STOREWELL CREDITS & CAPITAL P. LTD, MUMBAI v. ACIT RG 5(3), MUMBAI

ITA 4864/MUM/2011 | 2007-2008
Pronouncement Date: 27-07-2012 | Result: Allowed

Appeal Details

RSA Number 486419914 RSA 2011
Assessee PAN AADCS9571Q
Bench Mumbai
Appeal Number ITA 4864/MUM/2011
Duration Of Justice 1 year(s) 1 month(s) 9 day(s)
Appellant STOREWELL CREDITS & CAPITAL P. LTD, MUMBAI
Respondent ACIT RG 5(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 27-07-2012
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted E
Tribunal Order Date 27-07-2012
Date Of Final Hearing 23-07-2012
Next Hearing Date 23-07-2012
Assessment Year 2007-2008
Appeal Filed On 17-06-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI I.P.BANSAL (J.M) & SHRI N.K.BILLAIYA (A.M) ITA NO. 4864/MUM/2011(A.Y. 2007-08) STOREWELL CREDITS & CAPITAL PVT. LTD. KEJRIEWAL HOUSE 7 N. GAMADIA ROAD MUMBAI - 26. PAN:AADCS 9571Q (APPELLANT) VS. THE ACIT RANGE 5(3) 5 TH FLOOR AAYKAR BHAVAN MK ROAD MUMBAI - 20. (RESPONDENT) APPELLANT BY : SHRI S.V.JOSHI RESPONDENT BY : SHRI V.KRISHNA MOORTHY DATE OF HEARING : 23/07/2012 DATE OF PRONOUNCEMENT : 2 7/ 07/2012 ORDER PER I.P.BANSAL J.M THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS D IRECTED AGAINST THE ORDER DATED 24/3/2011 OF CIT(A)-9 MUMBAI FOR THE ASSESSMENT YEAR 2007- 08. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE R EAD AS UNDER: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -9 MUMBAI ERRED IN HOLDING THAT THE APPELLANT WAS A DEALER IN SHARES AND THE PROFIT / LOSS ARISING ON SALE OF SUCH SHARES WAS AS SESSABLE TO TAX AS BUSINESS INCOME AND NOT AS CAPITAL GAIN AS CONT ENDED BY THE APPELLANT. 2. THE LEARNED CIT-(A)-9 MUMBAI IN THE FACTS AND C IRCUMSTANCES OF THE CASE OUGHT TO HAVE HELD THAT THE APPELLANT HELD THE SHARES IN LISTED COMPANIES AS INVESTMENTS AND NOT AS STOCK-IN TRA DE. 3. THE LEARNED CIT-(A)-9 MUMBAI ERRED IN FOLLOWING THE ORDER PASSED BY HIS PREDECESSOR FOR A.Y. 2006-07 IGNORING VARIOU S ITAT DECISIONS RENDERED AFTER THE ORDER WAS PASSED BY HIS PREDECES SOR. ITA NO. 4864/MUM/2011(A.Y. 2007-08) 2 3.1 THE LEARNED CIT(A)-9 MUMBAI OUGHT TO HAVE FOLLO WED VARIOUS ITAT DECISIONS CITED BEFORE HIM WHICH WERE PRONOUNCED AF TER THE APPELLATE ORDER WAS PASSED BY HIS PREDECESSOR FOR A.Y. 2006-0 7. 4. THE CIT-(A)-9 MUMBAI AFTER HAVING HELD THAT THE APPELLANT WAS A DEALER IN SHARES OUGHT TO HAVE HELD THAT THE APPELL ANT WAS ENTITLED TO: I) DEDUCTION OF INTEREST OF RS.2 95 467/- II) DEDUCTION OF TRANSACTION COSTS OF RS. 1 84 727/ -. 5. THE LEARNED CIT-(A)-9 MUMBAI ERRED IN HOLDING TH AT THE ASSESSING OFFICER WAS JUSTIFIED IN DENYING DEDUCTION OF RS.80 50 000/- CLAIMED BY THE APPELLANT U/S. 35AC IN RESPECT OF CONTRIBUTI ON MADE TO ELIGIBLE PROJECT. 2. THE AO TREATED THE SHORT TERM CAPITAL GAIN ARISI NG TO THE ASSESSEE OUT OF SALE AND PURCHASE OF SHARES AMOUNTING TO RS. 68 15 802/- AS BUSINESS INCOME AGAINST THE CLAIM OF THE ASSESSEE THAT THE S AME SHOULD BE CONSIDERED TO BE SHORT TERM CAPITAL GAIN. THE ACTION OF AO HA S BEEN CONFIRMED BY LD. CIT(A). THE ASSESSEE IS AGGRIEVED HENCE RAISED T HE AFOREMENTIONED GROUNDS OF APPEAL. 3. IT IS THE CASE OF THE ASSESSEE THAT THE ISSUE RA ISED IN THE PRESENT APPEAL IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE IMMEDIATE PRECEDING YEAR I.E. FOR A.Y 2006-07. TO DEMONSTRATE THAT THE FACTS FOR THE IMMEDIATE PRECEDING YEAR AS RELATED T O THE IMPUGNED ISSUE ARE SIMILAR LD. A.R HAS REFERRED TO PARA 7 8 & 9 OF TH E ASSESSMENT ORDER WHICH IS REPRODUCED BELOW: 7. THE FACTS NATURE & EXTENT OF THE TRANSACTIONS IN THIS ASSESSMENT YEAR ARE THE SAME AS THE FACTS NATURE & EXTENT OF THE TRANS ACTIONS FOR THE A.Y.2006-07. IN VIEW OF THIS SIMILARITY AND ON ACCOUNT OF THE S AME REASONS AS HAVE BEEN BROUGHT OUT IN THE ORDER FOR THE ORDER HAS BEEN CON FIRMED BY THE CIT(A) THE SURPLUS SO GENERATED ON ACCOUNT OF THE TRANSACTIONS IN SHARES IS TREATED AS BUSINESS INCOME AND THE CONTENTIONS / STANDS ADOPTE D BY THE ASSESSEE FOR TREATING THE SURPLUS ARISING FROM SHARE TRANSACTION S AS SHORT TERM CAPITAL GAIN IS REJECTED. ITA NO. 4864/MUM/2011(A.Y. 2007-08) 3 8. IT MAY BE MENTIONED HERE THAT THE ASSESSMENT ORD ER FOR THE A.Y. 2006-07 WAS THE SUBJECT MATTER OF THE APPEAL WITH THE CIT(A ) AND THE CIT(A) WHILE ADJUDICATING THE APPEAL AND THE ISSUES BEFORE HIM D ECIDED THAT THE INCOME OUGHT TO BE TAXED UNDER THE HEAD BUSINESS INCOME AN D NOT UNDER THE HEAD SHORT TERM CAPITAL GAIN. THIS DECISION OF THE CIT(A ) IS AFTER TAKING IN CONSIDERATION THE APPEAL ORDERS FOR THE A.Y.2004-05 & 2005-06 WHICH WERE DECIDED IN FAVOUR OF THE ASSESSEE. 9. HAVING DONE SO VARIOUS EXPENSES CLAIMED BY THE A SSESSEE WILL NEED TO BE EXAMINED. IN THE ASST. ORDER FOR THE A.Y.2006-07 T HE A.O. HAS MADE VARIOUS DISALLOWANCES IN THE ASSESSMENT ORDER UNDER THE FOL LOWING HEADS. FOLLOWING THE ASSESSMENT ORDER FOR A.Y.2006-07 IN THIS YEAR ALSO ON ACCOUNT OF THE SAME REASONS THE FOLLOWING DISALLOWANCES ARE BEING MADE . 4. THE LD. A.R ALSO REFERRED TO PARA 2.5 OF LD. CIT (A)S ORDER WHEREIN HE HAS RECORDED A FINDING THAT THE FACTS OF THIS YEAR ARE SIMILAR TO THE FACTS OF A.Y 2006-07. THE RELEVANT PARA 2.5 IS REPRODUCED AS UNDER: 2.5 SINCE THE NATURE OF TRANSACTION AND FACTS OF T HE CASE IN THIS YEAR ARE SIMILAR TO THE FACTS OF THE ASSESSMENT YEAR 2006-07 . THEREFORE RELYING ON DETAILED AFORESAID ANALYSES OF MY PREDECESSOR CIT(A ) I HOLD THAT THE ASSESSING OFFICER WAS FULLY JUSTIFIED IN TAXING PRO FITS ON SALE OF SHARES AS BUSINESS INCOME INSTEAD OF SHORT TERM CAPITAL GAIN CLAIMED BY THE APPELLANT. THUS THIS GROUND OF APPEAL IS DISMISSED. 4.1 LD. A.R FURTHER PLEADED THAT FOR A.Y 2006-07 THE ORDER OF CIT(A) WAS CHALLENGED BEFORE ITAT AND IT WAS DECIDED BY THE TR IBUNAL VIDE ITS ORDER DATED 21/3/2012 IN ITA NO.5286/M/09 AND REFERENCE WAS MADE TO THE FOLLOWING OBSERVATIONS: 14. ON HEARING BOTH SIDES IT IS CLEAR THAT THE HO LDING PATTERN BY THE ASSESSEE CO. HAS TO BE TAKEN INTO ACCOUNT. IT IS SEEN THAT THE ASSESSEE CO. HAS DEMONSTRATED THAT DESPITE THE FACT THAT THERE WERE SUBSTANTIAL MOVEMENT IN SOME OF THE SCRIPS (PRAJ) THE AVERAGE HOLDING IN A LL SHARES PUT TOGETHER EXCEED 192 DAYS I.E. MORE THAN SIX MONTHS. THIS ITSELF ES TABLISHES THAT THE ASSESSEE CO. HAS BEEN HOLDING ON ITS PURCHASES. THE ASSESSE E CO. FURTHER ESTABLISHES THE FACT THAT IN THE CURRENT YEAR THE INVESTMENTS A RE MORE THAN 10 TIMES THE BORROWINGS WHICH ACCORDING TO THE AR BORROWINGS WERE EFFECTIVELY 0% AGAINST INVESTMENT. THE AR OF THE ASSESSEE CO. VER Y EFFECTIVELY POINTED OUT THAT ALL PURCHASE HAVE BEEN DELIVERY BASED WHICH T HE DR COULD NOT CONTROVERT. THE FACT THAT THE ASSESSEE CO. IN CONDUCTING ITS BU SINESS FROM ITS RESIDENCE ITA NO. 4864/MUM/2011(A.Y. 2007-08) 4 GOES TO PROVE THAT THE OBSERVATION OF THE AO AND CI T(A) THAT THE ASSESSEE HAS BEEN CONDUCTING BUSINESS IN A CONTINUOUS ORGANIZED AND SYSTEMATIC MANNER DOES NOT SEEM TO INSPIRE CONFIDENCE BECAUSE IF TH E ASSESSEE CO. IS CONDUCTING ITS PORTFOLIO FROM RESIDENCE IT CANNOT BE ORGANIZE D AND SYSTEMATIC AND IF THE HOLDING PATTER IS BETWEEN 192 DAYS TO 470 AND CLOSI NG STOCK HOLDING AVERAGES 1378 DAYS CANNOT BE CALLED CONTINUOUS. 15. TAKING INTO ACCOUNT ALL THE FACTS AND GOING IN TO THE REFERRED CASE LAWS AS PLACED BEFORE US ALONGWITH THE CASE OF GOPAL PUROH IT WHICH HAS BEEN UPHELD BY THE HONBLE BOMBAY HIGH COURT WHICH SQUARELY AP PLY TO THE ASSESSEES CASE IN THE PRESENT SET OF CIRCUMSTANCES WE ARE O F THE CONSIDERED VIEW THAT THE ASSESSEE CO. IS AN INVESTOR AND NOT A TRADER IN SHARES. THUS IT WAS CLAIMED BY THE LD. A.R THAT ADDITION HA S WRONGLY BEEN MADE AND SUSTAINED AND THE SAME SHOULD BE DELETED. HE SUB MITTED THAT THE ISSUE RAISED IN GROUND NO.1 TO 2 IS DECIDED IN FAVOUR OF THE ASSESSEE BY CONSIDERING THE COVERED MATTER THEN OTHER GROUNDS NEED NOT TO BE DECIDED AS THEY WILL BECOME INFRUCTUOUS IN VIEW OF ACCEPTAN CE OF MAIN CASE OF THE ASSESSEE. 5. LD. D.R ON THE OTHER HAND RELIED UPON THE ORDE RS PASSED BY A.O AND CIT(A). 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. THE AO AS WELL AS LD. C IT(A) BOTH HAVE RELIED UPON THE CASE OF THE ASSESSEE FOR A.Y 2006-07. FO R A.Y. 2006-07 LD. CIT(A) HAD CONFIRMED THE SIMILAR ACTION OF THE AO REFERRI NG TO WHICH FOR THE IMPUGNED YEAR ALSO LD. CIT(A) HAS DISMISSED THIS GR OUND OF THE ASSESSEE. THE ORDER OF LD. CIT(A) FOR A.Y 2006-07 ON THIS ISS UE WAS CONSIDERED BY THE TRIBUNAL RELEVANT PORTION OF WHICH HAS ALREADY BEEN REPRODUCED IN THE ABOVE PART OF THIS ORDER. THEREFORE THE ISSUE RAISED BY THE ASSESSEE IS CLEARLY COVERED BY THE AFOREMENTIONED ORDER AND FOLLOWING T HE DECISION OF THE CO- ORDINATE BENCH WE HOLD THAT IN THE PRESENT SET OF C IRCUMSTANCES THE ASSESSEE COMPANY IS AN INVESTOR AND NOT TRADER IN SHARES. THEREFORE WE ITA NO. 4864/MUM/2011(A.Y. 2007-08) 5 ALLOW GROUND NO. 1TO 3.1 OF THE ASSESSEE IN THE MAN NER AFORESAID. THE OTHER GROUNDS AS STATED BY LD. A.R HAVE BECOME INFRUCTUO US IN VIEW OF ACCEPTANCE OF THE CASE OF THE ASSESSEE AS MENTIONED IN GROUND NO.1 TO 3.1. 7. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON THE 27TH DAY OF JULY 2012 SD/- SD/- ( N.K.BILLAIYA ) (I.P.BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED 27 TH JULY 2012 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RE BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR I TAT MUMBAI BENCHES MUMBAI. VM.