ACIT, CHENNAI V. Smt. Vijaya Srinivasan, CHENNAI

ITA 103/CHNY/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77359 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2014
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 16-06-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 21-01-2013
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN
• Assessee Lawyers: K BALASUBR AMANIAN
• Keywords: Capital asset; Business income; Salary income; Question of law

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHE NNAI . . . , ! , ' # $ BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI VIKAS AWASTHY, JUDICIAL MEMBER . / I.T.A. NO. 102/MDS/2013 / ASSESSMENT YEAR : 2006-07 THE ASST. COMMISSIONER OF INCOME TAX, BUSINESS CIRCLE-II, CHENNAI-34 VS SHRI K.SRINIVASAN (HUF), C/O.BALASUBRAMANIAN, B.COM., B.L., ADVOCATE TAX CONSULTANT, D1, 4 TH FLOOR, KRISHNA PARADISE, NO.6, RAMACHANDRA ROAD, MYLAPORE, CHENNAI-600 004 [PAN: AAAHK 0187 L] . / I.T.A. NO. 103/MDS/2013 / ASSESSMENT YEAR : 2006-07 THE ASST. COMMISSIONER OF INCOME TAX, BUSINESS CIRCLE-II, CHENNAI-34 ( !% /APPELLANT) VS SMT. VIJAYA SRINIVASAN, C/O.BALASUBRAMANIAN, B.COM., B.L., ADVOCATE TAX CONSULTANT, D1, 4 TH FLOOR, KRISHNA PARADISE, NO.6, RAMACHANDRA ROAD, MYLAPORE, CHENNAI-600 004 [PAN: ACEPV 1779 M] ( &'!% /RESPONDENT) REVENUE BY : SHRI N. MADHAVAN, JCIT ASSESSEE BY : SHRI K.BALASUBRAMANIAN, ADV. / DATE OF HEARING : 16-06-2014 / DATE OF PRONOUNCEMENT : 16-06-2014 #( / O R D E R PER VIKAS AWASTHY, J.M: THE APPEALS HAVE BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-VI , CHENNAI I.T.A. NOS. 102 & 103/MDS/13 2 DATED 31-10-2012 IN THE CASE OF RESPECTIVE ASSESSEE S FOR THE ASSESSMENT YEAR (AY) 2006-07. ITA NO.102/MDS/2013 H AS BEEN FILED AGAINST SHRI K.SRINIVASAN IN THE CAPACITY OF HUF AND ITA NO.103/MDS/2013 IS AGAINST SMT.VIJAYA SRINIVASAN, W /O. K.SRINIVASAN. SINCE COMMON ISSUE IS INVOLVED IN BO TH THE CASES AND THE FACTS ARE IDENTICAL, BOTH THE APPEALS ARE T AKEN UP TOGETHER FOR ADJUDICATION. THE COMMON ISSUE RAISED IN BOTH THE APPEALS IS; WH ETHER THE INCOME ARISING OUT OF SALE OF SHARES IS TO BE T REATED AS BUSINESS INCOME OR IT HAS TO BE ASSESSED AS CAPITAL GAINS? 2. THE RETURNS OF THE ASSESSEES FOR THE AY UNDER CO NSIDERATION WERE PROCESSED U/S.143(1) OF THE INCOME TAX ACT, 19 61 (HEREIN AFTER REFERRED TO AS THE ACT). THEREAFTER, IN TH E CASE OF BOTH THE ASSESSEES, ASSESSMENT WAS REOPENED U/S.147 OF THE A CT. IN RE-ASSESSMENT PROCEEDINGS, THE ORIGINALLY ADMITTED LONG TERM CAPITAL GAIN/SHORT TERM CAPITAL GAIN ON SALE OF SHA RES WAS RE-ASSESSED AS BUSINESS INCOME. AGGRIEVED AGAINST THE ASSESSMENT ORDER PASSED U/S.1 47 R.W.S.143(3), THE ASSESSEES PREFERRED APPEALS BEFOR E THE CIT(APPEALS). THE CIT(APPEALS) HELD THAT THE PURCH ASE OF SHARES WERE MADE FROM ACCUMULATED SAVINGS AND NO BORROWING S WERE I.T.A. NOS. 102 & 103/MDS/13 3 REPORTED TO ACQUIRE THE SAME. THE PART OF INVESTME NT WHICH WAS HELD FOR CONSIDERABLE TIME WAS CONSIDERED AS LONG T ERM CAPITAL ASSET AND THE GAINS ARISING THERE FROM WERE TREATED AS LONG TERM CAPITAL GAINS. INCOME FROM TRANSACTIONS WHICH WERE COMPLETED WITHIN A PERIOD OF LESS THAN THIRTY DAYS, WERE HELD TO BE BUSINESS INCOME AND THE INCOME FROM SALE OF SHARES WHICH WER E HELD BEYOND THE PERIOD OF THIRTY DAYS BUT LESS THAN TWEL VE MONTHS WAS CONSIDERED AS SHORT TERM CAPITAL GAIN. NOT SATISFIED WITH THE ORDER, THE REVENUE HAS ASSAI LED THE FINDINGS OF THE CIT(APPEALS) BEFORE THE TRIBUNAL. 3. BOTH SIDES APPEARING BEFORE US AT THE OUTSET SUB MITTED THAT SIMILAR ISSUE HAD COME UP BEFORE THE TRIBUNAL IN TH E APPEALS OF THE REVENUE IN ITA NOS.1846 & 1847/MDS/2012 TITLED ACIT VS. SMT.VIJAYA SRINIVASAN , RELEVANT TO THE AYS.2005-06 & 2008-09. THE ASSESSEE HAD ALSO FILED CROSS OBJECTIONS I.E., C.O.NOS.176 & 177/MDS/2012. THE LD.COUNSEL FOR THE ASSESSEE PLAC ED ON RECORD THE COPY OF THE ORDER OF THE TRIBUNAL DT.21-01-2013 IN THE AFORESAID APPEALS OF THE REVENUE. THE TRIBUNAL HAD PARTLY AC CEPTED THE APPEALS OF THE REVENUE. I.T.A. NOS. 102 & 103/MDS/13 4 4. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE ORDER OF THE C O-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS.SMT.VIJAYA SRINIVASAN RELEVANT TO THE AYS.2005-06 & 2008-09 IN THE APPEAL OF THE REVENUE IN ITA NOS.1846 & 1847/MDS/2012 (SUPRA). W E FIND THAT THE ISSUE IN APPEAL IS IDENTICAL TO THE ONE ALREADY ADJUDICATED IN ONE OF THE ASSESSEES CASE FOR THE AYS.2005-06 & 20 08-09. THE AY UNDER CONSIDERATION IS OF INTERVENING PERIOD AND THERE HAS BEEN NO CHANGE IN THE FACTS AND CIRCUMSTANCES IN THE PRE SENT AY. THE TRIBUNAL WHILE ADJUDICATING THE ISSUE IN THE AFORES AID APPEALS HAD OBSERVED AS UNDER: 9. THE ASSESSING OFFICER HAS GIVEN DETAILS OF TRA NSACTION OF SHARES IN PAGE 3 OF THE ASSESSMENT ORDER. THE AS SESSEE HAS BEEN DEALING WITH FOUR DIFFERENT SHARE BROKERS I.E. 1. APEEJAY SECURITIES, 2. CD EQUISEARCH 3. SHAREKHAN A ND 4. MACONOHIE & CO. THE ASSESSEE HAS BEEN KEEPING A CLO SE WATCH ON THE MARKET AND THE INTENTION OF THE ASSESS EE WAS NOT TO MAKE AN INVESTMENT. THERE WAS HUGE NUMBER OF TRANSACTIONS IN THE SALE AND PURCHASE OF SHARES AND THERE WERE CERTAIN SHARES WHICH WERE TRADED ON THE SAME D AY WITH THE HOLDING PERIOD OF ZERO DAYS. LOOKING INTO THE ASSESSEES CONDUCT, IT IS CLEAR THAT SHE HAD NO INTENTION TO K EEP THE SHARES TO EARN DIVIDEND OR CAPITAL APPRECIATION. A LL THESE FACTS I.T.A. NOS. 102 & 103/MDS/13 5 CLEARLY SHOW THAT THE ASSESSEE HAS BEEN DEALING IN SHARES TO EARN QUICK PROFITS. 10. THE ASSESSEE MAY HAVE BEEN EARNING INCOME FROM SALARY BUT THIS DOES NOT DEFY THE FACT THAT THE SIZ EABLE INCOME OF THE ASSESSEE IS FROM TRADING OF SHARES. THE SCAL E OF ACTIVITY IS SUBSTANTIAL. THE PERIOD OF HOLDING BEING VERY SH ORT SHOWS THE INTENTION OF THE ASSESSEE ON QUICK PROFITS. THE TRANSACTIONS WERE CONTINUOUS AND REGULAR IN A SYSTEMATIC MANNER. MOREOVER, THE DIVIDEND INCOME OF THE ASSESSEE VIS- -VIS HER INVESTMENT IN SHARES IS TOO MEAGER. THE A.R IN ORD ER TO SUPPORT HIS CONTENTIONS HAS RELIED ON THE JUDGEMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF NEERAJ AM IDHAR SURTI (SUPRA) AND THE JUDGEMENT OF THE HONBLE BOMB AY HIGH COURT IN THE CASE OF GOPAL PUROHIT (SUPRA). HOWEVER , THE RATIO OF AFORESAID JUDGEMENTS CANNOT BE APPLIED IN THE FA CTS AND CIRCUMSTANCES OF THE PRESENT CASE. THE FACTS IN TH E SAID JUDGEMENTS WERE ENTIRELY DIFFERENT FROM THE ONE IN THE INSTANT CASE. THE FINDINGS OF THE HONBLE BOMBAY HIGH COURT IN GOPAL PUROHITS CASE IS ON THE FACTS AS NO SUBSTANTIAL QU ESTION OF LAW WAS INVOLVED IN THE SAID CASE FOR THE ADJUDICATION OF THE HONBLE HIGH COURT. 11. XXXXXXX 12. XXXXXXX 13. THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF JAY SHREE PRADIP SHAH VS. ACIT., REPORTED AS 137 TTJ 17 3 HAS LAID DOWN THE PRINCIPLES TO DECIDE THE ISSUE AS TO WHETHER THE PROFIT ARISING FROM PURCHASE AND SALE OF SHARES IS TO BE CONSIDERED AS BUSINESS OR CAPITAL GAIN. THE RELEVAN T EXTRACT OF THE ORDER IS REPRODUCED HEREIN BELOW:- I.T.A. NOS. 102 & 103/MDS/13 6 (A) WHETHER TRANSACTIONS OF SALE AND PURCHASE OF S HARES WERE TRADING TRANSACTIONS OR WHETHER THEY WERE IN T HE NATURE OF INVESTMENTS IS MIXED QUESTION OF LAW AND FACT. [ CIT VS. H. HOLCK LARSEN (1986) 5 CTR (SC) 53: (1986) 160 ITR 6 7(SC)]. (B) IT IS POSSIBLE FOR AN ASSESSEE TO BE BOTH AN IN VESTOR AS WELL AS A DEALER IN SHARES. WHETHER A PARTICULAR HO LDING IS BY WAY OF INVESTMENT OR FORMED PART OF STOCK-IN-TRADE IS A MATTER WHICH IS WITHIN THE KNOWLEDGE OF THE ASSESSEE AND I T IS FOR THE ASSESSEE TO PRODUCE EVIDENCE FROM HIS RECORDS AS TO WHETHER HE MAINTAINED ANY DISTINCTION BETWEEN SHARES WHICH WERE HOLD BY HIM AS INVESTMENTS AND THOSE HELD AS STOCK- IN-TRADE. [CIT VS. ASSOCIATED INDUSTRIAL DEVELOPMENT CO. LTD. 1972 CTR (SC) 239: (1971) 82 ITR 586(SC)]. (C) TREATMENT IN THE BOOKS BY AN ASSESSEE WILL NOT BE CONCLUSIVE. IF THE VOLUME, FREQUENCY AND REGULARIT Y WITH WHICH TRANSACTIONS ARE CARRIED OUT INDICATE SYSTEMATIC AN D ORGANIZED ACTIVITY WITH PROFIT MOTIVE, THEN IT WOUL D BE A CASE OF BUSINESS PROFITS AND NOT CAPITAL GAIN, [CIT VS. MO TILAL HIRABHAI SPG. & WVG. CO. LTD. 1977 CTR (GUJ) 674: (1978) 113 ITR 173(GUJ), RAJA BAHADUR VISHESHWARA SINGH (DECD) & O RS. VS. CIT (1961) 41 ITR 685(SC)]. (D) PURCHASE WITHOUT AN INTENTION TO RESELL WHERE T HEY ARE SOLD UNDER CHANGED CIRCUMSTANCES WOULD BE CAPITAL GAINS. CIT VS. P.K.N. CO. LTD. (1966) 60 ITR 65(SC). PURCHASE WITH AN INTENTION TO RESELL WOULD RENDER THE GAIN PROFIT ON SALE BUSINESS PROFIT DEPENDING ON THE CIRCUMSTANCES OF T HE CASE LIKE NATURE AND QUANTITY OF ARTICLE PURCHASED, NATU RE OF THE OPERATION INVOLVED. [SAROJ KUMAR MAZUMDAR VS. CIT ( 1959) 37 ITR 242(SC)]. (E) NO SINGLE FACT HAS ANY DECISIVE SIGNIFICANCE AN D THE QUESTION MUST DEPEND UPON THE COLLECTIVE EFFECT OF ALL THE I.T.A. NOS. 102 & 103/MDS/13 7 RELEVANT MATERIALS BROUGHT ON RECORD. [JANKI RAM BA HADUR RAM VS. CIT (1965) 57 ITR 21(SC)]. THE TRIBUNAL HAS LAID DOWN THE PRINCIPLES AFTER E XAMINING VARIOUS JUDGEMENTS OF THE HONBLE SUPREME COURT OF INDIA. AFTER PERUSING ABOVE ORDERS OF THE TRIBUNAL AND THE LAW LAID DOWN BY THE HONBLE SUPREME COURT OF INDIA AND APP LYING THE SAME TO THE FACTS OF THE PRESENT CASE, WE DO NOT AG REE WITH THE FINDINGS OF THE CIT(A) THAT THE PROFIT ARISING FROM SHARES HELD FOR MORE THAN 30 DAYS IS TO BE CONSIDERED AS SHORT OR L ONG TERM CAPITAL GAIN DEPENDING UPON THE PERIOD OF HOLDING AND THAT WHERE SHARES HAVE BEEN PURCHASED AND SOLD IN LESS THAN 30 DAYS, THE PROFIT HAS TO BE CONSIDERED AS BUSINESS I NCOME. THE INCOME TAX ACT ONLY RECOGNIZES THE PERIOD FOR DETER MINING SHORT TERM OR LONG TERM CAPITAL GAIN. THE CRITERIA OF 30 DAYS FOR DETERMINING BUSINESS INCOME OR CAPITAL GAIN, IN OUR CONSIDERED OPINION, IS NEITHER RECOGNIZED NOR ACCEPTABLE UNDER THE PROVISIONS OF THE INCOME TAX ACT. THE INTENTION O F THE ASSESSEE IN PURCHASING THE SHARES WAS CLEARLY TO EA RN PROFITS FROM SALE AND NOT TO EARN DIVIDEND OR INVESTMENT. 14. XXXXXXX 15. THEREFORE, IN VIEW OF OUR AFORESAID FINDINGS, W E ARE OF THE CONSIDERED OPINION THAT THE SHARES HELD BY THE ASSE SSEE FOR LONGER PERIOD MAY BE TREATED AS INVESTMENT AND THE PROFIT ARISING THEREFROM BE TREATED AS LONG TERM CAPITAL GAIN. HO WEVER, AS REGARDS SHARES HELD FOR SHORT DURATION ARE CONCERNE D, THE MAGNITUDE, FREQUENCY AND VOLUME OF TRANSACTIONS GIV ES FLAVOR OF BUSINESS INCOME AND THE SAME IS CONSIDERED TO BE IN COME FROM BUSINESS. I.T.A. NOS. 102 & 103/MDS/13 8 16. THUS, BOTH THE APPEALS OF THE REVENUE ARE PARTL Y ALLOWED AND THE CROSS OBJECTIONS OF THE ASSESSEE AR E DISMISSED. SINCE THE ISSUE IN PRESENT APPEAL IS SQUARELY COVER ED BY THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL I N ASSESSEES OWN CASE FOR THE AYS.2005-06 & 2008-09, WE FOLLOW T HE SAME. ACCORDINGLY, THE APPEALS OF THE REVENUE ARE PARTLY ALLOWED IN THE SAME TERMS. ORDER PRONOUNCED ON MONDAY, THE 16 TH JUNE, 2014 AT CHENNAI. SD/- SD/- ( . . . ) ( ! ) (DR. O.K. NARAYANAN) (VIKAS AWAS THY) / VICE PRESIDENT ! / JUDICIAL MEMBER '# /CHENNAI, $ /DATED: 16 TH JUNE, 2014 TNMM #% & '( )#( /COPY TO: 1. *+ /APPELLANT 2. &,*+ /RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. (01 & 2 /DR 6. 13 4 /GF