FLOROSCENT SECURITIES LTD, MUMBAI v. ITO 10(3)(1), MUMBAI

ITA 6545/MUM/2010 | 2007-2008
Pronouncement Date: 23-10-2013 | Result: Dismissed

Appeal Details

RSA Number 654519914 RSA 2010
Assessee PAN AAACF4429M
Bench Mumbai
Appeal Number ITA 6545/MUM/2010
Duration Of Justice 3 year(s) 1 month(s) 16 day(s)
Appellant FLOROSCENT SECURITIES LTD, MUMBAI
Respondent ITO 10(3)(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 23-10-2013
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted F
Tribunal Order Date 23-10-2013
Date Of Final Hearing 10-09-2013
Next Hearing Date 10-09-2013
Assessment Year 2007-2008
Appeal Filed On 06-09-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH MUMBAI BEFORE SHRI D. MANMOHAN VICE PRESIDENT AND SHRI D. KARUNAKARA RAO ACCOUNTANT MEMBER ITA NO. 6545/MUM/2010 (ASSESSMENT YEAR: 2007-08) M/S. FLOROSCENT SECURITES LTD. INCOME TAX OFFICER - 10(3)(1) SHOP NO. 3&4 SAI SMRUTI AAYAKAR BHAVAN M.K. ROAD SHANKAR GOPAL JOSHI MARG VS. MUMBAI 400020 MULUND (W) MUMBAI 400080 PAN - AAACF4429M APPELLANT RESPONDENT APPELLANT BY: NONE RESPONDENT BY: SHRI D. PRABHAKAR REDDY DATE OF HEARING: 10.09.2013 DATE OF PRONOUNCEMENT: 23.10.2013 O R D E R PER D. MANMOHAN V.P. THIS IS AN APPEAL FILED AT THE INSTANCE OF THE ASSE SSEE AND IT PERTAINS TO A.Y. 2007-08. 2. THE ONLY GROUND URGED BEFORE US IS WITH REGARD TO E LIGIBILITY TO CLAIM THE BENEFIT OF CARRY FORWARD AND SET OFF OF THE LOS SES PERTAINING TO A.Y. 2003- 04 AND A.Y. 2004-05 AGAINST THE BUSINESS PROFIT FOR THE YEAR UNDER CONSIDERATION. 3. THE CASE WAS POSTED ON 23.05.2012 ON WHICH DATE THE ASSESSEE REQUESTED FOR ADJOURNMENT AND ACCORDINGLY THE CASE WAS ADJOURNED TO 24.07.2012 AND AS AND WHEN FRESH DATE IS GIVEN THE SAME IS ANNOUNCED BY DISPLAYING THE SAME ON THE NOTICE BOARD. FINALLY TH E CASE WAS POSTED FOR HEARING ON 10.09.2013 ON WHICH DATE NONE APPEARED O N BEHALF OF THE ASSESSEE. WE THEREFORE PROCEEDED TO DISPOSE OF THE APPEAL E XPARTE QUA ASSESSEE. 4. THE FACTS IN SHORT ARE THAT THE ASSESSEE COMPANY IS A DEALER IN SHARES AND SECURITIES FOR THE YEAR UNDER CONSIDERATION. IT DECLARED TOTAL INCOME OF ` 19 00 000/- WHICH WAS SUBSEQUENTLY REVISED BY DECLA RING TOTAL INCOME AT ITA NO. 6545/MUM/2010 M/S. FLOROSCENT SECURITES LTD. 2 ` 7 34 068/-. THE CASE WAS TAKEN UP FOR SCRUTINY WHER EIN THE AO NOTICED THAT THE ASSESSEE CLAIMED SET OFF OF CARRIED FORWAR D LOSSES OF THE ASSESSMENT YEARS 2003-04 AND 2004-05 WHICH IS NOT PERMISSIBLE . DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY EARNED SPE CULATION INCOME OF ` 28 66 219/-. ACCORDING TO THE AO THE BROUGHT FORWAR D BUSINESS LOSS CANNOT BE SET OFF AGAINST THE SPECULATION INCOME EARNED IN THIS YEAR. AS PER THE PROVISO TO SECTION 73 OF THE ACT ONLY SPECULATION L OSS CAN BE SET OFF AGAINST SPECULATION INCOME. 5. BEFORE THE FIRST APPELLATE AUTHORITY IT WS CONTENDE D ON BEHALF OF THE ASSESSEE COMPANY THAT THOUGH THE INCOME WAS DECLARE D AS BUSINESS INCOME BUT THE FACT REMAINS THAT THE EXPENDITURE WAS MUCH MORE AND UNDISPUTEDLY THE ASSESSEE WAS CARRYING ON THE BUSINESS OF PURCHA SE AND SALE OF SHARES; THUS BY VIRTUE OF EXPLANATION TO SECTION 73 OF THE ACT PURCHASE AND SALE OF SHARES OF OTHER COMPANIES IT WOULD BE DEEMED TO BE SPECULATION BUSINESS AND HENCE LOSSES WHICH WERE CARRIED FORWARD SHOULD BE TREATED AS SPECULATION LOSS. CONSEQUENTLY THE SAME SHOULD BE A LLOWED TO BE SET OFF AGAINST CURRENT YEARS SPECULATION PROFIT. 6. THE LEARNED CIT(A) REJECTED THE CONTENTION OF THE A SSESSEE ON THE GROUND THAT THE ASSESSEE ITSELF TREATED THE LOSS AS BUSINESS LOSS IN ASSESSMENT YEARS 2003-04 AND 2004-05 AND HENCE IT C ANNOT NOW BE TREATED AS SPECULATION LOSS. THE OPERATIVE PORTION OF THE O RDER OF THE FIRST APPELLATE AUTHORITY IS AS UNDER: - 2.4 I HAVE CONSIDERED THE FACTS OF THE CASE PERUSED TH E ASSESSMENT ORDER AND SUBMISSION MADE BY THE APPELLA NT AND ALSO DISCUSSED THE CASE WITH THE A/R OF THE APPELLA NT. THE A.O. HAS NOT ALLOWED BROUGHT FORWARD BUSINESS LOSS OF A. Y. 2003-2004 AND 2004-2005 TO BE SET OFF OF AGAINST SPECULATION INCO ME OF THE CURRENT YEAR SINCE AS PER PROVISIONS OF SEC. 73 SPECULATION INCO ME CAN BE SET OFF ONLY AGAINST SPECULATION LOSS. BEFORE ME IT WAS SUBMITT ED THAT IN A.Y. 2002- 2003 THERE WAS PROFIT FROM PURCHASE AND SALE OF SHA RES AND MAJOR ACTIVITY OF THE APPELLANT IN THAT YEAR WAS TRADING IN SHARES AND THERE WAS NOMINAL BROKERAGE INCOME. IT WAS ALSO FURTHER C LAIMED THAT BULK OF THE EXPENSES HAD A DIRECT NEXUS TO SHARE TRADING BU SINESS. IT WAS CLAIMED THAT THE EXPENDITURE OF RS.20 LACS HAS TO B E ATTRIBUTED TO BUSINESS INCOME AND THUS THE NET LOSS PERTAINED TO SHARE BUSINESS ONLY AND HENCE IT WOULD PARTAKE THE CHARACTER OF SPECULA TION LOSS. HOWEVER I DO NOT AGREE WITH THE ANALOGY PUT FORWARD BY THE AP PELLANT. FROM THE P ITA NO. 6545/MUM/2010 M/S. FLOROSCENT SECURITES LTD. 3 & L A/C. FOR A.Y. 2003-2004 IT IS NOTED THAT THE B ROKERAGE INCOME SHOWN IS RS.2 06 185/- AND THE RATE OF BROKERAGE IS 0.5% TO 1.00%. THUS THE TURNOVER OF THE APPELLANT IN ANY CASE WOU LD BE MORE THAN RS.4 CRORES. THUS THE ENTIRE EXPENDITURE OF RS.22 LACS CANNOT BE ATTRIBUTED TO THE TRADING BUSINESS ONLY AND HENCE WITHOUT PROPER APPORTIONMENT OF THE EXPENSES THE APPELLANTS CLAIM OF ALL THE SHAR E TRADING INCOME TO BE SPECULATING LOSS IS FAR FETCHED. SIMILAR IS THE POS ITION OF A.Y. 2004-2005. THE APPELLANT HAS ALSO RELIED UPON THE EXPLANATION TO SECTION 73. IN THE SAID SECTION THE DEEMING PROVISION CAN BE INVOKED O NLY TO THE EXTENT TO WHICH THE BUSINESS CONSISTS OF PURCHASE AND SALE OF SUCH SHARES. AS DISCUSSED ABOVE THE APPELLANT HAS NOT PRODUCED ANY APPORTIONMENT OF TOTAL EXPENSES DEBITED TO THE P & L A/C. TO SUPPORT ITS CLAIM THAT THERE WAS A LOSS WHICH IS ATTRIBUTABLE TO THE SHARE TRADI NG BUSINESS ONLY. HENCE THE EXPLANATION TO SECTION 73 IS NOT APPLICA BLE TO THE FACTS OF THE APPELLANTS CASE. THE APPELLANT HAS ALSO RELIED UPO N THE JUDGEMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF LOKMAT NEW S PAPER (SUPRA). HOWEVER THE FACTS OF THAT CASE ARE DISTINGUISHABLE AS COMPARED TO THE CASE OF THE APPELLANT. IN THE CASE OF LOKMAT NEWS P APER THERE WAS A CLEAR B/F SPECULATIVE LOSS OF RS.27.61 LACS FROM A. Y. 1996-1997 WHICH WAS SET OFF AGAINST SPECULATIVE INCOME OF A.Y. 2003 -04. FURTHER THE A.O. DID NOT TREAT THE INCOME WHICH AROSE FROM THE SALE OF SHARES AS INCOME FROM SPECULATIVE BUSINESS ON THE GROUND THAT THE AS SESSEE HAD SETTLED ITS TRANSACTION OF SALE AND PURCHASE OF SHARES THROUGH PHYSICAL DELIVERY. THUS THE RATIO OF THE JUDGEMENT IS NOT APPLICABLE TO THE FACTS OF THE APPELLANTS CASE. THE OTHER CASE LAWS RELIED UPON B Y THE APPELLANT ARE ALSO BASED ON DIFFERENT SET OF FACTS. FURTHER IN A .Y. 2006-07 VIDE MY ORDER NO.CIT(A)-22/ITO-10(3)(I)/IT.348/2009-10 DATE D 01.01.2010 ON IDENTICAL FACTS IT WAS HELD THAT THE APPELLANT ITSE LF HAS SHOWN THE LOSS AS BUSINESS LOSS IN A.Y. 2003-2004 AND 2004-2005 AND T HERE WAS NO SPECULATIVE LOSS. IN VIEW OF THESE FACTS I AM OF T HE CONSIDERED OPINION THAT THE A.O. WAS JUSTIFIED IN NOT ALLOWING SET OFF OF T HE BUSINESS LOSS OF EARLIER YEAR AGAINST SPECULATIVE INCOME OF THE CURRENT YEAR WHICH IS UPHELD. AGGRIEVED ASSESSEE IS IN APPEAL. 7. NO DOUBT THE ASSESSEE FILED PAPER BOOK CONSISTING O F 42 PAGES BUT AS PER RULE 18(6) OF THE APPELLATE TRIBUNAL RULES 196 3 DOCUMENTS THAT ARE REFERRED TO AND RELIED UPON BY THE PARTIES DURING T HE COURSE OF ARGUMENTS SHALL ALONE BE TREATED AS PART OF THE RECORD OF THE TRIBUNAL AND SINCE THE ASSESSEE HAS NOT BEEN REPRESENTED BY ANY PERSON WE DO NOT TAKE INTO CONSIDERATION THE PAPER BOOK FILED BEFORE US. 8. WE HAVE HEARD THE LEARNED D.R. AND CAREFULLY PERUSE D THE RECORD. NO EVIDENCE WAS BROUGHT ON RECORD TO SHOW THAT THOUGH THE ASSESSEE HAS DECLARED IT AS BUSINESS INCOME FOR A.Y. 2003-04 AND 2004-05 BY VIRTUE OF THE DEEMING PROVISIONS IT WOULD AMOUNT TO SPECULATI ON LOSS AND HENCE THE ITA NO. 6545/MUM/2010 M/S. FLOROSCENT SECURITES LTD. 4 ASSESSEE IS ELIGIBLE TO CARRY FORWARD AND CLAIM SET OFF AGAINST SPECULATION INCOME EARNED IN THIS YEAR. HAVING REGARD TO THE CI RCUMSTANCES OF THE CASE WE HAVE NO OTHER ALTERNATIVE BUT TO UPHOLD THE ORDE R PASSED BY THE CIT(A). 9. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD OCTOBER 2013. SD/- SD/- (D. KARUNAKARA RAO) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI DATED: 23 RD OCTOBER 2013 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 22 MUMBAI 4. THE CIT 10 MUMBAI CITY 5. THE DR F BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.