KAMLESH REAL ESTATES P. LTD, MUMBAI V. ACIT (OSD) CIR 2(2), MUMBAI

ITA 1451/MUM/2010

• Counselvise Citation: 145119914 RSA 2010
• Duration Of Justice: 1 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 23-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 23-02-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Keywords: Business income

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI R. V. EASWAR, PRESIDENT AND SHRI RAJEN DRA SINGH(AM) ITA NO.1451/M/2010 ASSESSMENT YEAR 2006-07 M/S.KAMLESH REAL ESTATES PVT. LTD. THE ACIT (OSD) -2, AAYAKAR BHAVAN 401, LANDMARK, 4 TH FLOOR, M.K.MARG, ,MUMBAI 400 020. 554, DR. G.M.BHOSALE MARG WORLI, MUMBAI 400 018. PAN : AAACK 2266 R APPELLANT RESPONDENT ASSESSEE BY : SHRI SANJAY PARIKH REVENUE BY : SHRI A.K.NAYAK O R D E R PER RAJENDRA SINGH (AM) THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 15.1.2010 OF CIT(A) FOR THE ASSESSMENT YEAR 2006-07 . 2. THE FIRST DISPUTE IS REGARDING NATURE OF INCOME AMOUNTING TO RS.4,89,637/- RECEIVED BY THE ASSESSEE FROM LETTING OUT THE TERRACE FOR PUTTING THE MOBILE TOWERS BY THE TELECOM COMPANIES. THE REN TAL INCOME HAD BEEN RECEIVED FROM M/S.HUTCHISON MAX TELECOM LTD. AND M/ S.RELIANCE INFOCOM LTD. THE ASSESSEE HAD DECLARED THE INCOME AS INCOME FROM HOUSE PROPERTY. THE AO DID NOT ACCEPT THE CLAIM. IT WAS OBSERVED BY HIM TH AT ONLY THE RENTAL INCOME FROM ANY BUILDING OR LAND APARTMENT THERETO COULD B E ASSESSED AS INCOME FROM HOUSE PROPERTY. IN THIS CASE THE ASSESSEE HAD RECEI VED THE RENTAL INCOME FROM 2 LEASE OF TERRACE AND/ OR PARAPET WALLS WHICH COULD NOT BE CONSIDERED AS PART OF THE BUILDING. HE THEREFORE TREATED THE RENTAL INCOM E AS INCOME FROM OTHER SOURCES. 2.1 THE ASSESSEE DISPUTED THE DECISION OF THE AO AN D SUBMITTED BEFORE CIT(A) THAT RENTAL INCOME FROM LETTING OUT OF TERRA CE/ PARAPET WALLS FOR PUTTING UP HORDING ETC HAS TO BE ASSESSED AS INCOME FROM HO USE PROPERTY. RELIANCE WAS PLACED ON THE DECISION OF THE TRIBUNAL IN CASE OF SATYAM SHIVAM SUNDARAM COOPERATIVE SOCIETY LTD. IN ITA NO.516 TO 514 M/200 4 AND THE DECISION OF THE TRIBUNAL IN CASE OF PINTO PARK VIEW COOPERATIVE HOU SING SOCIETY LTD. IN ITA NOS.5859-5894/M/2003. IN THESE CASES THE TRIBUNAL H AD HELD THAT RENTAL INCOME FROM LETTING OUT TERRACE FOR PUTTING UP HOAR DING AND TELECOM TOWERS WILL BE ASSESSABLE AS INCOME FROM HOUSE PROPERTY. CIT(A) HOWEVER, DID NOT ACCEPT THE CONTENTIONS RAISED. HE REFERRED TO THE JUDGMENT OF HONBLE HIGH COURT OF KOLKATA IN CASE OF MUKHERJEE ESTATE P. LTD. VS CIT (244 ITR 1) IN WHICH IT WAS HELD THAT INCOME FROM LETTING OUT FLOOR SPACE AND W ALL SPACE ON THE ROOF OF THE HOUSE PROPERTY TO ADVERTISING AGENCIES FOR PUTTING UP HOARDING, COULD NOT BE CONSIDERED AS INCOME FROM HOUSE PROPERTY AND THE SA ME WAS ASSESSABLE AS INCOME FROM OTHER SOURCES. CIT(A) ACCORDINGLY UPHEL D THE VIEW OF THE AO ASSESSING THE SAME AS INCOME FROM OTHER SOURCES. AG GRIEVED BY THE SAID DECISION, THE ASSESSEE IS IN APPEAL BEFORE THE TRIB UNAL. 2.2 BEFORE US THE LEARNED AR FOR THE ASSESSEE REITE RATED THE SUBMISSIONS MADE BEFORE CIT(A) THAT THE RENTAL INCOME HAS TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY FOLLOWING THE DECISIONS OF THE TRIBU NAL IN CASE OF M/S.PINTOS PARK VIEW PREMISES CO.OP. HOUSING SOCIETY LTD. (SUP RA) AND IN CASE OF SATYAM SHIVAM SUNDARAM CHS LTD (SUPRA). THE LEARNED DR ON THE OTHER HAND 3 SUPPORTED THE ORDER OF CIT(A) AND PLACED RELIANCE O N THE JUDGMENT OF HONBLE HIGH COURT OF KOLKATA IN CASE OF MUKHERJEE ESTATE P VT. LTD. (SUPRA) 2.3 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING NATURE OF INCOM E RECEIVED BY THE ASSESSEE FROM LETTING OUT THE TERRACE FOR PUTTING UP MOBILE TOWERS BY THE TELECOM COMPANIES. THE ASSESSEE HAD DECLARED THE SAID INCOM E AS INCOME FROM HOUSE PROPERTY WHEREAS THE AUTHORITIES BELOW HAVE ASSESSE D THE SAME AS INCOME FROM OTHER SOURCES. THE CASE OF THE ASSESSEE IS SUP PORTED BY THE DECISION OF THE TRIBUNAL IN CASE OF SATYAM SHIVAM SUNDARAM COOP ERATIVE SOCITY LTD. (SUPRA) AND IN CASE OF PINTOS PARK VIEW PREMISES C O.OP. HOUSING SOCIETY LTD. (SUPRA). IN THESE CASES, INCOME FROM LETTING OUT TE RRACE FOR PUTTING UP HORDING AND TELECOM TOWERS HAVE BEEN HELD ASSESSABLE AS INC OME FROM HOUSE PROPERTY. THE REVENUE HAS PLACED RELIANCE ON THE JUDGMENT OF HONBLE HIGH COURT OF KOLKATA IN CASE OF MUKHERJEE ESTATE PVT. LTD. (SUPR A) IN WHICH RENTAL INCOME FROM PUTTING UP HOARDING ON THE TERRACE AND THE WAL L SPACE HAS BEEN HELD ASSESSABLE AS INCOME FROM OTHER SOURCES. WE HAVE PE RUSED THE SAID JUDGMENT OF HONBLE HIGH COURT OF KOLKATA. IN THE SAID CASE, THERE WAS A CLEAR FINDING OF THE TRIBUNAL THAT THE RENTAL INCOME HAD ARISEN FROM THE LETTING OUT OF THE HORDING WHICH WAS HELD TO BE NOT PART OF THE PROPER TY. IT WAS THEREFORE HELD THAT RENTAL INCOME FROM LETTING OUT OF HOARDING, WH ICH WAS NOT PART OF THE PROPERTY COULD NOT BE CONSIDERED AS INCOME FROM HOU SE PROPERTY. IN THE PRESENT CASE THE ASSESSEE HAS ONLY LET OUT THE TERR ACE AND THE HOARDING HAVE BEEN PUT UP BY THE TELECOM COMPANIES AND THEREFORE RENTAL INCOME HAS ARISEN FROM LETTING OUT OF THE TERRACE AND NOT FROM LETTIN G OUT OF HOARDING OR TOWERS. THEREFORE IN OUR VIEW THE JUDGMENT OF HONBLE HIGH COURT OF KOLKATA IN CASE OF MUKHERJEE ESTATE PVT.LTD. (SUPRA) WILL NOT COVER TH E CASE OF THE ASSESSEE. THE 4 CASE OF THE ASSESSEE IS COVERED BY THE DECISIONS OF THE TRIBUNAL CITED EARLIER. THEREFORE RESPECTFULLY FOLLOWING THE SAID DECISIONS WE SET ASIDE THE ORDER OF CIT(A) AND ALLOW THE CLAIM OF THE ASSESSEE. 3. THE SECOND DISPUTE IS REGARDING DEDUCTION OF MAI NTENANCE CHARGES OF RS.44,544/- WHILE COMPUTING INCOME FROM HOUSE PROPE RTY. THE ASSESSEE HAD INCURRED THE MAINTENANCE CHARGES WHICH CONSISTED OF ELECTRICITY CHARGES, LIFT MAINTENANCE CHARGES, WATCH AND WARD CHARGES, CLEANI NG CHARGES ETC. AND THE SAME WAS CLAIMED AS DEDUCTION WHILE COMPUTING THE I NCOME FROM HOUSE PROPERTY. AO DISALLOWED THE CLAIM WITHOUT GIVING AN Y REASONS. THE ASSESSEE DISPUTED THE DECISION OF THE AO AND SUBMITTED BEFOR E CIT(A) THAT THE MAINTENANCE CHARGES WERE ALLOWABLE FOLLOWING THE DE CISION OF THE TRIBUNAL IN CASE OF SHARMILA TAGORE VS DCIT (93 TTJ 483) AND TH E DECISION IN CASE OF VERMA FAMILY TRUST (7 ITD 392). CIT(A) HOWEVER WAS NOT CONVINCED BY THE ARGUMENTS ADVANCED. IT WAS OBSERVED BY HIM THAT DED UCTION COULD BE ALLOWED ONLY IN RESPECT OF ITEMS OF EXPENDITURE LISTED UNDE R SECTION 24(1). THERE WAS NO SPECIFIC CLAUSE FOR ALLOWING MAINTENANCE CHARGES. C IT(A) THEREFORE HELD THAT NO DEDUCTION COULD BE ALLOWED ON ACCOUNT OF MAINTENANC E CHARGES. RELIANCE WAS PLACED ON THE JUDGMENT OF HONBLE HIGH COURT OF KOL KATA IN CASE OF VIDYASAGAR SAMABAY ABASAN SAMITI LTD. VS CIT 244 ITR 517(CAL) AND IN CASE OF CIT VS SREELEKHA BANERJEE (179 ITR 46) HE ACCORDINGLY CONF IRMED THE DISALLOWANCE AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3.1 BEFORE US THE LEARNED AR FOR THE ASSESSEE REITE RATED THE SUBMISSIONS MADE BEFORE CIT(A) THAT DEDUCTION HAS TO BE ALLOWED IN RESPECT OF MAINTENANCE CHARGES. HE PLACED RELIANCE ON THE DECISION OF THE TRIBUNAL IN CASE OF ACIT VS SUNIL KUMAR AGARWAL (8 ITR (TRIB) 304) AND THE DECI SION OF TRIBUNAL IN CASE OF 5 SHARMILA TAGORE (93 TTJ 310). THE LEARNED DR PLACED RELIANCE ON THE ORDER OF CIT(A). 3.2 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ALLOWABILITY OF DEDUCTION ON ACCOUNT OF MAINTENANCE CHARGES PAID BY THE ASSESSEE. THE MAINT ENANCE CHARGES CONSISTED OF ELECTRICITY CHARGES, LIFT MAINTENANCE CHARGES, W ATCH AND WARD CHARGES, CLEANING CHARGES ETC. THE CLAIM HAS BEEN MADE FOLLO WING THE DECISION OF THE TRIBUNAL IN CASE OF ACIT VS SUNIL KUMAR AGARWAL (SU PRA) AND IN CASE OF SHARMILA TAGORE (SUPRA) IN WHICH MAINTENANCE CHARGE S PAID BY THE ASSESSEE TO THE SOCIETY FOR COMMON SERVICES RENDERED HAVE BEEN HELD ALLOWABLE AS DEDUCTION WHILE COMPUTING THE HOUSE PROPERTY INCOME . WE HAVE CONSIDERED THE VARIOUS ASPECTS OF THE MATTER CAREFULLY. INCOME UND ER THE HEAD HOUSE PROPERTY IS CHARGEABLE IN RESPECT OF THE BONAFIDE LETTING OU T VALUE OF THE PROPERTY. IN CASE THE RENT ALSO INCLUDES ANY AMOUNT FOR RENDERIN G COMMON SERVICES BY THE SOCIETY, SUCH AMOUNT HAS TO BE EXCLUDED FROM THE GR OSS RENT AS THE SAME IS NOT RELATED TO THE LETTING OUT OF THE PROPERTY. BUT IN CASE THE RENTAL INCOME IS ONLY IN RESPECT OF LETTING OUT OF THE PROPERTY AND THE A SSESSEE HAS INCURRED CERTAIN EXPENSES ON ACCOUNT OF COMMON SERVICES RENDERED, SU CH EXPENSES CANNOT BE ALLOWED AS DEDUCTION AS THESE ARE NOT COVERED BY TH E PROVISIONS OF SECTION 24(1). IN CASE OF ACIT VS SUNIL KUMAR AGARWAL (SUPR A) AND IN CASE OF SHARMILA TAGORE (SUPRA) MAINTENANCE CHARGES PAID BY THE ASSE SSEE HAVE BEEN HELD ALLOWABLE AS DEDUCTION ON FACTS OF THOSE CASES. IN THE PRESENT CASE, IT IS NOT CLEAR WHETHER THE RENT FIXED BY THE ASSESSEE WAS IN CLUSIVE OF ANY CHARGES PAYABLE FOR COMMON SERVICED PROVIDED BY THE SOCIETY . WE THEREFORE RESTORE THE ISSUE TO THE FILE OF AO FOR PASSING A FRESH ORDER A FTER NECESSARY EXAMINATION IN 6 THE LIGHT OF OBSERVATIONS MADE ABOVE AND AFTER ALLO WING OPPORTUNITY OF HEARING TO THE ASSESSEE. 4. THE THIRD DISPUTE IS REGARDING NATURE OF INCOME FROM SHARE TRANSACTIONS. THE ASSESSEE HAD EARNED INCOME OF RS.14,47,865/- FR OM SALE OF SHARES WHICH HAD BEEN DECLARED BY THE ASSESSEE AS SHORT TERM CAP ITAL GAIN. THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE INTENTION OF THE A SSESSEE WAS TO MAKE INVESTMENT IN SHARES WHICH HAD ALSO BEEN DECLARED A S INVESTMENT IN THE BALANCE SHEET. THE TRANSACTIONS WERE ALSO NOT REPE TITIVE AND MUCH IN QUANTITY. IT WAS ACCORDINGLY URGED THAT THE CAPITAL GAIN INCO ME DECLARED SHOULD BE ACCEPTED. AO HOWEVER DID NOT ACCEPT THE CONTENTIONS RAISED. IT WAS OBSERVED BY HIM THAT THE ASSESSEE HAD DEALT IN SHARES OF 32 COMPANIES AND THERE WERE TOTAL OF 97 TRANSACTIONS RESULTING INTO GAIN OF RS. 14,47,865/-. AO HELD THAT THE ASSESSEE WAS REGULARLY PURCHASING AND SELLING SHARE S WITH THE PROFIT MOTIVE. HE THEREFORE TREATED THE INCOME AS BUSINESS INCOME. 4.1 IN APPEAL THE ASSESSEE SUBMITTED BEFORE CIT(A) THAT THE ASSESSEE WAS IN THE BUSINESS OF DEVELOPING AND CONSTRUCTING PROP ERTY. IT HAD COMPLETED A PROJECT AT WORLI AND THEREAFTER WAS ON THE LOOK OUT FOR ANOTHER PLOT/ PROPERTY FOR DEVELOPMENT BUT NO SUCH PLOT/ PROPERTY WAS AVAI LABLE TO THE SATISFACTION OF THE ASSESSEE. PENDING LOCATION OF ANOTHER PROJECT, THE ASSESSEE INVESTED ITS SURPLUS FUNDS IN THE SHARES OF LISTED COMPANIES. TH E PURCHASES HAD BEEN SHOWN AS INVESTMENT IN THE BALANCE SHEET. THE ASSESSEE HA D BEEN CONSISTENTLY OFFERING THE INCOME FROM SALE OF SHARES AS CAPITAL GAINS AND THE SAME HAD BEEN ACCEPTED BY THE DEPARTMENT FROM YEAR TO YEAR EXCEPT IN THE YEAR UNDER CONSIDERATION. IT WAS ALSO SUBMITTED THAT THE ASSES SEE SOME TIMES HAD TO SELL SHARES AFTER HOLDING FOR A SHORT PERIOD DUE TO VARI OUS FACTORS SUCH AS CHANGE IN 7 GOVERNMENT POLICY, MANAGEMENT, MARKET OUTLOOK, GLOB AL CONDITIONS ETC. THE SHARES HAD BEEN PURCHASED FROM OWN FUNDS AS THE ASS ESSEE DID NOT HAVE ANY BORROWED FUNDS. THE ASSESSEE HAD RECEIVED SUBSTANTI AL DIVIDEND OF RS.87,083 COMPARED TO RS.26,323/- IN THE EARLIER YEAR. THE AS SESSEE REFERRED TO SEVERAL JUDGMENTS IN WHICH WHEN SEPARATE ACCOUNTS OF INVEST MENT WAS MAINTAINED AND DOMINANT INTENTION WAS TO HOLD THE SHARES AS INVEST MENT PROFIT ON SALE HAD BEEN HELD ASSESSABLE AS CAPITAL GAIN. SIMILAR TRANS ACTION HAD BEEN ACCEPTED BY THE AO AS CAPITAL GAIN IN THE EARLIER YEAR AND THER EFORE FOLLOWING THE DOCTRINE OF CONSISTENCY THE CLAIM HAD TO BE ALLOWED. THE HOLDIN G PERIOD OF SHARES VARIED FROM 76 TO 339 DAYS EXCEPT IN ONE CASE IN WHICH DUE TO MISTAKES THE SHARES HAD BEEN SOLD ON THE SAME DAY. CIT(A) AFTER CONSIDE RING THE DETAILS FILED BY THE ASSESSEE OBSERVED THAT THERE WERE NO DISPUTES THAT THE ASSESSEE HAD MAKE PURCHASES FROM OWN FUND AND HAD EARNED SUBSTANTIAL DIVIDEND. IT WAS ALSO NOTED BY HIM THAT MOST OF THE GAIN HAD ARISEN FROM SALE OF SHARES HELD FOR MORE THAN 90 DAYS. HE THEREFORE CONCLUDED THAT IT W AS NOT PROPER TO TREAT THE ENTIRE INCOME AS BUSINESS INCOME. HE DIRECTED THE A O TO TREAT THE INCOME FROM SALE OF SHARES WITHIN 90 DAYS OF PURCHASE AS BUSINE SS INCOME AND THE BALANCE AS CAPITAL GAIN. AGGRIEVED BY THE SAID DECISION THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4.2 BEFORE US THE LEARNED AR FOR THE ASSESSEE REITE RATED THE SUBMISSIONS MADE BEFORE LOWER AUTHORITIES THAT SHARE TRANSACTIO NS WERE PART OF INVESTMENT ACTIVITY AND THESE HAD BEEN DULY DECLARED AS INVEST MENT. IT WAS ALSO SUBMITTED THAT NO BORROWED FUNDS WERE UTILIZED AS WAS CLEAR F ROM THE BALANCE SHEET PLACED AT PAGES 106/107 OF THE PAPER BOOK. IT WAS F URTHER SUBMITTED THAT THE ASSESSEE WAS A BUILDER AND NOT A SHARE TRADER. IT H AD ONLY INVESTED THE SURPLUS FUNDS PENDING LOCATION OF ANOTHER PROJECT. THE SHAR ES IT WAS POINTED OUT 8 ULTIMATELY WERE SOLD FULLY IN A.Y.2007-08 AS WAS CL EAR FROM THE BALANCE SHEET PLACED AT PAGES 108/109 OF THE PAPER BOOK. IT WAS A LSO ARGUED THAT CIT(A) HAD GIVEN NO BASIS FOR TREATING THE SHARES SOLD WITHIN 90 DAYS AS TRADING ACTIVITY. HE ALSO REFERRED TO SEVERAL DECISIONS OF THE TRIBUNAL IN WHICH SHARE TRANSACTIONS HAVE BEEN TREATED AS INVESTMENT ACTIVITY. IN EARLI ER YEARS, IT WAS POINTED OUT, SIMILAR TRANSACTIONS HAD BEEN ACCEPTED AS INVESTMEN T ACTIVITIES. THE LEARNED DR ON THE OTHER HAND SUPPORTED THE ORDER OF CIT(A) AND PLACED RELIANCE ON THE FINDINGS GIVEN IN THE APPELLATE ORDER. 4.3 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING NATURE OF INCOME EARNED BY THE ASSESSEE FROM SHARE TRANSACTIONS. THE ASSESSEE DURING THE YEAR HAD ENTE RED INTO SALE AND PURCHASE TRANSACTIONS IN RESPECT OF SHARES OF 32 COMPANIES I NVOLVING 97 TRANSACTIONS RESULTING INTO GAIN OF RS.14,47,865/-. THE ENTIRE G AIN WAS SHOWN AS SHORT TERM CAPITAL GAIN. THE AO HELD THAT THE ASSESSEE WAS REG ULARLY PURCHASING AND SELLING SHARES WITH PROFIT MOTIVE AND THEREFORE ASS ESSED THE INCOME AS BUSINESS INCOME. CIT(A) HAS NOTED THAT THE MAXIMUM GAIN HAD COME FROM SHARES SOLD AFTER HOLDING THE SAME FOR MORE THAN THREE MONTHS A ND THEREFORE THE GAIN ARISING FROM SALE OF SHARES HELD FOR MORE THAN THRE E MONTHS HAS BEEN TREATED AS INCOME FROM CAPITAL GAIN WHEREAS GAIN ARISING FR OM SALE OF SHARES HELD FOR LESS THAN THREE MONTHS HAS BEEN TREATED AS BUSINESS INCOME. THE DECISION OF THE CIT(A) TREATING THE GAIN ARISING FROM SALE OF S HARES WITH HOLDING PERIOD OF MORE THAN THREE MONTHS AS CAPITAL GAIN HAS BEEN ACC EPTED BY THE REVENUE. THE ONLY ISSUE BEFORE US IS WHETHER THE INCOME FROM SHA RE TRANSACTIONS WITH HOLDING PERIOD OF LESS THAN THREE MONTHS CAN BE ASS ESSED AS CAPITAL GAIN OR BUSINESS INCOME. 9 4.4 WE HAVE CONSIDERED THE VARIOUS ASPECTS OF THE ISSUE CAREFULLY. WHETHER THE PARTICULAR SHARE TRANSACTIONS CONSTITUTE INVEST MENT ACTIVITY OR TRADING ACTIVITY WILL DEPEND UPON FACTS AND CIRCUMSTANCES O F EACH CASE. THE FACTORS SUCH AS ENTRY IN THE BOOKS OF ACCOUNT AS INVESTMENT , TRANSACTIONS BEING FUNDED FROM OWN FUNDS AND NOT BORROWED FUNDS ETC, ARE SOME OF THE RELEVANT FACTORS IN DECIDING THE TRUE NATURE OF TRANSACTIONS BUT NONE O F THESE FACTORS IS CONCLUSIVE. THE INTENTION AT THE TIME OF PURCHASES IS THE MOST IMPORTANT FACTOR BUT SUCH INTENTION HAS TO BE GATHERED FROM SUBSEQUENT CONDUC T OF THE ASSESSEE IN DEALING WITH THESE SHARES AND NOT FROM THE ENTRY IN THE BOOKS OF ACCOUNTS. AN INVESTOR PURCHASES A SHARE WITH A VIEW TO EARNING I NCOME IN THE FORM OF DIVIDEND AND FOR APPRECIATION IN VALUE OVER A LONG PERIOD OF TIME AND IS NOT MOTIVATED TO SELL SHARES ON EACH AND EVERY RISE IN THE VALUE OF SHARES WHICH ARE IN FACT THE ATTRIBUTES OF A TRADER. IN THE PRESENT CASE THE ASSESSEE HAS BEEN FREQUENTLY PURCHASING AND SELLING SHARES AND THE SA LES IN ALL CASES HAVE BEEN MADE AFTER HOLDING THE SHARES FOR LESS THAN 3 MONTH S AND THE OVERALL PROFIT EARNED HAS ALSO BEEN SMALL CLEARLY SUGGESTING THAT THE ASSESSEE HAD BEEN SELLING THE SHARES MOTIVATED BY PROFIT. EVEN AN INV ESTOR SOME TIMES MAY SELL SHARES AFTER HOLDING FOR A SHORT PERIOD IN ORDER TO RESHUFFLE THE PORTFOLIO WHEN A PARTICULAR SHARE IS NOT DOING WELL OR IN CASE OF EX CEPTIONAL APPRECIATION. SUCH SELLING AFTER SHORT HOLDING HAS TO BE EXPLAINED. I N THIS CASE THE ASSESSEE HAS NOT EXPLAINED WHY IT HAS BEEN SELLING THE SHARES AF TER HOLDING FOR A SHORT TERM. THE ASSESSEE HAS GIVEN GENERAL REASONS SUCH AS GOVE RNMENT POLICY, MANAGEMENT, MARKET OUTLOOK ETC. WHICH IS QUITE VAGU E AND DOES NOT EXPLAIN SATISFACTORILY THE REASON FOR FREQUENTLY SELLING TH E SHARES AFTER HOLDING FOR A SHORT PERIOD. IT HAS BEEN ARGUED THAT IN EARLIER YE ARS SIMILAR TRANSACTIONS HAVE BEEN ACCEPTED AS INVESTMENT ACTIVITY BUT IT HAS NOT BEEN SHOWN HOW THE TRANSACTIONS IN EARLIER YEARS WERE EXACTLY IDENTICA L AND WHETHER THE SAME HAD 10 BEEN ACCEPTED AFTER EXAMINATION. THE ASSESSEE HAS A LSO CITED SOME TRIBUNAL DECISIONS WHICH IN OUR VIEW ARE DISTINGUISHABLE AS EACH CASE HAS ITS OWN PECULIAR FEATURES. IN OUR VIEW, ON THE FACTS OF TH E CASE, THE INCOME ARISING FROM SALE AND PURCHASE OF SHARES WITHIN THE THREE M ONTHS PERIOD HAS TO BE TREATED AS BUSINESS INCOME. HOWEVER WE MAKE IT CLEA R THAT IN CASE ANY PART OF THE GAIN IS IN RESPECT OF SALE OF SHARES APPEARING IN THE OPENING BALANCE WHICH HAS BEEN TREATED AS INVESTMENT IN THE EARLIER YEAR, IT HAS TO BE TREATED AS CAPITAL GAIN AND EXCLUDED FROM THE BUSINESS PROFIT. SUBJECT TO ABOVE WE CONFIRM THE ORDER OF CIT(A). 5. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED. 6. ORDER WAS PRONOUNCED IN THE OPEN COURT 20.04.20 11. SD/- SD/- ( R. V. EASWAR ) (RAJENDR A SINGH) PRESIDENT ACCOUNTANT MEMBER DATE : 20.04.2011 AT :MUMBAI COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A), MUMBAI CONCERNED 4. THE CIT, MUMBAI CITY CONCERNED 5. THE DR G BENCH, ITAT, MUMBAI // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ALK