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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI D.T. GARASIA, JM & SHRI MANOJ KUMAR AGGARWAL, AM
Per Manoj Kumar Aggarwal (Accountant Member) 1. The captioned appeal by assessee is before us for hearing consequent to Tribunal’s MA No. 148/Mum/2016 dated 21/10/2016 arising out of 02/03/2016 for Assessment Year [AY] 2008-09.
ITA.No.1506/Mum/2012 Standard Chartered Securities (India) Limited Assessment Year-2008-09 2. The brief background is that the captioned appeal for Assessment Year [AY] 2008-09 contest the order of the Ld. Commissioner of Income- Tax (Appeals)-9 [CIT(A)], Mumbai, Appeal No.CIT(A)-9/AC- 4(2)/16/2011-12 dated 07/12/2011. The assessment for impugned AY was framed by Ld. Assistant Commissioner of Income Tax Range 4(2), Mumbai [AO] u/s 143(3) of the Income Tax Act, 1961 on 15/12/2010 determining income of Rs.128.74 Lacs after certain adjustments / disallowances as against returned income of Rs.88.98 Lacs. The assessee contested the same with partial success before Ld. CIT(A) vide impugned order dated 07/12/2011. Aggrieved, the assessee contested the same before this Tribunal vide 02/03/2016 by raising two grounds of appeal s viz. disallowance u/s 14A and treatment of certain Short Term Capital Gains under the head Business Income or Capital Gains. The Tribunal adjudicated the issue of disallowance u/s 14A in but omitted to adjudicate the second issue. Upon being pointed out vide MA 148/Mum/2016, the said omission was noted and the order was recalled to the limited extent of hearing the second ground on merits. Accordingly, the appeal is before us for re-adjudication with respect to second ground viz. treatment of certain Short Term Capital Gains under the head Business Income or Capital Gains. For the same, the assessee has raised the following grounds of appeal:- 1B. On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax, Appeal-9, Mumbai has erred in confirming the addition made by the Assessing Officer on account of the following- Short Term Capital Gains assessed under head “Business Income” instead of “Short Term Capital Gain” Rs. 10,50,927/-.
2. Without prejudice to what is stated above on the facts and circumstances of the case and in law the Appellant shall be allowed to adjust the deemed ITA.No.1506/Mum/2012 Standard Chartered Securities (India) Limited Assessment Year-2008-09 speculation loss determined under explanation to Section 73 of the Income Tax Act, 1961 for the earlier periods against the current income under share trading account determined as business income arising from the transactions in shares”.
The Ld. Authorised Representative [AR], at the outset, drew our attention to the fact that similar issue came before this Tribunal in assessee’s own case for AY 2006-07 vide dated 21/03/2012 where additional alternative ground raised
by the assessee has been restored to the file of Ld. CIT(A) with certain directions and therefore, the present matter may also be restored back on similar lines. The Ld. Departmental Representative [DR] fairly conceded the same.
4. Upon perusal of cited order of the Tribunal for AY 2006-07, we find that the matter has been restored back to the file of Ld. CIT(A) in the following manner:-
13. With reference to Ground No.2, the learned Counsel submitted that the gains arising out of sale of shares/units are treated as business income instead of short term capital gain. It was submitted that in the earlier years the assessee had suffered losses on the same account and the Assessing Officer treated as speculation loss by virtue of invoking the provisions of section 73 explanation (2) and therefore, the assessee has raised the additional ground that in case the amounts are treated as speculation business, the same is required to be set of to the losses determined by the Assessing Officer in the earlier years. He referred to the submissions before the Assessing Officer vide letter dated 25/02/2008, more so Item No.24 to submit that an amount of Rs.73,79,000/- and Rs.35,93,025/- were disallowed being loss incurred in share trading as deemed speculation loss in assessment years 2001-02 and 2002-03. It was further submitted that by applying the same principles the assessee requested the Assessing Officer the benefit of adjusting speculation loss against the share trading income of the current assessment year. It was submitted that the Assessing Officer even though was specifically requested, did not consider this claim of the assessee and simply treated short term capital gain as business income without adjusting the loss determined by the Assessing Officer in the earlier years. It was submitted that if this additional ground is allowed, the assessee would not prefer Ground No.2. The learned Departmental Representative, however, submitted that as per the provisions of the Act, the earlier year’s determination as speculation loss has no bearing on the issue ITA.No.1506/Mum/2012 Standard Chartered Securities (India) Limited Assessment Year-2008-09 and further submitted that the orders in earlier years were not on record. Therefore, he is not in a position to offer his comments on the claim of the assessee. It was submitted that the Assessing Officer and the CIT (A) correctly treated the short term capital gain shown by the assessee as business income as the assessee was trading in the shares and units.
In reply the learned Counsel submitted that he has no objection if the matter is remitted back to the CIT (A) for consideration of the additional ground as the Hon'ble Bombay High Court in the case of Lokmat Holdings 322 ITR 43 has considered the scope of section 73 Explanation (2) and therefore, in view of the jurisdictional High Court judgment the assessee’s contention made before the Assessing Officer during the assessment should be allowed and if that is considered, there is no case for adjudicating the Ground No.2 as such.
We have considered the issue. The main dispute is with reference to treatment given to share transactions. Assessee treated them as investments where as AO treated them as Trading transactions. We were informed that in earlier years when assessee suffered Capital Loss the AO treated them as business loss and Speculation loss. As seen from the paper book placed, the assessee had made specific request to the Assessing Officer to set off speculation losses determined in earlier year’s consequent to change of head from short term capital loss to speculation loss on the same set of transactions. Therefore, we are of the opinion that this aspect of the claim has to be examined by the authorities, since earlier year orders were not available on record. Without going into merits of rival contentions, we are of the opinion that the additional ground being a legal ground can be admitted and we order accordingly. The issue in Ground No.2 and additional ground now admitted are inter-linked. In case the Assessing Officer treated the short term capital loss in earlier years as business income and consequently as speculation loss by virtue of provisions of section 73 Explanation (2), similar treatment is also required in this year. Respectfully following the principles laid down by the Hon'ble Bombay High Court in the case of Lokmat Holdings 322 ITR 43, the assessee’s contentions prima facie are to be allowed. Since it requires examination of the treatment given by AO in earlier years, we are of the opinion that the matter can be restored to the file of the CIT (A) who after giving due opportunity to the Assessing Officer and the assessee, should examine and consider the claim afresh. With these remarks, the issue in these grounds is restored to the file of the CIT (A) for fresh adjudication. Grounds are allowed for statistical purposes.
We find that a view has already been taken by the Tribunal in assessee’s own case on similar facts and circumstances. Therefore, respectfully following the same, we restore the issue back to the file of Ld. CIT(A) on similar lines. The ground of assessee’s appeal stands allowed for statistical purposes.