THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 07.01.2010
+ ITA 726/2009
THE COMMISSIONER OF INCOME TAX - III ... Appellant
- versus -
SMC CREDIT LIMITED ... Respondent
Advocates who appeared in this case:
For the Appellant : Ms Rashmi Chopra
For the Respondent : Mr O.S. Bajpai, Sr Advocate with Mr V.N. Jha and
Mr Bibhuti Kumar Singh
CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE SIDDHARTH MRIDUL
1. Whether Reporters of local papers may be allowed to
see the judgment ?
2. To be referred to the Reporter or not ?
3. Whether the judgment should be reported in Digest ?
BADAR DURREZ AHMED, J (ORAL)
1. In this appeal filed by the revenue against the order dated
17.10.2008 passed by the Income-tax Appellate Tribunal in ITA
No.1133/Del/06 pertaining to the assessment year 1998-99, the issue relates
to the loss of Rs 18,06,620/- claimed by the respondent / assessee as a
trading loss on account of transactions in shares. The Assessing Officer as
well as the Commissioner of Income-tax (Appeals) held that the shares in
respect of which the loss is claimed were in the nature of investment and,
therefore, the loss incurred in respect thereof would be capital loss and not a
business / trading loss.
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2. The Income-tax Appellate Tribunal, however, found as a fact that
the shares in question were held as stock-in-trade. The learned counsel for
the revenue drew our attention to an order dated 12.10.2004, whereby the
Appellate Tribunal, in respect of this very assessment year, had, in the first
round, set aside the order dated 09.04.2001 passed by the Commissioner of
Income-tax (Appeals), who had deleted the loss of Rs 18,06,620/- incurred
on the sale of the said shares and directed that the same be treated as a
business loss instead of a capital loss as treated by the then Assessing
Officer. The Tribunal, in the first round, by virtue of its order dated
12.10.2004, set aside the decision of the Commissioner of Income-tax
(Appeals) and remanded the matter to the Assessing Officer with a direction
to pass a reasoned order with specific reference to the material on record
and to come to a conclusion afresh after giving a reasonable opportunity of
being heard to the assessee.
3. It is thereafter that the Assessing Officer re-examined the matter
and came to the conclusion that the shares were held as investment and the
same were shown to be investments in Schedule-4 of the balance sheet.
Similarly, it was also pointed out in the assessment order that the shares,
which were held as stock-in-trade for the purposes of earning business
income, had been separately reflected by the assessee in Schedule-5 of the
balance sheet. Thus, going by the presentation of the accounts and the
balance sheet given by the assessee itself, the Assessing Officer held that
the shares in question were held by the assessee not as stock-in-trade, but as
an investment and consequently, the loss incurred in respect thereof would
ITA No.726/2009 Page No.2 of 5
be a capital loss and not a business or trading loss. The same view was
taken by the Commissioner of Income-tax (Appeals) in his order dated
14.02.2006.
4. Being aggrieved by the fresh assessment and the order passed in
appeal by the Commissioner of Income-tax (Appeals), the respondent /
assessee preferred the said appeal (ITA 1133/Del/06) before the Income-tax
Appellate Tribunal pertaining to the assessment year 1998-99, which was
allowed by the Tribunal by the order dated 17.10.2008, which is impugned
before us. From the impugned order, it is apparent that on behalf of the
assessee, it was argued that the presentation of accounts in the balance sheet
for the assessment years 1996-97 and 1997-98 were identical to the
presentation of accounts in the balance sheet in the current year, i.e.,
assessment year 1998-99. More particularly, it was pointed out that in the
earlier years also, though some of the shares were shown as investment,
they, in fact, represented stock-in-trade. It had been contended before the
Tribunal, on behalf of the assessee, that the frequency of transactions
indicated that the assessee was dealing with the shares on the trading
account and that the nomenclature of the entries in the books of accounts
was not conclusive with regard to the actual nature of transactions. On the
other hand, strong reliance was placed on the orders of the Assessing
Officer and that of the Commissioner of Income-tax (Appeals) by the
departmental representative.
5. The Tribunal, after examining the records of the case and on a
comparative analysis of the presentation of the accounts of transactions
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done in the earlier years as well as the year in question, came to the
conclusion that there had been no change in the fact situation with regard to
the presentation of accounts. It was also found as a fact that the assessee
had significant frequency in dealing with the shares and that the same really
constituted stock-in-trade though they were shown as investment in the
books of accounts. It was specifically noted that in the year in question,
there were more than one hundred transactions in shares in which the loss
had been incurred. The Tribunal found as a fact that the loss was a result of
a systematic activity in relation to shares and, therefore, it came to the
conclusion that the loss claimed by the assessee should have been accepted
as a business loss. Consequently, the Tribunal accepted the assessee’s
contention having regard to the facts and circumstances of the case as
prevailing in the current year as well as that in the earlier years.
6. In view of the foregoing, we are of the opinion that the findings
sought to be challenged before us are in the nature of factual findings and
no question of law, what to speak of a substantial question of law, arises for
our consideration. Although it was sought to be argued that a question on
perversity could be framed, on going through the impugned order as well as
the orders of the lower authorities, we do not find any substance in such a
plea. A finding of fact has been returned with regard to the nature of the
loss in respect of the year in question after the Tribunal examined the
material on record. Consequently, no interference is called for. It is
obvious that such factual matters require examination in the context of the
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assessment year in question and the findings so recorded are relevant for
that year. The fact situation may be different in future assessment years.
7. Anyhow, no substantial question of law arises for our
consideration in this appeal. The same is dismissed.
BADAR DURREZ AHMED, J
SIDDHARTH MRIDUL, J
January 07, 2010
dutt
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