Abbott Hotels Pvt.Ltd., Ahmednagar V. DCIT Ahmednagar, Ahmednagar

ITA 1424/PUN/2008

• Counselvise Citation: 142424514 RSA 2008
• Duration Of Justice: 2 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 07-11-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A S SINGH
• Assessee Lawyers: MUKESH BHAT T
• Keywords: Capital asset; Business income; Opportunity of being heard; Rule of consistency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI I C SUDHIR, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO 1424/PN/08 (ASSTT. YEAR: 2005-06) ABBOTT HOTELS P. LTD., .. APPELLANT 13 ABBOTT MARG, CAMP, AHMEDNAGAR PAN - AACCA2908E VS. DY. COMMISSIONER OF INCOME-TAX, .. RESPONDENT AHMEDNAGAR APPELLANT BY: SHRI MUKESH BHAT T RESPONDENT BY: SHRI A S SINGH ORDER PER I C SUDHIR, JM: THE FIRST APPELLATE ORDER HAS BEEN QUESTIONED ON S EVERAL GROUNDS INVOLVING THE ISSUE AS TO WHETHER THE LD CIT(A) WAS JUSTIFIED IN HOLDING THAT SHORT- TERM CAPITAL GAIN OF RS 49,19,877/- AND LONG-TERM CAPITAL GAIN OF RS 98,31,915/- ON SALE OF SHARES WAS ASSESSABLE AS BUSINESS INCOME AND NOT AS CAPITAL GAINS? (GROUND NOS 1 TO 5) 2. AN ALTERNATIVE GROUND HAS BEEN RAISED AS UNDER: WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE ASSESS EE SUBMITS THAT THERE IS NO PROHIBITION ON AN ASSESSEE TO HOLD CERTAIN SH ARES AS STOCK AND CERTAIN SHARES AS AN INVESTMENT AND THEREFORE, ASSU MING WITHOUT ADMITTING THAT THE ASSESSEE HAD CARRIED OUT SOME TRADING IN S HARES, THE LONG TERM CAPITAL GAIN ON SALE OF SHARES OUGHT TO HAVE BEEN T REATED AS EXEMPT U/S 10(38)? (GROUND NO. 6) 3. WE HAVE GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW, MATERIAL AVAILABLE ON RECORD AND THE DECISIONS RELIED UPON I N VIEW OF THE ARGUMENTS ADVANCED BY THE PARTIES. 4. THE RELEVANT FACTS ARE THAT THE ASSESSEE COMPANY IN THE HOTEL BUSINESS FOR THE LAST 30 YEARS HAVING AROUND RS 3 TO 4 CRORES OF TURNOVER IN THE LAST 2 - 3 YEARS CLAIMED TO HAVE EARNED CAPITAL GAINS FROM THE SALE OF THE SHARES, WHEREIN THEY 2 HAD INVESTED IN EARLIER YEARS. IT WAS CLAIMED THAT THE SAID INVESTMENT WAS MADE FROM THE SURPLUS FUNDS GENERATED OUT OF THE PROFITS OF THE HOTEL BUSINESS. THE INVESTMENTS MADE IN THE SHARES OF CERTAIN COMPANY W ERE REFLECTED IN THE BALANCE SHEET UNDER THE HEAD INVESTMENT AND NOT AS STOCK-IN-TRADE. IN SUPPORT, BALANCE SHEET AS ON 31.3.2005 WAS MADE AVAILABLE FO R PERUSAL. IT WAS SUBMITTED BY THE ASSESSEE THAT THE SHARES HELD AS INVESTMENTS IN THE BOOKS WERE ACCEPTED BY THE DEPARTMENT AS INVESTMENT FOR THE ASSESSMENT YEAR 2001-02. IT WAS FURTHER SUBMITTED THAT WHAT IS RELEVANT IS FREQUENC Y OF THE TRANSACTION AND NOT THE VOLUME OF THE TRANSACTION. IT WAS SUBMITTED WITH TH E ASSISTANCE OF CHART GIVING DETAILS OF LONG-TERM AND SHORT-TERM CAPITAL GAIN, T HAT EVEN THOUGH IN THE CASE OF LONG-TERM CAPITAL GAIN, THE TRANSACTIONS ARE RUNNIN G INTO A PAGE, ACTUALLY THERE ARE HARDLY 10 TO 15 TRANSACTIONS IN THE YEAR IN RESPECT OF ESSAR STEELS LTD., 17000 SHARES WERE PURCHASED ON 19.5.1997 AND OUT OF WHICH 2000 SHARES WERE SOLD ON 14.3.2005 AND 15000 SHARES WERE SOLD ON 15.3.2005. IN THE CHART, THESE TWO TRANSACTIONS ARE SHOWN SEPARATELY BECAUSE THE DATES OF SALE ARE DIFFERENT. HOWEVER, IN REALITY, THE ASSESSEE WANTED TO DISPOSE OFF THE ENTIRE 17000 SHARES PURCHASED WAY BACK IN 1997 AND ONLY BECAUSE PART OF THE SHARES COULD NOT BE SOLD ON 14.3.2005, THEY WERE SOLD ON 15.3.2005. SIM ILAR IS THE CASE IN THE CONTEXT OF JAI PRAKASH INDUSTRIES LTD AND TAJ GVK LTD. IT W AS FURTHER MENTIONED THAT THE ASSESSEE HAD INVESTED LARGE AMOUNT IN UTI MASTER SH ARES. THE INVESTMENT WAS MADE IN THE SHARES FROM 1997 TO 2001. ALL THESE SHA RES WERE REDEEMED ON 15.12.2004 AND IN THE CHART THEY ARE SHOWN SEPARATE LY ONLY BECAUSE THE DATES OF INVESTMENT ARE DIFFERENT. REGARDING THE SHORT-TERM CAPITAL GAIN ALSO, IT WAS STATED THAT THE ASSESSEE HAD HARDLY ENTERED INTO AROUND 15 TO 17 TRANSACTIONS IN A PERIOD OF 12 MONTHS, I.E. ONE TRANSACTION PER MONTH . EVEN IN THIS CASE THE TRANSACTIONS IN A PARTICULAR SCRIP ARE SHOWN SEPARA TELY ONLY ON THE GROUND THAT THE INVESTMENT DATE OR THE SALE DATE WERE DIFFERENT . IT WAS SUBMITTED FURTHER THAT THE ASSESSEE HAS NOT TRADED IN ONE PARTICULAR SCRIP . IT IS NOT A CASE THAT THE ASSESSEE HAD PURCHASED CERTAIN SHARES OF A PARTICUL AR SCRIP AND SOLD IT LATER ON AND THEREAFTER IT HAS AGAIN RE-PURCHASED THE SHARES OF SAME SCRIP. THE FREQUENCY 3 OF TRANSACTION WAS VERY SMALL. IN CERTAIN MONTHS TH ERE ARE NO TRANSACTIONS AT ALL. THE AO DID NOT AGREE WITH THE SUBMISSIONS AND TREAT ED THE CLAIMED CAPITAL GAIN AS BUSINESS INCOME. THE LD CIT(A) HAS UPHELD THE SA ME. 5. BEFORE US, THE LD AR HAS BASICALLY REITERATED TH E SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. HE REFERRED TO PAGE NO 6 OF THE PAPER BOOK I, I.E. BALANCE SHEET AS ON 31.3.2005 OF THE ASSESSEE COMPANY TO SU PPORT HIS CONTENTION THAT THE INVESTMENTS IN SHARES ARE REFLECTED IN THE BALA NCE SHEET UNDER THE HEAD INVESTMENT AND NOT AS STOCK-IN-TRADE. HE ALSO R EFERRED TO PAGE NO 81 TO 84 OF PAPER BOOK NO II SHOWING THE DETAILS OF DURATION OF HOLDING IN THE SHARE TRANSACTIONS. HE ALSO REFERRED TO ANNEXURES A-5, A- 6, A-7, A-8 AND A-9 OF THE PAPER BOOK NO. II GIVING THE TOTAL NUMBER OF COMPAN Y/MUTUAL FUND IN WHICH THE INVESTMENT WAS MADE. WITH THE ASSISTANCE OF ANNEXUR E 6, HE SUBMITTED THAT THE TRANSACTION PERTAINING TO SALE AND PURCHASE IN RESP ECT OF CAPITAL GAIN WERE CARRIED ON FOR 49 DAYS DURING THE YEAR WHEN THE STOCK EXCHA NGE WAS OPEN FOR TRANSACTION ALMOST ON 250 DAYS DURING THE YEAR. DUR ING THIS PERIOD, THERE WAS NO TRANSACTION AT ALL IN THE MONTHS OF APRIL, AUGUST, SEPTEMBER AND OCTOBER. IN THE REMAINING MONTHS, ONLY 2 TO 10 TRANSACTIONS WERE TH ERE. THE LD AR SUBMITTED FURTHER THAT THE INTENTION AS TO WHETHER TO MAKE IN VESTMENT IN SHARES OR TO TRADE IS TO BE SEEN AT THE TIME OF PURCHASE OF SHARES. THE L D AR REFERRING TO PAGE NO 6 OF THE PAPER BOOK NO. I SUBMITTED THAT THE COMPANY HAS PAID UP CAPITAL OF RS 25 LAKHS AND ITS RESERVES (ACCUMULATED PROFITS) ARE RS 474 LAKHS, I.E. ALMOST 19 TIMES THE SHARE CAPITAL. EVEN BEFORE MAKING GAIN ON SALE OF INVESTMENT DURING THE YEAR UNDER APPEAL, THE ASSESSEE HAD RESERVES (A CCUMULATED PROFITS) OF RS 225 LAKHS, I.E. ALMOST 9 TIMES THE SHARE CAPITAL AS ON 31.3.2004. HE ALSO DREW OUR ATTENTION TO PAGE 36 OF PAPER BOOK NO. I TO SUP PORT HIS SUBMISSION THAT THE OBJECT CLAUSE OF THE MEMORANDUM OF ASSOCIATION DOES NOT PERMIT THE ASSESSEE TO CARRY ON BUSINESS IN BUYING AND SELLING OF SHARE S. INVESTMENT IN SHARES AND SECURITIES WAS MADE OUT OF ACCUMULATED PROFITS YEAR AFTER YEAR. THE BORROWING OF RS 22 LAKHS APPEARING IN THE BALANCE SHEET AND OF S ECURED LOAN WAS PATENTLY 4 LINKED WITH THE PURCHASE OF VEHICLE WORTH RS 27 LAK HS. HE REFERRED TO PAGE 29 OF THE PAPER BOOK WITH THE SUBMISSION THAT THE ASSESSE E DID NOT SELL ITS INVESTMENT EVEN WHEN MARKET VALUE OF ITS INVESTMENT WENT DOWN CONSIDERABLY. THE ASSESSEE HAS DISCLOSED INVESTMENT AND STOCK IN TRAD E SEPARATELY IN ITS BALANCE SHEET. IN SUPPORT, HE REFERRED TO PAGE 10 AND 11 OF THE PAPER BOOK NO. I. HE SUBMITTED FURTHER THAT INCOME BY WAY OF DIVIDEND WA S RS 15,42,273/- AS AGAINST RS 8,9,282/- IN THE PREVIOUS YEAR. IN SUPPORT, HE D REW OUR ATTENTION TO PAGE NO 12 OF THE PAPER BOOK NO. I. HE SUBMITTED THAT THOUGH T HE INVESTMENT DURING THE YEAR HAS GONE UP FROM RS 1,10,64,891/- TO RS 3,24,65,114 /-, THE FRESH FUND DEPLOYED IN INVESTMENT IS HARDLY RS 66,53,431/- AS THE BALAN CE IS OUT OF RE-INVESTMENT OF PROFITS GENERATED DURING THE YEAR. IN SUPPORT, HE R EFERRED TO PAGE A-7 OF PAPER BOOK NO. II. 6. REGARDING CLAIMED LONG-TERM CAPITAL GAIN, THE LD . AR SUBMITTED THAT IT WAS CLAIMED AT RS 98,31,915/- ON SALE OF SHARES AND UNI TS OF MUTUAL FUND HOLDING PERIOD OF WHICH WAS FROM ONE TO TWO YEARS TO OVER 1 0 YEARS. IN SUPPORT, HE REFERRED TO PAGE A-2 OF THE PAPER BOOK NO. II. IN T ERMS OF PERCENTAGE, THE APPRECIATION IN INVESTMENT WAS 60% IN THE CASE OF U NITS OF MUTUAL FUND AND 308% IN THE CASE OF SHARES. IN SUPPORT, HE REFERRED TO P AGE A-3 OF THE PAPER BOOK NO. II. THE TOTAL YEAR OF MUTUAL FUND IN WHICH INVESTME NT WAS MADE WAS 3 (6 SCHEMES) AND THE NUMBER OF COMPANIES WHOSE SHARES W ERE INVOLVED WAS 7. A REFERENCE TO PAGE A-4 OF PAPER BOOK NO II WAS MADE IN SUPPORT. 7. REGARDING SHORT-TERM CAPITAL GAIN, THE LD AR SUB MITTED THAT IT WAS GAINED AT RS 49,19,878/- ON SALE OF UNITS OF MUTUAL FUNDS AND SHARES WHEREIN HOLDING PERIOD WAS FROM 1 TO 3 MONTHS TO 9 TO 12 MONTHS. IN SUPPORT, HE REFERRED TO PAGE A.4 OF THE PAPER BOOK NO. II. IN TERMS OF PERCENTAG E, APPRECIATION IN INVESTMENT WAS 27% EVEN ON SELLING INVESTMENT IN SHORT PERIOD OF TIME. THE TOTAL NUMBER OF MUTUAL FUNDS IN WHICH INVESTMENT WAS MADE WAS TWO A ND THE NUMBER OF COMPANIES WHOSE SHARES WERE INVOLVED WAS 13. IGNORI NG ALL THESE MATERIAL FACTS, THE AUTHORITIES BELOW HAVE WRONGLY COME TO THE CONC LUSION THAT THE CLAIMED 5 CAPITAL GAIN WAS BUSINESS INCOME AND NOT OUT OF INV ESTMENT. HE PLACED RELIANCE ON THE FOLLOWING DECISIONS: (I) CIT V H. HOLCK LARSEN 160 ITR 67 (SC); (II) MANAGEMENT STRUCTURE & SYSTEMS V ITO, ITA NO 6 966/MUM/07 (AY 2004-05), ORDER DATED 30.4.2010; (III) CIT V PNB FINANCE & INDUSTRIES LTD. ITA NO 30 6/210 DATED 18.10.2010 (DELHI H.C); (IV) ACIT & ORS. V VINOD K NEVATIA, MUMBAI ITA NO 6 556/MUM/09 & ORS. (A.Y. 2005-06), ORDER DATED 03.12.2010 (V) DCIT V. SMK SHARES & STOCK BROKING P. LTD. MUMB AI ITA NO 799/MUM/09 (A.Y 2005-06), ORDER DT 24.11.2010; (VI) MR NEVAL V SHAH V ACIT ITA NO 2733/MUM/09 (A.Y 2005-06), ORDER DATED 15.12.2010; (VII) SARNATH INFRASTRUCTURE P.LTD. V. ACIT 120 TTJ 216 (LUCK); (VIII) GOPAL PUROHIT V JCIT 29 SOT 117 (MUM) (UPHEL D BY THE HONBLE BOMBAY HIGH COURT IN CIT V GOPAL PUROHIT) (IX) RADHASOAMI SATSANG V CIT 193 ITR 321 (SC); (X) CIT V NIRMAL COMMERCIAL LTD. 213 ITR 361 (BOM)( FB). 8. THE LD DR, ON THE OTHER HAND, TRIED TO JUSTIFY T HE ORDERS OF THE AUTHORITIES BELOW. HE SUBMITTED THAT THE SHARE TRANSACTION IN T HE CASE OF ASSESSEE SUDDENLY INCREASED DURING THE YEAR SUGGESTING THAT IT WAS TR ADE IN NATURE. EVERY ASSESSMENT YEAR IS AN INDEPENDENT UNIT. HENCE, THER E IS NO ESTOPPEL AGAINST THE ACTION OF THE DEPARTMENT IN TREATING THE TRANSACTIO N DIFFERENTLY IN FUTURE ASSESSMENT YEAR, WHEN THE FACTS AND CIRCUMSTANCES A RE DIFFERENT. HE SUBMITTED THAT THE DECISIONS RELIED UPON BY THE LD AR ARE HAV ING DISTINGUISHABLE FACTS AND THESE ARE NOT HELPFUL TO THE ASSESSEE. THE LD DR PL ACED RELIANCE ON THE FOLLOWING DECISIONS: (I) AJINKYA ELECTROMELT P. LTD. PUNE V ACIT ITA NO 1519/PN/08 (A.Y 2005-06), ORDER DATED 30.7.2010; (II) SMT SADHANA NABERA, MUMBAI V. ACIT ITA NO 2586 /MUM/09 (AY 2005-06), ORDER DATED 26.3.2010 9. CONSIDERING THE ABOVE SUBMISSIONS, WE FULL AGREE WITH THE CONTENTION OF THE LD. AR THAT IN THE CASE OF CIT V. H. HOLCK LARS EN (SUPRA), THE HONBLE 6 SUPREME COURT HAS BEEN PLEASED TO HOLD THAT THE INT ENTION OF THE ASSESSEE AT THE TIME OF PURCHASE AND NOT AT THE TIME OF SALE OF SHA RES IS RELEVANT TO DECIDE WHETHER SHARES WERE PURCHASED AS STOCK IN TRADE OR AS INVESTMENT. UNDISPUTEDLY, IN ITS BOOKS OF ACCOUNT AND BALANCE S HEET, THE PURCHASE OF SHARES IN QUESTION HAS BEEN SHOWN AS INVESTMENT. THE SHARE S WERE PURCHASED BY THE ASSESSEE WAY BACK IN THE YEARS 1994, 1997, 1998 ETC . WHICH HAVE BEEN SOLD IN THIS YEAR. IF THE ASSESSEE WAS A TRADER IN SHARES, IT WAS NOT POSSIBLE TO HOLD VARIOUS SHARES FOR SUCH A LONG TIME. BESIDES, THE M OST IMPORTANT ASPECT OF THE MATTER IS THAT THE SHARES HELD AS INVESTMENT IN THE BOOKS HAVE BEEN ACCEPTED BY THE DEPARTMENT AS INVESTMENTS FOR THE ASSESSMENT YE AR 2001-02. THUS, WHEN THE SUBSTANTIAL INVESTMENT HAS BEEN ACCEPTED BY THE DEP ARTMENT AS INVESTMENT AND NOT AS STOCK-IN-TRADE, THERE WAS NO REASON FOR THE DEPARTMENT TO TREAT THE SHARES AS STOCK IN TRADE FOR THE YEAR OF SALE. IN THE CAS E OF SARNATH INFRASTRUCTURE P. LTD. V. ACIT (SUPRA) FOLLOWED BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF GOPAL PUROHIT V. JCIT NOW UPHELD BY THE HONBLE JUR ISDICTIONAL HIGH COURT, IT HAS BEEN HELD THAT WHAT IS THE INTENTION OF THE ASSESSE E AT THE TIME OF PURCHASE OF SHARES (OR ANY OTHER ITEM) CAN BE FOUND OUT FROM TH E TREATMENT IT GIVES TO SUCH PURCHASE IN THE BOOKS OF ACCOUNT AS TO WHETHER IT H AS TREATED8 IT AS STOCK-IN- TRADE OR INVESTMENT. THERE IS NO DISPUTE THAT THE I NTENTION OF THE ASSESSEE CANNOT BE READ FROM HIS MIND, BUT IT REFLECTS IN HIS CONDU CT AND THE WAY HE TREATS THE TRANSACTIONS. THE MUMBAI BENCH OF THE TRIBUNAL IN T HE CASE OF GOPAL PUROHIT V JCIT (SUPRA) HAS ALSO HELD THAT IF THE ITEMS IN QUE STION ARE VALUED AT COST, IT WOULD INDICATE THAT THEY ARE INVESTMENTS OR WHERE T HEY ARE VALUED AT LOWER OF COST OR MARKET VALUE, IT WILL INDICATE THAT THE ITE MS IN QUESTION ARE TREATED AS STOCK-IN-TRADE. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. PNB FINANCE & INDUSTRIES LTD. (SUPRA) HAS BEEN PLEASED TO HOLD TH AT IF SHARES ARE SHOWN AS A CAPITAL ASSET IN THE BALANCE SHEET FROM THE DATE OF PURCHASE AND NO OBJECTION WAS TAKEN BY THE AO IN THE EARLIER YEARS, HE CANNOT HOLD IT TO BE STOCK-IN-TRADE WITHOUT THERE BEING ANY CHANGE IN FACTS. THE HONBL E SUPREME COURT IN THE CASE OF RADHASOAMI SATSANG V CIT (SUPRA), WHICH HAS ALSO BEEN FOLLOWED BY THE 7 HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V SHRE E NIRMAL COMMERCIAL LTD. (SUPRA), AND GOPAL PUROHIT (SUPRA), HELD THAT THOUG H THE DOCTRINE OF RES JUDICATA DOES NOT APPLY TO TAX PROCEEDINGS AND THAT EACH YEA R IS A SEPARATE YEAR, YET THE RULE OF CONSISTENCY MUST BE FOLLOWED AND THE INCOME THAT WAS TAXED UNDER THE HEAD CAPITAL GAINS IN EARLIER YEAR MUST ALSO BE TAX ED UNDER THE SAME HEAD OF INCOME WHEN THE FACTS AND THE LAW ON THE SUBJECT AR E UNCHANGED. THE MAGNITUDE OF TRANSACTIONS DOES NOT ALTER THE NATURE OF TRANSACTION AND HENCE A TRANSACTION OF INVESTMENT DOES NOT BECOME A TRANSAC TION OF TRADE ONLY BECAUSE OF ITS MAGNITUDE, HELD MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF JANA S. RANGWALLA 11 SOT 627 (MUM), AND HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF SHAH-LA INVESTMENTS & FINANCIAL CONSULTANTS (P) LTD. V. DCIT 2 SOT 371 (HYD). THE SHORT PERIOD OF HOLDING SHARES DOES NOT PER SE SUGGEST BUSINESS ACTIVITY. PRIMARILY, THE INTENTION WITH WHICH AN AS SESSEE STARTS HIS ACTIVITY IS THE MOST IMPORTANT FACTOR. IF SHARES ARE PURCHASED FROM OWN FUNDS, WITH A VIEW TO KEEP THE FUNDS IN EQUITY SHARES TO EARN CONSIDERABL E RETURN ON ACCOUNT OF ENHANCEMENT IN THE VALUE OF SHARE OVER A PERIOD THE N MERELY BECAUSE THE ASSESSEE LIQUIDATES ITS INVESTMENT WITHIN SIX MONTH S OR EIGHT MONTHS WOULD NOT LEAD TO THE CONCLUSION THAT THE ASSESSEE HAD NO INT ENTION TO KEEP THE FUNDS AS INVESTED IN EQUITY SHARES BUT IT WAS ACTUALLY INTEN DED TO TRADE IN SHARES. MERE INTENTION TO LIQUIDATE THE INVESTMENT AT HIGHER VAL UE DOES NOT IMPLY THAT THE INTENTION IS ONLY TO TRADE IN SECURITY. WHILE VOLUM E OF TRANSACTION IS AN IMPORTANT INDICATOR OF THE INTENTION OF THE ASSESSEE WHETHER TO DEAL IN SHARES AS TRADING ASSET OR TO HOLD THE SHARES AS INVESTOR, IT IS CERT AINLY NOT THE SOLE CRITERION. A PRUDENT INVESTOR ALWAYS KEEPS A WATCH ON THE MARKET TRENDS AND, THEREFORE, IS NOT BARRED UNDER LAW FROM LIQUIDATING HIS INVESTMEN TS IN SHARES. THE LAW ITSELF HAS RECOGNIZED THIS FACT BY TAXING THE TRANSACTION UNDER THE HEAD SHORT-TERM CAPITAL GAIN. INVESTMENT COMPANY PERIODICALLY VARI ES ITS INVESTMENT DOES NOT NECESSARILY MEAN THAT THE PROFITS RESULTING FROM SU CH VARIATION IS TAXABLE UNDER THE INCOME-TAX ACT. VARIATION OF ITS INVESTMENTS MU ST AMOUNT TO DEALING IN INVESTMENTS BEFORE SUCH PROFITS CAN BE TAXED AS INC OME UNDER THE INCOME-TAX 8 ACT. CONSIDERING THESE MATERIAL ASPECTS IN THE PRES ENT CASE, AS DISCUSSED HEREINABOVE, ESPECIALLY THE UNDISPUTED FACT THAT SH ARES SHOWN AS CAPITAL ASSET IN THE BALANCE SHEET FROM THE DATE OF PURCHASE ACCEPTE D BY THE AO IN EARLIER YEARS, THE AO NOW CANNOT HOLD IT TO BE STOCK IN TRADE WITH OUT THERE BEING ANY CHANGE IN THE FACTS. WE THUS DECIDE THE ISSUE RAISED IN FAVOU R OF THE ASSESSEE THAT THE LD CIT (A) WAS NOT JUSTIFIED IN TREATING THE CLAIMED S HORT-TERM CAPITAL GAIN OF RS 49,19,877/- AND LONG-TERM CAPITAL GAIN OF RS 98,31, 915/- ON SALE OF SHARES ASSESSABLE AS BUSINESS INCOME AND NOT AS CAPITAL GA INS. WE THUS SET ASIDE THE MATTER TO THE FILE OF THE AO TO VERIFY THE CLAIMED SHORT-TERM AND LONG-TERM CAPITAL GAINS IN VIEW OF ABOVE FINDINGS THAT TRANSACTIONS I N QUESTION ARE CAPITAL GAIN, AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSE E. THE GROUNDS NO 1 TO 5 RAISING THE ISSUE ARE THUS ALLOWED FOR STATISTICAL PURPOSES. GROUND NO. 6 IS ALTERNATIVE GROUND, WHICH DOES NOT NEED ADJUDICATION IN VIEW OF THE ABOVE FINDING ON THE MAIN ISSUE. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATISTIC AL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31ST DA Y OF MAY, 2011. SD/- SD/- (G.S. PANNU) (I.C. S UDHIR) ACCOUNTANT MEMBER JUDICIAL MEMBE R PUNE: DATED: 31 ST MAY, 2011 B COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEE 2. DCIT, AHMEDNAGAR, 3. THE CIT(A) 4. THE CIT 5. THE D.R, B BENCH, PUNE 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE