ITO Vs Oval Investment Pvt. Ltd (ITAT Delhi)
AIS/Form 10DB Mismatch Not Conclusive- Share & F&O Profits Taxable Only in Real Owner’s Hands- Commission Agent Cannot Be Taxed on Principal’s Trading Income
dismissed the Revenue’s appeal and upheld deletion of additions aggregating to ₹4.13 crore, holding that share trading, F&O and dividend income belonged to the principal (M/s RKS Distributors Pvt Ltd) and not to the assessee, who merely acted as an agent/manager.
Assessee-company had declared a small loss. During scrutiny, AO treated profits from equity trading, F&O transactions and dividend income reflected in AIS/Form 10DB as undisclosed income of the assessee and also made addition u/s 68 for credit balance payable to M/s RKS Distributors Pvt Ltd, besides disallowance u/s 14A. CIT(A) deleted the trading-related additions and the u/s 68 addition, retaining only the 14A disallowance.
Before ITAT, Revenue argued that since all transactions appeared in assessee’s name and STT was paid, entire profits should be taxed in assessee’s hands. Tribunal rejected this approach, noting that there was a written agreement dated 06-04-2016 under which RKS Distributors provided funds, assessee executed trades on its behalf, and was entitled only to 10% commission, which was duly offered to tax by the assessee. The entire trading profits were credited to RKS Distributors’ ledger, confirmed by affidavits, reconciled ledgers, balance-sheets of both parties and returns filed by RKS Distributors, which had already offered the income to tax.
ITAT emphasised that real ownership of income, not AIS/Form 10DB entries or mechanical reliance on STT payment, determines taxability. AO made no independent enquiry from RKS Distributors despite confirmations on record and proceeded on a preconceived notion. Taxing the same income again in assessee’s hands would lead to impermissible double taxation.
Accordingly, ITAT upheld CIT(A)’s order deleting additions relating to share trading, F&O profits and credit balance, and dismissed Revenue’s appeal in toto, reiterating that an agent cannot be taxed on the principal’s income merely because transactions pass through its books.
