SOHANALAL JHAWAR FAMILY TRUST, MUMBAI V. ITO 14(3)(1), MUMBAI

ITA 1407/MUM/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7961 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 07-08-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 17-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Assessee Lawyers: NARAYAN T ATUL
• Keywords: Business income

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E B ENCH, MUMBAI , ! '# $ $ $ $ , % && , , '# ' BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUICIAL MEMBER ./ I.T.A. NOS.1407 & 5345/MUM/2011 ( ( ( ( ( / ASSESSMENT YEARS :2007-08 & 2008-09 M/S. SOHANLAL JHAWAR FAMILY TRUST, 285, PRINCES STREET, C.J. HOUSE, 2 ND FLOOR, MUMBAI-400 002 / VS. THE ITO 14(3), MUMBAI #) ! ./ %* ./ PAN/GIR NO. : AABTS 8862K ( )+ / APPELLANT ) .. ( ,-)+ / RESPONDENT ) )+ . / APPELLANT BY: SHRI NARAYAN T. ATUL ,-)+ / . / RESPONDENT BY: SHRI PANKAJ KUMAR / 01! / DATE OF HEARING :07.08.2014 23( / 01! / DATE OF PRONOUNCEMENT :13.08.2014 '4 / O R D E R PER N.K. BILLAIYA, AM: THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGAI NST THE ORDERS OF THE LD. CIT(A)-25, MUMBAI DT. 29.6.2011 AND 17.1.20 11 PERTAINING TO A.YRS.2007-08 & 2008-09 RESPECTIVELY. AS BOTH THES E APPEALS INVOLVED COMMON ISSUES, THEY WERE HEARD TOGETHER AND DISPOSE D OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVIT Y. ITA NOS.1407 & 5345/M/2011. 2 2. THE GRIEVANCE OF THE ASSESSEE IN BOTH THESE YEA RS ARE TWO FOLD (I) THE LD. CIT(A) ERRED IN APPROVING THE ASSESSMENT B Y WHICH SHORT TERM CAPITAL GAINS/LONG TERM CAPITAL GAINS HAVE BEEN TRE ATED AS BUSINESS INCOME. (II) THE LD. CIT(A) ERRED IN NOT GRANTING DEDUCTION IN RESPECT OF THE SHARES OF THE BENEFICIARIES. 3. FOR THE SAKE OF OUR CONVENIENCE, WE TAKE UP THE FACTS OF A.Y. 2007-08 IN ITA NO. 1407/M/2011. 4. THE ASSESSEE IS A FAMILY TRUST BEING IN THE BUSI NESS OF TRADING IN FABRICS, SHARES AND SECURITIES. THE RETURN FOR THE YEAR WAS FILED ON 28.7.2007 DECLARING TOTAL INCOME AT RS. 8,83,810/-. THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT AND STATUTORY NOTI CES WERE ISSUED AND SERVED UPON THE ASSESSEE. WHILE SCRUTINIZING THE R ETURN OF INCOME, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SHO WN PURCHASES AND SALES OF SHARES AND SECURITIES AMOUNTING TO RS. 59,00,911 /- AND RS. 61,91,713/- RESPECTIVELY. THE AO FURTHER NOTICED THAT THE ASSE SSEE HAS SHOWN SHORT TERM CAPITAL GAINS (STCG) FROM THE SALE OF SHARES. ON PERUSING THE BALANCE SHEET, THE AO FOUND THAT THE ASSESSEE HAS S HOWN INVESTMENT IN SHARES AND SECURITIES AT RS. 1.06 CRORES WHEREAS TH E CAPITAL IS 52.66 LAKHS. THE AO WAS OF THE OPINION THAT THE ASSESSEE HAS RAI SED LOAN FUNDS OF RS. 76.25 LAKHS. 4.1. AFTER CONSIDERING THE NATURE OF TRANSACTION, T HE AO CAME TO THE CONCLUSION THAT THE STCG DECLARED BY THE ASSESSEE I S NOTHING BUT BUSINESS INCOME DERIVED FROM TRADING IN SHARES AND ACCORDINGLY TREATED THE STCG AS BUSINESS INCOME OF THE ASSESSEE. ITA NOS.1407 & 5345/M/2011. 3 5. THE MATTER WAS TAKEN BEFORE THE LD. CIT(A). IT WAS EXPLAINED THAT THE ASSESSEE IS MAINTAINING TWO PORTFOLIOS ONE IN R ELATION TO TRADING IN SECURITIES AND OTHER AS INVESTMENT. IT WAS FURTHER EXPLAINED THAT THE AMOUNT WHICH HAS BEEN CONSIDERED BY THE AO AS LOAN AMOUNT IS NOTHING BUT UNDISTRIBUTED SHARE OF PROFIT OF FOUR BENEFICIA RIES OF THE TRUST. THE ASSESSEE FILED NECESSARY DETAILS IN RESPECT OF SHAR E TRANSACTIONS AND SHARE INVESTMENT. AFTER CONSIDERING THE FACTS AND THE SU BMISSIONS, THE LD. CIT(A) WAS CONVINCED THAT THE AO HAS RIGHTLY TREATE D STCG AS BUSINESS INCOME. 6. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. 7. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. THE LD. CO UNSEL ALSO DREW OUR ATTENTION TO THE COPIES OF THE INVESTMENT REGISTER AS WELL AS THE SHARE TRADING REGISTER AND STATED THAT THE ASSESSEE IS MA INTAINING TWO PORTFOLIOS ONE FOR INVESTMENT AND OTHER FOR TRADING IN SHARES. IT IS THE SAY OF THE LD. COUNSEL THAT HOLDING PERIOD RANGES FROM 16 DAYS TO 236 DAYS AND THE AVERAGE HOLDING PERIOD IS WELL ABOVE 50 DAYS. THE LD. COUNSEL FURTHER STATED THAT AS PER VARIOUS JUDICIAL DECISIONS, THE ASSESSEE CAN HAVE TWO PORTFOLIOS AND THIS HAS ALSO BEEN ACCEPTED BY THE C BDT, THEREFORE, THE ACTION OF THE REVENUE AUTHORITIES IS NOT AS PER THE SETTLED POSITION OF LAW. 8. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE FINDINGS OF THE LOWER AUTHORITIES. 9. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTH ORITIES BELOW AND THE RELEVANT EVIDENCES BROUGHT ON RECORD BEFORE US. UNDISPUTEDLY, THE ASSESSEE IS MAINTAINING TWO SEPARATE PORTFOLIOS ONE IN RELATION TO ITA NOS.1407 & 5345/M/2011. 4 INVESTMENT AND OTHER IN RELATION TO TRADING IN SHAR ES AND SECURITIES. EXTRACTS OF THE INVESTMENT REGISTER AND THE SHARE T RADING REGISTER ARE ON RECORD. A PERUSAL OF THE INVESTMENT REGISTER SHOW S THAT THERE IS NOT MUCH CHURNING IN SHARES. THE SHARES ONCE PURCHASED HAVE BEEN SOLD, HOLDING PERIOD RANGES FROM 16 DAYS TO 236 DAYS. WHICH IS E VIDENT FROM THE INVESTMENT REGISTER. THE HONBLE JURISDICTIONAL HIG H COURT IN THE CASE OF CIT VS GOPAL PUROHIT 336 ITR 287(2010) 188 TAXMAN 140 (BOM) HAS ALSO LAID DOWN THAT THE ASSESSEE CAN HAVE TWO SEPAR ATE PORTFOLIOS ONE FOR INVESTMENT AND OTHER FOR TRADING IN SHARES AND SECU RITIES. A PERUSAL OF THE BALANCE OF THE ASSESSEE SHOWS THAT THE AMOUNT CONSI DERED BY THE AO HAS LOAN LIABILITY IS NOTHING BUT THE UNDISTRIBUTED PRO FIT TO THE BENEFICIARIES. CONSIDERING THE MANNER IN WHICH THE INVESTMENT REGI STER AND THE SHARE TRADING REGISTER HAS BEEN MAINTAINED CLEARLY SHOW T HAT AT THE TIME OF PURCHASING THE SHARES, THE ASSESSEES INTENTION IS VERY CLEAR WHETHER TO KEEP THE SHARES IN STOCK REGISTER OR IN INVESTMENT REGISTER. SOME OF THE SHARES ARE FOUND TO BE PURCHASED IN 1992 AND 1995. CONSIDERING ALL THESE FACTS IN TOTALITY, WE HAVE NO HESITATION TO HOLD TH AT THE CAPITAL GAINS OFFERED BY THE ASSESSEE HAVE TO BE TAXED AS SUCH. WE, THEREFORE, SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE AO TO ACCEPT THE CAPITAL GAINS AS OFFERED BY THE ASSESSEE AS STCG OR LTCG A S THE CASE MAY BE. THIS GROUND OF THE ASSESSEE IS ALLOWED. 10. THE SECOND GRIEVANCE OF THE ASSESSEE RELATES TO NOT GRANTING DEDUCTION IN RESPECT OF THE SHARES OF THE BENEFICIA RIES. 11. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS FILED THE COMPUTATION OF INCOME OF THE BENEFICIARIES. IT IS THE SAY OF THE LD. COUNSEL THAT THE BENEFICIARYS SHARES BEING DETERMI NED AND THE RESPECTIVE ITA NOS.1407 & 5345/M/2011. 5 BENEFICIARIES HAVE OFFERED THEIR INCOME IN THE RESP ECTIVE HANDS, THEREFORE THE DEDUCTION CLAIMED BY THE ASSESSEE SHOULD BE ALL OWED. 12. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT TH IS ISSUE HAS NOT AT ALL BEEN DISCUSSED BY THE AO IN HIS ASSESSMENT ORDE R. THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY, WE RESTORE THIS ISSUE TO THE FILE OF THE AO. THE AO IS DIRECTED TO DECIDE THIS ISSUE AFRESH AS P ER PROVISIONS OF LAW CONSIDERING THE RETURNED INCOME OF ALL THE BENEFICI ARIES. THE ASSESSEE IS DIRECTED TO SUBMIT NECESSARY DETAILS BEFORE THE AO. NEEDLESS TO MENTION, THE AO SHALL GIVE REASONABLE OPPORTUNITY OF BEING H EARD TO THE ASSESSEE. 13. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH AUGUST, 2014 SD/- SD/- (SANJAY GARG ) (N.K. BILLAIYA) '# / JUDICIAL MEMBER ! '# / ACCOUNTANT MEMBER MUMBAI; 5' DATED : 13 TH AUGUST, 2014 . . ./ RJ , SR. PS ITA NOS.1407 & 5345/M/2011. 6 '4 '4 '4 '4 / // / ,0 ,0 ,0 ,0 6(0 6(0 6(0 6(0 / COPY OF THE ORDER FORWARDED TO : 1. )+ / THE APPELLANT 2. ,-)+ / THE RESPONDENT. 3. 7 ( ) / THE CIT(A)- 4. 7 / CIT 5. 8& ,0 , , / DR, ITAT, MUMBAI 6. &9 : / GUARD FILE. '4 '4 '4 '4 / BY ORDER, -0 ,0 //TRUE COPY// ; ;; ; / < < < < % % % % (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI