NEVER TAKE THE PLACE OF PROOF THE FINDING ARRIVED A T BY THE TRIBUNAL THAT BOTH THE SALE AND PURCHASE WERE GENUINE TRANSACTION S WAS NOT EVEN ALLEGED BY THE REVENUE TO HAVE NOT BEEN BASED ON EVIDENCE. SINCE THE FINDING OF THE TRIBUNAL WAS FACTUALLY CORRECT, THE TRIBUNAL HA D NO OPTION BUT TO DIRECT THE AO TO GIVE THE BENEFIT OF THE LOSSES SUFFERED B Y THE ASSESSEE, WHICH HE HAD DISALLOWED. THE APPEAL DID NOT RAISE ANY QUESTI ON OF LAW AND WAS THEREFORE NOT TO BE ADMITTED. (A Y. 1995-96). 14. THE LD.AR ARGUED THAT IN VIEW OF THE FACT BOTH THE AO AS WELL THE CIT-A HAVE FAILED TO BRING ON RECORD ANY C ONCLUSIVE MOTIVE BEHIND THE ACQUISITION AND SALE OF SHARES OF M/S. GCS CHEMICALS PVT. LTD., IT IS ABUNDANTLY CLEAR THAT TH ERE IS NO INFIRMITY IN THE CLAIM OF THE ASSESSEE OF THE RESUL TANT LOSS ARISING FROM THE SAID TRANSACTIONS. IN THE INSTANT CASE, THE ASSESSEE HAS NEITHER ADJUSTED THE ALLEGED LOSS IN T HE RELEVANT ASSESSMENT NOR IN THE SUCCEEDING A.Y. 2012-13 AND F INALLY PURSUANT TO THE AMALGAMATION OF THE ASSESSEE COMPAN Y WITH M/S. ABL INTERNATIONAL LTD. (PRESENTLY KNOWN AS SUD ERA REALTY ITA NO. 724/KOL/15 M/S. SUDERA SERVICES PVT.LTD PVT. LTD.) W.E.F. 01/04/2012, THE SAME GOT LAPSED. THEREFORE, IT IS CLEAR THAT THERE WAS NO ULTERIOR MOTIVE OF THE A SSESSEE BEHIND ENTERING INTO THE ABOVE TRANSACTION OF PURCH ASE AND SALE OF SHARES OF G.C.S CHEMICALS. THE LD.AR URGED THAT THE ASSESSEE HAVING ESTABLISHED THE GENUINENESS OF THE AFORESAID TRANSACTION OF PURCHASE AND SALE OF SHARES AND BOTH THE AO AND THE CIT-A HAVING FAILED UTTERLY IN PROVING THEIR ST AND, THE ASSESSEE'S CLAIM FOR CARRY FORWARD OF SPECULATION L OSS TO THE TUNE OF RS.2,70,00,000/- MAY KINDLY BE ALLOWED AND THE ADDITION MADE IN THIS REGARD MAY BE DELETED. 15. THE LD.DR SUBMITS THAT THE CIT-A HAS GIVEN VALI D REASONS IN UPHOLDING THE ORDER OF THE AO AND ARGUED THAT TH E PURCHASE OF 6,00,000 SHARES IN THE MONTH OF MARCH, 2010 AND SELLING THE SAME ON VERY NEXT MONTH I.E APRIL 2010 FOR RS.5/- P ER SHARE TO THOSE COMPANIES BELONGING TO M/S. GCS CHEMICALS TO SHOW THE LOSS AND TO AVOID TAXES THEREON. HE REFERRED TO PAG ES 22-29 OF THE PAPER BOOK AND ARGUED THAT ALL THE BETTER THING S ABOUT THE BUSINESS WERE SHOWN. THE LD.DR RELIED ON THE ORDERS OF THE AUTHORITIES. HE ALSO POINTED OUT THAT THE ASSESSEE COULD NOT SHOW ANY TRANSACTION OR NEGOTIATION SAID TO HAVE BE EN HELD IN ABANDONING THE IDEA OF REAL ESTATE BUSINESS. 16. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE MAIN ISSUE IN THE PRESENT APPEAL IS WIT H RESPECT TO THE LOSS ON SALE OF SHARES OF GCS CHEMICALS PRIVATE LIMITED. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAD SOLD THE SHARES OF A PRIVATE LIMITED AND IS NOT LISTED ON THE STOCK EXCHANGE. THE AO DOUBTED THE TRANSACTI ON FOR THE SALE & PURCHASE OF SHARES BY OBSERVING THAT THE ASSESSEE H ELD THE SHARES FOR A SHORT TIME AND THESE WERE SOLD TO THE ASSOCIATED PA RTIES. COMMISSIONER OF INCOME-TAX (APPEALS) ALSO CONFIRMED THE SAME. HOWEV ER ON PERUSAL OF ITA NO. 724/KOL/15 M/S. SUDERA SERVICES PVT.LTD RECORDS WE FIND THAT THE LOWER AUTHORITIES HAVE NOT POINTED OUT ANY DEFECT IN THE DOCUMENTS FOR THE PURCHASE & SALE OF SHARES. THE SHARES WERE SOLD TO OTHER COMPANIES WHICH ARE SEPARATE LEGAL ENTITIE S AND THE CONSIDERATION OF THE SAME WAS RECEIVED BY THE ASSES SEE FROM THE SELLER THROUGH BANKING CHANNELS. THE LOWER AUTHORITIES HAV E DENIED THE CLAIM OF THE ASSESSEE FOR THE IMPUGNED LOSS ON THE GROUND TH AT NO PRUDENT BUSINESS MAN WILL INDULGE IN THE IMPUGNED LOSS. HOW EVER WE FIND THAT IN THE SIMILAR FACTS & CIRCUMSTANCES THE HON'BLE APEX COURT IN THE CASE OF UNION OF INDIA V. AZADI BACHAO ANDOLAN [2003] 263 ITR 706 (SC) HELD THAT THE TRANSACTION OF SALE OF SHARES IN THE PRESE NT CASE CANNOT BE CONSIDERED AS A SHAM OR A DEVICE TO VOID TAX. AN ACT WHICH IS OTHERWISE VALID IN LAW CANNOT BE T REATED AS NON EST MERELY ON THE BASIS OF SOME UNDERLYING MOTIVE SUPPOSEDLY RESULTING IN SOME ECONOMIC DETRIMENT OR PREJUDICE TO THE NATIONAL INTERESTS; NOT ONLY IS THE PRINCIPLE I N DUKE OF WESTMINSTER ALIVE AND KICKING IN ENGLAND, BUT IT ALSO SEEMS TO HAVE ACQUIRED JUDICIA L BENEDICTION OF THE CONSTITUTIONAL BENCH IN INDIA, NOTWITHSTANDING THE TEMPORARY TURBULENCE CREATED IN THE WAKE OF MCDOWELL. 17. FURTHER, THE HONBLE HIGH COURT OF GUJARAT IN T HE CASE OF ASTT. CIT (APPEALS) VS. BIRAJ INVESTMENT PVT. LTD R EPORTED IN TAX APPEAL NO. 260 OF 200 DATED 07-08-2012, RELEVAN T PARAS OF FINDING ARE REPRODUCED HEREIN BELOW:- 17. WE ARE NOT INCLINED TO ACCEPT THE REVENUE'S CON TENTION THAT THIS WAS A COLOURABLE DEVICE AND THAT THE ENTIRE ARRANGE MENT WAS A PAPER ARRANGEMENT. FIRSTLY, THERE IS NO PROVISION IN THE ACT WHICH WOULD PREVENT THE ASSESSEE FROM SELLING LOSS MAKING SHARE S. SIMPLY BECAUSE SUCH SHARES WERE SOLD DURING THE PREVIOUS YEAR WHEN THE ASSESSEE HAD ALSO SOLD SOME SHARES AT PROFIT BY ITSELF WOULD NOT MEAN THAT THIS IS A CASE OF COLOURABLE DEVICE OR THAT THERE IS A CASE O F TAX AVOIDANCE. FURTHER, THERE IS NO RESTRICTION THAT SUCH SALE OR TRANSACTION CANNOT BE EFFECTED WITH A GROUP COMPANY. AS LONG AS THE REVEN UE COULD NOT DOUBT THE SALE PRICE OF THE SHARES, IT WOULD NOT BE OPEN FOR THE REVENUE TO CONTEND THAT THE ASSESSEE HAD SHOWN LOSS WHICH IT D ID NOT REALLY SUFFER. IN THE PRESENT CASE, IT IS NOT EVEN THE CASE OF THE REVENUE THAT SHARES WERE SOLD AT A PRICE LOWER THAN THE MARKET RATE. IF THAT BE SO, THE QUESTION OF INFLATING THE LOSS BY TRANSFERRING THE SHARES TO GROUP COMPANY WOULD NOT ARISE. UNDER ORDINARY CIRCUMSTANC ES, IT IS ALWAYS OPEN TO THE ASSESSEE IN HIS OWN WISDOM TO EITHER HO LD ON TO CERTAIN BUNCH OF SHARES OR TO SELL THE SAME TO AVOID FURTHE R LOSS, IF HE FINDS THAT MARKET VALUE OF THE SHARES IS FAST DIMINISHING . IT IS EQUALLY OPEN FOR THE ASSESSEE TO EFFECT SUCH SALE DURING THE SAM E YEAR WHEN HE ALSO CHOOSES TO DISPOSE OF CERTAIN PROFIT MAKING SHARES. IN THE PRESENT CASE, OF COURSE, THERE IS A FURTHER ANGLE OF THE SH ARES IN QUESTION BEING PLEDGED TO LDBI AND THEREFORE IT WOULD NOT BE POSSI BLE FOR THE ASSESSEE TO DELIVER THE ORIGINAL SHARE CERTIFICATES TO ITS P URCHASER ALONG WITH THE DULY SIGNED TRANSFER FORMS, AS ALREADY NOTED, SUCH SPECIAL ANGLE MAY HAVE REPERCUSSION INSOFAR AS THE LEGAL RELATION BET WEEN THE ASSESSEE AND THE IDB[ IS CONCERNED AND INSOFAR AS THE PURCHA SER'S RIGHT TO HAVE SHARES TRANSFERRED IN ITS NAME IS CONCERNED. THIS, HOWEVER, BY ITSELF ITA NO. 724/KOL/15 M/S. SUDERA SERVICES PVT.LTD WOULD NOT ESTABLISH THAT THE SALE OF SHARES WAS ONL Y A PAPER TRANSACTION AND A DEVICE CONTRIVED BY THE ASSESSEE TO CLAIM LOSS WHICH IT DID NOT SUFFER AND THEREBY SEEK SET OFF AGAINST THE CAPITAL GAIN RECEIVED BY IT DURING THE YEAR UNDER CONSIDERATION. 18. IN THE CASE OF COMMISSIONER OF LNCOME TAX V. SA KARLAL BALABHAI, 69 ITR 186, A DIVISION BENCH OF THIS COURT OBSERVED TH AT AVOIDANCE OF TAX CANNOT INCLUDE EVERY CASE OF REDUCTION OF TAX LIABI LITY OF AN ASSESSEE. THE ASSESSEE MAY ENTER INTO A TRANSACTION WHICH HAS THE EFFECT OF DIMINISHING HIS INCOME AND CONSEQUENTLY REDUCING HI S TAX LIABILITY. IN SUCH A CASE THERE WOULD BE NO AVOIDANCE OF TAX, FOR EXAMPLE, A CASE WHERE THE ASSESSEE MAKES A GIFT OF SHARES TO HIS SO N. BY REASON OF GIFT INCOME FROM THE SHARES WOULD NOT ACCRUE TO THE ASSE SSEE BUT WOULD ACCRUE TO THE SON AND TO THAT EXTENT THE INCOME OF THE ASSESSEE WOULD BE DIMINISHED AND HIS TAX LIABILITY REDUCED. THIS C ANNOT BE REGARDED AS A CASE OF TAX AVOIDANCE EVEN IF THE MOTIVE OF THE A SSESSEE IN MAKING THE GIFT WAS TO SAVE TAX ON THE INCOME FROM SHARES AT A HIGHER RATE APPLICABLE TO HIM. 18. UNDER THE CIRCUMSTANCES, EVEN WITHOUT REFERRING TO THE DECISION OF THE APEX COURT IN THE CASE OF AZADI BACBAO ANDOLAN (SUPRA)AND THE OBSERVATIONS MADE IN THE LATER DECISION IN THE CASE OF VODAFONE (SUPRA), WE DO NOT FIND THAT THIS A CASE WHICH WOUL D FALL WITHIN THE PARAMETERS OF THE DECISION IN THE CASE OF MCDOWELL & COMPANY LTD (SUPRA). 18. WE ALSO FIND PERTINENT TO NOTE THAT THE ASSESSE E IN THE INSTANT CASE WAS AMALGAMATED IN THE SUBSEQUENT YEAR W.E.F. 1.4.2 012 AND IN THE SCHEME OF AMALGAMATION THE IMPUGNED LOSS WAS NOT CA RRIED FORWARD. THUS THE IMPUGNED LOSS GOT LAPSED AND IN THESE FACT S & CIRCUMSTANCES IT CANNOT BE INFERRED THAT THE ASSESSEE HAD MALA-FIDE INTENTION TO ESCAPE FROM THE TAX LIABILITY BY INCURRING THE IMPUGNED LO SS. IN HOLDING SO WE FIND SUPPORT FROM THE JUDGMENT OF HONBLE DELHI HIGH COU RT IN THE CASE OF CIT VS. GILLETTE DIVERSIFIED OPERATIONS PRIVATE LTD. RE PORTED IN 324 ITR 226 WHEREIN IT WAS HELD AS UNDER : AS NOTED BY THE CIT(A) AS WELL AS BY THE TRIBUNAL, SHARES IN QUESTION WERE HELD BY THE ASSESSEE COMPANY FOR MORE THAN THREE YEARS BEFORE T HEY WERE SOLD. THE ASSESSEE COMPANY WAS VERY MUCH ENTITLED IN LAW TO SELL THE SHARES HE LD BY IT AT ANY TIME, WHICH IT CONSIDERED TO BE APPROPRIATE FOR SUCH SALE. IT IS FOR THE HOLD ER OF THE SHARES AND NOT FOR THE REVENUE TO DECIDE, WHEN TO SELL THE SHARES HELD BY IT. THE CIT (A) WAS OF THE VIEW THAT THERE WAS NO NECESSITY TO SELL THE SHARES AS THE ASSESSEE ITSELF HAD RECEIVED BACK SHARE APPLICATION MONEY OR ADVANCE FOR SHARES FROM GGIPL/WISL/GDOPL AND THE SALE PROCEEDS WERE USED TO REDUCE LIABILITIES PRIOR TO AMALGAMATION OF ASSESSEE WITH GDOPL. HE WAS ALSO INFLUENCED BY THE FACT THAT THE SALE PROCEEDS WERE USED TO REPAY OUTSTANDI NG LIABILITY OF GGIPL WHICH WAS A GROUP COMPANY. IF THE SALE OF SHARES WAS NOT ILLEGAL, IT COULD HAVE BEEN MADE TO ANY ONE, INCLUDING A GROUP COMPANY. IT IS IMMATERIAL THAT THE PURPOSE OF SALE OF SHARES WAS TO REDUCE THE OUTSTANDING LIABILITIES OF THE ASSESSEE COMPANY. TH ERE WAS NOTHING ILLEGAL IN THE ASSESSEE COMPANY SELLING SHARES HELD BY IT, FOR THE PURPOSE OF REDUCING ITS LIABILITIES. IT IS ALSO ABSOLUTELY IMMATERIAL THAT THE LIABILITIES OF THE A SSESSEE COMPANY WERE TOWARDS GROUP COMPANIES. SIMILARLY, IT IS ALSO IMMATERIAL THAT TH E SHARES SOLD BY THE ASSESSEE COMPANY WERE OF ANOTHER GROUP COMPANY. IT IS ALSO IMMATERIA L AS TO WHO THE PURCHASER OF THE SHARES WAS, SO LONG AS THE SHARES ARE NOT SOLD AT A PRICE WHICH WAS HIGHER OR LOWER THAN THEIR FAIR PRICE AND THERE WAS NO RESTRICTION ON SALE OF SUCH SHARES TO A GROUP COMPANY. ALL THESE FACTORS COULD HAVE BEEN RELEVANT HAD THE TRIBUNAL F OUND THAT THE TRANSACTIONS UNDERTAKEN BY THE ASSESSEE COMPANY WERE A COLOURABLE DEVICE WITH A VIEW TO CAUSE A LOSS TO THE REVENUE. AS NOTED BY THE TRIBUNAL, NEITHER THE ASSESSEE COMP ANY NOR THE AMALGAMATED COMPANY ITA NO. 724/KOL/15 M/S. SUDERA SERVICES PVT.LTD ADJUSTED THE CAPITAL LOSS ON ACCOUNT OF SALE OF THE SE SHARES AGAINST ANY LONG-TERM CAPITAL GAIN EVEN TILL THE ASST. YR. 2002-03. NO TAX BENEFI T WAS, THEREFORE, OBTAINED BY THE ASSESSEE COMPANY FOR AT LEAST TWO YEARS AFTER THE CAPITAL LO SS WAS BOOKED BY IT. HENCE, IT CANNOT BE SAID THAT THE TRANSACTIONS IN QUESTION WERE A COLOU RABLE DEVICE, MEANT TO GAIN SOME UNFAIR TAX ADVANTAGE. 19. THE HONBLE CALCUTTA HIGH COURT IN THE SIMILAR FACTS & CIRCUMSTANCES HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE IN THE CASE OF CIT VS. LAKSHMANGARH & TRADING CO. LTD. REPORTED IN 220 TAX MAN 122 WHEREIN IT WAS HELD AS UNDER : 6. ON THE BASIS OF A SUSPICION HOWSOEVER STRONG IT IS NOT POSSIBLE TO RECORD ANY FINDING OF FACT. AS A MATTER OF FACT, SUSPICION CAN NEVER TAKE THE PLACE OF PROOF. WHAT WERE THE INDIVIDUAL FACTS AND CIRCUMSTANCES IN THE CASE OF O THER INVESTORS INDICATED IN THE CHART APPEARING AT PAGE-51 OF THE PAPER BOOK ARE NOT KNOW N TO US. IN SO FAR AS THE ASSESSEE IS CONCERNED, THE FACTS AND CIRCUMSTANCES ARE BEFORE U S WHICH WE HAVE ALSO TABULATED. THE FINDING ARRIVED AT BY THE TRIBUNAL INDICATED ABOVE WAS NOT EVEN ALLEGED BY MR. DUTTA TO HAVE NOT BEEN BASED ON EVIDENCE. IN THE TEETH OF THE AFO RESAID FINDINGS MADE BY THE TRIBUNAL ON THE BASIS OF EVIDENCE, IT IS DIFFICULT, IF NOT IMPO SSIBLE, TO HOLD THAT THE TRANSACTION OF BUYING AND SELLING OF SHARES OF HINDUSTAN DEVELOPMENT CORP ORATION LTD. WAS A COLOURABLE TRANSACTION OR WAS RESORTED TO WITH ANY ULTERIOR MO TIVE OF REDUCING THE TAX PAYABLE FOR LONG TERM CAPITAL GAIN. THE FIRST GROUND OF APPEAL IS RE GARDING PERVERSITY OF THE JUDGMENT OF THE LEARNED TRIBUNAL. MR. DUTTA DID NOT CITE ONE EXAMPL E TO SHOW THAT THE JUDGMENT OF THE LEARNED TRIBUNAL IS NOT BASED ON EVIDENCE. 20. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTAT IVE COULD NOT CONTROVERT THE ARGUMENTS OF THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) BY BRINGING ANY CONTRARY MATERIAL ON RECO RD. IN VIEW OF THE AFORESAID FACTS, WE REVERSE THE ORDER OF LOWER AUTH ORITIES. THUS THIS GROUND OF THE ASSESSEE IS ALLOWED. 21. GROUND NO.3 IS RELATING TO CONFIRMATION OF DISA LLOWANCE MADE BY THE AO ON ACCOUNT OF INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. 22. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE ASSESSEE EARNED INTEREST INCOME OF RS.45,0 2,913/- AND INCURRED EXPENDITURE OF RS.38,72,441/- IN EARNING SUCH INTEREST AND CLAIMED THE SAID INTEREST EXPENDITURE UNDER THE HEAD BUSINESS INCOME. ACCORDING TO AO, THE ASSESSEE ME NTIONED IT AS BUSINESS AS TRADER IN SHARES AS INVESTMENT IN TH E TAX AUDIT REPORT. BASING ON WHICH, THE FINDING OF ASSESSEE IS NOT THE ITA NO. 724/KOL/15 M/S. SUDERA SERVICES PVT.LTD BUSINESS OF GRANTING OF LOANS AND ADVANCES AND TREA TED THE INTEREST INCOME AS EARNED AS BUSINESS INCOME AND TR EATED THE SAME AS INCOME FROM OTHER SOURCES AND DISALLOWED TH E SAME. 23. THE CIT-A UPHELD THE FINDING OF THE AO. 24. BEFORE US THE LD.AR OF THE ASSESSEE SUBMITS AS UNDER:- 3.4 IN REGARD TO THE ABOVE, THE ASSESSEE WOULD LIK E TO FIRST SUBMIT THAT IN THE TAX AUDIT REPORT ONLY THE NAME OF THE PRINCIPAL BUSINESS OF THE COMPANY IS MENTIONED, WHICH IS TRADING IN SHARES AND INVEST MENT IN CASE OF THE ASSESSEE CONCERNED. APART FROM THE PRIMARY BUSINESS ACTIVITY NO OTHER BUSINESS ACTIVITIES ARE MENTIONED IN THE TAX AUDIT REPORT AND HENCE, THAT CANNOT BE A DETERMINATIVE FACTOR FOR CONSIDERING WH ETHER THE GRANTING OF LOANS AND ADVANCES, WHICH IS MENTIONED IN THE MEMOR ANDUM OF ASSOCIATION OF THE ASSESSEE COMPANY, IS ONE OF THE BUSINESS ACTIVI TIES OF THE ASSESSEE OR NOT. 3.5. FURTHER, THE ALLEGATION OF THE AO AS WELL AS T HE LD.CIT CA) THAT GRANTING OF LOANS AND ADVANCES NOT BEING INCLUDED IN THE MAI N OBJECTS OF THE MEMORANDUM OF THE ASSESSEE COMPANY, THE INTEREST IN COME EARNED AND INTEREST EXPENDITURE INCURRED DURING THE RELEVANT Y EAR FROM SUCH ACTIVITY CANNOT BE TREATED UNDER THE HEAD 'INCOME FROM BUSIN ESS', IS TOTALLY ILLOGICAL AND UNJUSTIFIED. THE FACT THAT GRANTING OF LOANS AN D ADVANCES IS MENTIONED UNDER 'INCIDENTAL OR ANCILLARY OBJECTS' AS CONTAINE D IN THE MEMORANDUM OF ASSOCIATION, HAS NOTHING TO DO WITH THE ASSESSEE'S CONTENTION THAT IT IS ALSO ENGAGED IN THE BUSINESS OF GRANTING OF LOANS AND AD VANCES IN ADDITION TO TRADING IN SHARES AND DEBENTURES. IT IS A COMMON FA CT THAT AS PER THE COMPANIES ACT, 1956, AN ASSESSEE IS ENTITLED TO CAR RY ON ANY BUSINESS WHICH IS EITHER MENTIONED IN THE MAIN OBJECTS OR IN THE A NCILLARY OBJECTS, AS CONTAINED IN THE MEMORANDUM OF ASSOCIATION OF THE C OMPANY. 3.6. HOWEVER, EVEN OTHERWISE, IT IS RELEVANT TO NOT E HERE THAT THE FACT THAT GRANTING OF LOANS AND ADVANCES IS ONE OF THE BUSINE SS ACTIVITIES OF THE ASSESSEE, IS ALSO MENTIONED IN THE MAIN OBJECTS OF THE MEMORANDUM OF ASSOCIATION OF THE ASSESSEE COMPANY. ATTENTION HERE IS INVITED TO RELEVANT CLAUSE 7 OF T HE MAIN OBJECTS, AS CONTAINED IN THE MEMORANDUM, COPY OF WHICH IS ENCLO SED AT PAGE NOS. 169- 194 OF THE P/B. THE SAID CLAUSE READS AS UNDER: '7. TO INVEST AND DEAL WITH THE MONEYS OF THE COMPA NY IN SUCH MANNER AS MAY BE DETERMINED FROM TIME TO TIME AND TO BORROW O R RAISE MONEY WITH OR WITHOUT SECURITY AND/OR BY THE ISSUE OR SALE OF ANY BONDS, MORTGAGES, DEBENTURES OR DEBENTURE-STOCK OF THE COMPANY, WHETH ER PERPETUAL OR OTHERWISE, AND TO DEVOTE ANY MONEY SO RAISED TO ANY OF THE OBJECTS OF THE COMPANY AND TO PROVIDE FINANCE WHETHER BY MAKING LO ANS OR OTHERWISE UPON SUCH TERMS AS MAY BE ARRANGED. ' THUS, PERUSAL OF THE ABOVE CLAUSE CLEARLY AFFIRMS T HE SAID FACT. 3.7. HAVING STATED AS ABOVE, THE ASSESSEE WOULD FUR THER LIKE TO INVITE ATTENTION TO THE FACT THAT SIMILAR TREATMENT OF INT EREST INCOME HAS BEEN ADOPTED BY THE ASSESSEE IN THE PRECEDING ASSESSMENT YEAR 2010-11 AND THE SAME HAS ALSO BEEN ACCEPTED BY THE DEPARTMENT IN TH AT YEAR. REFERENCE HERE IS INVITED TO THE COMPUTATION OF TOT AL INCOME ALONG WITH COPY OF ACCOUNTS OF THE ASSESSEE-COMPANY FOR THE A.Y. 20 10-11, AS ENCLOSED AT PAGE NOS. 151-162 OF THE P/B. FURTHER, COPY OF IT A CKNOWLEDGEMENT FOR THE A. Y. 2010-11 AND COPY OF INTIMATION U/S.143(1) FOR THE SAME YEAR ARE ALSO ENCLOSED IN THIS REGARD AT PAGE NOS. 163-167 OF THE P/B. ITA NO. 724/KOL/15 M/S. SUDERA SERVICES PVT.LTD PERUSAL OF THE AFOREMENTIONED DOCUMENTS AFFIRM THE FACT THAT SIMILAR TREATMENT OF INTEREST INCOME EARNED FROM THE BUSINE SS OF GRANTING LOANS AND ADVANCES WAS ACCEPTED AS SUCH IN THE PRECEDING ASSE SSMENT YEAR 2010-11. 3.8. THEREFORE, DIFFERENT TREATMENT OF INTEREST INC OME IN THE CURRENT ASSESSMENT YEAR IS NOT CALLED FOR WHEN THERE IS NO CHANGE IN THE FACTS OF THE PRESENT CASE IN COMPARISON TO THE EARLIER YEAR, AS FAR AS THIS ISSUE IS CONCERNED. 3.9. RELIANCE HERE IS PLACED ON THE DECISION OF THE APEX COURT IN THE CASE OF RADHASOAMI SATSANG V. COMMISSIONER OF INCOME-TAX RE PORTED IN 193 ITR 0321. IN THE SAID CASE THE HON'BLE APEX COURT HELD AS UND ER: 'THAT IN THE ABSENCE OF ANY MATERIAL CHANGE JUSTIFY ING THE DEPARTMENT TO TAKE A DIFFERENT VIEW FROM THAT TAKEN IN EARLIER PR OCEEDINGS, THE QUESTION OF THE EXEMPTION OF THE ASSESSEEAPPELLANT SHOULD NOT H AVE BEEN REOPENED. STRICTLY SPEAKING, RES JUDICATA DOES NOT APPLY TO I NCOME-TAX PROCEEDINGS. THOUGH, EACH ASSESSMENT YEAR BEING A UNIT, WHAT WAS DECIDED IN ONE YEAR MIGHT NOT APPLY IN THE FOLLOWING YEAR; WHERE A FUND AMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS H AS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NOT BE AT AL L APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR ' 3.10. FURTHER, RELIANCE IS PLACED ON THE DECISION O F THE HON 'BLE APEX COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. J.K. CHARITABLE TRUST REPORTED IN 15 DTR (SC) 41 WHEREIN IT WAS HELD THAT 'REVENUE HAVING NOT FILED ANY APPEAL IN OTHER ASSESSMENT YEARS, IT IS PRECLUDED F ROM FILING APPEALS IN THE RELEVANT ASSESSMENT YEARS INVOLVING IDENTICAL FACT SITUATION. IN THIS CASE, IT IS ACCEPTED BY THE COUNSEL FOR THE REVENUE THAT THE FACT SITUATION IN ALL THE ASSESSMENT YEARS IS SAME. ACCO RDING TO HIM, IF THE FACT SITUATION CHANGES THEN THE REVENUE CAN CERTAINLY PR EFER AN APPEAL NOTWITHSTANDING THE FACT THAT FOR SOME YEARS NO APP EAL WAS PREFERRED. ' 3.11. AGAIN, IN THE CASE OF BHARAT SANCHAR NIGAM LT D. V. UNION OF INDIA REPORTED IN 201 CTR 346, THE HON 'BLE SUPREME COURT PRONOUNCED THE JUDGMENT THAT WHERE THE FACTS AND LAW IN A SUBSEQUE NT ASSESSMENT YEAR ARE THE SAME NO AUTHORITY WHETHER QUASI JUDICIAL OR JUD ICIAL CAN GENERALLY BE PERMITTED TO TAKE A DIFFERENT VIEW. IT WAS HELD THAT 'RES JUDICATA DOES NOT APPLY IN MA TTERS PERTAINING TO TAX FOR DIFFERENT ASSESSMENT YEARS BECAUSE RES JUDICATA APP LIES TO DEBAR COURTS FROM ENTERTAINING ISSUES ON THE SAME CAUSE OF ACTION WHE REAS THE CAUSE OF ACTION FOR EACH ASSESSMENT YEAR IS DISTINCT. THE COURTS WI LL GENERALLY ADOPT AN EARLIER PRONOUNCEMENT OF THE LAW OR A CONCLUSION OF FACT UNLESS THERE IS A NEW GROUND URGED OR A MATERIAL CHANGE IN THE FACTUA L POSITION. THE REASON WHY COURTS HAVE HELD PARTIES TO THE OPINION EXPRESS ED IN A DECISION IN ONE ASSESSMENT YEAR TO THE SAME OPINION IN A SUBSEQUENT YEAR IS NOT BECAUSE OF ANY PRINCIPLE OF RES JUDICATA BUT BECAUSE OF THE TH EORY OF PRECEDENT OR PRECEDENTIAL VALUE OF THE EARLIER PRONOUNCEMENT. WH ERE THE FACTS AND LAW IN A SUBSEQUENT ASSESSMENT YEAR ARE THE SAME, NO AUTHO RITY WHETHER QUASI- JUDICIAL OR JUDICIAL CAN GENERALLY BE PERMITTED TO TAKE A DIFFERENT VIEW. ' 3.12. THUS, WHAT APPEARS FROM ABOVE IS THAT EVEN TH OUGH RES JUDICATA DOES NOT APPLY TO INCOME-TAX PROCEEDINGS, BUT, EACH ASSE SSMENT YEAR BEING A UNIT, WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY O R THE OTHER AND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT C HALLENGING THE ORDER, IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITI ON TO BE CHANGED IN A SUBSEQUENT YEAR. THE COURTS WILL GENERALLY ADOPT AN EARLIER PRONOUNC EMENT OF THE LAW OR A CONCLUSION OF FACT UNLESS THERE IS A NEW GROUND URG ED OR A MATERIAL CHANGE IN THE FACTUAL POSITION. THE REASON WHY COURTS HAVE HE LD PARTIES TO THE OPINION EXPRESSED IN A DECISION IN ONE ASSESSMENT YEAR TO T HE SAME OPINION IN A SUBSEQUENT YEAR IS NOT BECAUSE OF ANY PRINCIPLE OF RES JUDICATA BUT BECAUSE OF THE THEORY OF PRECEDENT OR PRECEDENTIAL VALUE OF THE EARLIER PRONOUNCEMENT. THEREFORE, WHERE THE FACTS AND LAW I N A SUBSEQUENT ITA NO. 724/KOL/15 M/S. SUDERA SERVICES PVT.LTD ASSESSMENT YEAR ARE THE SAME, NO AUTHORITY WHETHER QUASI-JUDICIAL OR JUDICIAL CAN GENERALLY BE PERMITTED TO TAKE A DIFFERENT VIEW . 3.13. FINALLY, IN VIEW OF THE ABOVE, IT IS CONCLUDE D THAT THE ASSESSEE HAS PRODUCED SUFFICIENT MATERIALS ESTABLISHING THE FACT THAT GRANTING OF LOANS AND ADVANCES IS ONE OF THE BUSINESS ACTIVITIES OF THE A SSESSEE AND AS SUCH, THE INTEREST INCOME EARNED FROM SUCH ACTIVITY IS RIGHTF ULLY TAXABLE AS 'BUSINESS INCOME'. IN THIS REGARD, IT IS TO BE NOTED THAT THE FACT THAT DURING THE RELEVANT YEAR THE ASSESSEE EARNED INTEREST INCOME F ROM TWO PARTIES AND THAT THE LOANS WERE SQUARED UP DURING THE RELEVANT FINAN CIAL YEAR ITSELF, WILL NOT HAVE ANY ADVERSE EFFECT IN THE TREATMENT OF THE INT EREST INCOME AS BUSINESS INCOME. IT IS ALREADY STATED ABOVE THAT THE DEPARTM ENT HAS ACCEPTED SIMILAR TREATMENT OF INTEREST INCOME IN THE PRECEDING ASSES SMENT YEAR 2010-11 AND AS SUCH, ON IDENTICAL SET OF FACTS AND LAW, THE AD CANNOT TAKE A DIFFERENT VIEW TO THE VIEW ALREADY TAKEN. 25. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORD ERS OF THE AUTHORITIES BELOW. 26. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE MAIN ISSUE IN THE PRESENT APPEAL IS WIT H RESPECT TO THE TREATMENT OF INTEREST INCOME AS INCOME FROM OTHER S OURCES. THE AO HAS TREATED THE INTEREST INCOME WHICH WAS SHOWN BY THE ASSESSEE FROM THE SOURCE BUSINESS AS INCOME FROM OTHER SOURCES WHICH WAS SUBSEQUENTLY CONFIRMED BY THE LD. CIT-A. HOWEVER ON PERUSAL OF T HE MEMORANDUM OF ASSOCIATION OF THE ASSESSEE WE FIND THAT THE FINANC ING ACTIVITY IS COVERED IN 7 OF THE MAIN OBJECT WHICH READS AS UNDER : '7. TO INVEST AND DEAL WITH THE MONEYS OF THE COMPA NY IN SUCH MANNER AS MAY BE DETERMINED FROM TIME TO TIME AND TO BORROW O R RAISE MONEY WITH OR WITHOUT SECURITY AND/OR BY THE ISSUE OR SALE OF ANY BONDS, MORTGAGES, DEBENTURES OR DEBENTURE-STOCK OF THE COMPANY, WHETH ER PERPETUAL OR OTHERWISE, AND TO DEVOTE ANY MONEY SO RAISED TO ANY OF THE OBJECTS OF THE COMPANY AND TO PROVIDE FINANCE WHETHER BY MAKING LO ANS OR OTHERWISE UPON SUCH TERMS AS MAY BE ARRANGED. ' 27. BESIDES THE ABOVE WE ALSO FIND THAT IN THE IMME DIATE PRECEDING ASSESSMENT YEAR 2010-11 REVENUE HAS ACCEPTED INTERE ST INCOME AS INCOME FROM THE SOURCE OF THE BUSINESS. THEREFORE I T CANNOT BE INFERRED FROM THE TAX AUDIT REPORT THAT THE ASSESSEE IS NOT ENGAGED IN THE BUSINESS OF GRANTING OF LOANS. WE ALSO OBSERVE THAT THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES IN THE BUSINESS OF THE ASSESSEE W ITH THAT OF THE EARLIER AY 2010-11, THUS THE INSTANT ISSUE OF THE ASSESSEE IS SQUARELY GOES IN FAVOUR OF ASSESSEE. IN THIS CONNECTION WE FIND SUPP ORT FROM THE JUDGMENT ITA NO. 724/KOL/15 M/S. SUDERA SERVICES PVT.LTD OF THE HONOURABLE SUPREME COURT IN THE CASE OF RADH ASOAMI SATSANG VS. CIT REPORTED IN 193 ITR 321 WHERE IN IT WAS HELD AS UNDER : 'THAT IN THE ABSENCE OF ANY MATERIAL CHANGE JUSTIFY ING THE DEPARTMENT TO TAKE A DIFFERENT VIEW FROM THAT TAKEN IN EARLIER PR OCEEDINGS, THE QUESTION OF THE EXEMPTION OF THE ASSESSEE APPELLANT SHOULD NOT HAVE BEEN REOPENED. STRICTLY SPEAKING, RES JUDICATA DOES NOT APPLY TO I NCOME-TAX PROCEEDINGS. THOUGH, EACH ASSESSMENT YEAR BEING A UNIT, WHAT WAS DECIDED IN ONE YEAR MIGHT NOT APPLY IN THE FOLLOWING YEAR; WHERE A FUND AMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS H AS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NOT BE AT AL L APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR ' 28. IN VIEW OF ABOVE WE ARE INCLINED TO CONCLUDE TH AT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF GRANTING OF LOANS AND AD VANCES APART FROM OTHER ACTIVITIES. THEREFORE THE INCOME OF INTEREST FROM SUCH ACTIVITY IS ELIGIBLE FOR THE TAXATION PURPOSES UNDER THE HEAD A S BUSINESS INCOME. THE CHARACTER OF INTEREST INCOME CANNOT BE CHANGED EVEN THE LOANS ON WHICH INTEREST INCOME WAS EARNED WERE SQUARED UP IN THE Y EAR UNDER CONSIDERATION. IN VIEW OF THE AFORESAID FACTS, WE R EVERSE THE ORDER OF LOWER AUTHORITIES. THUS THIS GROUND OF THE ASSESSEE IS ALLOWED. 29. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN OPEN COURT ON 19-04 -2017 WASEEM AHMED S.S. VIS WANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 19 -0 4-2017 SD/- SD/- *PP/SPS: COPY OF THE ORDER FORWARDED TO: ITA NO. 724/KOL/15 M/S. SUDERA SERVICES PVT.LTD 1 . THE APPELLANT/ASSESSEE:M/S. SUDERA SERVICES PVT. L TD 1 SHAKESPEARE SARANI, KOLKATA-700 071. 2 THE RESPONDENT/DEPARTMENT: THE ITO W 8(4), KOLKATA 3 4. THE CIT(A) THE CIT 5 . DR, KOLKATA BENCH 6 . GUARD FILE . BY ORDER, ASSTT. REGISTRAR