NENMENY INVESTMENT & AGENCIES LTD, MUMBAI V. ITO 2(2(3), MUMBAI

CO 97/MUM/2012

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8767 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 12-06-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 02-04-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 11-06-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 5561 /MUM/2011 ASSESSMENT YEAR: 2007-08 ITO 2(2)(3) 542, AAYAKAR BHAVAN M.K. ROAD MUMBAI VS. NENMENY INVESTMENT & AGENCIES LTD. 29, 4 TH FLOOR, SEA CASTEL, DR. N.A. PURANDARE MARG, CHOWPATY SEA FACE, MUMBAI 400 007 PAN: AAACN 9180 D (APPELLANT) (RESPONDENT) & C.O. NO. 97 /MUM/2012 (ARISING OUT OF APPEAL NO. ITA 5561/M/2011 ASSESSMENT YEAR: 2007-08) NENMENY INVESTMENT & AGENCIES LTD. 29, 4 TH FLOOR, SEA CASTEL, DR. N.A. PURANDARE MARG, CHOWPATY SEA FACE, MUMBAI 400 007 PAN: AAACN 9180 D VS. ITO 2(2)(3) 542, AAYAKAR BHAVAN M.K. ROAD MUMBAI (APPELLANT) (RESPONDENT) REVENUE BY : SHRI MOHIT JAIN ASSESSEE BY : SHRI VIJAY MEHTA DATE OF HEARING : 02.04.2013 DATE OF PRONOUNCEMENT : 12.06.2013 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE REVENUE AND THE CROSS OBJ ECTIONS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE COMMON ORDER OF T HE LD.CIT(A) -5 MUMBAI DATED ITA NO. 5561 /MUM/2011 & C.O. NO. 97 /MUM/2012 (ARISING OUT OF APPEAL NO. ITA 5561/M/2011 NENMENY INVESTMENT & AGENCIES LTD. ASSESSMENT YEAR: 2007-08 2 18.05.2011 FOR THE ASSESSMENT YEAR 2007-08. THE APP EAL OF THE REVENUE AND THE CROSS OBJECTIONS OF THE ASSESSEE ARE DISPOSED BY WA Y OF THIS COMMON ORDER. 2. THE GROUNDS RAISED IN THE REVENUES APPEAL RELAT E TO THE ISSUE OF TREATING AN AMOUNT OF RS.30,68,438/- RECEIVED BY THE ASSESSEE O N ACCOUNT OF TRANSFER OF SHARES AS BUSINESS INCOME BY THE AO AND THE LD.CIT(A) ALLO WING THE CLAIM AS REGARDS THE AMOUNT OF RS.27,70,816/- AS LONG TERM CAPITAL GAIN AS CLAIMED BY THE ASSESEE AND THE CROSS OBJECTIONS RELATE TO THE DIRECTION GIVEN BY THE LD.CIT(A) TO SEGREGATE THE TRANSACTIONS WHERE THE SHARES WERE SOLD OFF WITHIN A PERIOD OF 30 DAYS AS BUSINESS INCOME AND THE REST AS SHORT TERM CAPITAL GAIN IN R ESPECT OF AN AMOUNT OF RS.2,97,622/- CLAIMED BY THE ASSESSEE AS STCG. 3. BRIEFLY STATED, THE ASSESSEE, A COMPANY WHILE DE CLARING A TOTAL INCOME OF RS.3,06,427/- HAD SHOWN A LONG TERM CAPITAL GAIN OF RS.27,70,816/- AND RS.2,97,622/- AS SHORT TERM CAPITAL GAIN TOTAL AMOU NTING TO RS.30,68,438/- ON SALE OF SHARES. HOWEVER, IN THE ASSESSMENT FRAMED U/S 143(3 ) OF THE INCOME TAX ACT, THE AO TREATED THE ENTIRE INCOME UNDER THE HEAD PROFIT OF GAINS FROM BUSINESS & PROFESSION AS AGAINST THE CLAIM OF THE ASSESSEE UN DUE THE HEAD CAPITAL GAINS. ACCORDING TO THE AO, THE TRANSACTIONS OF LTCG INVOL VE EACH SCRIPT HAVING MULTIPLE TRANSACTIONS AND THE TOTAL TRANSACTIONS SHOWN BY TH E ASSESSEE ARE 118. AS REGARDS THE STCG, ACCORDING TO THE AO, INVOLVES 102 SCRIPTS HAVING MULTIPLE TRANSACTIONS AMOUNTING TO 205. 3.1 ON APPEAL, THE LD.CIT(A) WHILE ALLOWING THE CLA IM OF THE ASSESSEE AS REGARDS THE CLAIM OF LTCG, THE LD.CIT(A) HAS DIRECTED THE A O TO SEGREGATE ALL THE TRANSACTIONS WHERE THE SHARES WERE SOLD OFF WITHIN A PERIOD OF 30 DAYS AFTER CALLING FROM RELEVANT DETAILS FROM THE APPELLANT AND TREAT SUCH TRANSACTIONS AS BUSINESS INCOME. REST OF THE TRANSACTIONS WOULD BE TREATED A S SHORT TERM CAPITAL GAINS AND TAXED ACCORDINGLY. AGGRIEVED BY THE IMPUGNED ORDER, THE REVENUE IS IN APPEAL AND THE ASSESSEE HAS FILED THE CROSS OBJECTIONS BEFORE US. ITA NO. 5561 /MUM/2011 & C.O. NO. 97 /MUM/2012 (ARISING OUT OF APPEAL NO. ITA 5561/M/2011 NENMENY INVESTMENT & AGENCIES LTD. ASSESSMENT YEAR: 2007-08 3 4. BEFORE US, THE LD. DR HAS ARGUED IN THE LINE OF THE REASONS CITED BY THE AO BY RELYING ON THE ASSESSMENT ORDER FOR THE PROPOSITION THAT THE IMPUGNED TOTAL INCOME OF THE ASSESSEE HAS TO BE TREATED AS BUSINESS INCOM E. THE LD. DR HAS FURTHER PLACED HIS RELIANCE ON THE DECISION OF THE APEX COURT IN T HE CASE OF DALHOUSIE INVESTMENT TRUST (68 ITR 486) IN SUPPORT OF THE REVENUES CASE . ON THE OTHER HAND THE LD. AR HAS FILED A FACT SHEET REGARDING CRITERIAS FOR DEC IDING NATURE OF TRANSACTIONS IN SHARE AND HAS DRAWN OUR ATTENTION TO THE VOLUME OF TRANSA CTIONS, FREQUENCY OF TRANSACTIONS, CONSISTENCY AND MANNER OF ACCOUNTING TO SUBSTANTIATE THE CLAIM OF THE ASSESSEES CASE. 4.1 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IT IS PERTINENT TO MENTION THAT THE PREVIOUS ASSESSMENT R ECORDS INDICATE THAT THE ASSESSEE HAS ENGAGED IN SHARE TRADING AS WELL AS INVESTMENT FOR YEARS TOGETHER. AS REGARDS THE SALE TRANSACTIONS GIVING RAISE TO THE IMPUGNED LONG TERM CAPITAL GAINS, THERE ARE 58 SCRIPTS AS NOTED FROM ANNEXURE A OF THE ASSESSME NT ORDER AND IT IS OBSERVED THAT MOST OF THESE SHARES ARE QUITE OLD AND PURCHASED FR OM 1991-2005. IF A PERSON MAKES INVESTMENTS OVER THE YEARS AND THEN SELLS THO SE ACCUMULATED INVESTMENTS IN A SINGLE YEAR, THEN IN OUR VIEW, NATURALLY THE NUMB ER OF TRANSACTIONS AND VOLUME OF TRANSACTIONS WILL BE HIGH IN THE YEAR OF SALE WHICH CANNOT BE THE BASIS FOR TREATING SUCH OLD INVESTMENTS AS BUSINESS INCOME WHEN THE SA ME DO NOT FORM PART OF STOCK IN TRADE AND HAVE BEEN PURCHASED FOR CAPITAL APPREC IATION AND DIVIDEND EARNING ONLY. IN VIEW OF THAT MATTER, WE DO NOT FIND ANY INFIRMIT Y IN THE FINDINGS OF THE LD.CIT(A) ON THE ISSUE OF ALLOWING THE CLAIM OF THE ASSESSEE TREATING THE SAID INCOME OF RS.27,70,816/- AS LONG TERM CAPITAL GAINS. 4.2 AS REGARDS THE SHORT TERM CAPITAL GAIN OF RS.2, 97,622/- CLAIMED BY THE ASSESSEE, AFTER CONSIDERING THE TOTALITY OF THE FAC TS AND DETAILS OF TRANSACTION, WE AGREE WITH THE FINDINGS OF THE LD.CIT(A) THAT IN SO ME CASES, THE FREQUENCY OF THE TRANSACTIONS IS APPARENTLY SUBSTANTIAL WHICH SHOWS THAT THE ASSESSEE HAS NEITHER FULLY ACTING AS A TRADER NOR AS AN INVESTOR. THOUGH IN THE BOOKS, ALL THE PURCHASES ARE SHOWN AS INVESTMENT BUT IN MANY CASES FREQUENCY IS VERY LARGE AND HOLDING PERIOD VERY SMALL. HENCE, WE DO NOT FIND ANY INFIRM ITY IN THE DIRECTION OF THE ITA NO. 5561 /MUM/2011 & C.O. NO. 97 /MUM/2012 (ARISING OUT OF APPEAL NO. ITA 5561/M/2011 NENMENY INVESTMENT & AGENCIES LTD. ASSESSMENT YEAR: 2007-08 4 LD.CIT(A) TO ADOPT THE CRITERIA IF SHARES ARE HELD FOR MORE THAN A MONTH, THEY SHOULD BE TREATED AS INVESTMENT AND PROFIT ON THE SAME SHO ULD BE CHARGED AS SHORT TERM CAPITAL GAINS WHILE WHEN SHARES ARE HELD FOR LESS T HAN A MONTH, GAIN SHOULD BE TREATED AS BUSINESS PROFIT. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE A ND THAT OF THE CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12TH D AY OF JUNE, 2013. SD/- SD/- (B. RAMAKOTAIAH) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 12.06.2013. *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR B BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.