PREETI PARESH BHAGAT, MUMBAI V. ADDL. C.I.T. RG.21(1), MUMBAI

ITA 7278/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88484 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2015
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 03-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 31-10-2011
• Court: TRIBUNAL
• Keywords: Business income; Earning of tax free income; Revised return
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI VK;DJ VIHYH; VF/KDJ.K] LH U;K;IHB EQACBZ BEFORE SHRI VIJAY PAL RAO , JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER JH FOT; IKY JKO] U;KF;D LNL; ,OA JH JKTSUNZ] YS[KK LNL; DS LE{K ITA NO. 7278/MUM/2011 ASSESSMENT YEAR: - 2008 - 09. MRS. PREETI PARESH BHAGAT 17, NIRMAL RESIDENCY SOCIETY, 7 - 8 CROSS NORTH SOUTH ROAD, JVPD SCHEME, VILE PARLE (WEST) MUMBAI 400 049. VS.` THE ADDL. COMMISSIONER OF INCOME TAX, RANGE 21 (1) MUMBAI. PAN: - AABPB3237H APPELLANT / VIHYKFKHZ RESPONDENT / IZR;FKHZ ITA NO. 7478/MUM/2011 ASSESSMENT YEAR: - 2008 - 09 ASST. C.I.T., CIRCLE 21(1), 6 TH FLOOR, ROOM NO. 601, PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E) MUMBAI 400 051. VS.` PREETI PARESH BHAGAT 17, NIRMAL RESIDENCY SOCIETY, 7 - 8 CROSS NORTH SOUTH ROAD, JVPD SCHEME, VILE PARLE (WEST) MUMBAI 400 049. APPELLANT / VIHYKFKHZ RESPONDENT / IZR;FKHZ ORDER PER VIJAY PAL RAO, JM THESE CROSS APPEAL ARE DIRECTED AGAINST THE ORDER DATED 18.08.2011 OF CIT(A) FOR THE A.Y. 2008 - 09. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN THIS APPEAL: - ASSESSEE BY / FU/KKZFJRH FD VKSJ LS SHRI NISHANT THAKKAR AND SHRI PRASHANT THAKKAR REVENUE BY / JKTLP DH VKSJ LS SHRI PREMANAND J. DATE OF HEARING 03.03.2015 DATE OF PRONOUNCEMENT 05 .03.2015 MRS. PREETI PARESH BHAGAT 2 | P A G E 1. GROUND NO.1: LONG - TERM CAPITAL GAIN OF RS. 4,46,80,121 (EXEMPT INCOME) HAS BEEN OFFERED TO TAX AS SHORT - TERM CAPITAL GAINS (TAXABLE INCOME) DUE TO AN INADVERTENT HUMAN ERROR . 1.1 THE COMMISSIONER OF IN COME - TAX (APPEALS) - 32, MUMBAI [ CIT(APPEALS)'], ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, ERRED IN NOT ALLOWING TO CONSIDER GAINS OF RS. 4,46,80,121 ARISING ON SALE OF SHARES (PRIMARILY THE SHARES OF LARSEN & TURBO LIMITED) A S LONG - TERM CAPITAL GAINS (EXEMPT INCOME) WHICH, DUE TO AN , INADVERTENT HUMAN ERROR, WAS CONSIDERED AS AN SHORT - TERM CAPITAL GAINS IN THE RETURN OF INCOME. 1.2 IN THE GIVEN FACTS AND CIRCUMSTANCES, THE APPELLANT SUBMITS THAT THE LEARNED CIT(APPEALS) FAILED TO APPRECIATE THAT THE DECISION OF GOETZE (INDIA) LTD V. CIT [2006] 284 ITR 323 (SC) IS NOT APPLICABLE INASMUCH AS THE FACTS OF THE SAID CASE AND THE PRESE NT CASE ARE NOT IDENTICAL. 1.3 THE LEARNED CIT(APPEALS) ALSO FAILED TO APPRECIATE THAT THE CBDT CIRCULAR NO. 14 (XL - 35) OF 1995 DATED APRIL 11, 1955 IS STILL IN FORCE AND THAT VARIOUS APPELLATE COURTS, WHILE DISTINGUISHING THE DECISION OF GOETZE (INDIA) LTD (SUPRA), HAS HELD THAT THE ASSESSING OFFICER SHOULD ALLOW THE BENEFITS DUE TO THE ASSESSEE IF SUCH ASSESSEE HAS NOT CLAIMED IN THE RETURN OF INCOME. 1.4 THE APPELLANT PRAYS THAT THE LONG TERM CAPITAL GAIN OF RS. 4,46,80,121/ - SHOULD BE ALLOWED AS EXE MPT INCOME, UNDER THE PROVISIONS OF THE ACT , AND TAX REFUND DUE BE GRANTED. SUCH BENEFIT SHOULD NOT BE DENIED MERELY ON THE PREMISE THAT THE APPELLANT HAD NOT FILED REVISED RETURN OF INCOME . 2. THE ONLY ISSUE ARISES FROM THE GROUNDS RAISED BY THE ASSESSEE IS REGARDING THE LONG TERM CAPITAL GAIN OF RS. 4,46,80,121/ - WHICH IS EXEMPT AS PER SECTION 10(38) OF THE INCOME TAX ACT WAS MISTAKENLY OFFERED AS SHORT TERM CAPITAL GAIN AND WAS NOT ALLOWED BY THE AUTHORITIES BELOW ON THE GROUND THAT THE ASSESSEE HAS NOT CLAIMED THE SAME IN THE RETURN OF INCOME. THE FACTS LEADING TO THE CONTROVERSY ARE THAT THE ASSESSEE HAS OFFERED SHORT TERM CAPITAL GAIN OF RS. 6,64,77,497/ - ARISING FROM SALE OF SHARES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE SUBMITTED THE DETAILS OF SALE AND PURCHASE OF SHARES AND CLAIMED THAT THE PROFIT OF RS. 4,46,80,121/ - ON SALE OF SHARES OF L&T WAS ACTUALLY A LONG MRS. PREETI PARESH BHAGAT 3 | P A G E TERM CAPITAL GAIN WHICH WAS INADVERTENTLY SHOWN AS SHORT T ERM CAPITAL GAIN. THE ASSESSING OFFICER DID NOT ALLOW THE CLAIM OF THE ASSESSEE BY FOLLOWING THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. V. CIT [ 284 ITR 323 (SC)] 3. ON APPEAL, THE CIT(A) HAS CONFIRMED THE ACTION OF ASSESSING OFFICER BY FOLLOWING THE SAME JUDGMENT IN THE CASE OF GOETZE (INDIA) LTD. V. CIT (SUPRA). 4. BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT SO FAR AS THE FACT OF LONG TERM CAPITAL GAIN OF RS. 4,46,80,121/ - WAS INADVERTENTL Y OFFERED AS SHORT TERM CAPITAL GAIN HAS NOT BEEN DISPUTED BY THE ASSESSING OFFICER AS WELL AS BY THE CIT(A). HOWEVER, BOTH ASSESSING OFFICER AND CIT(A) HAS REJECTED THE CLAIM OF ASSESSEE ON TECHNICAL GROUND AS THE SAME WAS NOT CLAIMED IN THE RETURN OF IN COME. HE HAS FURTHER SUBMITTED THAT THERE IS NO BAR ON THE POWERS AND JURISDICTION OF THE APPELLATE AUTHORITIES TO ENTERTAIN THE FRESH CLAIM OF THE ASSESSE EVEN IF THE SAME WAS NOT MADE IN THE RETURN OF INCOME. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UP ON THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE PRUTHVI BROKERS AND SHAREHOLDERS 349 ITR 336. 5. ON THE OTHER HAND, THE LD. DR HAS RELIED UPON THE ORDERS OF AUTHORITIES BELOW AND SUBMITTED THAT THE JURISDICTION OF THE CIT(A) CO TERMINUS W ITH THAT OF ASSESSING OFFICER, THEREFORE, THE POWERS OF CIT(A) ARE NOT DIFFERENT THAT FROM THE ASSESSING OFFICER SO FAR AS ENTERTAINING A FRESH CLAIM. MRS. PREETI PARESH BHAGAT 4 | P A G E 6. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS FACT AND CIRCUMSTANCES OF THE CASE, WE NOTE THAT THERE IS NO DISPUTE THAT THE ASSESSEE HAS INADVERTENTLY OFFERED A SUM OF RS. 4,46,80,121/ - TO TAX AS SHORT TERM CAPITAL GAIN WHICH IS ACTUALLY A LONG TERM CAPITAL GAIN ARISING FROM SALE OF SHARES OF L& T. THE LONG TERM CAPITAL GAIN IN QUESTION IS EXEMPT AS PER PROVISIONS OF SECTION 10(38) AND, THEREFORE, DUE TO THE INADVERTENT MISTAKE ON THE PART OF THE ASSESSEE, THE ASSESSEE HAS OFFERED THE EXEMPT INCOME TO TAX. WE FIND THAT IT IS SETTLED LAW THAT THE APPELLATE AUTHORITY HAS THE JURISDICTION TO ENTERTAIN FRESH CLAIM AND PLEA AND THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. V. CIT (SUPRA) DOES NOT RESTRICT THE POWERS OF APPELLATE AUTHORITY TO ENTERTAIN A FRESH CLAIM. THE HON'B LE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER COMPANY LTD. VS. CIT 229 ITR 383 HAS CLEARLY HELD THAT THE APPELLATE AUTHORITY CAN ENTERTAIN A FRESH PLEA IF NO NEW FACTS ARE REQUIRED TO BE INVESTIGATED FOR DECIDING THE FRESH PLEA RAISED BY THE ASS ESSEE. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF PRUTHVI BROKERS AND SHAREHOLDERS (SUPRA) WHILE CONSIDERING THE ISSUE OF JURISDICTION OF THE APPELLATE AUTHORITY IN ENTERTAINING THE FRESH CLAIM HAS HELD IN PARA 18 TO 24 AS UNDER: - 18. IN THE CASE BEFORE US, THE CIT(A) AND THE TRIBUNAL HAVE HELD THE OMISSION TO CLAIM THE DEDUCTION OF RS.40,00,000/ - TO BE INADVERTENT. BOTH THE APPELLATE AUTHORITIES HELD, AFTER CONSIDERING ALL THE FACTS, THAT THE ASSESSEE HAD INADVERTENTLY CLAIMED A DEDUCTION OF RS.20,00,000/ - PAID AFTER THE END OF THE YEAR IN QUESTION. WE SEE NO REASON TO INTERFERE WITH THIS FINDING. WE SEE LESS REASON TO INTERFERE WITH THE EXERCISE OF DISCRETION BY THE APPELLATE AUTHORITIES IN PERMITTING THE RESPONDENT TO RAISE THIS CLAIM. THAT T HE RESPONDENT IS ENTITLED TO THE DEDUCTION IN LAW IS ADMITTED AND, IN ANY EVENT, CLEARLY ESTABLISHED. IN THE CIRCUMSTANCES, THE RESPONDENT OUGHT NOT BE PREJUDICED. 19. THE ORDERS OF THE CIT(A) AND THE TRIBUNAL CLEARLY INDICATE THAT BOTH THE APPELLATE AUTHO RITIES HAD EXERCISED THEIR JURISDICTION TO CONSIDER THE ADDITIONAL CLAIM AS THEY WERE ENTITLED TO IN VIEW OF THE VARIOUS JUDGMENTS ON THE ISSUE, INCLUDING THE JUDGMENT OF THE SUPREME COURT IN NATIONAL THERMAL POWER CORPN. LTD. (SUPRA) . THIS IS CLEAR FROM THE FACT THAT THESE JUDGMENTS HAVE BEEN EXPRESSLY REFERRED TO IN DETAIL BY THE CIT(A) AND BY THE TRIBUNAL. MRS. PREETI PARESH BHAGAT 5 | P A G E 20. WE WISH TO CLARIFY THAT BOTH THE APPELLATE AUTHORITIES HAVE THEMSELVES CONSIDERED THE ADDITIONAL CLAIM AND ALLOWED IT. THEY HAVE NOT REMANDED THE MATTER TO THE ASSESSING OFFICER TO CONSIDER THE SAME. BOTH THE ORDERS EXPRESSLY DIRECT THE ASSESSING OFFICER TO ALLOW THE DEDUCTION OF RS. 40,00,000/ - UNDER SECTION 43B OF THE ACT. THE ASSESSING OFFICER IS, THEREFORE, NOW ONLY TO COMPUTE THE RESPONDENT'S TAX LIABILITY WHICH HE MUST DO IN ACCORDANCE WITH THE ORDERS ALLOWING THE RESPONDENT A DEDUCTION OF RS. 40,00,000/ - UNDER SECTION 43B OF THE ACT. 21. THE CONCLUSION THAT THE ERROR IN NOT CLAIMING THE DEDUCTION IN THE RETURN OF INCOME WAS INADVERTENT CANNOT BE FAULTED FOR MORE THAN ONE REASON. IT IS A FINDING OF FACT WHICH CANNOT BE TERMED PERVERSE. THERE IS NOTHING ON RECORD THAT MILITATES AGAINST THE FINDING. THE APPELLANT HAS NOT SUGGESTED, MUCH LESS ESTABLISHED THAT THE OMISSION WAS DELIBERATE, MALA - FIDE OR EVEN OTHERWISE. THE INFERENCE THAT THE OMISSION WAS INADVERTENT IS, THEREFORE, IRRESISTIBLE. 22. IT WAS THEN SUBMITTED BY MR. GUPTA THAT THE SUPREME COURT HAD TAKEN A DIFFERENT VIEW IN GOETZE (INDIA) LTD ( SUPRA). WE ARE UNABLE TO AGREE. THE DECISION W AS RENDERED BY A BENCH OF TWO LEARNED JUDGES AND EXPRESSLY REFERS TO THE JUDGMENT OF THE BENCH OF THREE LEARNED JUDGES IN NATIONAL THERMAL POWER COMP. LTD. ( SUPRA). THE QUESTION BEFORE THE COURT WAS WHETHER THE APPELLANT - ASSESSEE COULD MAKE A CLAIM FOR DE DUCTION, OTHER THAN BY FILING A REVISED RETURN. AFTER THE RETURN WAS FILED, THE APPELLANT SOUGHT TO CLAIM A DEDUCTION BY WAY OF A LETTER BEFORE THE ASSESSING OFFICER. THE CLAIM, THEREFORE, WAS NOT BEFORE THE APPELLATE AUTHORITIES. THE DEDUCTION WAS DISALLO WED BY THE ASSESSING OFFICER ON THE GROUND THAT THERE WAS NO PROVISION UNDER THE ACT TO MAKE AN AMENDMENT IN THE RETURN OF INCOME BY MODIFYING AN APPLICATION AT THE ASSESSMENT STAGE WITHOUT REVISING THE RETURN. THE COMMISSIONER OF INCOME - TAX (APPEALS) ALLO WED THE ASSESSEE'S APPEAL. THE TRIBUNAL, HOWEVER, ALLOWED THE DEPARTMENT'S APPEAL. IN THE SUPREME COURT, THE ASSESSEE RELIED UPON THE JUDGMENT IN NATIONAL THERMAL POWER CO. LTD. (SUPRA) CONTENDING THAT IT WAS OPEN TO THE ASSESSEE TO RAISE THE POINTS OF LAW EVEN BEFORE THE TRIBUNAL. THE SUPREME COURT HELD : - '4. THE DECISION IN QUESTION IS THAT THE POWER OF THE TRIBUNAL UNDER SECTION 254 OF THE INCOME - TAX ACT, 1961, IS TO ENTERTAIN FOR THE FIRST TIME A POINT OF LAW PROVIDED THE FACT ON THE BASIS OF WHICH THE ISSUE OF LAW CAN BE RAISED BEFORE THE TRIBUNAL. THE DECISION DOES NOT IN ANY WAY RELATE TO THE POWER OF THE ASSESSING OFFICER TO ENTERTAIN A CLAIM FOR DEDUCTION OTHERWISE THAN BY FILING A REVISED RETURN. IN THE CIRCUMSTANCES OF THE CASE, WE DISMISS THE CI VIL APPEAL. HOWEVER, WE MAKE IT CLEAR THAT THE ISSUE IN THIS CASE IS LIMITED TO THE POWER OF THE ASSESSING AUTHORITY AND DOES NOT IMPINGE ON THE POWER OF THE INCOME - TAX APPELLATE TRIBUNAL UNDER SECTION 254 OF THE INCOME - TAX ACT, 1961. THERE SHALL BE NO ORD ER AS TO COSTS.' [EMPHASIS SUPPLIED] 23. IT IS CLEAR TO US THAT THE SUPREME COURT DID NOT HOLD ANYTHING CONTRARY TO WHAT WAS HELD IN THE PREVIOUS JUDGMENTS TO THE EFFECT THAT EVEN IF A CLAIM IS NOT MADE BEFORE THE ASSESSING OFFICER, IT CAN BE MADE BEFORE T HE APPELLATE AUTHORITIES. THE JURISDICTION OF THE APPELLATE AUTHORITIES TO ENTERTAIN SUCH A CLAIM HAS NOT BEEN NEGATED BY THE SUPREME COURT IN THIS JUDGMENT. IN FACT, THE SUPREME COURT MADE IT CLEAR THAT THE ISSUE IN THE CASE WAS LIMITED TO THE POWER MRS. PREETI PARESH BHAGAT 6 | P A G E OF TH E ASSESSING AUTHORITY AND THAT THE JUDGMENT DOES NOT IMPINGE ON THE POWER OF THE TRIBUNAL UNDER SECTION 254. 24. A DIVISION BENCH OF THE DELHI HIGH COURT DEALT WITH A SIMILAR SUBMISSION IN CIT V. JAI PARABOLIC SPRINGS LTD. [2008] 306 ITR 42 / 172 TAXMAN 258 . THE DIVISION BENCH, IN PARAGRAPH 17 OF THE JUDGMENT HELD T HAT THE SUPREME COURT DISMISSED THE APPEAL MAKING IT CLEAR THAT THE DECISION WAS LIMITED TO THE POWER OF THE ASSESSING AUTHORITY TO ENTERTAIN A CLAIM FOR DEDUCTION OTHERWISE THAN BY A REVISED RETURN AND DID NOT IMPINGE ON THE POWERS OF THE TRIBUNAL. IN PAR AGRAPH 19, THE DIVISION BENCH HELD THAT THERE WAS NO PROHIBITION ON THE POWERS OF THE TRIBUNAL TO ENTERTAIN AN ADDITIONAL GROUND WHICH, ACCORDING TO THE TRIBUNAL, ARISES IN THE MATTER AND FOR THE JUST DECISION OF THE CASE. 7. IN VIEW OF THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. CIT (SUPRA) AS WELL AS JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF PRUTHVI BROKERS & SHAREHOLDERS (SUPRA), WE ALLOW THE CLAIM OF ASSESSEE REGARDING THE LONG TERM CAPI TAL GAIN OF RS. 4,46,80,121/ - . 8. THE REVENUE IN ITS APPEAL HAS RAISED FOLLOWING GROUNDS: - 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DIRECTING THE A.O TO ASSESS THE PROFIT ON SALE OF SHARES AMOUNTING TO RS .42,02,465/ - AS SHORT TERM CAPITAL GAIN ONLY AND NOT AS BUSINESS INCOME. 2 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE IS AN INVESTOR AND NOT A TRADER IN SHARES AND SECURITIES'. 9. TH E ASSESSEE HAS SHOWN SHORT TERM CAPITAL GAIN OF RS. 6,64,77,497/ - ON SALE OF SHARES INCLUDING THE LONG TERM CAPITAL GAIN OF RS. 4,46,80,121/ - INADVERTENTLY OFFERED AS SHORT TERM CAPITAL GAIN. THE ACTUAL SHORT TERM CAPITAL GAIN ARISING OUT OF SALE OF SHAR ES WAS OFFERED BY THE ASSESSEE AT RS. 2,17,52,869/ - INCLUSIVE OF RS. 42,02,465/ - ON SALE OF SHARES ACQUIRED THROUGH IPO WHICH WAS TREATED BY THE ASSESSING OFFICER AS BUSINESS INCOME. THE ASSESSEE CHALLENGED THE ACTION OF ASSESSING OFFICER REGARDING THE PRO FIT MRS. PREETI PARESH BHAGAT 7 | P A G E FROM SALE OF SHARES ACQUIRED THROUGH IPO BEING ASSESSED AS BUSINESS INCOME BY FILING THE APPEAL BEFORE THE CIT(A). THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE AND DIRECTED THE ASSESSING OFFICER TO ASSESS THE PROFIT OF RS. 42,02,465/ - AS SHORT TERM CAPITAL GAIN AND NOT AS BUSINESS INCOME. 10. BEFORE US, THE LD. DR HAS SUBMITTED THAT THE PROFIT EARNED BY THE ASSESSEE OF RS. 42,02,465/ - FROM SALE OF SHARES ACQUIRED THROUGH IPO HAS BEEN ASSESSED AS BUSINESS INCOME BY THE ASSESSING OFFICER BY CONSIDERING THE FACT THAT THE ASSESSEE HAS USED BORROWED FUNDS FOR THE PURPOSE OF ACQUIRING THE SHARES THROUGH IPO AND PAID INTEREST EQUIVALENT TO 80%, 73% AND 23% OF THE COST OF SHARES RESPECTIVELY. HE HAS REFERRED THE DETAILS OF THE SHARES ACQUIRED THROUGH IPO AND SUBMITTED THAT THE MAXIMUM HOLDING PERIOD OF THE SHARES ACQUIRED THROUGH IPO IS 8 DAYS ONLY AND NONE OF THE SHARES OF 11 DIFFERENT COMPANIES ACQUIRED THROUGH IPO HAS BEEN KEPT BY THE ASSESSEE FOR MORE THAN 8 DAYS . T HEREFORE, WHEN THE ASSESSEE HAS USED THE BORROWED FUND FOR ACQUIRING THE SHARES AND IM MEDIATELY AF TER THE ALLOTMENT AND LISTING ON THE STOCK EXCHANGE, THE ASSESSEE HAS SOLD THE SHARES, WHICH SHOWS THE INTENTION OF THE ASSESSEE TO ACQUIRE THE SHARES THROUGH IPO WAS SOLELY TO EARN PROFIT ON THE VERY FIRST OCCASION AFTER ALLOTMENT AND LISTING. HE HAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS PLACED RELIANCE ON THE JUDGMENT IN THE CASE OF G. VENKATASWAMI NAIDU & CO. VS. CIT 35 ITR 594 AND THE PRINCIPLE LAID DOWN BY THE HON'BLE SUPREME COURT ARE SQUARELY APPLICABLE IN THE CASE OF THE ASSE SSEE SO FAR AS THE TRANSACTION OF PURCHASE AND SALES OF THE SHARES ACQUIRED THROUGH IPO ARE CONCERNED. THUS THE LD. DR HAS SUBMITTED THAT THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE WITHOUT CONSIDERING THE FACT THAT THE INTENTION OF THE ASSESSEE IN A CQUIRING THE SHARES THROUGH IPO WAS ONLY TO RESALE AND EARNING THE MRS. PREETI PARESH BHAGAT 8 | P A G E PROFIT AND NOT TO RETAIN THE SHARES FOR EARNING THE DIVIDEND. HE HAS RELIED UPON THE ORDER OF ASSESSING OFFICER . 11. O N THE OTHER HAND , THE LD. AUTHORIZED REPRESENTATIVE HAS SUBMITTED THAT THE CIT(A) HAS TAKEN INTO CONSIDERATION ALL FACTORS AND ASPECT OF THE TRANSACTION ON HOLISTIC BASIS AND NOT ON THE BAIS OF SINGLE FACTOR OF BORROWED MONEY. HE HAS FURTHER SUBMITTED THAT THE ASSESSEE AVAILED THE CREDIT F U NDING SCHEME OF IPO ONLY ON FOUR OCCASIONS WHICH DOES NOT CHANGE THE CHARACTER OF INVESTMENT INTO TRADING, WHERE AS IN ALL OTHER TRANSACTION OF PURCHASE AND SALE OF SHARES, THE ASSESSING OFFICER HAS ACCEPTED THE CAPITAL GAIN OFFERED BY THE ASSESSEE . THE LD. AUTHORIZED REPRESENTATIVE HAS SUBMITTED THAT THE ASSESSEE HAS EARNED THE CAPITAL GAIN OF RS. 6.64 CRORE ARISING FROM PURCHASE AND SALE OF SHARES OUT OF WHICH ONLY RS. 42,02,465/ - WAS EARNED FROM THE SHARES ACQUIRED THROUGH IPO WHICH IS INTANGIBLE IF THE TOTALITY OF THE TRANSACTION ARE TAKEN INTO CONSIDERATION. THE ISSUE OF NATURE OF TRANSACTION CAN BE DECIDED BY CONSIDERING ALL THE FACTS AND FACTORS AND NOT BY TAKING INTO CONSIDERATION ONLY ONE ASPECT OF BORROWED MONEY UTILIZED BY THE ASSESSEE. HE HAS FURTHER CONTEND ED THAT OUT OF THE TOTAL CAPITAL GAIN OF RS. 6.6 CRORES THE CAPITAL GAIN OF RS. 4.46 CRORES IS LONG TERM CAPITAL GAIN AND THE HOLDING PERIOD OF THE SHARE IS MORE THAN 12 MONTHS WHEREAS THE CAPITAL GAIN TO THE EXTENT OF RS. 1.75 CRORE WAS ACCEPTED BY THE A SSESSING OFFICER AS SHORT TERM CAPITAL GAIN. THEREFORE, ONLY ON 11 OCCASIONS THROUGH IPO, THE ASSESSEE HAS EARNED PROFIT OF RS. 42,02,465/ - WHICH CANNOT BE TREATED DIFFERENTLY THAN THE CAPITAL GAIN ACCEPTED ON THE OTHER TRANSACTIONS. HE HAS FURTHER CONTEN DED THAT ALL THE TRANSACTIONS ARE DELIVERY BASED TRANSACTIONS AND, THEREFORE, THE CIT(A) IS JUSTIFIED IN ALLOWING THE CLAIM OF SHORT TERM CAPITAL GAIN. MRS. PREETI PARESH BHAGAT 9 | P A G E 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND RELEVANT MATERIAL ON RECORD. THERE IS NO QUARREL THAT IN ORDER TO DECIDE THE QUESTION OF NATURE OF TRANSACTION OF TRADING OR INVESTMENT VARIOUS FACTS ARE TO BE TAKEN INTO ACCOUNT INCLUDING THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE OF SHARE, USE OF BORROWED MONEY TO PURCHASE AND PAYMENT OF INTEREST THEREON, THE FREQUENCY OF PURCHASE AND SALE OF THE PARTICULAR ITEM , THE PURPOSE OR MOTIVE OF PURCHASE AND SALE , WHETHER IT IS FOR REALIZATION OF PROFIT OR FOR RETENTION AND APPRECIATION OF ITS VALUE, THE MANNER IN WHICH A PARTICULAR ITEM HAS BEEN TAKEN INTO THE BALANCE - SHEET AND IN BOOKS OF ACCOUNTS OF THE ASSESSEE ETC. THEREFORE, NO SINGLE CRITERIA CAN BE CONSID ERED AS DECISIVE FACTOR FOR DETERMINING THE NATURE OF TRANSACTION WHETHER TRADING OR INVESTMENT. ALL THESE FACTORS ARE APPLIED TO DETERMINE THE INTENTION OF THE ASSESSEE WHILE CARRYING OUT THE TRANSACTION OF PURCHASE AND SALE OF THE ARTICLES/GOODS. IN THE CASE IN HAND, THE ASSESSING OFFICER HAS GIVEN THE DETAILS OF SHARES ACQUIRE BY THE ASSESSEE THROUGH IPO AT PAGE 12 AS UNDER: - STATEMENT SHOWING SHORT TERM CAPITAL GAIN EARNED ON IPO SHARES ALLOTTED AND APPLIED THROUGH IPO FUNDING. NAME OF THE COMPANY SHARES ALLOTTED SALE PRICE (A) COST OF SHARES ALLOTTED (B) INTEREST PAID ON FUNDS (C) COST SHOWN IN CAPITAL GAIN CALCULATION (B+C) PROFIT/LOSS (A - C) EDLEWEISS CAPITAL LTD. 4,624, 72,21,142 38,14,800 30,59,813 68,74,613 3,46,529 MUDRA PORT 8,916 89,43,366 39,23,040 28,70,134 67,93,174 21,50,192 POWER GRID IPO 13,453 14,18,081 6,99,556 - 6,99,556 7,18,525 ECLERX 7,649 30,55,922 24,09,435 5,47,069 29,56,504 99,418 TOTAL 2,06,38,511 1,08,46,831 64,77,016 1,73,23,847 33,14,664 MRS. PREETI PARESH BHAGAT 10 | P A G E STATEMENT SHOWING SHORT TERM CAPITAL GAIN EARNED ON IPO SHARES ALLOTTED AND APPLIED FROM OWN FUNDS NAME OF THE COMPANY SHARES ALLOTTED SALE PRICE (A) COST OF SHARES ALLOTTED (B) PROFIT/LOSS (A - B) FUTURE CAP 992 1011627 851745 159882 IRB INFRA 450 84579 83250 1328 JYOTHY LAB 10 7848 6900 948 KOLTEPATIL 44 8100 6380 1720 MAYTAS INFRA LTD. 18 10151 6660 3491 POWER GRID 13,453 1418081 699556 718525 REC LTD 121 14613 12705 1908 TOTAL 2554998 1667196 8878801 13 . THUS THERE ARE TOTAL 11 SCRIPS WHICH WERE ACQUIRED BY THE ASSESSEE THROUGH IPO. OUT OF THESE 11 SHARES ONLY 4 SCRIPS WERE ACQUIRED BY THE ASSESSEE BY USING BORROWED FUND AND PAID A VERY HIGH INTEREST IN COMPARISON TO THE COST OF SHARES ALLOTTED TO THE ASSE SSEE. THE ASSESSING OFFICER HAS POINTED OUT SOME OF THE RELEVANT FACTS IN RESPECT OF THESE TRANSACTIONS OF ACQUIRING THE SHARES THROUGH IPO AND SALE OF THE SAME AT PAGE 13 AS UNDER: - I) THE ASSESSEE HAS DONE TRANSACTIONS IN SHARES ACQUIRED THROUGH IPO AND IN 11 DIFFERENT COMPANIES. II) IN ALL 11 SCRIPS THE MAXIMUM HOLDING IS 8 DAYS, THUS NONE OF THE SHARES ACQUIRED THROUGH IPO HAS BEEN KEPT FOR MORE THAN 8 DAYS. III) IN NONE OF THE SCRIPS ASSESSEE HAS WAITED FOR DIVIDEND. IV) THE ASSESSEES INTENTION OF EARNING PROFIT BY MAKING APPLICATION IN IPO IS ALSO CLEARLY EVIDENT FROM THE HOLDING PERIOD WHICH IS MENTIONED ABOVE, IN EACH AND EVERY CASE IS LESS THAN 8 DAYS. V) MOST IMPORTANTLY, AS PER DETAILS SUBMITTED BY ASSESSEE IN 4 OUT OF 11 SCRIPS, ITPS HAVE BEEN MADE WITH BORROWED FUNDS ALSO. MRS. PREETI PARESH BHAGAT 11 | P A G E VI) FROM THE ABOVE TABLE IT CAN ALSO BE SEEN THAT IN RESPECT OF THREE SCRIPS I.E. EDLEWEISS CAPITAL LTD., MUDRA PORT AND ECLERX THE INTEREST COMPONENT ARE IN THE REGION OF 80%, 73% & 23% OF THE COST OF SHARES RESPECTIVE LY. ONE WOULD NEVER INCUR THIS TYPE OF INTEREST COST JUST TO EARN DIVIDEND, THE MOTIVE TO EARN PROFIT IS VERY MUCH CLEAR. 15. THERE IS NO DISPUTE THAT OUT OF THE SHARES OF 11 COMPANIES ACQUIRED THROUGH IPO, THE SHARES OF 4 COMPANIES IN THE FIRST TABLE WERE ACQUIRED THROUGH BORROWED FUND AND THE ASSESSEE PAID THE INTEREST IN THE RANGE OF 80%, 73% & 23% OF THE COST OF THE RESPECTIVE SHARES. THE MAXIMUM HOLDING PERIOD OF THE SHARES ACQUIRED THROUGH IPO IS 8 DAYS. SINCE THE SHARES WERE ACQUIRED THROUGH IPO AND SOLD WITHIN THE SHORT PERIOD OF 8 DAYS, THEREFORE, THERE IS NO QUESTION OF GIVING THE TREATMENT OF SHARES IN THE BOOKS OF ACCOUNTS BY ASSESSEE AS INVESTMENT OR STOCK IN TRADE OR AT COST OR AT MARKET PRICE. WHEN THE ASSESSEE IS ALREADY HAVING A HUGE IN VESTMENT IN SHARES APART FROM DERIVATIVE TRADING IN THE SHARES THEN ACQUIRING THE SHARES THROUGH IPO BY USING THE BORROWED FUND AND SELLING THE SAME JUST AFTER THE ALLOTMENT AND LISTING O N THE STOCK EXCHANGE CLEARLY SHOWS THE INTENTION OF THE ASSESSEE THAT THE SHARES WERE ACQUIRED FOR RESALE PURPOSE AND TO EARN THE PROFIT AT THE EARLIEST POSSIBLE OCCASION. IN ALL ELEVEN SCRIPS WHERE THE SHARES WERE ACQUIRED THROUGH IPO, THE ASSESSEE HAS SOLD THE SHARES IMMEDIATELY AFTER ALLOTMENT AND LISTING OF THE SHARES ON STOCK EXCHANGE, THEREFORE, IN THESE CIRCUMSTANCES, THE RELEVANT FACTORS ARE THE MANNER IN WHICH THE SHARES ARE ACQUIRED AND SOLD BY THE ASSESSEE AND PARTICULARLY BY USING THE BORROWED FUND FOR A SHORT PERIOD OF ACQUIRING THE SHARES AND SELLING THE SAME WITHIN THE PERIOD OF 8 DAYS. THEREFORE, THE ACQUISITION OF SHARES THROUGH IPO WAS MADE BY THE ASSESSEE CLEARLY WITH THE INTENTION AND VIEW TO RESALE THE SAME AT A PROFIT AND AT THE EARLIEST POSSIBLE TIME. ACCORDINGLY, WE ARE OF THE VIEW THAT THE TRANSACTI ON OF ACQUIRING THE SHARES THROUGH IPO AND SELLING THE SAME JUST AFTER ALLOTMENT AND LISTING COUPLED MRS. PREETI PARESH BHAGAT 12 | P A G E WITH USE OF BORROWED FUND CLEARLY ESTABLISHES THE INTENTION OF THE ASSESSEE AS NOT TO RETAIN THE SHARES SO ACQUIRED BUT TO EARN THE PROFIT. HENCE, WE SET ASIDE THE ORDER OF CIT(A) QUA THIS ISSUE AND RESTORE THE ORDER OF ASSESSING OFFICER. 16 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE AS WELL AS THE APPEAL FILED BY THE REVENUE ARE ALLOWED. ORDER PRONOUCNED IN THE OPEN COURT ON THIS 5 TH DAY OF MARCH 2015 VKNS'K DH ?KKS'K.KK [KQYS U;K;KY; ES FNUKAD 05 EKPZ 2015 DKS DH XBZA SD/ - SD/ - ( RAJENDRA ) (VIJAY PAL RAO) ( ACCOUNTANT MEMBER / YS[KK LNL; ) (JUDICIAL MEMBER/ U;KF;D LNL; ) MUMBAI DATED 05 .03.2015 SKS SR. P.S, COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, C BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI