I.T.O, Ward - 6(4), Kolkata, Kolkata v. M/S. Waterloo Exports Private Limited, Kolkata

ITA 24/KOL/2010 | 2006-2007
Pronouncement Date: 14-05-2010

Appeal Details

RSA Number 2423514 RSA 2010
Bench Kolkata
Appeal Number ITA 24/KOL/2010
Duration Of Justice 4 month(s) 7 day(s)
Appellant I.T.O, Ward - 6(4), Kolkata, Kolkata
Respondent M/S. Waterloo Exports Private Limited, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 14-05-2010
Appeal Filed By Department
Bench Allotted C
Tribunal Order Date 14-05-2010
Date Of Final Hearing 22-04-2010
Next Hearing Date 22-04-2010
Assessment Year 2006-2007
Appeal Filed On 06-01-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SRI D. K. TYAGI JM & HONBLE SRI C. D. RAO AM] I.T.A. NO.24/2010 ASSESSMENT YEAR: 2006-07 INCOME-TAX OFFICER WD-6(4) KOLKATA -VS- M/S. WAT ERLOO EXPORTS PRIVATE LTD. (PA NO.AAACW 2398 G) (APPELLANT) (RESPONDENT) APPELLANT BY : SRI NEERAJ SINGH RESPONDENT BY : SRI S. HALDER O R D E R PER D. K. TYAGI JM: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AG AINST THE ORDER OF THE LD. CIT(A) KOLKATA DATED 23.10.2009 FOR ASSESSMENT YEA R 2006-07. 2. GROUND NO. 1 READS AS UNDER : THAT THE LD. CIT(A)-VI KOLKATA HAS ERRED IN ON T HE FACTS AS WELL AS ON LAW IN DELETING THE ADDITION OF RS.1 55 445/- UNDER SECTION 40(A)(I A). THE ALLEGED DOCUMENTARY EVIDENCES WERE PRODUCED BEFORE THE LD. CIT(A) WAS I N VIOLATION OF RULE 46. 2.1. THE REVENUE IS AGGRIEVED BY THE ORDER OF THE L D. CIT(A) IN DELETING THE ADDITION OF RS.1 55 445/- U/S. 40(A)(IA) OF THE ACT ON ACCOU NT OF DISALLOWANCE OF INTEREST. BRIEF FACTS OF THIS GROUND ARE THAT IN THE ASSESSMENT ORD ER THE AO NOTED THAT THE ASSESSEE FAILED TO DEDUCT TAX AT SOURCE FROM PAYMENT OF INTE REST OF RS.1 55 445/- MADE ON 31.3.2006 TO THE LOAN CREDITOR AND DEBITED IN THE P & L ACCOUNT. HENCE THE AO DISALLOWED THE SAME U/S. 40(A)(IA) OF THE ACT AND A DDED THE SAID SUM OF RS.1 55 445/- TO THE TOTAL INCOME OF THE ASSESSEE. IN APPEAL THE L D. CIT(A) DELETED THE SAID ADDITION BY OBSERVING THAT THE LD. AR FILED THE TDS CERTIFICATE REGARDING THE PAYMENT OF INTEREST OF RS.1 55 445/- TO UMIL SHARE & STOCK BROKING SERVICE S (P) LTD. AGGRIEVED BY THE SAID ORDER NOW THE REVENUE IS IN APPEAL BEFORE US. 2.2.. AT THE TIME OF HEARING BEFORE US THE LD. DR RELIED ON THE ORDER OF THE AO AND SUBMITTED THAT THE AO HAS RIGHTLY MADE THE ADDITION OF RS.1 55 445/- AS NO DOCUMENTARY EVIDENCE WAS FILED BEFORE HIM. HE ALSO SUBMITTED T HAT BEFORE THE LD. CIT(A) THE ASSESSEE FILED THE TDS CERTIFICATE FOR THE FIRST TI ME WHICH IS IN VIOLATION OF RULE 46. THEREFORE THE LD. CIT(A) SHOULD NOT HAVE DELETED T HE ADDITION WITHOUT RESTORING THE 2 MATTER BACK TO THE AO FOR VERIFICATION OF THE SAID TDS CERTIFICATE. HE LASTLY CONCLUDED THAT THE ORDER OF THE LD. CIT(A) MAY BE SET ASIDE. 2.3. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASS ESSEE HEAVILY RELIED ON THE ORDER OF THE LD. CIT(A) AND URGED BEFORE THE BENCH TO CONFIR M HIS ACTION 2.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE FILED THE TDS CE RTIFICATE BEFORE THE LD. CIT(A) AND THE LD. CIT(A) HAS GIVEN RELIEF TO THE ASSESSEE WIT H THE SATISFACTION THAT THE ASSESSEE HAD NOT FAILED TO DEDUCT TAX AT SOURCE FROM THE PAYMENT OF INTEREST OF RS.1 55 445/-. SINCE THE LD. CIT(A) HAS DELETED THE ADDITION BY SATISFYI NG THAT THE ASSESSEE DEDUCTED TDS FROM PAYMENT OF INTEREST OF RS.1 55 445/- WE DO NO T FIND ANY INFIRMITY IN HIS ORDER AND THE SAME IS HEREBY UPHELD. THIS GROUND OF APPEAL O F THE REVENUE IS THEREFORE DISMISSED. 3. GROUND NO. 2 READS AS UNDER : THAT THE LD. CIT(A)-VI KOLKATA HAS ERRED ON THE F ACT AS WELL ON LAW IN TREATING THE INCOME OF RS.9 43 289/- BEING INCOME FROM STCG INST EAD OF BUSINESS INCOME. 3.1. THE REVENUE IS AGGRIEVED BY THE ORDER OF THE L D. CIT(A) SINCE HE TREATED THE INCOME OF RS.9 43 289/- BEING INCOME FROM STCG INST EAD OF BUSINESS INCOME AS HELD BY THE AO. FACTS OF THIS GROUND ARE THAT THE AO AT THE TIME OF ASSESSMENT PROCEEDINGS NOTED THAT THE INCOME WHICH WAS DISCLOSED BY THE A SSESSEE ON SHORT TERM CAPITAL GAIN WAS IN FACT TRADING PROFIT FROM SHARES TO BE COMPUT ED UNDER THE HEAD BUSINESS OR PROFESSION. HENCE THE AMOUNT OF RS.9 43 289/- WAS TREATED AS INCOME FROM BUSINESS OR PROFESSION FOR COMPUTING THE TOTAL INCOME AND TAX L IABILITY OF THE ASSESSEE. IN APPEAL THE LD. CIT(A) TREATED THE SAID INCOME OF RS.9 43 2 89/- OF THE ASSESSEE AS INCOME FROM SHORT TERM CAPITAL GAIN INSTEAD OF BUSINESS INCOME AS HELD BY THE AO. AGGRIEVED BY THE SAID ORDER NOW THE REVENUE IS IN APPEAL BEFORE US. 3.2. AT THE TIME OF HEARING BEFORE US THE LD. DR R ELIED ON THE ORDER OF THE AO AND URGED BEFORE THE BENCH TO CONFIRM THE SAME. 3.3. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASS ESSEE RELIED ON THE ORDER OF THE LD. CIT(A) AND PRAYED BEFORE THE BENCH TO CONFIRM THE A CTION OF THE LD. CIT(A). 3.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE LD. CIT(A) HAS DEALT THE ISSUE AS UNDER : 3 I HAVE GONE THROUGH THE SUBMISSIONS OF THE APPELLA NT AND ALSO THE ORDER OF THE ASSESSING OFFICER. AS SEEN FROM THE DETAILS THE APP ELLANT COMPANY; CONVERTED TRADING STOCK TO INVESTMENT IN SHARES DURING THE ASSTT. YEA R 2004-05 [ SHARES WORTH RS.5 96 456/- MERE CONVERTED OUT OF THE OPENING STO CK OF RS.7 10 460/-] . THIS CONVERSION HAS TAKEN PLACE LONG BEFORE THE AMENDMEN T OF THE ACT BY WAY OF INSERTION OF SEC.111A OF THE ACT. AS SEEN FROM DETAILS APPELLANT WAS TRADING IN SHARES UNDER TRADING HEAD AND INVESTMENT ACCOUNT IS TRUE THAT THE ASSESS EE ENGAGED HIS INVESTMENT ACTIVITY AS A RESULT OF AMENDMENT OF I.T ACT. THE APPELLANT ALS O MADE FRESH INVESTMENT IN SHARE AND THE BEST JUDGE REGARDING BENEFICIAL ACTIVITY TO THE ASSESSEE IS ASSESSEE HIMSELF. THE CONSISTENCY OF HOLDING OF SHARES AND THE TRADIN G TRANSACTION IN ANY DETERMINE THE ADHOC INCOME UNDER WHICH THE APPELLANTS BOOKS PROF ITS. IT IS SEEN FROM THE DETAILS THE APPELLANT HAS DECLARED TRADING ACTIVITY IN SHARE IN VESTMENT IN SHARES IN ISOLATION WITH EACH OTHER. THE METHOD OF VALUATION OF STOCK IN TRA DING IS ALSO DIFFERENT FROM THE STOCK INVESTMENT IN SHARES AND APPELLANT HAS FOLLOWED THE SAME. THE TRADING STOCK WAS VALUED AT MARKET PRICE OR COST WHICHEVER IS LOWER WHILE TH E INVESTMENT WAS VALUED AT COST. THE APPELLANT ALSO FILED THE MINUTE OF THE PROCEEDI NGS OF THE MEETING OF THE BOARD OF DIRECTORS APPROVING THE INVESTMENT IN SHARES OF VAR IOUS COMPANIES. AS SEEN FROM THIS THE BOARD OF DIRECTORS AT VARIOUS POINTS OF TIME HA D APPROVED THE PURCHASE OF INVESTMENT AND SALE OF INVESTMENT. THE APPELLANT AL SO FILED DETAILS TO SHOW THAT (UMIL) SALES PROCEEDS OF USHA MARTIN INVESTMENT LTD. SHARE S WERE INVESTED IN PUBLIC ISSUES OF ABG SHIPYARD LTD. SIMILARLY THE SALE PROCEEDS OF S OME OTHER SHARES WERE INVESTED IN PUBLIC ISSUES OF RAMSARUP INDUSTRIES LTD. THE FREQU ENCY OF TRANSACTIONS AND CANNOT BE TERMED AS TRADING TRANSACTION. THE SHARE S WHICH WERE SOLD ON DIFFERENT DATES WERE FROM THE INVESTMENT PORTFOLIO. THE ASSESSING O FFICERS OBSERVATION THAT THE ASSESSEE HAD FREQUENT TRANSACTION WITH PROFIT MOTIV E TO EARN BUSINESS PROFIT DISCERNIBLE IN TRADING TRANSACTIONS CANNOT BE CONCLUSIVE EVIDEN CE TO SAY THAT TRADING PROFIT FROM SHARES IS TO BE COMPUTED UNDER THE HEAD BUSINESS OR PROFESSION. THE ACTIVITY OF INVESTMENT IN SHARES IS ALSO PRIMARILY TO MAKE PROF IT APART FROM EARNING DIVIDEND INCOME. VOLUME AND FREQUENCY DEPEND ON THE AMOUNT O F CAPITAL INVESTED AND ALSO PRICE FLUCTUATIONS IN PARTICULAR SHARES. AS SEEN FROM DETAILS THERE WERE ONLY 16 PURCHASE TR ANSACTIONS AND SALE TRANSACTIONS DURING THE YEAR. THE CBDT IN ITS CIRCULAR NO.4/2007 . CBDT ALSO WISHES TO EMPHASISE THAT IT IS POSSIBLE FOR A TAX PAYER TO HAVE TWO POR TFOLIOS I.E. AN INVESTMENT PORTFOLIO COMPRISING OF SECURITIES WHICH ARE TO BE TREATED AS CAPITAL ASSETS AND A TRADING PORTFOLIO COMPRISING OF STOCK IN TRADE WHICH ARE TO BE TREATE D AS TRADING ASSETS. WHERE AN ASSESSEE HAS TWO PORTFOLIOS THE ASSESSEE MAY HAVE INCOME FROM BOTH HEADS I.E. CAPITAL GAINS AS WELL AS BUSINESS INCOME. IN J.M. SHARE & STOCK BROKERS PVT. LTD. VS. JCIT (ITA NO. 2801-02/MUM/2000 DT.30.11.2007) HONBLE I TAT HELD THAT THE PROFIT ON SALE OF SHARES HELD AS INVESTMENT MUST BE TAXED AS CAPIT AL GAINS AND NOT AS BUSINESS PROFIT. THE APPELLANT SUBMITTED THAT THE COMPANY HAS NOT CL AIMED LOSS DUE TO FALL IN VALUE OF CAPITAL ASSETS OR INVESTMENTS. THE APPELLANT SUBMITTED THAT THE COMPANY HAS SHOWN INTEREST INCOME OF RS.15 42 502/- AND INTEREST PAID TO A PARTY NAMELY M/S. UMIL SHAR ES AND STOCK BROKING SERVICES PVT. LTD. IS RS.5 09 999. THIS VERY FACT SUGGESTS THAT T HE ASSESSEE COMPANY HAD SURPLUS FUNDS OTHER THAN BORROWED FUND AVAILABLE FOR INVESTMENT IN SHARES. THE A.O. WITHOUT BRINGING OUT THE FACTS CONCLUDED THAT THE ASSESSEE USED BORR OWED FUND AND PRESUMED THE EXISTENCE OF BUSINESS ACTIVITY. BASED ON THE ABOVE DISCUSSION AND TAKING INTO CONSI DERATION THE SUBMISSIONS OF THE APPELLANT I AM OF THE OPINION THAT THE PROFIT OF R S.9 43 289 INCOME FROM SHORT TERM CAPITAL GAIN. THIS GROUND OF APPEAL IS ALLOWED. 4 AT THE TIME OF HEARING BEFORE US THE LD. DR DID NO T CONTROVERT THE ABOVE FINDINGS OF THE LD. CIT(A) BY PRODUCING ANY COGENT MATERIAL/EVIDENC E HENCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND THE SA ME IS HEREBY UPHELD. THIS GROUND OF APPEAL OF THE REVENUE IS ALSO DISMISSED. 4. IN THE RESULT THE APPEAL OF THE REVENUE IS DIS MISSED. 5. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 14. 5.10 SD/- SD/- (C. D. RAO) (D. K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 14TH MAY 2010 COPY TO : 1. ITO WARD-6(4) KOLKATA. 2. M/S. WATERLOO EXPORTS PVT. LTD. 1B OLD POST OFFIC E STREET 1 ST FLOOR KOL-1. 3. CIT(A) KOLKATA. 4. CIT KOLKATA. 5. D.R. ITAT KOLKATA. TRUE COPY BY ORDER DEPUTY REGISTRAR JD.(SR.P.S.) I.T.AT. KOLKATA