Smt. Devhooti Janmejay Vyas, Ahmedabad V. The ACIT.,(OSD)Range-1., Ahmedabad

CO 219/AHD/2011

• Counselvise Citation: [2016] 119 COUNSELVISE.COM (IT) 3380 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 9 month(s) 7 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 27-07-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-07-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 20-10-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD , BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI N. K. BILLAIYA , ACCOUNTANT MEMBER. ITA. NO.1907/AHD/2011 (ASSESSMENT YEAR: 2008-09) ACIT(OSD), RANGE-1, AHMEDABAD APPELLANT VS. SMT. DEVHOOTI JANMEJAY VYAS B/1/A, RAJHANS SOCIETY, ST. XAVIERS COLLEGE ROAD, ELLIS BRIDGE, AHMEDABAD RESPONDENT & C.O. NO.219/AHD/2011 (IN ITA NO.1907/AHD/2011) (ASSESSMENT YEAR: 2008-09) SMT. DEVHOOTI JANMEJAY VYAS B/1/A, RAJHANS SOCIETY, ST. XAVIERS COLLEGE ROAD, ELLIS BRIDGE, AHMEDABAD APPELLANT VS. ACIT(OSD), RANGE-1, AHMEDABAD RESPONDENT PAN: AAJVP5327Q ITA NO.1907/AHD/11 & C.O. NO.219/AHD/11 A.Y. 08-09 [ACIT(OSD) VS. SMT. DEVHOOTI J. VYAS] PAGE 2 /BY APPELLANT : SHRI JAMES KURIAN, SR. D.R. /BY RESPONDENT : SHRI TUSHAR P. HEMANI, A.R. /DATE OF HEARING : 20.07.2016 /DATE OF PRONOUNCEMENT : 27.07.2016 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THESE TWO APPEALS OF WHICH ONE IS FILED BY REVENUE AND THE OTHER I.E. CROSS OBJECTION BY ASSESSEE ARE AGAI NST THE ORDER OF CIT(A)-VI, AHMEDABAD, DATED 18.05.2011 FOR A.Y. 2008-09. 2. IN ITA NO.1907/AHD/2011, REVENUE HAS FILED THE APPEAL ON FOLLOWING GROUND: 1. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DIR ECTING THE A.O. TO TREAT THE ADDITION OF RS.59,78,609/- AS INVESTMENT RESULTING IN CAPITAL GAIN INSTEAD OF BUSINESS INCOME. 2. THE ONLY ISSUE BEFORE US IS WITH REGARD TO ADDITION OF RS.59,78,609/- MADE BY ASSESSING OFFICER. ASSESSIN G OFFICER FROM THE DETAILS OF INCOME FURNISHED BY ASSESSEE DU RING ASSESSMENT PROCEEDINGS OBSERVED THAT ASSESSEE IS EN GAGED IN TRADING OF SHARES & SECURITIES, FREQUENTLY, ASSESSE E HAS SHOWN CAPITAL GAIN OF RS.3,25,272/- AS SHORT TERM C APITAL GAIN (HEREINAFTER CALLED AS STCG) AND RS.56,53,33 7/- AS LONG TERM CAPITAL GAIN (HEREINAFTER CALLED AS LTCG ). OUT OF ITA NO.1907/AHD/11 & C.O. NO.219/AHD/11 A.Y. 08-09 [ACIT(OSD) VS. SMT. DEVHOOTI J. VYAS] PAGE 3 GROSS TOTAL RECEIPTS OF RS.2,47,55,016/-, ASSESSEE HAS EARNED INCOME FROM SALE OF SHARES OF RS.96,89,950/- WHICH WAS ABOUT 39.14% OF TOTAL INCOME. HENCE, HE OBSERVED T HAT ASSESSEE HAS EARNED SUBSTANTIAL PART OF ITS INCOME FROM TRANSACTIONS OF SHARES. THEREFORE, ASSESSEE WAS AS KED VIDE ORDER AS TO WHY THE CAPITAL GAIN INCOMES SHOULD NOT BE TREATED AS BUSINESS INCOME. IN RESPONSE TO SAME, A SSESSEE HAS GIVEN DETAILS OF ITS TRANSACTIONS AS DETAILED I N PARA 2.1 CIT(A)S ORDER CONSIDERING THE SUBMISSION ON BEHALF OF ASSESSEE, CIT(A) DELETED THE ADDITION. 2.1 SAME HAS BEEN OPPOSED ON BEHALF OF REVENUE INTE R ALIA SUBMITTING THAT CIT(A) ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSESSING OFFICER TO TREAT THE ADDITION OF RS.5 9,78,609/- AS INVESTMENT RESULTING IN CAPITAL GAIN INSTEAD OF BUSINESS INCOME. ACCORDINGLY, HE REQUESTED TO SET ASIDE THE ORDER OF CIT(A) AND THAT OF ASSESSING OFFICER BE RESTORED. ON THE OTHER HAND, LD. AUTHORIZED REPRESENTATIVE SUPPORTED THE ORDER OF CIT(A). 2.2 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATER IAL ON RECORD, WE FIND THAT ASSESSEE HAS EARNED CAPITAL GAIN OF RS.3,25,272/- AS STCG AND RS.56,53,337/- AS LTCG ON SALE OF SHARES AGGREGATING TO RS.59,78,609/- WHICH HAS B EEN TREATED AS BUSINESS INCOME BY ASSESSEE. 2.2.1 WITH REGARD TO ISSUE PERTAINING TO LONG TERM CAPITAL GAIN OF RS.56,53,337/- SHOWN AS SUCH SAME I S ITA NO.1907/AHD/11 & C.O. NO.219/AHD/11 A.Y. 08-09 [ACIT(OSD) VS. SMT. DEVHOOTI J. VYAS] PAGE 4 COVERED IN FAVOUR OF ASSESSEE BY CBDT CIRCULAR NO.6 /2016 DATED 29.02.2016. ACCORDING TO WHICH, ASSESSING OF FICER HAS BEEN INSTRUCTED IN HOLDING WHETHER THE SURPLUS GENE RATED FROM SALE OF LISTED SHARES OR OTHER SECURITIES WOUL D BE TREATED AS CAPITAL GAIN OR BUSINESS INCOME, SHALL TAKE INTO ACCOUNT THE FOLLOWINGS: ( A) WHERE THE ASSESSEE ITSELF, IRRESPECTIVE OF THE P ERIOD OF HOLDING THE LISTED SHARES AND SECURITIES, OPTS T O TREAT THEM AS STOCK-IN-TRADE, THE INCOME ARISING FR OM TRANSFER OF SUCH SHARES/SECURITIES WOULD BE TREATED AS ITS BUSINESS INCOME, (B) IN RESPECT OF LISTED SHARES AND SECURITIES HELD FOR A PERIOD OF MORE THAN 12 MONTHS IMMEDIATELY PRECEDING THE DATE OF ITS TRANSFER, IF THE ASSESSEE DESIRES TO TREAT THE INCOME ARISING FROM THE TRANSF ER THEREOF AS CAPITAL GAIN, THE SAME SHALL NOT BE PUT TO DISPUTE BY THE ASSESSING OFFICER. HOWEVER, THIS STAND, ONCE TAKEN BY THE ASSESSEE IN A PARTICULAR ASSESSMENT YEAR, SHALL REMAIN APPLICABLE IN SUBSEQUENT ASSESSMENT YEARS ALSO AND THE TAXPAYERS SHALL NOT BE ALLOWED TO ADOPT A DIFFERENT/CONTRARY STAND IN THIS REGARD IN SUBSEQUENT YEARS; (C) IN ALL OTHER CASES, THE NATURE OF TRANSACTION ( I.E. WHETHER THE SAME IS IN THE NATURE OF CAPITAL GAIN O R BUSINESS INCOME) SHALL CONTINUE TO BE DECIDED KEEPING IN VIEW THE AFORESAID CIRCULARS ISSUED BY T HE CBDT. IN VIEW OF ABOVE, WE ARE OF THE VIEW THAT LTCG HAS RIGHTLY BEEN TREATED AS INVESTMENT BY CIT(A). SAME IS UPHELD. 2.2.2 REGARDING SHORT TERM CAPITAL GAIN, WE FIND T HAT ASSESSING OFFICER FAILED TO APPRECIATE THE FACT THA T ASSESSEE IS ITA NO.1907/AHD/11 & C.O. NO.219/AHD/11 A.Y. 08-09 [ACIT(OSD) VS. SMT. DEVHOOTI J. VYAS] PAGE 5 FULL TIME EMPLOYEE OF DISHMAN PHARMACEUTICALS & CHE MICALS LTD. AND DRAWING SALARY OF RS.36,00,000/- PER ANNUM . ASSESSEE HAS AFFECTED 5 TRANSACTIONS IN 2 SCRIPS AN D 24 TRANSACTIONS IN 3 SCRIPS FROM WHICH STCG AND LTCG H AVE BEEN EARNED RESPECTIVELY. IN CASE OF STCG, SHARES OF PI ONEER EMBROIDARIES WERE HELD FOR 106-107 DAYS. SUCH SHAR ES WERE ACQUIRED ON 22.07.2007 (ONE TRANSACTION) AND SOLD O N 05/06.11.2007 (FOUR TRANSACTIONS). SHARES OF FERR O ALLOY CORPN WERE HELD FOR AROUND 60 DAYS, SUCH SHARES WER E ACQUIRED ON 16.08.2007 (ONE TRANSACTION) AND SOLD O N 15.10.2007 (ONE TRANSACTION). SHARES HAVE BEEN SHO WN AS INVESTMENTS IN BOOKS OF ACCOUNT AND NOT AS STOCK-IN -TRADE. SUCH INVESTMENTS HAVE BEEN VALUED AT COST. ASSESSEE DOES NOT HAVE NUMBER OF EMPLOYEES AND HENCE, MUCH TIME HAS N OT BEEN DEVOTED FOR SUCH ACTIVITIES. ASSESSEE HAS MADE INV ESTMENT IN SHARES WITH INTENTION OF LONG TERM APPRECIATION AND ALSO MADE DIVIDEND INCOME. SHARES SOLD DURING THE YEAR UNDER CONSIDERATION WERE PURCHASED IN EARLIER YEARS OUT O F OWN FUNDS AND NOT OUT OF BORROWED FUNDS. ALL TRANSACTIONS AR E DELIVERY BASED TRANSACTIONS. IN FACT, NATURE OF ACTIVITIES, MODUS OPERANDI OF ASSESSEE, MANNER OF KEEPING RECORDS AND PRESENTATION OF SHARES AS INVESTMENTS AT THE END OF YEAR IS SAME AS IN EARLIER YEARS. HENCE, FOLLOWING PRINCIP LES OF CONSISTENCY, INCOME ARISING ON SALE OF SHARES DESER VES TO BE TAXED AS CAPITAL GAIN. IN LIGHT OF FACTUAL AND LEG AL DISCUSSION, IT IS CLEAR THAT ASSESSEE IS AN INVESTOR IN SHARES AND NOT A TRADER. ACCORDINGLY, ENTIRE INCOME ARISING OUT OF CONCERNED SHARES OUT TO HAVE BEEN TAXED AS CAPITAL GAIN AND NOT AS BUSIN ESS INCOME. ITA NO.1907/AHD/11 & C.O. NO.219/AHD/11 A.Y. 08-09 [ACIT(OSD) VS. SMT. DEVHOOTI J. VYAS] PAGE 6 IN VIEW OF ABOVE DISCUSSION, ORDER OF CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 3. IN RESULT, REVENUES APPEAL IS DISMISSED. 4. IN CROSS OBJECTION, ASSESSEE IS NOTHING BUT IN S UM AND SUBSTANCE SUPPORTING THE ORDER OF CIT(A) REGARDING CIT(A)S DIRECTION TO ASSESSING OFFICER TO TREAT GAIN ON SAL E OF SHARES HELD FOR MORE THAN 30 DAYS OR LESS AS BUSINESS INCO ME. ACCORDING TO ASSESSEE, ENTIRE GAIN ON SALE OF SHARE S OUGHT TO HAVE BEEN TREATED AS CAPITAL GAIN. ALTERNATIVELY, I F LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT VIEW IS TA KEN THAT INCOME ON SALE OF SHARES IS TO BE TREATED AS BUSINE SS INCOME, THEN EXPENDITURE INCURRED FOR THE PURPOSE OF CARRYI NG OUT SUCH ALLEGED BUSINESS ACTIVITY BE ALLOWED AS DEDUCTION F ROM THE SAME. 5. AS A RESULT, APPEAL FILED BY REVENUE AND CROSS OBJECTION BY ASSESSEE BOTH ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 27 TH DAY OF JULY, 2016. SD/- SD/- (N. K. BILLAIYA) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD: DATED 27/07/2016 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE $ %&%'( ) / CONCERNED CIT 4 )- / CIT (A) ,-./00'(1 '( 123& / ITA NO.1907/AHD/11 & C.O. NO.219/AHD/11 A.Y. 08-09 [ACIT(OSD) VS. SMT. DEVHOOTI J. VYAS] PAGE 7 DR, ITAT, AHMEDABAD 4/5678 / GUARD FILE. BY ORDER / 1 / 2% '( 123&