M/S. SHAYAMA SAKARIA, MUMBAI V. THE ACIT CIR 21(2), MUMBAI

CO 62/MUM/2008

• Counselvise Citation: [2010] 122 COUNSELVISE.COM (IT) 5133 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 25-08-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 02-06-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 25-02-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUMIT KUMAR
• Assessee Lawyers: SAMEER G DALAL; VIPUL B JOSHI
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SHRI V.DURGA RAO, JM ITA NO.7321/MUM/2007 : ASST.YEAR 2004-2005 THE ASST.COMMISSIONER OF INCOME-TAX CIRCLE 21(2) MUMBAI. VS. MRS.SHYAMA SAKARIA 10 VRINDAVAN, 34 SUBHASH ROAD VILE PARLE (EAST), MUMBAI 400 057. PA NO.AAMPS3782R. (APPELLANT) (RESPONDENT) CO NO.64/MUM/2008 : ASST.YEAR 2004-2005 MRS.SHYAMA SAKARIA 10 VRINDAVAN, 34 SUBHASH ROAD VILE PARLE (EAST), MUMBAI 400 057. VS. THE ASST.COMMISSIONER OF INCOME-TAX CIRCLE 21(2) MUMBAI. (CROSS OBJECTOR) (RESPONDENT) REVENUE BY : SHRI SUMIT KUMAR ASSESSEE BY : S/SHRI VIPUL B.JOSHI & SAMEER G.DALAL O R D E R PER R.S.SYAL (AM) : THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY T HE ASSESSEE ARISE OUT OF THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 08.10.2007 IN RELATION TO THE ASSESSMENT YEAR 2004-2005. 2. THE REVENUE IS AGGRIEVED AGAINST THE ACTION OF T HE LEARNED CIT(A) IN DIRECTING TO TAX THE INCOME DERIVED FROM SALE OF SH ARES HELD FOR MORE THAN ONE YEAR AS LONG TERM CAPITAL GAIN AND NOT AS BUSINESS INCOM E AS HELD BY THE ASSESSING OFFICER. BRIEFLY STATED THE FACTS OF THE CASE ARE T HAT THE ASSESSEE DERIVED INCOME FROM DERIVATIVE TRADING IN SHARES, LONG TERM CAPITA L GAINS ON SALE OF SHARES, SHORT TERM CAPITAL GAINS FROM SALE OF SHARES AND INCOME F ROM OTHER SOURCES. ON BEING CALLED UPON TO FURNISH THE DETAILS OF PURCHASE AND SALE OF SHARES LEADING TO INCOME FROM LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAIN AND DERIVATIVE TRADING, THE ASSESSEE FURNISHED SUCH DETAILS BY CLAIMING HERSEL F TO BE INVESTOR IN SHARES. THE ASSESSING OFFICER NOTED THAT BASICALLY THERE WERE T HREE TYPES OF INCOMES VIZ., FIRST ITA NO.7321/MUM/2007 CO NO.62/MUM/2008 MRS.SHYAMA SAKARIA. 2 ARISING FROM HUNDREDS OF DERIVATIVE TRANSACTIONS, L OSS FROM TRADING WHICH WAS CLAIMED AS BUSINESS LOSS TO THE TUNE OF RS.17,81,80 7, SECOND BEING TRANSACTION FROM PURCHASE AND SALE OF SHARES RESULTING INTO SHORT TE RM CAPITAL GAIN, AND THIRDLY BEING TRANSACTIONS FROM SALE AND PURCHASE OF SHARES RESUL TING INTO LONG TERM CAPITAL GAIN. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD F OUR OVERDRAFT ACCOUNTS WITH FEDERAL BANK LIMITED AND THE BALANCE OUTSTANDING AS AT THE END OF THE YEAR IN SUCH ACCOUNT WAS AT RS.34.90 LAKHS. IT WAS OPINED THAT THE SAID OVERDRAFT FACILITY WAS ENJOYED IN THE COURSE OF DEALINGS IN PURCHASE AND S ALE OF SHARES. CONSIDERING THESE FACTS, THE ASSESSING OFFICER TREATED THE INCOME CL AIMED BY THE ASSESSEE FALLING UNDER THE HEAD `BUSINESS INCOME, AS SHORT TERM CA PITAL GAIN. THEREAFTER SPECULATION PROFIT WAS CONSIDERED SEPARATELY ALONG WITH SPECULATION GAIN. THE LEARNED CIT(A) NOTED THE TRANSACTIONS RESULTING INT O LONG TERM CAPITAL GAIN OF RS.71,31,758 AS UNDER:- SR. NO. DATE OF PURCHASE NO.OF SHARES NO.OF SALES TRANSACTION DURING THE YEAR NAME OF THE SHARE/CO. L.T. GAIN/ LOSS 1. 2000-01 & 2001-02 67,627 13 FEDERAL BANK 672,82,177 2. 09/05/02 3,000 2 NATH SEEDS (34,193) 3. 10/02/02 4,000 2 PRISM CEMENT 2,637 4. 11/02/02 2,000 2 PRISM CEMENT 8,816 5. 20/02/02 800 1 PRISM CEMENT 3,112 6. 12/11/00 33,355.57 1 PRU.ICICI (1,60,107) 7. 14/12/00 45,330.916 1 PRU.ICICI (10,612) 8. 31/03/01 50,403.226 1 BIRLA M.F. 39,955 71,31,785 CONSIDERING VARIOUS CIRCUMSTANCES IT WAS NOTICED THAT SUCH SHARES WERE RETAINED BY THE ASSESSEE FOR MORE THAN THREE YEARS. THE SAID SHARES WERE ALWAYS SHOWN BY THE ASSESSEE AS INVESTMENT. HE, THEREFORE, HELD THAT THE AMOUNT OF ITA NO.7321/MUM/2007 CO NO.62/MUM/2008 MRS.SHYAMA SAKARIA. 3 RS.71.31 LAKHS WAS RIGHTLY TAXABLE AS LONG TERM CAP ITAL GAIN. THE REVENUE IS AGGRIEVED AGAINST THIS FINDING OF THE LD. FIRST APP ELLATE AUTHORITY. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. PAGE NO.3 AND 4 ARE DETAIL OF LONG TERM CAP ITAL GAIN CLAIMED BY THE ASSESSEE. IT COMPRISES OF 23 TRANSACTIONS IN TOTAL DURING THE YEAR WHICH HAVE BEEN REPRODUCED ABOVE. FROM THE DETAIL OF THESE TRANSACTIONS IT IS SEEN THAT MOST OF THE SHARES WERE PURCHASED IN THE YEAR 2000 WHICH HAVE BEEN SOLD IN 2003 EXCEPT FOR CERTAIN SHARES IN WHICH CASE ALSO THE PERIOD OF SHARE HOLDING IS N OT LESS THAN ONE YEAR IN ANY CASE. THERE IS NO DISPUTE AND CANNOT BE THAT A PERSON MAY BE INVESTOR IN SHARES WHILE CARRYING OUT THE BUSINESS OF TRADING IN SHARES. THI S POSITION HAS ALSO BEEN RECOGNIZED BY CBDT VIDE ITS CIRCULAR WHICH HAS BEEN REPRODUCED IN THE ORDERS OF THE AUTHORITIES BELOW. THERE IS NO STRAIT JACKET FO RMULA FOR CLASSIFYING THE SHARES HELD AS STOCK-IN-TRADE OR INVESTMENT. VARIOUS FACTO RS NEED TO BE CONSIDERED AND IT IS A CUMULATIVE EFFECT ALL SUCH FACTORS THAT ULTIMATEL Y LEADS TO THE DETERMINATION OF THE CHARACTER OF HOLDING OF SHARES VIZ., STOCK OR INVES TMENT. THE VIEW POINT OF THE ASSESSING OFFICER THAT THERE IS OVERDRAFT FACILITY ENJOYED BY THE ASSESSEE AND THESE SHARES WERE PURCHASED OUT OF SUCH OVERDRAFT FACILIT Y, IS NOT CORRECT. IT IS APPARENT FROM PAGES 26, 27, 28 AND 29 OF THE PAPER BOOK, BEI NG THE COPIES OF OVERDRAFT ACCOUNT OF THE ASSESSEE WITH BANKS. AS CAN BE SEEN THAT THE FIRST DISBURSEMENT IN THESE ACCOUNTS IS ON 30.01.2004 AS AGAINST WHICH S UCH SHARES, WHICH BECAME SUBJECT MATTER OF SALE IN THIS YEAR HELD TO BE RESU LTING INTO LONG TERM CAPITAL GAIN, WERE MOSTLY PURCHASED IN 2000 AND IN SOME CASES IN IN 2001 OR 2002. APART FROM THAT THE ASSESSEE STATED BEFORE THE A.O. THAT SHE W AS A HIGH WORTH ASSESSEE HAVING DECLARED INCOME OF RS.2.92 CRORE IN ASSESSMENT YEAR 2000-2001, RS.95 LAKHS IN ASSESSMENT YEAR 2001-2002 ETC. IT IS THIS PERIOD DU RING WHICH THE ASSESSEE PURCHASED MOST OF THE SHARES. THESE FACTS INDICATE THAT THE SHARES WERE IN FACT PURCHASED BY THE ASSESSEE OUT OF HER OWN FUNDS AND THE OUTSTANDING BALANCE PAYABLE TO BANKS AT THE END OF THE CURRENT YEAR DOE S NOT HAVE ANY RELATION WITH ITA NO.7321/MUM/2007 CO NO.62/MUM/2008 MRS.SHYAMA SAKARIA. 4 THESE SHARES. FURTHER OTHER MOST IMPORTANT FACTOR I S THE PERIOD OF HOLDING OF SHARES. HERE AGAIN WE FIND THAT SUCH SHARES WERE HELD BY TH E ASSESSEE FOR A FAIRLY LONG PERIOD OF AROUND THREE YEARS IN MOST OF THE CASES A ND IN NO CASE IT IS LESS THAN ONE YEAR. BALANCE SHEET OF THE ASSESSEE IS AVAILABLE AT PAGE 10 OF THE PAPER BOOK FROM WHERE IT CAN BE SEEN THAT SUCH SHARES WERE INCLUDED UNDER THE HEAD `INVESTMENTS. THOUGH NO SINGLE FACTOR, IN ITSELF, CAN CONCLUSIVE LY DECIDE THE NATURE OF SHARE HOLDING AS STOCK-IN-TRADE OR INVESTMENT, BUT THE CU MULATIVE EFFECT OF ALL THE RELEVANT FACTS TAKEN NOTE OF BY US ABOVE, GOES TO SHOW THAT THESE SHARES / UNITS WERE HELD BY THE ASSESSEE FOR THE PURPOSE OF INVESTMENT ONLY. WE , THEREFORE, HOLD THAT PROFIT FROM SALE OF THESE SHARES HAS RIGHTLY HELD BY THE L EARNED CIT(A) TO BE RESULTING INTO LONG TERM CAPITAL GAIN. 4. THE ASSESSEE IS AGGRIEVED AGAINST THE CON FIRMING BY THE LEARNED CIT(A) OF SHORT TERM CAPITAL GAIN ON SALE OF SHARES AS BUSINE SS INCOME AND ALSO PROFIT OR LOSS ON TRADING OF DERIVATIVES AS SPECULATIVE BUSINESS I NCOME / LOSS. THE LEARNED COUNSEL FOR THE ASSESSEE WAS FAIR ENOUGH NOT TO PRE SS THESE GROUNDS OF APPEAL, WHICH HEREBY STAND DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE AND CRO SS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON THIS 25 TH DAY OF AUGUST, 2010. SD/- SD/- ( V. DURGA RAO ) ( R.S.SYAL ) JUDICIAL MEMBER ACC OUNTANT MEMBER MUMBAI : 25 TH AUGUST, 2010. DEVDAS* ITA NO.7321/MUM/2007 CO NO.62/MUM/2008 MRS.SHYAMA SAKARIA. 5 COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) - XVIII, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.