DCIT, Circle - 4, Kolkata, Kolkata v. M/s. Mcleod & Co. Ltd., Kolkata

ITA 107/KOL/2011 | 2007-2008
Pronouncement Date: 15-07-2011

Appeal Details

RSA Number 10723514 RSA 2011
Assessee PAN AABCM7872L
Bench Kolkata
Appeal Number ITA 107/KOL/2011
Duration Of Justice 6 month(s)
Appellant DCIT, Circle - 4, Kolkata, Kolkata
Respondent M/s. Mcleod & Co. Ltd., Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 15-07-2011
Appeal Filed By Department
Bench Allotted A
Tribunal Order Date 15-07-2011
Assessment Year 2007-2008
Appeal Filed On 14-01-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [ . . . . . .. . ! ! ! ! ] [BEFORE HONBLE SHRI S.V. MEHROTRA AM & HONBLE SHRI MAHAVIR SINGH JM !' !' !' !' / I.T.A. NO. 107/KOL/2011 #$ %& #$ %& #$ %& #$ %&/ // / ASSESSMENT YEAR : 2007-08 DY. COMMISSIONER OF INCOME TAX -VS.- M/S. MCLEOD & CO. LIMITED CIRCLE-4 KOLKATA. KOLKATA [PAN : AABC M 7872 L] [ () /APPELLANT] [ *+()/ RESPONDENT] () / FOR THE APPELLANT : /SHRI A. K. PARAMANIK *+() / FOR THE RESPONDENT : /SHRI A. K. TRIBREWAL - /O R D E R [ . . . . . .. . ] PER S.V. MEHROTRA AM THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSMENT YEAR 2007-08 AGAINST ORDER OF CIT(A)- IV KOLKATA DATED 25.02.2010. 2. AS PER OFFICE NOTE THE APPEAL IS DELAYED BY 90 DAYS. THE DEPARTMENT HAS FILED AFFIDAVIT OF SHRI P.B. PRAMANIK DY. COMMISSIONER OF INCOME TAX. IT IS STATED THAT THE LAST DATE OF FILING SECOND APPEAL AGAINST THE APPELLATE ORDER WAS ON 16.10.201 0 BUT FOR THE FOLLOWING REASONS IT COULD NOT BE FILED WITHIN TIME. DATE REASON S 16.10.2010 TO 09.01.2011 APPLICATION FOR FILING S ECOND APPEAL WAS NOT COMMUNICATED. 10.01.2011 APPLICATION FOR FILING SECOND APPEAL COMMUNICATED. 11.01.2011 & 13.01.2011 PAPERS WERE BEING PROCESS ED FOR FILING. 14.01.2011 THE PAPERS ARE BEING FILED FOR SECON D APPEAL. [ ITA NO. 107/KOL/2011] 2 WITHIN A SPAN OF ONE WEEK THIS OFFICE RECEIVED 93 A PPELLATE ORDERS FROM THE OFFICE OF LD. CIT(A) RELATING TO SEVERAL MONTHS BAT CHES APART FROM HAVING 19 OLD APPELLATE ORDER OF WHICH APPEAL SCRUTINY REP ORTS ARE BEING PREPARED AND SENT TO THE OFFICE OF CIT KOL.-II KOLKATA. BESIDES THIS DUE TO PENDENCY TIME BARRED TO BE COM PLETED BY 31.12.2010 A DELAY OCCURRED IN SENDING PAPERS FOR FILING OF APPE AL. THAT THE DELAY IS NOT DELIBERATE AND THE RESPONDENT DOES NOT GAIN IN ANY MANNER BY DELAY COMMITTED. 3. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND HAVE PERUSED THE RECORDS OF THE CASE. CONSIDERING THE FACTS AS STATED IN THE AFFIDA VIT NOTED ABOVE WE ARE OF THE OPINION THAT THE DEPARTMENT WAS PREVENTED BY REASONABLE CAUSE FROM P REFERRING THE APPEAL WITHIN THE STIPULATED LIMITATION PERIOD. WE ACCORDINGLY CONDONE THE DEL AY AND PROCEED TO DECIDE THE APPEAL ON MERITS. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-CO MPANY HAD FILED ITS RETURN OF INCOME SHOWING TOTAL INCOME OF RS.43 55 673/- WHICH COMPRISED OF R ENTAL INCOME INTEREST INCOME MAINTENANCE HIRING & SERVICE CHARGES AND PARTLY ON ACCOUNT OF TRADING OF SHARES. THE ASSESSMENT WAS COMPLETED AT A TOTAL INCOME OF RS.1 42 71 202/- BY CONSIDERIN G INTER ALIA ANNUAL LETABLE VALUE OF THE PROPERTY LET OUT AT RS.22 62 511/- UNDER THE HEAD INCOME FR OM HOUSE PROPERTY AND FURTHER BY TREATING THE INCOME FROM SALE OF SHARES UNDER THE HEAD CAPITAL GAIN INSTEAD OF BUSINESS INCOME. THE LD. CIT(A) PARTLY ALLOWED ASSESSEES APPEAL. 5. BEING AGGRIEVED THE DEPARTMENT IS IN APPEAL BEF ORE US AND HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT(A) KOLKATA HAS ERRED IN LAW IN DIRECTING THE A.O. TO DELETE THE ADDITION WI THOUT APPRECIATING THE FACT THAT IN THIS CASE TWO ASPECTS ARE INVOLVED. FIRSTLY JUD ICIAL PRONOUNCEMENT UPON WHICH LD. CIT(A) RELIED ON DID NOT ADJUDICATE ON THE ISSU ES RAISED BY THE A.O. AS TO THREE CONDITIONS LAID DOWN IN SEC.23 FOR ESTIMATION OF FAIR RENT AND SECONDLY THE CONCEPT OF FAIR RENT IS NOT BASED ON MARKET VALUATI ON AND CANNOT DIFFER AT THE SAME PLACE AND IN THE SAME PREMISES. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT(A) KOLKATA HAS ERRED IN LAW IN ALLOWING THE CLAIM OF THE ASSESSEE AS TO BUS INESS LOSS OF RS.18 40 969/- WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE CREA TED SUCH LOSS BY INFLATION OF CREDIT SIDE TO GET BENEFIT OF THE CORRESPONDING DEB IT SIDE IN P & L A/C. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT(A) KOLKATA HAS ERRED IN LAW IN ALLOWING THE CLAIM OF THE ASSESSEE AS TO BUS INESS INCOME RAISED ON THE SHARE ACTIVITIES OF SUBSIDIARY COMPANIES TO KEEP CO NTROL OVER IT WITHOUT [ ITA NO. 107/KOL/2011] 3 CONSIDERING THE FACT THAT IN THE PREVIOUS YEAR THE ASSESSEE PERFORMED A VERY LITTLE ACTIVITY OF SHARE TRADING WITH ITS SUBSIDIARY COMPA NY. 6. BRIEF FACTS APROPOS GROUND NO.1 ARE THAT THE MAI N SOURCE OF ASSESSEES INCOME WAS FROM MCLEOD HOUSE. THE ASSESSING OFFICER OBSERVED THAT T HIS PROPERTY WAS LOCATED AT A PLACE WHICH IS ITS PRIME LOCATION FOR OFFICES IN KOLKATA. HE HAS GIVEN THE DETAILS OF TENANTS WITH AREA OF OCCUPATION AND RATE OF RENT PER MONTH AT PAGE 2 OF HIS ORDER. TAKING INTO CONSIDERATION THE FACT THAT ASSESSEE HA D LET OUT DIFFERENT AREA OF DIFFERENT FLOORS OF THE P REMISES AT DIFFERENT RATES PROCEEDED TO COMPUTE THE FAIR MARKET RENT. AFTER CONSIDERING THE ASSESSEES SUBMISSIONS HE OBSERVED THAT FAIR RENT EXPECTED FROM THE LET OUT PROPERTY WAS @ RS.33.49 PER MONTH PER SFT. AND TAKING INTO CONSIDERATION THE FLOOR AREA OF 56301.66 SFT. BEING LET OUT THE FAIR RENT IS TO BE TAKEN AT RS.2 26 26 511/-. HE FURTHER OBSERVED THAT THIS AMOUNT IS HIGHER OF THREE CONDIT IONS MENTIONED IN SECTION 23 OF THE ACT AND THEREFORE IT IS TO BE TAKEN AS ANNUAL LETABLE VALU E OF THE PROPERTY. BEFORE LD. CIT(A) IT WAS INTER ALIA POINTED OUT THAT THE ASSESSING OFFICER HIMSEL F HAD OBSERVED THAT AS PER MUNICIPAL VALUATION THE ANNUAL VALUATION OF THE PROPERTY IS RS.50.72 LA KHS WHICH IS LOWER THAN THE ACTUAL RENT RECEIVED OF RS.90.13 LAKHS. THE ASSESSEE HAD RELIED ON THE DECI SIONS OF HONBLE SUPREME COURT IN THE CASE OF DEWAN DAULAT RAJ KAPOOR VS. NEW DELHI MUNICIPAL COM MITTEE & ANOTHER [1980] 122 ITR 700 (SC) AND IN THE CASE OF MRS. SHEILA KAUSHISH VS. CI T [1981] 131 ITR 435 (SC). IT WAS POINTED OUT THAT IN BOTH THESE CASE IT WAS DECIDED THAT WHERE THE PROPERTY IS SUBJECT TO RENT CONTROL REGULATION THE MUNICIPAL VALUATION SHOULD BE CONSIDERED TO REP RESENT THE FAIR RENT OF THE PROPERTY FOR THE PURPOSES OF LEVIES OF MUNICIPAL TAXES AND ALSO INCO ME TAX. IT WAS FURTHER POINTED OUT THAT IN THE CASE OF MRS. SHEILA KAUSHISH (SUPRA) ALTHOUGH THE ACTUA L RENT RECEIVED FROM THE PROPERTY WAS HIGHER THAN THE MUNICIPAL VALUATION IT WAS HELD THAT MUNICIPAL VALUATION SHOULD BE ADOPTED FOR THE PURPOSE OF DETERMINATION OF ANNUAL VALUE OF THE PROPERTY. WITH REFERENCE TO THESE DECISIONS IT WAS POINTED OUT THAT IN THE PRESENT CASE MAJORITY OF THE TENANTS W ERE VERY OLD ONES AND PAYING RENT AT THE OLD RATE O F 1.80 PER SFT. THE TENANCY WAS SUBJECT TO REGULATION UNDER WEST BENGAL PREMISES TENANCY ACT AND HENCE THE RENT COULD NOT BE ENHANCED. THE ASSESSEE HAD ALSO RELIED ON THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF IN THE CASE OF C IT VS. KISHANLAL & SONS (UDYOG) PVT.LTD. [2003] 260 ITR 481 (CAL.) WHEREIN IT WAS INTER ALIA HEL D THAT THE RENT BEING FETCHED BY THE PROPERTY AT TH E BEGINNING OF THE RELEVANT PREVIOUS YEAR SHOULD BE C ONSIDERED TO REPRESENT THE ANNUAL RENT VALUE OF THE PROPERTY. THE ASSESSEE ALSO RELIED ON THE DECIS ION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. MODI INDUSTRIES LTD. [1993] 200 ITR 350 (DE LHI) AND IN THE CASE OF CIT VS. MODI SPINNING & MANUFACTURING MILLS CO. LTD. [1980] 125 ITR 361 ( ALL.) FOR THE PROPOSITION THAT WHEN THE PROPERTY IS SUBJECT TO STATUTORY CONTROL REGULATION S THE ACTUAL RENT BEING FETCHED BY THE PROPERTY [ ITA NO. 107/KOL/2011] 4 SHOULD PREVAIL AS A MEASURE OF ANNUAL VALUE OF THE PROPERTY FOR THE PURPOSE OF ASSESSMENT OF INCOME FROM THE PROPERTY. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND INTER ALIA TAKING NOTE OF THE FACT THAT THE TENANCY AGREEMENT HAD NOT BEEN CHALLENGED BY THE DEPARTMENT AND FURTHER TAKING NOTE OF THE FACT THAT THE MUNICIPAL VALUATION OF THE PROPERTY IS RS.50.72 LAKHS AND ANNUAL VALUE OF THE PROPERTY WAS RS.90.13 LAKHS HE LD THAT ANNUAL VALUE AS TAKEN BY THE ASSESSEE ON THE BASIS OF ACTUAL RENT HAS TO BE ACCEPTED. 7. LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE OR DER OF THE ASSESSING OFFICER. 8. LD. COUNSEL APPEARING ON BEHALF OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND POINTED OUT THAT THE ISSUE IS COVERE D BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF KISHANLAL & SONS (UDYOG) PVT.L TD. (SUPRA). 9. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND HAVE PERUSED THE RECORDS OF THE CASE. IT IS NOT DISPUTED THAT THE MUNICIPAL VALUATI ON OF THE PROPERTY AS EVIDENCED AT PAGE 16 OF THE PAPER BOOK IS LESS THAN THE ACTUAL RENT RECEIVED. IT IS ALSO NOT DISPUTED THAT MOST OF THE TENANTS AR E OLD. THE LD. CIT(A) HAS ALSO NOTED THAT MOST OF THE TENANT-COMPANIES WERE EARLIER UNDER THE MANAGEMENT OF THE ASSESSEE-COMPANY BUT PRESENTLY T HEY ARE NEITHER UNDER THE MANAGEMENT OF THE ASSESSEE-COMPANY OR UNDER THE CONTROL OF THE ASSESS EE-COMPANY. THE DIRECTORS WERE ALSO NOT COMMON AND THE SHAREHOLDINGS WERE ALSO DIFFERENT. T HESE FACTS HAVE NOT BEEN CONTROVERTED BY THE DEPARTMENT. THE TENANCY AGREEMENT HAS NOT BEEN DISP UTED BY THE DEPARTMENT. SECTION 23 CLAUSE (1)(B) REFERS TO THE CASES WHERE THE PROPERTY HAS B EEN LET OUT FOR THE PURPOSES OF DETERMINATION OF ANNUAL VALUE. AS PER THIS CLAUSE IF THE ACTUAL REN T RECEIVED IS MORE THAN THE FAIR RENT AS PER CLAUSE (A) THEN THE ACTUAL RENT IS TO BE TAKEN AS ANNUAL VALUE OF THE PROPERTY. SINCE THE PROPERTY WAS UNDER THE CONTROL OF WEST BENGAL TENANCY ACT THE RENT CO ULD BE REALIZED SUBJECT TO THE CONDITIONS OF THE SAID ACT. HONBLE SUPREME COURT IN THE CASE OF DEWA N DAULAT RAJ KAPOOR (SUPRA) HAS HELD THAT WHERE THE PROPERTY IS SUBJECT TO RENT CONTROL REGUL ATIONS THE MUNICIPAL VALUATION SHOULD BE CONSIDERED TO REPRESENT THE FAIR RENT OF THE PROPER TY FOR THE PURPOSE OF LEVIES OF MUNICIPAL TAX AND INCOME TAX. THEREFORE UNDER CLAUSE (A) MUNICIPAL VALUATION IS TO BE TREATED AS FAIR RENT OF THE PROPERTY. ADMITTEDLY THE MUNICIPAL VALUATION IS LE SS THAN THE ACTUAL RENT RECEIVED AND THEREFORE AS PER SECTION 23 CLAUSE (B) ANNUAL VALUE OF THE PRO PERTY IS TAKEN AS ACTUAL RENT RECEIVED BY THE ASSESSEE. FURTHER HONBLE CALCUTTA HIGH COURT IN T HE CASE OF KISHANLAL & SONS (UDYOG) PVT.LTD. (SUPRA) HAS HELD THAT UNDER SUCH CIRCUMSTANCES THE RENT BEING FETCHED BY THE PROPERTY AT THE BEGINNING OF THE RELEVANT PREVIOUS YEAR SHOULD BE C ONSIDERED TO REPRESENT THE ANNUAL VALUE OF THE [ ITA NO. 107/KOL/2011] 5 PROPERTY. IN VIEW OF ABOVE DISCUSSION WE DO NOT FI ND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). THIS GROUND OF THE DEPARTMENT IS DISMISSED. 10. BRIEF FACTS APROPOS GROUND NOS. 2 & 3 ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS ASSESSING OFFICER NOTICED THAT ASSESSEE HAD SHOWN P ROFIT ON SALE OF SHARE AND HAD CLAIMED THE SAME AS BUSINESS PROFIT. THE ASSESSING OFFICER EXAMINED THE INVENTORY OF STOCK AND NOTED THAT EITHER DURING THE YEAR OR IN LAST YEAR ASSESSEE HAD NOT P URCHASED ANY SHARE. THE SHARE SCRIPTS WHICH WERE SOLD WERE OF THOSE COMPANIES IN WHICH THE ASSESSEE- COMPANY OR ITS ASSOCIATE HAD CONTROL OVER THE MANAGEMENT. HE OBSERVED THAT ASSESSEE HAD SOLD SHAR ES OF SUBSIDIARY COMPANY AND CLAIMED THE SAME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS A S SHARE TRADER. HE POINTED OUT THAT THE INTENTION OF THE ASSESSEE IN HOLDING THOSE SHARES WAS NOT FOR TRADING IN THOSE SHARES BUT TO REIGN CONTROL OVER THE AFFAIRS OF THOSE COMPANIES. HE FURTHER OBSERVED THAT THERE WAS NO REPETITION OF SALES OR PURCHASE OF SHARES SO AS TO CONSTITUTE TRADING ACTIVITY. HE DID NOT ACCEPT THE ASSESSEES CLAIM REGARDING SHARE TRADING AS BUSINESS AFFAIR AND TREATED THE SAME AS LONG TERM CAPITAL GAIN. BEFORE THE LD. CIT(A) IT WAS POINTED OUT THAT ASSESSEE WAS IN THE LINE OF SH ARE TRADING SINCE LONG AND THE POSITION HAD ALSO BEEN ACCEPTED BY THE DEPARTMENT IN THE PAST ASSESSM ENTS OF THE ASSESSEE. THE DEPARTMENT HAD REOPENED CERTAIN ASSESSMENTS U/S. 147 OF THE ACT FO R THE PURPOSE OF TREATING THE SHARE TRADING ACTIVITIES AS DEEMED SPECULATIVE ACTIVITY UNDER THE PROVISIONS OF EXPLANATION TO SECTION 73 OF THE ACT. HOWEVER THE ASSESSING OFFICER FINALLY HELD TH AT THE ASSESSEE-COMPANY IS AN INVESTMENT COMPANY THEREFORE THE PROVISIONS OF EXPLANATION T O SECTION 73 OF THE ACT DID NOT APPLY. THUS IT WAS SUBMITTED THAT THE POSITION THAT THE SHARE TRA DING ACTIVITIES OF THE ASSESSEE CONSTITUTE BUSINESS ACTIVITY HAS BEEN ACCEPTED BY THE DEPARTMENT. THE L D. CIT(A) RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RADHASOAMI SATSANG VS. CIT [1992] 193 ITR 321 (SC) WHEREIN IT WAS HELD THAT ALTHOUGH THE PRINCIPLE OF RES JUDICATA DO ES NOT APPLY TO INDIVIDUAL INCOME-TAX ASSESSMENT FROM YEAR TO YEAR BUT AT THE SAME TIME THEIR FUNDA MENTAL ASPECT PERMEATING TO DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE BEEN ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER IT WOULD NO T BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR ALLOWED THE ASSESSEE S APPEAL. 11. LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT ASSESSEE HAD SOLD SHARES OF SUBSIDIARY COMPANIES IN WHICH THERE COULD NOT BE ANY INTENTION TO TRADE. LD. DEPARTMENTAL REPRESENTATIVE FURTHER REFERRED TO PROFIT & LOSS ACCOUNT CONTAINED AT SL.NO.8 OF THE PAPER BOOK AND POINTED OUT THAT SALES AS PER INTERNAL PAGE 13 OF THE PROFIT & LOSS ACCOUNT HAS BEEN SHOWN AT RS.11 90 397/-. HE [ ITA NO. 107/KOL/2011] 6 FURTHER REFERRED TO INTERNAL PAGE 20 OF THE ANNUAL ACCOUNTS AND POINTED OUT THAT IN SCHEDULE 12 THE OPENING STOCK AND CLOSING STOCK OF SHARES HAS BEEN SHOWN AS UNDER :- SCHEDULE 12 INCREASE/(DECREASE) IN STOCK OPENING STOCK 37 46 622/- CLOSING STOCK 25 81 912/- (11 64 710/-) WITH REFERENCE TO THESE FIGURES HE POINTED OUT THA T IT IS NOT CLEAR AS TO HOW THE ASSESSEE HAD CLAIME D BUSINESS LOSS OF RS.18 40 969/-. 12. LD. COUNSEL APPEARING ON BEHALF OF THE ASSESSEE REFERRED TO PAGE 7 OF THE PAPER BOOK WHEREIN THE COMPUTATION OF TOTAL INCOME IS CONTAINE D AND SHOWED THE MANNER IN WHICH THE LOSS UNDER THE HEAD PROFITS AND GAINS OF THE BUSINESS HAD BEEN ARRIVED. LD. COUNSEL FURTHER SUBMITTED THAT ASSESSEE IS IN SHARE TRADING ACTIVITY SINCE LO NG AND THESE FACTS HAVE BEEN ACCEPTED BY THE DEPARTMENT. 13. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORDS OF THE CASE. THE FUNDAMENTAL PRINCIPLE FOR DECIDING WHETHE R THE ASSESSEE IS CARRYING ON SHARE TRADING ACTIVITY SO AS TO CONSTITUTE THE BUSINESS ACTIVITY OR HOLDING SHARES FOR THE PURPOSES OF INVESTMENT DEPENDS ENTIRELY ON THE ASSESSEES INTENTION. THE A SSESSEES INTENTION IS TO BE GATHERED FROM THE FACTS AND CIRCUMSTANCES IN EACH CASE. IN THIS REGAR D THE PAST HISTORY MANNER OF HOLDING THE SHARES I N THE BOOKS OF ACCOUNT FREQUENCY OF TRANSACTIONS AND ALL OTHER INCIDENTAL FACTORS ASSUME GREAT SIGNIFICANCE. IT IS SETTLED LAW THAT THE MANNER OF RECORDING TRANSACTIONS IN BOOKS OF ACCOUNT IS NOT DECISIVE OF THE TRUE NATURE OF TRANSACTIONS. THE AS SESSEES INTENTION IS TO BE DECIDED AFTER TAKING IN TO CONSIDERATION ALL THESE ASPECTS. IF THE INTENTION O F THE ASSESSEE IS TO HOLD THE SHARES AS INVESTMENT THEN THE SAME CANNOT BE TREATED AS PART OF SHARE TR ADING ACTIVITY WHEN THE INVESTMENT IS LIQUIDATED. THERE CAN NOT BE ANY DISPUTE THAT A HOLDING COMPANY HOLDS SHARES OF ITS SUBSIDIARY AS ITS INVESTMENT AND TO THE EXTENT OF SUCH HOLDING ITS PORTFOLIO OF SHARE HOLDING CANNOT BE TREATED AS PART OF SHARE TRADING PORTFOLIO. IN THE BACKDROP OF THESE PRINCIP LES IF WE EXAMINE THE FACTS OF THE PRESENT CASE W E FIND THAT AT INTERNAL PAGE 8/17 OF THE PAPER BOOK SCHEDULE 6 TO THE BALANCE SHEET GIVING DETAILS OF STOCK-IN-TRADE OF SHARES AND SECURITIES IS CONTAINE D. AS PER THIS SCHEDULE ASSESSEE-COMPANY WAS HOLDING 1 57 654 SHARES OF CRAIG JUTE MILLS LTD. W HICH WAS ITS SUBSIDIARY. ALL SUCH SHARES HAVE BEEN LIQUIDATED ENBLOCK AND THEREFORE THIS CAN NO T BE TREATED AS PART OF ASSESSEES SHARE TRADING ACTIVITY. HOWEVER IN RESPECT OF OTHER SHARES SINC E ASSESSEES SHARE TRADING ACTIVITY HAS BEEN ACCEPTED IN PAST THEREFORE FROM SALE OF THOSE SHA RES THE BUSINESS PROFIT/LOSS IS TO BE COMPUTED. THE [ ITA NO. 107/KOL/2011] 7 ASSESSING OFFICER HAS TREATED THE ENTIRE SALE PROCE EDS AS BEING FROM SALE OF SHARES RELATING TO SUBSIDIARY COMPANY BUT THE ASSESSEE DISPUTES THE SA ME. WE THEREFORE SET ASIDE THE ORDER OF LD. CIT(A) ON THIS ISSUE AND RESTORE THE MATTER BACK TO THE FILE OF ASSESSING OFFICER WITH THE FOLLOWING DIRECTIONS :- (I) AS REGARDS SALE OF SHARES OF SUBSIDIARY COMPAN IES ASSESSING OFFICER WILL COMPUTE LONG TERM CAPITAL GAIN AS PER LAW. (II) IN RESPECT OF SALE OF OTHER SHARES ASSESSING OFFICER WILL COMPUTE BUSINESS LOSS/PROFIT AS PER LAW. WE MAY CLARIFY THAT IF CERTAIN QUOTED EQUITY SHARES AS MENTIONED IN SCHEDULE 6 OF THE BALANCE SHEET RELATE TO SUBSIDIARY COMPANY THEN ASSESSING OFFICE R WILL DETERMINE THE LONG TERM CAPITAL GAIN AS PER DIRECTION NO. (I) ABOVE. ACCORDINGLY THESE TWO GROUNDS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES IN TERMS OF AFOREMENTIONED OBSERVATIONS. 14. IN THE RESULT THE APPEAL FILED BY THE DEPARTME NT IS ALLOWED IN PART FOR STATISTICAL PURPOSES. - - - - . .. . /# /# /# /# 0 0 0 0 1 11 1 ORDER PRONOUNCED IN THE COURT ON 15. 07. 20 11. SD/- SD/- [ ! ] [ .. ] [ MAHAVIR SINGH ] [ S.V. MEHROTRA ] JUDICIAL MEMBER ACCOUNTANT MEMBER 2 / DATED : 15TH JULY 2011. - 3 * 4 54%6 - COPY OF THE ORDER FORWARDED TO: 1. /APPELLANT- DY. COMMISSIONER OF INCOME TAX CIRCL E-4 P-7 CHOWRINGHEE SQUARE 8 TH FLOOR KOLKATA-700 069. 2 *+() / RESPONDENT : M/S. MCLEOD & CO. LTD. 3 N.S. ROAD MCLEOD HOUSE KOLKATA-700 001. 3. -# / CIT(E) 4. -# ( )/ CIT(A) 5. 0 * # / DR KOLKATA BENCHES KOLKATA [ +4 * / TRUE COPY] -#/ / BY ORDER 7 / !8 /DEPUTY/ASSTT. REGISTRAR . [KKC 9: #;8 < /SR.PS]