DCIT, CHENNAI V. F.L.Dadabhoy, CHENNAI

ITA 1187/CHNY/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7159 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 01-12-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 05-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: A S SRIRAMAN
• Keywords: Business income
• Section: 143(3)

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH, CHE NNAI . , . ! ! ! ! , ' ' ' ' # # # # BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI V. DURGA RAO, JUDICIAL MEMBER ./ I.T.A.NO.1187/MDS/2014 ' ! $! / ASSESSMENT YEAR :2005-06 THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE VI(3), AAYAKAR BHAVAN, NEW BLOCK, 121, M.G. ROAD, 7 TH FLOOR, CHENNAI 600 034. VS. SHRI F.L. DADABHOY, NO. 18 (OLD NO. 13), FIRST STREET, SUBBA RAO AVENUE, CHENNAI 06. [PAN : AAAPD4332J] ( %& %& %& %& /APPELLANT ) ( '(%& '(%& '(%& '(%& / RESPONDENT ) %& ) * / APPELLANT BY : SHRI P. RADHAKRISHNAN, JCIT '(%& ) * / RESPONDENT BY : SHRI A.S. SRIRAMAN, ADVOCATE ) + / DATE OF HEARING : 01.12.2014 ,$ ) + /DATE OF PRONOUNCEMENT : 12.12.2014 - - - - / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) VI, CHENNAI, D ATED 31.01.2014 RELEVANT TO THE ASSESSMENT YEAR 2005-06. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A WHOLE TIME DIRECTOR OF M/S. SICGIL INDIA LIMITED AND M/S. SICGIL INDUST RIAL GASES LIMITED. THE ASSESSEE HAD FILED HIS RETURN OF INCOME BY DECLARIN G TOTAL INCOME OF .36,69,530/- AND AGRICULTURAL INCOME OF .6,000/-. THE RETURN FILED BY THE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1187 187187 187/M/ /M/ /M/ /M/1 11 14 44 4 2 ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT. AFTER DUE PROCESS, THE ASSESSMENT WAS REOPENED AND THE AS SESSMENT WAS COMPLETED UNDER SECTION 143(3) R.W.S. 147 OF THE AC T. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS OBSERVED THAT THE PERIOD FOR THE RELEVANT YEAR TO THE ASSESSMENT YEAR IS 2005-06 AND THE ASSE SSEE HAS PURCHASED 605 ITEMS IN SHARES WITH A TOTAL VOLUME OF .1,25,32,901.39 FROM 06.04.2004 TO 30.03.2005. DURING THE SAME PERIOD, THE ASSESSEE HAS SOLD 360 ITEMS IN SHARES WITH A GROSS TURNOVER OF .1,20,54,778.71. THE ASSESSING OFFICER HAS NOTED THAT IF AN ASSESSEE IS ABLE TO DEVOTE MUCH TI ME THROUGHOUT THE YEAR FOR HIS DEALING IN SHARES, IT IS NOT JUSTIFIABLE TO ARG UE THAT HE IS NOT DOING THE BUSINESS ACTIVITY IN SHARE TRANSACTIONS. IT IS TRUE THAT SHARES ARE PURCHASED AND SOLD TO DERIVE PROFIT OR GAIN BUT IN ASSESSEES CASE, IT IS THE FULCRUM ACTIVITY ON WHICH HIS ATTENTION, CONCENTRATION AND THINKING REVOLVE SO AS TO ATTAIN OPTIMAL BENEFIT OUT OF TRANSACTIONS IN SHARE S, ETC. HENCE, THE ASSESSING OFFICER HAS HELD THAT THE ASSESSEE WAS CA RRYING ON THE BUSINESS OF TRADING IN SHARES WITH ALL SORTS OF FREQUENCY, C ONTINUITY AND REGULARITY AND ACCORDINGLY, AN AMOUNT OF .13,44,893/-, WHICH WAS DERIVED FROM SALE ON SHARES WAS TREATED AS BUSINESS INCOME OF THE ASSESS EE INSTEAD OF SHORT TERM CAPITAL GAIN AS CLAIMED BY THE ASSESSEE. 3. ON APPEAL, THE LD. CIT(A), BY CONSIDERING THE D ETAILED SUBMISSIONS MADE BY THE ASSESSEE AND BY FOLLOWING ANOTHER ASSES SEES CASE, WHO IS I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1187 187187 187/M/ /M/ /M/ /M/1 11 14 44 4 3 WORKING AS DIRECTOR IN THE SAME COMPANY, WHERE THE ASSESSEE IS ALSO WORKING [IN ITA NO. 1300/MDS/2011 FOR THE A.Y. 2008 -09 IN THE CASE OF ACIT V. R.F. DADABHOY], ALLOWED THE CLAIM OF THE ASSESSE E AS CAPITAL GAINS. THE RELEVANT PORTION OF THE ORDER OF THE LD. CIT(A) IS EXTRACTED AS UNDER: I HAVE CONSIDERED THE FINDINGS GIVEN BY THE AO, SU BMISSIONS MADE BY AR OF THE APPELLANT AND ALSO RATIO OF THE V ARIOUS JUDICIAL PRONOUNCEMENTS IN THIS REGARD. IT'S A FACT THAT THE ASSESSEE IS AN INDIVIDUAL AND THE MANAGING DIRECTOR OF SICGIL INDI A LTD. THE RETURN OF INCOME INCLUDES SALARY, INCOME FROM HOUSE PROPER TY, INTEREST INCOME, DIVIDEND INCOME APART FROM INCOME FROM SALE OF SHARES WHICH WAS TREATED BY THE APPELLANT AS CAPITAL GAINS. IT I S ALSO NOT DISPUTED THAT THE MAIN OCCUPATION OF THE APPELLANT IS HIS EMPLOYM ENT AS THE MANAGING DIRECTOR OF A PUBLIC LIMITED COMPANY. IT I S ALSO NOT DISPUTED THAT THE APPELLANT HAS INDULGED IN INVESTMENT ACTIV ITY IN THE SHARES AND DECLARED THE INCOME ARISING OUT OF THE SALE OF SHAR ES AS CAPITAL GAINS IN THE EARLIER YEARS ALSO. THE SHARES WERE ACQUIRED OU T OF SAVINGS OF THE ASSESSEE AND NO BORROWALS WERE MADE. ALL THE SHARES HELD BY THE ASSESSEE IN DEMAT ACCOUNT DURING THE YEAR UNDER CON SIDERATION AND ALSO IN THE EARLIER YEARS. IT IS ALSO NOT DISPUTED THAT THE APPELLANT HAS NOT EMPLOYED ANY PERSONAL OR HAS INCURRED ANY EXPEN DITURE OTHER THAN THE PURCHASE PRICE OF THE SHARES WHILE DOING INVEST MENT ACTIVITY. ON IDENTICAL AND SIMILAR FACTS, HON'BLE ITAT A BENCH I N ITA NO.1300/MDS/2011 FOR THE A.Y. 2008-09 IN THE CASE O F ACIT, COMPANY CIRCLE-VI(3) VS. R.F. DADABHOY DISMISSED THE APPEAL OF THE REVENUE AND CONCURRED WITH THE FINDING OF THE CIT(APPEALS) THAT THE ASSESSEE IS ONLY AN INVESTOR AND THE INTENTION OF THE ASSESSEE IS TO ONLY INVEST IN SHARES AND THERE IS NO MOTIVE OF TRADING IN BUSINES S ACTIVITIES IN SHARES. RESPECTFULLY FOLLOWING THE RATIO OF THE DECISION OF THE HON'BLE ITAT A BENCH IN THE CASE OF R.F. DADABHOY (SUPRA) AND VARI OUS BENCHES OF ITAT, MUMBAI CITED BY THE AR OF THE APPELLANT, I AM OF THE VIEW THAT THE APPELLANT IS ONLY AN INVESTOR AND THERE IS NO I NTENTION TO INDULGE IN THE ACTIVITY OF TRADING IN SHARES. THEREFORE, THE A O IS DIRECTED TO TAX THE INCOME FROM SALE OF SHARES UNDER THE HEAD 'CAPITAL GAINS'. THE APPELLANT GETS RELIEF ON THIS ACCOUNT. 4. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 5. THE LD. DR SUPPORTED THE ORDER PASSED BY THE AS SESSING OFFICER. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1187 187187 187/M/ /M/ /M/ /M/1 11 14 44 4 4 6. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE HAS STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 7. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THIS CA SE, THE ASSESSEE IS A WHOLE TIME DIRECTOR OF M/S. SICGIL INDIA LIMITED AND M/S. SICGIL INDUSTRIAL GASES LIMITED. THE ASSESSEE HAS ACQUIRED THE SHARES BY UT ILIZING HIS OWN FUNDS. THERE IS NOTHING ON RECORD TO SHOW THAT THE ASSESSE E HAS BORROWED FUNDS TO PURCHASE SHARES. ALL PURCHASE AND SALE OF SHARES AR E DONE THROUGH DEMAT ACCOUNT OF THE ASSESSEE. NO SEPARATE MANPOWER OR IN FRASTRUCTURE IS EMPLOYED FOR THE PURPOSE OF INVESTMENTS IN SHARES. AS PER THE CHART FILED BEFORE THE LD. CIT(A) FOR THE ASSESSMENT YEAR 2001- 02 TO 2004-05, IT IS CLEAR THAT THE ASSESSEE IS REGULARLY DECLARING DIVIDEND I NCOME. AS PER THE SUBMISSIONS MADE BEFORE THE LD. CIT(A), THE HOLDING PERIOD OF SHARES WAS ONE YEAR TO NINE YEARS. WE FIND FROM THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER CAME TO A CONCLUSION THAT THE PUR CHASE AND SALE OF SHARES AS BUSINESS INCOME OF THE ASSESSEE ON THE BASIS THA T DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE PURCHASED 605 ITEMS OF SHARES AND SOLD 360 ITEMS OF SHARES. THERE IS NOTHING ON RECORD TO SHOW THAT THE ASSESSEE HAS SOLD THE SAME SHARES, WHICH WAS PURCHASED IN THE SA ME ASSESSMENT YEAR. THERE IS ALSO NOTHING ON RECORD THAT THE ASSESSEE H AS PURCHASED SAME SHARES DURING THE YEAR UNDER CONSIDERATION AND SOLD AND PURCHASED. SIMPLY I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1187 187187 187/M/ /M/ /M/ /M/1 11 14 44 4 5 BECAUSE BULK OF SHARES OF 605 ITEMS AND SOLD 360 IT EMS CANNOT BE SAID THAT THE ACTIVITY OF THE ASSESSEE IS BUSINESS ACTIVITY B ECAUSE THE ASSESSEE IS BUYING AND SELLING SHARES FROM THE YEAR 2001-02 AND THEREFORE, IT CANNOT BE HELD THAT THE AMOUNT RECEIVED BY THE ASSESSEE BY SE LLING OF SHARES IS BUSINESS ACTIVITY WITHOUT ANY BASIS. IN VIEW OF THE ABOVE, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) AND THE GROUN DS RAISED BY THE REVENUE ARE DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 12 TH OF DECEMBER, 2014 AT CHENNAI. SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (V. DURGA RAO) JUDICIAL MEMBER CHENNAI, DATED, THE 12.12.2014 VM/- - ) ''+./ 0/$+ /COPY TO: 1. %& / APPELLANT, 2. '(%& / RESPONDENT, 3. 1 ( ) /CIT(A), 4. 1 /CIT, 5. /2 ''+' /DR & 6. 3! 4 /GF.