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Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
Before: Shri A. T. Varkey, JM & Shri Waseem Ahmed, AM]
ORDER Per Shri A.T.Varkey, JM
This is an appeal filed by the revenue against the order of Ld. CIT(A)-XII, Kolkata dated 19.11.2013 for AY 2009-10. 2. The first ground raised by the revenue is against the order of the Ld. CIT(A) in allowing the loss in shares amounting to Rs.17,67,845/- as business loss instead of capital loss.
The brief facts of the case is that the AO during the assessment proceedings noted that the assessee has purchased five scrips on 14.03.2008 and sold the same on 04.11.2008 through stock broker DSP Merillynch. It was noted by the AO that in the entire year there was no other transactions except for these transactions. However, the assessee has claimed the same as business transaction and has debited Rs.1,00,92,237/- as expenses against the sale of shares of Rs.17,67,845/-. The AO noted that there was no other business of the assessee other than the real estate and this investment. Therefore, the AO asked the assessee as to why the sale of shares should not be considered as yielding capital gain and not income from business. The assessee submitted that it incurred establishment expenses of Rs.86.04 lacs. It was pointed out
Pressman Realty Ltd.., AY 2009-10 by the assessee that in the instant year there was wide fluctuation in the market , therefore, the research team of the assessee company took a conscious decision against any trading in shares in the market till the general market sentiment gets improved. Fearing that there was every likelihood of incurring loss in trading of shares, so it was avoided anticipating substantial loss. It was also pointed out to the AO that the BSE Sensex has come down from 17480 to as low as 8047 by the end of the year. So it was pointed out to the AO that the company decided not to trade in shares for this particular reason and invested Rs.3406 lacs in various mutual funds and have redeemed Rs.3000 lacs during the year. It was brought to the knowledge of the AO that the company maintains a full fledged establishment for trading in shares which has research team which prepares the market reports and analyse the market sentiment and the decision of trading in shares are to be taken after extensive research and analysis and after report submitted by the research executives engaged by the assessee to study the share market. The AO did not accept the reply given by the assessee and held that the loss from the sale of shares is considered as short term capital loss. Aggrieved, assessee preferred an appeal before the ld. CIT(A), who was pleased to allow the appeal of the assessee by observing as under:
“I have considered the submissions put forth on behalf of the appellant and the findings of the AO. I find from the assessment order that as per the AO there was only one transaction of sale of shares, that only opening stock of shares which was sold, that in last five years the share business was negligible and substantial part of the activity of the appellant was that of earning of rent and maintenance charges. Therefore as per the AO the shares were held as investments and there was no trading of shares and business income is to be computed at nil. In my opinion, the action of the AO is not sustainable…………” Aggrieved by the aforesaid order of the Ld. CIT(A) the revenue is before us.
We have heard rival submissions and perused the material available on record. We note that the five scrips in question were purchased by the assessee on 14.03.2008 and were shown by the assessee as stock in trade which has been accepted by the AO in the previous assessment year done u/s. 143(3) of the Act and it has been taken as the opening stock in trade on 01.04.2008. When the AO has accepted in the previous assessment year that the scrips in question as stock-in-trade, the AO without valid
Pressman Realty Ltd.., AY 2009-10 reason cannot hold that the opening stock in trade has to be treated as investment. The Ld. AR drew our attention to the scrutiny assessment carried out by the AO u/s. 143(3) of the Act for the AY 2008-09 to support the said fact. The Ld. CIT(A) has taken note of the fact that the assessee has purchased and sold the trading shares in question and have routed the transaction through P&L Account. The assessee had shown the shares as stock in trade and the AO u/s. 143(3) of the Act for AY 2008-09 has accepted it as stock in trade and, therefore, the assessee has shown the scrips in question as opening stock in trade as on 01.04.2008. Since there is no change in facts from the earlier assessment year and when in the earlier year AO is permitting the treatment given by the assessee for the very same shares as stock-in-trade, then in the instant assessment year without change in the facts or law, the AO ought not to have treated the shares as investment and not as stock-in-trade. The CBDT Circular No. 6 of 2016 on 29.02.2016 has noted the dispute which consistently arose in respect to treatment of trading of shares as business or investment in shares. From a perusal of para 3(a) of the said circular, we note that the CBDT has given clear direction that where the assessee has treated the listed shares and securities as stock-in-trade, irrespective of the period of holding, the income arising from transaction of such shares/securities would be treated as its business income. The only condition expressed by the CBDT Circular is that once the assessee has taken a stand in an assessment year that he is trading in shares as business, or as investment, then he should not change, which means that the assessee should be consistent. We note that the assessee in AY 2008-09 has treated the said five scrips purchased as stock in trade which was accepted by the AO and the same was the opening stock for the instant assessment year i.e. as on 01.04.2008, therefore, as per the Circular of the CBDT, since the assessee has taken a stand that the shares are stock in trade then irrespective of the time of holding, the income arising from the transaction of such shares needs to be treated as business income. Therefore, the Ld. CIT(A) has rightly treated the same as business income and we do not find any infirmity in the order of the ld. CIT(A) and, therefore, we dismiss this ground of appeal of the revenue.
5. The next ground is against the action of the Ld. CIT(A) in holding the interest income as business income in place of income from other sources as held by the AO.
Pressman Realty Ltd.., AY 2009-10 6. The brief facts of the case are that the assessee has received interest income of Rs.4,72,281/- in the instant assessment year and claimed it as business income, however, the AO has treated the same as income from other sources. On appeal the ld CIT(A),upheld the assessee’s contention. Aggrieved by the said action of the ld CIT(A), the revenue is before us.
7. We have heard both the parties and perused the records. From the assessment order, we do not find any discussion by the AO on treating the interest income as income from other sources. During the appellate proceedings, it was brought to the knowledge of the Ld. CIT(A) that the assessee is also in the business of granting of loans and advances, therefore, the interest income has to be treated as income from business and not from the other sources. All throughout the earlier years the interest income of the assessee was consistently being accepted by the AO as business income and that only in this year there was a somersault done on this issue and that too without confronting the assessee in case the AO had any reservation on this issue. The Ld. CIT(A) also took note of the fact that there is not even a single word or reason in the assessment order to depart from the consistent view followed by the department and to change the view to treat the interest income as income from other sources there should be some change in facts or law, which is admittedly absent in this case. When the fact remains that the assessee is into the business of granting loans and advances, certainly the interest income of the assessee would be business income and the Ld. DR was unable to controvert the said fact before us. Therefore, we do not find any infirmity in the order of Ld. CIT(A) and we dismiss this ground of appeal of the revenue.
In the result, the appeal of revenue is dismissed.