Income Tax Appellate Tribunal - Panji
Sri Subhash Bhararia,, Visakhapatnam vs The Dcit, Circle - 3(1),, Visakhapatnam on 28 July, 2017
ITA No.709/Vizag/2013
Sri Subhash Bhararia, VSKP
आयकर अपीलीय अिधकरण,
अिधकरण िवशाखापटणम पीठ,
पीठ िवशाखापटणम
IN THE INCOME TAX APPELLATE TRIBUNAL,
VISAKHAPATNAM BENCH, VISAKHAPATNAM
ी वी.
वी दुगा राव,
ाव
याियक सद य एवं
ी िड.एस
िड एस.
एस सु
दर सह,
सह लेखा सद य के सम
BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER &
SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER
आयकर अपील सं./I.T.A.No.709/Vizag/2013
(िनधा रण वष / Assessment Year: 2009-10)
Sri Subhash Bhararia, DCIT, Circle-3(1),
Visakhapatnam Visakhapatnam
[PAN No.ABLPB6829Q]
अपीलाथ / Appellant)
(अपीलाथ याथ / Respondent)
( याथ
अपीलाथ क ओर से / Appellant by : Shri G.V.N. Hari, AR
याथ क ओर से / Respondent by : Shri S.R.S. Narayan, DR
सुनवाई क तारीख / Date of hearing : 01.06.2017
घोषणा क तारीख / Date of Pronouncement : 28.07.2017
आदेश / O R D E R
PER D.S. SUNDER SINGH, Accountant Member:
This appeal filed by the assessee is directed against order of the Commissioner of Income Tax (Apeals) [CIT(A)], Visakhapatnam in ITA no.336/11-12/JCIT(OSD),C-3(1)/VSP/2013-14 dated 12.9.2013 for the A.Y. 2009-10.
1 ITA No.709/Vizag/2013
Sri Subhash Bhararia, VSKP
2. All the grounds of the appeal are related to the assessment of Business loss in Share trading as capital gains and not allowing the set off of Brought forward business losses. The assessee is engaged in the business of transport and in share trading. For the assessment year 2009-10, the assessee filed return of income admitting business loss on account of trading in shares amounting to ` 37,87,504/- and Profit from the transportation business of ` 82,26,385/-. The assessee claimed the set off of share trading loss from the business profit of the transport business.
The assessee has incurred loss of ` 36,58,780/- in the assessment year 2008-09, which was as set off against the current years business income and furnished return of income admitting total income of ` 24,54,170/-. The case was selected for scrutiny and the assessing officer held that the loss incurred on account of sale of shares was capital gains since the assessee is not a share broker and the shares were held for long period of time and there were no derivative transactions. It was also observed by the A.O. that the assessee has used his own surplus funds for investing in shares without borrowing any money. Accordingly, the assessing officer held that the loss resulting on purchase and sale of shares as a capital loss and rejected the assessee's claim for set off of brought forward losses as well as the 2 ITA No.709/Vizag/2013 Sri Subhash Bhararia, VSKP current year's loss holding the same was capital loss. Aggrieved by the order of the A.O., the assessee went on appeal before the CIT(A). The Ld. CIT(A) dismissed the assessee's appeal as under:
5. The AR filed letter dtd.08.08.2013 in which the submission made to the AO vide letter dtd.30.11.2011 was enclosed. The AR also relied on the recent case law in CIT Vs. Gautam G.Chadha 2011 (62 DTR Del.
58). I have considered the submissions made. The details of purchase and sale of shares during the year was given as follows:-
Name of Purchase details S a l e d e t a i l s
Loss
shares
Date Cont. No.of Rate Value Date Cont. No.of Rate Value
no. shares No. share
s
1 HimachalFu 17.12.07 21951 10000 44.6 446000 4.11.08 50,304 6,000 7.08 425,000
Touristic Coo
muni- 18.12.07 64070 10000 39.25 392500
cation 19.12.07 22527 10000 43.05 430500
Ltd. 2.1.08 68842 20000 51.00 1019930
HFCL 10.1.08 71294 10000 60.94 609375
60000 2898305
6,000 -2473305
1,000 1
2 OCLI Ltd 27.12.07 66,470 1,000 321.57 1 321,574 4.11.08 50,304 50.7 -270874
50,700
1,000
Steel -206550
3 25.1.08 28,171 2,000 120.9 241,800 4.11.08 1,414 2,000 17.63 35,250
Exchange
Exchange
Uniply 21,748
4 2.1.08 24,756 3,450 49.5 170,763 4.11.08 50,304 3,450 6.3 -149016
Industries
Vardha
5 Acrae 11.2.08 13,744 8 109,929 4.11.08 50,304 13,744 3.24 44530 -65399
Total
Loss 3165143
5.1 It is seen that the AO has applied the CBDT circular No.4/2007 to determine whether the transaction is one of the capital gains or business income. It is seen that the assessee has not purchased any new shares during the year and the claim that it was involved in trading of shares is not sustainable. I find that the AO has rightly concluded that the transaction is not business in nature and would result only in capital loss. Accordingly the AO's action in not allowing the loss relating to A.Y.2008-09 and the current year on account of purchase and sale of shares to be set off against business income is justified. The appellant's ground is dismissed."
3 ITA No.709/Vizag/2013
Sri Subhash Bhararia, VSKP
3. Aggrieved by the order of the Ld. CIT(A) the assessee is in appeal before us. Appearing for the assessee, the Ld. A.R. argued that during the assessment year 2008-09, the assessee has started the share trading business and incurred loss of ` 36,58,783/- and filed the return of income on 30.9.2008 which was accepted by the department. The books of accounts were duly audited by the statutory auditor and in form 44AB, it was clearly mentioned that the business as 'Trading in shares'. The assessee purchased the shares and sold with clear intention to do the business. By referring Page No.50 of the paper book Ld. A.R argued that the assessee has declared the closing stock of shares in the balance sheet and accounted the purchases and sales of shares in Profit Loss account. The assessee has made frequent purchase and sale of the shares, which is evident from the page No.56 & 57 of the paper book, wherein the assessee has submitted the details of purchases and sales for the F.Y 2007-08. He has also taken our attention to the return of income for the assessment year 2009-10 and stated that the closing stock declared in the immediately preceding year was sold in the year under consideration and there were no fresh purchases made during the year and argued that the loss resulted in purchase and sales of shares should be assessed as a business 4 ITA No.709/Vizag/2013 Sri Subhash Bhararia, VSKP income and business loss. The Ld. A.R. further stated that in the Balance sheet, the assessee has declared the closing stock as a business asset but not as an investment. Since the financial statements and the conduct of the assessee clearly shows that the assessee is actively involved in the purchase and sale of shares with an intention to do the business, the Ld. A.R. argued that both the CIT(A) and the A.O. has made a blatant error and require interference from this Tribunal.
4. On the other hand, the Ld. D.R. argued that merely because of the return of income is accepted u/s 143(1), it should not be treated as an assessment framed u/s 143(3) of the Act. The Ld. A.O. has considered all the details and intention of the assessee, sources of funds frequency of purchase and sale of shares and held that the loss was resulted on account of capital loss but not business loss. Accordingly, the Ld. D.R. supported the orders of the lower authorities.
5. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The assessee has filed the return of income for the assessment year 2008-09 and 2009-10 before the due date of filing the return of income, which is not disputed. The assessee has 5 ITA No.709/Vizag/2013 Sri Subhash Bhararia, VSKP declared the business results for the assessment year 2008-09 as business loss and filed the return of income, which was accepted by the department u/s 143(1) of the Act. There was no dispute that in Profit & loss account and in the balance sheet the assessee has admitted the purchase and sale of shares as business transactions. In the balance sheet, the assessee has declared the unsold shares as stock in trade but not as an investment. The Audit report u/s 44AB report clearly shows that the assessee is engaged in the business of trading in shares. For the assessment year 2009-10, the assessee has sold the opening stock of shares, which was purchased in the immediately preceding assessment year. The details of purchases and sales are furnished in the paper book. There was a clear identification of shares held as investment and shares held as stock in trade. This fact was not disputed by the revenue. It is for the assessee to treat a particular transaction as investment or stock in trade and whether the intention of the assessee was to make the business or as investment should be established with the financial statements and the conduct of the assessee. In the balance sheet by declaring stock in trade and accounting the purchases and sales in P&L A/c the assessee declared the intention as a business transaction but not as investments. The assessee is free to make 6 ITA No.709/Vizag/2013 Sri Subhash Bhararia, VSKP certain assets as business assets and certain assets as investments. This view is upheld by the Hon'ble Madras High Court decision in the case of NSS Investments Vs. CIT. Therefore, we hold that the assessee is engaged in the business of share trading and resultant Profit or loss required to be assessed as a business income but not as capital gains. Accordingly, we set aside the order of the lower authorities and delete the addition made by the A.O.
6. In the result, the appeal filed by the assessee is allowed. The above order was pronounced in the open court on 28th Jul'17.
Sd/- Sd/-
वी.
वी दुगा राव)
(वी ाव िड.एस
िड एस.
(िड एस सु
दर सह)
सह
(V. DURGA RAO) (D.S. SUNDER SINGH)
याियक सद य/JUDICIAL
सद य MEMBER लेखा सद य/ACCOUNTANT
सद य MEMBER
िवशाखापटणम /Visakhapatnam:
दनांक /Dated : 28.07.2017
VG/SPS
आदेश क ितिलिप अ ेिषत/Copy of the order forwarded to:-
1. अपीलाथ / The Appellant - Sri Subhash Bhararia, B-101, VUDA Apartments, MMTC Colony, Seethammadhara, Visakhapatnam
2. याथ / The Respondent - The DCIT, Circle-3(1), Visakhapatnam
3. आयकर आयु / The CIT, Visakhapatnam
4. आयकर आयु (अपील) / The CIT (A), Visakhapatnam
5. िवभागीय ितिनिध, आय कर अपीलीय अिधकरण, िवशाखापटणम / DR, ITAT, Visakhapatnam
6. गाड फ़ाईल / Guard file आदेशानुसार / BY ORDER // True Copy // Sr. Private Secretary ITAT, VISAKHAPATNAM 7