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The Commissioner of Income Tax, Cochin v/s Parry Agro Industries Ltd., W. Island, Kochi


Company & Directors' Information:- K. N. C. AGRO LIMITED [Active] CIN = U01500WB2005PLC102657

Company & Directors' Information:- F AND K AGRO PRIVATE LIMITED [Active] CIN = U01111PN1980PTC014563

Company & Directors' Information:- PARRY AGRO INDUSTRIES LIMITED [Active] CIN = U01132TN2011PLC079800

Company & Directors' Information:- R K B AGRO INDUSTRIES LIMITED [Active] CIN = L17100KA1979PLC003492

Company & Directors' Information:- R T AGRO PRIVATE LIMITED [Active] CIN = U15400MH1988PTC122934

Company & Directors' Information:- N M AGRO PRIVATE LIMITED [Active] CIN = U15209DL2000PTC103461

Company & Directors' Information:- K F AGRO PRIVATE LIMITED [Active] CIN = U01132PB1998PTC021937

Company & Directors' Information:- T K M AGRO LIMITED [Active] CIN = U01119TZ2000PLC009159

Company & Directors' Information:- J R AGRO INDUSTRIES PRIVATE LIMITED [Active] CIN = U15342UP1982PTC005792

Company & Directors' Information:- B M AGRO INDUSTRIES LIMITED [Active] CIN = U74899DL1992PLC049988

Company & Directors' Information:- R S AGRO INDUSTRIES PRIVATE LIMITED [Active] CIN = U15319DL1998PTC097025

Company & Directors' Information:- S N T AGRO INDUSTRIES PRIVATE LIMITED [Active] CIN = U01122DL1997PTC086925

Company & Directors' Information:- M S AGRO PRIVATE LIMITED [Active] CIN = U01403WB2011PTC163653

Company & Directors' Information:- S K K AGRO PRIVATE LIMITED [Active] CIN = U01110DL2007PTC163157

Company & Directors' Information:- INCOME INDUSTRIES PRIVATE LIMITED [Active] CIN = U02411MP1989PTC005351

Company & Directors' Information:- D D AGRO INDUSTRIES LIMITED [Active] CIN = U24219PB1999PLC022487

Company & Directors' Information:- P N AGRO PVT LTD [Active] CIN = U01401WB1992PTC056261

Company & Directors' Information:- B R V AGRO PRIVATE LIMITED [Strike Off] CIN = U15139UP2007PTC034299

Company & Directors' Information:- A A AND A AGRO LIMITED [Converted to LLP] CIN = U01111DL1986PLC025101

Company & Directors' Information:- S S D AGRO INDUSTRIES PRIVATE LIMITED [Active] CIN = U15100MH1998PTC113744

Company & Directors' Information:- B. P AGRO INDIA PRIVATE LIMITED [Active] CIN = U15132DL2019PTC357421

Company & Directors' Information:- M Y AGRO PRIVATE LIMITED [Active] CIN = U51221DL2011PTC215043

Company & Directors' Information:- S. A. B. INDIA AGRO INDUSTRIES LIMITED [Active] CIN = U01403UP2009PLC038365

Company & Directors' Information:- U K AGRO INDUSTRIES PRIVATE LIMITED [Strike Off] CIN = U15114UP2003PTC028107

Company & Directors' Information:- H R D AGRO PRIVATE LIMITED [Active] CIN = U15490PB2006PTC030412

Company & Directors' Information:- R. K. AGRO INDUSTRIES PRIVATE LIMITED [Under Process of Striking Off] CIN = U15410WB2012PTC180269

Company & Directors' Information:- C F L AGRO PRIVATE LIMITED [Strike Off] CIN = U01409KA2001PTC028797

Company & Directors' Information:- R J AGRO INDUSTRIES PRIVATE LIMITED [Strike Off] CIN = U15311KA2005PTC035485

Company & Directors' Information:- S O I AGRO INDUSTRIES PRIVATE LIMITED [Strike Off] CIN = U15310GJ2010PTC059966

Company & Directors' Information:- L K AGRO PRIVATE LIMITED [Active] CIN = U15140MH1998PTC115185

Company & Directors' Information:- PARRY AND COMPANY LIMITED [Dissolved] CIN = U65991TN1928PLC001985

Company & Directors' Information:- H D AGRO PRIVATE LIMITED [Strike Off] CIN = U01111MH1996PTC097451

Company & Directors' Information:- P C L AGRO PRIVATE LIMITED [Active] CIN = U74899DL1992PTC049537

Company & Directors' Information:- A S AGRO PRIVATE LIMITED [Active] CIN = U74899DL1989PTC040467

Company & Directors' Information:- S N N AGRO PRIVATE LIMITED [Active] CIN = U01114JH2016PTC008919

Company & Directors' Information:- R R S AGRO PRIVATE LIMITED [Strike Off] CIN = U15139DL2010PTC209756

Company & Directors' Information:- S I P AGRO INDUSTRIES LIMITED [Strike Off] CIN = U01403WB2012PLC188362

Company & Directors' Information:- AGRO PRIVATE LIMITED [Strike Off] CIN = U51101KA1962PTC001475

Company & Directors' Information:- S. S. AGRO INDUSTRIES PRIVATE LIMITED [Active] CIN = U15490PN2013PTC146574

Company & Directors' Information:- D. J. AGRO PRIVATE LIMITED [Strike Off] CIN = U01112DL1994PTC057414

Company & Directors' Information:- G A AGRO PRIVATE LIMITED [Active] CIN = U01229KL2002PTC015736

Company & Directors' Information:- M K B AGRO PRIVATE LIMITED [Active] CIN = U01100MH1996PTC101802

Company & Directors' Information:- T D K AGRO PRIVATE LIMITED [Active] CIN = U29190BR1991PTC004486

Company & Directors' Information:- S G AGRO PRIVATE LIMITED [Active] CIN = U01122KA1995PTC017091

Company & Directors' Information:- J J AGRO INDUSTRIES PRIVATE LIMITED [Active] CIN = U15130MH1980PTC023302

Company & Directors' Information:- A R AGRO INDUSTRIES PRIVATE LIMITED [Active] CIN = U74899DL1992PTC050526

Company & Directors' Information:- AGRO INDIA PRIVATE LIMITED [Active] CIN = U01407AR2013PTC008381

Company & Directors' Information:- U & V AGRO PRIVATE LIMITED [Active] CIN = U01403TZ2015PTC021823

Company & Directors' Information:- B A B AGRO LTD [Strike Off] CIN = U24231MH1993PLC073114

Company & Directors' Information:- G S AGRO INDUSTRIES PVT LTD [Active] CIN = U01132WB1990PTC049960

Company & Directors' Information:- D V AGRO INDUSTRIES PRIVATE LIMITED [Active] CIN = U74899DL1993PTC051892

Company & Directors' Information:- B A B AGRO LTD [Active] CIN = U24233WB1987PLC043179

Company & Directors' Information:- B C M AGRO PRIVATE LIMITED [Active] CIN = U01119WB1999PTC090308

Company & Directors' Information:- K. K. AGRO PVT. LTD. [Strike Off] CIN = U51420WB1987PTC042090

Company & Directors' Information:- COCHIN CO PRIVATE LIMITED [Strike Off] CIN = U74999KL1963PTC002029

Company & Directors' Information:- H & W AGRO PRIVATE LIMITED [Strike Off] CIN = U01400MH2012PTC238144

Company & Directors' Information:- K D AGRO PRIVATE LIMITED [Converted to LLP] CIN = U15312DL2005PTC131996

Company & Directors' Information:- H R AGRO PRIVATE LIMITED [Active] CIN = U01119PB1995PTC016403

Company & Directors' Information:- C K N AGRO PRIVATE LIMITED [Active] CIN = U01300KL2020PTC064742

Company & Directors' Information:- P AND G AGRO INDUSTRIES P LTD [Strike Off] CIN = U99999UP1985PTC007509

Company & Directors' Information:- R. K. G. S. AGRO INDUSTRIES PRIVATE LIMITED [Active] CIN = U15100UP2017PTC097391

Company & Directors' Information:- A Q AGRO PVT LTD [Under Process of Striking Off] CIN = U51209WB2006PTC109930

Company & Directors' Information:- S E AGRO PRIVATE LIMITED [Active] CIN = U52500AP2016PTC103446

Company & Directors' Information:- S U B AGRO PRIVATE LIMITED [Active] CIN = U24129PN2000PTC015404

Company & Directors' Information:- A S G AGRO LIMITED [Strike Off] CIN = U01119HR2004PLC035459

Company & Directors' Information:- T & T AGRO PRIVATE LIMITED [Active] CIN = U01132WB1999PTC090368

Company & Directors' Information:- C L AGRO PRIVATE LIMITED [Strike Off] CIN = U74120UP2012PTC051898

Company & Directors' Information:- P M S AGRO PVT LTD [Strike Off] CIN = U29211PB1994PTC014448

Company & Directors' Information:- AGRO ISLAND PRIVATE LIMITED [Active] CIN = U52335MP2019PTC049892

Company & Directors' Information:- B R K AGRO PRIVATE LTD [Strike Off] CIN = U29211PB1994PTC014302

Company & Directors' Information:- R E I AGRO LTD. [Active] CIN = U01111WB1994PLC065082

Company & Directors' Information:- V G AGRO INDUSTRIES LIMITED [Strike Off] CIN = U01400DL1993PLC051666

Company & Directors' Information:- P & S AGRO INDIA LIMITED [Strike Off] CIN = U01403MH2011PLC214782

Company & Directors' Information:- D N D AGRO (INDIA) LIMITED [Active] CIN = U01403PN2011PLC139235

Company & Directors' Information:- L C A AGRO PRIVATE LIMITED [Strike Off] CIN = U01112UP2005PTC029657

Company & Directors' Information:- V M G AGRO INDIA LIMITED [Active] CIN = U01100MP2011PLC026434

Company & Directors' Information:- G D AGRO PRIVATE LIMITED [Strike Off] CIN = U24122UP1993PTC015164

Company & Directors' Information:- P B AGRO PRIVATE LIMITED [Amalgamated] CIN = U26960MH1990PTC057137

Company & Directors' Information:- R A P AGRO INDIA PVT LTD [Strike Off] CIN = U14200WB2006PTC107514

Company & Directors' Information:- G T AGRO INDIA PRIVATE LIMITED [Strike Off] CIN = U74899DL2005PTC142577

Company & Directors' Information:- F AND K AGRO PVT LTD [Strike Off] CIN = U29248PN1980PTC022759

Company & Directors' Information:- T S AGRO INDUSTRIES PVT LTD [Strike Off] CIN = U15209UP1987PTC008974

Company & Directors' Information:- E M AGRO (INDIA) PRIVATE LIMITED [Strike Off] CIN = U02001UP1997PTC022261

Company & Directors' Information:- J S AGRO PRIVATE LIMITED [Strike Off] CIN = U01300PB1993PTC013943

Company & Directors' Information:- A N AGRO PRIVATE LIMITED [Strike Off] CIN = U01119DL1996PTC081855

Company & Directors' Information:- V R L AGRO PRIVATE LIMITED [Strike Off] CIN = U85110KA1999PTC024717

Company & Directors' Information:- B AND P AGRO INDUSTRIES PRIVATE LIMITED [Strike Off] CIN = U01110MH1972PTC015574

Company & Directors' Information:- P. S. R. AGRO PRIVATE LIMITED [Active] CIN = U24248UP1974PTC004017

Company & Directors' Information:- O N AGRO PRIVATE LIMITED [Active] CIN = U74899DL1988PTC031986

Company & Directors' Information:- P V R K AGRO INDUSTRIES PVT LTD [Strike Off] CIN = U01119AP1988PTC008395

Company & Directors' Information:- K R S AGRO PRIVATE LIMITED [Strike Off] CIN = U01400PN2011PTC141711

Company & Directors' Information:- J K AGRO PRIVATE LIMITED [Strike Off] CIN = U74900PY2011PTC002548

Company & Directors' Information:- W B S AGRO PRIVATE LIMITED [Active] CIN = U01122PB2003PTC025879

Company & Directors' Information:- K R P AGRO INDUSTRIES PVT LTD [Active] CIN = U01110MH1991PTC062304

Company & Directors' Information:- G T M AGRO PRIVATE LIMITED [Strike Off] CIN = U01100MH2005PTC150816

Company & Directors' Information:- Y K AGRO PRIVATE LIMITED [Converted to LLP and Dissolved] CIN = U74999DL2013PTC250398

Company & Directors' Information:- N P M AGRO PRIVATE LIMITED [Strike Off] CIN = U15494DL2011PTC214942

Company & Directors' Information:- B L B AGRO PRIVATE LIMITED [Strike Off] CIN = U51200DL2012PTC244511

Company & Directors' Information:- D A AGRO PRIVATE LIMITED [Active] CIN = U74900DL2015PTC288168

Company & Directors' Information:- D. B. AGRO PRIVATE LIMITED [Active] CIN = U01100MP2010PTC025035

    I.T.A. Nos. 59 & 1534 of 2009 & 33 of 2014

    Decided On, 28 January 2019

    At, High Court of Kerala

    By, THE HONOURABLE MR. JUSTICE K. VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON

    For the Appearing Parties: P.K.R. Menon, Sr. Counsel, Jose Joseph, SC, P. Gopinath, E.K. Nandakumar, Sr. Advocates, Joson Manavalan, K. John Mathai, Kuryan Thomas, M. Gopikrishnan Nambiar, P. Benny Thomas, Preetha S. Nair, Raja Kannan, Advocates.



Judgment Text


Vinod Chandran, J.

[ITA 59/2009, ITA.33/2014, ITA.1534/2009]

1. These appeals are connected, insofar as the questions of law raised. The question arises essentially from the order impugned in I.T.A.No.1534/2009 and in the identical order impugned in the other appeals both relating to the same company for the year 1991-92, the Tribunal followed its earlier order.

2. The questions of law arising in the appeal of the Revenue, as re-framed by us, are as follows:

i) Whether on the facts and circumstances of the case the Tribunal was correct in having found Section 94(4), not applicable to the specific transactions of the assessee, resulting in a loss which was not reckoned for computation of profits and gains as provided in sub-section (4) of Section 94, being allowed?

ii) Whether the Tribunal was correct in having found that the assessee does not have a business consisting wholly or partly in dealing in securities for reason only of the Assessing Officer having treated the loss on sale of securities as capital loss in an earlier year and the same having acquired finality at the Tribunal stage, with the Revenue accepting the same ?

3. The transactions by virtue of which the Assessing Officer invoked Section 94 is purchase and sale of units. Admittedly, the assessee had purchased units of the Unit Trust of India in the earlier years and also in the subject year and sold a considerable portion of the same in the subject year itself. For the units/bonds purchased and held for about 25 months, short term capital gain of Rs.22,81,871/- was computed. The assessee claimed a loss of Rs.2,14,65,000/-, which was claimed as loss occurred on the purchase and sale of the units in the very same year. The assessee disclosed in its accounts and the returns, the interest income obtained from such investments made in units, which was purchased and sold in the very same year. This was exempted under Section 10(15) of the Income Tax Act, 1961 (for short “the Act”).

4. The Assessing Officer found that sub-section (4) of Section 94 would be applicable and disallowed the same. The First Appellate Authority also concurred. The Tribunal, however, reversed the dis-allowance on the ground that sub-section (4) of Section 94 is not applicable to the assessee for reason of the assessee being not an owner of the shares as provided under sub-section (1) of Section 94 and also since the assessee did not have a business wholly or partly in securities. We have heard the Senior Standing Counsel for the Revenue and the learned Senior Counsel for the assessee.

5. The entire issue revolves on the interpretation of Section 94. We find that sub-sections (1) and (4) of Section 94 are interconnected, which are extracted hereunder:

“94. Avoidance of tax by certain transactions in securities.—(1) Where the owner of any securities [in this sub-section and in sub-section (2) referred to as ?the owner] sells or transfers those securities, and buys back or reacquires the securities, then, if the result of the transaction is that any interest becoming payable in respect of the securities is receivable otherwise than by the owner, the interest payable as aforesaid shall, whether it would or would not have been chargeable to income-tax apart from the provisions of this sub-section, be deemed, for all the purposes of this Act, to be the income of the owner and not to be the income of any other person.

Explanation.—The references in this subsection to buying back or reacquiring the securities shall be deemed to include references to buying or acquiring similar securities, so, however, that where similar securities are bought or acquired, the owner shall be under no greater liability to incometax than he would have been under if the original securities had been bought back or reacquired.

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(4) Where any person carrying on a business which consists wholly or partly in dealing in securities, buys or acquires any securities and sells back or retransfers the securities, then, if the result of the transaction is that interest becoming payable in respect of the securities is receivable by him but is not deemed to be his income by reason of the provisions contained in subsection (1), no account shall be taken of the transaction in computing for any of the purposes of this Act the profits arising from or loss sustained in the business.”

6. The assessee as the owner of securities did not sell the shares owned by it and then repurchase it and hence there is no applicability of sub-section (1). The contention of the Revenue also is that the purchase and sale of the units carried out by the assessee in the subject year was from persons, who would fall under sub-section (1) and for that reason the assessee would come within the ambit of sub-section (4). This is why the Assessing Officer also called for the details of the persons from whom the shares were purchased and then sold. We do not think that such an enquiry is possible in the present case, especially when the units were purchased through an agent and there is nothing to indicate that the assessee had intended such owner, the seller, to be absolved of the liability to tax, which he would otherwise have had; dehors Section 10(15) by application of the deeming provision under sub-section (1).

7. Sub-sections (1) and (4) of Section 94 are interlinked. We are of the opinion that the enquiry should commence from sub-section (1); where the owner of securities attempts to sell and repurchase, so that the interest income is not taxed in his hands. In that circumstances, the person to whom the securities are sold and then repurchased from; who actually earns the interest income and is liable to income-tax, but however is absolved from it by reason only of sub-section (1); would not in his assessment be entitled to claim for any loss that occurred in the transaction. Section 94 at one stroke discourages both the owner of securities, who sells and the purchaser from entering into a transaction, ostensibly to be one for avoidance of tax on the interest income. The owner, who sells and re-purchases securities, enabling another person to earn the interest due on the record date; in the process avoids tax on the interest but obtains a gain in so far as the repurchase would be at a lesser price after the record date. Section 94(1) in that circumstances shifts the liability to income tax on such interest income to the seller-repurchaser. Consequently, the person who received the interest income, but is exempted from liability to income tax by virtue of sub-section (1) of Section 94, is disentitled from claiming the loss occassioned in the transaction, in his assessment.

8. Pertinently, it is to be seen that sub-section (4) does not speak of an exemption under Section 10(15), but speaks of the interest income received by the person, who buys and re-sells the securities, not having the liability to income tax by reason only of sub-section (1), the deeming provision, which mulcts the liability of income tax on such interest income, on the owner of the securities, who sold it and then repurchased it. These are provisions interlinked, so as to bring to tax the income of such persons, who sell and repurchase securities; only to absolve themselves of the liability to tax on interest income and in the process enables another to claim loss, which later claim, cannot be entertained by reason of the provisions under sub-section (4).

9. In the present case, we do not see any such deeming fiction applied on the interest income obtained by the assessee by reason only of which the interest receivable by him is exempted from taxation. The fact that Section 10(15) exempts such interest income is not relevant, insofar as sub-section (4) speaking only of the interest received by an assessee being deemed to be not his income by reason of the provisions under sub-section (1). In such circumstances, we answer the first question of law framed in favour of the assessee and against the Revenue and uphold the order of the Tribunal. We notice that the Tribunal has also considered the second issue of the assessee's purchase of securities being capital investment made, with which we do not think we have to deal with as we have found on the other issue that the assessee cannot be mulcted with the liability by adding back the loss claimed.

10. I.T.A.No.59/2009 is filed by the Revenue and I.T.A.No.33/2014 is filed by the assessee, who is the respondent in the other appeal. Here, again the Assessing Officer disallowed the loss claimed on the purchase and sale of shares. The assessee on being issued with a notice under Section 148, produced the details of the sellers and purchasers, not fully, but partly. The transactions with those persons, who were identified were excluded by the Assessing Officer. However, the First Appellate Authority issued a notice and included those transactions also and disallowed the loss with respect to such transactions enhancing the tax payable, in appeal. The assessee filed a further appeal before the Tribunal raising contentions against both the issues; on the disallowance as such and on the addition made with respect to those exempted by the Assessing Officer. The Tribunal followed its own order, impugned in I.

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T.A.No.1534/2009, and found the issue of dis-allowance in favour of the assessee; against which the Revenue has filed appeal. The Tribunal did not speak about the enhancement made by the First Appellate Authority and hence the appeal by the assessee. 11. There is also an ancillary ground raised on the application of sub-section (7) of Section 94, which is held in favour of the assessee and against the Revenue holding it to be prospective in application from 01.04.2002. The Hon'ble Supreme Court in CIT v. Walfort Share and Stock Brokers Private Limited, (2010) 8 SCC 137 has upheld the judgment relied on by the Tribunal. 12. We having upheld the order of the Tribunal in I.T.A.No.1534/2009, follow the same here also and reject I.T.A.No.59/2009 and allow I.T.A.No.33/2014. The loss claimed by the assessee on the sale of securities shall be allowed without any dis-allowance made under sub-section (4) of Section 94. I.T.A.Nos.1534/2009 and 59/2009 are rejected I.T.A.No.33/2014 is allowed. No order on costs.
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