Income-tax Officer, V. Smt. Ruchi Amitkumar Patni, Pune

ITA 1481/PUN/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1792 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 13-09-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 24-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K RASTOGI
• Keywords: Capital asset converted into stock in trade; Business income; Cost of acquisition; Date of conversion
• Section: 14A

Judgement Text

] IQ.KS ] IQ.KS ] IQ.KS ] IQ.KS IQ.KS IQ.KSIQ.KS IQ.KS IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , . . , # BEFORE MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM . / ITA NO.1481/PN/2014 % % / ASSESSMENT YEAR : 2010-11 ITO, WARD-2(3), PUNE . / APPELLANT V/S SMT. RUCHI AMITKUMAR PATNI, S.NO.1A, IRANI MARKET COMPOUND, YERAWADA, PUNE 411006 PAN NO. AARPP6091R . / RESPONDENT / ASSESSEE BY : SHRI C.H. NANIWADEKAR / REVENUE BY : SHRI S.K. RASTOGI, CIT / ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE OR DER DATED 30-04-2014 OF THE CIT(A)-II, PUNE RELATING TO ASSE SSMENT YEAR 2010-11. 2. GROUNDS OF APPEAL NO.1 TO 4 BY THE REVENUE READ AS UNDER : 1. THE LEARNED COMM I SS I ONER OF INCOME-TAX (APPEALS) ERRED IN HOLDING THAT THE ACTIVITY OF TRANSACTION IN SHARES/MUT UAL FUND BY ENGAGING PMS WAS AN I NVESTMENT ACTIVITY AND RESULTANT GA I N/LOSS WAS ASSESSABLE UNDER THE HEAD ' CAP I TAL GAINS '. / DATE OF HEARING :19.05.2016 / DATE OF PRONOUNCEMENT:20.05.2016 2 ITA NO.1481/PN/2014 2. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE HAD CARRIED OUT BUSINESS OF TRADING IN SHARES/MUTUAL FUNDS IN A SYSTEMATIC AND ORGAN I ZED MANNER BY UTILIZING THE SERVICES OF PORTFOLIO MANAGEMENT SER VICE PROVIDERS TO ACT AS AN AGENT . 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN NOT APPRECIATING THAT MOST OF THE TRANSACTIONS EFFECTE D WERE OF SHORT TERM NATURE, CLEARLY INDICATIVE OF THE MOTIVE OF TH E ASSESSEE TO EARN PROFITS BY RESORTING TO FREQUENT TRADING RATHER THAN TO EARN DIVIDEND BY HOLDING SHARES FOR LONG DURATIONS . 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN NOT APPRECIATING THAT THE ASSESSEE HAD CARRIED OUT TRAN SACTIONS IN HIGH VOLUME AND IN AN ORGANIZED MANNER WHICH CONSTITUTE T HE ACTIVITY AS BUSINESS AND NOT INVESTMENT AS CLAIMED BY THE ASSESSEE AND AS SUCH THE PROFITS DERIVED FROM SUCH TRANSACTIONS WAS TAXABLE U NDER THE HEAD ' INCOME FROM BUSINESS PROFESSION . 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND DERIVES INCOME FROM HOUSE PROPERTY, INCOME FRO M BUSINESS, CAPITAL GAINS AND INCOME FROM OTHER SOURCES. SHE FILED HER RETURN OF INCOME ON 30-07-2010 DECLARING TOTAL INCOME OF RS.3,59,150/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE ASSESSEE HAS ENTERED INTO PORTFOLIO M ANAGEMENT SERVICES (IN SHORT PMS) AGREEMENT WITH DSP MERILL LYNCH P MS AND ENAM PMS TO WHOM THE ASSESSEE HAD ENTRUSTED CERTAIN FUNDS. AS PER THE PMS AGREEMENT THE FUNDS OF THE ASSESSEE WERE INVESTED IN STOCK MARKET BY THESE 2 PARTIES AND THE ASSESSEE HAS EARNED SHORT TERM AS WELL AS LONG TERM CAPITAL GAINS ON SALE OF SHARES. 4. THE ASSESSEE HAD PAID TAXES @10% FOR THE EARNINGS MA DE ON SHORT TERM CAPITAL GAIN AND EARNINGS IN LONG TERM CAPITAL GAIN WAS CLAIMED AS EXEMPT AS PER THE PROVISIONS OF SECTION 10(38) OF THE I.T.ACT. ACCORDING TO THE AO SINCE THE ASSESSEE HAD FRE QUENTLY ENTERED INTO TRANSACTIONS OF PURCHASE AND SALE OF SHARES , THEREFORE, THE INTENTION OF THE ASSESSEE IS TO TRADE IN SHARES. THE AO ALSO TOOK INTO ACCOUNT OTHER FACTS SUCH AS OUTSOURCING OF CERTAIN ACTIVITY OF 3 ITA NO.1481/PN/2014 SHARE TRADING TO THE PMS PROVIDERS, PAYMENT OF TAX TO P MS PROVIDERS ETC. AND HELD THAT THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE WERE TYPICAL OF A BUSINESS ACTIVITY. FOLLOWING HIS S TAND TAKEN AND REASONINGS GIVEN IN THE ASSESSEES OWN CASE IN THE PRECEDING ASSESSMENT YEARS, I.E. 2007-08, 2008-09 AND 200 9-10 THE AO HELD THE GAIN/LOSS IN RESPECT OF INVESTMENT THRO UGH PMS AS BUSINESS INCOME AND ALSO RELATED EXPENDITURE, I.E. PMS FEE AS DEDUCTION. 5. IN APPEAL THE LD.CIT(A) FOLLOWING HIS ORDER FOR A.YRS. 2007 -08, 2008-09 AND 2009-10 WHICH HAS BEEN UPHELD BY THE TRIBU NAL IN ASSESSEES OWN CASE HELD THAT THE ACTIVITY OF TRANSACTI ONS IN SHARES/MUTUAL FUNDS BY ENGAGING THE PMS WAS AN INVESTME NT ACTIVITY AND THE RESULTANT GAIN WAS ASSESSABLE UNDER THE HEAD CAPITAL GAINS. 6. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 7. AFTER HEARING BOTH THE SIDES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) WHO FOLLOWING THE ORDER OF THE TRIBU NAL IN ASSESSEES OWN CASE HAS DECIDED THE ISSUE IN FAVOUR OF T HE ASSESSEE BY OBSERVING AS UNDER : 3 . 3 I HAVE CON S I D ER E D THE SUB MI SSIO N OF THE AP P ELLA NT AND MATE R IAL AVAILABLE ON RECORD . I ALSO PERUSE D T HE APPELLATE O R DERS IN APPE L LA NT ' S CASE F O R EARL I ER YEARS . THIS PA R TICULA R ISSUE OF TAXING PROFIT ON SALE OF SHARES AS BUSI NESS , INCOME BY THE A . O . HAS BEEN ELABORATELY DISCUSSED IN THE ABOVE REFERRED ORDERS AND IT WAS HELD THAT THE ACTIVITY OF TRANSACTIONS IN SHARES / MUTUAL FUNDS BY ENGAGING THE PM S WAS AN INVESTMENT ACTIVITY AND THE RESULTANT GAIN WAS ASSESSABLE UNDER THE HEAD 'CAPITAL GAINS' . THIS VIEW WAS FURTHER UPHELD BY THE HON'BLE ITAT PUNE, VIDE COMBINED ORDER DATED 27 . 09 . 2012 PASSED IN THE CASE OF THE APPELLANT AND OTHER RELATED CASES IN ITA NOS . 1534 , 1535 , 1568 , 1569, 1570 AND 1571/PN/11 . THE RELEVANT OPERATIVE PARAS OF THE ITA T'S ORDE R DATED 27 . 09.2012 ARE REPRODUCED BELOW: 4 ITA NO.1481/PN/2014 6.. . . . . . . . . . .WE FIND THE TRIBUNAL, FOLLO WING THE ORDER OF THE TRIBUNAL IN THE GROUP CASES FOR A.Y. 2006-07, ALLOWED THE CLA IM OF SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN FROM GAINS I N RESPECT OF INVESTMENT THROUGH PMS SERVICE AS AGAINST BUSINESS INCOME TREATED BY THE AO BY HOLDING AS UNDER : 3. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. . . . . . . . . . . . . . . . . . 10. . . . . . . . . . . . . . . . . . 11. . . . . . . . . . . . . . . . . . . . . . . . . . . .WE HAVE EXAMINED THE POSITION, IN PARTICULAR THE ANALYSIS MADE OUT BY THE COMMISSIONER OF INCOME-TAX (APPEALS) IN THE EXTRACTED PORTION WITH REFERENCE TO THE STATEMENT AND TRANSACTIONS WHICH HAVE BEEN PLACED N THE PAPER BOOK FILED BEFORE US. IN OUR CONSIDERED OPINION, THE INFERENCE DRAWN OUT BY THE COMMISSIONER OF INCOME-TAX (APPEALS) CLEARLY ESTABLISHES THAT THE VOLUM E AND FREQUENCY OF TRANSACTIONS SOUGHT TO BE MADE OUT BY THE ASSESSING OFFICER WITH REGARD TO THE IMPUGNED ACTIVITY STANDS ON AN ENTIRELY DIFFERENT FOOTING AND IS QUITE DISTIN CT FROM THE ACTIVITY OF TRADING IN SHARES CARRIED OUT BY THE ASSESSEE . IN FACT, IT IS NOTABLE THAT IN THE SHARE TRADING BUSINESS CARRIED ON BY THE ASSESSEE, HE HAS CARRIED OUT CERTAIN SPECULATIVE AND TRAD ING ACTIVITIES AND THAT IN THE CASE OF A PMS PROVIDER, SUC H ACTIVITIES ARE PROHIBITED IN LAW. HAVING REGARD TO THE AFORESAI D DISCUSSION BY THE COMMISSIONER OF INCOME-TAX . . . . . . . . . . . . . . . . . . . . . . OF THE RECORD. WE, THEREFORE, FIND NO REASONS TO UPHOLD THE PLEA OF THE ASSESSING OFFICER ON THE BASIS OF THE VOLUME AND FREQUENC Y OF TRANSACTIONS. 12. THE ASSESSING OFFICER HAS ALSO POINTED OUT THAT EARNI NG OF DIVIDENDS WAS NOT AT ALL THE MOTIVE OF SUCH TRANSA CTIONS, BECAUSE THE SHARES HAVE BEEN SOLD JUST BEFORE THE SAME BE CAME EX-DIVIDEND ON THE STOCK EXCHANGES. IN THIS REGARD, W E FIND THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS FACTUALLY FOUND THE SAME TO BE CONTRARY TO MATERIAL ON RECORD AS PER THE DISCUSSION IN PARA 4.15 OF THE ORDER, WHICH IS AS UNDER: 4.15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . ON THIS ASPECT ALSO, WE FIND NO MATERIAL TO DIFFER WIT H THE FINDINGS OF THE COMMISSIONER OF INCOME-TAX (APPEALS), W HICH WE HEREBY AFFIRM. 13. ANOTHER ASPECT MADE OUT BY THE ASSESSING OFFICER WAS TO THE EFFECT THAT BY ITS VERY NATURE, SALES AND PURCHASES CARRIED OUT BY THE PMS PROVIDER WAS OF SHORT-TERM NATURE AND, THEREFORE, IT WAS TO BE REGARDED AS A BUSINESS ACTIVITY. FACTUALLY SPEAKING, ON THIS ASPECT THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS DEALT WITH THE SAME IN PARA 4.17 OF HIS O RDER, WHICH IS AS UNDER: 5 ITA NO.1481/PN/2014 4.17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CONSIDERING THE AFORESAID MATTERS, WE, THEREFORE, ARE OF THE VIEW THAT THE OBJECTIONS MADE OUT BY THE ASSESSING OFFICER HAVE BEEN ADEQUATELY ADDRESSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) IN COMING TO HIS FINDINGS THAT THE INVESTMENT S CARRIED OUT BY THE ASSESSEE THROUGH THE PMS PROVIDER DO NOT RESU LT IN A GAIN ASSESSABLE AS BUSINESS INCOME. 15. IN VIEW OF THE AFORESAID DISCUSSION, AND HAVING REG ARD TO THE REASONINGS EXTENDED BY THE COMMISSIONER OF INCOME-T AX (APPEALS) WITH WHICH WE HEREBY AFFIRM, WE FIND THAT THE GRIEVANCE OF THE REVENUE IN THIS APPEAL IS MISDIRECTED AND ACCORDINGLY THE CONCLUSION ARRIVED AT BY THE COMMISSIO NER OF INCOME-TAX (APPEALS) ON THIS ASPECT IS HEREBY AFFIRMED. . . . . . . . . . . . . . . RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL I N ASSESSEES OWN CASE AND IN ABSENCE OF ANY CONTRARY MATERIAL BROU GHT TO OUR NOTICE BY THE REVENUE THE GROUNDS RAISED BY THE R EVENUE ON THIS ISSUE ARE DISMISSED. 7. ACCORDINGLY THE REVENUE APPEAL WAS DISMISSED. SINC E NOTHING CONTRARY WAS BROUGHT TO OUR NOTICE AGAINST TH E ORDER OF THE TRIBUNAL IN THE CONNECTED CASES, THEREFORE, RESPEC TFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN THE GROUP CA SES WE UPHOLD THE ORDER OF THE CIT(A). CONSEQUENTLY THE GR OUNDS RAISED BY THE REVENUE ARE DISMISSED. 3.4 IN VIEW OF THE ABOVE FACTSW AND AS THE FACTUAL MA TRIX OF THE CASE IS PARI MATERIA THE SAME AS IN AY . 2006-07, AY . 2007-08 , AY . 2008 - 09 AND AY . 2009-10 FOR THE REASONS DISCUSSED , THE GROUND BEING TH E SAME AS IN T H E EARLIER YEARS, FOLLOWING THE DECISION TAKEN EARLIER FOL L OWING THE HON ' BLE ITAT, PUNE DECIS I ON IN ORDER DATED 27 . 09 . 2012, IT IS HELD THAT THE ACTIVITY OF TRANSACTIONS IN SHARES 1 MUTUAL FUND BY ENGAGING THE PMS WAS AN INVESTMENT ACTIVITY, AND TH E RESULTANT GAIN WAS ASSESSABLE UNDER THE HEAD 'CAPITAL GAINS ' . THE G R OUND OF APPEAL NO . 1 AND ITS SUB - GROUNDS RAISED FOR THIS YEAR ARE , THEREFO R E , LIABLE TO BE AL L OWED . 8. THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT BRING A NY MATERIAL SO AS TO TAKE A DIFFERENT VIEW. WE FIND THE TRIBUNA L IN ASSESSEES OWN CASE VIDE ITA NO.1570/PN/2011 ORDER DA TED 27-09- 2012 FOR A.Y. 2008-09 FOLLOWING THE ORDER FOR A.Y.2007-08 HAS ALSO DISMISSED THE APPEAL FILED BY THE REVENUE ON THIS ISSUE. IN CASE OF OTHER FAMILY MEMBERS ALSO THE TRIBUNAL IN A.Y. 2009-10 HAS 6 ITA NO.1481/PN/2014 DISMISSED THE APPEAL FILED BY THE REVENUE ON SIMILAR ISSUE. SINCE THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE, THEREFORE, IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE WE DO NO T FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS ISSUE. GROUNDS OF APPEAL NO.1 TO 4 BY THE REVENUE ARE ACCORDINGLY DISMISSED. 9. GROUND OF APPEAL NO.5 BY THE REVENUE READS AS UNDER : 5. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) E RRED IN HOLDING THAT SINCE NO EXPENDITURE HAS BEEN INCURRED , DISALLOWANCE U/S.14A CANNOT BE MADE DEHORS THE SPECIF I C PROVISIONS OF SECTION 14A(3) OF THE ACT? 10. AFTER HEARING BOTH THE SIDES, WE FIND THE AO APPLYING THE PROVISIONS OF SECTION 14A DISALLOWED AN AMOUNT OF RS.6,45,342/ -. BEFORE CIT(A) IT WAS SUBMITTED THAT DISALLOWANCE U/S.14A REQ UIRES FINDING OF INCURRING OF EXPENDITURE AND WHERE IT IS FOUND THAT FOR EARNING EXEMPTED INCOME NO EXPENDITURE HAS BEEN INCURRE D OR CLAIMED DISALLOWANCE U/S.14A CANNOT STAND. SINCE THE ASSES SEE HAS NOT CLAIMED ANY EXPENDITURE OF PMS, THEREFORE, THERE D OES NOT REMAIN ANY OTHER EXPENDITURE OTHER THAN THIS EXPENDITUR E WHICH WAS OTHERWISE LIABLE TO BE DISALLOWED UNDER RULE 8D OF I.T. R ULES. WE FIND THE CIT(A) FOLLOWING THE ORDER OF THE TRIBUNAL IN THE C ASE OF THE ASSESSEE AS WELL AS VARIOUS OTHER FAMILY MEMBERS DE LETED THE DISALLOWANCE MADE BY THE AO BY OBSERVING AS UNDER : 4.3 THIS HAS ALSO BEEN ELABORATELY DISCUSSED IN THE APPE LLATE ORDER PASSED BY THE UNDERSIGNED VIDE NO. ITO WD-2(3), PN/134 /2011-12 DATED 22-04-2013 AND UPHELD BY THE HONBLE ITAT PUN E, VIDE COMBINED ORDER DATED 27-09-2012 PASSED IN THE CASE OF THE APPELLANT AND OTHER RELATED CASES IN ITA NOS. 1534,1535, 1568, 1 569, 1570 AND 1571/PN/11. THE HON BLE ITAT HELD AS UNDER : 7 ITA NO.1481/PN/2014 10. AFTER HEARING BOTH THE SIDES, WE FIND NO INFIRMI TY IN THE ORDER OF THE CIT(A). THE LEARNED CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT EXPENDITURE ON PMS HAS NOT BEEN CLAIMED BY THE ASSESSEE AND THERE DOES NOT REMAIN ANY OTHER EXPENDITURE OTHER THAN THIS EXPENDITURE, THEREFORE, NO DISALLOWAN CE U/S.14A R.W. RULE8D CAN BE MADE. THE ABOVE FACTUAL FINDING GIVEN BY THE LEARNED CIT(A) COULD NOT BE CONTROVERTED BY THE LEA RNED DR. UNDER THESE CIRCUMSTANCES, WE HOLD THAT THE LEARNED CI T(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE MADE BY THE AO . GROUNDS RAISED BY THE REVENUE ARE ACCORDINGLY DISMISSED. IN VIEW OF THE ABOVE FACTS, THE DISALLOWANCE MADE OF RS.6,45,342/- IS DIRECTED TO BE DELETED. 4.4 IN VIEW OF THE DECISION OF THE TRIBUNAL UPHOLDIN G THE REASONING EXTENDED BY THE UNDERSIGNED VIDE ORDER DATED 27-09-2 012, THE FACTUAL MATRIX OF THE CASE BEING SAME, GROUND OF APPEAL NO.2 RAISED BY THE APPELLANT ON WITHOUT PREJUDICE BASIS IS ALLOWED. 11. SINCE THE LD.CIT(A) FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE AS WELL AS VARIOUS OTHER FAMILY MEMB ERS HAS DELETED THE DISALLOWANCE MADE U/S.14A, THEREFORE, IN ABSENCE OF ANY DISTINGUISHABLE FEATURES BROUGHT TO OUR NOTICE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). ACCORDINGLY, THE SA ME IS UPHELD AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. 12. GROUND OF APPEAL NO.6 BY THE REVENUE READS AS UNDER : 6. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) E RRED IN TREATING THE STOCK-IN TRADE OF SHARES AS I NVESTMENT MERELY ON THE BASIS OF A NOTICE OF CLOSURE U/S.176(3) OF THE ACT AND ALSO ON WRONGLY RELYING UPON THE DECISION OF BRIGHT STAR INVESTMENT PVT . LTD . (2009) 17 DTR 399 (MUM TRIB.) . 13. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO DURING T HE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT IN F.Y. 2005-06 THE ASSESSEE HAS STATED THAT THE SHARE TRADING BUSINESS WAS CLOSED AND ALL THE STOCK WERE TRANSFERRED AT COST TO THE INVESTMENT ACCO UNT. THE STAND OF THE ASSESSEE WAS NOT ACCEPTED IN ASSESSMENT ORDER FOR A.Y.2006-07 AND IT WAS HELD THAT MERELY SHOWING THE STOC K OF 8 ITA NO.1481/PN/2014 SHARES AS ON 31-03-2006 AS INVESTMENT MAY NOT BE TRE ATED AS CLOSURE OF BUSINESS. THE SHARES HAVE REMAINED IN THE SAM E DEMAT ACCOUNT AND MERELY BY PASSING THE BOOK ENTRIES THE NATURE OF S CRIPS CANNOT UNDERGO A CHANGE. THE AO, THEREFORE, HELD THAT T HE SHARES SOLD BY THE ASSESSEE OUT OF THE STOCK IN THE ASSESSMEN T YEAR HAS TO BE TREATED AS BUSINESS INCOME/LOSS FOR THE CURRENT YEAR AS WELL AS THE FORTHCOMING ASSESSMENTS. SINCE THE ASSESSEE DURING THE IMPUGNED ASSESSMENT YEAR HAS SHOWN AS LOSS FROM SALE OF SUCH SCRIPS FROM STOCK IN TRADE AS ON 31-03-2006 AS LONG TER M CAPITAL LOSS AND CONSIDERED THE SAME AS EXEMPTED INCOME/LOSS, TH EREFORE, THE AO FOLLOWING THE STAND TAKEN IN PREVIOUS ASSESSMENT O RDER TREATED THE LOSS AS BUSINESS LOSS. ACCORDINGLY, SUCH CAP ITAL LOSS OF RS.13,04,012/- WAS CONSIDERED BY THE AO AS BUSINESS LOSS. 14. IN APPEAL THE LD.CIT(A) ALLOWED THE CLAIM OF THE ASSESS EE AS CAPITAL LOSS BY OBSERVING AS UNDER : 5.1 DURING THE APPELLATE PROCEEDINGS FOR AY. 2006- 07 THE SAID GROUND OF APPEAL WAS NOT ADJUDICATED IN VIEW OF THE FACT THAT THE OBSERVATION OF THE ASSESSING OFFICER HAD NO IMPLICATION IN RESPECT OF THAT YEAR'S ASSESSMENT OF INCOME. HOWEVER, THIS ISSUE CAME UP DURING THE APPELLATE PROCEEDINGS FOR AY. 2007-08 WHEREIN MY PREDECESSOR CIT(APPEALS) HAS HELD AS UNDER, WHICH WAS ALSO FOLLOWED BY THE UNDERSIGNED WHILE ADJUDICATING THE MATTER FOR AY. 20 08-09: '5.2 I HAVE CONSIDERED THE SUBMISSIONS AND THE DECISION OF THE ITAT IN THE CASE OF ACIT VS. BRIGHT STAR INVESTMEN T (P) LTD., (2009) 17 DTR 399 (MUM.). THE APPELLANT HAS CITED THE HEAD NOTES FOR THE RATIO OF THIS DECISION, WHICH IS REPRODUC ED IN THE ABOVE SUBMISSION. IN THIS DECISION, THE ITAT HAD OBSERVED THAT THE RECEIPTS FROM SALE OF SHARES AFTER CONVERSION FROM STOCK-IN- TRADE TO INVESTMENT WERE RIGHTLY OFFERED BY THE ASSESSEE AS LONG TERM CAPITAL GAINS, I.E.; THE DIFFERENCE BETWEEN THE SALE PRICE OF THE SHARES AND THE COST OF ACQUISITION OF SHARES, WHICH IS THE BOOK VALUE ON THE DATE OF CONVERSION WITH INDEXATION FROM THE DATE OF CONVERSION, THERE BEING NO PROVISION LIKE S.45 (2) TO DEAL WITH SUCH A SITUATION. 5.3 MOREOVER, IT IS ALSO INFORMED THAT THE APPELLANT HAD DULY GIVEN THE NOTICE OF DISCONTINUATION OF BUSINESS VIDE L ETTER DTD. 7.4.2006 SUBMITTED WITH THE ASSESSING OFFICER ON 12.4.2006 I. E. WITHIN THE PRESCRIBED PERIOD OF TIME AS MENTIONED IN SECTION 9 ITA NO.1481/PN/2014 176(3) OF THE I. T. ACT, 1961. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE LEGAL POSITION ENUNCI ATED BY THE ABOVE REFERRED TO DECISION OF THE MUMBAI TRIBUNA L, THE APPELLANT'S CLAIM IS HELD TO BE TENABLE IN LAW. .ACC ORDINGLY GROUND NO.3(A) & (B) ARE HELD TO BE ALLOWED. SINCE GROUND NO.3(A) &. (B) ARE ALLOWED, THERE IS NO NEED TO ADJUDICATE ON GROUND NO. 3 (C) WHICH IS ON A WITHOUT PREJUDICE BASIS.' THE AFORESAID VIEW OF THE LD. CIT (APPEALS) WAS ALSO UP HELD BY THE HON'BLE ITAT BY HOLDING THAT GAINS ON SALE OF SUCH SHARES IS TAXABLE UNDER THE HEAD 'CAPITAL GAINS'. 5.2 IN VIEW OF THE ABOVE, AS THE FACT AND THE LEGAL POSI TION HAS NOT UNDERGONE ANY CHANGE IN THE YEAR UNDER CONSID ERATION, THE GROUND BEING THE SAME AS IN AYRS. 2007-08 & 2008-0 9, FOLLOWING THE DECISION TAKEN FOR THE EARLIER YEARS, T HE ADDITIONAL GROUND OF APPEAL RAISED FOR THIS YEAR ALSO IS HELD AS LI ABLE TO BE ALLOWED. 15. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 16. AFTER HEARING BOTH THE SIDES WE FIND IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 200 7-08. WE FIND THE TRIBUNAL VIDE ITA NO.800/PN/2011 AND BATCH OF OTHER APPEALS ORDER DATED 28-06-2012 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER : 13. AFTER HEARING BOTH THE SIDES WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A). THE FINDING GIVEN BY THE LEARNED CIT(A) THAT ASSESSEE HAS DULY GIVEN THE NOTICE OF DISCONTINUATIO N OF BUSINESS VIDE LETTER DATED 7-11-06 FILED BEFORE THE AO ON 12 -04-06 WHICH IS WITHIN THE PRESCRIBED PERIOD OF TIME AS PER SECTION 17 6(3) OF THE INCOME TAX ACT COULD NOT BE CONTROVERTED BY THE LEA RNED DR. FURTHER IT HAS BEEN CATEGORICALLY SUBMITTED BY THE ASSESSEE BEFO RE THE LOWER AUTHORITIES THAT HE HAS DISCONTINUED THE SHARE TRADING BUSINESS AND THE CLOSING STOCK IN SHARES AS ON 31-03-06 HAS BEEN TRANSFERRE D TO HIS CAPITAL ACCOUNT AT COST AND THE SAME ALSO REMAINS UNCON TROVERTED. IT HAS BEEN HELD BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. BRIGHT STAR INVESTMENT PVT. LTD. (SUPRA) THAT REC EIPT FROM SALE OF SHARES AFTER CONVERSION FROM STOCK IN TRADE TO INVESTMEN T HAS TO BE HELD AS CAPITAL GAIN IN ABSENCE OF PROVISION LIKE SEC. 45(2). RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF BRIGHT STAR INVESTMENT PVT. LTD. (SUPRA) AND IN VIEW OF THE DETAILED ORDER PASSED BY THE LEARNED CIT(A) ON THIS ISSU E WE FIND NO INFIRMITY IN THE SAME. ACCORDINGLY THE SAME IS UPHELD . THE GROUND RAISED BY THE REVENUE IS DISMISSED. 10 ITA NO.1481/PN/2014 17. SINCE THE LD.CIT(A) WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE HAS FOLLOWED THE ORDER OF THE TRIBUNAL IN ASSESSE ES OWN CASE, THEREFORE, IN ABSENCE OF ANY CONTRARY MATERIAL BROUG HT TO OUR NOTICE, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) ALLOWING T HE CLAIM OF THE ASSESSEE. THE GROUND RAISED BY THE REVENUE IS THEREFORE DISMISSED. 18. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20-05-2016. SD/- SD/- ( SUSHMA CHOWLA ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER IQ.KS PUNE ; DATED : 20 TH MAY , 2016. LRH'K ' (*+ ,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. % ( ) - THE CIT(A)-II, PUNE 4. 5. THE CIT-II, PUNE ( ++,, ,, IQ.KS / DR, ITAT, A PUNE; 6. 0 / GUARD FILE. / BY ORDER , // ( + //TRUE COPY //// 23 + , / SR. PRIVATE SECRETARY ,, IQ.KS / ITAT, PUNE