Smt. Vijaya Srinivasan, Kolkata V. DCIT, C.C. XXVIII, Kolkata

CO 45/KOL/2009

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7480 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 11 month(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 08-06-2012
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 16-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 23-06-2009
• Court: TRIBUNAL
• Assessee Lawyers: D S DAMLE
• Keywords: Capital asset; Business income

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH A , KOLKATA [ () . .. . . .. . , , , , , ! ''# $% ''# $% ''# $% ''# $% ] ]] ] [BEFORE HONBLE SRI C. D. RAO, AM & HONBLE SRI GEORGE MATHAN, JM] !' !' !' !' /ITA NO.891/KOL/2009 (%) *+/ ASSESSMENT YEAR : 2006-07 ($- / APPELLANT ) - % - ( /0$- /RESPONDENT) A.C.I.T., CENTRAL CIRCLE-XXVIII SMT.VIJAYA SRIN IVASAN KOLAKATA -VERSUS- KOLKATA (PAN:AMGPS 8648 N) 1 23 1 23 1 23 1 23 /C.O.NO.45/KOL/2009 !' !' !' !' /A/O ITA NO.891/KOL/2009 (%) *+/ ASSESSMENT YEAR : 2006-07 ($- / CROSS OBJECTOR ) - % - ( /0$- /RESPONDENT) SMT.VIJAYA SRINIVASAN A.C.I.T., CENTRAL CIRCLE- KOLKATA -VERSUS- XXVIII, KOLKATA (PAN:AMGPS 8648 N) $- 4 5 / FOR THE DEPARTMENT: SHRI A.K.SINGH /0$- 4 5 / FOR THE ASSESSEE: SHRI D.S.DAMLE 6%7 4 /DATE OF HEARING : 22.05.2012. 8* 4 /DATE OF PRONOUNCEMENT : 08.06.2012. 9 / ORDER ( (( ( . .. . . .. . ) )) ), , , , PER SHRI C.D.RAO, AM THE ABOVE APPEALS ONE FILED BY THE REVENUE AND CROS S OBJECTION FILED BY ASSESSEE ARE AGAINST ORDER DATED 24.02.2009 OF CIT (A) CENTRAL-I, KOLKATA PERTAINING TO A.YR. 2006- 07. 2. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLO WING GROUNDS :- 1. THAT IN THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) HAS ERRED IN ALLOWING EARNED BY THE ASSESSEE DURING THE FINANCIA L YEAR AS LIABLE TO ASSESSED AS LTCG AND NOT AS BUSINESS INCOME THOUGH THERE WAS THE FAC TUAL ASPECT OF FREQUENCY AS WELL AS VOLUMINOUS TRANSACTIONS OF SALE AND PURCHASE OF SHA RES BY THE ASSESSEE. 2. THAT IN THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE ON THE COUNT OF SERVICE CHARGE CLAIM HELD AS INADMISSIBLE. 2 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT WHILE DO ING THE SCRUTINY ASSESSMENT AO HAS OBSERVED THAT THE ASSESSEE HAS CLAIMED SHORT TE RM CAPITAL GAIN OF RS.26,67,997/- AND CALCULATED TAX AT SPECIAL LOWER RATES AS PER SE CTION 111A OF IT ACT, 1961. WHEN THE ASSESSEE WAS SHOW CAUSED WHY THE LONG TERM CAPI TAL GAIN AND SHORT TERM CAPITAL GAIN INCOME SHOULD NOT BE HELD AS BUSINESS INCOME OF ASSESSEE. THE LD. COUNSEL FOR ASSESSEE HAS SUBMITTED WHICH IS AS UNDE R :- THE A.R.OF THE ASSESSEE MADE A WRITTEN SUBMISSION CONTENDING AS FOLLOWS : ON PERUSAL OF THE STATEMENT OF CAPITAL GAINS, YOU W ILL NOTE THAT THE ASSESSEE HAS DERIVED GAIN MAINLY FROM SHARES HELD ON INVESTMENT ACCOUNT AND WHICH WERE ACQUIRED FOR PERIOD EXCEEDING 12 MONTHS. ON PERUSAL OF THE ASSESSMENT R ECORDS OF THE ASSESSEE, YOUR HONOUR WILL NOTE THAT THE ASSESSEE HAS BEEN REGULARLY INVE STING IN SHARES. THESE INVESTMENTS HAVE BEEN MADE OUT OF THE ASSESSEES OWN FUNDS AND NO BORROWED FUNDS ARE USED FOR ACQUIRING THE INVESTMENT. THE ASSESSEE HAS NOT BEEN CLAIMING DEDUCTION ON ACCOUNT OF INTEREST PAID ON BORROWED FUNDS. FROM PERUSAL OF AC COUNTS YOU WILL ALSO NOTE THAT THE ASSESSEE IS AN INDIVIDUAL AND IS DERIVING INCOME MA INLY FORM CONSULTANCY FEES & SALARY AND AS SUCH THE ASSESSEE IS NOT ENGAGED AND IN FACT CANNOT BE ENGAGED IN DOING ANY BUSINESS ACTIVITY. THE SURPLUS FUNDS GENERATED FROM THE SAVINGS AND PAS ACCRETIONS HAVE BEEN INVESTED IN SHARES FOR THE PURPOSE OF EARNING REGULAR INCOME IN THE FORM OF DIVIDEND AND TO REALIZE APPRECIATION. THE ASSESSEE DOES NOT MAINTAIN ANY ESTABLISHMENT NOR CARRIES ON ANY ORGANIZED ACTIVITY OF SHARE TRAD ING. THE SHARES PURCHASED BY THE ASSESSEE ARE IMMEDIATELY TAKEN ON DELIVERY AND THE SHARES ARE DULY REFLECTED IN THE ASSESSEES DEMAT ACCOUNT. YOU WILL ALSO NOTICE FROM THE LIST OF INVESTMENT THAT MANY SHARES ARE HELD EVEN FOR MORE THAN 10 YEARS. THE COURTS HAVE HELD THAT ACTIVITIES IN THE NATURE OF ADVENTURE OF TRADE ARE TO BE CONSIDERED AS BUSINESS. HOWEVER, FOR CARRYING ON SU CH ADVENTURE ON ASSESSEE IS REQUIRED TO CARRY ON THE ACTIVITY IN AN ORGANIZED MANNER BY ESTABLISHING A BUSINESS ORGANIZATION. HOWEVER, WHERE AN ASSESSEE INVESTS HIS SURPLUS FUND S OR OWN FUNDS FOR EARNING REGULAR INCOME AND TO REALIZE APPRECIATION IN THE VALUE OF INVESTMENT SUCH TRANSACTION IS TO BE CONSIDERED AS INVESTMENT TRANSACTION AND NO BUSINES S TRANSACTION. 3.1. HOWEVER, THE LD. AO BY PLACING RELIANCE IN THE CASE OF G.VENKATASWAMI NAIDU & CO. VS CIT (1959) 35 ITR 594 (SC) AND CBDT VIDE I TS CIRCULAR NO.4/2007 DATED 15.06.2007 HAS CONSIDERED THE SHORT TERM CAPITAL GA IN AS INCOME FROM BUSINESS. 3.2. ON APPEAL THE LD. CIT(A) HAS DELETED THE SAME BY OBSERVING THAT IN THE ASSESSMENT ORDER FOR AY. 2004-05 DATED 22-9-06 AND FOR A.Y. 2005-06 DATED 4-5-07 THE CLAIM OF THE CAPITAL GAIN ON SALE OF SHARES OF RS. 39,45,305/- AND OF RS. 75,29,591/- IS ACCEPTED. THE QUESTION IS WHETHER THERE IS ANY T HRESHOLD OF GAIN BEYOND WHICH, WHAT IS ACCEPTED AS CAPITAL GAIN OTHERWISE, HAS TO BE TR EATED AS PROFIT OF A BUSINESS. THE EARLIER ASSESSMENT ORDERS ARE NOT REVISED. BUT THE VIEW ABOUT THE NATURE OF THE SURPLUS ON SALE OF SHARES IS REVISED IN A.Y. 2006-07, WHICH , PROBABLY IS AN ACCOUNT OF THE 3 SHEER VOLUME OF SURPLUS, SEVERAL TIMES HIGHER THAN EARLIER YEARS. BUT THEN THE ASSESSEE LEFT BEHIND THE GAINS FROM A LIFE-TIME OF WISE INVE STMENT. 3.3. ONE CRITERION IS THE FREQUENCY OF TRANSACTIONS . THE APPELLANT IS NOT SHOWN TO HAVE PURCHASED AND SOLD THE SCRIPS OF THE SAME COMP ANY WITH ANY FREQUENCY. FROM DETAILS OF LONG-TERM CAPITAL GAIN, THE PATTERN OF P URCHASE AND SALE IS THAT THE PURCHASE OF A FAVOURITE SCRIP IS SPREAD OVER SEVERAL TRANSAC TIONS AND THEN THE ENTIRE ACCUMULATION IS SOLD IN ONE TRANSACTION. THE INVEST MENTS ARE ACCUMULATED TILL THE MOMENT OF BEST REALIZATION. BUT THIS IS NOT LIKE TU RNOVER OF STOCK-IN-TRADE. SOME OF THE SCRIPS WERE PURCHASED AS EARLY AS F.Y. 81-82 AND AL L QUALIFY FOR DESCRIPTION AS LONG TERM CAPITAL ASSET. THE PATTERN OF PURCHASE AND SAL E IS NOT THAT OF A BUSINESSMANS FREQUENCY OF PURCHASE AND SALE. 3.4. THE OTHER RELEVANT FACTOR IS THAT THE SOURCE O F THE PURCHASES ARE APPELLANTS SAVINGS. THE APPELLANT CLAIMS NO EXPENDITURE ON INT EREST ON BORROWED FUNDS FOR INVESTMENT. THE SOURCE OF INVESTMENTS IS NOT FOUND TO BE UNEXPLAINED, THIS WOULD BE ANOTHER INDICATOR OF THE PURCHASES NOT BEING THE ST OCK-IN-TRADE. 3.5. HE IS OF THE OPINION THAT THE SHEER VOLUME OF SURPLUS REALIZED, THERE IS NOTHING IN THESE TRANSACTIONS WHICH WOULD REQUIRE THEM TO B E TREATED AS BUSINESS TRANSACTIONS. THE BENEFIT OF SECTION 10(38) OR OF SECTION 111A OF THE ACT IS AGAIN A CONSEQUENCE OF AND INCIDENTAL TO THE TIMING OF THE TRANSACTION. JU ST BECAUSE THESE BENEFITS FOLLOW THE CAPITAL GAIN, WHAT IS CAPITAL GAIN BY THE CRITERIA FOLLOWED IN PRECEDING ASSESSMENT YEARS DO NOT BECOME PROFITS OF BUSINESS. 3.6. AGGRIEVED BY THIS NOW THE REVENUE IS IN APPEAL BEFORE US. 4. AT THE TIME OF HEARING BEFORE US, THE LD. DR APP EARING ON BEHALF OF THE REVENUE HAS HEAVILY RELIED ON THE ORDERS OF AO AND REQUESTE D TO UPHELD THE SAME BY SETTING ASIDE THE ORDER OF LD. CIT(A). 4 5. ON THE OTHER HAND, THE LD. COUNSEL APPEARING ON BEHALF OF ASSESSEE HAS RELIED ON THE ORDERS OF LD. CIT(A) AND FURTHER RELIED ON THIS TRIBUNAL CASES IN TEN OF THE TRIBUNAL OF KOLKATA BENCHES WHICH WAS FILED IN THE FORM OF P APER BOOK FROM PAGES 1 TO 51. THE DETAILS ARE AS UNDER :- SL. NO. COMPILATION OF JUDICIAL DECISIONS/ORDERS PG. NO. 1. COPY OF DECISION OF THE KOLKATA BENCH OF ITAT IN THE CASE OF DCIT VS RITU KUMAR (ITA NO. 635/K/201 I) DT. 13.01.2012 1-5 2. COPY OF DECISION OF THE KOLKATA BENCH OF ITAT IN THE CASE OF JCIT VS SHRI DEO KURNAR SARAF(ITA NO. 1987/K/2010) DATED 06.09.2011 6-10 3. COPY OF DECISION OF THE KOLKATA BENCH OF ITAT IN THE CASE OF ITO VS WATERLOO EXPORTS PVT LTD (ITA NO. 24/K/2010) DT 14.05.2010 11-14 4. COPY OF DECISION OF THE KOLKATA BENCH OF ITAT IN THE CASE OF DCIT VS RELIANCE TRADING ENTERPRISES LIMITED (ITA NO. 94 4/K/2008) DATED 03.10 .2008 15-21 5. COPY OF DECISION OF THE KOLKATA BENCH OF ITAT IN THE CASE OF ITO VS LANDMARK FINANCE PVT LTD (ITA NO. 195/K/201 1) D ATED 22-28 28.12.2011 6. COPY OF DECISION OF THE KOLKATA BENCH OF ITAT IN THE CASE OF DCIT VS VISHAL TIE-UP (P) LTD (ITA NO. 10/K/2010) DATED 30.01.2012 29-31 7. COPY OF DECISION OF THE KOLKATA BENCH OF ITAT IN THE CASE OF DCIT VS PRASHANT KHANDELWAL (ITA NO. 280/K/20 10) D ATED 11 .11 .2011 32-39 8 COPY OF DECISION OF THE KOLKATA BENCH OF ITAT IN THE CASE OF ITO VS SMT.BHARATI KHANDELVAL (ITA NO. 268/K/2010) DATE D 09.09.2011 40- 44 9. COPY OF DECISION OF THE KOLKATA BENCH OF ITAT IN THE CASE OF JCIT VS SHRI DEO KUMAR SARAF (ITA NO.411/K/2009) DA TED 18.06.2009 45-46 10. COPY OF DECISION OF THE KOLKATA BENCH OF ITAT I N THE CASE OF LYONS & ROSES LTD VS DCIT (ITA NO. 2943/K/1996) DT 28.09.2001 47-51 THEREFORE HE REQUESTED TO UPHELD THE ACTION OF LD. CIT(A). 6. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREF UL PERUSAL OF MATERIALS AVAILABLE ON RECORD, KEEPING IN VIEW OF THE FACT TH AT THE LD. DR COULD NOT BRING ANY CONTRARY MATERIAL TO CONTROVERT THE OBSERVATIONS MA DE BY LD. CIT(A) AND THIS TRIBUNAL HAS CONSISTENTLY TAKING THE VIEW THAT SHEER VOLUME OF SURPLUS REALIZED, THERE IS NOTHING IN THESE TRANSACTIONS WHICH WOULD REQUIRE THEM TO B E TREATED AS BUSINESS TRANSACTIONS. THE BENEFIT OF SECTION 10(38) OR OF SECTION 111A OF THE ACT IS AGAIN A CONSEQUENCE OF AND INCIDENTAL TO THE TIMING OF THE TRANSACTION. JU ST BECAUSE THESE BENEFITS FOLLOW THE CAPITAL GAIN, WHAT IS CAPITAL GAIN BY THE CRITERIA FOLLOWED IN PRECEDING ASSESSMENT 5 YEARS DO NOT BECOME PROFITS OF BUSINESS. WE FIND NO INFIRMITY IN THE ORDERS OF LD. CIT(A) TO BE INTERFERED WITH. WE CONFIRM THE SAME A ND DISMISS THE APPEAL OF REVENUE. 7. AT THE TIME OF HEARING THE LD. COUNSEL FOR ASSE SSE DID NOT PRESS THE CROSS OBJECTION FILED BY ASSESSEE. THEREFORE THE CROSS OB JECTION IS DISMISSED AS BEING NOT PRESSED. 8. IN THE RESULT THE APPEAL OF REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE COURT ON 08.06.2012. SD/- SD/- [ .''# $% , ] [ .., ] [ GEORGE MATHAN ] [ C. D. RAO ] JUDICIAL MEMBER ACCOUNTANT MEMBER ( (( ( ) )) ) DATE:08.06.2012. R.G.(.P.S.) 9 4 /((2 :2*;- COPY OF THE ORDER FORWARDED TO: 1. SMT.VIJAYA SRINIVASAN, WIFE OF LATE K.SRINIVASAN, 1 4, BALLYGUNJE ROAD, KOLKATA-700019. 2 THE A.C.I.T., CENTRAL CIRCLE-XXVIII, KOLKATA. 3. THE CIT- 4. THE CIT(A)-CENTRAL-I, KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA 02 /(/ TRUE COPY, 9%6/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES