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Income Tax Appellate Tribunal - Mumbai

Dcit 4(2)(1), Mumbai vs S I Investment & Broking P.Ltd, Mumbai on 18 May, 2017

                IN THE INCOME TAX APPELLATE TRIBUNAL,
                       MUMBAI BENCH "G", MUMBAI

           BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND
              SHRI N.K. PRADHAN, ACCOUNTANT MEMBER

                                ITA No.3156/M/2015
                              Assessment Year: 2010-11

        The DCIT-4(2)(1),                    M/s. SI Investment & Broking
        Room No.642, 6th Floor,              Pvt. Ltd.,
        Aayakar Bhavan,                  Vs. 402, Rotunda Bldg.,
        M.K. Road,                           B.S. Marg, Fort,
        Mumbai - 400020                      Mumbai - 400 001
                                             PAN: AABCS 5547A
             (Appellant)                        (Respondent)

                                CO No.221/M/2015
                       (Arising out of ITA No.3156/M/2015)
                            Assessment Year: 2010-11

        M/s. SI Investment & Broking     The DCIT-4(2)(1),
        Pvt. Ltd.,                       Room No.642, 6th Floor,
        402, Rotunda Bldg.,          Vs. Aayakar Bhavan,
        B.S. Marg, Fort,                 M.K. Road,
        Mumbai - 400 001                 Mumbai - 400020
        PAN: AABCS 5547A
              (Appellant)                  (Respondent)


      Present for:
      Assessee by                 : Shri Subhash S. Shetty, A.R.
      Revenue by                  : Miss Anupama Singla, D.R.

      Date of Hearing             : 19.04.2017
      Date of Pronouncement       : 18.05.2017

                                    ORDER

Per D.T. Garasia, Judicial Member:

The present appeal by the Revenue and the cross objection by the assessee have been preferred against the order dated 27.03.2015 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2010-11. First we take up the Revenue's appeal i.e. ITA No.3156/M/2015 2 ITA No.3156/M/2015 CO No.221/M/2015 M/s. SI Investment & Broking Pvt. Ltd.

2. The only ground in the departmental appeal is to treat the short term capital gain amounting to Rs.2,41,92,131/- as business income.

3. The short facts of the case are that assessee is the member of Bombay Stock Exchange which is engaged in stock broking business. Assessee company charges for brokerage on transactions executed on behalf of client. Assessee company also invests surplus money in shares and profit or loss on investment is offered as capital gain or loss. Profit or loss on trading is treated as business income. The assessee company's source of income during the year under consideration was the income from capital gain and income from other source. During the course of assessment proceedings, the Assessing Officer (hereinafter referred to as the AO) tried to verify the assessee company's long term capital gain to tally with the date of such sale of shares submitted by the assessee. The AO has given show cause notice as to why the long term capital loss of Rs.3,15,77,417/- which the assessee has set up against short term capital gain should not be treated as nil and short term capital gain of Rs.2,41,92,131/- should not be treated as assessee company's business income and to be taxed accordingly. The assessee has stated that the AO has referred to an analysis statement on the basis of which AO concluded that movement of shares day wise, week wise and month wise does not tally with the date of sale of shares. The assessee submitted that the analysis statement which was referred to by the AO was not attached to the letter sent by the AO. The AO, thereafter, held that the letter with the statement was provided to the assessee but assessee denied to have received this letter to avoid reconciliation regarding date of holding period of shares. Therefore, AO has treated long term capital loss as nil and short terms capital gain of Rs.2,41,92,131/- was brought to tax.

CO No.221/M/2015 M/s. SI Investment & Broking Pvt. Ltd.

4. Matter carried to the Ld. CIT(A) and the Ld. CIT(A) has decided the issue in favour of the assessee by observing that similar issue was involved in the assessee's own case for assessment year 2009-10 which was decided in favour of the assessee by his predecessor wherein the Ld. CIT(A) had observed as under:

"I have considered the submissions made by the appellant carefully. It is seen that similar issue was involved in appellant's own case in A. Y 2006-07. My predecessor while deciding appeal of the appellant for A. Y. 2006-07 in Appeal No.IT/CI7"(A)-IV/Cir.41360108-09, dtd. 14.09.2009 has made following observations :-

The appellant is treating the shares as 'investment' as the books of accounts and the income of Rs.3,92,84,6031- in respect of one script Sesa Goa Ltd. is after bonus share issued by the company of 36000 shares. The activity of the appellant is not different than that of A.Y. 2005-06 where the AO has accepted the appellant to be an 'investor' so far as long term capital gain is concerned. The appellant had converted its stock in trade into investment and had already paid tax on conversion which was treated as business income of Rs.1,33,28,497/- The factual position of the appellant is similar to that of A. Y. 2005- 06, except for the considerable increase in the quantum which is due to good run in the stock exchange. The appellant is maintaining an investment portfolio and has not treated the shares as stock in trade, therefore, the shares have been held as investment and not as stock in trade. The shares, therefore, are capital assets as defined in Section 2(14) of the I.T. Act and transfer of the capital assets are assessed as Long Term Capital Gain and Short Term Capital Gain u/s. 229B and 242B respectively. There is no reason, whatsoever, to treat the STCG and LTCG as business income. The AO is directed not to treat the STCG & LTCG as declared by the appellant as business income. This ground is thus allowed."

As the facts and circumstances of the case are identical to that of A. Y. 2006-07, following my predecessor's order in the case of appellant for A.Y. 2006-07 mentioned in preceding para, the AO is directed not to treat the Short Term Capital Gain as business income. This ground of appeal is thus allowed."

5. Aggrieved by the order of the Ld. CIT(A), the Revenue has preferred appeal before us.

CO No.221/M/2015 M/s. SI Investment & Broking Pvt. Ltd.

6. We have heard the rival contentions of both the parties. During the course of hearing, the Ld. A.R. pointed out that similar issue had arisen in assessment years 2005-06 and 2007-08 and in both the years assessee's appeal was decided in favour of the assessee, hence, this appeal of the Revenue may be dismissed.

7. Having heard both the parties, we find that the issue in controversy is covered by the decisions of the Tribunal in ITA No.1497/M/2009 and in ITA Nos.7695 & 7483/M/2010. For the sake of convenience, the relevant para of the Tribunal's decision in ITA Nos.7695 & 7483/M/2010 is reproduced as under:

"Before us, the Ld. Counsel for the assessee stated that in earlier years, this issue travelled upto the Tribunal and the Tribunal has decided this issue in favour of the assessee and against the Revenue in ITA No. 1497/M/09. Once again this issue arose in A.Y. 2006-07 and the Tribunal in ITA No. 644/M/09 following the earlier order of the Tribunal in AY 2005- 06 directed the AO to treat the capital gains under the head 'Capital Gains'. As no distinguishing decision has been brought on record by the DR, respectfully following the decision of the Co-ordinate Bench in assessee's own case (supra), we direct he AO to treat the Short Term capital gain as such. Ground No. 2 is accordingly allowed."

8. Respectfully following the decision of the Tribunal, we dismiss the departmental appeal.

Now we take up the assessee's cross objection i.e. CO No.221/M/2016.

CO No.221/M/2016

9. In this cross objection, the issue relates to disallowance of transaction charges of Rs.4,90,415/- on account of non deduction of TDS under section 40a(ia) of the Act. The AO has discussed this issue on page 7 & 8 of the assessment order. The AO has disallowed and the Ld. CIT(A) has dismissed the appeal of the assessee.

10. During the course of hearing, the Ld. A.R. has pointed out that the assessee has already deducted and paid the TDS on the impugned transaction.

CO No.221/M/2015 M/s. SI Investment & Broking Pvt. Ltd.

Therefore, we are of the view that this requires verification at the end of the AO. Therefore, we restore this issue to the file of the AO to verify whether the assessee has deducted the TDS or not. If the payee has already accounted this income in his books of account, then no disallowance can be made under section 40a(ia) of the Act. Therefore, we restore this issue to the file of the AO with limited observation as stated above. Accordingly, cross objection is allowed for statistical purposes.

11. In the result, appeal of the Revenue is dismissed and the cross objection of the assessee is allowed for statistical purposes.

Order pronounced in the open court on 18.05.2017.

         Sd/-                                                     Sd/-
   (N.K. Pradhan)                                           (D.T. Garasia)
ACCOUNTANT MEMBER                                       JUDICIAL MEMBER

Mumbai, Dated: 18.05.2017.
* Kishore, Sr. P.S.

Copy to: The Appellant
        The Respondent
        The CIT, Concerned, Mumbai
        The CIT (A) Concerned, Mumbai
        The DR Concerned Bench
//True Copy//                             [




                                                  By Order



                                 Dy/Asstt. Registrar, ITAT, Mumbai.