The Pr. Commissioner Of Income Tax -4 v. M/S Gda Finvest & Trade P. Ltd

$~2 IN THE HIGH COURT OF DELHI AT NEW DELHI +ITA 144/2017 & CM No. 5133/2017 THE PR. COMMISSIONER OF INCOME TAX -4 ..... AppellantThrough: Mr. Ruchir Bhatia, Adv.Through: Mr. Ruchir Bhatia, Adv. versus M/S GDA FINVEST & TRADE P. LTD...... RespondentThrough: Mr. Ved Jain, Mrs. Rano Jain and Mr.Pranjal Srivastava, Advs. CORAM:HON'BLE MR. JUSTICE S. RAVINDRA BHATHON'BLE MR. JUSTICE NAJMI WAZIRIO R D E R%10.03.2017 1.The question which the Revenue urges is whether in thecircumstances the ITAT’s findings that the amount declared by theassessee as short-term capital gain was erroneously accepted insteadof the proper inference that it was business income. 2.The assessee had inter alia reported a gain of ` 95,92,653/- forthe given period i.e. AY 2006-07.In addition, the assessee hadreported a much smaller figure as interest amount. The AO broughtto tax larger amount as business income rejecting the assessee’scontention that it was short-term capital gain. In doing so, the AOmerely relied upon the rulings of the Supreme Court in G.VenkataSwami Naidu & Co. V. CIT(1959) 35 ITR 594 (SC) as well as inSardar Indra Singh & Sons Ltd. Vs. CIT (1953) 24 ITR 415 (SC).After recounting the principles, the AO found as follows:ITA 144/2017Page 1 of 4 “.... The aforesaid principles as laid down by theHon'ble Supreme Court are clearly and squarelyapplicable in the case of the assessee. On perusal ofdetails filed by the assessee company it is seen that theshort term capital gain earned by assessee Company issquarely covered by above principle of Hon'bleSupreme Court and it cannot be treated under the head'Income from Short term capital gain'. In view of the detailed discussion made above, it isheld that the entire gains derived by the assessee fromthe purchase and sale of shares amounting to Rs.9592653/- which has been claimed by the assessee asshort term capital gain is taken as business income ofthe assessee and charged to tax accordingly. Since Iam satisfied that the assessee has filed incorrectparticulars of its income, penalty proceedings undersection 271(l)(c) are being initiated separately....” 3.The assessee’s appeal succeeded before the CIT(A) whichaccepted its plea thatthe amount was to be treated as short-termcapital gain rather than as business income. 4.The ITAT had to deal with the Revenue’s appeal which made abald ground for averment that instead of short-term capital gain thesame had to be brought to tax as business income. In paras 10 to 14of the order, the ITAT discussed the relevant facts as discerned by itand held inter alia as follows: “..... 11. It is an admitted fact that the assesseeduring the year has earned long term capital gain ofRs.14,27,860/-. This long term capital gain has beenaccepted by the A0 and whereas the short term capitalgain has been assessed as business income. From theassessment order, we find that no reason has been ITA 144/2017 Page 2 of 4 given by the AO to treat these two differently. From thebalance sheet of the assessee company of this year andalso earlier years it is evident that all along theassessee has been making investment in shares and thesamehavebeendeclaredasinvestment.Thesetransactions have been accounted for in the books ofaccount as investment. The dividend earned on suchinvestment has been declared separately. From thedetails filed by the assessee and available on record wenote that there are no multiple transactions. Theassessee has made investment and after a period oftime the same have been sold. Depending upon theperiod of holding the gain arising thereon have beendeclared as long term capital gain and short termcapital gain. From the details it is also evident thatthere are only few scripts in which assessee has madeinvestment. There are no repeated transactions in thesame script. There does not appear to be anyorganized activities as is normal in the case of atrader. There is no intra-day transaction...... ....... 13. An income has to be assessed under a properhead as per the ....... 13. An income has to be assessed under a properhead as per the provisions of the Income Tax Act. As per Section 45(1)of the Act, any gain arising on transfer of a capitalasset is to be taxed as capital gain. Further section2(14) define capital asset to mean property of any kindheld by an assessee whether or not earmarked for hisbusiness or profession, but does not include any stockin trade, consumable stores or raw material held forthe purpose of business. Thus the gain arising oncapital asset falling within the meaning as defined inSection 2(14) is to be charged as capital gain. 14. In the present case as is evident from the facts onrecord, the investments in shares were held as capitalasset. The assessee has accounted for these investmentsin shares as capital asset in its books of accounts. TheITA 144/2017Page 3 of 4 Page 3 of 4 same has also been declared in the financial statementsas capital asset. These financial statements have beenauditedandalsohavebeenapprovedbytheshareholders filed with the Registrar of Companies.The books of accounts and the audited financialstatementshaveevidentiallyvalueandwhatisrecorded therein cannot be disturbed lightly.Theincome arising on sale of capital asset, as statedhereinabove, has to be assessed under Section 45(1) ascapital gain and accordingly the CIT(A) was right inholding that gain arising on sale of investment will bechargeable as capital gain and not as businessincome.....” 5.The Revenue urges that the ITAT had acted in error inrendering factually incorrect findings contrary to the records and,therefore, this Court needs to interfere with the impugned order. 6.The Court is of the opinion that having regard to the concurrentnature of findings, under the circumstances the ITAT concededlywent by the record, it cannot be contended that there is an error of lawor a substantial error of law required under Section 260A of the Act.7.The appeal is, therefore, dismissed. S. RAVINDRA BHAT, J MARCH 10, 2017/kk NAJMI WAZIRI, J ITA 144/2017 Page 4 of 4