Income Tax Appellate Tribunal - Kolkata
Khatuwala Computech Private Limited , ... vs I.T.O.,Ward-14(2), Kolkata on 12 April, 2021
ITA No. 2019/KOL/2019
Assessment Year: 2016-2017
Khatuwala Computech Pvt. Limited
IN THE INCOME TAX APPELLATE TRIBUNAL,
'B' BENCH, KOLKATA
[Virtual Court Hearing]
Before Shri J. Sudhakar Reddy, Accountant Member &
Shri A.T. Varkey, Judicial Member
I.T .A. No. 2019/KOL/2019
Assessment Year: 2016-2017
Khatuwala Computech Pvt. Limi ted,......... ........................... Appellant
46, Middle Road, P.O. Barrackpore,
North 24-Parganas-700120
[PAN:AABCK3455H]
-Vs.-
Income Tax Officer,............................................................... Respondent
Ward-14(2 ), Kolkata,
Aayakar Bhawan Po orva,
110, Shanti Pally,
Kolkata-700107
Appearances by:
Shri Rohit Shukl a, FC A, appeared on behalf of the assessee
Smt. Ranu Biswas, Additional CIT, appeared on behalf of the Revenue
Date of concluding th e hearing : March 30, 2021
Date of pronouncing the order : April 12, 2021
O R D E R
Per Shri J. Sudhakar Reddy, Accountant Member:-
This appeal filed by the assessee is directed against the order of ld. Commissioner of Income Tax (Appeals)-5, Kolkata dated 05.06.2019 for the assessment year 2016-17 on the following effective Ground:-
"That the ld. CIT(Appeals)-5, Kolkata erred in confirming the addition of Rs.1,52,000/- as speculative income since the value shown in the contract note for sale was different than the value shown in Form 10DB in respect of transactions o f shares of Ceat Limited".1 ITA No. 2019/KOL/2019
Assessment Year: 2016-2017 Khatuwala Computech Pvt. Limited
2. After hearing the rival contentions, we find that the sole issue involved in the ground of appeal for adjudication is the value of sale of equity shares of Ceat Limited. The Assessing Officer considered the sale consideration of equity shares as per the computation for calculating Securities Transaction Tax. The assessee's contention that the actual sale consideration has to be taken and not the value considered for computing STT, was rejected by both the Assessing Officer as well as ld. CIT(Appeals). We have gone through the detailed submissions made by the assessee. The same is extracted from page 2 to 9 of the paper book for ready reference:-
"3.01 Exhibit 2 was filed vide th e assessee's reply on 15.11.20 18 (Page 34 to Page 39 of PB) in response to the learned AO's not ice dated 23.10.2018 (Page 32 to Page 33 of PB) with reference to t he learned AO's query: "(5) Reconcile sal e of Equity Share of Rs.1 ,74,16,897 In yo ur books with Rs.1,76,10,177 as per o ur informatio n". It was expl ained that the reconciliation is as per Exhibit 2 and that th e value difference is because of the Brokerage & Charges of 0.1% (approx. Rs.17,557) and also on account of Hedging Profit / (Loss) of Ceat Limited (Rs.1 ,28,564) and Wockhardt Limit ed (Rs.11,409).
Exhibit 3 was filed vide the assessee's reply on 15 .11.2018 in response to the learned AO' s notice dated 23.10.2018 with reference to the query: "(6 ) No mention of sale of Equity Shares to the tune of Rs.11,98,90,649 in your books and st atements submitted" . It was explained th at the aforesaid sale val ue is t he sale value of shares under speculation and that for the purpose of accounting, onl y the difference being profit or loss arising out of speculative t ransactio ns is reco rded.
It was also submitted during the course of scrutiny assessment th at as per N SE Circular N o. N SE/CMO/0146/2004 dat ed 10.11.2004, for the purposes of STT calculation, the sale value is first calculated by using the VWAP (Volume weighted average price) method as expl ained in the said circular. This derived sale value is then t he basis for form 10DB on which STT is further calculated. T his Circular is at Page 40 to 42 of PB. Therefore, it is not always a case where " Sale Value" as appearing in a contract note matches with "Value" for calcul ating STT (in Form 10DB).
3.02 During the financial year 2015-16, th e assesse e t ransacted in shares of Ceat Limited on 5 different dat es as per T able A given below:
TABLE A (A) (B) (C) (D) (E) (F) (G) (H) Date of Contract Qty. Qty. Sale value after Speculation Form 10DB Form 10DB value transactio Note No Bough Sold brokerage gain/loss value (other than 2 ITA No. 2019/KOL/2019 Assessment Year: 2016-2017 Khatuwala Computech Pvt. Limited n t (Deliver) delivery) 1.4.15 NR/13511 2500 2065330.40(page1 2067400(pag
0) e 11) 6.4.15 NR/32842 1500 1258995.70 (page 1260255(pag
12) e 13) 17.4.15 NR/19698 36254 3625 144570.77(pa 33594406.56(pa 7 4 ge 16) ge 17) 20.4.15 NR/21585 7500 1150 3461478.86(page 3629320(pag 6804975(page 1 0 18) e 20) 20) 29.4.15 NR/34074 1750 1750 5197.20 (page 1326045(page 3 21) 23) 6785804.96 139373.57 6956975 41725426.56 *** Page Numbers referred in Table A are the Page Numbers printed on the Contract Notes / PB Ceat Limited - Data as per Contract Notes Total Value of Sale 6785804.96 (after brokerage) Value as shown by Form 10DB for the purpose 6956975.00 of calculation of Securities Transaction Tax (STT)
4. The five co ntract notes ment ioned in Table A above respect ively bearing number N/R/13511 dated 0l.04.2015; N/R/32842 dated 06.04.2015, N/R/j19 6987 dated 17.04.20 15, N/R/21585 1 dat ed 20.04.2015 and N/R/340743 dated 29.04.2015 are appearing at Pages 10 to 23 of PB. These contract notes st ate the detailed transactions and al so the Securit ies Transaction Tax (SIT ) & Volume fo r calcul atio n fo r Form 10DB purposes.
Values given in "Reconciliation St atement of Value of Sale of Shares vis-a-vis Value of Sale of Shares appearing in Fo rm 10DB in Exhibit - 2.
The assessee incurred specul ation loss and hedging loss out of transactions in relation to shares of Ceat Limited as det ailed in Exhibit 3 and as per details in Table A above. These figures of Contract Notes (Column H) are matching with the values given in "Reconciliation St atement of Speculative Gain j (Loss) vis-a-vis Value appearing in Fo rm No. 10DB in Exhibit - 3.
5. A reconciliation of the transactions of Contract Note No: N/R/215851 of 20.04.2015- (Page 18 to Page 20 of PB) Ceat Limited 7500 Purchase Rs.6887064.35 Ceat Limited 7500 Sale Rs.67,58,500.51 Hedging gain/loss Rs.128564.34 Ceat Limited 4000 Sale Rs.3590043.20 Sale recorded in Rs.3461478.86 books Fro m the aforesaid contract note N/ R/215851 of 20.04.2015 and chart it is evident th at the assessee appro priat ed the loss on 7,5 00 shares of Ceat Limit ed of (Rs.1 ,28,564) as Hedging Loss on which the Fo rm 10DB value is ascertained at Rs.6 8,04,975. Nowhere has the assessee either not disclosed th e sale value or the profit / (loss) on the sh are t ransaction.
6. The learned AO observed at Page 2 of his order dated 19/24- 12-2018 "As per Reco nciliation st atement of sale of equit y sh ares 3 ITA No. 2019/KOL/2019 Assessment Year: 2016-2017 Khatuwala Computech Pvt. Limited sale value of Ceat Limited shown to be Rs. 69, 56, 975. But as per reconciliation st atement of speculat ive t ransaction sale value of such sh ares is shown to be Rs.68,04,97 5. The co mpany was direct ed to show cause why under valuation of sales of equity shares of Rs.l,52,000(Rs.69 ,56,975minus Rs.68,04,975) will not be added back with ret urned income. In reply the AR re plied, 'The sale values h ave been given in Exhibit 3 only to reconcile th e sal e value of Rs.11,98,90 ,650 as per Fo rm 10DB for speculative transactions which resulted in speculative loss of Rs.2 ,63,830 and hedging loss of Rs.l,3 9,973 [Ceat Limited Rs.1,28,564 & Wockh ardt Limited Rs.11,409]" But 10DB reveals follo wing details.
Name of share Value as 10DB in Value as 10DB in Difference
exhibit 2 of exhibit 3 of
reconciliation reconciliation
statement of sale of statement of speculative
equity shares submitted transaction submitted
on 15.11.18 on 15.11.18
Ceat Limited 6956975 6804975 152000
Wockhardt Limited 1763200 1763200 0
So value of sales cannot be different wh et her it is considered for speculation or co nsidered for sale of sh ares just like Wockhardt Limited. Hence AR's contention is not acceptable. On th is basis Rs.1 ,52,000 is added with returned income as undisclosed value of shares during speculation t ransact ion."
The assessee refers t o the cont ract note no N/R/ 158010 dat ed 15.04.2015 for Wock hardt Limited (Page 24 to 29 of PB) which was submitted during the course of assessment proce edings on 15.11.2018. The relevant dat a is reproduced below:
Wockhardt Ltd. 1000 Purchase Rs.1768927.50 Wockhardt Ltd. 1000 Sale Rs.1757519.00 Hedging gain/loss Rs.11408.50 Wockhardt Ltd. 1000 Sale Rs.1761385.90 Sale recorded in Rs.1749977.40 books(as per contract note) The assessee further submits that the data as per Page 27 of PB on the aforesaid contract note:
Column Heading Value STT Transaction settled by delivery- 1763200.00 1763.20 sale Transaction settled by other 1763200.00 440.80 than delivery
In the case of Wockh ardt Limited, the Fo rm 10 DE value fo r both types of t ransactions is each valued at Rs.17,63,200 for STT purposes and hence in Exh ibit 2 - the delivery Form 10DB at column 5 is the same as val ue at Exhibit 3 - speculat ive sale val ue.
The learned AO allowed this hedging loss and since the Fo rm 10DB values were the same in delivery and non delivery cases, he did not apply his mind and held this as the basis fo r ext rapolating it to Ceat Limited witho ut realizing that the comparison of the sale values is tot ally wrong - one is the sale value (Form 10DB) fo r non delivery sh ares and th e other is the sal e val ue of delivery shares.
4 ITA No. 2019/KOL/2019Assessment Year: 2016-2017 Khatuwala Computech Pvt. Limited
7. Further th e learned C IT(A) while co nfirming the above addition observed at Page 9 of his order dated 05-06 -2019:-
"I h ave considered t he submission of th e appellant and perused the relevant assessment records. The A. O. h ad added back Rs.1 ,52,000 which represented th e under valuation of shares as per reconciliat ion st atement submitted by th e appellant. The A/ R of t he appellant in his submission h ad h eld that the difference arose due to the methodology of charging SIT by the broker in compliance with NSE Circular No . N SE/C MO/0146/2004 dated 10.11.2004. T he A.O. held that th e difference in value of sales reflected in cont ract note and value reflected in Fo rm 10DB was bound to arise because of the methodology of computing sales fo r the purpose of charging SIT . There is not much merit in t he claim of the appellant. He could not reconcile in difference in turnover as reflected in the books and in Fo rm 10DB. Form 10DB is evidence of payment of SIT o n t ransactions entered through recognized stock exchange. T herefo re, there cannot be any difference in turnover bet ween SIT and books. The A/ R of th e appell ant h ad emph asized the point that the method fo r comput ing t urnover fo r arriving SIT is different . However, there is not much credence in the submissio n of the appellant. The Circular No. NSE/CMO/0146/2004 dat ed 11.11.2004 only relates to comput ation of SIT and does not relate to comput ation of turno ver. The addition of Rs.l ,52,OOO is sust ained. This ground of appeal fails and is th erefore, not allowed.
The learned A.O. erred in comparing figures. Please see highligh ted portion of Table A appearing above. He co mpared sum of value of Contract Note Page 1 1, 13 & 20 of PH amounting to Rs.69 ,56,9 75 with the value of Rs.6 8,04,975 appearing at Contract Note Page 20 of PH. In other words he did not co mpare with apple with apple but compared apples wit h oranges. Thus, h e arrived at an entirely erroneous co nclusion. The value of Rs.68,0 4,975 is the Fo rm 10 DB value of 7 ,500 shares that were t ransacted on 20.04.2015 and settled "other than delivery" and whereas Rs.69,56,975 is th e Form 10DB 'delivery' value of 8,000 (2 ,500 + l ,500 + ,00 0) sh ares of Ceat Limited t ransacted on 01.04.2015, 06.04.20 15 & 20.0 4.2015.
9. The learned C IT (A) also could not give justice to the fact s of t he case and upheld th e action of th e AO.
10. The assessee co ntends that on co mparison with five cont ract notes of Ceat Limited appearing at Page 10 to 23 of PH and contract note of Wockhardt Limited appearing at Page 24 to 29 of PH.
10.01 In th e case of Wockhardt Limited, the learned AO made erroneous co mpariso n of the sale value as per Form 10DB for non 5 ITA No. 2019/KOL/2019 Assessment Year: 2016-2017 Khatuwala Computech Pvt. Limited delivery shares with t he sale value of delivery shares and concluded that it did not result in any difference. But such cases do happen when Form 10DB values fo r these different types of t ransactions were identical, and in this case the value was same fo r both t he types of transactio ns.
10.02 It dul y disclosed the sale value of 8,000 sh ares of Ceat Limited at Rs.67,85,8 04.96 as is evident from Exh ibit - 2 appearing at Page 30 of PB as well as Table A abo ve. The value of Rs.69 ,56,975 is the value shown in Form 10DB in respect of these 8,000 shares.
10.03 The val ue on 20.04.2015 of Rs.68 ,04,975 is the Form 10 DB sale value of shares of Ceat Limited on specul ation on which the assessee incurred a hedging loss of (Rs.128,564), which was duly disclosed vide Exhibit - 3 appearing at Page 31 of PB and T able A above.
11. As such the conclusion arrived by t he learned A O th at the assessee suppressed t he value of sales by comparing two figures of Rs.68 ,04,975 and Rs.69,56,975 is erro neo us. Furth er there is no difference in the t urnover of Ceat Limit ed between the books and the cont ract notes. It is only for the purpose of calcul ation of Securities T ransactio n Tax (Fo rm 10DB) based on VWAP (Volume Weighted Average Price), two different values of Sales are appearing in the Cont ract Note.
12. Based on facts of the above case, the assessee prays for deletion of Rs.152,000".
3. The ld. Departmental Representative could not controvert the above submissions of the assessee. In view of the above discussion and considering the totality of the facts and circumstances of the case, we delete the addition made by the Assessing Officer as confirmed by the ld. CIT(Appeals) and allow the appeal of the assessee.
4. In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on April 12, 2021.
Sd/- Sd/-
(A.T. Varkey) (J. Sudhakar Reddy)
Judicial Member Accountant Member
Kolkata, the 12 t h day of April, 2021
Copies to : (1) Khatuwala Computech Pvt. Limi ted, 46, Middle Road, P.O. Barrackpore, 6 ITA No. 2019/KOL/2019 Assessment Year: 2016-2017 Khatuwala Computech Pvt. Limited North 24-Parganas-700120 (2) Income Tax Officer, Ward-14(2 ), Kolkata, Aayakar Bhawan Po orva, 110, Shanti Pally, Ko lkata-700107 (3) Commissioner of Inco me T ax (Appeals)-5, Kolkata; (4) Commissioner of Inco me T ax- , (5) The Depart ment al Represent ative (6) Guard File By order Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S. 7