ACIT, New Delhi v. M/s. Ascot Investments, New Delhi

ITA 4691/DEL/2011 | 2007-2008
Pronouncement Date: 27-04-2015 | Result: Dismissed

Appeal Details

RSA Number 469120114 RSA 2011
Assessee PAN AAMFA6159Q
Bench Delhi
Appeal Number ITA 4691/DEL/2011
Duration Of Justice 3 year(s) 6 month(s) 2 day(s)
Appellant ACIT, New Delhi
Respondent M/s. Ascot Investments, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 27-04-2015
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 27-04-2015
Date Of Final Hearing 20-04-2015
Next Hearing Date 20-04-2015
Assessment Year 2007-2008
Appeal Filed On 25-10-2011
Judgment Text
INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A: NEW DELHI BEFORE SHRI N.K.SAINI ACCOUNTANT MEMBER AND SHRI A. T. VARKEY JUDICIAL MEMBER ITA NO. 4691 /DEL/2011 (ASSESSMENT YEAR: 2007 - 08 ) ACIT CENTRAL CIRCLE - 25 ROOM NO.331 ARA CENTRE JHANDEWALAN EXTENSION NEW DELHI VS. ASCOT INVESTMENTS RATAN JYOTI BUILDING 18 RAJENDRA PLACE NEW DELHI PAN:AAMFA6159Q (APPELLANT) (RESPONDENT) APPELLANT BY : SH. B.R.R. KUMAR SR. D R RESPONDENT BY : SHRI VED JAIN SH. RANO JAIN CA AND SH. V. MOHAN CA DATE OF HEARING 20 .04.2015 DATE OF PRONOUNCEMENT 27 .04.2015 ORDER PER A. T. VARKEY JUDICIAL MEMBER THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 06 . 6 .2011 PASSED BY THE LD. CIT(A) - XXV I NEW DELHI PERTAINING TO ASSESSMENT YEAR 200 7 - 0 8 . 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN ITS APPEAL: - 1. THE ORDER OF THE CIT(A) IS NOT CORRECT IN LAW AND FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS IN FACTS IN DIRECTING THE AO TO TREAT THE INCOME OF RS. 1 76 03 581/ - DECLARED BY THE ASSESSEE AS SHORT TERM CAPITAL GAINS ONLY AND NOT AS BUSINESS INCOME WITHOUT PROPERLY CONSIDERING THE ARGUMENTS AND FACTS AS MENTIONED IN THE ASSESSMENT ORDER. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS IN FACTS IN IGNORING THE FACT THAT THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS VIDE HIS LETTER DATED 4.12.2009 HAS STATED THAT THE MANAGEMENT FEES OF RS.41 88 451/ - PAID FOR MANAGING PORTFOLIO MANAGEMENT SCHEME (PMS) HAS BEEN WRONGLY CLAIMED AND OFFERED THE ITA NO. 4691/DEL/2011 ACIT VS. ASCORT INVESTMENT 2 PORTFOLIO MANAGEMENT FEES (PMS) FOR TAXATION MEANING THEREBY THAT THE ASSESSEE HAS HIMSELF IMPLIEDLY ADMITTED THAT HIS INCOME FROM THE SALE AND PURCHASE OF SHARES/MUTUAL FUNDS IS BUSINESS INCOME THOUGH IN THE RETURN OF INCOME THE SAME HAS BEEN SHOWN INCOME FROM SHORT TERM CAPITAL GAINS. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE ID. CIT(A) HAS ERRED IN LAW AS WELL AS IN FACTS IN HOLDING THAT THE LOSS OF RS.8 26 229/ - ON TRADING OF DERIVATIVES IS TO BE CONSIDERED AS BUSINESS LOSS ONLY AND ALLOWED TO BE SET OFF AGAINST OTHER INCOME AS PER PROVISIONS OF THE ACT. 5. THE ORDER OF LD. CIT()A IS PERVERSE IN LAW LAND ON FACTS. 6. THE APPELLANT CRAVES LEAVE TO ADD ALTER OR AMEND ANY/ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF THE HEARING OF THE APPEAL. 3 . THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED RETURN DECLARING AN INCOME OF RS. 2 32 72 210/ - FOR THE ASSESSMENT YEAR 2007 - 08. THE RETURN WAS PROCESSED U/S. 143(1) OF THE INCOME TAX ACT 1961 (HEREIN AFTER THE ACT) . THE CASE WAS SELECTED FOR SCRUTINY. THE ASSESSEE IS A PARTNERSHIP FIRM WHICH IS ENGAGED IN THE BUSINESS OF INVESTMENT IN SHARES AND MUTUAL FUND UNDER THE NAME AND STYLE OF M/S ASCOT INVESTMENTS. THIS IS THE FIRST YEAR OF BUSINESS. DURING THE YEAR UNDER CONSIDERATION TH E ASSESSEE HAS DECLARED INCOME FROM BUSINESS AND PROFESSION INCOME FROM CAPITAL GAINS AND DIVIDEND INCOME AND INTEREST INCOME. AFTER PERUS AL OF THE DETAILS FILED ALONG WITH THE RETURN OF INCOME FILED BY THE ASSESSEE THE AO NOTED THAT THE ASSESSEE HAD CLAIMED INCOME FROM CAPITAL GAINS FROM INVESTMENTS IN SHARES AND MUTUAL FUNDS APART FROM INCOME FROM PROFITS AND GA INS OF BUSINESS OR PROFESSI ON AND HE OBSERVED THAT DURING THE YEAR THERE WAS NO INVESTMENT RECEIPTS RATHER ALL THE RECEIPTS WERE TRADING RECEIPTS. THEREFORE HE HELD THAT THE AMOUNT OF RS.1 76 03 581/ - CLAIMED TO HAVE BEEN EARNED AS SHORT T ERM CAPITAL GAIN IS NOT THE INCOM E FROM CAPITAL GAINS BUT IS BUSINESS INCOME AND ACCORDINGLY COMPLETED THE ASSESSMENT U/S. 143(3) OF THE ACT ON 24.12.2009 AND MADE VARIOUS ADDITIONS. 4. AGAINST THE AFORESAID ORDER OF THE ASSESSING OFFICER ASSESSEE APPEALED BEFORE THE LD. CIT(A) WHO VIDE HIS ORDER DATED 6 . 6 .2011 HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE . ITA NO. 4691/DEL/2011 ACIT VS. ASCORT INVESTMENT 3 5. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) NOW THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. . 6. LD. DR RELIED UPON THE ORDER OF THE AO AND REITERATED THE CONTENTION RAISED IN THE GROUNDS OF APPEAL RAISED BY THE REVENUE. 7. ON THE CONTRARY LD. COUNSEL OF THE ASSESSEE HAS RELIED UPON THE ORDER OF THE LD. CIT(A) AND DEFENDED THE SAME AND DOES NOT WANT US TO INTERFERE IN THE SAME. 8. WE HAVE HEARD BOTH THE PARTIE S AND PERUSED THE RECORDS. THE GROUND NO. 1 BEING GENERAL NATURE HENCE NEED S NOT ADJUDICAT ION . 8.1 GROUND NO . 2 IS RELATING TO TREATING THE INCOME OF RS.1 76 03 581/ - DECLARED BY THE ASSESSEE AS SHORT TERM CAPITAL GAINS AND NOT AS BUSINESS INCOME AS HE LD BY THE AO IS CONCERNED WE FIND THAT THE LD . CIT(A) APPRECIATED THE FACTS OF THE CASE BY TAKING INTO ACCOUNT THE DETAILS OF SALE PURCHASE AND INVESTMENT IN SHARES THE INTENTION OF THE ASSESSEE VARIOUS CASE LAWS AND CIRCULAR S OF CBDT IN THIS REGARD. THE CBDT CIRCULAR NO .4/2007 HAS REFERRED TO VARIOUS PRINCIPLES LAID DOWN BY JUDICIAL AUTHORITIES IN ORDER TO ENABLE MAKING DISTINCTION BETWEEN SHARES HELD FOR TRADING AND SHARES HELD AS INVESTMENTS AND HAVE CLARIFIED THAT TOTAL EFF ECT OF ALL THE PRINCIPLES SHOULD BE CONSIDERED IN DETERMINING WHETHER IN A GIVEN CASE THE SHARES ARE HELD BY ASSESSEE AS INVESTMENT OR STOCK IN TRADE. IN THE CASE OF CIT VS. ASSOCIATED INDUSTRIAL DEVELOPMENT CO. (P) LTD. 82 ITR 586 THE HONBLE SUPREME CO URT HAD OBSERVED THAT WHETHER A PARTICULAR HOLDING OF SHARES IS BY WAY OF INVESTMENT OR FORMS PART OF THE STOCK - IN - TRADE IS A MATTER WHICH IS WITHIN THE KNOWLEDGE OF THE ASSESSEE WHO HOLDS THE SHARES AND IT SHOULD IN NORMAL CIRCUMSTANCES BE IN A POSITION TO PRODUCE EVIDENCE FROM ITS RECORDS AS TO WHETHER IT HAS MAINTAINED ANY DISTINCTION BETWEEN THOSE SHARES WHICH ARE ITS STOCK - IN - TRADE AND THOSE WHICH ARE HELD BY WAY OF INVESTMENT. LD . COUNSEL OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE IS A PARTNE RSHIP FIRM THROUGH WHICH THE PARTNERS HAVE INVESTED THEIR FUNDS IN VARIOUS SHARES SECURITIES MUTUAL FUND SCHEMES. DURING THE YEAR THE ASSESSEE FIRM INVESTED ITS OWN FUND (NOT BORROWED FUND) IN VARIOUS MUTUAL FUNDS SHARES SECURITIES & OTHER INVESTMENTS AND EARNED A ITA NO. 4691/DEL/2011 ACIT VS. ASCORT INVESTMENT 4 NET CAPITAL GAIN OF RS.1 76 03 580.95. THE ASSESSEE FIRM ALSO EARNED AN AMOUNT OF RS.42 77 597.73 ON ACCOUNT OF DIVIDEND AND RS.59 59 134.27 FROM VARIOUS OTHER SOURCES. THE ASSESSEE FIRM FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR ON 3 1.10.2007 DECLARING AN INCOME OF RS.2 32 72 210/ - . ACCORDING TO THE LD AR THIS IS THE FIRST YEAR OF THE FIRM AND THE SAID FIRM WAS FORMED ONLY FOR THE PURPOSE OF INVESTMENT AND ITS NAME ASCOT INVESTMENTS ITSELF SUGGESTS THAT THE FIRM WAS CONSTITUTED WITH SUCH AN INTENTION . ACCORDING TO HIM THE FIRM CONSISTS OF FAMILY MEMBERS I.E. FATHER SH. SATISH GUPTA AND TWO SONS SAMEER GUPTA AND SUNDEEP GUPTA WHO ARE ALL EQUAL PARTNERS OF THE ASSESSEE FIRM. AND IT WAS STARTED WITH AN INTENTION TO MANAGE VARIO US INVESTMENTS HELD BY THE PARTNERS IN THEIR INDIVIDUAL CAPACITY AND TO POOL THEIR RESOURCES TOGETHER FOR THE PURPOSE OF INVESTMENT. ACCORDING TO HIM PRIOR TO THE SAME THE INVESTMENTS WERE HELD BY THE PARTNERS IN THEIR INDIVIDUAL CAPACITY AND WERE SHOWN AS INVESTMENTS IN THEIR RESPECTIVE INDIVIDUAL BALANCE SHEETS. COPIES OF THEIR RETURNS OF INCOME ALONG WITH COMPUTATION OF INCOME FOR THE AY 2004 - 05 2005 - 06 & 2006 - 07 HAVE BEEN PLACED ON RECORD BEFORE THE AUTHORITIES BELOW AND BEFORE US AND PERUSAL OF THE SAME DEPICT THE INVESTMENTS MADE AND THE INCOME EARNED BY THE PARTNERS IN THEIR INDIVIDUAL CAPACITY IN PAST YEARS. DURING THE YEAR UNDER CONSIDERATION ACCORDING TO THE ASSESSEE FIRM IT HAS MADE VARIOUS INVESTMENTS IN MUTUAL FUNDS OF VARIOUS COMPANIES. THE LD AR POINTED OUR ATTENTION TO A LIST OF VARIOUS COMPANIES ALONG WITH SUMMARY OF TRANSACTIONS DONE AND CAPITAL GAIN ED ON THE SAME WERE SHOWN TO US . ACCORDING TO THE LD AR ALL SHARES PURCHASED WERE DULY TRANSFERRED TO THE DMAT ACCOUNT OF THE ASSESSEE F IRM AND ALL THE TRANSACTIONS WERE DONE BY INVESTMENT IN MUTUAL FUNDS OR THROUGH PORTFOLIO MANAGEMENT SCHEME ( PMS ) . THE LD AR POINTED OUT THAT A HUGE AMOUNT OF DIVIDEND HAS BEEN EARNED DURING THE YEAR UNDER CONSIDERATION I.E. RS.42 77 597.73/ - . FURTHER IT W AS SUBMITTED BY THE LD AR THAT AS AND WHEN THE OPPORTUNITY AROSE THE ASSESSEE FIRM SOLD THE SHARES IN THE OPEN MARKET. ACCORDING TO HIM THE SAID GAIN WAS IN THE NATURE OF SHORT TERM CAPITAL GAIN WHICH WAS DULY OFFERED FOR TAXATION IN THE RETURN OF INCOME FILED BY THE ASSESSEE FIRM FOR THE YEAR UNDER CONSIDERATION. ITA NO. 4691/DEL/2011 ACIT VS. ASCORT INVESTMENT 5 8. 2 THE REASONING GIVEN BY THE ASSESSING OFFICER TO TREAT THE SAID INCOME AS BUSINESS INCOME IS MAINLY BECAUSE THAT THE ASSESSEE HAS MADE HUGE VOLUME OF INDEPENDENT PURCHASES AND SALE OF SHARES AND MUTUAL FUNDS AND THE ASSESSEE HAS ALSO CLAIMED EXPENSES ON ACCOUNT OF INTEREST AND ADMINISTRATIVE EXPENSES WHICH ARE NOT ALLOWABLE IN CASE OF CAPITAL GAIN. THE ASSESSING OFFICER IS ALSO OF THE OPINION THAT THERE IS NO LONG TERM CAPITAL GAIN IN ANY OF THE CASES WHICH INDICATE THAT THE ASSESSEE IS NOT AN INVESTOR BUT A TRADER. A PERUSAL OF THE BALANCE - SHEET OF THE ASSESSEE FIRM REFLECTS THAT IT HAS A 'CAPITAL BASE OF MORE T HAN RS.52 CRORE OUT OF WHICH IT HAS MADE INVESTMENT OF ABOUT RS.34 CRORE AND THAT IN THE BALANCE SHEET AND THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE FIRM THE TRANSACTIONS ARE BEING ACCOUNTED FOR AS INVESTMENT. THE ASSESSEE HAS ALSO EARNED HUGE DIVID END INCOME OF RS.42 77 597/ - DURING THE YEAR UNDER CONSIDERATION . 9. THE LD CIT(A) HAS RIGHTLY OBSERVED THAT FROM THE BALANCE SHEET AND THE ACTIVITIES CARRIED OUT BY THE ASSESSEE IT CANNOT BE SAID THAT THE ASSESSEE IS DOING BUSINESS AND THERE IS NO OTHER ADVERSE FEATURE TO COME TO THE CONCLUSION THAT THE ASSESSEE IS NOT AN INVESTOR BUT A TRADER. THE BOARD CIRCULAR REFERRED IS VERY CLEAR WHEREBY CERTAIN PARAMETERS HAVE BEEN FIXED. ON ANALYSIS OF THIS BOARD CIRCULAR AND THE FACTS OF THE CASE OF THE ASSESSEE IT IS QUITE CLEAR THAT ASSESSEE CANNOT BE HELD TO BE A TRADER. IN THE BOARD CIRCULAR IN PARA 8.2 IT HAS BEEN QUITE CLEARLY STATED THAT THE MANNER OF MAINTAINING BOOKS OF ACCOUNT FURNISHES A GOOD GUIDE TO DETERMINE THE NATURE OF THE TRANSACTION. FURTHE R IT HAS BEEN STATED IN THE CIRCULAR THAT INVESTMENT MADE IN SHARES TO DERIVE INCOME BY WAY OF DIVIDEND IS ALSO A GOOD INDICATOR. IT IS AN ADMITTED FACT ON RECORD THAT THE ASSESSEE FIRM HA S EARNED DIVIDEND INCOME OF RS. 42 77 597/ - DURING THE YEAR. FURTHER IT IS ALSO A FACT ON RECORD THAT ASSESSEE HAS NOT BORROWED FUNDS FOR THE PURPOSE OF MAKING INVESTMENTS SO AS TO CALL ITS ACTIVITIES AS BUSINESS. THE LD CIT(T)A HAS RIGHTLY HELD THAT THE MERE FACT THAT THE ASSESSEE HAS MADE PURCHASES AMOUNTING TO RS.31.7 8 CRORE AND SALE AMOUNTING TO RS.2 5 .57 CRORE DOES NOT MEAN THAT IT HAS BECOME BUSINESS. THESE FIGURES HAVE TO BE UNDERSTOOD IN THE CONTEXT THAT THE CAPITAL OF THE ASSESSEE ITA NO. 4691/DEL/2011 ACIT VS. ASCORT INVESTMENT 6 FIRM IS RS.52.13 CRORE AND IT IS HOLDING INVESTMENTS IN SHARES OF RS.34.48 CRORE. TH ESE FIGURES ITSELF SUBSTANTIATE THE CASE OF THE ASSESSEE THAT ASSESSEE IS AN INVESTOR WHEREBY A MAJOR PART OF THE CAPITAL HAS BEEN INVESTED IN THE INVESTMENTS. 10. WE FIND THAT THE ASSESSING OFFICER HAS RELIED ON THE DEFINITION OF THE WORD 'PARTNERSHIP' A S PER THE INDIAN PARTNERSHIP ACT 1932 AS 'RELATION BETWEEN PERSONS WHO HAVE AGREED TO SHARE THE PROFITS OF THE BUSINESS CARRIED ON BY ALL OR ANY OF THEM ACTING FOR ALL.' TO BOLSTER HIS CONCLUSION THAT THE INCOME ACCRUED TO THE ASSESSEE FIRM IS BUSINESS A ND NOT INVESTMENT. THE DEFINITION GIVEN BY THE INDIAN PARTNERSHIP ACT CANNOT OVERRIDE THE PROVISIONS OF THE INCOME TAX ACT AND THE NATURE OF INCOME AS PER THE INCOME TAX ACT . THE ASSESSMENT OF INCOME HAS TO BE MADE UNDER THE VARIOUS HEADS OF INCOME AS PER THE SCHEME OF THE INCOME TAX ACT. IF THE AOS VIEW HAS TO BE TAKEN THEN IT WAS INTEREST INCOME FOR PURPOSES OF SEC 80HHC 80LA 80LB ETC. BE TAKEN TO BE BUSINESS INCOME ENTITLED TO DEDUCTION AND NOT TREATED AS INCOME FROM OTHER SOURCES. FURTHER IT WOULD M EAN THAT NO INCOME OF THE FIRM WOULD BE ASSESSED UNDER THE HEAD CAPITAL GAINS RENTAL INCOME OR INCOME FROM OTHER SOURCES WHICH WOULD CREATE ABSURD REASONING. THEREFORE THE LD CIT(A) HAS RIGHTLY HELD THAT ASSESSING OFFICER HAS WRONGLY RELIED ON THE DEFINI TION OF PARTNERSHIP AS DEFINED IN THE INDIAN PARTNERSHIP ACT 1932 TO DECIDE THE HEAD OF INCOME UNDER WHICH TO ASSESS THE INCOME. THERE IS A FLAW IN THE ASSESSING OFFICER S OBSERV ATION THAT THERE IS NO LONG TERM CAPITAL GAIN BUT ONLY SHORT TERM CAPITAL GA INS WITHOUT APPRECIATING THAT THIS W AS THE FIRST YEAR OF INVESTMENT MADE BY THE ASSESSEE FIRM SO THERE COULD BE NO QUESTION OF HAVING MADE ANY INCOME FROM LONG TERM CAPITAL GAINS BECAUSE MINIMUM QUALIFICATION TO TREAT AN INCOME AS CAPITAL GAIN IS THAT IT S HOULD BE HELD BY THE ASSESSEE FOR MORE THAN AN YEAR. FURTHER THE ASSESSEE WHEN IT SEES THE VALUE OF INVESTMENTS GOING DOWN IN SHARES OR MUTUAL FUNDS WOULD NORMALLY GET OUT/SELL/SWITCH TO OTHER OPTIONS. SIMILAR IS THE CASE WHERE HE FINDS THAT INVESTMENT IN OTHER PORTFOLIOS WOULD YIELD BETTER DIVIDENDS OR RETURNS. THEREFORE NO ADVERSE INFERENCE OUGHT TO HAVE BEEN DRAWN FROM THE MERE FACT THAT THERE WERE NO LONG TERM CAPITAL GAINS ACCRUED TO THE ASSESSEE . ANOTHER ITA NO. 4691/DEL/2011 ACIT VS. ASCORT INVESTMENT 7 REASON HELD AGAINST THE ASSESSEE BY THE ASSES SING OFFICER IS THAT THE ASSESSEE HAS CLAIMED EXPENSES OF RS.20 97 294/ - WHICH INCLUDE INTEREST EXPENSES OF RS.2 70 077/ - AND ADMINISTRATIVE EXPENSES OF RS.10 00 988/ - . EX PENDITURE INCURRED AND CLAIMED BY AN ASSESSEE WILL NOT CHANGE THE NATURE OF THE INCO ME. MOREOVER A PERUSAL OF THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE IT IS NOTICED THAT THIS EXPENDITURE HAS NOT BEEN CLAIMED AGAINST CAPITAL GAIN INCOME SHOWN BY THE ASSESSEE. WE ALSO CONCUR WITH THE LD CIT(A) THAT A PERUSAL OF SCHEDULE IX ATTACHED TO THE PROFIT AND LOSS ACCOUNT SHOWS INCOME ON ACCOUNT OF SHORT TERM CAPITAL GAIN OF RS.1 76 03 545/ - AND THE SA ME HAS BEEN SHOWN AS NET INCOME IN THE COMPUTATION OF INCOME FILED BY THE ASSESSEE. IT IS ALSO FURTHER NOTICED THAT THE ASSESSEE HAS SHOWN INTEREST INCOME IN RESPECT OF RS.57 56 497/ - WHICH ALSO CONFIRMS THE FACT THAT THE SURPLUS FUNDS OF THE ASSESSEE ARE BEING INVESTED EITHER IN SHARES OR TO EARN INTEREST INCOME. THE ASSESSEE HAS ALSO FILED DETAILS OF THE SHORT TERM CAPITAL GAINS AND ON GOING THROUG H THE SAME IT IS NOTICED THAT THERE ARE 9 ENTRIES OUT OF WHICH THE ASSESSEE HAS SUFFERED LOSS IN 4 CASES AND HAS INCOME IN 5 CASES. THE MAJOR INCOME OF RS.1 53 76 789/ - IS COMING IN RESPECT OF THE INVESTMENTS MADE ON ITS OWN ACCOUNT. THUS THE REASONING A ND BASIS OF THE ASSESSING OFFICER TO TREAT THE INCOME FROM BUSINESS/ TRADE IS NOT CORRECT. 11. FU RTHER WE FIND FORCE IN THE SUBMISSION OF THE LD AR THAT THE INCOME FROM THE SALE HAVE BEEN SHOWN AS INCOME FROM CAPITAL GAINS BECAUSE THE INTENTION OF THE A SSESSEE WAS TO MAKE INVESTMENTS IN MUTUAL FUNDS AND SECURITIES AND EARN INCOME FROM CAPITAL GAINS DIVIDENDS ETC. THE INTENTION OF THE PARTNERS FOR DERIVING INCOME FROM INVESTMENTS IS BORNE OUT BY THE FOLLOWING FACTS (AS NOTED BY THE LD CIT(A) IN PAGE 31 O F THE IMPUGNED ORDER : > THE PARTNERS ARE CARRYING ON THE BUSINESS OF MANUFACTURE AND SALE OF SOUND PROOF GENERATORS ELECTRICAL PANELS ETC. IN THE NAME OF 'JAKSONS' AND GROUP TURNOVER IS IN EXCESS OF RS. 50 0 CRORES. SINCE THEY WERE BUSY IN THE SAID BUSINESS INVESTMENTS WERE MADE THROUGH THE ASSESSEE FIRM. > THE PARTNERS HAVE PUT IN THEIR OWN CAPITAL OF RS. 5 2. 5 CRORES (APPROX.) FOR INVESTMENT PURPOSES OUT OF THEIR SURPLUS FUNDS. ITA NO. 4691/DEL/2011 ACIT VS. ASCORT INVESTMENT 8 > NO BORROWED FUNDS WERE INVESTED. > THE INVESTMENTS HAVE BEEN B ASICALLY MADE IN MUTUAL FUNDS AND PORTFOLIO MANAGEMENT SCHEMES (PMS). THE TRADING IN DERIVATIVES WAS DONE BY PMS MANAGERS AND NOT BY PARTNERS. > THE AMOUNT HAS BEEN SHOWN AS 'INVESTMENTS' IN THE BOOKS OF ACCOUNTS AND IN THE BALANCE SHEET. > INCOME UNDER THE HEAD SHORT TERM CAPITAL GAINS/LOSS DIVIDEND AND OTHER INCOME HAS BEEN SHOWN. > THE CLOSING VALUE OF SHARES AND MUTUAL FUNDS SHOWN AS INVESTMENTS HAS BEEN VALUED AT COST AND NOT AT 'COST PRICE OR MARKET PRICE WHICHEVER IS LOWER' AS APP LICABLE TO VALUATION OF STOCKS. > THE MAJORITY OF FUNDS WERE INVESTED IN MUTUAL FUNDS & PMS AND NOT IN EQUITY SHARES . 12. THE LD . CIT(A) HAS TAKEN DUE NOTE OF THE TAX AUDIT REPORT FILED BY THE ASSESSEE FIRM IN WHICH THE AUDITORS HAVE STATED IN ITEM 8(A ) REGARDING NATURE OF BUSINESS/PROFESSION AS 'INVESTMENT IN SHARES & MUTUAL FUNDS'. IN ITEM 12(A ) REGARDING THE METHOD OF VALUATION OF CLOSING STOCK THE AUDITORS HAVE STATED 'NOT APPLICABLE (BEING AN INVESTMENT FIRM}'. FURTHER IN SCHEDULE 13 REGARDIN G SIGNIFICANT ACCOUNTING POLICIES THE AUDITORS HAVE INTER ALIA STATED AS UNDER: - INVESTMENTS ARE VALUED AT COST. - INVESTMENT TRANSACTIONS ARE ACCOUNTED FOR ON TRADE DATE BASIS. - ACCOUNTING OF INVESTMENTS MADE THROUGH PMS AND INCOME EARNED THEREON HA S BEEN MADE AS PER AUDITED STATEMENT RECEIVED FROM THE CONCERNED ASSETS MANAGEMENT COMPANY. 13. SO ACCORDING TO THE LD AR THUS THE TAX AUDIT REPORT ALSO REINFORCES THE INTENTION OF THE ASSESSEE THAT THE OBJECT OF THE ASSESSEE WAS INVESTMENT AND NOT BUSI NESS AS OPINED BY THE AO AND SO THE LD CIT(A) HAS RIGHTLY UPHELD THE CLAIM OF THE ASSESSEE FIRM. 14 . IN THE IMPUGNED ORDER THE LD CIT(A) HAS TAKEN DUE NOTE OF THE CBDT CIRCULAR NO.4/2007 DATED 15.06.2007 WHICH HAS SPECIFICALLY THE CONDITIONS TO DETERMI NE THE NATURE OF TRANSACTION IN QUESTION OF BEING WHETHER IT IS IN THE NATURE OF ITA NO. 4691/DEL/2011 ACIT VS. ASCORT INVESTMENT 9 INVESTMENT OR TRADE. IN THE SAID CIRCULAR CBDT HAS STATED THAT THE PRINCIPLE LAID DOWN IN THE CASE OF ASSOCIATED INDUSTRIAL DEVELOPMENT COMPANY (P) LTD. AS REPORTED IN 82 ITR 586 AND IN THE CASE OF H. HOICK LARSEN AS REPORTED IN 160 ITR 67 (S C ) AFFORDED ADEQUATE GUIDANCE TO THE ASSESSING OFFICER WHILE DETERMINING WHETHER A TRANSACTION IS IN THE NATURE OF INVESTMENT OR TRADE . THE LD CIT(A) OBSERVES IN PAGE 32 OF THE IMPUGNED ORDER THAT THE RATIO OF THESE DECISIONS WHEN APPLIED TO THE FACTS OF THE PRESENT CASE THEN IT WOULD' BE FOUND THAT ASSESSEE SATISFIED THE REQUIREMENTS BECAUSE AS A RULE THE ASSESSEE HAD TAKEN DELIVERY AT THE TIME OF PURCHASE AND GIVEN DELIVERY A T THE TIME OF SALE IN RESPECT OF ALL THE SHARES IN ITS INVESTMENT PORTFOLIO AND THE ASSESSEE HAD ALSO KEPT SEPARATE RECORDS TO RECORD THE TRANSACTIONS OF EACH CATEGORY I.E. DELIVERY BASED AND NON - DELIVERY BASED. ALSO BY. TREATING THE DELIVERY BASED TRANSACTION AS AN INVESTMENT THE ASSESSEE CLEARLY ESTABLISHED THAT IT DID NOT TAKE THE FIRST STEP AS A TRADER HENCE THE RESULT OF THE DELIVERY BASED TRANSACTION WAS TREATED AS SHORT TERM CAPITAL GAIN DEPENDING UPON THE PERIOD OF HOLDING OF SUCH SHARES. THE LD DR COULD NOT ASSAIL THE SAID FINDING OF THE LD CIT(A) BY BRINGING ANY EVIDENCE TO THE CONTRARY FROM THE ASSESSMENT ORDER OF THE AO OR OTHER EVIDENCE IN THIS BEHALF. 15. THE LD CIT(A) HAS RIGHTLY HELD THAT THE T ESTS OF BADGES OF TRADE EVOLVED BY ROYAL COMMISSION OF ENGLAND AND APPROVED BY THE HON'BLE SUPREME COURT ARE ALSO MET BY THE ASSESSEE. IN ORDER TO BUTTRESS ITS CONTENTION THE LD AR CONTENDED THAT (1) AN EQUITY SHARE OF INDIAN COMPANIES IS NOT ESSENTIALLY A TRADING COMMODITY. MORE OFTEN THAN NOT SHARES ARE PURCHASED BY INDIAN PUBLIC AS AN INVESTMENT. WHILE HELD FOR LONG PERIOD THE SHARES YIELD REGULAR INCOME IN THE FORM OF DIVIDEND. IT MAY HOWEVER BE NOTED THAT SOME HOLDERS BUY AND SELL SHARES BY WAY OF T RADE AND NOT INVESTMENT. (2) WHERE SHAREHOLDING IS FOR TRADING FREQUENCY OF PURCHASE AND SALE SCRIP - WISE IS VERY HIGH AND THE PERIOD OF HOLDING OF A PARTICULAR LOT IS MINIMAL. IT SHOULD BE NOTED THAT OVER THE COURSE OF TIME EQUITY SHARES HAVE BECOME A PO PULAR MODE OF INVESTMENT. THERE IS HUGE VARIETY TO CHOOSE FROM. DUE TO GLOBALIZATION AND VARIOUS UNCERTAINTIES OF MODERN TIMES THERE ITA NO. 4691/DEL/2011 ACIT VS. ASCORT INVESTMENT 10 IS INCREASING VOLATILITY IN THE SHARE MARKET. THIS HAS AFFECTED THE LENGTH OF PERIOD OF HOLDING IN THE CASES OF INVESTORS ALSO. HAVING REGARD TO THESE VARIOUS ISSUES UNDER THE PROVISIONS OF THE ACT WHERE SHARES ARE HELD FOR ONE YEAR AND MORE THE SAME QUALIFY TO BE ASSESSED AS LONG TERM CAPITAL ASSETS. THE PERIOD OF LESS THAN ONE YEAR RESULTS INTO SHORT TERM CAPITAL ASSET. TH ERE IS NO MINIMUM PERIOD PRESCRIBED FOR SHORT TERM CAPITAL GAINS. IN CERTAIN CIRCUMSTANCES HOLDING OF EVEN ONE DAY MAY RESULT INTO A SHORT TERM CAPITAL ASSET. IT IS SUBMITTED THAT DUE TO LARGE NUMBER OF COMPANIES LISTED ON STOCK EXCHANGE AND VOLATILITY IN THE MARKET EVEN A SERIOUS INVESTOR HAS TO FREQUENTLY SHUFFLE HIS PORTFOLIO BUT IT DOES NOT SIGNIFY THAT THE INVESTOR IS TRADING. 16. AT ANY RATE WHERE A PARTICULAR LOT OF SHARES IS PRIMARILY INTENDED FOR TRADING THE SAME WOULD NOT BE HELD FOR WEEKS OR MONTHS. IN THE CASE OF THE PRESENT ASSESSEE ALL THE SHARES HAVE BEEN SOLD AFTER THE DELIVERY OF SAME WERE TAKEN BY IT IN ITS BANK ACCOUNT. THE EXPRESSION 'SIMILAR TRANSACTIONS BY THE SAME PERSON' AND 'SAME SORT OF PROPERTY' NEEDS TO BE EMPHASIZED. AN INV ESTOR MAY BUY OR SELL EVERYDAY BUT THAT MAY NOT BE CONSIDERED SUCH FREQUENCY AS TO LEAD TO THE INFERENCE OF TRADING. IT IS ONLY WHEN PARTICULAR SCRIP IS BOUGHT AND SOLD A NUMBER OF TIMES OVER A SHORT PERIOD THAT AN INFERENCE OF TRADING AS AGAINST INVESTMEN T MAY BE DRAWN. IN THE CASE OF THE PRESENT ASSESSEE THE ALLEGATION OF FREQUENCY IS NOT ONLY UNSUPPORTED BUT INCORRECT AS WELL IF SCRIP WISE DETAILS ARE ANALYZED. IN THE CASE OF THE PRESENT ASSESSEE THERE IS BARE MINIMUM INFRASTRUCTURE IN THE FORM OF OFFI CE EMPLOYEES EQUIPMENTS ETC. THE .ASSESSEE DOES NOT INDULGE IN ADVERTISING OR CANVASSING OF ANY KIND WHATSOEVER. THERE IS NO ORGANIZED EFFORT TO OBTAIN PROFIT EXCEPT THAT INVESTMENT IS MADE THROUGH MUTUAL FUNDS AND PMS SERVICE FOR SHARES PURCHASED BY A SSESSEE . IF IT BECOMES NECESSARY THEY ARE SOLD PROMPTLY ON THE BASIS OF MARKET CONDITION. THEREFORE IT CANNOT BE SAID THAT THE ASSESSEE HAS DRESSED UP IN SUCH WAY SO AS TO WEAR THE BADGE OF TRADING. WHENEVER THERE IS PREMATURE SALE I.E. THE SALE WITHIN A FEW DAYS OR WEEKS FROM PURCHASE THERE IS ALWAYS SOME SPECIFIC REASON SUCH AS DOWNTREND IN MARKET SENTIMENTS OVER A' ITA NO. 4691/DEL/2011 ACIT VS. ASCORT INVESTMENT 11 PARTICULAR SCRIP OR INDUSTRY. SUCH TRANSACTIONS HOWEVER IN THE CASE OF THE ASSESSEE ARE FEW AND FAR IN BETWEEN. THE EFFORT IN RESPECT OF DELIVERY BASED TRANSACTION IS ALWAYS TO HOLD THE SHARES INITIALLY ALLOTTED FOR AS LONG AS IT MAY BE SENSIBLE TO HOLD THEM. AS ALREADY EXPLAINED THE MOTIVE OF THE ASSESSEE IN DELIVERY - BASED TRANSACTIONS IS ALWAYS INVESTMENT. SURROUNDING CIRCUMSTANCES OF THE ASSESSEE'S TRANSACTIONS SUPPORT THE VIEW THAT IN DELIVERY - BASED TRANSACTIONS THE ASSESSEE HAS BEEN ACTING AS AN INVESTOR. THESE SHARES ARE ALWAYS TRANSFERRED IN THE NAME OF THE ASSESSEE. GENERALLY THE SHARES ARE NOT SOLD UNTIL IT BECOMES NECESSARY T O EXIT OR OTHERWISE DUE TO LONG HOLDING THE SHARES HAVE BECOME RIPE FOR REALIZATION OF PROFIT. IN ALL CASES DELIVERIES ARE INVARIABLY TAKEN AND GIVEN; FULL PRICE IS PAID AND COLLECTED. THERE IS HARDLY ANY INVOLVEMENT OF BORROWED CAPITAL. TO SUM UP THERE IS NO PRESUMPTION THAT A TRANSACTION IN SHARES WAS FOR A TRADE AND THE CORRECT POSITION WAS THAT ORDINARILY EQUITY SHARES WERE CAPITAL ASSETS IN WHICH ASSESSEE INVESTED MONEY AND IF A PARTICULAR ACQUISITION OF SHARES WAS TREATED AS STOCK - IN - TRADE THE BU RDEN OF PROOF WAS ON THE AO WHO ASSERTED IT TO BE STOCK - IN - TRADE AND IN THE PRESENT CASE THERE WAS NO MATERIAL BROUGHT ON RECORD BY THE ASSESSING OFFICER TO SUGGEST THAT ASSESSEE'S INTENTION AT THE TIME OF PURCHASE WAS TRADING AND NOT INVESTMENT HENCE THE ACTION OF THE ASSESSING OFFICER WAS NOT JUSTIFIED IN LAW FOR THIS REASON ALSO. FURTHER IT NEED TO BE NOTED THAT THE ASSESSEE HAS SHOWN THE TRANSACTIONS OF SHARES IN ITS BOOKS OF ACCOUNT UNDER THE HEAD INVESTMENT WHICH AS PER THE ABOVE MENTIONED CIRC ULAR AND OTHER CASE LAWS FURTHER STRENGTHENS THE PLEA OF THE ASSESSEE THAT IT IS NOT SHOWN AS NO STOCK IN TRADE IN THE BALANCE SHEET WHICH SUPPORTS THE FACT THAT THE SAME WERE HELD BY THE ASSESSEE IN THE NATURE OF INVESTMENT. 17. THE LD CIT(A) HAS RELIED ON THE VARIOUS RELEVANT CASE LAWS WHICH ARE FO UND TO BE WELL IN SUPPORT OF HER DECISION . 18 . WE FIND THAT IN THE PRESENT CASE ALL THE TRANSACTIONS ARE DELIVERY BASED TRANSACTIONS ONLY. THE ASSESSEE ALSO EARNED DIVIDEND TO THE TUNE OF RS.42 77 59 7.73 THEREON. IT IS ALSO NOTED THAT THE APPELLANT HAD NOT CLAIMED THE AMOUNT OF SIT PAID BY IT AS BUSINESS EXPENDITURE. ITA NO. 4691/DEL/2011 ACIT VS. ASCORT INVESTMENT 12 19 . FURTHER THE COURTS HAVE DECIDED THAT A PERSON CAN BE A TRADER AS WELL AS AN INVESTOR FOR SAME TYPES OF TRANSACTIONS DONE WITH DIFF ERENT MOTIVES. (I) RAM NARAIN SONS (P) LTD. V CIT AS REPORTED IN 411TR 534 (S C ) (II) OWARKADAS KESARDEV MORARKA AS REPORTED IN 44 ITR 625 (S C ) (III) CIT VS. MADAN GOPAL RADHEYLAL AS REPORTED IN 73 ITR 652 (S C E) (IV) CIT V. ASSOCIATED DEVELOPMENT CO. LTD. AS REPORTED IN 82 ITR 586 ( SC ). 20 . THE ABOVE JUDGMENTS CLEARLY STATE THAT THE SAME PERSON CAN BE A TRADER AS WELL AS INVESTOR IN SHARES. 21 . IN A RECENT DECISION OF LUCKNOW BENCH OF THE TRIBUNAL IN THE CASE OF SARMATH INFRASTRUCTURE (P) LTD. AS REPORTED IN 16 DTR ( LUCKNOW ) ( TRIB ) 97 A VIEW HAD BEEN TAKEN IN FAVOUR OF THE ASSESSEE AFTER FULLY CONSIDERING THE CBDT CIRCULAR AND THE FACTS & CIRCUMSTANCES OF THE CASE. THE FACTS OF THE PRESENT CASE ARE MORE OR LESS SAME AS IN THAT CASE AND THEREFORE THE RATIO OF THAT DECISION IS SQUARELY APPLICABLE TO THE PRESENT CASE. 22 . IN VIEW OF THE ABOVE AND CONSIDERING THE INTENTION OF THE PARTIES THE FACT THAT THE MUTUAL FUNDS/SHARES HAVE BEEN SHOWN AS INVESTMENT AND NOT CLOSING STOCK THAT THE CLOSING BALANCE HAVE BEEN VALUED AT COST AND NOT AT 'COST OR MARKET VALUE WHICHEVER IS LOW ER' THAT NO BORROWED FUNDS HAVE BEEN USED ETC. THE INCOME FROM INVESTMENT MAY BE TREATED AS INCOME FROM CAPITAL GAINS AND NOT AS INCOME FROM BUSINESS. 23 . LD. CIT(A) HAS OBSERVED THAT THE AO HAS WRONGLY STATED THAT THE ASSESSEE HAS TRADED IN DERIVATIVES WHICH CANNOT BE TREATED AS INVESTMENT. ON PERUSAL OF THE RECORDS IT IS NOTICED THAT THE TRANSACTIONS IN RESPECT OF DERIVATIVES ARE NOT PART OF THE SHORT TERM CAPITAL GAIN. THESE HAVE BEEN SEPARATELY QUANTIFIED AS BUSINESS TRANSACTIONS AND ON THIS ASPECT A LETTER DATED 4TH DECEMBER 2009 HAS ALSO BEEN FILED WITH THE A SSESSING OFFICER CLARIFYING THIS POSITION. 24 . T HE ASSESSING OF FICER HAS REASONED THAT THE ASSESSEE FIRM HAS EARNED INCENTIVE INCOME AND THIS INCENTIVE INCOME HAS TO BE ASSESSED AS BUSINESS INCOME AND THE OTHER INCOME SHALL ALSO BECOME BUSINESS INCOME. WE CONCUR WITH THE LD CIT(A) THAT THIS INTERPRETATION OF THE ASSESSING OFFICER IS INCORRECT. THE ASSESSEE ITA NO. 4691/DEL/2011 ACIT VS. ASCORT INVESTMENT 13 HAVING MADE INVESTMENTS AND CONSEQUENT TO SUCH INVESTMENTS SOME INCENTIVE IS RECEIVED. TREATMENT OF THAT INCENTIVE INCOME WILL NOT CHANGE THE NATURE OF THE INVESTMENTS. ON THE CONTRARY THIS RECEIPT OF INCENTIVE ITSELF CONFIRMS THE FACT THAT THIS ASSESSEE HAS EARNED INCENTIVE CONSEQUENT TO INVESTMENTS BEING MADE WHICH IS NORMALLY GIVEN TO T HE INVESTOR. 25 . AS REGARDS THE PORTFOLIO MANAGEMENT IT IS OBSERVED ON EXAMINATION OF THE FACTS AND RECORDS AND AS EXPLAINED ABOVE THAT THE ASSESSEE HAS MADE INVESTMENTS THROUGH PORTFOLIO MANAGEMENT IN FIVE CASES AND OUT OF THESE FIVE CASES THE ASSESS EE HAS SUFFERED LOSSES IN TWO CASES TO THE EXTENT OF RS.21 65 551/ - AND HAS M ADE GAIN IN THREE CASES OF RS.36 04 177/ - WITH THE RESULT THAT THE NET GAIN ON ACCOUNT OF PORTFOLIO MANAGEMENT IS ONLY RS.14 38 626/ - OUT OF THE TOTAL CAPITAL GAIN OF RS.L 76 03 5 80/ - . THE INVESTMENT IN PORTFOLIO MANAGEMENT IS A COMMON FEATURE AND CANNOT BE HELD TO BE A BUSINESS. 26 . ANOTHER REASON OF THE ASSESSING OF FICER IS THAT ASSESSEE HAS PREPARED BOOKS OF ACCOUNT PROFIT AND LOSS ACCOUNT AND BALANCE SHEET AND HAS GOT THE SAME AUDITED. THERE IS NOTHING WRONG IN THIS. THE ASSESSEE BEING A LEGAL ENTITY IS REQUIRED TO MAINTAIN ITS BOOKS OF ACCOUNT AND GET THE SAME AUDITED. TH IS CANNOT BE A GROUND FOR THE ASSESSING OFFICER TO HOLD THAT THE ASSESSEE IS CARRYING ON BUSINESS. THE LD CIT(A) HAS RIGHTLY OBSERVED THAT IF THE CONTENTION OF THE ASSESSING OFFICER IS ACCEPTED THEN PROBABLY IN EACH AND EVERY CASE WILL BE COVERED UNDER THE BUSINESS INCOME AND THERE WILL BE NO CASE FOR INVESTMENT. THE ASSESSING OFFICER IS WRONG IN ASSUMING THAT FOR THE PURPOSE OF INVESTMENT THE BOOKS OF ACCOUNT ARE NOT REQUIRED TO BE MAINTAINED OR ARE NOT REQUIRED TO BE AUDITED. 27 . IN VIEW OF THE ABOVE DI SCUSSION AND AFTER CAREFUL CONSIDERATION OF VARIOUS CASE LAWS AND THE BOARD'S CIRCULAR ON THE SUBJECT REFERRED ABOVE LD. CIT(A) HAS RIGHTLY HELD THAT HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN CHANGING THE TREATMENT OF INCOME OF APPELLANT FROM SHORT TERM' CAPITAL GAINS TO INCOME FROM BUSINESS. THE ASSESSING OFFICER WAS ACCORDINGLY DIRECTED TO TREAT THE INCOME OF RS.1 76 03 581/ - DECLARED BY THE ASSESSEE AS SHORT TERM CAPITAL GAINS ONLY AND NOT AS BUSINESS INCOME. IN THE BACKGROUND OF THE AFORE SAID DISCUSSIONS WE DO NOT FIND ITA NO. 4691/DEL/2011 ACIT VS. ASCORT INVESTMENT 14 ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) HENCE WE UPHOLD THE SAME AND DISMISS THE ISSUE IN DISPUTE RAISED BY THE REVENUE. 28 . WITH REGARD TO ISSUE INVOLVED IN GROUND NO. 3 IS CONCERNED WE FIND THAT LD. CIT(A) H AS OBSERVED THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE HAD SURRENDERED AND OFFERED FOR TAXATION AN AMOUNT OF RS.41 88 451/ - ON ACCOUNT OF PORTFOLIO MANAGEMENT FEES BEING NOT ALLOWABLE U/S 48 OF THE ACT WHILE CALCULATING INCOME FROM CAPITAL GAINS AS PER FOLLOWING DETAILS: - L. KOTAK PMS FEES RS.5 84 124/ - 2. HDFC PMS FEES RS. 8 43 965/ - 3. ICLCI PMS FEES RS.27 60 362/ - RS.41 88 451/ - 29 . LD. CIT(A) HAS FURTHER OBSERVED THAT THE ASSESSING OFFICER HAS NOTED THAT THE ABOVE EXPE NDITURE INCURRED BY THE ASSESSEE ON PMS BECOMES ALLOWABLE ONCE THE INCOME ON SALE OF SHARES MUTUAL FUNDS UNITS WAS HELD TO BE BUSINESS INCOME AS AGAINST CAPITAL GAIN CLAIMED BY THE ASSESSEE. THEREFORE THE SUM OF RS. 41 88 451/ - WAS ALLOWABLE AS DEDU CTION AGAINST BUSINESS PROFITS AS ALREADY CLAIMED BY THE ASSESSEE IN RETURN OF INCOME AND WAS THEREFORE NOT ADDED BACK TO THE INCOME FROM BUSINESS EVEN THOUGH SURRENDERED BY THE ASSESSEE BEFORE THE AO. IN VIEW OF THE AFORESAID FACTS AND CIRCUMSTANCES AN D AS THE INCOME IN QUESTION HAS BEEN HELD TO BE SHORT TERM CAPITAL GAINS ONLY AND NOT AS BUSINESS INCOME THE AFORESAID AMOUNT OF RS. 41 88 451/ - HAS TO BE ADDED BACK ON ACCOUNT OF PORTFOLIO MANAGEMENT FEES WHILE CALCULATING THE INCOME FROM SHORT TERM CAPI TAL GAINS. WE FIND THAT THE LD CIT(A) HAS RIGHTLY DIRECTED THAT RS.41 88 451/ - NEED TO BE ADDED BACK WHILE COMPUTING THE INCOME OF THE ASSESSEE. WE DO NOT FIND ANY INFIRMITY IN THE SAID DECISION OF THE LD CIT(A) ON THE FACTS AND CIRCUMSTANCES OF THE CASE WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART HENCE WE UPHOLD THE SAME. THEREFORE THE ISSUE IN DISPUTE RAISED BY THE REVENUE IS REJECTED. ITA NO. 4691/DEL/2011 ACIT VS. ASCORT INVESTMENT 15 30 . WITH REGARD TO ISSUE INVOLVED IN GROUND NO. 4 IS CONCERNED REGARDING HOLDING THAT THE LOSS OF RS. 8 26 229/ - ON TRADING OF DERIVATIVES IS TO BE CONSIDERED AS BUSINESS LOSS ONLY AND ALLOWED TO BE SET OFF AGAINST OTHER INCOME AS PER THE PRO VISIONS OF THE ACT IS CONCERNED. DURING THE COURSE OF THE APPELLATE PROCEEDINGS THE LEARNED AR HAS RAISED ANOTHER G ROUND THAT IN THE RETURN THE LOSS ON TRADING OF DERIVATIVES HAS BEEN WRONGLY CLAIMED AS SPECULATIVE LOSS INSTEAD OF BUSINESS LOSS AS PER SECTION 43(S)(D)OF THE ACT. SO IT WAS PRAYED THEREFORE BE TREATED AS BUSINESS LOSS AND SET OFF AGAINST OTHER INCOME AS PER THE PROVISIONS OF THE ACT. THE LD. CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE THAT THE OMISSION TO RAISE GROUND FROM THE FORM OF APPEAL WAS NOT WILFUL OR UNREASONABLE AND THE THIS GROUND WAS AND ADJUDICATED. AS PER SECTION 43( 5 )(D) OF THE ACT T HE PROFIT/LOSS ON TRADING IN DERIVATIVES WILL HAVE TO BE CONSIDERED AS BUSINESS INCOME/LOSS ONLY. THE PROFIT AND LOSS ACCOUNT REFLECTS LOSS OF RS.8 26 229/ - ON ACCOUNT OF LOSS ON DERIVATIVES HAS BEEN DEBITED THEREIN. IN THE COMPUTATION OF INCOME FILED WITH THE RETURN THIS AMOUNT HAS BEEN ADDED BACK AS BEING LOSS FROM SPECULATION BUSINESS. HOWEVER DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSEE VIDE ITS LETTER DATED 4.12.2009 SUBMITTED THAT IN THE RETURN THE LOSS ON TRADING OF DERIVATIVES HA S BEEN WRONGLY TAKEN AS SPECULATIVE LOSS INSTEAD OF BUSINESS LOSS AS PER SECTION 43( 5 )(D) OF THE ACT AND THE SAID BUSINESS LOSS BE SET OFF AGAINST OTHER INCOME AS PER THE ACT. THE LD . CIT(A) NOTICED THAT THE ASSESSING OFFICER HAS NOT MADE ANY COMMENTS ON THIS ISSUE WHILE PASSING THE ASSESSMENT ORDER . SO HE ALLOWED THE SAID GROUND OF THE ASSESSEE. 31 . AGGRIEVED THE REVENUE IS BEFORE US. 32 . WE HAVE HEARD BOTH THE PARTIES AND HAVE PERUSED THE RECORDS. WE FIND THAT AS PER SECTION 43(5)(D) OF THE ACT THE PR OFIT/ LOSS ON TRADING OF DERIVATIVES WILL HAVE TO BE CONSIDERED AS BUSINESS INCOME/ LOSS ONLY. SO IN THE INSTANT CASE THE LOSS IS BUSINESS INCOME AND THE LD . CIT(A) HAS RIGHTLY HELD THAT THE LOSS OF RS.8 26 229/ - ON TRADING OF DERIVATIVES IS TO BE CONSIDER ED AS BUSINESS LOSS ONLY AND ALLOWED TO BE SET OFF AGAINST OTHER INCOME AS PER THE PROVISIONS OF THE ACT. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) ITA NO. 4691/DEL/2011 ACIT VS. ASCORT INVESTMENT 16 HENCE WE UPHOLD THE SAME AND DISMISS T HE ISSUE IN DISPUTE RAISED BY THE REVENUE. 33 . IN THE RESULT THE REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 7 . 04 . 2015 . - S D / - - S D / - ( N.K.SAINI ) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 2 7 / 04 / 2015 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT NEW DELHI