Tc/2012/2008 Of Smt Chandra Ramesh v. The Incometax Officer

IN THE HIGH COURT OF JUDICATURE AT MADRAS THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMand THE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN Smt. Chandra Ramesh,2, Vijayaraghava Road, T.Nagar Chennai-600 017...Appellant The Income-tax Officer,Ward I(1), Chennai-600 034...Respondent Tax Case Appeal filed under Section 260A of the Income-taxAct, 1961 against the order dated 07.05.2008 in I.T.A.No.708(Mds)/2005 on the file of the Income Tax Appellate ChennaiTribunal “A” Bench, Chennai for the assessment year 2001-02. against the Order of the Commissioner of Income Tax(Appeals-VI), Chennai -34, dated 13.12.2004 in ITA No.82/04-05,preferred against the Order of the Income Tax Officer, Ward I(1), Chennai dated 31.03.2004 in (PAN/GIR:AAAPR658L). This appeal, by the appellant/assessee filed under Section260A of the Income-tax Act, 1961 (hereinafter referred to as“the Act”), is directed against the order passed by the Income-tax Appellate Tribunal Chennai 'A' Bench (for brevity, “theTribunal”), dated 07.05.2008, in I.T.A.No.708(Mds)/2005 for theassessment year 2001-02. https://hcservices.ecourts.gov.in/hcservices/ in rejecting the consistent method of valuation ofshares at cost or market price whichever is lessand disallowing the corresponding loss? (ii) Whether on the facts and in thecircumstances of the case, the Tribunal failed toappreciate that it is the intention of theappellant and the manner in which the investmentis held that determines the character as towhether it is a long term investment or stock intrade? (iii) Whether on the facts and in thecircumstances of the case, the Tribunal was rightin ignoring the fact that profit on sale of shareshave been assessed as business income and loss onvalue of share has been allowed as a deduction inthe earlier year and has been accepted by thedepartment?” 3.We have heard Mr.R.Venkatanarayanan, learned counsel forM/s.Subbaraya Aiyar, Padmanabhan & Ramamani, learned counsel forthe appellant/assessee; and Mr.T.Ravi Kumar, learned SeniorStanding Counsel for the respondent/Revenue. 4.The short issue which falls for consideration is whether,the stocks which were shown in the investment account asinvestment only could be taken into consideration for claiming adeduction. The Assessing Officer while completing theassessment, vide order dated 31.03.2004, for the assessment yearunder consideration, recorded the following fact:- “Again the assessee has taken the market priceof the above shares as on 31.03.2001 and createdthe above provision for diminution and furtherclaimed it again as a loss. As per assessee's ownsubmission the above transaction is shown asinvestment. The very fact that they are takingthem into the investment account shows that theycannot be treated as closing stock. Further it ispurely notional and contingent. Assessee has alsoadmitted it to be a provision only. The assesseefailed to furnish any further evidence or detailsin this regard. As the claim is contingent andonly a provision, it cannot be an allowablededuction for the purpose of computing his profit.” 5.From the above, it is seen that the assessee had shown theshares as investment in the books of account and there was notrading activities. Consequently, the Assessing Officer heldthat it cannot be allowed as deduction for the purpose ofcomputing the profit of the assessee. 6.The assessee preferred appeal before the Commissioner ofIncome-tax (Appeals)-VI, Chennai (for brevity, “The CIT(A)”), inI.T.A.No.82/04-05. The said appeal was dismissed by order dated13.12.2004. The following factual finding was recorded by theCIT(A) to dismiss the assessee's appeal. 5.From the above, it is seen that the assessee had shown theshares as investment in the books of account and there was notrading activities. Consequently, the Assessing Officer heldthat it cannot be allowed as deduction for the purpose ofcomputing the profit of the assessee. 6.The assessee preferred appeal before the Commissioner ofIncome-tax (Appeals)-VI, Chennai (for brevity, “The CIT(A)”), inI.T.A.No.82/04-05. The said appeal was dismissed by order dated13.12.2004. The following factual finding was recorded by theCIT(A) to dismiss the assessee's appeal. “4.2.3..............From the details filed bythe appellant it is seen that the shares have beenheld by the appellant since as early as 1990. Theappellant herself has admitted that there was notrading in the shares. Therefore, I agree withthe Assessing Officer that the shares were held asinvestment and not as 'stock in trade'. Even inher accounts the appellant is showing these sharesas investment..........” 7.The assessee filed appeal before the Tribunal challengingthe order passed by the CIT(A), which was confirmed by theimpugned order. The Tribunal, which is the last fact findingauthority, went into the factual thicket and held that thereasons assigned by the CIT(A), affirming the reasons of theAssessing Officer are correct. 8.Mr.R.Venkatnarayanan, learned counsel submits that inrespect of the assessment for the years 1998-99, 1999-2000,2000-01 and 2003-04, the Tribunal had passed an order dated05.02.2010 in the appeals filed by the Department and remandedthe matter to the Assessing Officer for fresh consideration onthe very same issue. Further, it is submitted that theTribunal, in respect of the identical issue, for the assessmentyears 1998-99, 2000-01 and 2002-03 in the assessee's appeals,passed an order on 08.12.2017 remanding the matter to theAssessing Officer for fresh consideration. Therefore, it issubmitted that an opportunity should be given to the assessee toestablish that for the purposes of the Income-tax Act, 1961, theinvestment in share is a stock-in-trade. In support of hiscontention, the learned counsel placed reliance on the decisionof the High Court of Karnataka in the case of Karnataka BankLtd., vs. Assistant Commissioner of Income Tax reported in(2013) 356 ITR 0549 (Karnataka). 9.Mr.T.Ravi Kumar, learned Senior Standing appearing for theRevenue submitted that the Assessing Officer and the CIT(A) havethoroughly examined the facts and have specifically recordedthat no record was placed by the assessee to show that theshares are stock-in-trade. This factual finding was affirmed bythe Tribunal. Further, it was pointed out that the orderspassed by the Tribunal, dated 05.02.2010 and 08.12.2017, arefactually distinguishable and has drawn the attention of thisCourt to the reasons assigned by the Tribunal therein. Insupport of his contention, the learned counsel placed reliance on the decision of the High Court of Karnataka in the case ofKerala Small Industries Development Corporation Ltd., vs.Commissioner of Income Tax reported in (2004) 270 ITR 0452. 10.The assessee seeks for a remand to the Assessing Officerto redo the exercise and this argument is based on the twoorders passed by the Tribunal in the assessee's own case for theearlier years. on the decision of the High Court of Karnataka in the case ofKerala Small Industries Development Corporation Ltd., vs.Commissioner of Income Tax reported in (2004) 270 ITR 0452. 10.The assessee seeks for a remand to the Assessing Officerto redo the exercise and this argument is based on the twoorders passed by the Tribunal in the assessee's own case for theearlier years. 11.As rightly pointed out by Mr.T.Ravi Kumar, the Tribunalwhile passing an order of remand was conscious of the fact thatfor the year 2001-02, the Tribunal has dismissed the assessee'sappeal on 07.05.2008 (impugned herein). However, the Tribunalnoted that in the assessment year, which is under considerationin this appeal, the assessee did not produce any recordswhereas, before the Tribunal in those years which was concerned,the assessee had shown record that it was in trading activity.Therefore, the decisions of the Tribunal dated 05.02.2010 and08.12.2017 can be of no assistance for the assessee for thepresent assessment year, viz., 2001-02. Apart from that, theentire issue is factual and the two authorities and the Tribunalhave held that the assessee did not substantiate her plea byproducing any documents. Therefore, we cannot be called upon tore-examine the factual issues in an appeal filed under Section260A of the Act. 12.The decision in Karnataka Bank Ltd. (supra) can be of noassistance to the case of the assessee because, in the saidcase, it was found that the assessee maintained accounts interms of the Reserve Bank of India Regulations and he has shownit as investment, consistently, for more than two decades, ithas been shown as stock-in-trade and depreciation has beenclaimed and allowed. Therefore, the Court held thatnotwithstanding that in the balance sheet, it is shown asinvestment for the purpose of Income-tax Act, it is shown asstock-in-trade. On the facts and circumstances of the saidcase, the Court rendered such finding whereas, in the instantcase, there is absolutely no record placed by the assesseeeither before the Assessing Officer or before the CIT(A) orbefore the Tribunal to substantiate her stand. Therefore, thedecision in Karnataka Bank Ltd. (supra) cannot be applied to thefacts of the present case. 13.In the case of Kerala Small Industries DevelopmentCorporation Ltd. (supra), the Court had elaborately consideredmore or less an identical issue. In the said case, the KeralaSmall Industries Development Corporation Limited, the assessee,made investment in co-operative societies and the question waswhether it can be treated as stock-in-trade or a trading asset.After examining the memorandum and articles of association of the assessee-company, the Court took into consideration as towhat the word “business” connotes and held that it connotes somereal, substantial and systematic or organised course of activityor conduct with a set purpose. It further held that a singleand isolated transaction can be held to be conceivably capableof falling within the definition of “business” as being anadventure in the nature of trade provided the transaction bearsclear indicia of trade. Considering the facts of the said case,it was pointed out that the investment of the assessee in theco-operative societies cannot be treated as a trading activity,there was no purchase or sale involved, no such transaction andthat the transaction made by the assessee in the form of sharesin co-operative societies are only in the nature of capitalinvestments in furtherance of the objects of the company and notas trading capital or circulating capital of the assesseecompany. The decision in Kerala Small Industries DevelopmentCorporation Ltd. (supra) is a clear answer to the assessee'scase to hold that the assessee has not made out any ground tointerfere with the order passed by the Tribunal. 14.Thus, for the above reasons, the appeal filed by theassessee stands dismissed and the substantial questions of laware answered against the assessee. No costs. Assistant Registrar //True Copy// To1.The Income Tax Appellate Chennai Tribunal “A” Bench, Chennai. 2.The Income-tax Officer, Ward-I(1), Chennai-34. 3.The Commissioner of Income-tax (Appeals)-VI, 121, Mahathma Gandhi Road, Chennai-600 034. BP(CO)RV(30/11/2020)