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TMI Blog2009 (5) TMI 948X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee is Variable Insurance Product Fund Overseas Portfolio. Both the assessees are trusts organized in the USA and are residents there. Both the assessees are registered with Securities Exchange Board of India (SEBI) as a sub account of M/s Fidelity Management Research Co. The assessees filed their original returns of income for the assessment year 2004-05 on 27.07.2004 returning short term capital gains as well as dividend income. Thereafter, on the basis of a ruling of the Authority of Advance Ruling in the case of XYZ/ABC Equity Fund (2001) 250 ITR 194 as well as M/s Fidelity Advisor Series VIII (2004) 271 ITR 01, the assessee filed a revised return of income on 9th August, 2005, wherein it claimed that the Fund is carrying on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating the revised return as an invalid return. Thereafter, the assessing officer completed the assessment u/s. 143(3) on 26.12.2006, wherein after discussing in detail the issues that arose in the invalid revised returns, assessed the income at the same amount as found in the original returns of income. Thereafter he initiated penalty proceedings u/s. 271(1)(c) of the Act and levied the same on various grounds. On appeal, the first appellate authority sustained the levy of penalty u/s. 271(1)(c) of the Act. Aggrieved, the assessees are in appeal before us. 3. Shri MP Lohia, the learned counsel for the assessee filed before this bench a paper book running into 174 pages as well as a data sheet giving the dates and events. He contended that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 20th March, 2009. He submitted that the facts of both the cases are identical and hence the levy of penalty is bad in law. 4. Shri JVD Lengsteih, the learned departmental representative, on the other hand, opposed the contentions of Shri Lohia and submitted that the assessee had in fact filed a revised return of income and that in that return he has made a false claim that the income in question is assessable as business income and not as capital gains. He pointed out that the assessee chose not to dispute the assessment orders. He relied on the orders of the first appellate authority and submitted that the penalty has been rightly levied an upheld in these cases. He relied on the decision of the Hon'ble Supreme court in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Return of Income ('ROI') in Form no.3 for the assessment year under consideration, filed with your office on July 27, 2004, bearing acknowledgement no. 1153. A copy of the acknowledgement ROI is enclosed herewith as Annexure A for your ready reference. The Fund had, in the original ROI, offered to tax the income earned on sale of securities in India as Capital Gains and paid taxes thereon. However, as the Fund has been carrying on business as an investment trust, the shares and securities were held by the Fund as business assets, the profits from the purchase and sale of shares are in the nature of business income. The fact that the Fund is carrying on business of dealing in shares and securities is also evident from the objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sor Series VIII having a PE in India, and in this regard rule in the negative. The AAR ruled that the income earned by Fidelity Advisor Series VIII was in the nature of business income. The AAR also considered whether the presence of the custodian in India would tantamount to the Fidelity Advisor Series VIII having a PE in India, and in this regard ruled in the negative. THe AAR ruled that the income earned by Fidelity Advisor Series VIII was in the nature of business income and in the absence of PE in India its income from sale of securities was not taxable in India. The AAR has taken a similar view in the case of XYZ/ABC Equity FUnd. [2001] 250 ITR 0194 (AAR). In view of the above, the Fund wishes to offer its income as business income a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d specifically, vis-a-vis Indian investments and hence the question of audit u/s. 44AB does not arise. The assessees enclosed the details of sales, purchase, dividend income as well as opening and closing stocks and submitted that the assessee do not have separate trading account, profit and loss account, etc. The assessing officer, after considering the detailed replies, vide his order dated 31st January, 2006 concluded as follows: "05. The assessee has thus filed a defective return and when such defect(s) were pointed out to the assessee, has within the time limits prescribed under section 139(9) of the Act, failed to rectify these defects. The return filed by the assessee on 09.08.2005 is therefore treated as an invalid return and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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