×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
06-03-2019, The Bombay Dyeing, Section 45, 28(i), 2, Tribunal Mumbai
These appeals filed by assessee are directed against the order of Commissioner of Income Tax (Appeals)-4, Mumbai [hereinafter referred to as the ld CITA] dated 16/03/2015 for A.Y.2010-11 & 2011-12 in the matter of order passed u/s.143(3) of the Income Tax Act, 1961. Since identical issues are involved in these appeals, they were heard together and are being disposed off by this consolidated order for the sake of convenience.
ITA No.3953/Mum/2015 for A.Y.2010-11
2. The first issue to be decided in this appeal is as to whether the ld CITA was justified in upholding the action of the ld AO in treating the gains received from sale of shares as income from business as against capital gains reported by the assessee, in the facts and circumstances of the case. The inter connected issue involved therein is as to whether the ld CITA was justified in upholding the action of the ld AO in not allowing the set off of brought forward capital loss of earlier years and not allowing the set off of current year long term capital loss against the income determined during the year, in the facts and circumstances of the case.
3. The brief facts of this issue are that the assessee is engaged in the business of investment and had filed its return of income for the Asst Year 2010-11 on 30.9.2010 declaring total income of Rs 41,58,420/- under the head short term capital gains. The assessee declared short term capital gains of Rs 1,34,86,643/- on the purchase and sale of delivery based shares and had set off a sum of Rs 93,28,220/- being the brought forward short term capital loss of Asst Years 2008-09 and 2009-10 and offered the remaining short term capital gains of Rs 41,58,423/- (rounded off to Rs 41,58,420/-) in the return of income. The ld AO observed that the own capital of the assessee is Rs 78.25 crores and out of which, a sum of Rs 53.90 crores had been invested in shares which apparently is rotated / recycled throughout the year in sale and purchase of shares only. The ld AO called for the workings of short term capital gains derived by the assessee during the year in the sum of Rs 1,34,86,643/- which were duly furnished by the assessee. From the said details, the ld AO observed that the assessee had rotated the available capital for several times in the share purchase and sale activity, which is a typical character of the business. He observed from the workings of short term capital gains that barring few transactions in the year, almost all the sales are of shares / units purchased at the short intervals which means that these shares were purchased with the sole intention of selling it and at profit or loss with the risk elements embedded therein. The transactions of purchase and sale of shares was very frequent and the period of holding is less than few months. The assessee had paid portfolio management services (PMS) fees of Rs 68,30,708/- to look after the share transactions of the assessee and also to have an expert advise about the daily market for share trading. With regard to the argument of the assessee that it had been investing in shares for several years and had been treating the same as investments and not as business activity, the ld AO observed that the assessee is making investments as per the advice given by the PMS provider (expert) and that the assessee himself is knowledgeable and well aware of the commerce and the market and economic conditions and also keeps abreast of state of economy and about the various companies in whose shares the assessee had dealt within the year. The purchase of shares have been made after applying mind and on the main criteria of how much the share will rise/ fetch in return etc and sales were made when the shares reached the expected levels. The ld AO observed that share trading and had paid interest of Rs 3,52,397/- and further observedthat no prudent person will make investment by taking loan. The ld AO observed further that the associate concerns of the assessese viz. Amol Securities Pvt Ltd and Komac Investments & Finance Pvt Ltd are mainly engaged in the business of shares and securities. Based on these observations, the ld AO treated the assessee as a trader in shares and accordingly brought the short term capital gains reported by the assessee at Rs 1,34,86,643/- as business income of the assessee.
3.1. In view of the aforesaid decision of treating assessee as a trader in shares, the ld AO did not grant set off of short term capital loss brought forward from Asst Years 2008-09 and 2009-10 to the tune of Rs