M/s Utkal Investments Ltd., New Delhi V. DCIT, New Delhi

CO 209/DEL/2011

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 0524 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 month(s) 6 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 06-05-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 28-10-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 30-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SYED NASIR ALI
• Assessee Lawyers: M L DUJARI
• Keywords: Capital asset; Business income; Speculative transactions

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH H : NEW DELHI) BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.2558/DEL./2011 (ASSESSMENT YEAR : 2006-07) ITA NO.2894/DEL./2011 (ASSESSMENT YEAR : 2007-08) ITA NO.2662/DEL./2012 (ASSESSMENT YEAR : 2008-09) DCIT, CIRCLE 18 (1), VS. M/S. UTKAL INVESTMENTS LT D., NEW DELHI. B 47, CONNAUGHT PLACE, NEW DELHI. (PAN : AAACU1603L) CO NO.209/DEL./2011 (IN ITA NO.2558/DEL./2011) (ASSESSMENT YEAR : 2006-07) CO NO.210/DEL./2011 (IN ITA NO.2894/DEL./2011) (ASSESSMENT YEAR : 2007-08) CO NO.269/DEL./2012 (IN ITA NO.2662/DEL./2012) (ASSESSMENT YEAR : 2008-09) M/S. UTKAL INVESTMENTS LTD., VS. DCIT, CIRCLE 18 ( 1), B 47, CONNAUGHT PLACE, NEW DELHI. NEW DELHI. (PAN : AAACU1603L) (APPELLANT) (RESPONDENT) ITA NOS.2558 & 2894/DEL./2011 ITA NO.2662/DEL./2012 CO NO.209 & 210/DEL/20111 CO NO.269/DEL/2012 2 ASSESSEE BY : SHRI M.L. DUJARI, CA REVENUE BY : SHRI SYED NASIR ALI, CIT DR DATE OF HEARING : 12.03.2015 DATE OF PRONOUNCEMENT : .04.2015 ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : ITA NO.2558/DEL/2011 AND CO NO.209/DEL/2011 EMANATE FROM THE ORDER OF THE CIT (APPEALS)-XXI, NEW DELHI DATED 28. 02.2011. ITA NO.2894/DEL./2011 AND CO NO.210/DEL./2011 EMANATE F ROM THE ORDER OF THE CIT (APPEALS)-XXI, NEW DELHI DATED 30.03.2011. ITA NO.2662/DEL./2012 AND CO NO.269/DEL./2012 EMANATE F ROM THE ORDER OF THE CIT (APPEALS)-XXI, NEW DELHI DATED 29.03.2012. SINCE, IN ALL THESE APPEALS AND CROSS OBJECTIONS, SOME OF THE GROUNDS O F APPEALS ARE SIMILAR, THEREFORE, ALL THESE THREE APPEALS AND THREE CROSS OBJECTIONS ARE BEING DISPOSED OFF BY THIS COMMON ORDER. ITA NO.2558/DEL/2011 & CO NO.209/DEL/2011 2. THE ASSESSEE IS A REGISTERED NON BANKING FINANCI AL COMPANY IN WHICH PUBLIC IS SUBSTANTIALLY INTERESTED. THE ASSE SSEE COMPANY CARRIES OUT THE ACTIVITIES OF INVESTMENT IN SHARES, SECURITIES, UNITS OF MUTUAL FUNDS AND ADVANCING LOANS. THE ASSESSEE WAS DEALING IN SHARE S AND SECURITIES AND ALSO CARRYING ON BUSINESS OF GENERATION AND DISTRIB UTION OF ELECTRICITY. ITA NOS.2558 & 2894/DEL./2011 ITA NO.2662/DEL./2012 CO NO.209 & 210/DEL/20111 CO NO.269/DEL/2012 3 3. THE RETURN OF INCOME FOR ASSESSMENT YEAR 2006-07 WAS FILED DECLARING INCOME AT RS.1,33,77,935/- ON 23.10.2006 WHICH WAS PROCESSED U/S 143(1) OF THE INCOME-TAX ACT, 1961. THE ASSESS EE HAS CLAIMED THAT INVESTMENTS REALIZED DURING THE RELEVANT PERIOD TO THE ASSESSMENT YEAR 2006-07 WERE HELD AS INVESTMENT PORTFOLIO AT THE CL OSE OF THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2005-06. THESE INVESTM ENTS WERE ALSO REFLECTED AS INVESTMENT AT THE BEGINNING OF PREVIOU S YEAR RELEVANT TO ASSESSMENT YEAR 2006-07. THESE INVESTMENTS HAVE BE EN REFLECTED AS INVESTMENTS IN THE BOOKS OF ACCOUNTS. IT WAS ALSO CLAIMED THAT EARLIER ASSESSING OFFICER HAS ACCEPTED THIS POSITION OF INV ESTMENTS IN THE BOOKS OF ACCOUNTS. SHARES AND SECURITIES HELD AS INVESTMENT S WERE VALUED AT COST SUBJECT TO PROVISION FOR DIMINUTION IN THEIR VALUE. THE SHARES HELD AS TRADING STOCK-IN-TRADE WERE VALUED AT COST OR MARKE T VALUE WHICHEVER IS LOWER. SUCH TREATMENT WAS BEING ACCEPTED BY REVENU E SINCE LONG. IT WAS ALSO CLAIMED THAT MOST OF THESE INVESTMENTS REALIZE D DURING THE YEAR WERE HELD AS INVESTMENT FOR MORE THAN A YEAR. EVEN SOME OF THEM WERE HELD FOR MORE THAN 2 TO 4 YEARS. THUS, ASSESSEES INTENTION ALWAYS WAS TO KEEP INVESTMENT IN SHARES AND EARN DIVIDEND. DURING THE YEAR, ASSESSEE HAS EARNED DIVIDEND OF RS.3,51,49,900/-. THE ASSESSEE SUBMITTED COMPLETE DETAILS TOWARDS EACH INVESTMENT REALIZED DURING THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER DID NOT ACCEP T THE CONTENTION OF THE ITA NOS.2558 & 2894/DEL./2011 ITA NO.2662/DEL./2012 CO NO.209 & 210/DEL/20111 CO NO.269/DEL/2012 4 ASSESSEE. THE ASSESSING OFFICER HELD THESE TRANSAC TIONS OF PURCHASE AND SALE OF SHARES AS BUSINESS INCOME AND NOT AS CAPITA L GAIN. AGGRIEVED BY THIS ORDER, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT (A). THE CIT (A) HAS GRANTED THE RELIEF TO THE ASSESSEE BY HOLDING AS UN DER :- 4.4 I HAVE GONE THROUGH THE SUBMISSION OF THE ASSES SEE, FINDING OF THE AO IN THE ASSESSMENT ORDER AND REMAN D REPORT. IN MY CONSIDERED OPINION, THERE ARE VARIOUS JUDICIAL PRONOUNCEMENTS FROM VARIOUS APPELLATE AUTHORITIES P ROPOSING DIFFERENT PROPOSITION WHICH WERE PERUSED BY ME. AFT ER GOING THROUGH ALL THE JUDGMENTS MADE AVAILABLE TO ME BY A PPELLANT AND BY MY OWN EFFORTS. I PUT MY RELIANCE ON THE JUD GMENT OF HONOURABLE DELHI HIGH COURT IN THE CASE OF CIT VS. ROHIT ANAND REPORTED AT 327 ITR PAGE 445, THE HON'BLE DEL HI HIGH COURT HAS HELD AS UNDER:- 'THERE IS NO DOUBT THAT EVEN A SINGLE TRANSACTION C AN BE IN THE NATURE OF TRADE BUT THE ASSESSEE HAS DEMONST RATED THAT HIS INTENTION WAS NEVER TO TRADE IN SHARES. TH E INTENTION IS MANIFESTED BY TREATMENT GIVEN TO SUCH INVESTMENT THAT THE INVESTMENT IS OUT OF OWN FUND A ND NOT BORROWED THAT THE INVESTMENT IS NOT ROTATED FREQUENTLY, THAT THE TOTAL NUMBER OF TRANSACTIONS A RE VERY FEW, THAT ALL THE SHARES PURCHASED ARE NOT SOL D AND RATHER HELD FOR QUITE NUMBER OF DAYS. IT IS TO BE N OTED THE INCOME TAX ACT ITSELF HAS PROVIDED THAT WHEN TH E SHARES ARE HELD FOR A PERIOD OF ONE YEAR OR MORE WI LL BE TREATED AS LONG TERM CAPITAL ASSET CONTRARY TO OTHE R ASSETS WHERE THE HOLDING PERIOD TO TREAT SUCH ASSET A LONG TERM IS MORE THAN 36 MONTHS. THUS, EVEN AFTER HOLDING THE SHARES FOR MORE THAN 12 MONTHS AND SHOWING SUCH INTENTION FROM THE CONDUCT, THE ASSESSING OFFICER CANNOT REPLACE HIS OPINION FOR TH AT OF THE ASSESSEE IN HOLDING THAT THE SHARES ARE HELD AS STOCK IN TRADE AND PROFIT FROM WHICH IS TO BE ASSESSED AS BUSINESS INCOME. IN ALL SUCH CASES THE INTENTION IS MANIFESTED BY THE ASSESSEE HIMSELF BY HIS CONDUCT A ND OTHER RELEVANT FACTORS AS CONSIDERED BY THE LEARNED ITA NOS.2558 & 2894/DEL./2011 ITA NO.2662/DEL./2012 CO NO.209 & 210/DEL/20111 CO NO.269/DEL/2012 5 COMMISSIONER OF INCOME TAX (APPEALS). IT IS ALSO SE EN THAT THE SHARES WERE TREATED AS INVESTMENT IN EARLI ER YEAR AND WHICH FACT HAS BEEN ACCEPTED BY THE ASSESSING OFFICER. THE ASSESSEE HAS ALSO EARNED HUG E DIVIDEND INCOME FROM SUCH SHARES. THE ASSESSING OFFICER MERELY BECAUSE OF THE TOTAL VOLUME OF TRANSACTION IS SUBSTANTIAL, IS GUIDED TO HOLD THE I NCOME AS BUSINESS INCOME. HOWEVER, HE FAILED TO RECOGNIZE THAT THE VOLUME OF TRANSACTION INCLUDES THE APPRECI ATION IN SHARES ALSO AND SUCH APPRECIATION HAS BEEN OFFER ED FOR TAX. IF VOLUME OF TRANSACTION IS THE CRITERIA, WHAT IS TO BE EXAMINED IS HOW FREQUENTLY THE TRANSACTION IS DONE, WHETHER THE TRANSACTION IS SETTLED IN THE COU RSE OF THE DAY OF TRADING ITSELF OR IN THE SETTLEMENT PERI OD ITSELF SO AS TO AVOID PAYMENT OF FULL PURCHASE PRIC E. HERE THE ASSESSEE HAS BEEN HOLDING THE SHARES BY TA KING DELIVERY AND MAKING FULL PAYMENT FOR SUCH INVESTMEN T. IN SUCH CIRCUMSTANCES, THE TRANSACTIONS ARE TO BE T REATED AS GIVING RISE TO THE CAPITAL GAIN AND CANNOT BE BR ANDED AS TRADING OF MAKING INVESTMENT SO AS TO DETERMINE WHETHER THE TRANSACTION WAS FOR DEALING IN SHARES O R MAKING INVESTMENT FOR EARNING DIVIDEND AND APPRECIATION FROM SUCH INVESTMENT. ' AS PER HON'BLE DELHI HIGH COURT FOUR BASIC ELEMENTS TO DECIDE THE ISSUE ARE AS UNDER.- 1. VOLUME OF TRANSACTION 2. MODE OF DELIVERY 3. FREQUENCY OF TRANSACTION 4. SOURCE OF PAYMENT EITHER FROM OWN FUND OR BORROWED FUND. 4.5 AFTER TAKING INTO CONSIDERATION THE VARIOUS ASP ECTS AS MENTIONED ABOVE, THE HON'BLE DELHI HIGH COURT HAS D ECIDED THE ISSUE IN FAVOUR OF ASSESSEE THAT IT SHOULD BE T REATED AS CAPITAL GAIN. IN THE ABOVE MENTIONED CASE, THOUGH, THE HON'BLE DELHI HIGH COURT HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BUT THE HON'BLE HIGH COURT HAS LAID DOWN T HE PRINCIPLE THAT EVEN A SINGLE TRANSACTION CAN BE IN THE NATURE OF TRADE. TAKING INTO CONSIDERATION THE RATIO OF THE A BOVE SAID ITA NOS.2558 & 2894/DEL./2011 ITA NO.2662/DEL./2012 CO NO.209 & 210/DEL/20111 CO NO.269/DEL/2012 6 JUDGMENT OF THE HON'BLE DELHI HIGH COURT, I HAD GOT THE OCCASION TO GO THROUGH THE JUDGMENT OF THE HON'BLE ITAT, MUMBAI IN THE CASE OF MANAGEMENT STRUCTURE & SYSTEM S PVT. LTD. VS. ITO, WARD 6(3)(2), MUMBAI, REPORTED AT 201 O- TIOL-254-ITAT-MUM, WHEREIN, HON'BLE ITA T VIDE ORDE R DATED 30-4-2010 HAS DECIDED THE ISSUE VIDE PARA 15 OF THE ORDER AS UNDER:- 'WE HAVE GIVEN OUR SERIOUS CONSIDERATIONS TO THE DIFFERENT PRECEDENTS RELIED ON BY THE AO IN THE ASSESSMENT ORDER BUT IN OUR OPINION, THE PRINCIPLES LAID DOWN IN THOSE DECISIONS CANNOT BE APPLIED TO THE ASSESSEE'S CASE TO SAY THAT THE ACTIVITY OF THE ASS ESSEE BUYING AND SELLING OF THE SHARES AMOUNT TO TRADING ACTIVITY. IT IS WELL SETTLED PRINCIPLE AS HAS HELD IN THE CASE OF H. HOLSCK LARZEN (SUPRA) THAT WHETHER THE L AW AND FACT. IN THIS CASE, WE HAVE PERUSED THE BALANCE SHEET FILED BY THE ASSESSEE AND AS PER THE BOOKS OF ACCOUNT THE ASSESSEE HAS TREATED THE ENTIRE INVESTM ENT IN THE SHARES AS AN INVESTMENT ONLY AND NOT AS A ST OCK IN TRADE. ANOTHER IMPORTANT ASPECT TO BE CONSIDERED HERE IS THE ASSESSEE IS NOT A SHARE BROKER NOR HE IS HAVING A REGISTRATION WITH ANY STOCK EXCHANGE. MOREOVER, SOME SCRIPTS ARE HELD FOR MORE THAN FIVE YEARS AND IT IS NOT A CASE OF THE AO THAT THERE WER E ANY DERIVATIVE TRANSACTIONS BY THE ASSESSEE NOR IS IT A CASE OF THE AO THAT THERE WERE TRANSACTIONS WITHOUT ANY DELIVERY. IN THE PRESENT CASE, BOTH THE AUTHORITIES HAVE NOT DISPUTED THAT THE TRANSACTIONS ARE COMPLETED WI TH THE DELIVERY. THE INTENTION OF THE ASSESSEE CANNOT BE READ FROM HIS MIND BUT IT REFLECTS IN ITS CONDUCT, THE WAY HE TREATS THE TRANSACTIONS. THE ASSESSEE HAS NO T BORROWED ANY MONEY FOR INVESTING IN SHARES AND USED HIS OWN SURPLUS FUNDS AND THESE FACTS HAVE NOT BEEN DISPUTED BY THE AO. THE PROPOSITION HAS BEEN ACCEPT ED BY THE BOARD ALSO IN CIRCULAR NO.4/2007 THAT THE ASSESSEE IS ENTITLED TO MAINTAIN TWO PORTFOLIOS. IN THE CASE OF THE ASSESSEE, IN THE PRECEDING YEARS, THE ASSESSEE IS CONSISTENTLY DECLARING THE GAIN/PROFIT ON THE SALE OF THE SHARES UNDER THE HEAD 'CAPITAL GAIN' EI THER LONG TERM AND SHORT TERM AND THE SAME HAS BEEN ITA NOS.2558 & 2894/DEL./2011 ITA NO.2662/DEL./2012 CO NO.209 & 210/DEL/20111 CO NO.269/DEL/2012 7 ACCEPTED BY THE AO. IT IS TRUE THAT THE RULE OF RES JUDICATA IS NOT APPLICABLE TO THE INCOME TAX PROCEEDINGS, BUT AT THE SAME TIME, IT IS ALSO WELL SETTLED PRINCIPLES THAT IF THERE IS NO CHANGE IN THE FACTS, THEN, THERE SHOULD BE CONSISTENCY IN THE APPROACH OF THE REVENUE AUTHORITIES WHILE DECIDING THE TAX LIABILIT Y OF THE ASSESSEE.' 4.6. THE PROPOSITION LAID DOWN BY THE HON'BE MUMBAI ITAT IN THE ABOVE MENTIONED CASE INSISTS ON CONSIST ENCY AS WELL AS IT HAS ALSO RELIED ON CIRCULAR NO.4/2007 OF THE C.B.D.T., WHICH IS AN IMPORTANT FACTOR TO DECIDE TH E ISSUE. I HAVE ALSO GONE THROUGH THE LATEST JUDGMENT OF HON'B LE DELHI IT AT DATED 28.1.2011 IN THE CASE OF ACIT VS. M/S. BULLS & BEARS PORTFOLIOS LTD., REPORTED AT 2011-TIOL-1 09-I TA T- DEL, WHEREIN IN PARA 6 OF THE ORDER HON'BLE TRIBUNA L HAS HELD AS UNDER:- 'WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF TH E MATERIAL PRODUCED AND DECISION RELIED UPON. WE NOTE THAT THE ASSESSEE IS A BROKER AS WELL AS INVESTOR. IT HAS MAINTAINED THE INVESTMENT PORTFOLIO SEPARATELY INCO ME FOR WHICH WAS LIABLE TO BE TAXED AS CAPITAL GAINS, AS THE INTENTION IN RESPECT OF THIS WAS TO HOLD THE INVEST MENT AS INVESTMENT ONLY AND WERE SHOWN AS SUCH IN THE BOOKS OF ACCOUNTS AND INCOME THEREFORE WAS SHOWN AN D TREATED AS CAPITAL GAINS IN THE SUCCESSIVE ASSESSME NTS. ASSESSMENT YEAR 2002-03 AND 2004-05 WERE CONDUCTED U/S.143(3) AND 1423( 1) IN WHICH CAPITAL GAIN WAS ASSESSED AS CAPITAL GAIN. SCHEDULE OF INVESTMENT WA S DULY APPEARING IN THE BALANCE SHEET AS 31.3.2002, 31.3.2003, 31.2.2004, 31.3.2006. THE SCHEDULE OF INVESTMENT WERE DULY APPENDED IN THE BALANCE SHEET. ASSESSEE HAS ALSO MAINTAINED SEPARATE D-MAT ACCOUNT FOR INVESTMENT AND FOR TRADING. IN THESE CIRCUMSTAN CES, WE NOTE THAT ASSESSEE HAS DISTINCTLY MAINTAINED INVESTMENT ACCOUNT AND TRADING ACCOUNT.' 4.7 AFTER ANALYZING THE ISSUE AND CONSIDERING THE V ARIOUS CASE LAWS AS RELIED UPON BY THE ID. AR, I FIND THAT HOLDING PERIOD IS THE MOST APPROPRIATE FACTOR TO DECIDE THE ISSUE, ITA NOS.2558 & 2894/DEL./2011 ITA NO.2662/DEL./2012 CO NO.209 & 210/DEL/20111 CO NO.269/DEL/2012 8 WHETHER IT SHOULD BE TREATED AS STOCK IN TRADE TREA TING IT AS A BUSINESS .INCOME OR INVESTMENT SO AS TO TREAT IT AS CAPITAL GAIN. MY VIEW GETS STRENGTH FROM THE ORDER OF HON'BLE AHM EDABAD TRIBUNAL IN THE CASE OF SHRI SHUGAM CHAND C. SHAH V S. ACIT, ITA NO.3554/AHD/2008 VIDE ORDER DATED 29.L.20 10 HON'BLE TRIBUNAL HAS LAID DOWN THE CRITERIA OF DECI DING THE SHARE TO BE TAXED AS CAPITAL GAIN OR BUSINESS INCOM E. VIDE PARA 19 OF THE ABOVE SAID ORDER THE HON'BLE TRIBUNA L HAS HELD AS UNDER:- 'CONSIDERING THE TOTALITY AND PECULIARITY OF THE FA CTS OF THIS CASE, WE FIND THAT ASSESSEE IS NEITHER FULLY A CTING AS A TRADER NOR AS FULLY INVESTOR. DEMARCATION IS QUIT E HAZY; THOUGH IN THE BOOKS HE IS SHOWING ALL THE PURCHASES AS INVESTMENT BUT FREQUENCY OF TRANSACTIO N IN SEVERAL CASES IS SO LARGE AND HOLDING PERIOD IN MAN Y CASES IS SO SMALL - FROM 0 TO A WEEK OR SO THAT ASS ESSEE IS DE FACTO SELLING AND PURCHASING SHARES AS TRADER . HE IS ALSO HOLDING SHARES FOR LONG PERIOD - INDICATING THAT THEY ARE HELD AS INVESTMENT. THEREFORE, A CRITERIA HAS TO BE FIXED FOR DETERMINING AS TO WHEN HE IS ACTING AS TRADER AND WHEN AS INVESTOR. ACCORDINGLY, WE DECIDE FOLLOWING CRITERIA TO HOLD WHEN GAINS ARE TO BE TAX ED AS PROFIT TO BE EARNED UNDER THE BUSINESS OR TO BE TAX ED AS SHORT TERM CAPITAL GAIN, WE HOLD THAT IF SHARES ARE NOT HELD EVEN SAY FOR A MONTH, THEN THE INTENTION IS CL EARLY TO REAP PROFIT BY ACTING AS A TRADER AND HE DID NOT INTEND TO HOLD THEM IN INVESTMENT PORT-FOLIO. WE BELIEVE T HAT IF A PERSON INTENDS TO HOLD HIS PURCHASES OF SHARES AS INVESTMENT HE WOULD WATCH THE FLUCTUATION OF RATES IN THE MARKET FOR WHICH A MINIMUM TIME IS NECESSARY, WHICH WE ESTIMATE AT ONE MONTH. WHERE SHARES ARE HE LD FOR MORE THAN A MONTH, THEY SHOULD BE TREATED AS INVESTMENT AND ON THEIR SALE SHORT TERM CAPITAL GAI N SHOULD BE CHARGED. WHEN SHARES ARE HELD FOR LESS TH AN A MONTH, GAIN ON THEM SHOULD BE TREATED AS PROFIT FRO M BUSINESS.' THE CRITERIA LAID DOWN BY THE HON'BLE TRIBUNAL IS V ERY MUCH APPROPRIATE SO AS TO DECIDE THE ISSUE IN THIS REGAR D. ACCORDINGLY, IT IS HELD THAT SHARES WHICH WERE HELD FOR LESS ITA NOS.2558 & 2894/DEL./2011 ITA NO.2662/DEL./2012 CO NO.209 & 210/DEL/20111 CO NO.269/DEL/2012 9 THAN THIRTY DAYS WILL BE TREATED AS TRADING INCOME AND REMAINING SHARES WILL AUTOMATICALLY COME UNDER THE CATEGORY OF INVESTMENT TO BE TREATED AS CAPITAL GAINS.' 4.8 IN VIEW OF THE ABOVE DISCUSSION THE BIFURCATION OF THE SHARES HELD FOR LESS THAN 30 DAYS ON THE BASIS OF WORKING GIVEN BY MANAGING DIRECTOR OF ASSESSEE COMPANY VIDE LETTER DATED 6.12.2010, WHICH IS ENCLOSED AS ANNEXURE-A OF THIS ORDER, IS AS UNDER :- PARTICULARS. AMOUNT SHORT-TERM CAPITAL GAIN @ 30% 10,96,774/- SHORT TERM CAPITAL GAIN @ 10% OWN SHARES(BONUS SHARES AND/OR 21,53,221/- RIGHT ISSUE SHARES. OWN SHARES (OTHERS) 3,34,881/- PMS SHARES LOSS. 16,54,669/- TOTAL GAIN. 19,30,207/- THUS, THE GAIN ON SHARES HELD UP TO 30 DAYS COMES T O RS.19,30,207/-, WHICH WILL BE TREATED AS 'BUSINESS INCOME'. ALL THE OTHER GAINS WHICH HAVE BEEN HELD BY THE AO IN THE OWN SHARES (OTHERS) PMS SHARES BODY OF ORDER AS 'BU SINESS INCOME' IS ALLOWED AS CAPITAL GAIN WHETHER LONG TER M OR SHORT TERM. AO IS DIRECTED TO VERIFY THE CLAIM OF ASSESSE E WITH REGARD TO HOLDING PERIOD LESS THAN 30 DAYS AND GAIN OUT OF IT AFTER PROPER VERIFICATION AND TO ALLOW THE CLAIM OF APPELLANT. IN VIEW OF ABOVE DISCUSSION GROUNDS NO.2 TO 5 ARE P ARTLY ALLOWED. 4. NOW, THE REVENUE IS IN APPEAL BY TAKING THE FOLL OWING GROUND ON THIS ISSUE:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT (A) HAS ERRED IN HOLDING THAT OUT OF THE INCOME OF RS.38,72,78,020/- FROM TRANSACTIONS IN SHARES AND S ECURITIES HELD BY THE A.O. AS BUSINESS INCOME, LONELY AN AMOU NT OF ITA NOS.2558 & 2894/DEL./2011 ITA NO.2662/DEL./2012 CO NO.209 & 210/DEL/20111 CO NO.269/DEL/2012 10 RS.19,30,207/- WOULD COMPRISE BUSINESS INCOME AND T HE REMAINING RS.38,53,47,813/- WOULD COMPRISE CAPITAL GAINS. 5. ASSESSEE HAS ALSO FILED CROSS OBJECTION BY TAKIN G THE FOLLOWING GROUND ON THIS ISSUE :- THAT THE LEARNED CIT (APPEALS) HAS ERRED IN HOLDI NG THAT INTEREST EARNED BY THE ASSESSEE COMPANY IS INCOME F ROM OTHER SOURCES AND NOT INCOME FROM BUSINESS. 6. WHILE PLEADING ON BEHALF OF THE REVENUE THE LD. DR RELIED ON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT W HETHER A PARTICULAR HOLDING OF SHARES IS BY WAY OF INVESTMENT OR PART O F THE STOCK-IN-TRADE IS A MATTER WHICH IS WITHIN THE KNOWLEDGE OF THE ASSESSE E WHO HOLDS IT AND IT IS ON THE ASSESSEE TO PRODUCE NECESSARY EVIDENCES TO E STABLISH THE CLAIM. LD. DR SUBMITTED THAT CIT (A) HAS ADMITTED VITAL INFORM ATION AT THE BACK OF ASSESSING OFFICER. IT WAS ALSO PLEADED THAT NO SEP ARATE DEMAT ACCOUNT WAS MAINTAINED. THE COPY OF AGREEMENT WITH PORTFOL IO MANAGEMENT SERVICE PROVIDER/BROKER WAS NOT PRODUCED. IT WAS A LSO SUBMITTED THAT BORROWED FUND WAS UTILIZED. HE PLEADED THAT THERE WAS TRANSFER OF SHARES FROM INVESTMENT TO TRADING ACCOUNT. IT WAS ALSO PL EADED THAT THERE WAS HIGH VOLUME OF PURCHASE AND SALES OF SHARES. 7. ON THE OTHER HAND, LD. AR RELIED ON THE ORDER OF THE CIT (A). LD. AR HAS PLACED RELIANCE ON THE DECISION OF HONBLE S UPREME COURT IN THE CASE OF CIT VS. ASSOCIATED INDUSTRIAL DEVELOPMENT C OMPANY PVT. LTD. - 82 ITA NOS.2558 & 2894/DEL./2011 ITA NO.2662/DEL./2012 CO NO.209 & 210/DEL/20111 CO NO.269/DEL/2012 11 ITR 586. HE HAS ALSO PLACED RELIANCE ON THE DECISI ON OF HONBLE SUPREME COURT IN THE CASE OF RAJA BAHADUR VISHESHWAR SINGH VS. CIT - 41 ITR 685 FOR THE PROPOSITION THAT AN INVESTMENT MADE BY A PE RSON IN SHARES WITH THE INTENTION TO RESELL THEM IN FUTURE BRINGING IN A HI GHER PRICE, THOUGH MOTIVATED FOR A POSSIBILITY OF ENHANCED VALUE, WILL NOT NECESSARILY RENDER THE INVESTMENT OF TRANSACTION IN THE NATURE OF TRAD E. IT WAS ALSO SUBMITTED THAT THE GAIN REALIZED ALSO INCLUDE GAINS REALIZED ON SALE OF BONUS SHARES OF TATA IRON & STEEL CO. LTD., FEDERAL BANK AND K.E.C. INFRASTRUCTURE LTD. IT WAS ALSO SUBMITTED THAT THE ACCOUNTS MAINTAINED BY THE ASSESSEE COMPANY AND IN THE LIGHT OF RATIO LAID DOWN BY HONBLE SUPR EME COURT IN THE CASES OF CIT VS. ASSOCIATED INDUSTRIAL DEVELOPMENT COMPAN Y PVT. LTD. - 82 ITR 586 AND RAJA BAHADUR VISHESHWAR SINGH VS. CIT - 41 ITR 685, THE INVESTMENTS WERE REALIZED DURING THE ASSESSMENT YEA R AND THE ASSESSEE HAS RIGHTLY CONSIDERED THE SURPLUS AS A LONG TERM CAPIT AL GAIN. THE LD. AR ALSO PLEADED THAT CIT (A) WAS EVEN NOT JUSTIFIED FOR TRE ATING THE SHORT TERM CAPITAL GAIN ARISING FROM THE SHARES SOLD WITHIN A PERIOD OF 30 DAYS. IT WAS ALSO SUBMITTED THAT WHERE SHARES WERE HELD AS INVES TMENT AS ON 31.03.2005 THEN THERE SHOULD NOT BE A BASIS OF 30 DAYS FOR TRA DING THE SALE OF THE SAME AS TRADING. LD. AR ALSO SUBMITTED THAT THE CBDT CI RCULAR NO.4 OF 2007 DATED 15 TH JUNE, 2007 HAS ALSO CLARIFIED THE POSITION THAT A TAXPAYER CAN HAVE TWO PORTFOLIOS I.E. ONE INVESTMENT PORTFOLIO C OMPRISING SECURITIES ITA NOS.2558 & 2894/DEL./2011 ITA NO.2662/DEL./2012 CO NO.209 & 210/DEL/20111 CO NO.269/DEL/2012 12 WHICH ARE TO BE TREATED AS ITS CAPITAL ASSETS AND A NOTHER, A TRADING PORTFOLIO COMPRISING OF STOCK-IN-TRADE WHICH ARE TO BE TREATE D AS TRADING ASSET. THE ASSESSEE WAS HAVING TWO PORTFOLIOS AND HAS INCOME U NDER BOTH THE HEADS, I.E., CAPITAL GAINS AS WELL AS BUSINESS INCOME. TH E LD. AR ALSO SUBMITTED THAT HONBLE SUPREME COURT IN THE CASE OF DALHAUSIE INVESTMENT TRUST COMPANY LTD. VS. CIT - 68 ITR 486 HAS HELD THAT PRI NCIPAL CONSIDERATION IN DETERMINING WHETHER INCOME FROM SALE OF SHARES IS R EVENUE INCOME OR CAPITAL GAIN IS TO FIND OUT WHAT WAS THE PURPOSE OF PURCHASE OF THESE SHARES AND, IF THE PURPOSE WAS INVESTMENT, THE FACT THAT I N VARYING THE INVESTMENT, THE SALE OF THOSE SHARES RESULTED IN A PROFIT WILL NOT MAKE REVENUE INCOME. IT WAS ALSO SUBMITTED BEFORE US THAT WHAT IS THE IN TENTION OF THE ASSESSEE AT THE TIME OF PURCHASE OF SHARES IS VERY RELEVANT FAC TOR IN DETERMINING WHETHER IT WAS AN INVESTMENT IN SHARES OR THE SHARE S WERE HELD AS TRADING ASSETS. THIS CAN BE FOUND FROM THE TREATMENT GIVEN TO SUCH PURCHASES IN THE BOOKS OF ACCOUNTS. IN ASSESSEES CASE, THESE PURCH ASES WERE HELD AS INVESTMENT IN THE PREVIOUS YEAR AS WELL AS DURING T HE YEAR AND IN THE SUBSEQUENT YEARS. SECONDLY, THESE PURCHASES WERE N OT MADE FROM THE BORROWED FUNDS ON WHICH INTEREST WAS TO BE PAYABLE. NORMALLY, WHEN THE PURCHASES ARE MADE FROM BORROWED FUNDS THEN SUCH PU RCHASES ARE NOT FOR INVESTMENT AS NOBODY WILL INVEST BY TAKING BORROWED FUNDS AND PAY INTEREST. IN ASSESSEES CASE, THE FUNDS WERE NOT B ORROWED FOR MAKING THE ITA NOS.2558 & 2894/DEL./2011 ITA NO.2662/DEL./2012 CO NO.209 & 210/DEL/20111 CO NO.269/DEL/2012 13 INVESTMENT. THE THIRD ISSUE IS THE PERIOD OF RETEN TION WHERE THE SURPLUS HAS BEEN REALIZED. IN ASSESSEES CASE, THE SHARES WERE HELD FOR A LONG PERIOD OF MORE THAN A YEAR AND SOMETIMES 2 TO 4 YEARS. THIS FACT ITSELF SHOWS THAT ASSESSEE WAS NOT HAVING A TRADING MOTIVE WHICH IS E SSENTIAL INGREDIENT FOR A TRADE. HE ALSO SUBMITTED THAT THE VALUATION OF THE SE SHARES AT THE END OF THE YEAR WHETHER THESE WERE VALUED AT COST OR MARKET VA LUE OR NET REALIZABLE VALUE WHICHEVER IS LESS IS ALSO AN ASPECT TO DETERM INE WHETHER THE ASSETS HAVE BEEN HELD AS INVESTMENT OR STOCK-IN-TRADE. TH E LD. AR ALSO SUBMITTED THAT CBDT HAS ALREADY CLARIFIED IN ITS CIRCULAR THA T ASSESSEE CAN HAVE TWO PORTFOLIOS OF SHARES, ONE IS TRADING AND ANOTHER IS INVESTMENT. IT WAS ALSO PLEADED THAT NONE OF THE FACTOR ALONE ARE SUFFICIEN T TO COME ON A DEFINITE CONCLUSION BUT IT IS THE CUMULATIVE EFFECT OF THESE FACTORS WHICH WILL DETERMINE THE CHARACTER OF THE HOLDING OF THE SHARE S. 8. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE AND AL SO CONSIDERED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO CONSIDE RED THE CASE LAWS RELIED UPON BY BOTH THE SIDES. IT IS A FACT THAT ASSESSEE IS SHOWING THESE SHARES IN ITS INVESTMENT PORTFOLIO IN THE BOOKS OF ACCOUNTS. SHARES SOLD WERE SHOWN IN THE BALANCE SHEET FOR THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2005- 06 AS INVESTMENT AND THE SAME HAS BEEN CARRIED FORW ARD AS INVESTMENT IN THE BEGINNING OF THE FINANCIAL YEAR RELEVANT TO ASS ESSMENT YEAR 2006-07. IN THE EARLIER YEARS, THE REVENUE HAS ACCEPTED THE POS ITION OF INVESTMENTS AS IT ITA NOS.2558 & 2894/DEL./2011 ITA NO.2662/DEL./2012 CO NO.209 & 210/DEL/20111 CO NO.269/DEL/2012 14 IS IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. IT IS ALSO A FACT THAT MOST OF THE INVESTMENTS REALIZED DURING THE YEAR WERE HELD AS I NVESTMENT FOR MORE THAN A YEAR EVEN, IN SOME OF THE CASES, THESE INVESTMENT S WERE HELD FOR MORE THAN 2 TO 4 YEARS. THE ASSESSEE SUBMITTED DETAILS OF THESE TRANSACTIONS BEFORE THE ASSESSING OFFICER. IT IS ALSO A FACT TH AT DURING THE YEAR, THE ASSESSEE HAS EARNED SUBSTANTIAL DIVIDEND INCOME OF RS.3,51,49,900/-. THE CIT (A) HAS GIVEN THE RELIEF TO THE ASSESSEE RELYIN G ON THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ROH IT ANAND REPORTED IN 327 ITR 445 WHEREIN THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT ALTHOUGH EVEN A SINGLE TRANSACTION CAN BE IN THE NA TURE OF TRADE, HOWEVER, WHERE THE ASSESSEE HAS DEMONSTRATED THAT HIS INTENT ION WAS NEVER TO TRADE IN SHARES. THEN, REVENUE CANNOT CHANGE THE POSITION O THERWISE. THE INVESTMENTS HAVE BEEN MADE BY THE ASSESSEE OUT OF H IS OWN FUND AND THE SHARES WERE HELD QUITE FOR A LONG PERIOD. THE INCO ME-TAX ACT ITSELF PROVIDES THAT WHEN THE SHARES ARE HELD FOR A PERIOD OF MORE THAN A YEAR OR MORE WILL BE TREATED AS LONG TERM CAPITAL ASSET, CO NTRARY TO THE FACT THAT OTHER ASSETS TO BE CALLED AS LONG TERM ASSET HAVE T O BE HELD FOR MORE THAN 36 MONTHS. THESE SHARES WERE BEING TREATED AS INVESTM ENT IN EARLIER YEARS AND THIS FACT HAS BEEN ACCEPTED BY THE ASSESSING OFFICE R. SUBSTANTIAL DIVIDEND INCOME WAS BEING EARNED ON THESE INVESTMENTS. ALL T HESE FACTS SHOW THAT FACTS OF THE ASSESSEE ARE SIMILAR TO THE FACTS OF C ASE OF CIT VS. ROHIT ANAND, ITA NOS.2558 & 2894/DEL./2011 ITA NO.2662/DEL./2012 CO NO.209 & 210/DEL/20111 CO NO.269/DEL/2012 15 CITED SUPRA. THE ASSESSEE IS HOLDING THE SHARES BY TAKING THE DELIVERY BY MAKING FULL PAYMENT ON SUCH INVESTMENTS. ALL THESE CIRCUMSTANCES SUGGEST THAT REALIZATION OF THESE INVESTMENTS SHALL GIVE A RISE TO THE CAPITAL GAINS AND IT CANNOT BE TERMED AS TRADING OF SHARES. SIMI LARLY, THE ITAT, MUMBAI BENCH IN THE CASE OF MANAGEMENT STRUCTURE & SYSTEMS PVT. LTD. VS. ITO REPORTED IN 2010-TIOL-254-ITAT-MUM HAD ALSO HELD TH AT ALTHOUGH RULE OF RES JUDICATA IS NOT APPLICABLE TO THE INCOME-TAX PROCEEDINGS, HOWEVER, AT THE SAME TIME, IT IS ALSO WELL SETTLED PRINCIPLE TH AT IF THERE IS NO CHANGE IN THE FACTS, THEN, THERE SHOULD BE CONSISTENCY IN THE APPROACH OF INCOME-TAX AUTHORITIES WHILE DECIDING THE TAX LIABILITIES OF T HE ASSESSEE. IN THIS CASE, THE ASSESSEE WAS CONSISTENTLY DECLARING GAIN ON SAL E OF INVESTMENTS OF SHARES UNDER THE HEAD LONG TERM CAPITAL GAIN OR SHO RT TERM CAPITAL GAIN AND THIS POSITION WAS BEING ACCEPTED. THE CIT (A) HAS ALSO RELIED UPON THE DECISION OF ITAT, MUMBAI BENCH IN THE CASE OF ACIT VS. M/S. BULLS & BEARS PORTFOLIOS LTD. REPORTED IN 2011-TIOL-109-ITA T-DEL WHEREIN WHEN THE ASSESSEE HAS DECLARED INVESTMENT IN THE BA LANCE SHEET THEN THE REALIZATION OF THE SAME HAS HELD TO BE CAPITAL GAIN . AFTER ANALYZING THE FACTS OF THE CASE AND CONSIDERING VARIOUS CASE LAWS IN TERMS OF FACTS UNDER CONSIDERATION, WE ARE OF THE VIEW THAT CIT (A) HAS RIGHTLY GRANTED THE RELIEF TO THE ASSESSEE. WE UPHOLD THE ORDER OF THE CIT (A) ON THIS ISSUE. ITA NOS.2558 & 2894/DEL./2011 ITA NO.2662/DEL./2012 CO NO.209 & 210/DEL/20111 CO NO.269/DEL/2012 16 8.1 SINCE WE HAVE APPROVED THE CIT (A)S VIEW THAT INVESTMENTS DECLARED IN THE BOOKS OF ACCOUNTS SHALL NOT BE TREA TED AS TRADING IN THE SHARES AS BUSINESS, THEREFORE, THE SHARES HELD AS I NVESTMENT AT THE BEGINNING OF THE YEAR, EVEN IF THESE ARE SOLD WITHIN A PERIOD OF 30 DAYS, THEN ALSO CAPITAL GAIN ARISES IN RESPECT OF TRADING PROFIT, T HIS AMOUNT SHALL BE TREATED AS SHORT TERM CAPITAL GAIN. 9. THE REVENUE HAS ALSO TAKEN A GROUND WITH REGARD TO THE HOLDING THAT THE PROVISIONS OF EXPLANATION TO SECTION 73 OF THE ACT ARE NOT APPLICABLE TO THE CASE OF THE ASSESSEE AND INCOME FROM TRANSACTIO NS IN SHARES AND SECURITIES BY THE ASSESSEE IS NOT TO BE HELD AS INC OME FROM SPECULATIVE BUSINESS. 10. THE CIT (A) HAS DEALT THIS ISSUE IN ITS ORDER A T PARA 5 WHICH IS REPRODUCED AS UNDER :- 5. GROUND NO.6: IN THIS REGARD AGAINST THE ACTION OF AO TREATING IT AS A SPECULATIVE PROFIT, LD. AR OF T HE ASSESSEE HAS SUBMITTED A PAPER BOOK, IN THE RELEVANT PARA OF WHICH IT HAS BEEN CONTENDED AS UNDER.- IT IS SUBMITTED THAT EXPLANATION TO SECTION 73 DOES NOT APPLY TO THE ASSESSEE AS THE ASSESSEE FALLS IN THE EXCEPT ION IN AS MUCH AS IT IS A COMPANY, THE PRINCIPAL BUSINESS OF WHICH WAS GRANTING OF LOANS OR ADVANCES AS EVIDENT FROM BALAN CE SHEET AND AS PER PLEADING MADE VIDE PB 116 WHICH HAS NOT BEEN REBUTTED BY LD. AO. SECOND EXCEPTION ALSO APPLIES TO THE ASSESSEE AS IT IS A COMPANY WHOSE GTI (GROSS TOTAL INCOME) CONSISTS MAI NLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEAD 'CAPITAL GAINS' ITA NOS.2558 & 2894/DEL./2011 ITA NO.2662/DEL./2012 CO NO.209 & 210/DEL/20111 CO NO.269/DEL/2012 17 AND 'INCOME FROM OTHER SOURCES' AS IS EVIDENT FROM COMPUTATION OF INCOME. THUS, WHEN THE APPELLANT FALLS IN BOTH THE EXCEPTIO NS OF EXPLANATION TO SECTION 73, THERE IS NO QUESTION OF TREATING THE GAINS AS FROM SPECULATIVE BUSINESS.' 5.1 AS ALREADY HELD WHILE DECIDING GROUNDS NO.2 TO 5 THAT ASSESSEE'S INCOME WHICH IS CHARGEABLE TO TAX IS MAI NLY FROM CAPITAL GAIN, THEN ITS INCOME CANNOT BE TREATED AS SPECULATIVE BUSINESS IN VIEW OF EXCEPTION PROVIDED IN EXPLANATI ON 73 ITSELF. GROUND NO.6 IS ALLOWED. 11. SINCE WE HAVE DISMISSED THE GROUND OF THE REVEN UE ON THE CHARGEABILITY OF THE TAX AS TRADING PROFIT AGAINST THE CAPITAL GAIN DECLARED BY THE ASSESSEE, THEREFORE, WE ARE ALSO NOT INCLINED T O ACCEPT THIS GROUND OF REVENUES APPEAL AND THE SAME IS DISMISSED. 12. IN THE GROUND NO.2 OF THE CROSS OBJECTION FILED BY THE ASSESSEE, THE ISSUE IS THAT THE LD. CIT (A) HAS ERRED IN HOLDING THAT INTEREST EARNED BY THE ASSESSEE COMPANY IS INCOME FROM OTHER SOURCES AND N OT INCOME FROM BUSINESS. 13. THE CIT (A) HAS DEALT THIS ISSUE IN PARA 6 WHIC H IS REPRODUCED AS UNDER :- 6. GROUND NO.7 IS AGAINST THE ACTION OF AO TREATIN G INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER SO URCES. IN THIS REGARD VIDE PAPER BOOK SUBMITTED BY THE ID. AR OF THE ASSESSEE ISSUE HAS BEEN CONTENDED AS UNDER:- 'THE LD. AO HAS ASSESSED INTEREST ON LOANS OF RS.18,47,672/- AS 'INCOME FROM OTHER SOURCES' UNDER THE HEAD 'BUSINESS' AS SHOWN BY THE APPELLANT. LD. AO ITA NOS.2558 & 2894/DEL./2011 ITA NO.2662/DEL./2012 CO NO.209 & 210/DEL/20111 CO NO.269/DEL/2012 18 HAS COMPUTED THE INTEREST ON LOANS UNDER THE HEAD INCOME FROM OTHER SOURCES WITH OUT GIVING ANY REASO N WHAT SO EVER AND ABSENCE OF ANY REASON IS ENOUGH TO REVERSE THIS TREATMENT BY YOUR GOOD SELF. THE FACT OF THE MATTER IS THAT THE APPELLANT WAS ENGAGED INTER- ALIA IN THE BUSINESS OF GRANTING OF LOANS AND WAS REGIST ERED NBFC. DETAILED SUBMISSIONS HAVE BEEN MADE IN EARLIE R GROUND RELATING TO PLEADING AND EVIDENCES ABOUT THI S ACTIVITY HAVING BEEN MADE, WHICH MAY PLEASE BE TREATED TO HAVE BEEN ADDRESSED HERE. THERE IS NO FINDING NOR COULD IT BE, BY ID. AO THAT IT WAS NOT THE BUSINESS OF THE APPELLANT AS MAY BE SEEN FROM THE P LAIN READING OF THE ASSESSMENT ORDER. HE HAS JUST TREATE D THE INTEREST INCOME FROM THE BUSINESS AS INCOME FROM OT HER SOURCE AND THAT TOO WITH OUT ASSIGNING ANY REASON. THERE IS PARADOX IN THE APPROACH OF ID. AO THAT ONE HAND HE IS BENT ON TREATING THE ALL ALONG ACCEPTED ACTIVITY OF MAKING INVESTMENT IN SHARES AS BUSINESS . THUS, WHEN THE ASSESSEE EARNS INTEREST IN THE COURS E OF ITS BUSINESS OF GRANTING LOANS, THERE CAN NOT BE VI EW THAT THE INTEREST SO EARNED IS THE BUSINESS INCOME AS INTEREST IN SUCH A CASE IS DIRECT AND NATURAL OUTCO ME OF THE BUSINESS. INTEREST INCOME HAS ALWAYS BEEN OFFER ED TO TAX AS INCOME FROM BUSINESS AND HAS BEEN SO ASSESSED. ENCLOSED IS A CHART SHOWING THIS FACT ALO NG WITH THE NATURE OF ASSESSMENT. IT IS NOT AS IF THE INTEREST INCOME IS ALWAYS ASSES SABLE UNDER THE HEAD OTHER SOURCE AS SEEMS TO BE THE BELI EF OF ID. AO AS HAS BEEN HELD IN FOLLOWING DECISIONS ALSO THA T INTEREST IN THE FACTS AND CIRCUMSTANCES OF THE CASE WILL BE ASSESSABLE UNDER THE HEAD BUSINESS. -BUSINESS REAL ESTATE - BUSINESS INCOME OR INCOME F ROM OTHER SOURCES - AMOUNTS RECEIVED FROM CO-DEVELOPERS AND INVESTMENTS SUCH AMOUNTS IN FIXED DEPOSITS DIRECTLY RELATED TO BUSINESS ACTIVITY - INTEREST IN COME EARNED ON DEPOSITS HELD BUSINESS INCOME FOR EARLIER ASSESSMENT YEARS - REVENUE ACCEPTING APPELLATE ORDE RS - NO MATERIAL CHANGE IN FACTS IN SUBSEQUENT YEAR - VIEW TAKEN-FOR EARLIER YEARS WOULD CONTINUE ON ITA NOS.2558 & 2894/DEL./2011 ITA NO.2662/DEL./2012 CO NO.209 & 210/DEL/20111 CO NO.269/DEL/2012 19 PRINCIPLES OF CONSISTENCY - CIT VS. DALMAI PROMOTER S DEVELOPERS P. LTDS. 281 ITR 346 (DELHI). -S.28 - BUSINESS - OTHER SOURCES - BUSINESS INCOME OR INCOM E FROM OTHER SOURCES - ASSESSEE OPERATING CELLULAR MO BILE TELEPHONE SERVICES - DEPOSIT OF MARGIN MONEY TO OBT AIN LICENSE - DEPOSIT LINKED TO BUSINESS - INTEREST ON DEPOSIT - ASSESSABLE AS BUSINESS INCOME - CIT VS. KOSHIKA TELECOM LIMITED 287 ITR 479 (DELHI). THUS, THE ACTION OF ID AO. IS WRONG, WITH GREAT RES PECT, HERE ALSO WHICH MAY PLEASE BE REVERSED. 6.1 I HAVE GONE THROUGH THE FINDING OF THE AO AND SUBMISSION OF THE ID. AR OF THE ASSESSEE. IN MY CON SIDERED OPINION ACTION OF THE AO DESERVES TO BE UPHELD BECA USE HE HAS CONSIDERED THE ISSUE AFTER WHICH HE HAS ARRIVED AT HIS CONCLUSION THAT INTEREST ON LOAN REPRESENTS THE INC OME FROM OTHER SOURCES. IN THIS REGARD IT IS FOUND THAT AGAI NST THE ACTION OF AO TREATING TRADING IN SHARES HAS BEEN VEHEMENTL Y CONTESTED BY LEARNED AR AND ULTIMATELY IT HAS BEEN HELD THAT MAJORITY OF PORTION REPRESENTS CAPITAL GAIN. BY APP LYING SAME ANALOGY INTEREST INCOME WILL BE TREATED AS INCOME F ROM OTHER SOURCES. THIS GROUND IS DISMISSED. 14. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE. TH E CIT (A) HAS DISMISSED THE ASSESSEES GROUND WITHOUT GOING INTO THE DETAILS REGARDING BUSINESS OF GRANTING THE LOANS AS THE ASSESSEE WAS REGISTERED AS NBFC. THERE IS NO CLEAR CUT FINDING REGARDING THIS ASPECT IN THE ORDER OF THE AUTHORITIES BELOW. CIT (A) HAS RATHER BASED HIS OR DER ON THE FACT THAT ASSESSEE IS CLAIMING CAPITAL GAIN ON SALE OF SHARES , HENCE, NO BUSINESS INCOME. THIS RELIANCE IS NOT JUSTIFIED AS ASSESSEE IS A NBFC AND DOING BUSINESS OF GRANTING LOAN. HENCE, WE ALLOW THIS GR OUND OF ASSESSEES CROSS OBJECTION. ITA NOS.2558 & 2894/DEL./2011 ITA NO.2662/DEL./2012 CO NO.209 & 210/DEL/20111 CO NO.269/DEL/2012 20 15. GROUND NO.3 OF THE CROSS OBJECTION IS GENERAL I N NATURE AND DOES NOT REQUIRE ANY ADJUDICATION, HENCE, THE SAME IS DISMIS SED. 16. IN THE RESULT, THE APPEAL FILED BY THE REVENUE (ITA NO.2558/DEL/2011) IS DISMISSED AND THE CROSS OBJECT ION FILED BY THE ASSESSEE (CO NO.209/DEL/2011) IS PARTLY ALLOWED. ITA NO.2894/DEL/2011 & CO NO.210/DEL/2011 17. GROUND NO.1 TAKEN BY THE REVENUE READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT (A) HAS ERRED IN HOLDING THAT OUT OF THE INCOME OF RS.41,42,72,140/- FROM TRANSACTIONS IN SHARES AND S ECURITIES HELD BY THE A.O. AS BUSINESS INCOME, ONLY AN AMOUNT OF RS.1,60,05,383/- WOULD COMPRISE BUSINESS INCOME AND THE REMAINING RS.39,75,66,757/- WOULD COMPRISE CAPITAL GAINS. 18. ASSESSEE HAS ALSO FILED CROSS OBJECTION BY TAKI NG THE FOLLOWING GROUND ON THIS ISSUE :- 1. THAT THE LEARNED CIT (APPEALS) HAS ERRED IN HO LDING THAT INTEREST EARNED BY THE ASSESSEE COMPANY IS INC OME FROM OTHER SOURCES AND NOT INCOME FROM BUSINESS. 2. THAT THE LEARNED CIT (APPEALS) HAS ERRED IN TREA TING SHORT TERM CAPITAL GAINS ARISING FROM REALIZATION O F SHARES HELD AS INVESTMENT AS ON 31 ST MARCH 2006 AND ACCEPTED AS SUCH IN ASSESSMENT YEAR 2006-07, THOUGH SOLD WITHIN A PERIO D OF 30 DAYS. 19. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE AFORE SAID ISSUES IN THE REVENUES APPEAL AND CROSS OBJECTION FILED BY THE A SSESSEE ARE DECIDED BY ITA NOS.2558 & 2894/DEL./2011 ITA NO.2662/DEL./2012 CO NO.209 & 210/DEL/20111 CO NO.269/DEL/2012 21 US IN PARAS 8 & 8.1 OF THIS ORDER. ACCORDINGLY, FO LLOWING OUR AFORESAID DECISION, WE DISMISS GROUND NO.1 OF THE ASSESSEES APPEAL AND ALLOW THE CROSS OBJECTIONS FILED BY THE ASSESSEE ON THE AFORE SAID ISSUES. 20. GROUND NO.2 OF THE REVENUES APPEAL READS AS UN DER :- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT (A) HAS ERRED IN HOLDING THAT INCOME EARNED BY THE ASSESSEE FROM TRANSFER OF PROPERTY WAS TO BE TREATE D AS SHORT TERM CAPITAL GAINS AND NOT AS BUSINESS INCOME AS TR EATED BY THE ASSESSING OFFICER. 21. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. THE CIT (A) HAS DEALT THE ISSUE IN HIS ORDER AT PARAS 5 & 5.1 WHICH IS RE PRODUCED AS UNDER :- 5. GROUND NO.3 IS AGAINST THE ACTION OF THE AO BY TREATING TRANSFER OF THE PROPERTY RIGHTS AS BUSINESS INCOME NOT AS SHORT TERM CAPITAL GAINS. IN THIS REGARD AO HAS NOT GIVEN ANY PARTICULAR FINDING IN THE BODY OF THE ASSESSMENT OR DER. HE HAS TREATED ALL THE CAPITAL GAINS AS BUSINESS INCOME. I N THIS REGARD LD. AR OF THE ASSESSEE VIDE LETTER DATED 9.2.2011 HAS S UBMITTED AS UNDER:- 'IN THE ABOVE APPEAL GROUND NO. 3 ASSAILS ACTION OF THE ASSESSING OFFICER IN ASSESSING SHORT TERM CAPITAL G AIN ARISING FROM ASSIGNMENT OF PROPERTY RIGHTS AS BUSINESS INCO ME WITHOUT DISCUSSING THE MATTER IN THE ASSESSMENT ORDER AND W ITHOUT ASSIGNING ANY REASON POSSIBLY FOR THE REASON THAT C APITAL GAINS ARISING FROM REALIZATION OF INVESTMENT IN SHARES AN D SECURITIES HAVE BEEN TREATED BY HIM AS BUSINESS. 2. COPIES OF DOCUMENTS RELATING TO ACQUISITION AND ASSIGNMENT OF PROPERTY RIGHTS HAVE BEEN SUBMITTED T O THE ASSESSING OFFICER IN THE COURSE OF THE ASSESSMENT P ROCEEDINGS AND ARE PLACED AT PAGES 173 TO 184 OF THE PAPER BOO K. 3. BY AGREEMENT DATED 22ND OCTOBER, 2004 BETWEEN SUNSAM PROPERTIES PVT. LTD. OF KOLKATA AND THE ASSE SSEE ITA NOS.2558 & 2894/DEL./2011 ITA NO.2662/DEL./2012 CO NO.209 & 210/DEL/20111 CO NO.269/DEL/2012 22 COMPANY, THE ASSESSEE COMPANY BOOKED 7500 SQ. FT. O F SEMI BUILT-UP AREA FORMING PART OF THE COMMITTED AREA OF 25000 SQ. FT. IN FAVOUR OF M/S. SUNSAM PROPERTIES PVT. LTD. B Y CHANDRAS GREENS PROJECTS OF KOLKATA IN A PLOT OF LA ND SITUATED AT EASTERN METROPOLITAN BYE-PASS COMMONLY KNOWN AS BANTALA HILLOCK AND MADE FULL PAYMENT OF CONSIDERAT ION THEREFORE FROM TIME TO TIME. 4. OBLIGATION OF SUNSAM PROPERTIES PVT. LTD. WAS TO GET THE PLANS OF THE BUILDING SANCTIONED, CONSTRUCT, ERECT AND COMPLETE NEW BUILDING WITHIN A PERIOD OF 30 MONTHS FROM THE DATE OF EXECUTION OF THE AGREEMENT IN ACCORDANCE WITH PLAN SANCTIONED BY KOLKATA MUNICIPAL CORPORATION AND TO ARRANGE TEN ANT IN RESPECT OF THE SAID PROPERTIES. 5. HOWEVER, THERE BEING DELAY IN THE COMPLETION OF THE PROJECT, APPELLANT COULD FIND WILLING BUYER IN M/S. HELGIER DEVELOPMENT AND CONSTRUCTION COMPANY PVT. LTD. ACCORDINGLY, THE COMPANY ASSIGNED ITS RIGHTS IN FAV OUR OF HELGIER DEVELOPMENT AND CONSTRUCTION COMPANY PVT. L TD. BY AGREEMENT DATED 20 TH SEPTEMBER, 2006. ON SUCH TRANSFER IT EARNED A PROFIT OF RS.1,53,00,000/-. 6. APPELLANT IS NOT IN THE BUSINESS OF ACQUIRING, D EVELOPING AND SELLING OF THE PROPERTY. THE PROPERTY WAS SOUGH T TO BE ACQUIRED PURELY AS AN INVESTMENT PROPOSITION. THERE FORE, INVESTMENT MADE IN THE PROPERTY .WAS A CAPITAL INVE STMENT AND GAIN ARISING ON TRANSFER OF RIGHTS THEREIN IS A CAP ITAL GAIN AND ASSESSABLE AS CAPITAL GAIN. 7. IT IS, THEREFORE, SUBMITTED THAT THE ASSESSING OFFICER MAY KINDLY BE DIRECTED TO TREAT THE SAID GAIN AS SHORT TERM CAPITAL GAIN. 5.1 I HAVE GONE THROUGH THE WRITTEN SUBMISSION OF T HE ID. AR AND IN MY CONSIDERED OPINION THE ASSESSEE IS NOT DEALING IN THE IMMOVABLE PROPERTY. THERE IS A SINGLE TRANSACTI ON DURING THE YEAR ON WHICH SHORT TERM CAPITAL GAIN HAS BEEN OFFE RED. IN MY CONSIDERED VIEW ACTION OF THE AO IS MISCONCEIVED, H ENCE, RELIEF IS GRANTED TO THE APPELLANT AND GROUND NO.3 IS DECI DED IN FAVOUR OF THE APPELLANT. ITA NOS.2558 & 2894/DEL./2011 ITA NO.2662/DEL./2012 CO NO.209 & 210/DEL/20111 CO NO.269/DEL/2012 23 FROM THE FACTS AS NARRATED IN CIT (A)S ORDER, WE F IND THAT ASSESSEE WAS NOT DOING THE BUSINESS OF DEALING IN IMMOVABLE PROPERTY . THEREFORE, WE FIND NO FAULT IN THE ORDER OF THE CIT (A) AND WHATEVER S URPLUS EARNED BY THE ASSESSEE ON THE TRANSFER OF THE PROPERTY VIDE HIS A GREEMENT DATED 22.10.2004 WITH M/S. SUNSAM PROPERTIES PVT. LTD. FO R 7500 SQ.FT. OF SEMI BUILT UP AREA SHALL BE CONSIDERED AS SHORT TERM CAP ITAL GAIN AS HELD BY THE CIT (A). HENCE, THIS GROUND OF REVENUES APPEAL ST ANDS DISMISSED. 22. GROUND NO.3 OF THE REVENUES APPEAL READS AS UN DER :- 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT (A) HAS ERRED IN HOLDING THAT THE PROVISION S OF SECTION 43 (5) OF THE IT ACT ARE NOT APPLICABLE TO THE CASE OF THE ASSESSEE AND HOLDING THEREBY THAT THE INCOME FR OM TRANSACTIONS IN SHARES, SECURITIES ETC. IS NOT TO B E TREATED AS INCOME FROM SPECULATIVE TRANSACTIONS. 23. SINCE WE HAVE ALREADY HELD THAT ASSESSEE IS DER IVING INCOME FROM CAPITAL GAIN, VIZ., LONG TERM OR SHORT TERM, AND IT IS NOT INDULGED IN SPECULATIVE TRANSACTION, THEREFORE, THIS GROUND OF REVENUES APPEAL ALSO STANDS DISMISSED. 24. GROUND NO.3 IN THE CROSS OBJECTION FILED BY THE ASSESSEE IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. THE SAME IS DISMISSED. 25. IN THE RESULT, THE APPEAL FILED BY THE REVENUE (ITA NO.2894/DEL/2011) IS DISMISSED AND THE CROSS OBJECT ION FILED BY THE ASSESSEE (CO NO.210/DEL/2011) IS PARTLY ALLOWED. ITA NOS.2558 & 2894/DEL./2011 ITA NO.2662/DEL./2012 CO NO.209 & 210/DEL/20111 CO NO.269/DEL/2012 24 ITA NO.2662/DEL/2012 & CO NO.269/DEL/2011 26. GROUND NO.1 TAKEN BY THE REVENUE READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT (A) HAS ERRED IN DIRECTING THAT OUT OF THE ENTI RE BUSINESS INCOME OF RS.23,77,08,067/- TREATED AS SUCH BY THE A.O., ONLY A SUM OF RS.8,00,777/- BE ASSESSED AS BUSINESS INCO ME AND THE REST OF RS.23,69,07,290/- BE TREATED AS INCOME UNDER THE HEAD CAPITAL GAINS. 27. ASSESSEE HAS ALSO FILED CROSS OBJECTION BY TAKI NG THE FOLLOWING GROUND ON THIS ISSUE :- 1. THAT THE LEARNED CIT (APPEALS) HAS ERRED IN HO LDING THAT INTEREST EARNED BY THE ASSESSEE COMPANY IS INC OME FROM OTHER SOURCES AND NOT INCOME FROM BUSINESS. 2. THAT THE LEARNED CIT (APPEALS) HAS ERRED IN TREA TING SHORT TERM CAPITAL GAINS ARISING FROM REALIZATION O F SHARES HELD AS INVESTMENT AS ON 31 ST MARCH 2006 AND ACCEPTED AS SUCH IN ASSESSMENT YEAR 2006-07, THOUGH SOLD WITHIN A PERIO D OF 30 DAYS. 28. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE AFORE SAID ISSUES IN THE REVENUES APPEAL AND CROSS OBJECTION FILED BY THE A SSESSEE ARE DECIDED BY US IN PARAS 8 & 8.1 OF THIS ORDER. ACCORDINGLY, FO LLOWING OUR AFORESAID DECISION, WE DISMISS GROUND NO.1 OF THE ASSESSEES APPEAL AND ALLOW THE CROSS OBJECTIONS FILED BY THE ASSESSEE ON THE AFORE SAID ISSUES. 29. GROUND NO.2 OF THE REVENUES APPEAL READ AS UND ER :- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED CIT (A) ERRED IN DIRECTING THAT TH E INCOME DECLARED BY THE ASSESSEE COMPANY MAY NOT BE TREATED AS ITA NOS.2558 & 2894/DEL./2011 ITA NO.2662/DEL./2012 CO NO.209 & 210/DEL/20111 CO NO.269/DEL/2012 25 INCOME DERIVED FROM SPECULATIVE TRANSACTIONS AS PER SECTION 43 (5) OF THE INCOME-TAX ACT, 1961. 30. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. SIN CE WE HAVE ALREADY HELD THAT ASSESSEE IS DERIVING INCOME FROM CAPITAL GAIN, VIZ., LONG TERM OR SHORT TERM, AND IT IS NOT INDULGED IN SPECULATIVE T RANSACTION, THEREFORE, THIS GROUND OF REVENUES APPEAL ALSO STANDS DISMISSED. 31. GROUND NO.3 OF THE REVENUES APPEAL AND ALSO TH E CROSS OBJECTION FILED BY THE ASSESSEE IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. THE SAME IS DISMISSED. 32. IN THE RESULT, THE APPEAL FILED BY THE REVENUE (ITA NO.2662/DEL/2012) IS DISMISSED AND THE CROSS OBJECT ION FILED BY THE ASSESSEE (CO NO.269/DEL/2012) IS PARTLY ALLOWED. 33. TO SUM UP : THE THREE APPEALS FILED BY THE REVE NUE ARE DISMISSED AND THREE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE PA RTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 6 TH DAY OF MAY, 2015. SD/- SD/- (I.C. SUDHIR) (B.C. MEENA) VICE PRESIDENT ACCOUNTANT MEMBER DATED THE 6 TH DAY OF MAY, 2015 TS ITA NOS.2558 & 2894/DEL./2011 ITA NO.2662/DEL./2012 CO NO.209 & 210/DEL/20111 CO NO.269/DEL/2012 26 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXI, NEW DELHI 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.