Sanjay Jain, CHENNAI V. ACIT, CHENNAI

ITA 1435/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61010 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 11-04-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 12-08-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR
• Assessee Lawyers: T BANUSEKAR
• Keywords: Business income; Speculation loss; Block assessment; Futures and options; Speculative transactions
• Section: 143(3); 43(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER] I.T.A.NO.1435/MDS/2011 ASSESSMENT YEAR : 2005-06 SHRI SANJAY JAIN BHAGGYAM SHRI RANJANI FLAT NO.3, 3 RD FLOOR NEW NO.8A, OLD NO.23 SAMBASIVAM STREET T. NAGAR, CHENNAI - 17 VS THE ACIT CIRCLE II CHENNAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI T. BANUSEKAR RESPONDENT BY : SHRI K.E.B.RENGARAJAN, JR. STANDING COUNSEL DATE OF HEARING : 11-04-2012 DATE OF PRONOUNCEMENT : 20-04-2012 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSES SEE AGAINST THE ORDER OF THE LD.CIT(A) VI, CHENNAI, DATED 30.6.2011. 2. GROUND NO.1 & 6 OF THE APPEAL ARE GENERAL IN NATURE AND HENCE, REQUIRES NO SEPARATE ADJUDICATION BY US. I.T.A.NO.1435/11 :- 2 -: 3. GROUND NO.2 OF THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE LD.CIT(A) IN TREATING THE LOSS OF ` 1,87,184/- ON TRADING IN DERIVATIVES LIKE FUTURES AND OPTIONS AS SPECULATION LOSS THEREBY INCREASING THE BUSINESS PROFITS OF THE ASSESSEE TO THAT EXTENT. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER TREATED ` 1,87,184/- AS SPECULATION PROFIT AS AGAINST BUSINE SS PROFIT IN TRADING IN DERIVATIVES SHOWN BY THE ASSESSEE IN TH E RETURN OF INCOME. THE ASSESSING OFFICER, WHILE DOING SO, INVOKED THE PROVISIONS OF SECTION 43(5) OF THE ACT. 5. ON APPEAL BEFORE THE LD.CIT(A), THE ASSESSEE SUB MITTED THAT THE ASSESSEE HAD DEALT-WITH FUTURES AND OPTIO NS BESIDES DEALING IN SHARES. IT WAS SUBMITTED THAT DEALING IN FUTURE S AND OPTIONS IS ONLY DEALING IN RIGHTS AND THERE CANNOT BE DELIVERY OF T HE SAME AS IT IS NOT A TANGIBLE ASSET. HENCE, DEALING IN FUTURES AND OPTI ONS CANNOT BE TREATED AS SPECULATIVE TRANSACTION. THE ASSESSEE FURTHER RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CI T VS SURESH N GUPTA [2008] 297 ITR 322(S.C) WHERE IT WAS HELD THA T LEVY OF SURCHARGE IN BLOCK ASSESSMENT OF SEARCH CASES BY IN SERTION OF PROVISO BY THE FINANCE ACT 2002 W.E.F 1.6.2002 IS NOT PROSP ECTIVE BUT RETROSPECTIVE IN NATURE. RELYING ON THIS DECISION OF THE HON'BLE I.T.A.NO.1435/11 :- 3 -: SUPREME COURT, TO SUPPORT HIS ARGUMENT THAT THE PRO VISO WHICH IS INSERTED TO REMEDY UNINTENDED CONSEQUENCES REQUIRES TO BE TREATED AS RETROSPECTIVE IN OPERATION SO THAT A REASONABLE INT ERPRETATION CAN BE GIVEN TO THE SECTION AS A WHOLE. HENCE, IT WAS SUB MITTED THAT PROVISO (D) TO SECTION 43(5) WHICH DEEMS THAT AN ELIGIBLE T RANSACTION IN RESPECT OF TRADING IN DERIVATIVES IS NOT A SPECULATIVE TRAN SACTION THOUGH INSERTED BY THE FINANCE ACT, 2005 W.E.F 1.4.2006 HA S TO BE TREATED AS RETROSPECTIVE IN NATURE AND PRAYED FOR TREATING THE LOSS FROM DEALING IN FUTURES AND OPTIONS AS BUSINESS LOSS. 6. THE LD.CIT(A), AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE, HELD THAT IN THE CASE OF CIT VS SURESH N GUPTA (SUPRA), THE JUDGMENT WAS PASSED BY THE HON'BLE SUPREME COURT IN THE CONTEXT OF CHARGING OF SURCHARGE ON INCOME DETERMINED IN THE B LOCK ASSESSMENT. AS THE RATE OF TAX IS SPECIFIED IN CHAPTER XIV-B TH ERE WAS A DOUBT WHETHER SURCHARGE IS LEVIABLE, THEREFORE, PROVISO W AS INSERTED TO PUT TO REST THE AMBIGUITY IN THIS REGARD BY THE FINANCE AC T, 2002 WHICH WAS HELD TO BE RETROSPECTIVE BY THE APEX COURT. HOWEVE R, PROVISO (D) TO SECTION 43(5), WHICH DEEMS THAT AN ELIGIBLE TRANSAC TION IN RESPECT OF TRADING IN DERIVATIVES IS NOT A SPECULATIVE TRANSAC TION INSERTED BY THE FINANCE ACT, 2005 W.E.F 1.4.2006 PROVIDING FOR EXEM PTION FROM THE PROVISIONS OF SECTION 43(5) ONLY FROM ASSESSMENT YE AR 2006-07 AND I.T.A.NO.1435/11 :- 4 -: THEREFORE, THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTABLE AND THEREBY CONFIRMED THE ORDER OF THE ASSESSING OFFICE R. 7. AT THE TIME OF HEARING, THE LD. A.R OF THE ASSESSEE VEHEMENTLY ARGUED AND REITERATED THE SUBMISSIONS MA DE BEFORE THE LD.CIT(A). THE LD. A.R OF THE ASSESSEE FURTHER FIL ED A COPY OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS SHR I BHARAT R. RUIA (HUF) IN TAX APPEAL NO.1539 OF 2010, ORDER DATED 18 .4.2011 AND SUBMITTED THAT THE ISSUE IS COVERED AGAINST THE AS SESSEE. HE ALSO SUBMITTED THAT THE ISSUE IS ALSO COVERED AGAINST TH E ASSESSEE BY THE DECISION OF KOLKATA SPECIAL BENCH OF THE TRIBUNAL I N THE CASE OF SHREE CAPITAL SERVICES LTD VS ACIT,121 ITD 498 (KOL) (SB) . ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 8. WE FIND THAT THE KOLKATA SPECIAL BENCH OF THE TRIBU NAL IN THE CASE OF SHREE CAPITAL SERVICES LTD VS ACIT(SUPRA) H AS HELD THAT THE TERM DERIVATIVE IN WHICH UNDERLYING ASSET IS SHA RE, WILL FALL WITHIN THE MEANING OF COMMODITY USED IN SECTION 43(5)OF THE ACT. IT FURTHER HELD THAT CLAUSE (D) OF PROVISO TO SECTION 43(5) CL EARLY PROVIDE THAT WHERE SPECULATIVE TRANSACTIONS ARE CARRIED OUT WITH A VIEW TO GUARD AGAINST LOSS IN RESPECT OF CONTRACTS FOR ACTUAL DEL IVERY IN CASES REFERRED TO CLAUSE (A), (B) AND (C) OF THE PROVISO, THEN, SU CH SPECULATIVE I.T.A.NO.1435/11 :- 5 -: TRANSACTIONS SHALL NOT BE DEEMED TO BE SPECULATIVE TRANSACTIONS ONLY W.E.F 1.4.2006. TO THE SAME EFFECT, IS ALSO THE DE CISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS SHRI BHARAT R. RUIA (HUF) (SUPRA). THEREFORE, RESPECTFULLY FOLLOWING THE ABO VE DECISIONS, WE DISMISS THIS GROUND OF APPEAL OF THE ASSESSEE. 9. GROUND NOS.3,4 & 5 OF THE APPEAL OF THE ASSESSEE A RE DIRECTED AGAINST THE ORDER OF THE LD.CIT(A) IN TR EATING THE SHORT TERM CAPITAL GAINS AS BUSINESS PROFITS OF THE ASSESSEE. 10. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, IN THE RETURN OF INCOME HAD SHOWN SHORT TERM CAPITAL GAINS OF ` 16,46,783/- ON TRANSFER OF SHARES THROUGH A RECOGNIZED STOCK EX CHANGE, CHARGEABLE TO TAX @ 10% U/S 88E OF THE ACT. THE ASSESSING OF FICER OBSERVED THAT THE ASSESSEE HAD A TOTAL PROFIT OF ` 27,00,256/- ON TRANSACTIONS CLAIMED AS SHORT TERM CAPITAL GAINS. THE ABOVE FIG URE COMPRISED OF PROFIT OF ` 30,09,867/- ON TRANSACTIONS AFTER 1.10.2004 AND A LOSS OF ` 3,09,611/- ON TRANSACTIONS BEFORE 1.10.2004. THE ASSESSEE DEDUCTED A SUM OF ` 10,53,473/- ON ACCOUNT OF INTEREST PAID, DELIVERY CHARGES AND CONSULTANCY CHARGES FROM THE ABOVE PROFIT AND A RRIVED AT A FIGURE OF ` 16,46,783/-. THIS FIGURE WAS OFFERED FOR TAX AT C ONCESSIONAL RATE OF 10% AS SHORT TERM CAPITAL GAINS. THE ASSESSING OFFICER OBSERVED I.T.A.NO.1435/11 :- 6 -: THAT THE BREAK-UP OF EXPENSES CLAIMED AGAINST THE G AINS, IT IS APPARENT THAT ASSESSEE MADE THE ABOVE TRANSACTIONS WITH BOR ROWED CAPITAL. HE HIRED THE SERVICES OF A FEW CONSULTANTS IN ORDER TO MAKE GAIN OUT OF THE TRANSACTIONS. PRIMA FACIE THE MOTIVE OF THESE TRANS ACTIONS WAS TO EARN PROFIT. THE ASSESSING OFFICER ALSO NOTED THAT THE ASSESSEE EARNED DIVIDEND INCOME OF ` 4,42,760/- OUT OF WHICH ONLY ` 9,029/- WAS FROM SHARES SOLD AND SHOWN AS SHORT TERM CAPITAL GAINS. HE OBSERVED THAT THIS ALSO SHOWS THAT THE PURPOSE OF PURCHASE OF THE SHARES WAS EARNING PROFIT AND NOT EARNING DIVIDEND AS WOULD HA VE BEEN IN THE CASE OF INVESTMENT. HE, THEREFORE, TREATED THE AMOUNT A S TRADING PROFIT OF THE ASSESSEE. 11. ON APPEAL BEFORE THE LD.CIT(A), THE ASSESSEE SUB MITTED THAT THE ASSESSEE IS ENGAGED BOTH IN INVESTMENT AS WELL AS TRADING IN SHARES. THE GAINS FROM SHARES HELD AS INVESTMENT W AS SHOWN UNDER THE HEAD CAPITAL GAINS. IT WAS SUBMITTED THAT ONE OF THE CONTENTION OF THE ASSESSING OFFICER TO TREAT THE GAIN AS BUSINESS PROFITS WAS THAT THE ASSESSEE HAS SOLD THE SHARES WITHIN A SHORT PERIOD OF PURCHASE AND THEREFORE, IS NOT ACCEPTABLE FOR A GAIN TO BE TREAT ED AS SHORT TERM CAPITAL GAIN. IT WAS SUBMITTED THAT IF THE GAIN ON SALE OF SHARES WHICH ARE HELD FOR LESS THAN 12 MONTHS WAS TO BE TREATED AS BUSINESS PROFIT THEN THE CONCEPT OF SHORT TERM CAPITAL GAIN WOULD F AIL. I.T.A.NO.1435/11 :- 7 -: 12. THE LD.CIT(A), AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE, HELD THAT THE PROVISION IN THE ACT FOR SH ARES HELD FOR A PERIOD OF LESS THAN 12 MONTHS TO BE TREATED AS SHORT TERM CAPITAL GAIN HAS RELEVANCE IN THE CASE OF INVESTORS WHO DECIDE TO CO URSE CORRECT THEIR INVESTMENT DECISIONS WITHIN A PERIOD OF ONE YEAR D UE TO CHANGE IN THEIR PERCEPTION ABOUT THE DECISION TAKEN TO INVEST IN AN INSTRUMENT/ASSET. THUS, THE PROVISION IS APPLICABL E FOR INVESTMENT DECISIONS BUT NOT FOR BUSINESS DECISIONS. FURTHER, IN THE ASSESSEES CASE, THE ATTENDING CIRCUMSTANCES ARE FREQUENCY OF TRANSACTIONS, BORROWING TO FUND THE TRANSACTIONS AND ENGAGING CON SULTANTS ETC AND THEREFORE, THE GAIN IS A BUSINESS GAIN. FURTHER, THE CONTENTION OF THE ASSESSEE WAS THAT IN ASSESSMENT YEAR 2002-03, THE C LAIM OF SHORT TERM CAPITAL GAIN WAS ACCEPTED IN AN ASSESSMENT MADE U/ S 143(3). THEREFORE, THE GAIN SHOULD BE TREATED AS SHORT TERM CAPITAL GAIN IN THE PRESENT YEAR OF APPEAL ALSO CANNOT BE ACCEPTED AS R ES JUDICATA WAS NOT APPLICABLE IN TAXATION MATTERS. HE, THEREFORE, HEL D THAT THE ASSESSING OFFICER WAS JUSTIFIED IN TREATING THE AMOUNT OF ` 16,46,783/- SHOWN AS SHORT TERM CAPITAL GAIN AS BUSINESS PROFIT AND CONF IRMED THE ACTION OF THE ASSESSING OFFICER. WHILE DOING SO, THE LD.CIT (A) HAS ALSO HELD THAT THE ALTERNATIVE SUBMISSION OF THE LD. A.R THAT REBA TE U/S 88E FOR SECURITIES TRANSACTION TAX (STT) PAID BY THE ASSES SEE SHOULD BE I.T.A.NO.1435/11 :- 8 -: ALLOWED IF THE GAINS WERE TREATED AS BUSINESS PROFI TS. THE LD.CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW DEDUCTION FOR STT PAID BY THE ASSESSEE WHILE COMPUTING THE INCOME OF THE ASSESS EE. 13. THE LD. A.R OF THE ASSESSEE REITERATED THE SUBMISSI ONS MADE BEFORE THE ASSESSING OFFICER. HE FURTHER ARGUED TH AT ONE OF THE CONTENTION OF THE ASSESSING OFFICER IS THAT AS NO S TT WAS PAID BY THE ASSESSEE, THEREFORE, THE TRANSACTION WAS TO BE TREA TED AS BUSINESS GAINS OF THE ASSESSEE. HE ARGUED THAT THE ASSES SEE HAD PAID STT ON THE SHORT TERM CAPITAL GAIN SHOWN BY THE ASSESSEE. HE ARGUED THAT THE RATE OF STT IN THE CASE OF BUSINESS PROFITS AND GAINS WAS LOWER THAN THE RATE OF STT ON THE INVESTMENT IN SHARES AN D THAT THE ASSESSEE HAD PAID A HIGHER RATE OF TAX. THIS SHOWS THAT THE INTENTION OF THE ASSESSEE WAS TO HOLD THE SHARES AS INVESTME NTS AND NOT FOR BUSINESS PURPOSES. HENCE, HE ARGUED THAT THE ORDER S OF THE LOWER AUTHORITIES SHOULD BE REVERSED AND THE TAX ON PROFI T FROM SHARES SHOULD BE ASSESSED UNDER THE HEAD SHORT TERM CAPITAL GAIN AS SHOWN BY THE ASSESSEE. 14. ON THE OTHER HAND, THE LD. DR FULLY JUSTIFIED THE O RDERS OF THE LOWER AUTHORITIES. I.T.A.NO.1435/11 :- 9 -: 15. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSEE DISCLOSED LONG TERM CAP ITAL GAINS OF ` 7,51,631/-, SHORT TERM CAPITAL GAIN OF ` 16,46,783/- AND PROFIT ON DEALING IN SHARES OF ` 1,07,023/-. THE ASSESSING OFFICER ACCEPTED THE LONG TERM CAPITAL GAINS AS DISCLOSED BY THE ASSESS EE AND ALSO ACCEPTED THE PROFIT ON SHARE TRADING AS BUSINESS INCOME. HO WEVER, SHORT TERM CAPITAL GAIN OF ` 16,46,783/- CLAIMED BY THE ASSESSEE WAS TREATED A S BUSINESS INCOME BY THE ASSESSING OFFICER. ON APPEA L, THE LD.CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. BUT THE LD.CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW REBATE U/S 88E IN RESPECT OF THE STT PAID BY THE ASSESSEE ON SHARES RELATING TO SHO RT TERM CAPITAL GAIN CLAIMED BY THE ASSESSEE AFTER VERIFICATION. 16. BEFORE US, THE LD. A.R OF THE ASSESSEE VEHEMENTLY D ISPUTED THE FINDINGS OF THE LOWER AUTHORITIES. THE LD. A.R SUBMITTED THAT THE ASSESSEE IS BOTH MAKING INVESTMENT IN SHARES A WELL AS ALSO DEALING IN SHARES. THE SHARES WHICH WERE PURCHASED FOR TRADIN G PURPOSES ARE ACCOUNTED FOR SEPARATELY IN THE BOOKS OF ACCOUNT FO R SHARES WHICH WERE PURCHASED FOR INVESTMENT PURPOSES. THE SHARES PURCHASED FOR INVESTMENT PURPOSES WERE ACCOUNTED FOR UNDER THE HE AD INVESTMENT. HE CONTENDED THAT SIMILAR PROFIT ON SALE OF INVESTM ENT WERE ACCEPTED I.T.A.NO.1435/11 :- 10 -: BY THE DEPARTMENT AS SHORT TERM CAPITAL GAIN OR LON G TERM CAPITAL GAIN IN THE PAST IN THE CASE OF THE ASSESSEE EVEN IN AN ASSESSMENT MADE U/S 143(3) OF THE ACT FOR ASSESSMENT YEAR 2002-03. HE ARGUED THAT SIMPLY BECAUSE BORROWED FUNDS WERE UTILIZED FOR MAK ING INVESTMENT OR INVESTMENT WAS MADE BY TAKING THE HELP OR ADVICE OF THE CONSULTANT DOES NOT MAKE THE INVESTMENT A TRADING ASSET. 17. WE FIND THAT THE SHORT TERM CAPITAL GAIN DISCLOSED BY THE ASSESSEE WAS TREATED AS BUSINESS INCOME BY THE REVE NUE MAINLY ON THE GROUND THAT THE ASSESSEE CLAIMED INTEREST EXPE NDITURE, CONSULTANCY CHARGES EXPENSES AND BROKERAGE ETC. AGA INST SUCH PROFIT ON SALE OF THE SAME. WE FIND THAT IN THE INSTANT C ASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE IS DEALING IN SHARES AS WELL AS ALSO MAKING INVESTMENT IN SHARES. THE ABOVE FACT IS ALSO ESTAB LISHED BY THE FACT THAT THE REVENUE HAS ACCEPTED LONG TERM CAPITAL GAI N OF ` 7,51,631/- IN THE HANDS OF THE ASSESSEE. FURTHER, THE ASSES SEE HAS SEPARATELY DISCLOSED ITS INVESTMENT AND SHARES ACQUIRED FOR TR ADING PURPOSES AND ALSO REFLECTED THEM SEPARATELY IN THE BALANCE SHEET IS ALSO NOT IN DISPUTE. THE CRUX OF THE ISSUE IS THAT WHEN THE PR OFIT ON SALE OF SHARES CAN BE TREATED AS BUSINESS INCOME AND WHEN IT CAN B E TREATED AS INVESTMENT INCOME I.E CAPITAL GAINS. IN OUR CONSID ERED OPINION, WHEN THE SHARES ARE PURCHASED FOR TRADING PURPOSES I.E F OR THE PURPOSE OF I.T.A.NO.1435/11 :- 11 -: SELLING AT HIGHER PRICE THEN THE SAME IS TO BE TREA TED AS TRADING ASSET AND CONSEQUENTLY PROFIT THEREOF IS ASSESSABLE UNDER THE HEAD BUSINESS INCOME. ON THE OTHER HAND, WHEN THE SHARES ARE ACQ UIRED WITH THE INTENTION TO HOLD THE SAME FOR ENJOYING DIVIDEND TH EREFROM THEN THE SAME IS INVESTMENTS AND PROFIT ON SALE OF SUCH INVE STMENTS ARE TO BE TREATED AS CAPITAL GAINS. THUS, THE INTENTION OF T HE ASSESSEE AT THE TIME OF ACQUIRING OF SHARES IS THE DECIDING FACTOR WHETHER THE SHARES ARE TRADING ASSET OR INVESTMENT. SUCH INTENTION OF THE ASSESSEE IS TO BE GATHERED AFTER CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE INCLUDING THE TREATMENT GIVEN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. IN OUR CONSIDERED OPINION, NO SINGLE TEST CAN BE LAID DOWN FROM WHICH IT CAN BE DECIDED WHETHER THE SHARES WER E ACQUIRED AS TRADING ASSET OR AS AN INVESTMENT. IN THE INSTANT CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS ACCOUNTED FOR SEPARA TELY THE SHARES PURCHASED FOR TRADING PURPOSES AND SHARES ACQUIRED FOR INVESTMENT. THE SHARES SO ACQUIRED WERE ALSO DISCLOSED SEPARATE LY IN THE BALANCE SHEET WHICH WAS ACCEPTED BY THE DEPARTMENT IN THE P AST IN THE CASE OF THE ASSESSEE. IN OUR CONSIDERED OPINION, AFTER ACCEPTING THE SHARES AS INVESTMENT ASSET OF THE ASSESSEE , IT WAS NOT O PEN TO THE REVENUE TO ASSESS THE PROFIT ON SALE THEREOF AS BUSINESS IN COME IN PLACE OF SHORT TERM CAPITAL GAIN CLAIMED BY THE ASSESSEE. SIMPLY BECAUSE THE I.T.A.NO.1435/11 :- 12 -: INVESTMENT WAS MADE BY TAKING THE HELP OF BORROWED FUNDS OR SOME CONSULTANTS DOES NOT CONVERT THE INVESTMENT INTO A TRADING ASSET. IN THE INSTANT CASE, IT IS OBSERVED THAT THE REVENUE H AS FOUND THAT THE SHARES ON WHICH THE ASSESSEE DECLARED SHORT TERM C APITAL GAIN WERE HELD FOR AN AVERAGE PERIOD OF ABOUT 2 MONTHS. IN V IEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AND IN VIEW OF THE FACT THAT SUCH PROFITS ON INVESTMENT IN SHARES WERE ACCEPTED BY TH E DEPARTMENT AS SHORT TERM CAPITAL GAIN IN THE HANDS OF THE ASSESS EE, IN OUR CONSIDERED VIEW IT WAS NOT OPEN TO THE REVENUE TO TAKE AN ENTI RELY DIFFERENT POSITION WITHOUT ANY STRONG REASONS. NO DOUBT, RES JUDICATA IS NOT APPLICABLE IN TAX MATTERS BUT STILL RULE OF CONSIST ENCY IS DESIRABLE FOR AVOIDING CHAOS IN THE ADMINISTRATION OF TAX MATTERS . WE, THEREFORE, SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES ON THIS I SSUE AND HOLD THAT THE SHARES WHICH WERE ACCOUNTED FOR SEPARATELY FOR INVE STMENT PURPOSES WERE INVESTMENTS OF THE ASSESSEE AND PROFITS OR LO SS ON SALE THEREOF IS ASSESSASBLE UNDER THE HEAD CAPITAL GAINS. IN SO F AR AS DEDUCTION OF INTEREST EXPENDITURE AND OTHER EXPENDITURE CLAIMED BY THE ASSESSEE ARE CONCERNED, WE FIND THAT THE LOWER AUTHORITIES H AVE NOT EXAMINED THE SAME WHETHER THEY ARE ALLOWABLE FOR COMPUTING T HE CAPITAL GAINS OR NOT BECAUSE THEY TREATED THE INVESTMENT INCOME A S BUSINESS INCOME. THEREFORE, IN OUR CONSIDERED OPINION, IT S HALL BE FAIR AND JUST I.T.A.NO.1435/11 :- 13 -: TO RESTORE THE ISSUE BACK TO THE FILE OF THE ASSESS ING OFFICER FOR COMPUTING THE SHORT TERM CAPITAL GAIN AFRESH AS PER LAW AFTER ALLOWING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. NEEDLESS TO MENTION THAT ALLOWABILITY OF REBATE U/S 88E IS ALS O TO BE CONSIDERED AFRESH BY THE ASSESSING OFFICER IN VIEW OF OUR ABOV E DECISION TO TREAT THE PROFIT ON SALE OF SHARES HELD FOR INVESTMENT PU RPOSES AS ASSESSABLE UNDER THE HEAD CAPITAL GAINS. THUS, THE GROUNDS OF APPEAL OF THE ASSESSEE ARE ALLOWED IN THE MANNER INDICATED ABOV E. 18. IN THE RESULT, THE APPEAL OF THE ASSESSEE I S PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20-04-2012. SD/ SD/- (CHALLA NAGENDRA PRASAD) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 20 TH APRIL, 2012 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR