Karnataka High Court
The Commissioner Of Income Tax vs Aravind Prakash Malpani on 4 January, 2011
Bench: N.Kumar, Ravi Malimath
'ix
' " -~i{321ng{211c)1'e
IN THE HIGH COURT OF KARNATAKA AT BANGAMDRE
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PRESENT "
THE HoN*BLE MR. JUSTICE'
THE HODFBLE MR. 5 ITA No.1VA1--3Vi:A'*g.1'20Q6 .' " ' : BETWEEN: V u V 2
1 The COI11I;1Vi'S_Si()i1f3I:'H bf' Ei1cO::1fi=._'1'21X .V 2 " ' 3C€11i.1'é-fi .C,iI'C1'é3' _ R--}311.iidi31igAA "
Queens }f+1Q2iCf. '. "
B21f§gn§;1io:fe V' _ 2 .. The EncOrm3T21x' £).fI'i(:er .. '~ t':'j'§?'fl1~ézN 8(2) .....
. R §3é3'iI.di11g T. Q4:_:(V3e1Vis_ Rpzld « VE5aVi_:g;a1:);Ié ...Appe}.1ant:s (By Sri M V" S€ShEi{.?§1E1iE1, Acivo{:.2m3} "'._1'V\;i'a.~"»-'-"'ix1{i P1'2':.kass17: }\:'Ia1pam Bio. 186, 8'-'*1 E\/1211.11, RMV Ex£ens1'.cm ..,Re:s5pcmc1eI1§.
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{By Sri S P£1I"1i.1"1£-[SEEI'Ei'ihi. Aclvocaie). This ITA is flied under Se%(éi'.i:-fifihZ»:€:3O¢£'i.«oif;«I}f";b.;':e1f,'--:V1 arising {mi of order dated 072.704:-~2f}O6 pasis-ed" f~;.._t__1 :_I'I'A 310.922 / I3ang/ 2003 fbr the Assessriieni. yea:fis'* .200Q~:2.0()€_, pray'i.i1g; £0 E) f0rmu1ai'.e the sL.1»bs.i_,a111.i.2i.i.Vq_izesi.i{a1isj0.!f'_V1z1W_V§siaiiéd1 therein; ii) aiiew the appeai ar1d_ s~::i:. aside__ the Grdez" jriassed by the ITAT. Bang21Eorei'r1 rm No.922./sang/zeoes;'dates 7A4~2OO6 Confirming the order ciflilie ApAp'e}13;1;e: Cr_)mr11issian.e1* & coiiiirm the order passed by the V\.?211'daS{--:2,},,_Ba.ng21i01'e' This ETA e0_ming (m--.,.Efc>f;-. iiegiifirig".§1}iis._"d.z1y, N. KUZMAR J deiivered the f_€.3\11«:7§V'i'i'.1§§I ' ' rei'\,:zéV'1»1=ii.e Tijéis-_4'p1jefea'redWi:'his appeal. Cliallenging the order passed byfi,1'iE?':F§fi'i')?;;iV§2,11~~'WhiCh has held that the assessee was e_r_igageti~i1Vi the bi_:si§'iess of shares and, iherefore, he is i V' _ent:i.i;1E:d:»_'i<} :;EaiI11 detiu'-;:ii0£1 by Way of business €".Xp€I1diU.l1'(f and L ihfis' 'sAe'i:€.i_.1ig"é1si€ié the orcfers p£;1SS€d by the assessing ai1i.horiii.y " ._Vb'<.:s§,:zj1ess" 211251 also t:ia1'n':e.c§. deeiueiion of ir1iex"esi'. paid E3}? him. asevieil as i.ii£i fi1'si'. appeiime aL1E.h.()ri.1.y. The'. <":12':imed 1I2.msac:i,io:ns of shares Consequeni1"y, he claimed dedu(:ti01".1 t,c>waz"c£s e2<:pendit:L1re. However, iihe 21ssessi.1"1g edfieer ir1vest.1neI1f. in shares and t.h.at the shares sto(:¥:--i11wt'.1*ac?1e arid, iherefore, it assessee: is not er;E.it.1ed '£9: '..(:¥\(7\,.%'r,,i],'4A.f.'VEVi'3"'. expenditure and also 1.0\VE1I'dS"vf;)£%yf1"l€1'i'{. by ihe said order, 20{.rVi'"e1§$Vf3ea§ to the Commissioner of Income the order of the assessing c>ffi;:e1~:«.;;§;:;%;d Agai1"1st, the said order the éissessee."f2.re%eif§=F:Aei* zippeal to the ".['ribuna1.. The TribL1ria1 011 re¥ag'>fp.'1fe(f;é1'i'§ehof the m21{',eri211 em record heid that the assesseel has bee1»1Vkc:1.ain1i11g from the yeztl" 199798 the i,1'z1,:3isa1c:ii011s ih'A.shz1'1'es as a business and Ciaimecl deduciinuns . whieh_w€i'¢;}1}10\xxed by the departrnerit for éhree consecutive 0' .ve':i_1js."' .I'Vt.~v.,isV."mi1y for the assessrnem year 200001 the said det:'§--:_1c1.;--i_(§i;1s:- "iec:1'e not 21,}i(>wed on Ehe gg1'(>u11ci 111a'. in {he ba1an(:e V .sh.e.et., "shares were. treated as an i.1'1.vest111e:H. (zoupieci wi{.h the 'qfzxtszi-A"1hat a pa-uct. 01'1:he shares heid by the assessee E-1t'€f of Faxraily .~-Ci0I"lC{;'.1"IT1S_~?-. On a czareful e.x:z>.mi:'1a'u'011 of the 1n21§,e.1"'iai on t'e(:(>rd it. 3%,/""
hezlci t}1ai'1._ 1(}QkiE'}§_§ into '£'.hr: v0I:..:rn:=':., i}.'e%<.1;§é:z.3C.y and rc%g'ul_airiE:y* sf i.I'aE1SEiC'£,iO£1S, it is Clear t.ha1i" the ira'1i1sa::I".i<)r1s \xre:*e:"n321{i.e_ *»§%iéifi»;1 profii n'1o1.ive and not For i'11V€s5t.me:1£'.. '_E.'3.1.e: "§3'ri:1¢ip1e§ aecoumaxicy do not 0ve:*'1"ide the §31:f:'C'}\7'i%i:(')}'71:.',7'> l';7.i"
Laws and, Lh€I'€;'.fOI'€, mereiy 53:1" t',h<3:«'§:)g:1 :=:.§s of balance sheet for £116: year i$f11§fe ztfé shown as an in\res1'[11'1<:rsi:f"*1'11e '\{r;isVAi'v10t jusifiied in h(:+1dir1g that {he a1s$€SV'_5VfiL" of shares and the sh2irc;s'§f2ff;fr,1 gm inves-tmment and. therefore, it Sf:-4i" aE§i{1--c:, 'and. filloxved the de<:iuct.i(ms t.0\va1'dl$ bt-1S'i'f1.€VS:'3':CXf5€IiC3ii.i§1'ET€". 'Agg:"ieved by the said ordel'. the '1'evenue is" 'Q<:if01"ext.1_1i's A C01i.'1f1.. on 9.8.2007 admitted {he appeal to Ci«.)r_1é'5'ic¥'€é1*,_&i..h».r§"'iblioxving sL1bs"£.am':iaI questions of law: ~ . ':"Wf'1eif1er tile tribzmal con'1m.i.i.i.ed an error in holding that, the crasgessee is carrying on the business has ciecflareci fizz: shares as i.r'wesI,:IIer'1.t.' and not as stock in z.rad.¢~: and cor'2.sc.q1.a.er1t'i;; {he is not 2/ er'2{z'tied'. for aHOl.L'{U'TC(3 Qf ir'1z'{=.r'€5;s._.._.p0.i;fi* f:)f'*': {"316 cm'1our1£.$ borr"o14:..?e?(i for 1'.rwes£r7'1c{ .._f:
bl.I,Sif'I€SS experzciifure?
2. Wiiemer {fie 'I'riiJi.z:1gE idi'/'V{L"1l:§'V_C'?'I,").'?'VL'Ci' ?!Iv:'1 assessee is for " Qf imferest payn*z(-N11,,' [:5*.",_'E':'»?fif.1.ii.~!I"fi paid on car and C1epre(riaz.io_rjp_ ---- '§:'z.ZZowabZe Business z4é)"fi.é:r1. was not carryitig on 1: ihé'_!)1zSi':7<3s§fiz1 if'1'a5ii1"eg Shares?
: ''i.'he iéaiftiéctd "£:Qi1«:1Sté1 for the 1'a::veru,1e assailizlg the iI11;)11g:1ebi}'_01"d@1' "c_of11,er*1dé_.d 'that, when the assessee has shown irlfihé *baI21x1 E:<::V._.she«;:i:V for the assezssmeni, year 2000-01 the A ;~;§1ares'i<:cEgi him as an i1'1VeS1,r1'1em. and not as; si,0<:k~i.n~i'.1'ade. ii."-?3'(3z1s§'t.Eiu.£,e:s.;1"b21;:)if.21I asset and, i'hez*<::f0re. *:':.}1e is not e2:.'}"é1fi--1T.Iec§_ f::'a" d<~::du(7{..io'11 uncier the heaiciirxg of business .' £")X_{}(3i1{3i'1 L1.1'€f. T%1er<::f0z'e. the 'f.':'i':3:ma_I was in E'o'La.I @1701" in 3% ifésb...
iri_Ts;:'1a}*e:~: _ i§'1f'f3i'f€3'I'i1'1§:§ with the Vs-='€.H C'.(>l1Si(i€I'€'.d 01'cier passed"-.._§3y the assessing officer as w<'::11 as the fiz's'i: ap-pe.E§.a11:'e:2 am'1.11c:;ififi§:'-, :'-._ V'
5. Per contra. the E:E3211'11ed <:0=,:1'1se1 21;3;:i§%23.i'i'r'1g:"--{ofthe assessee s't:1bmif:s that', in the b211z1:1ge sheetfif 'Vf}"l,£'€tg yscaifi:
prior to 20004)] also, §':h(--3 assesses h_z1s:..-she-W11. Vi'he"'sh;11"L%sA as i}:1V€S{1"I1E'.I1{'. claimeci b::sin(--:s:--:§ e.§§pe11€§ii_L'1Vi":* has allowed iihfi'. same. officer he has procziuced records to in iléeu business of purchase and of s11_2:;1%'§:sV T'f'iE)¥iT:1;i.:vv1'La:'1'1i(?1} fact. is not in disptzftc E.i'I'.~fi. i:'1}€?1"éf€)1'€;.,'EELS"héid by the Supreme C0U.:"L the priéztciples GE aC(:.Quai.aIi{:§J_ c'ir.)"11ot ()ve1'~1'ide Lhe pI'OViSi0I1S of the imxopm: 'l'2£X~ I;a'Ars'V--.;11A1*rfl V*1.*i'ie: questio'1.1 w1".1c:'{'he1" the assessee is <:a§1"i{z.{izv1g_!i;'<>»r'1 a bii's3i:j_1§:_ss 01' not is purely 21 q'1:1es'{:i0n of i"a<;:t which is,t'.o bé vcic:--f:é}**z31i1'1eci from the II}E}1T,(:'I'i211 on mcorci and as rightiy }[email protected]€:1:VE1é 'T,.?éb1.1.:1z11. tE'1(;? n'1z1t<;*.ri£-1} on record ck-3:-1r1y est',ab1ish.e:s the faci. .i.1i:§;.'L {he asstisscéct. was (:a1'1"yi11g on Lhe busimass of shzams 'amci the sh:;§1'<;>,s heid by him was 110%: an i1'1vesm1e1'1'1'. and, ' ., i.}'1t:.1fei"0rr:., he submfis that no Case for :%n'1'.c%1*f'<%;"en<::: is I1'}21CI€;? out. '5 2: .. .-
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6. Fmm £11163 maiuzriai on record, it assesses: is deaiing in shares. He has f1'l.ed If::='i.u;*--11:s,s» f€$'i°.Ei';§: y._e21"1"e. II99?~98, 1998-99 and 19992000731zmsshixrgg, {mg'pgrv:_';¢s1;ia:;s' of ' thsset t1*ar1saC:£ions as wail 22s.»t:§':,¢. il1(?61:Zf1_t;"V.{1("?I"iX'.Ef,:1£( ihe profit. He has claimed and aiso d€:duc:iious on d:1 t.he Iszsls barrowed.
The depart:n1em:. has Waq--;sacLi0::s as a business expezllditure as wail as d€dL1C1Zi: 0:{1_ It is oniy in the year €1';e'.3,;vfiVf'<§'v<:1i11ed to show the business €xpenc:Tfi'_t3.1:r§: 2?1:1_d Jizhhe ground 'that the assessee has shown i11VV"t§j1é ba1 a_1':c'(:j the shares an investnlent and 1101. a:3--vstock¥i11»«t1'ade. 'The has prociuced the iedgers, bi}VfS,' I'€;'C.E)ifZ=1§S to slitii/X? 1.11311. he is Carrying' on the business in ' :3.}ié'11'::s'' wl'11"_C'hA'C!-£:a1'iy shows whai. is the opening Stock, what is the"-q:,12m{;i.i::£11 fof' shares }T31,1E'('.haS€.',d, what. is the? c:10s'i11g stock, '1.he"biiis of"'p1Jrc:h21se artld sak: of sh211*<:s, 61:3,. It aiso discloses f:}123£'i i11'v:;:3L<::I*} m.on=;:h {,hc1'<3 x.ve:1"<;> p1.1l"(',1'1EiS€S of shares of at 18215:: 3 E 2, 9 the b{lSi1".IC'.S-S sf sake of shams Wi?;.h 2-1 §_:s1'<>i'1't :r11e>1I.ive a;'1sd'h.{;t' for i£1V(:iS'L'I}"i€I1i anti, ihereti"01'e, e11t:if:ieci to businessgiieipe-r7£§:i§.1.;1;<.'::_'as waif as deduction 0;l'i11terc%s1, {.('>\va1'd.s 1.C}8.f} bc.:i:f::}_x3w:d';--..V:The said» a finding 03' {he Tribuxlal is based c}r}.fl»1€ga._]_ Tééw;;s'i.é'zI;%1'£(:,Ae' 'a1iC§fC1_Qes33 H012 suffer from any legai iI1fi2'111ityjuqaich {*;al1s= for i1f;téx*fc§"er1Céj.
7. In this View oi;'L£1_e m"af,t<§1";- }'."x'=??>"(r1./€1.S\-'»?CI' the subst'antiai questians of law raised in 3;-h;'s é1pVp<':~a1--'a.i_n" fa~v_c_"3?.;1r of {he assessee and against, the not see any merit: in this appeals" 'Ac:»é0r'Ci'ir:i.g1y','"ii?§"azpj,eaii._is* dism.1'ssed. Sdf fudgs Sé/w Euégs