FIDELITY SELECT PORTFOLIOS COMPUTERS PORTFOLIO, MUMBAI v. ADIT (IT) 3(2), MUMBAI

ITA 2518/MUM/2010 | 2005-2006
Pronouncement Date: 30-12-2010 | Result: Dismissed

Appeal Details

RSA Number 251819914 RSA 2010
Assessee PAN AAATF1376J
Bench Mumbai
Appeal Number ITA 2518/MUM/2010
Duration Of Justice 8 month(s) 29 day(s)
Appellant FIDELITY SELECT PORTFOLIOS COMPUTERS PORTFOLIO, MUMBAI
Respondent ADIT (IT) 3(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-12-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted F
Tribunal Order Date 30-12-2010
Assessment Year 2005-2006
Appeal Filed On 31-03-2010
Judgment Text
I.T.A NO.2518/ MUM/2010 ASSESSMENT YEAR: 2005-06 1 IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH MUMBAI. BEFORE SHRI R.V.EASWAR PRESIDENT AND SHRI PRAMOD KUMAR AM I.T.A NO.2518/ MUM/2010 ASSESSMENT YEAR: 2005-06 FIDELITY SELECT PORTFOLIOS : SOFTWARE AND COMPUTERS SERVICES PORTFOLIO .AP PELLANT C/O S.R.BATLIBOI & CO. 6 TH FLOOR EXPRESS TOWERS NARIMAN POINT MUMBAI 400 021. PAN : AAATF 1376 J VS ASST. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) CIRCLE 3(2) MUMBAI-400 021 .RESPONDENT APPELLANT BY : SHRI M.P.LOHIA RESPONDENT BY : SHRI SUMEET KUMAR O R D E R PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL THE ASSESSEE HAS CALLED INTO QUESTION CORRECTNESS OF CIT(A)S ORDER DATED 29 TH JANUARY 2010 FOR THE ASSESSMENT YEAR 2005-06 ON THE FOLLOWING GROUNDS: I.T.A NO.2518/ MUM/2010 ASSESSMENT YEAR: 2005-06 2 THE LD CIT(A) ERRED IN UPHOLDING THE ORDER OF TH E ADIT(INTERNATIONAL TAXATION) RANGE 3(2) MUMBAI THE REBY DISPOSING THE APPEAL OF THE APPELLANT ON THE FOLLOW ING GROUNDS: * IN NOT DIRECTING THE LEARNED AO TO ALLOW THE SET OFF OF BROUGHT FORWARD CAPITAL LOSSES AGAINST THE CAPITAL GAINS EARNED BY THE APPELLANT IN THE A.Y. 2005-06. * IN NOT DIRECTING THE LEARNED AO TO GIVE EFFECT TO THE RULING PRONOUNCED BY THE AUTHORITY FOR ADVANCE RULINGS (AA R) TO RE-CHARACTERIZE THE INCOME AND ALLOW BROUGHT FOR WARD CAPITAL LOSSES IN THE ASSESSMENT YEAR 2005-06. * IN REJECTING THE GROUND OF APPEAL BY HOLDING THAT IT IS NOT BORNE OUT FROM FINDINGS OF THE APPEAL. * IN CONCLUDING THAT NO CAUSE OF ACTION EMERGED FRO M THE APPEAL WITHOUT CONSIDERING THE FACT THAT AT THE TIM E OF PASSING THE ASSESSMENT ORDER BY THE AO FOR A.Y. 200 5-06 THE RULING IN THE CASE OF APPELLANT WAS ALREADY PRONOUNCED BY THE AAR. 2. THE ASSESSEE BEFORE US A FOREIGN INSTITUTIONAL INVESTOR IS A MAURITIUS BASED TRUST INVESTING IN INDIAN STOCK MAR KETS. IN THE ORIGINAL RETURN OF INCOME FILED BY THE ASSESSEE INCOME ON S ALE OF SHARES WAS DISCLOSED AS INCOME UNDER THE HEAD PROFITS AND GAI NS FROM BUSINESS AND PROFESSION. SUBSEQUENTLY ASSESSEE MADE AN APPLIC ATION TO THE AUTHORITY I.T.A NO.2518/ MUM/2010 ASSESSMENT YEAR: 2005-06 3 FOR ADVANCE RULING SEEKING A RULING ON CHARACTERIZA TION OF THE SAID INCOME AND CONTENDED THAT THE INCOME ON SALE OF SHA RES IN THE HANDS OF THE ASSESSEE SHOULD BE TREATED AS INCOME UNDER THE HEAD CAPITAL GAINS. THESE CONTENTIONS WERE UPHELD BY THE AUTHORITY FOR ADVANCE RULING. THEREAFTER A REVISED INCOME TAX RETURN WAS FILED B Y THE ASSESSEE DISCLOSING SHORT TERM CAPITAL GAINS AMOUNTING TO RS .47 34 29 126. THE ASSESSEE ALSO CLAIMED A SET OFF OF BROUGHT FORWARD SHORT TERM CAPITAL LOSS OF RS 87 73 516 PERTAINING TO THE ASSESSMENT YEAR 2 004-05 BUT THE ASSESSEE DECLINE THE SAME ON THE GROUND THAT IN THE RETURN FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2004-05 NO CAPITA L LOSS WAS DISCLOSED BY THE ASSESSEE AND THE GAINS ON SALE OF SHARES WER E SHOWN AS BUSINESS INCOME WHICH WAS CLAIMED TO BE NOT TAXABLE IN INDI A ON THE GROUND THAT THE ASSESSEE DID NOT HAVE A PE IN INDIA. IT WAS IN THIS BACKGROUND THAT THE CLAIM FOR SET OFF OF BROUGHT FORWARD SHORT TERM CAPITAL LOSS AMOUNTING TO RS 87 73 516 WAS DECLINED TO THE ASSE SSEE. AGGRIEVED BY THE STAND SO TAKEN BY THE ASSESSING OFFICER ASSESS EE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). IT WAS CONTENDED BY THE A SSESSEE THAT ONCE AUTHORITY FOR ADVANCE RULING HAS GIVEN A RULING TO THE EFFECT THAT GAINS ON SALE OF SHARES IS TO BE CHARACTERIZED AS CAPITAL G AIN AS A COROLLARY TO THIS RULING THIS RECHARACTERIZATION OF INCOME IS T O BE TAKEN TO ITS LOGICAL CONCLUSIONS BY EXTENDING THE SAME TREATMENT TO 2004 -05 AND TO ALLOW RESULTANT SET OFF CLAIM. THE CIT(A) HOWEVER DECL INED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEES APPLICAT ION TO THE AUTHORITY FOR ADVANCE RULING SEEKING SUCH RECHARACTERIZATION OF INCOME FOR THE ASSESSMENT YEAR 2004-05 IS STILL PENDING BEFORE TH E AAR AND AS SUCH CLAIM FOR SET OFF IS PREMATURE. THE CIT(A) HOWEVER ALSO OBSERVED THAT AS AND WHEN EFFECT TO AAR RULING IS GIVEN BY THE AO HE WILL ALSO GIVE CONSEQUENTIAL RELIEF IF ANY BASED ON THAT ( RULING ) . THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. I.T.A NO.2518/ MUM/2010 ASSESSMENT YEAR: 2005-06 4 3. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CA SE AS ALSO THE APPLICABLE LEGAL POSITION. 4. WE HAVE NOTED THAT ON 2 ND DECEMBER 2010 I.E. SUBSEQUENT TO FILING OF THIS APPEAL THE ASSESSING OFFICER HAS PASSED AN ORDER FOR THE ASSESSMENT YEAR 2004-05 GIVING EFFECT TO THE ORDER OF THE AUTHORITY FOR ADVANCE RULING A COPY OF WHICH IS PLACED BEFORE US AT PAGES 34 AND 35 OF THE COMPILATION OF PAPERS. VIDE THE SAID ORDER THE ASSESSING OFFICER HAS RECHARCTERIZED THE LOSS ON SALE OF SHARES AMOU NTING TO RS 87 73 516 AS LOSS UNDER THE HEAD CAPITAL LOSS. IN THIS VIEW OF THE MATTER IT IS NO LONGER NECESSARY TO GO INTO THE QUESTION WHETHER IN COME COULD BE RECHARACTERIZED FOR THE ASSESSMENT YEAR 2004-05 ON THE BASIS OF AAR RULING FOR AN ASSESSMENT YEAR OTHER THAN 2004-05. T HAT CONTROVERSY HAS NOW BEEN SET AT REST SINCE THE ASSESSING OFFICER H AS WHILE GIVING EFFECT TO THE AAR RULING FOR THE ASSESSMENT YEAR 2004-05 RECHARACTERIZED THE INCOME AS TAXABLE UNDER THE HEAD CAPITAL GAINS. TO THAT EXTENT GRIEVANCE RAISED BY THE ASSESSEE IS NOW INFRUCTUOUS AND DOES NOT CALL FOR ANY ADJUDICATION BY US. HOWEVER THIS RECHARACTERIZATIO N OF INCOME IN ASSESSMENT YEAR 2004-05 BY ITSELF DOES NOT RESULT IN SET OFF INASMUCH WHILE SET OFF OF OF THE LOSS INCURRED IN IN THE AS SESSMENT YEAR 2004 -05 IN COMPUTATION OF TAXABLE THE ASSESSMENT YEAR 2005-06 IS ONLY A NATURAL COROLLARY ITS EFFECT IS NEVERTHELESS TO BE SPECIFI CALLY GIVEN IN COMPUTATION OF TAXABLE INCOME FOR THE ASSESSMENT YEAR 2005-06. WE HAVE NOTED THAT THE CIT(A) HAS DIRECTED THE ASSESSING OFFICER THAT AS AND WHEN EFFECT TO AAR RULING IS GIVEN BY THE AO HE WILL ALSO GIVE CO NSEQUENTIAL RELIEF IF ANY BASED ON THAT ( RULING ) AND REVENUE IS SAID TO BE NOT IN APPEAL AGAINST THIS DIRECTION. IN ANY CASE WHEN INCOME I S RECHARACTERIZED IN AN I.T.A NO.2518/ MUM/2010 ASSESSMENT YEAR: 2005-06 5 ASSESSMENT YEAR AS A RESULT OF THE RULING OF THE A UTHORITY FOR ADVANCE RULING SUCH A RECHARACTERIZATION OF INCOME WILL BE MEANINGLESS UNLESS ALL THE COROLLARIES OF SUCH A RECHARACTERIZATION DO NOT FOLLOW. THE ASSESSING OFFICER IS THEREFORE REQUIRED TO GIVE CONSEQUENTI AL EFFECT TO LOSS ON SALE OF SHARES BEING RECHARACTERIZED AS SHORT TERM CAPI TAL LOSSES. SUBJECT TO THIS OBSERVATION THE APPEAL OF THE ASSESSEE IS TO BE DISMISSED AS INFRUCTUOUS. 5. IN THE RESULT AND SUBJECT TO THE ABOVE OBSERVA TIONS THE APPEAL STANDS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 3 0 TH DECEMBER 2010. SD/- (R.V.EASWAR ) PRESIDENT SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI DATED 30 TH DECEMBER 2010 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS) MUMBAI 4. COMMISSIONER OF INCOME TAX MUMBAI 5. DEPARTMENTAL REPRESENTATIVE BENCH F MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR ITAT MUMBAI