M/S. THE INDIAN PLYWOOD MANEW, Mumbai v. THE TATA INACIT CC-33, Mumbai

ITA 5509/MUM/2005 | 2002-2003
Pronouncement Date: 07-01-2011 | Result: Partly Allowed

Appeal Details

RSA Number 550919914 RSA 2005
Assessee PAN AAACT2444C
Bench Mumbai
Appeal Number ITA 5509/MUM/2005
Duration Of Justice 5 year(s) 4 month(s) 15 day(s)
Appellant M/S. THE INDIAN PLYWOOD MANEW, Mumbai
Respondent THE TATA INACIT CC-33, Mumbai
Appeal Type Income Tax Appeal
Pronouncement Date 07-01-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted F
Tribunal Order Date 07-01-2011
Date Of Final Hearing 22-12-2010
Next Hearing Date 22-12-2010
Assessment Year 2002-2003
Appeal Filed On 23-08-2005
Judgment Text
1 ITA NO.5509/MUM/2005 ITA NO.2939/MUM/2006 I II IN THE INCOME TAX APPELLATE TRIBUNAL N THE INCOME TAX APPELLATE TRIBUNAL N THE INCOME TAX APPELLATE TRIBUNAL N THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH MUMBAI BENCH MUMBAI BENCH MUMBAI BENCH F FF F MUMBAI MUMBAI MUMBAI MUMBAI BEFORE BEFORE BEFORE BEFORE SHRI N V VASUDEVAN JM & SHRI N V VASUDEVAN JM & SHRI N V VASUDEVAN JM & SHRI N V VASUDEVAN JM & SHRI SHRI SHRI SHRI R R R R K PANDA AM K PANDA AM K PANDA AM K PANDA AM IT ITIT ITA NO A NO A NO A NO. .. .5509/MUM/2005 5509/MUM/2005 5509/MUM/2005 5509/MUM/2005 (ASSTT YEAR 2002-03) ITA NO. 2939/MUM/2006 ITA NO. 2939/MUM/2006 ITA NO. 2939/MUM/2006 ITA NO. 2939/MUM/2006 (ASST YEAR 2001-02) THE INDIAN PLYWOOD MFG.CO P LTD CMMERCIAL UNIOIN HOUE 9 WALLACE STRET FORT MUMBAI 400 001 VS THE ASST COMMR OF INCOME TAX CEN.CIR 33 MUMBAI (APPELLANT) (RESPONDENT) PAN PAN PAN PAN AAACT2444C AAACT2444C AAACT2444C AAACT2444C ASSESSEE BY: SHRI F V IRANI/ SHRI MITESH SHA H REVENUE BY: SHRI A P SINGH O OO O R RR R D DD D E EE E R RR R PER PER PER PER R RR R K PANDA K PANDA K PANDA K PANDA: :: : THE ABOVE TWO APPEALS FILED BY THE ASSESSEE ARE DI RECTED AGAINST THE SEPARATE ORDERS DATED 30.6.2005 AND 23.6.2006 OF TH E CIT(A)- VIII MUMBAI RELATING TO ASSESSMENT YEARS 2002-03 AND 2001-02 RE SPECTIVELY. FOR THE SAKE OF CONVENIENCE BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. ITA NO.5509/MUM/2005(ASSESSMENT YEAR 2002 ITA NO.5509/MUM/2005(ASSESSMENT YEAR 2002 ITA NO.5509/MUM/2005(ASSESSMENT YEAR 2002 ITA NO.5509/MUM/2005(ASSESSMENT YEAR 2002- -- -03) 03) 03) 03) 2 IN GROUNDS OF APPEAL NO.1 THE ASSESSEE HAS CHAL LENGED THE ORDER OF THE CIT(A) IN UPHOLDING THE ACTION OF THE ASSESSIN G OFFICER IN ASSESSING THE BUSINESS INCOME OF ` 6 52 20 688/- FROM TRADING IN SHARES AS LONG TERM CAPITAL GAINS AND FURTHER NOT ALLOWING SET OFF OF BROUGHT FORWARD LOSSES AGAINST SUCH BUSINESS INCOME. 2 ITA NO.5509/MUM/2005 ITA NO.2939/MUM/2006 2.1 FACTS OF THE CASE IN BRIEF ARE THAT THE ASSES SEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PLYWOOD AND OTHER ALLI ED PRODUCTS. THE COMPANY HAS BEEN DECLARED AS SICK UNIT AND HAS BEEN REGISTE RED WITH BIFR. THE SANCTIONED SCHEME OF BIFR PROVIDED FOR VARIOUS DOWN PAYMENTS TO BE MADE TOWARDS WORKERS DUES AND CERTAIN STATUTORY PAYMENTS APART FROM PAYMENTS DUE TO OTHER OLD CREDITORS AND OTHER LIABILITIES. 2.2 DURING THE COURSE OF ASSESSMENT PROCEEDINGS TH E ASSESSING OFFICER NOTED THAT THE COMPANY HAS SHOWN SHARE TRADING INCO ME OF ` 652.21 LAKHS IN THE P&L ACCOUNT. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE THE ASSESSING OFFICER NOTED THAT SHRI H K VISSANJI AND SMT NIRMALA N VISSANJI THE PROMOTERS OF THE COMPANY HAD GIFTED 18000 SHARES AN D 6000 SHARES OF WIPRO LTD RESPECTIVELY TO THE ASSESSEE COMPANY AND THE COMPA NY HAD SOLD THEM FOR ` 6 52 20 688/- DURING THE YEAR AND CREDITED THE SAME IN THE P&L ACCOUNT AS SHARE TRADING INCOME. IN THE COMPUTATION OF INCOME THE ASSESSEE HAS CONSIDERED THE SHARE TRADING INCOME AS BUSINESS INCOME AND SET O FF THE SAME AGAINST CARRIED FORWARD UNABSORBED BUSINESS LOSS OF EARLIER YEARS. NO TAX HAS BEEN PAID ON THE SHARE TRADING INCOME OF ` . 652.21 LAKHS. 2.3 THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXP LAIN AS TO WHY THE INCOME FROM SHARE TRADING SHOULD NOT BE TREATED AS LONG TERM CAPITAL GAIN. ACCORDING TO THE ASSESSING OFFICER THE SHARES HELD BY ASSESSEE WERE CAPITAL ASSETS AND ANY GAIN ON TRANSFER OF SHARES WOULD GIV E RAISE TO INCOME UNDER THE HEAD CAPITAL GAIN. IF THE INCOME FROM SALE OF SHAR ES IS CONSIDERED AS INCOME 3 ITA NO.5509/MUM/2005 ITA NO.2939/MUM/2006 UNDER THE HEAD CAPITAL GAIN THEN ASSESSEE WILL NO T BE ENTITLED TO SET OFF UNABSORBED BUSINESS LOSS OF EARLIER YEARS AND THERE FORE THE CAPITAL GAIN WILL BE SUBJECTED TO TAX. IT WAS EXPLAINED BY THE ASSESSEE THAT SHARES IN QUESTION WERE HELD AS STOCK-IN-TRADE AND THE GAINS ARISING FROM T HE SALE THEREOF ARE TAXABLE UNDER THE HEAD BUSINESS INCOME. THE BOARD OF DIRE CTORS HAD PASSED A RESOLUTION IN THEIR MEETING HELD ON 28.3.2000 AUTHO RISING THE COMPANY TO COMMENCE TRADING AND DEALING IN SHARES IN TERMS OF SUB-CLAUSE NO.22 OF THE OBJECT CLAUSE OF MEMORANDUM OF ASSOCIATION (MOA) OF THE ASSESSEE COMPANY. THEREFORE THE INCOME HAS BEEN CORRECTLY OFFERED T O TAX UNDER THE HEAD BUSINESS INCOME. DECISIONS OF THE HONBLE BOMB AY HIGH COURT IN THE CAE OF CIT VS SMT T P SIDHWA REPORTED IN 113 ITR 840 AND T HE DECISION OF THE HONBLE RAJASTHAN HIGH COURT REPORTED 136 TAXMAN 66 WERE BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER TO SUPPORT THE CONTENTION OF THE ASSESSEE. 2.4 HOWEVER THE ASSESSING OFFICER WAS NOT SATISFIE D WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE NOTED THAT THE ASSESSEE COMPANY IS UNDER BIFR AND THE REHABILITATION PACKAGE OF THE COMPANY HAS BEEN SANCTIONED BY BIFR ACCORDING TO WHICH THE PROMOTER WERE SUPPOSED TO B RING IN CERTAIN AMOUNT OF CAPITAL. IN ORDER TO ACHIEVE THIS THE ASSESSEE COM PANY CREATED A FACADE WHEREBY CERTAIN PROMOTERS GIFTED 24000 SHARES TO TH E COMPANY DURING THE PERIOD 2.3.2000 TO 31.3.2001 AND THE SAME HAS BEEN SHOWN AS STOCK-IN-TRADE AND VALUED AT NIL IN THE BALANCE SHEET. IN THE MEAN WHILE THE MOA OF THE COMPANY WAS AMENDED AND A RESOLUTION WAS PASSED ON 28.3.2000 TO COMMENCE TRADING AND DEALING IN SHARES. THE SHARES WERE SOLD IN THE PERIOD 9.5.2001 TO 5.12.2001 FOR ` 6 52 20 688/-. THIS INCOME WAS SHOWN AS SHARE TRAD ING INCOME 4 ITA NO.5509/MUM/2005 ITA NO.2939/MUM/2006 AND TREATED AS BUSINESS INCOME AGAINST WHICH UNABSO RBED BUSINESS LOSS OF EARLIER YEARS HAS BEEN SET OFF AND RETURN OF INCOME HAS BEEN FILED DECLARING NIL INCOME. IT IS CLEAR FROM THE ABOVE FACTS THAT NEI THER THE TWO PROMOTERS WHO GIFTED THE SHARES TO THE ASSESSEE COMPANY NOR THE A SSESSEE COMPANY HAVE PAID ANY TAX ON THE INCOME OF ` . 652.21 LAKH. 2.5 THE ASSESSING OFFICER FURTHER NOTED THAT THE SHARES HAVE BEEN TRANSFERRED FROM THE DE-MAT ACCOUNT OF THE PROMOTER S TO THE DE-MAT ACCOUNT OF THE COMPANY. AS PER CLAUSE 22 OF THE MOA THE ASSE SSEE COMPANY COULD ONLY ACQUIRE OR HOLD SHARES OF COMPANIES HAVING SIMILAR OBJECT OR CARRYING ON BUSINESS CAPABLE OF DIRECTLY OR INDIRECTLY BENEFITING THE AS SESSEE COMPANY. ACCORDING TO THE ASSESSING OFFICER THE SHARES COULD HAVE BEEN S OLD BY THEM AND THE CAPITAL INTRODUCED FROM SALE OF SHARES. BUT THE SAME HAS NO T BEEN DONE AS THE PROMOTERS WOULD HAVE BEEN LIABLE TO CAPITAL GAINS T AX AND THE SAME COULD NOT HAVE BEEN AVOIDED. THE ASSESSEE COMPANY HAD NOT EN TERED INTO ANY OTHER SHARE TRANSACTIONS/TRADING EXCEPT THE ABOVE MENTION ED SALE OF SHARES OF WIPRO DURING THE CURRENT YEAR. 2.6 THE ASSESSING OFFICER DISTINGUISHED THE ABOVE T WO DECISIONS CITED BEFORE HIM AND HELD THAT THE DECISION OF THE HONBL E SUPREME COURT IN THE CASE OF MC.DOWELL LD REPORTED IN 54 ITR 148 IS CLEARLY A PPLICABLE TO THE FACTS OF THE PRESENT CASE. HE NOTED THAT THE HONBLE SUPREME CO URT IN THE SAID DECISION HAS HELD THAT COLOURABLE DEVICES CANNOT BE A PART OF TA X PLANNING AND IT IS WRONG TO ENCOURAGE AVOIDANCE OF TAX BY DUBIOUS METHODS. IT IS FOR THE COURT TO TAKE STOCK AND DETERMINE THE NATURE OF LEGAL DEVICES TO AVOID TAXES AND TO EXPOSE THESE 5 ITA NO.5509/MUM/2005 ITA NO.2939/MUM/2006 DEVICES FOR WHAT THEY REALLY ARE. SINCE IN THE INS TANT CASE THE PROMOTERS HAVE RESORTED TO A COLOURABLE DEVICE FOR AVOIDING PAYMEN T OF TAXES BOTH IN THEIR HANDS AND IN THE HANDS OF THE COMPANY; THEREFORE THE AS SESSING OFFICER TREATED THE INCOME FROM SHARE TRADING AS LONG TERM CAPITAL GA IN IN THE HANDS OF THE ASSESSEE AND BROUGHT TO TAX THE AMOUNT OF ` 6 52 20 688/- AS LONG TERM CAPITAL GAIN. 3 BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE COMPA NY IS ONE OF THE OLDEST UNITS ENGAGED IN MANUFACTURING OF RECONSTIT UTED WOOD PANEL PRODUCTS IN INDIA. DUE TO HEAVY LOSSES THE COMPANY WAS REFERRE D TO BIFR IN MAY 1995. A SCHEME OF REHABILITATION FOR THE ASSESSEE COMPANY HAS ALSO BEEN APPROVED BY BIFR VIDE ORDER DATED 31.3.2001 IN PURSUANCE TO THE SCHEME OF BIFR TH PROMOTERS HAVE INTRODUCED FUNDS OF ` 770.96 LAKHS DURING THE YEAR ENDED 31.3.2002 OUT OF WHICH A SUM OF ` 118.75 LAKH WAS BROUGHT IN AS ADVANCE AGAINST PROPOSED ISSUE OF EQUITY/PREFERENCE SHARES /CONVERTIBLE DEBENTURE AND ` 652.21 LAKHS WERE BROUGHT IN THE FORM OF GIFTS RE CEIVED FROM PROMOTERS IN THE SHAPE OF SHARES. THE TOTAL FUNDS INTRODUCED BY THE PROMOTERS FROM APRIL 1999 TO MARCH 2002 AMOUNTED TO ` 2149.70 LAKHS CONSISTING OF GIFT OF SHARES VALUE D AT ` 1265.51 LAKH FROM PROMOTERS AND ` 884.19 AS ADVANCE AGAINST PROPOSED ISSUE OF EQUITY/PREFERENCE SHARES/CONVERTIBLE DEBEN TURE. IT WAS SUBMITTED THAT ALL THESE FACTS ARE REPORTED BY THE STATUTORY AUDIT ORS IN NOTE NO.17 OF SCHEDULE 2 FORMING PART OF ACCOUNTS. 6 ITA NO.5509/MUM/2005 ITA NO.2939/MUM/2006 3.1 IT WAS SUBMITTED THAT THE TWO PROMOTERS NAMELY SHRI H K VISSANJI AND SMT NIRMALA N VISSANJI HAD GIFTED 20000 AND 6000 EQ UITY SHARES RESPECTIVELY OF WIPRO LTD. THESE SHARES ALONG WITH OPENING STOCK WE RE SOLD BY THE ASSESSEE THROUGH SMK SHARES & STOCK BROKING PVT LTD ON VARIO US DATES FROM 9.5.2001 TO 5.12.2001. THE VARIOUS SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER WERE REITERATED AND A NUMBER OF DECISIONS WERE CITED BEF ORE THE CIT(A). 3.2 AS REGARDS TO THE DECISION OF THE HONBLE SUPRE ME COURT IN THE CASE OF MCDOWELLS (SUPRA) IT WAS SUBMITTED THAT THE ASSES SING OFFICER FAILED TO DEMONSTRATE IN WHICH MANNER PROMOTERS HAVE RESORTED TO A COLOURABLE DEVICE FOR AVOIDING PAYMENT OF TAX. IT WAS SUBMITTED THAT TH E TRANSACTIONS ARE LEGITIMATE AND WITHIN THE FRAME WORK OF LAW AND THEREFORE THE MEANING OF THESE TRANSACTIONS SHOULD NOT BE ARTIFICIALLY CHANGED JUS T BECAUSE THE ASSESSEE WAS ELIGIBLE FOR SET OFF OF UNABSORBED LOSSES. THE DEC ISION OF THE HONBLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS AZADI BACHA O ANDOLAN REPORTED IN 263 ITR 706(SC)WAS BROUGHT TO THE NOTICE OF THE CIT(A). REL YING ON A COUPLE OF DECISIONS IT WAS SUBMITTED THAT IF THE LANGUAGE OF THE DOCUME NT IS CLEAR AND UNAMBIGUOUS THE QUESTION OF CONSIDERATION OF TAX AVOIDANCE DOES NOT ARISE. 3.3 AS REGARDS TO THE OBSERVATIONS OF THE ASSESSING OFFICER THAT THE PROMOTERS COULD HAVE BROUGHT CASH INSTEAD OF GIFTI NG SHARES IT WAS SUBMITTED THAT SINCE THE PROMOTERS WERE NOT HAVING SUFFICIEN T FUNDS SO AS TO INTRODUCE AS CAPITAL; THEREFORE THE PROMOTERS HAVE GIFTED CERTA IN SHARES TO THE ASSESSEE AND THE SAME HAS BEEN ACCEPTED BY THE BIFR IN THE PROCE EDINGS HELD ON 7.6.2002. THEREFORE GIFTING OF SHARES TO THE ASSESSEE COMPAN Y IN ORDINARY COURSE IN 7 ITA NO.5509/MUM/2005 ITA NO.2939/MUM/2006 ACCORDANCE WITH THE SCHEME OF BIFR SHOULD NOT BE TREATED AS COLORABLE DEVICE TO AVOID INCOME TAX. 3.4 AS REGARDS MOA IT WAS SUBMITTED THAT THE SHARE S WERE RECEIVED IN ACCORDANCE WITH THE SCHEME OF REHABILITATION APPROV ED BY THE BIFR AND THE ACTIVITY OF TRADING IN SHARES WAS DULY AUTHORISED B Y THE BOARD OF DIRECTORS AND THEREFORE THE SAME SHOULD NOT BE CONSTRUED AS INVE STMENT IN SHARES. IT WAS SUBMITTED THAT WHETHER A PARTICULAR HOLDING OF SHAR ES 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 IN THE CASE OF AS SESSEE THE SAME HAS BEEN DISCLOSED AT THE TIME OF ACQUISITION OF SHARES AND THAT THE SHARES WERE ACQUIRED FOR TRADING IN THE SHARES AND NOT AS INVESTMENT IN SHARES. THEREFORE THE ASSESSING OFFICER HAS NO AUTHORITY TO PRESUME OTHER WISE MORE PARTICULARLY WHEN NOTHING HAS BEEN BROUGHT ON RECORD BY HIM TO SUBSTA NTIATE HIS FINDINGS. IT WAS FINALLY ARGUED THAT THE ASSESSING OFFICER BROUGHT T O TAX THE TOTAL CONSIDERATION RECEIVED ON SALE OF SHARES AS LONG TERM CAPITAL GAI NS WITHOUT ALLOWING ANY DEDUCTION IN RESPECT OF COST OF ACQUISITION IN ACCO RDANCE WITH THE PROVISIONS OF SEC. 49(1)(II) AS WELL AS INDEXATION. THIS SHOWS T HAT THE ASSESSING OFFICER HAS ACTED ARBITRARILY BRINGING THE ENTIRE PROFIT ON SAL E TO TAX. IT WAS ACCORDINGLY SUBMITTED THAT ASSESSING OFFICER SHOULD BE DIRECT ED TO ASSESS PROFIT ON SALE OF SHARES UNDER THE HEAD PROFITS AND GAINS OF BUSINES S OR PROFESSION. 3.5 HOWEVER THE CIT(A) WAS NOT CONVINCED WITH THE ARGUMENTS ADVANCED BEFORE HIM AND UPHELD THE ACTION OF THE ASSESSING O FFICER BY HOLDING AS UNDER: 8 ITA NO.5509/MUM/2005 ITA NO.2939/MUM/2006 11. I HAVE CONSIDERED THE SUBMISSIONS OF THE LD CO UNSEL AND GONE THROUGH THE ASSESSMENT ORDER AND THE ASSESSMENT RECORDS. TH E FACTS WHICH ARE NOT IN DISPUTE ARE THAT FOR ASSESSMENT YEAR UNDER CONSI DERATION THE APPELLANT HAS SOLD CERTAIN SHARES OF WIPRO LTD. SUCH SHARES H AVE BEEN RECEIVED ONLY AS A GIFT FROM THE PROMOTERS. EXCEPTING TO THE SALE OF THESE SHARES OF WIPRO LTD. THERE HAS BEEN NO OTHER PURCHASE OR SAL E OF ANY OTHER SHARES. IT HAS ALSO BEEN FOUND ON THE PERUSAL OF THE RECORD THAT IN SCHEDULE VII OF THE AUDITED ACCOUNTS UNDER THE HEAD INVENTORY/STOC K OF SHARES THE AMOUNT HAS BEEN SHOWN AS NIL AS ON 31.3.2002 . SIM ILAR IS THE POSITION OF SHARES AS STOCK IN TRADE AS ON 31.3.2001. SINGLE T RANSACTION DOES NOT CONSTITUTE BUSINESS (CIT VS LAXMI SURGICAL P LTD 20 2 ITR 601(BOM). THE ASSESSING OFFICER HAS THEREFORE RIGHTLY TREATED SAL ES OF SUCH GIFTED SHARES UNDER THE HEAD CAPITAL GAINS. THE ASSESSING OFFIC ER IS HOWEVER NOT RIGHT IN ADOPTING ENTIRE SALE PROCEEDS WITHOUT FOLLOWING THE PROCEDURE IN SECTION 48. THE ASSESSING OFFICER IS DIRECTED TO OBTAIN THE DETAILS IN THE APPELLANT AND TO REWORK OUT THE CAPITAL GAINS. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESS EE IS IN APPEAL HERE BEFORE US. 4 THE LD COUNSEL FOR THE ASSESSEE REITERATED THE SA ME SUBMISSIONS AS MADE BEFORE THE ASSESSING OFFICER AND THE CIT(A). R EFERRING TO THE COPY OF THE ORDER OF THE BIFR WHICH IS PLACED AT PAGE 26 OF TH E PAPER BOOK VOLUME I HE SUBMITTED THAT THE COMPANY WAS DECLARED SICK SINCE 1995. REFERRING TO PAGE 35 OF THE PAPER BOOK HE DREW THE ATTENTION OF THE BEN CH TO THE SANCTIONED SCHEME OF BIFR. REFERRING TO PARA 8.2 TO 9.6 OF THE SAID ORDER THE LD COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH ACCORDING TO WHICH THE MEANS OF FINANCE ARE PROMOTERS CONTRIBUTION IN THE FORM OF R PS SALE OF SURPLUS LAND AND MACHINERY AND INTERNAL GENERATION. PENDING SALE OF ASSETS THE PROMOTERS PROPOSE TO PROVIDE A SHORT TERM INTEREST FREE UNSEC URED LOAN FOR AN EQUIVALENT AMOUNT WHICH ARE REPAYABLE FROM THE PROCEEDS FROM THE SALE OF ASSETS. PROMOTERS PROPOSE TO BRING IN THEIR CONTRIBUTION BY SALE OF THEIR PRIVATE PROPERTIES. 9 ITA NO.5509/MUM/2005 ITA NO.2939/MUM/2006 4.1 REFERRING TO PAGE 144 OF THE PAPER BOOK HE DR EW THE ATTENTION OF THE BENCH TO THE SUMMARY RECORD OF PROCEEDINGS OF THE REVIEW HEARING HELD ON 7.6.2002 . THE LD COUNSEL FOR THE ASSESSEE SUBMITTE D THAT PROMOTERS HAVE INTRODUCED A TOTAL OF ` 2149.70 LAKH TILL 31.3.2002 THE DETAILS OF WHICH ARE AS UNDER: I) GIFT OF HARES ` 1265.51 II) UNSECURED SHORT TERM LOANS ` 884.19 TOTAL ` 2149.70 4.2 REFERRING TO PAGE 23 OF THE PAPER BOOK THE LD COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE NOTES TO THE ACCOUNTS GIVEN BY THE AUDITORS. REFERRING TO PAGE 83 OF THE PAPER BOOK H E DREW THE ATTENTION OF THE BENCH TO THE SALE OF SHARES OF WIPRO LTD FOR A TOTA L CONSIDERATION OF ` 65 220 688/- ON VARIOUS DATES STARTING FROM 9.5.20 01 TO 5.12.2001. 4.3 REFERRING TO PAGE 84 OF THE PAPER BOOK HE SUBM ITTED THAT BOARD OF DIRECTORS IN THEIR MEETING HELD ON 28.3.2000 HAD RE SOLVED THAT THE COMPANY DO CARRY ON BUSINESS OF DEALING IN SHARES AND OTHER SE CURITIES AS MAY BE DEEMED FIT IN THE INTERESTS OF THE COMPANY. 4.4 REFERRING TO THE WRITTEN SUBMISSIONS FILED BEFO RE THE CIT(A) FOR THE ASSESSMENT YEAR 2001-02 DETAILS OF WHICH ARE PLACE D IN THE PAPER BOOK VOLUME I AT PAGES 313 TO 339 THE LD COUNSEL FOR THE ASSES SEE DREW THE ATTENTION OF THE BENCH TO THE DETAILED SUBMISSIONS GIVEN BEFORE THE CIT(A) FOR TREATING THE 10 ITA NO.5509/MUM/2005 ITA NO.2939/MUM/2006 INCOME FROM SALE OF SHARES AS BUSINESS INCOME AS AG AINST LONG TERM CAPITAL GAINS TREATED BY THE ASSESSING OFFICER AND RELIED ON THE SAME. 4.5 REFERRING TO PAPER BOOK PAGE-11 HE SUBMITTED THAT THE ASSESSEE IN ITS ACCOUNTS HAS HELD THE SHARES AS STOCK-IN-TRADE. RE FERRING TO PAGE 117 OF THE PAPER BOOK HE SUBMITTED THAT THE SHARES HAVE BEEN VALUED AT NIL. REFERRING TO PAGE 4 OF THE PAPER BOOK HE SUBMITTED THAT PROFIT O N SALE OF SHARES HAS BEEN SHOWN AS SHARE TRADING INCOME. 4.6 AS REGARDS TO THE OBSERVATIONS OF THE ASSESSING OFFICER THAT THE ASSESSEE NEVER INDULGED IN SHARE TRADING EITHER BEFORE OR AF TER THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE COMPANY DURING THE ASSESSMENT YEAR 2007-08 HAD TRADED IN SHARES. HE SUBMITTED THAT IF THE PROPOSITION OF THE ASSESSING OFFICER IS ACCEPTED THEN THE CONCEPT OF A DVENTURE IN THE NATURE OF TRADE WILL BE LOST. HE SUBMITTED THAT FREQUENCY OF TRANSACTIONS IS NOT REQUIRED FOR ADVENTURE IN TRADE. FOR THIS PROPOSITION HE RELIED ON THE DECISIONS REPORTED IN 137 ITR 346 (MP); 261 ITR 422(CAL) AND 1000 ITR 17 7(B0M). HE SUBMITTED THAT WHEN THE ASSESSEE COMPANY GOT THE SHARES ITS INTENT ION WAS TO SELL IT AND GET THE MONEY. HE SUBMITTED THAT ASSUMING FOR A MOMENT THA T THE ASSESSEE WOULD HAVE NO BROUGHT FORWARD LOSSES THE ASSESSING OFFICER W OULD NOT HAVE TREATED THE SAME AS CAPITAL GAIN AND WOULD HAVE TREATED THE SAM E AS BUSINESS INCOME. 4.7 AS REGARDS THE OBSERVATIONS OF THE ASSESSING OF FICER THAT THERE IS NO CLAUSE OF TRADE IN THE MOA HE SUBMITTED THAT AFTER THE BOARD RESOLUTION THE 11 ITA NO.5509/MUM/2005 ITA NO.2939/MUM/2006 COMPANY IS ENTITLED TO CARRY ON SHARE TRADING BUSIN ESS. REFERRING TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CI T VS HIMALAYAN TILES AND MARBLE PVT LTD REPORTED IN 100 ITR 177 HE SUBMITTE D THAT POWER IN MOA FOR TRADING IN SHARES IS IRRELEVANT. REFERRING TO THE SAID DECISION HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HAS HE LD THAT FACTS THAT THE MOA DID NOT PERMIT THE ASSESSEE COMPANY TO TRADE IN ACTIONA BLE CLAIMS WAS IRRELEVANT. AT THE TIME OF PURCHASING THE ACTIONABLE CLAIMS THE ASSESSEE WAS UNDER NO OBLIGATION OR COMPULSION TO DO SO. IN POINT OF TIME THERE WAS CLOSE PROXIMITY BETWEEN THE PURCHASE OF THE CLAIMS AND THE REALISAT ION. THE ASSESSEE HAD EMBARKED UPON A VENTURE IN THE NATURE OF TRADE AND THE SURPLUS REALISED FROM THE VENTURE WAS LIABLE TO BE INCLUDED IN THE INCOME OF THE ASSESSEE U/S 10. 4.8 AS REGARDS TO THE DECISION RELIED UPON BY THE L D CIT(A) IN THE CASE OF LAXMI SURGICAL PVT LTD (SUPRA) HE SUBMITTED THAT T HE SAID DECISION IS DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS O F THE PRESENT CASE. AS REGARDS TO THE DECISION RELIED UPON BY THE ASSESSING OFFICE R IN THE CASE OF MCDOWELL (SUPRA) HE SUBMITTED THAT IN VIEW OF THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT VS WALLFORT SHARES& STOCK BROKERS LTD R EPORTED IN 326 ITR 1 THE SALE OF SHARES HAS TO BE TREATED AS ADVENTURE IN THE NA TURE OF TRADE. HE ALSO RELIED ON A COUPLE OF DECISIONS TO SUPPORT THE CLAIM OF TH E ASSESSEE THAT SURPLUS ON SALE OF SHARES HAS TO BE TREATED AS BUSINESS INCOME AND NOT CAPITAL GAIN. 4.9 THE LD DR ON THE OTHER HAND SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. HE SUBMITTED THAT THE ONLY ISSUE IS TO BE D ECIDED IN THE IMPUGNED APPEAL IS AS TO WHETHER THE INCOME ON SALE OF SHARERS IS T O BE TREATED AS BUSINESS 12 ITA NO.5509/MUM/2005 ITA NO.2939/MUM/2006 INCOME OR INCOME FROM CAPITAL GAIN. HE SUBMITTED T HAT THE INTENTION OF THE ASSESSEE IN THE IMPUGNED CASE WAS NEVER TO DO BUSIN ESS OF TRADING IN SHARES. THE INTENTION AS PER THE SCHEME APPROVED BY THE BI FR WAS TO BRING IN CAPITAL TO THE COMPANY; THEREFORE IT CANNOT BE HELD THAT BY S ELLING THE SHARES WHICH WERE ACQUIRED BY WAY OF GIFT THE ASSESSEE EARNED BUSINE SS PROFITS. 4.10 REFERRING TO THE DECISION OF THE HONBLE CALCU TTA HIGH COURT IN THE CASE OF CIT VS MRS A GHOSH REPORTED IN 139 ITR 119(CAL) H E TRIED TO EXPLAIN WHAT IS ADVENTURE IN NATURE OF TRADE. REFERRING TO THE S AID DECISION HE SUBMITTED THAT THERE IS NO GENERAL OR UNIVERSAL TEST FOR ARRIVIN G AT THE CONCLUSION THAT THE CHARACTER OF A TRANSACTION CAN BE JUDGED SOLELY ON THE APPLICATION OF ANY ABSOLUTE RULE PRINCIPLE OR TEST BUT EVERY CASE IS TO BE JU DGED BY ITS OWN FACTS AND CIRCUMSTANCES. IN THE SAID DECISION THE ASSESSEES WERE NOT TRADERS IN THE PURCHASE OF THE SHARES AND THEIR RESALE AND THESE W ERE NOT A PART OF THEIR USUAL TRADE AND BUSINESS OR INCIDENTAL TO IT. THE TRANSA CTIONS OF PURCHASE AND SALE WERE NOT REPEATED. THE PURCHASE OF SHARES WAS NOT M ADE WITH THE SOLE INTENTION TO RESELL ON PROFIT. UNDER THESE CIRCUMSTANCES TH E TRIBUNAL FOUND THAT THE MOTIVE OF PROFIT WAS NOT THE DOMINANT OR SOLE OBJEC TIVE OF THE ASSESSEES IN ENTERING INTO THE TRANSACTIONS. THE HONBLE HIGH COURT UPHELD THE DECISION OF THE TRIBUNAL IN HOLDING THAT THE TRANSACTION IN QUE STION WAS NOT AN ADVENTURE IN THE NATURE OF TRADE. 4.11 REFERRING TO THE DECISION OF THE HONBLE BOMBA Y HIGH COURT IN THE CASE OF TUSHAR TANNA VS CIT REPORTED IN 153 TAXMAN 345(BOM) HE SUBMITTED THAT IN THAT CASE THE ASSESSES WERE MEMBERS OF SAME FAMIL Y. EACH OF THE ASSESSEES 13 ITA NO.5509/MUM/2005 ITA NO.2939/MUM/2006 ENTERED INTO SEPARATE CONTRACTS FOR PURCHASE OF GOL D BONDS OF WHICH DELIVERIES WERE MADE ON DIFFERENT DATE. SUBSEQUENTLY WITHIN A SHORT SPAN OF TIME ASSESSEES SOLD THOSE BONDS BY WAY OF VARIOUS SALE T RANSACTIONS AT PROFIT AND CLAIMED THAT PROFIT ON SALE OF THOSE GOLD BONDS WOU LD FALL UNDER THE HEAD CAPITAL GAINS AND WOULD THEREFORE BE EXEMPTED FROM TAX I N VIEW OF GOVERNMENT NOTIFICATION. THE ASSESSING OFFICER TREATED SUCH T RANSACTION AS ADVENTURE IN THE NATURE OF TRADE AND PROFIT ARRIVING AT THOSE TRANSA CTIONS AMOUNTED TO BUSINESS INCOME. ON APPEAL THE TRIBUNAL UPHELD THE ORDER O F THE ASSESSING OFFICER. WHEN THE MATTER WENT TO THE HIGH COURT THE HONBLE HIGH COURT HELD THAT; I) NO PRINCIPLE CAN BE LAID IN DECIDING WHETHER PER SON IS INDULGING IN BUSINESS IN THE NATURE OF TRADE II) WHETHER TRANSACTION IS ISOLATED ONE OR FORMS PA RT OF SERIES OF TRANSACTIONS SHOWING TRANSACTION TO BE IN THE NATUR E OF ADVENTURE IN TRADE. III) THE FACT THAT THE PROPERTY WAS SOLD WITHIN SHO RT TIME BY ITSELF DOES NOT INDICATE THAT TRANSACTION WAS IN THE NATURE OF ADVE NTURE IN TRADE IV) PROPERTY WAS PURCHASED WITH INTENTION OF INVEST MENT AND NOT IN ADVENTURE IN THE NATURE OF TRADE. AFTER ANALYSING THE FACTS OF THE CASE IT WAS HELD THAT TRANSACTION IN QUESTION WAS NOT AN ADVENTURE IN THE NATURE OF TRADE. 4.12 REFERRING TO PAGES 26 TO 81 OF THE PAPER BOOK THE LD DR INVITED THE ATTENTION OF THE BENCH TO THE DRAFT SCHEME OF REHAB ILITATION BY THE BIFR. REFERRING TO PAGE 44 OF THE PAPER BOOK HE SUBMITTE D THAT THE PROMOTERS WERE REQUIRED TO INFUSE CAPITAL. REFERRING TO PARA 9.8 OF THE SANCTIONED SCHEME THE LD DR DREW THE ATTENTION OF THE BENCH TO THE REQUE ST OF THE ASSESSEE TO THE INCOME TAX DEPARTMENT TO CONSIDER TO EXEMPT THE CO MPANY FROM CAPITAL GAIN TAX ON THE SALE OF DHARWAD LAND AND OTHER SURPLUS ASSETS OF THE COMPANY. REFERRING TO PARA 7 OF THE SUMMARY RECORDED DURING THE PROCEEDINGS HELD ON 14 ITA NO.5509/MUM/2005 ITA NO.2939/MUM/2006 7.6.2002 THE LD DR SUBMITTED THAT AS PER CLAUSE 7 OF THE SAID SUMMARY PROCEEDINGS NO DIRECTION HAS BEEN GIVEN TO THE INC OME TAX DEPARTMENT BUT THEY HAD BEEN ASKED TO CONSIDER PROVIDING CERTAIN E XEMPTION/BENEFITS TO THE COMPANY. REFERRING TO THE LETTER ADDRESSED TO THE TRIBUNAL ON 24.12.2009 THE LD DR DREW THE ATTENTION OF THE BENCH TO THE MISCEL LANEOUS PETITION FOR MODIFICATION OF THE SANCTIONED SCHEME FILED BY THE ASSESSEE COMPANY BEFORE THE BIFR AND DREW THE ATTENTION OF THE BENCH TO CLAUSE 9.8 (C) WHERE THE COMPANY HAD REQUESTED TO CONSIDER TO ALLOW TO SET OFF OF CA PITAL GAIN TAX ON SALE OF SHARES GIFTED BY THE PROMOTERS. THUS BEFORE ONE GOVERNMEN T AUTHORITY THEY ARE TELLING THAT IT IS CAPITAL GAIN AND BEFORE THE INCOME TAX A UTHORITIES THEY ARE CLAIMING THAT IT IS BUSINESS INCOME. HE SUBMITTED THAT THE E NTIRE SCHEME IS TO BRING IN CAPITAL. HAD THE INTENTION OF THE SCHEME WAS FOR TRADING IN SHARES IT WOULD HAVE COME UP BEFORE THE BIFR. FURTHER WITHOUT THE PER MISSION OF THE BIFR THE COMPANY CANNOT START ANY NEW LINE OF BUSINESS. 4.13 REFERRING TO THE DECISION OF THE HONBLE CALC UTTA HIGH COURT IN THE CASE OF MRS A GHOSH HE SUBMITTED THAT UNDER IDENTICAL FACT S AND CIRCUMSTANCES THE HONBLE HIGH COURT HAD HELD THAT TRANSACTION IN QUE STION WAS NOT AN ADVENTURE IN THE NATURE OF TRADE. 4.14 REFERRING TO THE DECISION OF THE HONBLE BOMBA Y HIGH COURT IN THE CASE OF RADHESHYAM R MORARKA HE SUBMITTED THAT SURPLUS OBT AINED ON PURCHASE OF SHARES OF DECREE WAS NOT CHARGEABLE TO TAX AS PROFI T OF BUSINESS. 15 ITA NO.5509/MUM/2005 ITA NO.2939/MUM/2006 4.15 REFERRING TO THE DECISION OF THE HONBLE SUPRE ME COURT IN THE CASE OF ORIENTAL INVESTMENT CO LTD (SUPRA) HE SUBMITTED TH AT THE HONBLE SUPREME COURT IN THE SAID CASE HAS HELD THAT MERELY BECAUS E THE COMPANY HAD WITHIN ITS OBJECTS THE DEALING IN INVESTMENT IN SHARES DID NOT GIVE TO IT THE CHARACTERISTICS OF A DEALER IN SHARES. AS TO WHAT WERE THE CHARACT ERISTICS OF THE BUSINESS OF DEALING IN SHARES OR THAT OF AN INVESTOR WAS A MIXE D QUESTION OF FACT AND LAW. 4.16 REFERRING TO THE OTHER DECISIONS HE SUBMITTED THAT UNDER SOME OF THE IDENTICAL FACTS SUCH INCOME WAS TREATED AS CAPITAL GAIN AND NOT AS BUSINESS INCOME. HE ACCORDINGLY SUBMITTED THAT PROFIT ON SALE OF SHARES HAS TO BE TREATED AS CAPITAL GAIN AS AGAINST BUSINESS INCOME DECLARED BY THE ASSESSEE SINCE THE INTENTION OF THE ASSESSEE TO DEAL IN TRAD ING IN SHARES IS MISSING. HE ALSO RELIED ON THE FOLLOWING DECISIONS: I) CIT VS SURESH CHAND GOYAL 163 TAXMAN 54(MP II)CIT VS SHASHI KUMAR AGRAWAL 66 TAXMAN 637(ALL) III) SMT NAYANTARA G AGRAWAL VS CIT 207 ITR 639(BO M) 5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE PARTIES PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND TH E PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE I S A SICK COMPANY AND REFERRED TO THE BIFR AS EARLY AS IN 1995. THERE IS ALSO NO DISPUTE TO THE FACT THAT AS PER THE SANCTIONED SCHEME OF BIFR PROMOTERS WERE SUPPO SED TO INFUSE CAPITAL IN THE SAID COMPANY. BY THE SAID ORDER OF THE BIFR WHICH IS PLACED AT PAGES 26 TO 59 OF THE PAPER BOOK THE SANCTIONED SCHEME OF REHABIL ITATION OF THE ASSESSEE IN CLAUSE 9.6 AT PAGE 51 IMPOSED THE FOLLOWING OBLIGA TIONS ON THE PART OF THE PROMOTERS: 16 ITA NO.5509/MUM/2005 ITA NO.2939/MUM/2006 A) TO CONTRIBUTE ` 787.14 LAKHS AS RPS LATEST WITHIN SIX MONTHS FROM THE DATE OF SANCTION OF THE SCHEME OF REHABILITATION BY BIFR IN THE LAST HEARING. B) PENDING SALE OF ASSETS TO ARRANGE UNSECURED LOA NS TO AN EXTENT OF ` 460 LAKHS TO MEET THE COST OF SCHEME INCLUDING AN Y CONTINGENT LIABILITIES WHICH ARE LIKELY TO ARISE AS REGULAR LIABILITIES. T HE UNSECURED LOANS CAN BE LATER ON REPAID OUT OF THE SALE PROCEEDS AFTER THE APPROVAL OF THE BOARD. C) TO MEET ANY SHORTFALL IN THE MEANS OF FINANCE OF THE SCHEME AND TO MEET ANY OVERRUN IN THE COST OF THE SCHEME OF REHAB ILITATION BY WAY OF ADDITIONAL INTEREST FREE UNSECURED LOANS. D) TO UNDERTAKE TO MEET ANY UNFORESEEN/UNDISCLOSED LIABILITIES AS AND WHEN IT DEVOLVE BY INDUCTING FRESH INTEREST FREE FU NDS FROM THEIR OWN SOURCES. E) TO PAY FULL OUTSTANDING PAYMENT OF ` . 132 LAKHS TOWARDS KARNATAKA STATE VEENERS LTD (KSVL) 6 THE BIFR IN ITS PROCEEDINGS HELD ON 7.6.2002 AS A CONDITION FOR ONE TIME SETTLEMENT WITH FOUR CONSORTIUM BANKS VIZ. CENTR AL BANK OF INDIA(CBI) UNION BANK OF INDIA(UBI THE SAKURA BANK LTD(SBL) AND B ANK OF NOVA SCOTIA (BNS) WANTED THE PROMOTERS TO INTRODUCE THEIR CONTRIBUTI ON BY WAY OF LOANS. THE PROMOTERS ACCORDINGLY HAD BROUGHT IN A SUM OF ` 2149.70 LAKHS IN THE FOLLOWING MANNER: PROMOTERS CONTRIBUTION: THE PROMOTERS HAD INTRODUCED A TOTAL OF RS. 2149.70 LACS TILL 31 ST MARCH 2002 AS FOLLOWS: GIFT OF SHARES 1265.51 UNSECURED SHORT TERM LOANS 884.19 TOTAL 2149.70 THE SCHEME ENVISAGED THE PROMOTERS CONTRIBUTING RS. 767.14 LACS BY WAY OF REDEEMABLE PREFERENCE SHARES. THE PROMOTERS HAD COMPLIED WITH THE BASIC REQUIREMENT OF THE SCHEME BY GIFTING SHARES W ORTH RS. 1265.51 LACS WITHOUT CREATING ANY LIABILITY ON THE COMPANY. 7 IT IS THUS CLEAR FROM THE AFORESAID SEQUENCE OF E VENTS THAT THE PROMOTERS GIFTED THEIR SHARES TO THE ASSESSEE INSTEAD OF BRIN ING CASH. THE REASONS FOR DOING 17 ITA NO.5509/MUM/2005 ITA NO.2939/MUM/2006 SO IS QUITE OBVIOUS; IF THE PROMOTERS HAD SOLD THE SHARES AND PAID TO THE ASSESSEE FOR REHABILITATION IN THE FORM OF CASH T HEN THE SALE OF SHARES BY THE PROMOTERS WOULD HAVE ATTRACTED CAPITAL GAIN WHICH IS CHARGEABLE TO TAX IN THEIR HANDS. BY MAKING A GIFT OF SHARES THE PROMOTERS H AD CLEARLY AN ADVANTAGE IN AS MUCH AS THEY WERE CHARGEABLE TO TAX ON THE CAPITAL GAIN HAD THEY SOLD THE SHARES. THIS ASPECT HAS NOT BEEN CONTROVERTED BY TH E LD COUNSEL FOR THE ASSESSEE DURING THE COURSE OF ARGUMENTS. 7.1 IT IS IN THIS BACKGROUND WE HAVE TO ASCERTAIN AS TO WHETHER THE CLAIM OF THE ASSESSEE THAT ITS STARTED BUSINESS OF DEALING I N SHARES IS ACCEPTABLE. IT IS NOT IN DISPUTE THAT IF THE SALE OF SHARES BY THE ASSESS EE AFTER IT WAS GIFTED BY THE PROMOTERS TO THE ASSESSEE WOULD IN NORMAL CIRCUMST ANCES HAVE BEEN CONSIDERED AS CAPITAL GAIN. IF IT IS TREATED AS CAPITAL GAIN THEN THE ASSESSEE WOULD HAVE TO PAY CAPITAL GAIN TAX ON THE SAID TRANSACTION. IF THE ASSESSEE CLAIMS IT AS BUSINESS INCOME THEN THE GAIN ON SALE OF SHARES BY THE ASSESSEE WOULD BE SET OFF OF AGAINST BROUGHT FORWARD BUSINESS LOSS OF THE ASS ESSEE. THIS ON THE ONE HAND THE PROMOTERS BY GIFTING THE SHARES INSTEAD OF BRI NGING THEIR CONTRIBUTION IN THE FORM OF CASH AVOIDED TAX ON CAPITAL GAIN. ON THE O THER HAND THE ASSESSEE BY CLAIMING THAT IT WAS ENGAGED IN THE BUSINESS OF TRA DING IN SHARES WOULD DERIVE ADVANTAGE IF THE INCOME FROM SALE OF SHARES IS TREA TED AS BUSINESS INCOME IN WHICH EVENT THE ASSESSEE COULD CLAIM SET OFF AGAIN ST ITS BROUGHT BUSINESS LOSS. 7.2 LAW IS WELL SETTLED THAT EVEN A SINGLE OR ISOLA TED TRANSACTION CAN BE TREATED AS CONSTITUTING A BUSINESS AS BEING AN ADVENTURE IN THE NATURE OF TRADE. 18 ITA NO.5509/MUM/2005 ITA NO.2939/MUM/2006 HONBLE SUPREME COURT IN THE CASE OF G VENKATASWAMI NAIDU & CO VS CIT REPORTED IN 35 ITR 594(SC) HAD LAID DOWN THE PRINC IPLES TO BE APPLIED TO DECIDE THE QUESTION AS TO WHEN A PERSON CAN BE SAID TO BE ENGAGED IN ADVENTURE IN THE NATURE OF TRADE IN THE FOLLOWING WORDS: THIS QUESTION HAS BEEN THE SUBJECT-MATTER OF SEVER AL JUDICIAL DECISIONS AND IN DEALING WITH IT ALL THE JUDGES APPEAR TO BE AGREED THAT NO PRINCIPLE CAN BE EVOLVED WHICH WOULD GOVERN THE DECISION OF A LL CASES IN WHICH THE CHARACTER OF THE IMPUGNED TRANSACTION FALLS TO BE C ONSIDERED. WHEN SECTION 2 SUB.SECTION (4) REFERS TO AN ADVENTURE I N THE NATURE OF TRADE IT CLEARLY SUGGESTS THAT THE TRANSACTION CANNOT PROPER LY BE REGARDED AS TRADE OR BUSINESS. IT S ALLIED TO TRANSACTIONS THAT CONSTITUTE TRADE OR BUSINESS BUT MAY NOT BE TRADE OR BUSINESS ITSELF C HARACTERIZED BY SOME OF THE ESSENTIAL FEATURES THAT MAKE UP TRADE OR BUSINE SS BUT NOT BY ALL OF THEM; AND SO EVEN AN ISOLATED TRANSACTION CAN SATIS FY THE DESCRIPTION OF AN ADVENTURE IN THE NATURE OF TRADE. SOMETIMES IT IS S AID THAT A SINGLE PLUNGE IN THE WATERS OF TRADE MAY PARTAKE OF THE CHARACTER OF AN ADVENTURE IN THE NATURE OF TRADE. THIS STATEMENT MAY BE TRUE; BUT IN ITS APPLICATION DUE REGARD MUST BE SHOWN TO THE REQUIREMENT THAT THE SI NGLE PLUNGE MUST BE IN THE WATERS OF TRADE. IN OTHER WORDS AT LEAST SO ME OF THE ESSENTIAL FEATURES OF TRADE MUST BE PRESENT IN THE ISOLATED O R SINGLE TRANSACTION. ON THE OTHER HAND IT IS SOMETIME SAID THAT THE APPEAR ANCE OF ONE SWALLOW DOES NOT MAKE A SUMMER. THIS MAY BE TRUE IF IN THE METAPHOR SUMMER REPRESENTS TRADE; BUT IT MAY NOT BE TRUE IF SUMMER REPRESENTS AN ADVENTURE IN THE NATURE OF TRADE BECAUSE WHEN THE S ECTION REFERS TO AN ADVENTURE IN THE NATURE OF TRADE IT IS OBVIOUSLY RE FERRING TO TRANSACTIONS WHICH INDIVIDUALLY CANNOT THEMSELVES BE DESCRIBED A S TRADE OR BUSINESS BUT ARE ESSENTIALLY OF SUCH A SMALL CHARACTER THAT THEY ARE TREATED AS IN THE NATURE OF TRADE. 7.3 THE CASE LAW ON THE ISSUE CLEARLY SUGGEST THAT THE OVERALL FACTS AND CIRCUMSTANCES OF EACH CASE HAS TO BE SEEN TO DECIDE WHETHER AN ASSESSEE HAS ENTERED INTO ANY ADVENTURE IN THE NATURE OF TRADE. ONE OF THE IMPORTANT CRITERIA IS INTENTION OF THE ASSESSEE AT THE RELEVANT POINT OF TIME. THE ONUS ON THE ASSESSEE TO SHOW THAT IT HAD ENTERED INTO AN ADVENT URE IN THE NATURE OF TRADE 19 ITA NO.5509/MUM/2005 ITA NO.2939/MUM/2006 BECAUSE OF THE ACTIVITY IN QUESTION IS NOT IN THE U SUAL LINE OF BUSINESS OF THE ASSESSEE. ON THE FACTS OF THE PRESENT CASE WE NOT ICE THAT THE ASSESSEE GOT THE SHARES BY WAY OF GIFT DURING THE PERIOD FROM 9.5.2 001 TO 5.12.2001 FOR A CONSIDERATION OF RS. 6 52 20 688/-. THE BOARD OF DI RECTORS IN THEIR MEETING HELD ON 28.3.2000 HAD PASSED THE FOLLOWING RESOLUTION: RESOLVED THAT THE COMPANY DO CARRY ON BUSINESS OF DEALING IN SHARES AND OTHER SECURITIES AS MAY BE DEEMED FIT IN THE INTERE STS OF THE COMPANY. FURTHER RESOLVED THAT MR C K VISSANJI MANAGING DI RECTOR AND/OR MR BANKIM HAMIR EXECUTIVE OF THE COMPANY BE AN THEY A RE INDIVIDUALLY AUTHORIZED FOR AN ON BEHALF OF THE COMPANY TO IMPLE MENT THE AFORESAID RESOLUTION. 7.4 THE MEMORANDUM OF ASSOCIATION (MOA) OF THE ASSE SSEE DID NOT HAVE AS ONE OF ITS OBJECT OF BUSINESS OF DEALING IN SHARES. IT IS NO DOUBT TRUE THAT THE EXISTENCE OF A POWER IN MOA IS NOT CONCLUSIVE TO DE CIDE THE ISSUE WHETHER A PERSON WAS ENGAGED IN DOING A PARTICULAR ACTIVITY A S BUSINESS. IN THE PRESENT CASE WE CONSIDER THE ABSENCE OF A POWER TO CARRY O N THE BUSINESS OF DEALING IN SHARE AS ONE CIRCUMSTANCE WHICH WOULD GO TO SHOW TH AT THE ASSESSEE NEVER INTENDED TO CARRY ON THE BUSINESS OF DEALING IN SHA RES. CLAUSE 22 OF THE MOA ON WHICH THE LD COUNSEL FOR THE ASSESSEE PLACED RELIAN CE READS AS FOLLOWS: 22. TO TAKE OR OTHERWISE ACQUIRE AND HOLD SHARES IN ANY OTHER COMPANY HAVING OBJECT ALTOGETHER OR IN PART SIMILAR TO THO SE OF THIS COMPANY OR CARRYING ON ANY BUSINESS CAPABLE OF BEING CONDUCTED SO AS DIRECTLY OR INDIRECTLY TO BENEFIT THIS COMPANY. IN OUR VIEW THE SHARES RECEIVED AS A GIFT BY THE AS SESSEE WERE SHARES OF A SOFTWARE COMPANY AND THEREFORE THE CLAIM OF THE A SSESSEE THAT IT HAD POWER TO CARRY ON THE BUSINESS OF TRADING SHARES CANNOT BE ACCEPTED ON FACTS OF THE CASE. THE SHARES WHICH THE ASSESSEE RECEIVED AS GIFT WER E ONLY SHARE IN WHICH THE ASSESSEE CLAIMS TO HAVE DONE THE BUSINESS OF TRADIN G IN SHARES. IN OUR OPINION IT 20 ITA NO.5509/MUM/2005 ITA NO.2939/MUM/2006 CANNOT BE ACCEPTED THAT THE ASSESSEE INTENDED TO CA RRY ON THE BUSINESS OF DEALING IN SHARES AND SECURITIES. THE CLAIM OF THE ASSESSEE AS ALREADY STATED HAS TO BE TESTED IN THE BACKGROUND OF PROCEEDINGS B EFORE THE BIFR APART FROM TAX ADVANTAGE WHICH THE ASSESSEE WOULD DESIRE BY MAKING THE CLAIM THAT IT WAS ENGAGED IN THE BUSINESS OF DEALING IN SHARES. 7.5 WE HAVE ALREADY OBSERVED THAT EVEN THE PROMOTER S INSTEAD OF BRINGING IN CASH GIFTED THE SHARES ONLY WITH A VIEW TO HAVE TAX ADVANTAGE. 7.6 THE GIFT OF SHARES BY THE PROMOTERS WAS IN THE FORM OF CONTRIBUTION TOWARDS MAKING THE NET WORTH OF THE ASSESSEE POSIT IVE. THE ASSESSEE CANNOT MAKE CLAIM THAT SUCH ASSETS HAVE BEEN USED BY IT FO R THE PURPOSE OF CARRYING ON A BUSINESS IN DEALING IN SHARES. IN THIS REGARD WE MAY REFER TO THE ORDER DATED 13.2.2001 BY THE BIFR SANCTIONING A SCHEME OF REHAB ILITATION. CLAUSE 8.2 PROVIDES AS FOLLOWS: 8.2 THE MEANS OF FINANCE ARE PROMOTERS CONTRIBUTIO N IN THE FORM OF RPS SALE OF SURPLUS LAND AND MACHINERY AND INTERNAL GEN ERATION. PENDING SALE OF ASSETS THE PROMOTERS PROPOSE TO PROVIDE A SHORT TERM INTEREST FREE UNSECURED LOAN FOR AN EQUIVALENT AMOUNT WHICH ARE REPAYABLE FROM THE PROCEEDS FROM THE SALE OF ASSETS. PROMOTERS PROPOSE TO BRING IN THEIR CONTRIBUTION BY SALE OF THEIR PRIVATE PROPERTIES. SIMILARLY CLAUSE 11(D) OF THE SAID SCHEME PROVIDES AS FOLLOWS: (D) THE COMPANY SHALL NOT UNDERTAKE ANY NEW PROJECT OR EXPANSION OR MAKE ANY INVESTMENT OR OBTAIN ANY ASSET ON LEAVE/HI RE WITHOUT THE PRIOR APPROVAL OF BIFR DURING THE PENDENCY OF THE SCHEME EXCEPTING 5% OF THE CAPITAL ASSETS. 21 ITA NO.5509/MUM/2005 ITA NO.2939/MUM/2006 IT IS THUS CLEAR FROM THE ABOVE SANCTIONED SCHEME T HAT THE ASSESSEE COULD NOT CARRY ON A BUSINESS CONTRARY TO THE SCHEME SANCTION ED BY THE BIFR. EVEN ON THIS BASIS THE CLAIM OF THE ASSESSEE DESERVES TO BE REJ ECTED. 7.7 THE LD COUNSEL FOR THE ASSESSEE HAS RELIED ON C ERTAIN JUDICIAL PRONOUNCEMENTS. THE SUM AND SUBSTANCE OF THOSE DECI SIONS GO TO SHOW THAT THE ISSUE IS BASICALLY A FACTUAL ISSUE TO BE DECIDED ON FACTS AND CIRCUMSTANCES OF EACH CASE. WE ARE THEREFORE NOT MAKING ANY REFEREN CE TO THE ABOVE. ON THE FACTS OF THE PRESENT CASE WE ARE OF THE VIEW THAT THE CLAIM OF THE ASSESSEE CANNOT BE ACCEPTED. WE THEREFORE DO NOT FIND ANY FORCE IN THE CONTENTION OF THE LD COUNSEL FOR THE ASSESSEE. THE GROUND RAISED BY T HE ASSESSEE IS ACCORDINGLY DISMISSED. 8 IN GROUNDS OF APPEAL NO.2 THE ASSESSEE HAS CHALLE NGED THE ORDER OF THE CIT(A) IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OUT OF THE FOLLOWING EXPENSES: I) CONVEYANCE AND TRAVELLING EXPENSES ` 50 000/- II) SUNDRY EXPENSES ` 50 000/- III) SALES PROMOTION EXPENSES ` 1 78 444/- 8.1 AFTER HEARING BOTH THE PARTIES WE FIND THE ASS ESSING OFFICER NOTED THAT THERE IS INCREASE IN CONVEYANCE AND TRAVELLING EXP ENSES FROM ` 26.79 LAKH TO ` 33.32 LAKH. ACCORDING TO THE ASSESSING OFFICER THE ASSESSEE HAS INCURRED EXPENSES OF ` 4 41 462/- ON LOCAL TRAVELLING FOR WHICH SELF MADE VOUCHERS ARE BEING PREPARED. FOR WANT OF PROPER VERIFICATION AN D RECORD AND IN VIEW OF 22 ITA NO.5509/MUM/2005 ITA NO.2939/MUM/2006 SUBSTANTIAL INCREASE IN THE EXPENSES THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF ` 50 000/- ON ADHOC BASIS. 8.2 IT WAS SUBMITTED BEFORE THE CIT(A) THAT THESE E XPENSES WERE INCURRED BY THE ASSESSEE ON LOCAL CONVEYANCE IN THE NATURE OF TAXI BUS AND TRAIN FARE WHILE PERFORMING OFFICE DUTIES AND IN THE CASE OF SUCH EX PENSES THERE CANNOT BE ANY CASH MEMO OR BILL. THE ONLY EVIDENCE WHICH COULD B E KEPT IS VOUCHERS DULY SIGNED BY THE STAFF MEMBER STATING THE DATE OF TRAV EL DESTINATION AND PURPOSE. 9 WE FIND THE CIT(A) CONFIRMED THE ADDITION ON THE GROUND THAT IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR UNDER IDENTIC AL FACTS ` 50 000/- WAS DISALLOWED BY THE ASSESSING OFFICER AND NO APPEAL W AS FILED BY THE ASSESSEE. HE ACCORDINGLY CONFIRMED THE ADDITION. 10 WE FIND ADMITTEDLY THE ASSESSEE HAS NOT MAINT AINED BILLS AND VOUCHERS AND THE EXPENSES HAVE BEEN CLAIMED ON THE BASIS OF SELF MADE VOUCHERS. FURTHER IN THE PRECEDING ASSESSMENT YEAR THE ASSE SSEE HAS ACCEPTED THE ADDITION OF ` 50 000/- ON ADHOC BASIS. SINCE THE EXPENDITURE IN THE CURRENT YEAR HAS ALSO GONE UP; THEREFORE IN ABSENCE OF FULL DET AILS ADDITION OF ` . 50 000/- ON ADHOC BASIS IN OUR CONSIDERED OPINION BEING REASON ABLE DOES NOT CALL FOR ANY INTERFERENCE. WE ACCORDINGLY UPHOLD THE ADDITION O F ` 50 000./- . 23 ITA NO.5509/MUM/2005 ITA NO.2939/MUM/2006 11 AS REGARDS THE SUNDRY EXPENSES WE FIND THE ASSE SSING OFFICER DISALLOWED AN AMOUNT OF ` 50 000/- OUT OF ` 2 93 928/- DEBITED UNDER THE HEAD SUNDRY EXPENSES FOR WHICH NO DETAILS WERE FURNISHED. WE FIND BEFORE THE CIT(A) IT WAS SUBMITTED THAT SUNDRY EXPENSES OF ` . 2 93 928/- WERE REASONABLE AND THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING OF ` 50 000/- IN SUMMARY MANNER IN ABSENCE OF DETAILS WITHOUT ASKING FOR SUC H DETAILS. 12 WE FIND ALTHOUGH THE ASSESSEE BEFORE THE CIT(A) HAS SUBMITTED THAT ASSESSING OFFICER HAS NOT ASKED FOR DETAILS OF SUND RY EXPENSES THE ASSESSEE HAS NOT FURNISHED THE DETAILS OF SUCH SUNDRY EXPENSES E ITHER BEFORE THE CIT(A) OR BEFORE US. MERELY STATING THAT THE SAID SUNDRY EX PENSES ARE FOR THE PURPOSE OF BUSINESS IN OUR OPINION IS NOT SUFFICIENT FOR CL AIMING THE EXPENSES AS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IT IS THE WELL SETTLED PROPOSITION OF LAW THAT FOR CLAIMING ANY EXPENSE AS GENUINE BUSINESS EXPENDITURE THE ONUS IS ALWAYS ON THE ASSESSEE TO PROVE TO THE SATISFACT ION OF THE ASSESSING OFFICER THAT THE SAME IS WHOLLY AND EXCLUSIVELY FOR THE PU RPOSE OF BUSINESS. SINCE THE ASSESSEE ADMITTEDLY HAD NOT GIVEN THE BIFURCATION OF THE DETAILS OF SUNDRY EXPENSES; THEREFORE ADHOC DISALLOWANCE OF ` 50 000/- IN THE FACTS OF THE CASE IN OUR OPINION BEING REASONABLE IS CONFIRMED. 13 SO FAR AS THE GROUND REGARDING DISALLOWANCE OF SALES PROMOTION EXPENSES OF ` 1 78 444/- IS CONCERNED WE FIND THE ASSESSING OF FICER DISALLOWED THE SAME ON THE GROUND THAT NO DETAILS WERE FURNISHED IN TH E CASE OF SALES PROMOTION EXPENSES PERTAINING TO COCHIN AND CHENNAI BRANCHES . IT IS THE SUBMISSION OF THE LD COUNSEL FOR THE ASSESSEE THAT THE DETAILS CALL ED FOR FROM THESE BRANCHES WERE NOT RECEIVED AND THEREFORE THE SAME COULD NOT BE F URNISHED BEFORE THE 24 ITA NO.5509/MUM/2005 ITA NO.2939/MUM/2006 ASSESSING OFFICER. MERELY BECAUSE THE DETAILS COULD NOT BE FURNISHED DUE TO UNAVOIDABLE CIRCUMSTANCES THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING THE ENTIRE EXPENSES OF THESE BRANCHES ON SUSPICION AND GUESS WORK. 14 WE FIND THE CIT(A) CONFIRMED THE ADDITION MADE B Y THE ASSESSING OFFICER ON THE GROUND THAT NO FURTHER DETAILS WERE FURNISHE D BEFORE HIM RELATING TO THE COCHIN AND CHENNAI BRANCHES. IT IS THE SUBMISSION OF THE LD COUNSEL FOR THE ASSESSEE THAT ALTHOUGH NO DETAILS COULD BE FURNISHE D THE ENTIRE AMOUNT SHOULD NOT HAVE BEEN DISALLOWED. IN OUR OPINION WHEN THE ASSESSEE FAILS TO FURNISH THE DETAILS OF ANY EXPENSE THE REVENUE AUTHORITIES ARE JUSTIFIED IN DISALLOWING THE SAME. WE FIND ALTHOUGH THE DETAILS COULD NOT BE FU RNISHED BEFORE THE ASSESSING OFFICER AND THE CIT(A) SUCH DETAILS WERE EVEN NOT FURNISHED BEFORE US. THEREFORE IT RAISES DOUBT IN OUR MIND REGARDING GE NUINENESS OF THE EXPENSES. HOWEVER CONSIDERING THE FACT THAT SOME EXPENSES MI GHT HAVE BEEN INCURRED BY THE ASSESSEE ON ACCOUNT OF SALES PROMOTION SINCE SUCH EXPENSES WERE INCURRED IN THE PAST; THEREFORE OUT OF THE DISALLOWANCE OF ` 1 78 444/- WE SUSTAIN THE DISALLOWANCE OFF ` . 1 LAC. THE GROUND RAISED BY THE ASSESSEE IS ACCO RDINGLY ALLOWED PARTLY. 15 IN THE GROUNDS OF APPEAL NO.3 THE ASSESSEE HAS CHALLENGED THE ORDER OF THE CIT(A) IN UPHOLDING THE LEVY OF INTEREST U/S 23 4B AND 234D. 16 AFTER HEARING BOTH THE PARTIES WE ARE OF THE OP INION THAT CHARGING OF INTEREST U/S 234B IS MANDATORY AND CONSEQUENTIAL IN NATURE. THEREFORE LEVY OF INTEREST U/S 234B IS UPHELD. 25 ITA NO.5509/MUM/2005 ITA NO.2939/MUM/2006 17 AS REGARDS LEVY OF INTEREST U/S 234D IN OUR OPI NION AND IN VIEW OF THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF EKTA PROMOTERS REPORTED IN 113 ITD 719 THE ASSESSEE IS NOT LIABLE FOR INTEREST U/S 234D SINCE THE ASSESSMENT YEAR INVOLVED IN THIS CASE IS ASSESSMENT YEAR 2002-03 AND THE PROVISIONS OF SEC. 234D WERE BROUGHT TO THE STATUTE BOOK W.E.F. 1.6.2003. ACCORDINGLY GROUNDS OF APPEAL NO .3 IS PARTLY ALLO WED. 18 IN THE GROUNDS OF APPEAL NO.4 THE ASSESSEE HAS CHALLENGED THE ORDER OF THE CIT(A) IN HOLDING THAT NO APPEAL LIES AGAINST I NITIATION OF PENALTY PROCEEDINGS U/S 271(1)( C) OF THE ACT. 19 AFTER HEARING BOTH THE PARTIES WE ARE OF THE CO NSIDERED OPINION THAT THIS GROUND IS PRE-MATURED; ACCORDINGLY THE SAME IS DIS MISSED. ITA NO. 2 ITA NO. 2 ITA NO. 2 ITA NO. 2939/MUM/2006 (A.Y 2001 939/MUM/2006 (A.Y 2001 939/MUM/2006 (A.Y 2001 939/MUM/2006 (A.Y 2001- -- -02) 02) 02) 02) 20 AT THE TIME OF HEARING THE LD COUNSEL FOR THE ASSESSEE DID NOT PRESS FOR THE GROUNDS OF APPEAL NO.1 WHICH RELATES TO REOPENING O F THE ASSESSMENT U/S 147 OF THE ACT. SINCE THE LD DR DID NOT RAISE ANY OBJECT ION; THEREFORE THE SAME IS DISMISSED AS NOT PRESSED. 21 IN GROUNDS OF APPEAL NO.2 THE ASSESSEE HAS CHALLENGED THE ORDER OF THE CIT(A) IN CONFIRMING THE ACTION OF THE ASSESSING O FFICER IN ASSUMING THE BUSINESS INCOME OF ` 6 13 30 252/- FROM TRADING IN SHARES AS LONG TERM CAPITAL GAINS AND NOT ALLOWING SET OFF OF BROUGHT FORWARD BUSINESS LO SSES AGAINST SUCH BUSINESS INCOME. 26 ITA NO.5509/MUM/2005 ITA NO.2939/MUM/2006 22 AFTER HEARING BOTH THE PARTIES WE FIND THI S GROUND IS IDENTICAL TO THE GROUNDS OF APPEAL NO.1 RAISED BY THE ASSESSEE IN IT A NO.5509/MUM/2005. WE HAVE ALREADY DECIDED THE ISSUE AGAINST THE ASSESSEE . FOLLOWING THE SAME RATIO THIS GROUND OF THE ASSESSEE IS DISMISSED. 23 IN GROUNDS OF APPEAL NO.3 THE ASSESSEE H AS CHALLENGED THE ORDER OF THE CIT(A) IN NOT PASSING A SPEAKING ORDER AGAINST LEV Y OF PENALTY U/S 234B AND 234D OF THE I T ACT. 24 AFTER HEARING BOTH THE PARTIES WE FIND THI S GROUND IS IDENTICAL TO THE GROUNDS OF APPEAL NO.3 RAISED BY THE ASSESSEE IN IT A NO.5509/MUM/2005. WE HAVE ALREADY DECIDED THIS ISSUE AND HELD THAT LEVY OF INTEREST U/S 234B IS MANDATORY AND CONSEQUENTIAL IN NATURE. 24.1 SIMILARLY CHARGING OF INTEREST U/S 234D IS NOT APPLICABLE TO THE CASE IN VIEW OF THE DECISION OF THE SPECIAL BENCH OF THE TR IBUNAL IN THE CASE OF EKTA PROMOTERS (SUPRA). FOLLOWING THE SAME RATIO THIS G ROUND OF THE ASSESSEE IS ALLOWED PARTLY. 25 IN GROUNDS OF APPEAL NO.4 THE ASSESSEE HAS CHALLENGED THE ORDER OF THE CIT(A) IN NOT DISPOSING OF THE GROUND RAISED AGAIN ST INITIATION OF PENALTY PROCEEDINGS U/S 271(1)( C) OF THE ACT. 26 AFTER HEARING BOTH THE PARTIES WE FIND TH IS GROUND IS PRE-MATURE WHICH DOES NOT REQUIRE ANY ADJUDICATION. 27 ITA NO.5509/MUM/2005 ITA NO.2939/MUM/2006 27 IN THE RESULT BOTH THE APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED ON THE 7 TH DAY OF JAN 2011. SD/- SD/- ( (( ( N V VASUDEVAN N V VASUDEVAN N V VASUDEVAN N V VASUDEVAN ) )) ) JUDICIAL MEMBER ( (( ( R K PANDA R K PANDA R K PANDA R K PANDA ) )) ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED: 7 TH JAN 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR ITAT MUMBAI