KAYNET CAPITAL LTD, MUMBAI V. ITO 4(3)(2), MUMBAI

ITA 8746/MUM/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3249 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 23-12-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 26-12-2011
• Court: TRIBUNAL
• Department Lawyers: VINITA MENON
• Keywords: Business income; Speculation loss

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A , BENCH MUMBAI BEFORE SHRI R.C.SHARMA , A M & SHRI PAWAN SINGH , J M ./ ITA NO . 8746 /MUM /20 1 1 ( / ASSESSMENT YEAR : 20 0 3 - 20 0 4 ) KAYNET CAPITAL LTD., 1 ST FLOOR, KHATAU BLDG. BOMBAY SAMACHAR MARG, FORT, MUMBA - 400001 VS. ITO - 4(3)(2), MUMBAI ./ ./ PAN/GIR NO. : A A BCK 3032 E ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI BHUPENDRA SHAH /REVENUE BY : MS. VINITA MENON / DATE OF HEARING : 2 3 / 1 2 / 201 5 / DATE OF PRONOUNCEMENT 28/03 /201 6 / O R D E R PER R.C.SHARMA (A.M) : TH IS IS AN APPEAL FILED BY THE ASSESSEE AG AINST THE ORDER OF CIT(A), MUMBAI , DATED 20 - 10 - 2011, FOR THE ASSESSMENT YEAR 200 3 - 0 4 , IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE I.T.ACT, ON THE FOLLOWING GROUNDS : - 1) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSING OFFICER ERRE D IN TREATING LOSS OF RS 13,05,973/ - IN RESPECT OF SHARE TRADING ACTIVITIES AS SPECULATION LOSS AND THEREBY DISALLOWING SET OFF OF THE SAME AGAINST INCOME FROM BROKERAGE ETC. 2) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSING OFFICE R ERRED IN TREATING EXPENSES OF RS 2,38,455/ - ATTRIBUTABLE TO SHARE TRADING ACTIVITIES AS SPECULATION LOSS AND THEREBY DISALLOWING SET OFF OF THE SAME AGAINST INCOME FROM BROKERAGE ETC. 3) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSES SING OFFICER ERRED IN DISALLOWING PROFESSIONAL CHARGES OF RS.6,40,000/ - PAID TO DIRECTOR WITHOUT ANY COMPARABLE CASE OR WITHOUT ANY JUSTIFICATION. ITA NO. 8746/11 2 4) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD COMMISSIONER OF INCOME TAX (A) ALSO ERRED IN CONFIRMING ABOVE ADDITIONS. 2 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A SHARE BROKER AND MEMBER OF STOCK EXCHANGE MUMBAI AND ACCORDINGLY CARRIED OUT BUSINESS OF SHARES AND SECURITIES BROKING. DURI NG THE COURSE OF ASSESSMENT THE AO DISALLOWED ASSESSES CLAIM FOR SET OFF OF SHARE LOSS ARISING OUT OF PURCHASE AND SALE OF SHARES BY TREATING SAME AS SPECULATION LOSS UNDER EXPLANATION TO SECTION 73. BY THE IMPUGNED ORDER CIT(A) CONFIRMED THE ACTION OF AO AGAINST WHICH ASSESSEE IS IN APPEAL BEFORE US. 3. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT ASSESSEE WAS HAVING INCOME FROM BUSINESS AND ALSO INCOME FROM OTHER SOURCES IN THE FORM OF DIVIDEND INCOME. AS THE ASSESSEE WAS HAVING BUSINESS LOSS OUT OF PURCHASE OF SALE AND SHARES MORE THAN THE INCOME FROM OTHER SOURCES THE AO DISALLOWED ASSESSEES CLAIM FOR SET OFF OF SUCH LOSS BY INVOKING PROVISIONS OF EXPLANATION TO SECTION 73 OF I.T.ACT. 4. BY THE IMPUGNED ORDER THE CIT(A) CONFIRMED THE ACTION OF AO BY OBSERVING AS UNDER : - T HE ASSESSEE TRADED ON ITS OWN ACCOUNT IN CERTAIN SHARES. IT IS ALSO NOT DISPUTED THAT THE APPELLANT IS NEITHER A COMPANY ENGAGED IN BUSINESS OF GIVING LOANS AND ADVANCES AS BANKING COMPANY OR AS NBFC AND HENCE IT IS NOT EXCL UDED FROM THE PURVIEW OF EXPLANATION TO SECTION 7 3 OF THE ACT. THE ASSESSEES P&L ACCOUNT SHOWS THAT IT HAD EARNED INCOME FROM DIVIDEND OF RS.7,81,182/ - BUT THE SAME WAS OFFERED AS BUSINESS INCOME. THE AO HAS DISCUSSED THAT THE APPELLANTS MANAGEMENT OF VA RIOUS EXPENSES WAS JUST TO REDUCE THE BUSINESS INCOME IN SUCH A WAY THAT IT IS LESS THAN THE DIVIDEND INCOME. THIS WAS AS ARGUED BY THE AO, DONE IN ORDER TO SAVE THE ASSESSEES CASE FROM THE PROVISION OF EXPLANATION TO SECTION 73 OF THE ACT. WHETHER EXPLAN ATION TO SECTION 73 IS APPLICABLE IN THE PRESENT CASE OR NOT, THE AVAILABLE JUDGEMENTS OF THE TRIBUNAL IN THE ITA NO. 8746/11 3 CASE OF AMAN PORTFOLIO (P) LTD. VS DCIT (SUPRA) AND HSBC SECUR I TIES & CAPITAL MARKET (I) PVT. LTD. VS JCIT(SUPRA) AND ALSO IN THE CASE OF DCIT VS FRONTLINE CAPITAL SERVICES L TD (2005) 96 TTJ (DEL) 201 HAVE TO BE CONSIDERED. IT IS NOTICED THAT THE JUDGMENT OF TRIBUNAL IN THE CASE OF AMAN PORTFOLIO (P) LTD. VS DCIT (SUPRA) WAS OVER RULED IN THE CASE OF DCIT VS FRONTLINE CAPIT AL SERVICES LTD (SUPRA) A ND THIS JUDGEMENT OF DELHI BENCH OF TRIBUNAL IN THE CASE (SUPRA), WAS NEITHER CITED BEFORE THE BENCH IN THE CASE OF HSBC SECURITIES & CAPITAL MARKET (I) PVT. LTD. VS JCIT(SUPRA), NOR WAS PERHAPS AVAILABLE BECAUSE THE DECISION IN THE CASE OF DCIT VS FRONTLI NE CAPITAL SERVICES L TD (SUPRA) IS DATED 30TH JUNE 2005 WHEREAS THE TRIBUNAL'S JUDGEMENT IN THE CASE OF HSBC SECURITIES & CAPITAL MARKET (I) PVT: LTD. VS JCIT(SUPRA) IS DATED 14.07.2005. THEREFORE THE JUDGMENT OF JURISDICTIONAL ITA T IN THE CASE OF KNC SH ARES & SECURITIES (P) L TD AS PER ITKNO.7420/6782/M/03 DATED 22.08.2006 IS VERY RELEVANT BECAUSE THE SAID JUDGEMENT HAS CONSIDERED THE CASE OF HSBC SECURITIES & CAPITAL MARKET (I) PVT. LTD. VS JCIT(SUPRA) AND ALSO THE CASE OF AMAN PORTFOLIO (P) LTD. VS DCI T (SUPRA) AND ALSO THE CASE OF DCIT VS FRONTLINE CAPITAL SERVICES L TD (SUPRA) AND AFTER CONSIDERING ALL THESE JUDGEMENTS IT WAS HELD BY THE HON'BLE TRIBUNAL IN THE CASE OF KNC SHARES & SECURITIES (P) LTD(SUPRA) THAT SET OFF OF LOSS AR I SING FROM PURCHASE A ND SALE OF SHARES SHOULD NOT BE ALLOWED AGAINST INCOME FROM BROKERAGE. THE ITAT RELIED UPON VARIOUS JUDGEMENT IN THE SUPPORT OF CONTENTION THAT EXPLANATION TO SECTION 73 WAS APPLICABLE UNDER THESE CIRCUMSTANCES. RESPECTFULLY FOLLOWING THE DECISION OF TRIBU NAL IN THE CASE OF KNC SHARES & SECURITIES (P) LTD VS ACIT (SUPRA). THE ACTION OF THE LAO IN TREATING THE AMOUNT OF RS.13,05,193/ - AS SPECULATION BUSINESS LOSS IS CONFIRMED. THERE IS NO ELEMENT OF SPECULATION IN THE COMMISSION INCOME RECEIVED BY THE APPELL ANT AND WHERE SUCH APPELLANT SUSTAINS ANY LOSS FROM HIS OWN SPECULATION BUSINESS, THEN SUCH COMMISSION CANNOT BE REDUCED FROM SPECULATION LOSS. RELIANCE IS PLACED ON THE HON'BLE APEX COURT DECISION IN THE CASE OF CIT VS PANGAL VITHAL NAYAK & CO. PVT LTD (1 969) 74 ITR 754 (SC). GROUNDS OF AP PEAL NO.2, IS THEREFORE DISMISSED. AGAINST THE ABOVE ORDER ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5. LD. AR RELIED ON THE DECISION OF HON BLE BOMBAY HIGH COURT IN THE CASE OF DARSHAN SECURITIES PVT. LTD., 341 ITR 556 AND CONTENDED THAT ASSESSEE IS COVERED BY EXCEPTION HAVING INCOME FROM OTHER SOURCES MORE THAN BUSINESS INCOME. 6. WE HAVE CONSIDERED THE RATIO LAID DOWN BY THE HON BLE HIGH COURT IN THE CASE OF DARSHAN SECURITIES PVT. LTD. (SUPRA) , WHEREIN ASSESSEES ITA NO. 8746/11 4 CL AIM FOR SHARE TRADING LOSS WAS ALLOWED TO BE SET OFF ON THE PLEA THAT ASSESSEE WAS HAVING INCOME FROM OTHER SOURCES MORE THAN THE INCOME FROM BUSINESS. WE FOUND THAT IN THIS CASE, THE ASSESSEE WAS HAVING N E T BUSINESS INCOME OF RS. 2 LAKHS AS AGAINST WHICH A SSESSEE WAS HAVING INCOME FROM DIVIDEND AMOUNTING TO RS.4.7 LAKHS WHICH IS APPARENTLY MORE THAN THE BUSINESS INCOME. THEREFORE, THE HONBLE HIGH COURT HELD THAT EXPLANATION TO SECTION 73 IS NOT ATTRACTED. HOWEVER, IN THE INSTANT CASE BEFORE US, BUSINESS IN COME IS MORE THAN THE DIVIDEND INCOME. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LOWER AUTHORITIES FOR INVOKING EXPLANATION TO SECTION 73 FOR DISALLOWING LOSS AROSE OUT OF SHARE TRADING. 7 . IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED . O RDER PRONOUNCED IN THE OPEN COURT ON THIS 28/03 / 201 6 . SD/ - SD/ - ( PAWAN SINGH ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 28/03 /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//