Main object is carry out infrastructure projects – Amendment in object clause as do business in futures and options – Amended clause to be considered

15. Pr.CIT-1 vs. Triforce Infrastructure
(India) Pvt. Ltd [ Income tax Appeal no 888 of 2016 Dated: 11^th
December, 2018 (Bombay High Court)]. 

[DCIT-1(3) vs. Triforce Infrastructure
(India) Pvt. Ltd; dated 12/06/2015 ; ITA. No 1890/Mum/2014, Bench : SMC  AY: 2007-08 , 
Mum.  ITAT ]

Main object is carry out infrastructure
projects –  Amendment in object
clause  as do business in futures and
options – Amended clause to be considered

The
assessee had in its return of income declared nil income. During assessment
proceedings, the A.O noted from the Profit & Loss Account that the assessee
was in receipt of speculation gain, dividend income and gain on Options
aggregating to Rs. 6.11 lakh. Against the above, the expenditure claimed was
Rs.42.45 lakh. Out of the above, expenditure claimed as loss on futures was
Rs.42.40 lakh. The A.O in assessment proceedings u/s. 143(3) of the Act
disallowed the loss on account of futures and options on the ground that the
object clause of Memorandum of Association (MOU) did not authorise the company
to do business in futures and options.

Being
aggrieved with the asst  order, the
assessee filed an appeal to the CIT(A). The CIT(A) while allowing the appeal
reproduced clauses 21 and clause 68 of the MOU. In fact, clause 68 was
introduced into the MOU w.e.f. 30^th December, 2005. It was further
held that clause 21 could itself permit the assessee to deal with the shares,
futures and options. Nevertheless, on 31^st December, 2005 clause 68
of the MOU specifically enabled the assessee to do business in futures and
options i.e. before starting the business in futures and options. As the
relevant assessment year is 2007-08, the CIT(A) allowed the assessee’s appeal
holding that loss incurred in futures and options as well as trading in shares
is a part of its business loss.

Being
aggrieved with the order of the CIT(A), the Revenue filed an appeal to the
Tribunal. The Tribunal find that the main business of the assessee is to carry
out infrastructure projects for which the assessee company collected share
application money also. As per the assessee, due to unfavourable circumstances,
the assessee did not get any infrastructure contract, therefore, he decided to
deploy the available surplus funds, collected for infrastructure activity, in
the stock exchange market. The assessee furnished all these details to the A.O
regarding the receipt of share application money, loss incurred in future and
options transactions, share business along with the details of business
expenditure incurred by the assessee. The A.O without providing due opportunity
to the assessee, as has been claimed, in the same breath, assess the income
from speculation business of shares and gains in the future options transactions.
The Tribunal dismissed the Revenue’s appeal upholding the order of the CIT(A).

Being
aggrieved with the order of the Tribunal, the Revenue filed an appeal to the
High Court. The Court find that the view taken by the CIT(A) as well as the
Tribunal, cannot be faulted with. The losses on futures and options was
incurred post 30^th December, 2005 i.e. after clause 68 was
introduced in the MOU by an amendment. This appeal is in respect of A.Y.
2007-08 when clause 68 of the MOU was in existence. This entitled the assessee
to do business in Futures and Options. In the above view, the question as
proposed does not give rise to any substantial question of law. The appeal is
dismissed.