Commissioner Of Income Tax-4 v. M/S. Harit Exports Ltd

sbw *1* IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 352 OF 2012 Commissioner of Income Tax-4 ..Appellant -Versus- M/s. Harit Exports Ltd...Respondent ........... Mr. Shashi Tulsiyan with Mr. P. C. Tripathi for the Appellant.Mr. A. R. Malhotra with Ms. Padma Divakar for the Respondent. ........... CORAM: S.C. DHARMADHIKARI AND B.P. COLABAWALLA, JJ. DATE :- 17[th] JULY, 2014 P.C.: 1]This appeal by the revenue challenges the order passed by the Income Tax Appellate Tribunal, Bench Mumbai, dated 29[th] June, 2001. The assessment year in question is 2005-06. 2]Mr. Malhotra, learned counsel, appearing on behalf of the revenue submits that the appeal raises three substantial questions of law. They are formulated by the revenue in the present memo of appeal itself and in that regard our attention was invited to para-6.1, 6.2 and 6.3. They read as under: “6.1Whether, on the facts and in the circumstances of the case, the Tribunal, in law, was right in holding that the nature of the transaction representing short-term capital gain is investment and not trading and allowing the claim of the Assessee? 6.2Whether, on the facts and in the circumstance of the case, the Tribunal, in law, was right in setting aside the issue of disallowance under section 14A to the file of the AO to decide the issue afresh in view of the decision of the jurisdiction of High Court in the case of Godrej & Boyce Manufacturing Pvt. Ltd. V/s. ACIT (328 ITR 81)? 6.3Whether, on the facts and in the circumstances of the case, the Tribunal, in law, was right in holding that the insurance premium paid by the assessee during the year is an allowable expenditure for the year in which it is paid, irrespective of the fact that the insurance policy covers the period of next financial year?” 3]In regard to the first question, Mr. Malhotra submits that the Tribunal was in complete error in reversing and upsetting the concurrent finding of facts. The transaction has not been appreciated in the proper *3* 5.itxa352.12 perspective. In that regard, our attention has been invited by Mr. Malhotra to the order of the Assessing Officer and his findings at page 24 and 25 of the paper book. It is submitted that the assessee has declared his business that of dealing in shares, debentures, derivatives and units of mutual fund. It had declared a short term capital gain and a long term capital gain. It had declared business income from dealing in shares and a sum of Rs.6,15,414/- as profits and gains of speculation business. Thus, the details were perused and what has come to notice of the Assessing Officer is the huge turnover. The sale and purchase of shares as detailed by the assessee and referred by the Assessing Officer would show that the transactions in the investment account are not isolated and with an intention to have any controlled stake in a enterprise or to enjoy fruits thereof. The assessee entirely devotes time to purchase and sale of shares. The scale of operation is huge. The assessee has held little over 4 scrips for a period of more than 6 months during the year and 5 scrips have been held for 3 to 5 months, while the remaining have been sold within a period of 30 days. The assessee, therefore, had no intent of holding on to the shares. The assessee has made massive borrowing to fund the investment portfolio so as to fulfill the requirement of trading. The details of borrowing are referred by Mr. Malhotra and he submits that the Assessing Officer has rightly summed up the calculation at running page 3/8 3/8 28 para 3.10 of his order. These findings of fact have been affirmed by the Commissioner and with regard to para-1.5 of the Commissioner's order, running page 44 has been referred to. Mr. Malhotra, therefore, submits that after referring to the tests laid down in the decisions of the Supreme Court, that the Tribunal has failed to note is that mere treating the transaction separately in the books of account would not assist the assessee in this case. These are not matters which the Tribunal could have reconsidered by re-appreciating and reappraising the factual materials. If the Tribunal does not hold that the concurrent findings are perverse, then, all the more, this question is a substantial question of law. 4]As far as question at para-6.2 is concerned, it is conceded by Shri Malhotra that the same is covered against the revenue and in favour of the assessee by a judgment of this Court in the case of Godrej & Boyce Manufacturing Pvt. Ltd. V/s. Assistant Commissioner of Income Tax reported in 328 ITR 81. 5]As far as third question is concerned, our attention is invited to para-11 of the Tribunal's order and it is submitted that the findings of fact rendered by the Assessing Officer that the assessee paid a premium only on the last date of the order, and therefore, the expenditure does not 4/8 pertain to the period relevant to the assessment year under consideration but to the next financial year and this findings of fact cannot be said to be in any way erroneous leave alone perverse. The third question also can be termed as a substantial question of law. 6]Learned counsel appearing for the assessee on the other hand, supported the order of the Tribunal and submitted that Tribunal's order refers to the admitted and undisputed facts, and therefore, its conclusion cannot be termed as perverse or vitiated by an error of law apparent on the face of the record. He, therefore, submits that neither of the questions can be termed as substantial question of law and the appeal should be dismissed. 7]With the assistance of the learned counsel appearing for the parties, we have perused the findings of the Assessing Officer, the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal. With regard to the first question, the Tribunal has referred to and extensively the facts. It has also referred to the rival contentions and arrived at a conclusion that the Assessing Officer having recorded the details of the transaction, it is clear that the Assessing Officer has treated the short term capital gain as trading transaction. No specific instance has been 5/8 *6* 5.itxa352.12 7]With the assistance of the learned counsel appearing for the parties, we have perused the findings of the Assessing Officer, the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal. With regard to the first question, the Tribunal has referred to and extensively the facts. It has also referred to the rival contentions and arrived at a conclusion that the Assessing Officer having recorded the details of the transaction, it is clear that the Assessing Officer has treated the short term capital gain as trading transaction. No specific instance has been 5/8 *6* 5.itxa352.12 mentioned except a share of Colgate Limited. The assessee purchased 26,500 shares out of which the 20,000 were held as investment and 6500/- were shown in trading portfolio. The Tribunal noted that there is no bar of trading in the share as well as keeping some scrips in the investment portfolio. The assessee has maintained a separate portfolio right from the beginning with regard to the transactions/investment and where the shares had been treated. The total number of transactions are only 27 during the entire period. This itself shows that the activity of sale and purchase of shares in the investment portfolio is not frequent. None of the transactions in the same scrips are repetitive. It is in these circumstances and finding that the volume of the investments as indicated in the separate portfolio is enough to indicate that the trading transactions have been undertaken from the income under this head and not borrowed funds that the Tribunal reversed the concurrent findings. It has been clarified in para-5, 5.2, and 5.3 of the order of the Tribunal that the facts and materials on records clearly establish the intention of the assessee at the time of acquiring the shares which are claimed as investment. They were for investment and not for trading. The balance sheet shows that the assessee's own fund is more than the investment made by the assessee and it is enough for indulging in the trading transactions. In such circumstances and going by the frequency of the transaction and applying 6/8 the relevant tests, the Tribunal rightly reversed the findings of fact . The Tribunal is a last fact finding authority and in this case we do not find that it is reversing the concurrent findings merely because another view is possible. If concurrent findings have been reversed because the materials and admitted facts have not been appreciated in the correct prospective, then, it was permissible for the Tribunal to step in and reverse the finding of the Assessing Officer and the Commissioner of Income Tax. 8]With regard to third question, it has been held by the Tribunal that there is no dispute regarding the allowability of keyman insurance. The disallowance was made by the Assessing Officer only because the assessee took the insurance policy on the last date of the financial year. The Assessing Officer treated, therefore, proportionate amount of the premium paid. This has been treated as pertaining to the next financial year. This bifurcation was not permissible. The expenditure came during the financial year relevant to the assessment year under consideration. Therefore, it was allowable. In the given facts and circumstances because the insurance policy cover is extended to the next financial year does not mean that the premium paid during the year under consideration is not an allowable expenditure. This is also a finding based on the peculiar facts and circumstances and in relation to the present assessee. These findings also cannot be termed as perverse or vitiated by any error of law apparent on the face of the record. 9]As a result of the above discussion, the appeal fails. It is accordingly dismissed. No costs. (B.P.COLABAWALLA, J.) (S.C. DHARMADHIKARI, J.) wadhwa