ACIT 11(2), MUMBAI v. ASHOK KUMAR GUPTA, MUMBAI

ITA 6677/MUM/2012 | 2009-2010
Pronouncement Date: 31-07-2015 | Result: Dismissed

Appeal Details

RSA Number 667719914 RSA 2012
Assessee PAN AACPG9453B
Bench Mumbai
Appeal Number ITA 6677/MUM/2012
Duration Of Justice 2 year(s) 8 month(s) 28 day(s)
Appellant ACIT 11(2), MUMBAI
Respondent ASHOK KUMAR GUPTA, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2015
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 31-07-2015
Date Of Final Hearing 23-07-2015
Next Hearing Date 23-07-2015
Assessment Year 2009-2010
Appeal Filed On 02-11-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A MUMBAI BEFORE SHRI G.S. PANNU ACCOUNTANT MEMBER AND SHRI SANJAY GARG JUDICIAL MEMBER ITA NO.6677/M/2012 ASSESSMENT YEAR: 2009-10 ASSTT. COMMISSIONER OF INCOME-TAX 11(2) ROOM NO.479 4 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400020 VS. SHRI ASHOK KUMAR GUPTA 401 DHEERAJ DHAN ST. ALEXIOUS ROAD BANDRA (WEST) MUMBAI 400 050 PAN: AACPG 9453B (ASSESSEE) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI HIRO RAI A.R. REVENUE BY : SHRI VIKRAM BATRA D.R. DATE OF HEARING : 23.07.2015 DATE OF PRONOUNCEMENT : 31.07.2015 O R D E R PER SANJAY GARG JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 07.08.2012 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2009-10. 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF A PPEAL: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW WHETHER THE LD.CIT(A) IS RIGHT IN HOLDING THAT THE LOSS INCURRE D ON SHARES PURCHASED THROUGH STOCK EXCHANGE AUCTION AMOUNTS TO SHORT TERM CAPITA L LOSS AS AGAINST SPECULATION LOSS HELD BY THE ASSESSING OFFICER AND CONSEQUENTLY IN DIRECTING THE A.O. TO SET OFF THE SHORT TERM CAPITAL LOSS OF RS. 2 75 00 981/- AGAINST THE SHORT TERM CAPITAL GAIN. 2. THE ASSESSEE PRAYS THAT THE ORDER OF THE CIT(APP EALS) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE R ESTORED. 3. THE ASSESSEE CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ITA NO.6677/M/2012 SHRI ASHOK KUMAR GUPTA 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E ACQUIRED 6 01 200 SHARES AS PART OF BONUS SHARES ISSUED BY THE COMPAN Y ON 22/08/2008. IT WAS CLAIMED THAT THE ASSESSEE SOLD 3 50 000 SHARES FOR A CONSIDERATION OF RS.5 02 06 090/-. HOWEVER SINCE THE SHARES COULD NOT B E DELIVERED HENCE THE SAME WERE AUCTIONED FOR RS.5 73 86 000/-. FURTHER 8 00 000 SHARES WERE SOLD ON 31 ST OCTOBER 2008 FOR RS.10 83 45 674/- FOR WHICH AGAIN DELIVERY COULD NOT BE GIVEN AND THE AUCTIONED AMOUNT PAID WAS AT RS.12 69 44 000/. THE ASSESSEE CLAIMED DEDUCTION OF RS. 2 75 00 981/- ON ACCOUNT OF AUCTION CHARGES AND DELAYED PAYMENTS AS SHORT TERM CAPITAL LOSS. THE AO NOTED THAT THE SHARES SOLD VIDE TRANSACTION DONE ON 28/10/2008 AND 31/10/2008 WERE NOT ACTUALLY DELIVERED TO THE PURCH ASER BUT THE TRANSACTION WAS SETTLED THROUGH AUCTION. HE THEREFO RE OBSERVED THAT ACTUAL DELIVERY AS PER CONTRACT NOTE HAD NOT TAKEN PLACE IN RESPECT OF THESE TWO TRANSACTIONS. THE AO OBSERVED THAT SECTI ON 43(5) OF THE ACT SAYS THAT ' SPECULATIVE TRANSACTION 'CLEARLY MEANS THE TRANSACTION IN WHICH A 'CONTRACT' FOR THE PURCHASE OR SALE OF ANY COMMODITY INCLUDING STOCKS AND SHARES IS PERIODICALLY OR ULT IMATELY SETTLED OTHERWISE THAN BY THE ACTUAL DELIVERY OR TRANSFER OF THE COMMODITY OR SCRIP'S. HE FURTHER OBSERVED THAT IN THIS CASE THE SHARES WHICH WERE DELIVERED TO THE PURCHASERS WERE NOT SHARES OWNED BY THE ASSESSEE. THE CONTRACT FOR SELLING WAS MADE FOR SHARES HELD BY THE ASSESSEE WHEREAS TH E DELIVERY WAS MADE OF SOME OTHERS SHARES THAT WERE NOT HELD BY THE ASSESS EE BUT PURCHASED FROM THE MARKET BY AND THROUGH STOCK EXCHANGE. THE DEMAT ACC OUNT ALSO SHOWED THAT THE SHARES SUPPOSED TO BE SOLD ON 29 TH OCTOBER 2008 AND 31 ST OCTOBER 2008 WERE CREDITED BACK TO THE ACCOUNT ON 31 ST OF OCTOBER 2008. THUS DELIVERY OF SHARES OWNED BY THE ASSESSE E HAD NOT BEEN DONE. HE THEREFORE HELD THAT THE SAID TRANSACTIONS WERE S PECULATIVE TRANSACTIONS WITHIN THE MEANING OF SECTION 43(5) OF INCOME TAX A CT. HE ACCORDINGLY TREATED LOSS OF RS.2 75 00 981/- AS SPECULATION LOS S WHICH WAS NOT ALLOWED TO ITA NO.6677/M/2012 SHRI ASHOK KUMAR GUPTA 3 BE SET OFF AGAINST SHORT TERM CAPITAL GAINS. 4. IN APPEAL BEFORE THE CIT(A) THE LD AR OF THE A SSESSEE SUBMITTED THAT THE ASSESSEE HAD SHOWN SHORT TERM CAPITAL GAINS OF RS.5 49 66 752/- ON SALE OF SHARES OF HDIL AFTER CLAIMING SHORT TERM CAPITAL LO SS OF RS.2 75 00 981/- ON SALE OF HDIL SHARES WHEREIN DELIVERY WAS SETTLED I N AUCTION. THE ASSESSEE WAS HOLDING 29 55 600 SHARES OF HDIL ON 27.10.08 IN THE DEMAT ACCOUNT WITH THE DEPOSITORY M/S. RELIGARE SECURITIES LTD. THE A SSESSEE HAD SOLD 3 50 000 SHARES ON 29/10/2008 FOR AN AMOUNT OF RS.5 02 06 09 0 AND 8 00 000 SHARES ON 31/10/2008 FOR RS.10 83 45 674. HOWEVER THE ASSESSEE COULD NOT GIVE THE DELIVERY SINCE THERE WAS A DELAY IN SUBMIT TING THE INSTRUCTIONS AND /OR DELIVERY NOTES TO DEPOSITORY. SINCE THE DE LIVERY WAS NOT GIVEN BY THE ASSESSEE ON TIME THE SALE OF SHARES OF 11 50 0 00 WAS SETTLED THROUGH AUCTION AS PER NORMS OF BOMBAY STOCK EXCHANGE. ON T HIS TRANSACTIONS THE ASSESSEE HAS SUFFERED A SHORT TERM CAPITAL LOSS OF RS.2 75 00 981/-. THE LD. AR HAS FURTHER CONTENDED THAT SALE TRANSACTIONS HAD BEEN SETTLED BY WAY OF ACTUAL DELIVERY TO THE PURCHASER THROUGH STOCK EXCH ANGE AUCTION. FURTHER THE ASSESSEE WAS HOLDING THE REQUISITE NUM BER OF SHARES SOLD IN DEMAT A/C ON THE DATE OF SALE. HENCE IT WAS ALSO N OT A CASE WHERE THE ASSESSEE HAD NOT HELD ANY SHARES AND SALE TRANSACTI ONS WAS ENTERED. AS SUCH TRANSFER OF SALE OF 11 50 0000 SHARES WAS NOT A SPE CULATIVE TRANSACTIONS AND DID NOT FALL WITHIN DEFINITION OF SECTION 43(5). THE LD . AR FURTHER SUBMITTED THAT THE ULTIMATE PURCHASER OF SHARES HAD GOT THE DELIVE RY OF SHARES WHICH WERE HELD FOR AND ON BEHALF OF THE ASSESSEE THROUGH STOCK EXC HANGE PROCEDURE FROM THE MARKET AND AS SUCH THE TRANSACTIONS DID NOT FALL W ITHIN THE DEFINITION OF SPECULATION. IT WAS FURTHER CONTENDED THAT PROVISIO NS OF SECTION 43(5) DEFINES SPECULATIVE TRANSACTIONS AS SPECULATIVE TRA NSFER MEANS A TRANSFER IN WHICH CONTRACT FOR THE PURCHASE OR SALE OF ANY COMM ODITY INCLUDING STOCKS AND SHARES IS PERIODICALLY OR ULTIMATELY SETTLED O THERWISE THAN BY THE ACTUAL ITA NO.6677/M/2012 SHRI ASHOK KUMAR GUPTA 4 DELIVERY OR TRANSFER OF THE COMMODITY OR SCRIPS. SP ECULATION IN COMMISSION PARLANCE CONNOTES AN INTENTION TO GAMBLE SPECULATIVE TAKE A CHANCE OR RISK. THE INCOME-TAX ACT 1961. HOWEVER P ROVIDES A VERY SIMPLE AND OBJECTIVE TEST FOR DETERMINING WHETHER A TRANSA CTION IS A SPECULATIVE TRANSACTIONS OR NOT. UNDER THIS DEFINITION ALL THAT HAS TO BE FOUND OUT IS WHETHER THE CONTRACT WAS PERIODICALLY OR ULTIMATELY SETTLED BY ACTUAL DELIVERY TRANSFER OR OTHERWISE. ON PERUSAL OF SECTION 43(5) IT IS SEEN THAT THERE IS NO REFERENCE FOR REQUIREMENT OF ACTUAL DELIVERY OR TRA NSFER OF THE COMMODITY OR THE SCRIPS BY THE ASSESSEE OR HIS AGENT BUT THE EMPHAS IS IS ON SETTLEMENT OF TRANSACTIONS OTHERWISE THAN BY THE ACTUAL DELIVERY OF THE COMMODITY OR SCRIPS. IF ULTIMATE BUYER HAS BEEN SETTLED BY AC TUAL DELIVERY OF THE COMMODITY IN TERMS OF CLAUSE 5 OF SECTION 43 THE TRANSACTIONS CANNOT BE BRANDED AS SPECULATIVE TRANSACTIONS. THUS THE DELI VERY CONTEMPLATED BY SECTION 43(5) NEED NOT BE ACTUAL DELIVERY BY THE ASSESSEE H IMSELF BUT EVEN CONSTRUCTIVE OR IMPLIED DELIVERY WOULD FALL WITHIN THE DEFINITION OF ACTUAL DELIVERY. THE AR RELIED IN THE CASE OF SRIPAL SATYP AL V ITO (2008) 217 CTR (RAJ) 337 AND C BHARAT KUMAR V DCIT (2005) 4 SOT 59 3(BANG) AND RAGHUNATH PRASAD V CIT 90 ITR 40(SC). CIT V MURARIL AL AHUJA & SONS 177 ITR 228(P&H) WHEREIN THE ASSESSEE ENTERING IN TO CO NTRACT FOR SALE OF GOODS BUT WAS UNABLE TO FULFILL THE CONTRA THEREFORE COM PENSATION WAS PAID BY WAY OF SETTLEMENT FOR BREACH OF CONTRACT I T WAS HELD THAT SUCH TRANSACTIONS DOES NOT AMOUNT SPECULATIVE TRANSFER A ND COMPENSATION IS ALLOWABLE AS BUSINESS LOSS. THE AR ALSO RELIED IN T HE CASE OF SUJATA KAPOOR V DCIT 97 TAXMAN 190 (DEL) (MAG) WHERE TAKING DELIV ERY OF SHARE BY BROKER WHO WAS AGENT OF THE ASSESSEE AMOUNTED TO TAKING DELIVERY BY THE ASSESSEE HIMSELF AND SUCH A TRANSACTIONS WOULD NOT BE CAUGHT WITHIN MISCHIEF OF DEFINITION OF SPECULATIVE TRANSACTIONS WITHIN SECTION 43(5). THE AR ARGUED THAT THE ASSESSEE HAD ACTUAL SHARES AND S OLD THEM BUT DUE TO ITA NO.6677/M/2012 SHRI ASHOK KUMAR GUPTA 5 TECHNICAL REASON DELIVERY COULD NOT BE GIVEN HE BUT DELIVERY TO THE ULTIMATE PURCHASER WAS GIVEN BY THE STOCK EXCHANGE DOES NOT AMOUNT TO SPECULATIVE TRANSACTIONS. AFTER CONSIDERING THE AB OVE SUBMISSIONS OF THE ASSESSEE THE LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE OBSERVING AS UNDER: I HAVE CONSIDERED THE FACTS AND PERUSED THE MATERI AL ON RECORD. IT IS SEEN THAT THE ASSESSEE HAS HELD 29 55 600 OF HDIL IN HIS DEMAT AC COUNT AS ON 27/10/2008 OUT OF WHICH SHARES OF 11 50 000 WERE SOLD THROUGH RELIGAR E SECURITIES DEPOSITORY. HOWEVER THE ASSESSEE COULD NOT GIVE PHYSICAL DELIVE RY OF SHARES AS PER STOCK EXCHANGE NORMS DUE DATE THEREFORE THE SHARE TO ABOVE EXTENT WERE PURCHASED BY STOCK EXCHANGE IN AUCTION AND SAME WER E DELIVERED TO THE PURCHASER. THUS THE DELIVERY OF SHARES WAS SETTLED BY STOCK EXCHANGE ON BEHALF OF THE ASSESSEE. THE PROVISIONS OF SECTION 43(5) PROVI DES THAT SPECULATIVE TRANSACTIONS MEANS WHERE THE TRANSFER WAS RESULTED OTHERWISE THAT BY PHYSICAL DELIVERY. IN THE CASE OF THE ASSESSEE IT WAS NOTICE D THAT THE ASSESSEE HAD SHARES IN HIS POSSESSION IN THE DEMAT ACCOUNT. THESE SHARES WERE SOLD THROUGH STOCK EXCHANGE AND ACCORDINGLY THE SHARE WAS CREDITED TO STOCK EXCHANGE ACCOUNT. HOWEVER DUE TO NON DELIVERY OF SHARES IN TIME THES E WERE AGAIN CREDITED IN DEMAT ACCOUNT OF THE ASSESSEE. THUS IT IS NOT A CAS E OF THE AO THAT THE ASSESSEE HAS NOT HELD SHARES OF HDIL. THE UNDERLYING ASSET W AS SHARES HELD BY THE ASSESSEE. RELIANCE IS PLACED IN THE CASE OF DCIT V RAJESH GUP TA (2008) 20 SOT 171 (MUM) WHEREIN IT WAS HELD THAT SECTION 43(5) CAN BE INVOK ED ONLY WHERE THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PURCHASE AND SC OF SHARE S AND A IS NOT ENGAGED IN THE BUSINESS OF DEALING IN SHARES CONTRACT A HAS BROKER FOR PURCHASE AND SALES OF SHARES AS ASSESSEE CANNOT TAKE DELIVERY OF SHARES FOR WANT OF FUND SALE OF SHARES BY BROKER AT LOSS RESULTING IN SHORT TERM CAPITAL LOSS WAS NO T HIT BY SECTION 43(5) AS THE SHARES DID NOT CONSTITUTE STOCK IN TRADE OF THE ASSESSEE. IN T HE CASE OF THE ASSESSEE ALSO DELIVERY OF SHARES WAS SETTLED THROUGH STOCK EXCHAN GE IN AUCTION WHICH AMOUNTS TO PASSIVE DELIVERY ON BEHALF OF THE ASSESS EE AND THEREFORE SAID TRANSACTIONS IS OUTSIDE OF THE AMBIT OF SECTION 43( 5) OF THE ACT AND IS COVERED BY PROVISO TO SECTION 43(5) OF THE ACT. THE AR ALSO RELIED IN THE CASE OF C BHARTA KUMAR V DCIT (2005) 4 SOT 593 (BANG) WHICH ALSO SUP PORTS HIS CASE IN THE LIGHT OF ABOVE FACTS IT COULD BE HELD THAT THE ASSESSEE HAS SUFFERED SHORT TERM CAPITAL LOSS ON SALE OF SHARES. HENCE THE TRANSACTIONS WAS SETTLED BY DELIVERY CANNOT BE TREATED AS SPECULATIVE TRANSACTIONS WITHIN THE MEAN ING OF SECTION 43(5) OF THE ACT. THE AR RELIED IN THE CASE OF CIT V MURARILAL AHUJA & SONS 177 ITR 228(P&H) WHEREIN THE ASSESSEE ENTERING INTO CONTRACT FOR SALE OF GOO DS BUT WAS UNABLE TO FULFILL THE CONTRACT THEREFORE COMPENSATION WAS PAID BY WAY OF SETTLEMENT FOR BREACH OF CONTRACT IT WAS HELD THAT SUCH TRANSACTION DOES NO T AMOUNT TO SPECULATIVE TRANSFER AND COMPENSATION IS ALLOWABLE AS BUSINESS LOSS. THE AR ALSO RELIED IN THE CASE OF SUJATA KAPOOR V DCIT 97 TAXMAN 190 (DEL) (MAG) WHER E TAKING DELIVERY OF SHARE BY BROKER WHO WAS AGENT OF THE ASSESSEE AMOUNTED TO TAKING DELIVERY BY THE ASSESSEE HIMSELF AND SUCH A TRANSACTIONS WOULD NOT BE CAUGHT WITHIN MISCHIEF OF DEFINITION OF SPECULATIVE TRANSACTIONS WITHIN SECTI ON 43(5). IN PRESENT CASE ITA NO.6677/M/2012 SHRI ASHOK KUMAR GUPTA 6 THE DELIVERY OF SHARES WAS DONE BY STOCK EXCHANGE ON BEHALF OF THE ASSESSE E THROUGH AUCTION AND SAME WAS DELIVERED TO THE PURCH ASER. IN THE LIGHT OF ABOVE FACTS AND JUDICIAL PRONOUNCEMENT THERE IS IMPLIED DELIVERY OF SHARES HELD BY THE ASSESSEE AND FACTS OF THE ASSESSEE CASE ARE COVERED BY THE AFORESAID DECISION. THEREFORE THE AO IS DIRECTED TO ALLOW DEDUCTION OF SHORT TERM CAPITAL LOSS OF RS. 2 75 00 981/- INCURRED ON ACCOUNT OF SALE OF SHARES TO BE SET OFF AGAINST SHORT TERM CAPITAL GAINS SHOWN BY THE ASSESSEE. THIS GROUND O F APPEAL IS THEREFORE ALLOWED. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE REVENUE HAS THUS COME IN APPEAL BEFORE US. 5. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE LD. REPRESENTATIVES OF THE PARTIES. WE FIND THAT THE LD. CIT(A) AFTER ANAL YZING THE PROVISIONS OF SECTION 43(5) AND AFTER RELYING UPON THE VARIOUS CA SE LAWS AS DISCUSSED ABOVE HAS RIGHTLY HELD THAT THE TRANSACTION OF DELIVERY O F THE SHARES THROUGH THE PRESCRIBED PROCESS OF THE STOCK EXCHANGE CAN NOT BE TERMED AS SPECULATIVE TRANSACTION. IN THIS CASE THE PURCHASE OF GOODS WA S ACTUALLY MADE AND SALE THEREOF WAS ALSO EFFECTED. THE STOCK EXCHANGE ACTED AS AGENT OF THE ASSESSEE. IT IS NOT A CASE WHERE THE TRANSACTION WAS SETTLED WIT HOUT ACTUAL DELIVERY OF THE SHARES. WE THEREFORE DO NOT FIND ANY INFIRMITY IN T HE ORDER OF THE CIT(A) ON THIS ISSUE THE SAME IS ACCORDINGLY UPHELD. 6. THE APPEAL OF THE REVENUE IS THEREFORE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 31.07.2015. SD/- SD/- (G.S. PANNU) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 31.07.2015. * KISHORE SR. P.S. COPY TO: THE ASSESSEE THE RESPONDENT THE CIT CONCERNED MUMBAI ITA NO.6677/M/2012 SHRI ASHOK KUMAR GUPTA 7 THE CIT (A) CONCERNED MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR ITAT MUMBAI.