SOLI R. MISTRY, MUMBAI V. ASST CIT 15(2), MUMBAI

ITA 1210/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93342 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2015
• Appeal Filed By: Assessee
• Bench Allotted: E
• Next Hearing Date: 01-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 22-02-2012
• Court: TRIBUNAL
• Department Lawyers: S K JANGRE
• Assessee Lawyers: VISPI T PATEL; RAJIV G SHAH
• Keywords: Business income

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI . . , , BEFORE SHRI R.C.SHARMA , A M & SHRI SANJAY GARG , J M ./ ITA NO . 1210 / MUM/20 1 2 ( / ASSESSMENT YEAR : 20 0 8 - 09 ) SOLI R.MISTRY, 10, HILL VIEW, RAGHAVJI ROAD, CUMBALA HILL, MUMBAI - 400036 VS. ACIT - 15(2), MUMBAI ./ ./ PAN/GIR NO. : A A CPM 1032 C ( / APPELLANT ) .. ( / RE SPONDENT ) ./ ITA NO. 1422/ MUM/20 12 ( / ASSESSMENT YEAR :2008 - 09 ) ACIT - 15(2), MUMBAI VS. SOLI R.MISTRY, 10, HILL VIEW, RAGHAVJI ROAD, CUMBALA HILL, MUMBAI - 400036 ./ ./ PAN/GIR NO. : A ACPM 1032 C ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI VISPI T.PATEL & SHRI RAJIV G.SHAH /REVENUE BY : SHRI S.K.JANGRE / DATE OF HEARING : 01 /0 7 / 2015 / DATE OF PRO NOUNCEMENT 29/ 07 /2015 / O R D E R PER R.C.SHARMA (A.M) : TH ESE ARE THE APPEALS FILED BY THE ASSESSEE AND REVENUE AGAINST THE ORDER OF CIT(A) , MUMBAI , FOR THE ASSESSMENT YEAR S 200 8 - 09 . ITA NO S . 1210&1422 /1 2 2 2. THE ASSESSEE IN ITS APPEAL (I.E. ITA NO. 1210/MUM/20 12) IS AGGRIEVED FOR TREATING SHORT TERM CAPITAL GAIN OF RS. 27,31,855/ - AS BUSINESS INCOME. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FROM THE RECORD WE FOUND THAT DURING THE PREVIOUS YEAR UNDER REVIEW, THE ASSESSEE DECLARED LONG - TERM CAPITA L GAINS AT RS. 1,29,89,687/ - AND SHORT - TERM CAPITAL GAINS AT RS. 27,31,855/ - UNDER SECTION 45 OF THE IT ACT. AS THE TRANSFER OF SHORT TERM INVESTMENT AS WELL AS LONG TERM CAPITAL INVESTMENT WERE SUBJECT TO THE SECURITIES TRANSACTIONS TAX, THE LONG TERM CAPIT AL GAINS REALIZED BY THE ASSESSEE WAS CLAIMED AS EXEMPT UNDER SECTION 10(38), WHEREAS SHORT TERM CAPITAL GAINS REALIZED BY THE ASSESSEE WERE OFFERED FOR TAX AT THE RATE SPECIFIED IN SECTION 111A OF THE ACT. THE AO DECLINED BOTH THE LONG TERM AND SHORT TERM CAPITAL GAIN OFFERED BY THE ASSESSEE AND TREATED THE SAME AS BUSINESS INCOME. BY THE IMPUGNED ORDER THE CIT(A) ACCEPTED THE LONG TERM CAPITAL GAIN OFFERED BY THE ASSESSEE AMOUNTING TO RS. 1.29 CRORES, AGAINST WHICH THE REVENUES IS IN APPEAL (I.E. ITA NO. 14 22/MUM/2012) , HOWEVER, THE CIT(A) TREATED THE SHORT TERM CAPITAL GAIN OF RS. 27,31,855/ - AS BUSINESS INCOME, AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 4. FROM THE RECORD WE FOUND THAT THE ASSESSEE HAS CONSISTENTLY BEEN INVESTING IN SHARES AND SECUR ITIES AND INCOME WAS OFFERED FROM TRANSFER OF SUCH SHARES UNDER THE HEAD CAPITAL GAINS, THE SAME WAS EVEN ACCEPTED BY THE AO UNDER THE SCRUTINY ASSESSMENT FOR THE ASSESSMENT YEAR 2004 - ITA NO S . 1210&1422 /1 2 3 05 TO 2009 - 2010 AND 2010 - 2011. THE CAPITAL GAINS OFFERED IN THE EARLIER AND SUBSEQUENT YEARS ARE AS UN D ER : - FINANCIAL YEARS 2009 - 10 2008 - 09 2007 - 08 2006 - 07 2005 - 06 2004 - 05 SHORT TERM CAPITAL GAIN 4,75,957 2,06,111 27,31,855 2,85,046 5,07,064 78,310 LONG TERM CAPITAL GAIN 24,58,295 23,93,002 1,29,89,687 7,51,401 - - 5. AS WE HAVE ALREADY VERIFIED THE SCRUTINY ASSESSMENT ORDER FRAMED U/S.143(3) OF THE ACT FOR THE ASSESSMENT YEARS 2004 - 05 TO 2009 - 2010 AND 2010 - 2011 , WHERE A SSESSEE WAS TREATED AS INVESTOR BY THE DEPARTMENT, THUS, THERE WAS NO JUSTIFIABLE REASON FOR TREATING THE SHARES HELD FOR LESS T HAN ONE YEAR AS BUSINESS INCOME WHILE ACCEPTING THE SHARES HELD FOR MORE THAN ONE YEAR AS LONG TERM CAPITAL GAINS DURING THE YEAR UNDER CONSIDERATION . THE PROPOSITION LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GOPAL PUROHIT, 228 CTR 582(BOM) , SLP FILED BY THE DEPARTMENT AGAINST WHICH HAS ALSO BEEN DISMISS ED BY THE HONBLE SUPREME COURT, IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE. IT IS ALSO A MATTER OF RECORD THAT ASSESSEE HAS NOT TAKEN ANY LOAN FOR INVESTING IN SHARES. THE ASSESSEE WAS ALSO UNDERTAKING INVESTMENT ACTIVITIES BY TA KING DELIVERY OF SHARES AND WAS NOT INVOLVED IN ANY DAY - TO - DAY TRADING OR SETTLEMENT OR TRANSACTION. THE INVESTMENT IN THE BOOKS WERE ALSO VALUED AT COST AND NO BENEFIT WAS TAKEN BY ASSESSEE OF DIMINUTION IN VALUE OF SHARES BY FOLLOWING THE COST OF MARKET, WHICHEVER IS LOWER IN THE CURRENT ASSESSMENT YEAR AS WELL AS IN ANY OF THE PREVIOUS ASSESSMENT YEARS. THIS METHOD OF ACCOUNTING OF INVESTMENT HAS BEEN CONS ISTENTLY FOLLOWED BY THE ASSESSEE WHICH HAS BEEN ACCEPTED BY THE ITA NO S . 1210&1422 /1 2 4 DEPARTMENT IN ALL THE EARLIER ASSES SMENT YEARS AS WELL AS IN SUBSEQUENT YEARS. 6. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY MERIT IN THE ACTION OF THE CIT(A) FOR TREATING THE PROFIT ARISING OUT OF SHARES HELD FOR LESS THAN ONE YEAR AS BUSINESS INCOME RATHER THAN SHORT TERM CAPITAL GA INS AS O FFERED BY THE ASSESSEE, W HEN THE CIT(A) HIMSELF HAS ACCEPTED ASSESSEES INVESTMENT IN SHARES HELD FOR MORE THAN ONE YEAR AS LONG TERM CAPITAL GAINS. ACCORDINGLY, APPEAL OF THE ASSESSEE (I.E.ITA NO. 1210/MUM/2012) IS ALLOWED. 7. IN APPEAL OF THE REVENUE (IE. ITA NO. 1422/MUM/2012) , THE REVENUE IS AGGRIEVED BY THE ACTION OF THE CIT(A) IN HOLDING THE INCOME DECLARED BY THE ASSESSEE OF RS . 1,29,89,687/ - AS LONG TERM CAPITAL GAINS INSTEAD OF BUSINESS INCOME. 8. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD . WE FOUND THAT THE AO DISALLOWED RS. 1,29,89,687/ - TREATING THE SAME AS SPECULATIVE TRANSACTIONS. IN APPEAL, THE CIT(A) ASSESSED THE SAME AS LONG TERM CAPITAL GAINS AFTER HAVING THE FOLLOWING OBSERVATIONS : - 3.2.5 HOWEVER, AS REGARDS THE INCOME DECLARED BY THE APPELLANT AS LONG TERM CAPITAL GAINS OF. RS. 1,29,80,687/ - , IT IS OBSERVED THAT THIS INCOME IS EARNED BY THE APPELLANT ON THOSE SCRIPS, WHICH WERE HELD FOR SUBSTANTIAL PERIODS OF MORE THAN ONE YEAR IN ALL THESE SCRIPS. I AGREE WITH THE CONTENTION OF THE LEARNED AR OF THE APPELLANT THAT APPRECIATION ON THESE SCRIPS, WHICH WERE HELD BY THE APPELLANT FOR A CONSIDERABLE PERIOD OF TIME, IS IN THE NATURE OF CAPITAL GAINS. ACCORDINGLY, THE FINDING OF THE AO IN TREATING THIS INCOME ALSO AS BUSINESS INCOME DO ES NOT APPEAR APPROPRIATE IN THE LIGHT OF THE AFORESAID DECISIONS OF JURISDICTIONAL ITAT AND HIGH COURTS. THEREFORE, IT IS HELD THAT INCOME ON SALE OF THESE SCRIPS SHOULD BE ASSESSED AS LONG TERM CAPITAL GAINS. ITA NO S . 1210&1422 /1 2 5 9. WE FOUND THAT THE CIT(A) OBSERVED THAT THE AFORESAID INCOME OF THE ASSESSEE ON THOSE SCRIPS, WHICH WERE HELD FOR SUBSTANTIAL PERIODS OF MORE THAN ONE YEAR IN ALL THESE SCRIPTS, ARE IN THE NATURE OF LONG TERM CAPITAL GAINS. THE FINDING OF CIT(A) IS AS PER MATERIAL ON RECORD, A CCORDINGLY, WE DO N OT FIND ANY REASON TO INTERFERE IN THE FINDINGS SO RECORDED BY THE CIT(A) IN THIS REGARD , WHICH RESULTED INTO LONG TERM CAPITAL GAINS. 10 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED, WHEREAS APPEAL OF THE REVENUE IS DISMISSED. O RDER PRONOUNCED IN TH E OPEN COURT ON THIS 29/07 / 201 5 . SD/ - SD/ - ( ) ( SANJAY GARG ) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 29/07 /201 5 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//