M/s Green City Estates P.Ltd., Hyderabad V. ITO, Hyderabad

ITA 92/HYD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3043 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-07-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 21-01-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V MADHUVANI
• Assessee Lawyers: P MURALI MOHAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA NO.92/HYD/2008 ASSESSMENT YEAR 2004-05 M/S GREENCITY ESTATES (P) LTD HYDERABAD (PAN AAACG7400K) (APPELLANT) VS ITO WARD NO.2(2), HYDERABAD. (RESPONDENT) APPELLANT BY : SHRI P. MURALI MOHAN RESPONDENT BY : SMT. V. MADHUVANI, DR O R D E R PER: CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A)-III, HYDERABAD DATED 15.10.2007 A ND PERTAINS TO THE ASSESSMENT YEAR 2004-05. 2. IN THIS APPEAL, THE CRUX OF THE GROUNDS OF THE AS SESSEE IS WITH REGARD TO SET OFF OF THE BUSINESS LOSS OF RS.25,47,650/- AGAINST THE LONG TERM CAPITAL GAINS. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY F ILED ITS RETURN OF INCOME DECLARING BUSINESS LOSS OF RS.3,05,778/-. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSER VED THAT THE ASSESSEE HAD SHOWN INCOME UNDER THE HEAD CAPITAL GAINS AND FURTHER SET OFF BUSINESS LOSS OF RS.25,97,650/- AGAINST TH E SAME, WHICH CLAIMED BY WAY OF REDUCTION OF COST PRICE OF UNITS SHOWN A S LOSS IN STOCK- IN-TRADE. THE ASSESSING OFFICER NOTED THAT THE MAIN ACT IVITY OF THE ASSESSEE WAS REAL ESTATE BUSINESS AND NOT TRADING IN SHARES. EVEN THE PURCHASE OF UNITS WAS ADMITTED BY THE ASSESSEE COMPANY IN TH IS VERY IITA NO.92/HYD/2007 M/S GREENCITY ESTATES (P) LTD 2 YEAR AS INVESTMENT, AND THE ASSESSEE CLAIMED SHORT TERM CA PITAL LOSS FOR SIMILAR TRANSACTION IN THE UNITS. IN VIEW OF THIS, THE ASSESSING OFFICER DISALLOWED THE LOSS CLAIMED ON DECREASE IN THE VALUE OF U NITS BY THE ASSESSEE. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. IN THIS CASE IT IS ADMITTED FACT THAT THE ASSE SSEE HAD PURCHASED SUBSTANTIAL UNITS OF MUTUAL FUNDS DURING THE YEAR. PARTS OF THESE UNITS WERE SOLD DURING THE YEAR AND THE LOSS FROM THIS TRANSACTION WAS CLAIMED AS SHORT TERM CAPITAL LOSS, WHICH HAS ALSO BEEN ALLOWED BY THE ASSESSING OFFICER IN THE COMPUTATION OF INCOME. THE R EMAINING UNITS WERE CLAIMED BY THE ASSESSEE AS STOCK IN TRADE AND REDUCTION IN THE VALUE OF THESE UNITS AT THE END OF THE YEAR WAS CLAIME D AS LOSS OF STOCK IN TRADE DEDUCTIBLE UNDER THE HEAD BUSINESS. IT I S ADMITTED FACT THAT THE ASSESSEE HAS BEEN IN THE BUSINESS OF REAL ESTATE. THE A SSESSEE CLAIMED LOSS ON THE SALE OF THESE UNITS AS CAPITAL LOSS ONLY . THE ONLY CONTENTION OF THE ASSESSEE IS THAT THE REDUCTION OF VALUE IN STOCK IN TRADE WHICH WAS HELD AS INVESTMENT IS TO BE ALLOWED AS A BUSIN ESS LOSS AND THEREAFTER, THE SAME IS TO SET OFF AGAINST THE LONG TE RM CAPITAL GAIN. THERE IS NO DISPUTE THAT THE UNITS WERE HELD BY THE AS SESSEE AS AN INVESTMENT AND BUSINESS OF THE ASSESSEE IS NOT MAKING INVE STMENTS IN UNITS AND THE ASSESSEE IS IN THE REAL ESTATE BUSINESS. THE I NTENTION OF THE ASSESSEE WAS TO HOLD THE UNITS AS INVESTMENTS AND NOT A S STOCK IN TRADE. DOMINANT MOTIVE IS ONLY RELEVANT FACTOR TO DE TERMINE THE CHARACTER OF TRANSACTION AND MOTIVE CAN BE EXPRESSED ONLY ON THE BASIS OF FACTS AND CIRCUMSTANCES OF THE CASE I.E., FREQUENCY OF PUR CHASE, SALE AND INTENTION OF THE PARTIES. IN THE YEAR UNDER APP EAL, THE ASSESSEE BEING SHOWN THE LOSS ON THE SALE OF THIS UNITS AS CAPITA L GAINS AND ON THE SAME PRINCIPLE, THE REDUCTION IN THE VALUE OF STOCK IN T RADE WHICH WAS IITA NO.92/HYD/2007 M/S GREENCITY ESTATES (P) LTD 3 HELD AT THE END OF THE YEAR BY THE ASSESSEE AS AN INVESTM ENT CANNOT BE CONSIDERED AS BUSINESS LOSS. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON : 30.7.2010 SD/- SD/- G.C. GUPTA CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER DATED THE 30 TH JULY, 2010 COPY FORWARDED TO: 1. C/O P. MURALI & CO., CA, 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD. M/S GREENCITY ESTATES (P) LTD., 105 SECOND ROAD, MARUTH I COMPLEX, RAJBHAVAN ROAD, SOMAJIGUDA, HYDERABAD 2. ITO WARD NO.2(2), HYDERABAD 3. CIT(A) III, HYDERABAD 4. CIT, HYDERABAD 5. THE D.R., ITAT, HYDERABAD. NP