Chhaya Shah Family Trust, Kolkata v. ITO, Ward - 34(3), Kolkata, Kolkata

ITA 590/KOL/2010 | 2006-2007
Pronouncement Date: 09-07-2010

Appeal Details

RSA Number 59023514 RSA 2010
Assessee PAN AAATC3790K
Bench Kolkata
Appeal Number ITA 590/KOL/2010
Duration Of Justice 3 month(s) 17 day(s)
Appellant Chhaya Shah Family Trust, Kolkata
Respondent ITO, Ward - 34(3), Kolkata, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 09-07-2010
Appeal Filed By Assessee
Bench Allotted SMC
Tribunal Order Date 09-07-2010
Date Of Final Hearing 30-06-2010
Next Hearing Date 30-06-2010
Assessment Year 2006-2007
Appeal Filed On 23-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH SMC KOLKATA (BEFORE HONBLE SMT.DIVA SINGH JM ) ITA NO. 590/KOL/2010 : ASSESSMENT YEAR 2006-07 CHHAYA SHAH FAMILY TRUST -VS- I.T.O. WARD-34(3) KOLKATA PAN : AAATC 3790 K KOLKATA (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUBHASH AGARWAL RESPONDENT BY : SHRI R .K.PAL SR.DR : O R D E R : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 15.01.2010 OF THE LD. CIT(A)-XX KOLKATA PERTAINING TO 2006-07 A SSESSMENT YEAR. 2. AT THE TIME OF HEARING IT WAS SUBMITTED BY THE LD. AR THAT THE EFFECTIVE GROUNDS RAISED IN THE PRESENT APPEAL ARE GROUND NO.1 2 AND 3. AS SUCH THEY ARE REPRODUCED HEREUNDER FOR READY REFERENCE : 1. THE COMMISSIONER OF INCOME TAX (APPEAL) WRONGLY OBSERVED THAT THE SHARES OF THE BENEFICIARIES ARE UNKNOWN. BUT IT IS CLEAR FROM THE TRUST DEED AS PER CLAUSE 22 THAT THE SHARES ARE DEFINITE. SO THE CIT(APPEAL) WRONGLY HELD THAT THE SECTION 164 IS APPLICABLE TO THE ASSESSEE AND M AXIMUM MARGINAL RATE WAS APPLICABLE. 2. THE COMMISSIONER OF INCOME TAX (APPEAL) ALSO ILL EGALLY AND ARBITRARILY HELD THAT THE SECTION 164 IS APPLICABLE AND THE MAXIMUM MARGINAL RATE TO BE CHARGED. 3. THE COMMISSIONER OF INCOME TAX (APPEAL) ALSO WRO NGLY CONSIDERED THAT THE COMMODITY TRANSACTION TO BE TREATED AS BUSINESS INC OME. 3. ADDRESSING GROUND NO.1 AND 2 IT WAS SUBMITTED BY THE LD. AR THAT THE AO IN PARAS 4 TO 6 HAS COME TO THE CONCLUSION THAT THE SH ARES OF BENEFICIARIES ARE NOT KNOWN/DETERMINATE AS SUCH AS PER SECTION 164 OF THE INCOME TAX ACT IT WAS TO BE TAXED AT THE MAXIMUM MARGINAL RATE. FURTHER THE AO HAS ALSO CONCLUDED IT WAS ARGUED THAT IN THE RETURN OF INCOME THE ASSESSEE HAS SHOWN ITS STATUS TO BE AOP AS SUCH THE 2 TOTAL INCOME OF THE AOP IS TO BE TREATED AT MAXIMUM MARGINAL RATE. ADDRESSING GROUND NO.3 IT WAS SUBMITTED THAT IN PARAS 2 AND 3 OF THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS HELD THE RETURNED INCOME OF R S.1 00 530/- SHOWN UNDER THE HEAD INCOME FROM OTHER SOURCES AS A SPECULATIVE TRANSA CTION AS SUCH TO BE ASSESSED UNDER THE HEAD BUSINESS INCOME. THE ARGUMENT THAT IT WA S NON-RECURRING IN NATURE CASUAL AND EARNED ONLY IN THE YEAR UNDER CONSIDERATION IT WAS ARGUED WAS NOT ACCEPTED BY THE AO 4. INVITING ATTENTION TO THE IMPUGNED ORDER IT WAS SUBMITTED BY THE LD. AR THAT IN APPEAL THE CIT(A) DECIDED BOTH THE ISSUES AGAINST T HE ASSESSEE UPHOLDING THE ACTION OF THE AO VIDE PARA 3 IN THE FOLLOWING MANNER :- 3. GROUND NO.1 RELATES TO APPLICATION OF SECTION 164. GROUND NO.2 RELATES TO ASSESSMENT OF INCOME FORM COMMODITY TRANSACTIONS AS BUSINESS INCOME. AS THESE GROUND ARE INTER-LINKED THEY ARE TAKEN TOGET HER. THE BRIEF FACTS OF THE CASE ARE THAT THE APPELLANT HAS SHOWN PROFIT OF RS. 1 00 530/- FROM SPECULATION IN COMMODITIES. COPIES OF BILLS/CONTRACT NOTES WERE PRODUCED BEFORE THE AO. THE AO FOUND THAT THE APPELLANT HAS EARNED INCOME F ROM SPECULATIVE TRADING IN COMMODITIES AT THE NATIONAL COMMODITY & DERIVATIVES EXCHANGE LIMITED. IT WAS ARGUED BEFORE THE AO THAT THE REGULAR INCOME OF THE TRUST CONSISTS OF INTEREST DIVIDEND AND INCOME FROM OTHER SOURCES. T HE TRANSACTIONS IN COMMODITIES ARE NON-RECURRING AND CAUSAL IN NATURE AND THEREFORE THE INCOME EARNED THERE FROM SHOULD BE ASSESSED AS INCOME FROM OTHER SOURCES. THE AO DID NOT ACCEPT THE EXPLANATION. THE AO HELD THAT TH E INCOME DERIVED FROM SPECULATIVE TRANSACTIONS IN COMMODITIES IS BUSINESS INCOME. THE AO ALSO OBSERVED THAT THE SHARES OF THE BENEFICIARIES ARE U NKNOWN AND THEREFORE MAXIMUM MARGINAL RATE WAS APPLICABLE IN VIEW OF THE PROVISIONS OF SECTION 164. THE LD. AR REITERATED THE SUBMISSIONS ALREADY MADE BEFORE THE AO. I HAVE PERUSED THE ASSESSMENT ORDER AND CONSIDERED THE SUB MISSION OF THE APPELLANT. I AM OF THE OPINION THAT THE INCOME DERIVED FROM SPEC ULATIVE TRANSACTIONS IN COMMODITIES HAS TO BE ASSESSED AS BUSINESS INCOME. THE APPELLANT HAS CARRIED OUT THE BUSINESS ACTIVITY AS PER CLAUSE 8 OF THE TR UST DEED. SECONDLY THE SHARES OF THE BENEFICIARIES ARE UNKNOWN. AND THEREFORE TH E AO HAS RIGHTLY APPLIED THE PROVISIONS OF SECTION 164 IN THE CASE OF THE APPELL ANT. THE VIEWS TAKEN BY THE AO ARE UPHELD. GROUND NO.1 & 2 ARE DISMISSED. 5. IN THE ABOVE BACKGROUND IT WAS HIS SUBMISSION TH AT THE CIT(A) HAS NOT CONSIDERED THE TRUST DEED WHICH WAS AVAILABLE ON RE CORD AND HAS GONE BY THE INTERPRETATION THEREOF GIVEN BY THE AO WHO TOO HAS NOT CARED TO CONSIDER THE SAME IN THE PROPER PERSPECTIVE. 3 5.1. INVITING ATTENTION TO CLAUSE 2 A) B) C) AND D) ALONG WITH CLAUSE 22 OF THE SAME WHICH CONTEMPLATES THE EVENTUALITY THAT IF THE BENE FICIARY SMT. CHAYA SHAH DOES NOT SURVIVE THEN THE SHARE IS TO BE DIVIDED EQUALLY AMO NGST HER CHILDREN IT WAS ARGUED THAT THE SHARE WAS FULLY KNOWN AND DETERMINATE.. IT WAS ALSO HIS ARGUMENT THAT THE TRUST WAS CREATED ON 9 TH NOVEMBER 1999 FOR A LIMITED PERIOD OF 10 YEARS AN D SINCE THIS IS THE LAST FEW YEARS THE DEPARTMENT HAVING ACCEPTED THE S AME IN THE PAST IS PRECLUDED FROM DISTURBING THE POSITION IN THE YEAR UNDER CONSIDERA TION. RELIANCE WAS PLACED ON TARABEN RAMAN BHRIJ PATEL AND ANOTHER VS- ITO 215 ITR 323 (GUJ) AND 192 ITR 619 (KOL) AND PADMAVATI JAYKISHAN TRUST AND ANOTHER VS - CWT 61 ITR 66 (GUJ). THE OBSERVATION THAT THE CREATOR OF THE TRUST SMT. REKH A KHENDERIA IS NOT RELATED TO THE BENEFICIARY SMT. CHHAYA SHAH IT WAS ARGUED IS AN IR RELEVANT OBSERVATION HAVING NO LEGAL BASIS. 5.2. ATTENTION WAS INVITED TO SECTION 164(1) AND 1 67 B TO WHICH THE AO HAS ALSO MADE REFERENCE IT WAS HIS SUBMISSION THAT THE BENEF ICIARIES ARE MINORS AND THE INCOME IS BELOW THE EXEMPTION LIMIT. 6. THE LD. DR PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 7. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD IT IS SEEN THAT IN THE FACTS OF THE CASE TH E AUTHORITIES HAVE NOT APPLIED THEIR MIND TO THE TRUST DEED AND THE TERMS AND CONDITIONS SET OUT IN THE CLAUSES. SIMILARLY THE RELEVANT PROVISIONS OF THE ACT WHICH COME INTO PLAY IN THE FACTS OF THE CASE TOWARDS WHICH ATTENTION HAS BEEN INVITED IN THE COURSE OF T HE ARGUMENTS BY THE LD. AR HAVE ALSO TO BE TAKEN INTO CONSIDERATION. IN THE AFORE M ENTIONED PECULIAR FACTS AND CIRCUMSTANCES IT IS CONSIDERED APPROPRIATE TO RESTO RE THE ISSUE BACK TO THE FILE OF THE AO WITH THE DIRECTION TO DECIDE THE SAME BY WAY OF A SPEAKING ORDER IN ACCORDANCE WITH LAW AFTER GIVING A REASONABLE OPPORTUNITY OF B EING HEARD. ACCORDINGLY GROUND NO.1 AND 2 ARE ALLOWED FOR STATISTICAL PURPOSES. 8 .ADDRESSING GROUND NO.3 IT WAS HIS SUBMISSION TH AT THIS WAS AN ISOLATED TRANSACTION AND NO OFFICE EXPENSES OR ANY OTHER MIS CELLANEOUS EXPENSES HAVE BEEN CLAIMED ON THE BASIS OF WHICH THE TAX AUTHORITIES C ONSIDER TREATING IT TO BE THE BUSINESS 4 INCOME. IT WAS ARGUED THAT THIS IS A ONE TIME TRANS ACTION. REFERRING TO EXPLANATION 2 TO SECTION 28 IT WAS SUBMITTED THAT NEITHER THERE WAS REGULARITY NOR ANY EXPENSES HAVE BEEN CLAIMED AND IT CANNOT BE TERMED TO BE A SPECUL ATIVE BUSINESS. 9. THE LD. DR PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 10. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD THE FIRST ISSUE HAS BEEN RESTORED AND IT IS CONSIDERED APPROPRIATE TO RESTORE THE SAME ISSUE ALSO BACK TO THE FILE OF THE AO TO TAKE INTO CONSIDERATION THE RELEVANT PROVISIONS OF THE ACT AND LEGAL PRINCIPLES. NEEDLES S TO SAY THE ASSESSEE SHALL BE AFFORDED A REASONABLE OPPORTUNITY OF BEING HEARD. T HE AO IS DIRECTED TO PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW. IN THE RESUL T GROUND NO.3 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 09.07.2010. SD/- (DIVA SINGH) JUDICIAL MEMBER DATED : 09.07.2010. RG(P.S.) COPY TO : 1. CHHAYA SHAH FAMILY TRUST C/O JAMNADAS & BROS. PVT. LTD. 1 BONFIELD LANE KOLKATA-700001. 2. I.T.O. WARD-34(3) KOLKATA 3. CIT(A)-XX KOLKATA 4. CIT KOLKATA 5. D. R. ITAT KOLKATA TRUE COPY BY ORDER ASSTT. REGISTRAR I.T.A.T. KOLKATA 5