I.T.O, Ward - 8(4), Kolkata, Kolkata v. M/S. Sthavishtay Investment & Trading Co. (P) Ltd., Kolkata

ITA 66/KOL/2010 | 2004-2005
Pronouncement Date: 07-05-2010

Appeal Details

RSA Number 6623514 RSA 2010
Assessee PAN AAHSC8479D
Bench Kolkata
Appeal Number ITA 66/KOL/2010
Duration Of Justice 3 month(s) 26 day(s)
Appellant I.T.O, Ward - 8(4), Kolkata, Kolkata
Respondent M/S. Sthavishtay Investment & Trading Co. (P) Ltd., Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 07-05-2010
Appeal Filed By Department
Bench Allotted B
Tribunal Order Date 07-05-2010
Date Of Final Hearing 19-04-2010
Next Hearing Date 19-04-2010
Assessment Year 2004-2005
Appeal Filed On 12-01-2010
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL 'B BENCH : KOLKATA (BEFORE HONBLE SRI D.K.TYAGI J.M. AND HONB LE SRI B.C.MEENA A.M.) I.T.A. NO.66 /KOL/2010 ASSESSM ENT YEAR : 2004-05 ITO WARD 8(4) KOLKATA VS M /S STHAVISHTAY INVESTMENT & TRADING CO. (P) LTD. (PAN NO. AAHSC 8479 D) (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. JYOTI KUMARI. RESPONDENT BY : SRI M.P.THAR D. O R D E R PER SHRI B.C.MEENA A.M. THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) CENTRAL-II KOLKATA DATED 23.09.2009 FOR THE AS SESSMENT YEAR 2004-05. 2. GROUNDS OF APPEAL RAISED ARE AS UNDER : 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE LD. CIT(A) ERRED IN ALLOWING THE DIVIDEND INCOME { (EXEMPT U/S 10(34) } DOES NOT FORM PART OF ANY HEADS OF INCOME MENTIONED IN SE CTION 14 OF THE INCOME TAX ACT 1961. BUT IN FACT DIVIDEND INCOME ATT RIBUTABLE TO SHARES WHICH ARE HELD AS STOCK-IN-TRADE IN THE BUSINESS OF PU RCHASE AND SALE OF SHARES HAS TO BE TAKEN AS INCOME FROM BUSINESS. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED TO HOLD THAT THE A.O. HAS INCORRECTLY APPLI ED THE PROVISIONS OF EXPLANATION TO SECTION 73 AND THE LOSS IN SHARE T RADING CANNOT BE DEEMED AS SPECULATIVE LOSS AND THE PROVISIONS OF EXPLANAT ION 73ARE NOT ATTRACTED IN CASE OF THE APPELLANT BECAUSE THE GROSS TOTA L INCOME OF THE APPELLANT CONSISTS MAINLY OF INCOMES UNDER THE HEADS OTHER TH AN THE PROFIT AND GAINS OF BUSINESS & PROFESSION. BUT IN FACT AS PER EXPLANATION OF SECTION 73 OF THE I.T.ACT THE PURCHASE AND SALE O F SHARES OF OTHER COMPANIES BY THE ASSESSEE COMPANY IS DEEMED TO B E CARRYING ON A SPECULATIVE BUSINESS. 3. THE ISSUE INVOLVED IS REGARDING THE INVOKING THE PROVISIONS OF EXPLANATION TO SECTION 73 OF THE INCOME TAX ACT. THE A.O. IN VOKED THE PROVISIONS OF EXPLANATION TO SECTION 73 BY HOLDING AS UNDER : 2 THE SUBMISSION OF THE ASSESSEE HAS BEEN CAREFUL LY EXAMINED. IT IS NOT A FACT THAT DIVIDEND INCOME IS ALWAYS TO BE TREATE D AS INCOME FROM OTHER SOURCES AS SPECIFIED U/S 56(2)(I) OF THE I.T.AC T. IN FACT DIVIDEND INCOME ATTRIBUTABLE TO SHARES ARE HELD AS STOCK-IN-TRADE I N THE BUSINESS OF PURCHASE AND SALE OF SHARES HAS TO BE TAKEN AS INCOME FROM B USINESS AND NOT AS INCOME FROM OTHER SOURCE. THE HONBLE MUMBAI TR IBUNAL HAS TAKEN THIS DECISION IN THE CASE OF D.C.I.T. VS AAKROSH INV ESTMENT & LEASING PRIVATE LIMITED (2004) [90 ITD 287] IN VIEW OF THE APEX COURTS JUDGMENT IN WESTERN STATES TRADING COMPANY PRIVATE LIMITED V S CIT (1971) [80 ITR 21]. ACCORDINGLY THE ASSESSEES CASE CLEARL Y COMES UNDER THE PURVIEW OF EXPLANATION TO SECTION 73 AND NOT I N THE EXCLUDED CATEGORY THEREOF. 4. THE CIT(A) GRANTED THE RELIEF BY HOLDING AS UN DER : 1. IN THESE GROUNDS THE APPELLANT HAS OBJECTED TO THE ACTION OF THE ASSESSING OFFICER IN APPLYING THE PROVISIONS OF EXPLN. TO SEC .73 AS THE GROSS TOTAL INCOME OF THE APPELLANT COMPANY CHARGEABLE TO TAX UNDER THE H EADS INCOME FROM HOUSE PROPERTY INCOME FROM OTHER SOURCE AND INCOME F ROM CAPITAL GAINS EXCEEDED THE LOSS IN THE SHARE BUSINESS AND IN RELYING ON TH E DECISION OF THE APEX COURT IN THE CASE OF WESTERN STATES TRADING CO. PVT. LTD. (1 971) 80-ITR-21 WHICH HAD NO RELEVANCE IN THE FACTS OF THE APPELLANTS CASE. 2. ASSESSING OFFICER HAS STATED IN THE ASSESSMENT O RDER THAT THE DIVIDEND INCOME OF RS 10 60 079 WHICH IS EXEMPT U/S 10(34) OF THE I.T. ACT SHOULD ALSO BE CONSIDERED AS PART OF BUSINESS INCOME FOR THE PURPOSE OF GROS S TOTAL INCOME UNDER EXPLANATION TO SECTION 73 OF THE I.T.ACT. ASSESSING OFFICER FURTHER STATED THAT EVEN IF THE INTEREST ON INCOME TAX REFUND OF .RS 2 82 73 0 IS EXCLUDED FROM BUSINESS INCOME AND TAXED UNDER THE HEAD INCOME FROM OTHER S OURCES THE INCLUSION OF DIVIDEND INCOME IN BUSINESS INCOME WILL MAKE THE BU SINESS INCOME MAIN CONSTITUENT IN GROSS TOTAL INCOME IN CASE OF APPELL ANT FOR THE PURPOSE OF EXPLANATION TO SECTION 73 AND THEREFORE THIS EXPLAN ATION WILL APPLY. 3. APPELLANT HAS SUBMITTED THAT IF THE INCOME OF TH E APPELLANT CHARGEABLE TO TAX V UNDER THE HEAD INCOME FROM HOUSE PROPERTY INCOME FROM OTHER SOURCE AND INCOME FROM CAPITAL GAINS EXCEEDED THE INCOME FROM BUSINESS THE EXPLN TO SEC 73 IS NOT APPLICABLE. APPELLANT SUBMITTED THAT IN A LETTER DTD DECEMBER 12 2008 TO ASSESSING OFFICER APPELLANT HAD SHOWN THAT THE INCOME FROM HOUSE PROPERTY AND INCOME FROM OTHER SOURCES AGGREGATE D TO RS 13 74 394/- WHEREAS THE LOSS IN SHARE TRANSACTIONS WAS OF RS 12 16 219/ - AND THEREFORE THE APPELLANT WAS NOT COVERED BY THE EXPLN TO SEC 73. APPELLANT SUBMI TTED THAT AS PER THIS EXPLANATION THE DEEMING OF LOSS IN PURCHASE AND SAL E OF SHARES AS SPECULATION LOSS WILL NOT APPLY IF ANY OF THE TWO CONDITIONS ARE SAT ISFIED IE. THE GROSS TOTAL INCOME CONSISTS MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS INTEREST ON SECURITIES INCOME FROM HOUSE PROPERTY CAPITAL GAINS AND INCOME FROM OTHER SOURCES OR THE ASSESSEE IS A COMPANY THE PRINCIP AL BUSINESS OF WHICH IS THE BUSINESS OF BANKING OR THE GRANTING OF LOANS AND AD VANCES. APPELLANT FURTHER SUBMITTED THAT IN THE APPELLANTS CASE THE FIRST C ONDITION IS SATISFIED IN AS MUCH AS THE INCOME FROM HOUSE AND THE INCOME FROM OTHER SOURCES TOGETHER WAS HIGHER THAN THE LOSS IN SHARE TRANSACTIONS. THE BREAK-UP O F THE FIGURES WAS GIVEN AS UNDER: INCOME FROM HOUSE PROPERTY .. RS. 10 91 664/- INCOME FROM OTHER SOURCES .. RS. 2.82.730/ RS. 13 74 394/- 3 APPELLANT SUBMITTED THAT IN THE ORIGINAL ASSESSMENT THE ASSESSING OFFICER DID NOT SEPARATE OUT THE INTEREST ON INCOME TAX REFUNDS AND ASSESSED THE ENTIRE INCOME UNDER THE HEAD BUSINESS THROUGH INADVERTENCE BUT T HAT WILL NOT CHANGE THE POSITION IN LAW BECAUSE INTEREST ON 1.T. REFUND IS ASSESSAB LE UNDER THE HEAD INCOME FROM OTHER SOURCES ONLY. THEREFORE AGAINST THE AGGREGAT E OF INCOME FROM HOUSE PROPERTY AND INCOME FROM OTHER SOURCES OF RS 13 74 394/- THE LOSS FROM SHARE TRANSACTIONS WAS OF RS. 12 16 219/- ONLY AND THEREF ORE THE EXPLANATION TO SEC.73 HAD NO APPLICATION IN THE FACTS OF THE APPELLANTS CASE. 3.2 APPELLANT FURTHER SUBMITTED THAT THE STAND OF ASSESSING OFFICER THAT THE INCOME FROM DIVIDEND WAS ALSO A BUSINESS INCOME IS INCORRECT BECAUSE THE DIVIDEND INCOME BEING EXEMPT FROM TAX U/S.L0(34) D OES NOT ENTER THE COMPUTATION OF INCOME AND DOES NOT FORM PART OF GROSS TOTAL IN COME THEREFORE THE VERY CONSIDERATION OF THE SAME FOR THE PURPOSE OF DETERM INING THE AMOUNT OF PROFIT OR LOSS IN SHARE TRANSACTIONS IS BASICALLY FALLACIOUS. APPELLANT SUBMITTED ANOTHER ARGUMENT THAT ASSUMING BUT NOT ADMITTING THAT THE D IVIDEND INCOME IS ALSO TO BE CONSIDERED FOR THE PURPOSE OF DETERMINING THE GROSS TOTAL INCOME THEN ALSO IT WILL GO IN FAVOUR OF THE APPELLANTS CASE BECAUSE THE DI VIDEND HAVING BEEN RECEIVED IN RESPECT OF THE SHARES TRADED BY THE APPELLANT THE LOSS IN SHARE TRANSACTIONS WILL GET REDUCED BY THE AMOUNT OF DIVIDEND AND IN THAT EVEN T THE ACTUAL LOSS IN SHARE TRANSACTIONS WILL GET REDUCED TO RS 1 71 549/- ONL Y (LOSS IN SHARE TRANSACTIONS RS 12 16 219/- MINUS DIVIDEND RS 10 44 670/-). APPELLA NT FURTHER SUBMITTED THAT IF THE DIVIDEND HAD NOT BEEN EXEMPT IT HAD TO BE ASSESSED. UNDER THE SPECIFIC PROVISION OF SEC 56(2)(I) WHICH PROVIDES THAT THE DIVIDEND WILL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD INCOME FROM OTHER SOURCES ONLY. A PPELLANT SUBMITTED THAT THE RELIANCE OF ASSESSING OFFICER ON THE DECISION OF TH E HONBLE SUPREME COURT IN THE CASE OF WESTERN STATE TRADING CO PVT. LTD REPORTED IN 80-ITR-21 IS NOT RELEVANT BECAUSE IN THAT CASE THE ISSUE DECIDED BY THE HONB LE COURT WAS UNDER THE INDIAN INCOME ACT 1922 AND THE QUESTION FOR CONSIDERATION WAS WHETHER THE BUSINESS LOSS CARRIED FORWARD COULD BE SET-OFF AGAINST THE INCOME FROM DIVIDEND EARNED ON SHARES HELD IN THE TRADING ACCOUNT THE HONBLE COUR T HAD NO OCCASION TO CONSIDER THE HEAD UNDER WHICH THE DIVIDEND WAS TO BE ASSESSE D APPELLANT SUBMITTED THAT IN THE YEAR UNDER CONSIDERATION THE DIVIDEND INCOME WA S EXEMPT FROM CHARGEABILITY OF TAX UNDER CHAPTER III OF THE I T ACT AND THEREFO RE THE VERY PROPOSITION OF THE ASSESSING OFFICER IS HYPOTHETICAL AND HAS NO RELEVA NCE IN THE FACTS OF APPELLANTS CASE. 4. 1 HAVE GONE THROUGH THE ASSESSMENT ORDER AND S UBMISSIONS OF APPELLANT. THE FACTS OF THE CASE SHOW THAT APPELLANT HAD INCOME AS UNDER: 1NCOM FROM HOUSE PROPERTY .. RS. 10 91 6 64/- INCOME FROM OTHER SOURCES .. RS. 2 8 2 730/ INCOME FROM BUSINESS RS. 12 16 219/- (LOSS) INCOME FROM DIVIDEND RS. 10 44 670/- (EXEMPT U/S 10(34) OF I.T.ACT) HONBLE SPECIA[ BENCH OF ITAT- MUMBAI-H BENCH IN TH E CASE OF ACIT VS CONCORD COMMERCIALS (P.) LTD (95 LTD 117) AFTER AN ALYZING ALL THE DECISIONS OF APEX COURT INCLUDING THE DECISION IN CASE OF WESTE RN STATES TRADING CO. PVT. LTD. (1971) - 80-ITR- 21 HELD IN PARA 50 OF THEIR ORDE R THAT: 50. THERE ARE NO MATERIALS ON RECORD TO SHOW THAT THE ASSESSEE-COMPANY DID MAKE LOSS IN THE SHARE TRADING ACTIVITIES IN ORDER TO RE DUCE THE TAX INCIDENCE. IN RESPECT OF THE CONTENTION REGARDING GROSS TOTAL INCOME SECTI ON 73 DOES NOT PROVIDE FOR ANY SPECIAL TREATMENT. THE SUPREME COURT HAS HELD IN CI T V. VENKATESWARA HATCHERIES (P.) LTD. [1999] 237 ITR 174 THAT THE SAME WORD OCC URRING MORE THAN ONCE IN THE ACT SHOULD GENERALLY BE GIVEN THE SAME MEANING BUT THE CONTEXT MAY INDICATE THE CONTRARY LEGISLATIVE INTENTION. THERE IS NO SUCH IN DICATION IN SECTION 73 AND THE EXPLANATION THE RETO. THEREFORE THE MEANING OF THE EXPRESSION GROSS TOTAL INCOME HAS TO BE CONSTRUED AS GIVEN IN SECTION 80B (5). 4 HONBLE SPECIAL BENCH HAS HELD THAT THE GROSS TOTA L INCOME UNDER EXPLANATION TO SECTION 73 HAS NO DIFFERENT MEANING THAT ITS MEA NING U/S 80B(5) OF THE LT.ACT. THE PROVISIONS OF SECTION 80B. ARE AS UNDER: 80B(5) GROSS TOTAL INCOME MEANS THE TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT . BEFORE MAKING ANY DEDU CTION UNDER THIS CHAPTER ; TOTAL INCOME IS DEFINED IN SUBSECTION (45) OF SECTI ON 2 OF LT ACT AND IS COMPUTED U/S 14 OF THE I T.ACT AND THESE PROVISIONS ARE AS U NDER: 2(45) TOTAL INCOME MEANS THE TOTAL AMOUNT OF INC OME REFERRED TO IN SECTION 5 COMPUTED IN THE MANNER LAID DOWN IN THIS ACT 14. HEADS OF INCOME. SAVE AS OTHERWISE PROVIDED B Y THIS ACT ALL INCOME SHALL FOR THE PURPOSES OF CHARGE OF INCOME-TAX AND COMPUTATION OF TOTAL INCOME BE CLASSFIED UNDER THE FOLLOWING HEADS OF INCOME: - A - SALARIES. C - INCOME FROM HOUSE PROPERTY. D - PROFITS AND GAINS OF BUSINESS OR PROFESSIO N. E - CAPITAL GAINS. F - INCOME FROM OTHER SOURCES. THE DIVIDEND INCOME IS EXEMPT U/S 10(34) OF I.T.ACT AND IT DOES NOT FORM PART OF ANY HEADS OF INCOME MENTIONED IN SECTION 4 OF THE I .T.ACT. THEREFORE THE PROPOSAL OF ASSESSING OFFICER.THAT THE EXEMPT DIVIDEND SHOUL D BE INCLUDED UNDER PROFITS AND GAINS OF BUSINESS OR PROFESSION IS NOT A CORRE CT PROPOSITION IN VIEW OF THE POSITION OF LAW AND THE DECISION OF HONBLE SPECIAL BENCH OF ITAT IN THE CASE OF ACIT VS CONCORD COMMERCIALS (P.) LTD (95 LTD 117) . WITHOUT CONSIDERING THE DIVIDEND UNDER ANY HEADS OF INCOME THERE IS NO DOU BT THAT THE BUSINESS LOSS OF RS 12 16 219/- IS LESS THAN THE INCOMES UNDER THE REMA INING HEADS OF INCOME WHICH IN PRESENT CASE ARE INCOME FROM HOUSE PROPERTY OF R S. 10 91 664/- AND INCOME FROM OTHER SOURCES OF RS. 2 82 730/ TOTALING RS. 13 74 394/-. FURTHER APPELLANT MUST HAVE SPENT SOME EXPENDITURE IN EARNING THE DIV IDEND INCOME OF RS. 10 44 670/- WHICH APPELLANT SHOULD NOT HAVE APPROPR IATED TOWARDS DEDUCTIBLE BUSINESS EXPENDITURE. APPELLANT HAS CALCULATED THE EXPENDITURE OF RS. 12 822/- U/R 8D OF I.T.RULES READ WITH SECTION 14A OF THE 1.T.AC T UNDER PROTEST. IF THIS EXPENDITURE IS APPROPRIATED TOWARDS THE DIVIDEND IN COME THE BUSINESS LOSS WILL FURTHER REDUCE TO RS 12 16 219/-(-) 12 822/- = RS. 12 03 397/- WHICH IS LESS THAN THE INCOMES UNDER THE OTHER HEADS F INCOME TOTALIN G RS. 13 74 394/- THEREFORE THE PROVISIONS OF EXPLANATION 73 ARE NOT ATTRACTED IN C ASE OF APPELLANT BECAUSE THE GROSS TOTAL INCOME OF APPELLANT CONSISTS MAINLY OF INCOMES UNDER THE HEADS OTHER THAN THE PROFITS AND GAINS OF BUSINESS AND PROFESS ION. I THEREFORE HOLD THAT ASSESSING OFFICER HAS INCORRECTLY APPLIED THE PROVI SIONS OF EXPLANATION TO SECTION 73 AND THE LOSS IN SHARE TRADING CANNOT BE DEEMED A S SPECULATIVE LOSS. 5.. AFTER HEARING BOTH THE SIDES AND CONSIDERING THE FACTS OF THE CASE WE FIND THAT THE REVENUES STAND THAT EXEMPTED DIVIDEN D INCOME U/S 10(34) OF THE I.T.ACT SHOULD FORM PART OF THE PROFIT & GAINS FROM BUSINESS OF PROFESSION IS NOT JUSTIFIED. THE DIVIDEND INCOME IS EXEMPTED U/S 10(34) OF THE I.T.ACT AND IT WILL NOT FORM PART OF THE GROSS TOTAL INCOME. I F THE DIVIDEND INCOME IS NOT EXEMPTED UNDER THE PROVISIONS OF SECTION 10(34) O F THE INCOME TAX ACT THEN ALSO IT SHALL BE TAXED AS INCOME FROM OTHER SOUR CES IN VIEW OF THE PROVISIONS OF SECTION 56(1)(I) OF THE I.T.ACT. AFTER HOLDING S O THE STATISTICAL MATRIX OF THE CASE SHOWS THAT THE PROVISIONS OF THE EXPLANATION TO SE CTION 73 ARE NOT APPLICABLE IN 5 THE ASSESSEES CASE AS THE GROSS TOTAL INCOME OF THE ASSESSEE CONSISTS MAINLY OF INCOMES UNDER THE HEADS OTHER THAN THE PROFITS AN D GAINS OF BUSINESS AND PROFESSION. THEREFORE WE SUSTAIN THE ORDER OF THE CIT(A) AND DISMISS THE REVENUES APPEAL. ORDER PRONOUNCED IN THE OPEN COURT ON 07.05.2010 SD/- SD/- (D.K.TYAGI) (B.C.MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 07.05.2010 COPY FORWARDED TO :- 1) ITO WARD 8(4) KOLKATA. 2) M/S STHAVISHTAY INVESTMENT & TRADING CO. (P) LTD. 53B MIRZA GALIB STREET KOLKATA. 3) CIT(A) KOLKATA. 4) CIT KOLKATA. 5) D.R. ITAT KOLKATA. BY ORDER ASSISTANT REGISTRAR I.T.AT. KOLKATA. BCD