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Kaynet Capital Ltd, Mumbai vs ITO | ITAT Mumbai 2016 | BharatTax

KAYNET CAPITAL LTD,MUMBAI vs. ITO 4(3)(2), MUMBAI

ITA 8746/MUM/2011Status: DisposedITAT Mumbai28 March 2016AY 2003-044 pages

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Cases cited in this judgment

Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.

CIT v. Darshan Securities (P) Ltd.
341 ITR 556 · 2012 · HC
27 citing
CIT v. Pangal Vithal Nayak & Co. Pvt Ltd.
74 ITR 754 · 1969 · SC
4 citing

Income Tax Appellate Tribunal, “A”, BENCH MUMBAI

Before: SHRI R.C.SHARMA, AM & SHRI PAWAN SINGH, JM

Hearing: 23/12/2015Pronounced: 28/03/2016

O R D E R PER R.C.SHARMA (A.M): This is an appeal filed by the assessee against the order of CIT(A), Mumbai, dated 20-10-2011, for the assessment year 2003-04, in the matter of order passed u/s.143(3) of the I.T.Act, on the following grounds:- 1) In the facts and circumstances of the case and in law, the Assessing Officer erred in treating loss of Rs 13,05,973/- in respect of share trading activities as speculation loss and thereby disallowing set off of the same against income from brokerage etc. 2) In the facts and circumstances of the case and in law, the Assessing Officer erred in treating expenses of Rs 2,38,455/- attributable to share trading activities as speculation loss and thereby disallowing set off of the same against income from brokerage etc. 3) In the facts and circumstances of the case and in law, the Assessing Officer erred in disallowing professional charges of Rs.6,40,000/- paid to director without any comparable case or without any justification.

1.

2 4) In the facts and circumstances of the case and in law, the Ld Commissioner of Income Tax (A) also erred in confirming above additions.

2.

Rival contentions have been heard and record perused. Facts in brief are that the assessee is a share broker and member of Stock Exchange Mumbai and accordingly carried out business of shares and securities broking. During the course of assessment the AO disallowed assesse’s claim for set off of share loss arising out of purchase and sale of shares by treating same as speculation loss under Explanation to Section 73. By the impugned order CIT(A) confirmed the action of AO against which assessee is in appeal before us.

3.

We have considered rival contentions and found that assessee was having income from business and also income from other sources in the form of dividend income. As the assessee was having business loss out of purchase of sale and shares more than the income from other sources the AO disallowed assessee’s claim for set off of such loss by invoking provisions of Explanation to Section 73 of I.T.Act.

4.

By the impugned order the CIT(A) confirmed the action of AO by observing as under :- “The assessee traded on its own account in certain shares. It is also not disputed that the appellant is neither a company engaged in business of giving loans and advances as banking company or as NBFC and hence it is not excluded from the purview of explanation to Section 73 of the Act. The assessee’s P&L Account shows that it had earned income from dividend of Rs.7,81,182/- but the same was offered as business income. The AO has discussed that the appellant’s management of various expenses was just to reduce the business income in such a way that it is less than the dividend income. This was as argued by the AO, done in order to save the assessee’s case from the provision of Explanation to Section 73 of the Act. Whether explanation to Section 73 is applicable in the present case or not, the available judgements of the Tribunal in the 3 case of Aman Portfolio (P) Ltd. vs DCIT (supra) and HSBC Securities & Capital Market (I) Pvt. Ltd. Vs JCIT(supra) and also in the case of DCIT vs Frontline Capital Services L td (2005) 96 TTJ (Del) 201 have to be considered. It is noticed that the judgment of Tribunal in the case of Aman Portfolio (P) Ltd. vs DCIT (supra) was over ruled in the case of DCIT vs Frontline Capital Services Ltd (supra) and this judgement of Delhi Bench of Tribunal in the case (supra), was neither cited before the Bench in the case of HSBC Securities & Capital Market (I) Pvt. Ltd. Vs JCIT(supra), nor was perhaps available because the decision in the case of DCIT vs Frontline Capital Services L td (supra) is dated 30th June 2005 whereas the Tribunal's judgement in the case of HSBC Securities & Capital Market (I) Pvt: Ltd. Vs JCIT(supra) is dated 14.07.2005. Therefore the judgment of jurisdictional ITA T in the case of KNC Shares & Securities (P) L td as per ITkNo.7420/6782/M/03 dated 22.08.2006 is very relevant because the said judgement has considered the case of HSBC Securities & Capital Market (I) Pvt. Ltd. Vs JCIT(supra) and also the case of Aman Portfolio (P) Ltd. vs DCIT (supra) and also the case of DCIT vs Frontline Capital Services L td (supra) and after considering all these judgements it was held by the Hon'ble Tribunal in the case of KNC Shares & Securities (P) Ltd(supra) that set off of loss arising from purchase and sale of shares should not be allowed against income from brokerage. The ITAT relied upon various judgement in the support of contention that explanation to Section 73 was applicable under these circumstances. Respectfully following the decision of Tribunal in the case of KNC Shares & Securities (P) Ltd vs ACIT (supra). The action of the LAO in treating the amount of Rs.13,05,193/- as speculation business loss is confirmed. There is no element of speculation in the commission income received by the appellant and where such appellant sustains any loss from his own speculation business, then such commission cannot be reduced from speculation loss. Reliance is placed on the Hon'ble Apex Court decision in the case of CIT vs Pangal Vithal Nayak & Co. Pvt Ltd (1969) 74 ITR 754 (SC). Grounds of appeal