NALIN PRAVIN SHAH ( HUF), MUMBAI V. DCIT CIR 14(1), MUMBAI

ITA 1596/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75653 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 06-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PITAMBAR DAS
• Assessee Lawyers: NITESH JOSHI
• Keywords: Business income; Transactions in derivatives; Question of law
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE S/SHRI B.R.MITTAL,(JM) AND RAJENDRA (AM) . . , , I.T.A.NOS.1576/MUM/2012 ( / ASSESSMENT YEAR:2008-09) SHRI NALIN PRAVIN SHAH. 95/B, MEGHDOOT, NS ROAD, MARINE DRIVE, MUMBAI 400 002 / VS. A SSTT . COMMISSIONER OF INCOME TAX CIRCLE-14(1), 2 ND FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI- 400021 ( & / APPELLANT) .. ( ' & / RESPONDENT) ./ ./PAN/GIR NO. : AAHPS3860K I.T.A.NOS.1595/MUM/2012 ( / ASSESSMENT YEARS:2008-09) SHRI MANAN NALIN SHAH. 95/B, MEGHDOOT, NS ROAD, MARINE DRIVE, MUMBAI 400 002 / VS. A DDL. COMMISSIONER OF INCOME TAX CIRCLE-14(1), 2 ND FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI- 400021 ( & / APPELLANT) .. ( ' & / RESPONDENT) ./ ./PAN/GIR NO. ABOPS2030F I.T.A.NOS.1596/MUM/2012 ( / ASSESSMENT YEAR:2007-08) SHRI NALIN PRAVIN SHAH. (HUF) 95/B, MEGHDOOT, NS ROAD, MARINE DRIVE, MUMBAI 400 002 / VS. DY. COMMISSIONER OF INCOME TAX CIRCLE-14(1), 2 ND FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI- 400021 ( & / APPELLANT) .. ( ' & / RESPONDENT) ./ ./PAN/GIR NO.: AAAHN1589D ITA. NOS.1576,1595 AND 1596/MUM/2012 2 & / ASSESSEES BY SHRI NITESH JOSHI ' & * /REVENUE BY SHRI PITAMBAR DAS * - / DATE OF HEARING : 10.2.2014 * - / DATE OF PRONOUNCEMENT : 21.2.2014 / O R D E R PER B.R.MITTAL, JM: THESE THREE APPEALS ARE FILED BY THREE ABOVE NAMED ASSESSEES AGAINST SEPARATE ORDERS OF LD. CIT(A), DATED 31.01.2012 R ELATING TO ASSESSMENT YEAR 2008-09 IN RESPECT OF SHRI NALIN PRAVIN SHAH AND SHRI MANAN N ALIN SHAH AND ASSESSMENT YEAR 2007-08 IN RESPECT OF SHRI NALIN PRAVIN SHAH (HUF) . SINCE FACTS AND ISSUES INVOLVED IN ALL THESE APPEALS ARE COMMON, WE HAVE HEARD THESE APPEALS TOGETHER AND ARE BEING DECIDED BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. GROUNDS OF APPEAL TAKEN BY THE ASSESSEE IN ITA NO.1576/MUM/2012 ARE AS UNDER:. 1. LEARNED COMMISSIONER OF INCOME TAX (APPEALS)} HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER (AO) IN ASSESSI NG SHORT TERM CAPITAL GAINS OF RS.9,88,631/- & LONG TERM CAPITAL GAIN OF RS.20,36, 224/- EARNED BY THE APPELLANT ON SALE OF SHARES AND SECURITIES THROUGH PORTFOLIO MANAGEMENT SERVICES UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION . ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, THE AFORESAID SUM OUGHT TO BE ASSESSED AS CAPITAL GAINS. 2. LEARNED CIT(A) HAS ERRED IN ASSESSING THE SHORT TERM CAPITAL GAINS OF RS.75,17,459/- AND LONG TERM CAPITAL GAIN OF RS.5,1 8,68,286/- EARNED BY THE APPELLANT ON SALE OF SHARES AND SECURITIES CARRIED OUT INDEPENDENTLY UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION. ON THE F ACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT NO T TO HAVE DISTURBED THE ASSESSMENT MADE IN THIS REGARD AND THE AFORESAID SU MS OUGHT TO BE ASSESSED AS CAPITAL GAINS. LD. CIT(A) ERRED IN DIRECTING THE AO TO ENHANCE THE ASSESSMENT BY ASSESSING THE GAINS ARISING FROM PURCHASE AND SALE OF SHARES HELD FOR MORE THAN 30 DAYS UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION INST EAD OF ITS ASSESSMENT AS CAPITAL GAINS BY THE AO. LD. CIT(A) HAS ERRED IN OBSERVING THAT THE APPELLAN T HAS CONVERTED SHARES OF FINANCIAL TECHNOLOGIES AND HENKEL SPICE FROM INV ESTMENT TO STOCK IN TRADE, WHICH IS CONTRARY TO FACTS ON RECORD. ITA. NOS.1576,1595 AND 1596/MUM/2012 3 3. WHILE CONFIRMING THE ACTION OF THE AO IN TREATIN G THE INCOME IN RESPECT OF AMOUNT INVESTED UNDER THE PMS SCHEME AS BUSINESS IN COME, LEARNED CIT(A) HAS ERRED IN HOLDING/OBSERVING THAT: A. THE PORTFOLIO MANAGER IS KEEPING THE RECORD OF T HE ASSESSEE IN HIS BOOKS OF ACCOUNTS AS STOCK IN TRADE. B. TRANSACTION IN F&O SCHEME IS SHOWN BY THE ASSESS EE AS INVESTMENT. C. INVESTMENT IN SURPLUS FUNDS BY PMS MANAGER IN L IQUID FUND RESULTS IN ACTIVITY OF PMS BEING TREATED AS BUSINESS ACTIVITY CONFIRMATION OF THE ACTION OF THE AO ON THE BASIS O F ABOVE OBSERVATION BEING CONTRARY TO FACTS OF THE CASE OUGHT TO BE DELETED. 3. GROUNDS OF APPEAL TAKEN BY THE ASSESSEE IN IT A NO.1595/MUM/2012 ARE AS UNDER:. 1. LEARNED COMMISSIONER OF INCOME TAX (APPEALS)} HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER (AO) IN ASSESSI NG SHORT TERM CAPITAL GAINS OF RS.8,37,296/- & LONG TERM CAPITAL GAIN OF RS.16,12, 521/- EARNED BY THE APPELLANT ON SALE OF SHARES AND SECURITIES THROUGH PORTFOLIO MANAGEMENT SERVICES UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION . ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, THE AFORESAID SUM OUGHT TO BE ASSESSED AS CAPITAL GAINS. 2. LEARNED CIT(A) HAS ERRED IN DIRECTING THE AO TO ASSESS THE SHORT TERM CAPITAL GAINS OF RS.1,29,40,876/-- AND LONG TERM CA PITAL GAIN OF RS.8,05,16,499/- EARNED BY THE APPELLANT ON SALE OF SHARES AND SECUR ITIES UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT NOT TO HAVE DISTURB ED THE ASSESSMENT MADE IN THIS REGARD AND THE AFORESAID SUMS OUGHT TO BE ASSE SSED AS CAPITAL GAINS. LD. CIT(A) ERRED IN DIRECTING THE AO TO ENHANCE THE ASSESSMENT BY ASSESSING THE GAINS ARISING FROM PURCHASE AND SALE OF SHARES HELD FOR MORE THAN 30 DAYS UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION INST EAD OF ITS ASSESSMENT AS CAPITAL GAINS BY THE AO. LD. CIT(A) HAS ERRED IN OBSERVING THAT THE APPELLAN T HAS CONVERTED SHARES OF FINANCIAL TECHNOLOGIES AND HENKEL SPICE FROM INV ESTMENT TO STOCK IN TRADE. 3. WHILE CONFIRMING THE ACTION OF THE AO IN TREATIN G THE INCOME IN RESPECT OF AMOUNT INVESTED UNDER THE PMS SCHEME AS BUSINESS IN COME, LEARNED CIT(A) HAS ERRED IN HOLDING/OBSERVING THAT: A. THE PORTFOLIO MANAGER IS KEEPING THE RECORD OF T HE ASSESSEE IN HIS BOOKS OF ACCOUNTS AS STOCK IN TRADE. B. TRANSACTION IN F&O SCHEME IS SHOWN BY THE ASSESS EE AS INVESTMENT. C. INVESTMENT IN SURPLUS FUNDS BY PMS MANAGER IN L IQUID FUND RESULTS IN ACTIVITY OF PMS BEING TREATED AS BUSINESS ACTIVITY ITA. NOS.1576,1595 AND 1596/MUM/2012 4 CONFIRMATION OF THE ACTION OF THE AO ON THE BASIS O F ABOVE OBSERVATION BEING CONTRARY TO FACTS OF THE CASE OUGHT TO BE DELETED. 4. GROUNDS OF APPEAL TAKEN BY THE ASSESSEE IN IT A NO.1596/MUM/2012 ARE AS UNDER:. 1. LEARNED COMMISSIONER OF INCOME TAX (APPEALS)} HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER (AO) IN ASSESSI NG SHORT TERM CAPITAL GAINS OF RS.41,05,905/- (INADVERTENTLY CONSIDERED AS RS.40, 24,034/- BY THE AO) & LONG TERM CAPITAL GAIN OF RS.55,34,345/- EARNED BY THE APPELLANT ON SALE OF SHARES AND SECURITIES THROUGH PORTFOLIO MANAGEMENT SERVICE S UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION. ON THE FACTS AND IN C IRCUMSTANCES OF THE CASE, THE AFORESAID SUM OUGHT TO BE ASSESSED AS CAPITAL GAIN S. 2. LEARNED CIT(A) HAS ERRED DIRECTING THE AO TO ASSESS THE SHORT TERM CAPITAL GAINS OF RS.2,00,523/- AND LONG TERM CAPITA L GAIN OF RS.2,88,83,346/- EARNED BY THE APPELLANT ON SALE OF SHARES AND SECUR ITIES UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION INSTEAD OF ASSESSED AS CAPITAL GAINS BY THE AO AND CONSEQUENTLY ENHANCING THE ASSESSMENT. ON THE F ACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT NO T TO HAVE DISTURBED THE ASSESSMENT MADE IN THIS REGARD AND THE AFORESAID SU MS OUGHT TO BE ASSESSED AS CAPITAL GAINS. LD. CIT(A) ERRED IN OBSERVING THAT THE APPELLANT H AS CONVERTED SHARES OF FINANCIAL TECHNOLOGIES AND HENKEL SPICE FROM INV ESTMENT TO STOCK IN TRADE, WHICH IS CONTRARY TO FACTS ON RECORD. 3. WHILE CONFIRMING THE ACTION OF THE AO IN TREATIN G THE INCOME IN RESPECT OF AMOUNT INVESTED UNDER THE PMS SCHEME AS BUSINESS IN COME, LEARNED CIT(A) HAS ERRED IN HOLDING/OBSERVING THAT: A. THE PORTFOLIO MANAGER IS KEEPING THE RECORD OF T HE ASSESSEE IN HIS BOOKS OF ACCOUNTS AS STOCK IN TRADE. B. TRANSACTION IN F&O SCHEME IS SHOWN BY THE ASSESS EE AS INVESTMENT. C. INVESTMENT IN SURPLUS FUNDS BY PMS MANAGER IN L IQUID FUND RESULTS IN ACTIVITY OF PMS BEING TREATED AS BUSINESS ACTIVITY CONFIRMATION OF THE ACTION OF THE AO ON THE BASIS O F ABOVE OBSERVATION BEING CONTRARY TO FACTS OF THE CASE OUGHT TO BE DELETED. 5. AT THE TIME OF HEARING, LD. REPRESENTATIVE S OF BOTH THE PARTIES SUBMITTED THAT THE FACTS AND ISSUES INVOLVED IN ALL THESE APPEALS OF ABOVE NAMED ASSESSEES ARE COMMON, SAVE AND EXCEPT THE AMOUNT INVOLVED. LD. AR SUBMI TTED THAT ON SIMILAR FACTS, THE SIMILAR ISSUES HAVE BEEN CONSIDERED BY TRIBUNAL IN THE CASE OF ABOVE NAMED ASSESSEES AND PLACED A COPY OF THE ORDER OF TRIBUNAL DATED 10.1.2014 RELATING TO ASSESSMENT YEAR 2007-08 DECIDED IN THE CASE OF SHRI NALIN PRA VIN SHAH IN I.T.A.NOS.1575/MUM/2012 AND SHRI MANAN NALIN SHAH IN I.T.A.NOS.1594/MUM/2012 ITA. NOS.1576,1595 AND 1596/MUM/2012 5 AND SUBMITTED THAT THE TRIBUNAL AFTER CONSIDERING ITS EARLIER ORDERS HAVE DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. HE FURTHER SUBMITTED THAT EVEN IN THE CASE OF NALIN PRAVIN SHAH (HUF) ALSO THE ISSUE HAD BEEN DECIDED IN FAVOU R OF ASSESSEE IN THE EARLIER ASSESSMENT YEARS 2004-05 AND 2005-06 BY THE TRIB UNAL IN ITA NOS.2126/MUM/2008 AND 4125/MUM/2008 BY FOLLOWING THE DECISION IN TH E CASE OF MANAN NALIN SHAH. HENCE, ISSUES RAISED IN THESE APPEALS ARE COVERED BY THE EARLIER DECISIONS OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIER YEA RS . HOWEVER, LD. DR CONCEDED THAT SIMILAR ISSUES IN THE CASE OF ABOVE NAMED ASSESSE ES HAVE BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF ASSESSEE BUT EACH CASE HAS T O BE DECIDED ON ITS OWN FACTS. HE FURTHER SUBMITTED THAT THE ASSESSEE IS CARRYING ON ACTIVITIES OF PURCHASE AND SALES OF SHARES EITHER HIMSELF OR THROUGH BY FOLLOWING THE P ORTFOLIO MANAGEMENT SERVICES, IS IN THE BUSINESS OF SHARE TRADING AND THE PROFIT IS TO BE HELD AS INCOME FROM BUSINESS INSTEAD OF CONSIDERING IT AS CAPITAL GAIN. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF LD. REPR ESENTATIVES OF THE PARTIES AND THE ORDERS OF AUTHORITIES BELOW IN THE LIGHT OF THE ORDER PASSED BY TRIBUNAL DATED 10.1.2014 FOR THE ASSESSMENT YEAR 2007-08 IN THE C ASES OF SHRI NALIN PRAVIN SHAH(ITA.NOS.1575/MUM/2012) AND SHRI MANAN NALIN S HAH ( I.T.A.NOS.1594/MUM/2012). WE OBSERVE THAT THE TRIBUNAL IN THE SAID CASE AFTER FOLLOWING ITS EARLIER ORDERS IN THE CASE OF ABOVE N AMED ASSESSEE DATED 6.7.2012 AND IN THE CASE OF MANAN NALIN SHAH V/S DCIT IN ITA NO .6166/MUM/2008 FOR ASSESSMENT YEAR 2003-04, ITA NO.2125/MUM/2008 FOR ASSESSMENT Y EAR 2004-05 AND ITA NO.4126/MUM/2008 FOR ASSESSMENT YEAR 2005-06 ALLOW ED THE CLAIM OF THE ASSESSEE STATING THAT THE VERY NATURE OF PMS IS SUCH THAT INVESTMENTS MADE BY ASSESSEE CANNOT BE SAID TO BE SCHEME OF TRADING OF SHARES AN D STOCKS AND THEREFORE, THE PROFIT IS TO BE ASSESSED UNDER THE HEAD CAPITAL GAINS. IT IS ALSO OBSERVED THAT THE TRIBUNAL BY FOLLOWING THE SAID ORDER IN THE ASSESSEES CASE IT S ORDER DATED 23.1.2013 IN THE CASE OF NALIN PRAVIN SHAH IN ITA NO.5635/MUM/2009 AND IT A NO. 5642/MUM/2009 FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07, DECIDED THE ISSUE IN FAVOUR OF ASSESSEE THAT MAKING INVESTMENT THROUGH PMS BY PLACING CERTAIN FU NDS WITH THE PMS MANAGERS IS TO BE ASSESSED UNDER THE HEAD CAPITAL GAIN. WE CONS IDER IT PRUDENT TO REPRODUCE PARA 8 OF THE ORDER OF TRIBUNAL DATED 10.1.2014 WHICH IS AS UNDER : 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE PARTIES AND THE ORDERS OF AUTHORITIES BELOW AS WELL AS EARLIER ORDERS OF THE TRIBUNAL DATED 6.7.2012 (SUPRA) AND THE ORDER DATED 23.1.2013 (SUPRA). WE CONSIDER IT PRUDENT TO REPRODUCE PARA 5 OF THE ORDE R OF TRIBUNAL DATED 23.1.2013 WHICH READS AS UNDER : ITA. NOS.1576,1595 AND 1596/MUM/2012 6 5. WE HAVE PERUSED THE RECORDS AND CONSIDERED TH E MATTER CAREFULLY. THE IDENTICAL DISPUTE RAISED IN THESE APPEALS IS RE GARDING THE NATURE OF INCOME EARNED BY THE ASSESSEES FROM PURCHASE AND SA LE OF SHARES THROUGH PMS . ALL THESE ASSESSEES HAVE BEEN MAKING INVESTMENTS IN SHARES AND UNITS OF MUTUAL FUNDS FOR THE LAST SEVER AL YEARS WHICH HAD BEEN DECLARED AS INVESTMENT IN THE BOOKS AND INCOME FROM WHICH WAS BEING DECLARED AS CAPITAL GAIN AND WAS ALSO BEING A CCEPTED BY THE DEPARTMENT. FROM ASSESSMENT YEAR 2003-04 ALL THESE ASSESSEES STARTED MAKING INVESTMENT THROUGH PMS BY PLACING CERTAIN FU NDS WITH THE PMS MANAGERS. IN ASSESSMENT YEAR 2003-04, THE AO HAD AS SESSED THE INCOME AS BUSINESS INCOME WHICH HAD BEEN UPHELD BY THE CIT (A). IN FURTHER APPEAL, THE TRIBUNAL IN CASE OF MANAN NALIN SHAH IN ITA NO.6166/MUM/2008 FOR ASSESSMENT YEAR 2003-04 NOTED ON EXAMINATION OF PMS THAT PMS MANAGER WAS AUTHORIZED TO PURCHASE, ACQUIRE, OBTAIN, TAKE, HOLD, SELL, TRANSFER, SUBSTITUTE OR CHANGE AL L OR ANY OF THE INVESTMENTS MADE ON BEHALF OF THE ASSESSEE. PMS MAN AGER WAS ALSO AUTHORIZED TO HOLD ALL OR ANY OF SUCH INVESTMENT IN HIS NAME OR AT HIS DISCRETION ON BEHALF OF THE ASSESSEE AND MAKE EVERY EFFORT TO MAXIMIZE THE VALUE OF INVESTMENT. THE PMS MANAGER WAS REQUIR ED TO PROVIDE THE ASSESSEE WITH QUARTERLY STATEMENT OFINVESTMENT. THE TRIBUNAL NOTED THAT THE PMS MANAGER HAD SOLE AND ABSOLUTE DISCRETION TO MAKE INVESTMENT FOR AND ON BEHALF OF THE ASSESSEE AND THE ASSESSEE HAD NO ROLE TO PLAY. THE ASSESSEE HAD NOT TAKEN ANY BORROWED FUNDS FOR P LACING MONEY WITH THE PMS MANAGER. IT WAS ALSO NOTED BY THE TRIBUNAL THAT THE AVERAGE HOLDING PERIOD OF THE SHARES WAS MORE THAN TWO MONT HS. THE TRIBUNAL ACCORDINGLY CONCLUDED THAT THE INCOME EARNED FROM P MS HAS TO BE ASSESSED AS CAPITAL GAIN. THE DECISION OF THE TRIBU NAL IN CASE OF MANAN NALIN SHAH IN ASSESSMENT YEAR 2003-04 WAS FOLLOWED BY THE TRIBUNAL IN ASSESSMENT YEARS 2004-05 & 2005-06 IN ITA NOS.2125/ M/2008 AND 4126/MUM/2008.THE SAID DECISION WAS AGAIN FOLLOWED BY THE TRIBUNAL IN CASE OF NALIN P. SHAH IN ASSESSMENT YEAR 2004-05 IN ITA NO.2122/MUM/2008. SIMILARLY THE SAME ISSUE WAS DECI DED BY THE TRIBUNAL IN CASE OF NALIN P. SHAH (HUF) IN ASSESSME NT YEAR 2004-05 AND 2005-06 IN ITA NOS.2126/MUM/2008 AND 4125/MUM/2008 IN WHICH THE DECISION IN CASE OF MANAN NALIN SHAH (SUPRA), WAS F OLLOWED. THUS, ISSUE RAISED IN THESE APPEALS IS COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIER YEARS. NO DISTIN GUISHING FEATURE HAVE BEEN BROUGHT TO OUR NOTICE BY THE LD. DR IN THESE Y EARS WITH RESPECT TO FACTUAL POSITION IN THE EARLIER YEARS DECIDED BY TH E TRIBUNAL. WE, THEREFORE, AGREE WITH THE LD. AR THAT THE ISSUE RAI SED IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN EARLIER YEARS. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION IN E ARLIER YEARS SET ASIDE THE ORDER OF CIT(A) AND ALLOW THE APPEALS OF THE ASSESS EE. SINCE THE TRIBUNAL HAS CONSIDERED THE SIMILAR ISSU E ON IDENTICAL FACTS IN THE CASE OF ASSESSEE AND THE EARLIER DECISIONS HAVE ALSO BEE N DECIDED BY A BENCH OF THE TRIBUNAL TO WHICH BOTH OF US WERE PARTIES, AND I N THE ABSENCE OF ANY DISTINGUISHING FEATURES BROUGHT OUT TO OUR NOTICE B Y LD. DR IN RESPECT OF ASSESSMENT YEAR UNDER CONSIDERATION, WE AGREE WITH THE LD. AR THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE EARLIER ORDERS. RESPECTFULLY FOLLOWING THE ORDERS OF THE TRIBUNAL F OR THE EARLIER ASSESSMENT YEARS (SUPRA), WE HOLD THAT STCG RS.83,14,515/- EARNED B Y ASSESSEE AND LTCG OF RS.70,39,652/- EARNED BY ASSESSEE ON SALE/PURCHASE OF SHARES AND SECURITIES THROUGH PMS IS TO BE ASSESSED UNDER THE HEAD CAPIT AL GAINS AND NOT AS ITA. NOS.1576,1595 AND 1596/MUM/2012 7 BUSINESS INCOME OF THE ASSESSEE. HENCE, WE ALLOW G ROUND NOS.1 AND 3 OF THE APPEAL TAKEN BY THE ASSESSEE BY REVERSING THE ORDER S OF AUTHORITIES BELOW. SINCE IN THE PRESENT CASES, THE DEPARTMENT HAS NOT BEEN ABLE TO BRING ANY DISTINGUISHING FACTS AND WE ALSO OBSERVE THAT THAT THE AUTHORITIES BELLOW HAVE GIVEN THE SAME REASONS AS GIVEN IN THE PRECEDING ASSESSMENT Y EARS, WE ALLOW GROUND NO.1 IN ALL THE APPEALS TAKEN BY THE ABOVE NAMED ASSESSEE BY RE VERSING THE ORDERS OF AUTHORITIES BELOW. 7. FURTHER, IN RESPECT OF SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN EARNED BY ABOVE NAMED ASSESSEE ON SALE OF SHARES AND SECUR ITIES CARRIED INDEPENDENTLY, WE OBSERVE THAT THE SAID ISSUE HAD ALSO BEEN CONSIDER ED BY TRIBUNAL IN THE EARLIER YEARS IN THE CASES OF ABOVE NAMED ASSESSEE AND THE FACTS ARE SIMILAR AND THE REASONS GIVEN BY LD. CIT(A) ARE SIMILAR WHILE HOLDING THAT THE PROF IT SHOWN BY ASSESSEE FROM PURCHASE AND SALE OF SHARES HAS TO BE ASSESSED UNDER THE HEA D INCOME FROM BUSINESS BUT THE TRIBUNAL AFTER CONSIDERING THE CBDT CIRCULAR AND T HE CASES CITED BY AUTHORITIES BELOW HAVE HELD THAT THE PROFIT SHOWN BY ASSESSEE IS THE CAPITAL GAIN AND TO BE ASSESSED AS LONG TERM/SHORT TERM CAPITAL GAIN. WE OBSERVE THA T THE FACTS IN THE CASE BEFORE US ARE IDENTICAL TO THE PRECEDING ASSESSMENT YEAR, SAVE A ND EXCEPT THE NUMBER OF TRANSACTIONS AND THE AMOUNT INVOLVED ARE DIFFERENT. WE CONSIDER IT PRUDENT TO REPRODUCE PARA 15 TO 19 OF THE SAID ORDER WHICH ARE AS UNDER : 15. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE LD. REPRESENTATIVES OF THE PARTIES AND THE ORDERS OF THE AUTHORITIES BE LOW. WE HAVE ALSO GONE THROUGH THE WRITTEN SUBMISSIONS FILED BY ASSESSEE A ND HAVE PERUSED RELEVANT PAGES OF THE PAPER BOOK. WE HAVE ALSO CONSIDERED T HE ASSESSMENT ORDERS OF EARLIER ASSESSMENT YEARS, COPIES PLACED AT PAGES 78 TO 114 OF THE PAPER BOOK (SUPRA). 16. THE DISPUTE IS REGARDING THE NATURE OF INCOME F ROM SHARE TRANSACTIONS ENTERED INTO BY THE ASSESSEE. THE ISSUE IS AS TO W HETHER SHARES TRANSACTIONS IN A PARTICULAR CASE SHOULD BE TREATED AS INVESTMENT A CTIVITY OR TRADING ACTIVITY HAS BEEN HIGHLY DEBATABLE ISSUE. THERE ARE DECISIONS OF TRIBUNAL ON BOTH SIDES. EACH CASE DEPENDS ON ITS OWN FACTS. THERE ARE VARI OUS FACTORS SUCH FREQUENCY, VOLUME, AND ENTRIES IN THE BOOKS OF ACCOUNT, NATURE OF FUND USED, HOLDING PERIOD ETC WHICH ARE RELEVANT IN DECIDING TRUE NATURE OF TRANSACTION AND NO SINGLE FACTOR IS CONCLUSIVE. THE HONBLE GUJARAT HIGH COURT I N THE CASE OF CIT V/S MOTILAL HIRABHAI SPG. & WVG. CO. LTD.. [1978] 113 ITR 173 (GUJ.) AND THE HONBLE APEX COURT IN THE CASE OF. RAJA BAHADUR VISHESHWARA SINGH. V/S CIT [1961] 41 ITR 685 (SC) HAVE HELD THAT THE TREATMENT IN THE BO OKS OF AN ASSESSEE WILL NOT BE CONCLUSIVE AND IF THE VOLUME, FREQUENCY AND REGU LARITY AT WHICH TRANSACTIONS ARE CARRIED OUT INDICATE SYSTEMATIC AND ORGANIZED A CTIVITY WITH PROFIT MOTIVE THEN ITA. NOS.1576,1595 AND 1596/MUM/2012 8 IT BECOMES BUSINESS PROFIT AND NOT CAPITAL GAINS. THE HON'BLE APEX COURT IN THE CASE OF CIT VS. HOLCK LARSEN (SUPRA) HELD THAT WHE THER A TRANSACTION OF SALE AND PURCHASE OF SHARES WERE TRADING TRANSACTIONS OR THE Y WERE IN THE NATURE OF INVESTMENT IS A MIXED QUESTION OF LAW AND FACTS. IT IS FURTHER HELD IN THE CASE OF CIT VS. ASSOCIATED INDUSTRIAL DEVELOPMENT CO. P. LT D (SUPRA) THAT IT IS POSSIBLE THAT THE ASSESSEE TO BE BOTH AN INVESTOR AS WELL AS DEALER IN SHARES. WHETHER A PARTICULAR HOLDING IS BY WAY OF INVESTMENT OR FORM PART OF STOCK-IN- TRADE IS A MATTER WITHIN THE KNOWLEDGE OF THE ASSESSEE AND IT IS FOR THE ASSESSEE TO PRODUCE EVIDENCE FROM THE RECORDS AS TO WHETHER HE MAINTAINED ANY DISTINCTION BETWEEN SHARES WHICH ARE HELD AS INVESTMENT AND THO SE HELD AS STOCK-IN-TRADE. THEREFORE, THE IMPORTANT FACTOR IS THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE, WHICH HAS TO BE GATHERED FROM THE ACTUAL CONDUCT OF THE ASSESSEE WHILE DEALING WITH THE SHARES SUBSEQUENTLY AND NOT ONLY ON THE BASIS OF ENTRY IN THE BOOKS OF ACCOUNT. IN THIS VIEW, WE ARE SUPPORTE D BY THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. MADANGOPAL RAD HEY LAL, 73 ITR 652(SC). THEREFORE, TO DECIDE THE NATURE OF TRANSACTION AS T O WHETHER IT IS IN THE NATURE OF TRADE OR AN INVESTMENT, NO SINGLE FACT HAS ANY DECI SIVE SIGNIFICANCE AND THE QUESTION HAS TO BE ANSWERED DEPENDING ON THE COLL ECTIVE EFFECT OF ALL RELEVANT MATERIAL BROUGHT ON RECORD AS HELD BY HONBLE APEX COURT IN THE CASE OF JANKI RAM BAHADUR RAM V/S CIT, 57 ITR 21 (SC). 17. WE ARE ALSO CONSCIOUS OF THE FACT THAT AN INVES TOR MAKES PURCHASES WITH LONG TERM GOAL OF EARNING INCOME FROM THE INVESTMEN T AND HE IS NOT TEMPTED TO SELL THE SHARES ON EVERY RISE AND FALL IN THE MARKE T WHICH ARE THE ATTRIBUTES OF A TRADER. THERE MAY BE SITUATIONS WHEN THE INVESTOR M AY ALSO SELL THE SHARES AFTER SHORT HOLDING IN ORDER TO RESHUFFLE PORTFOLIO WHEN PRICES ARE FALLING OR TO ENCASH INVESTMENT IN CASE OF EXCEPTIONAL GAIN OR FOR SOME OTHER PERSONAL EXIGENCIES. SINCE INCOME FROM INVESTMENT IN SHARES WHICH IS IN THE FORM OF DIVIDEND IS RECEIVED ANNUALLY, NORMALLY AN INVESTOR IS EXPECTED TO HOLD THE SHARES FOR MORE THAN A YEAR. THEREFORE, EACH CASE IS REQUIRED TO BE EXAMINED CAREFULLY TO ASCERTAIN THE TRUE NATURE OF TRANSACTIONS. 18. IN THE LIGHT OF ABOVE PROPOSITION, WE HAVE CONS IDERED THE FACTS OF THE CASE OF THE ASSESSEE BEFORE US. WE OBSERVE THAT TH E ASSESSEE IN THE EARLIER ASSESSMENT YEARS HAD ALSO CARRIED OUT THE TRANSACTI ONS OF PURCHASE AND SALES OF SHARES DIRECTLY AS WELL AS THROUGH PMS. WE OBSERVE THAT THE DEPARTMENT ACCEPTED THE TRANSACTIONS MADE BY ASSESSEE OF HIS O WN FOR PURCHASE AND SALE OF SHARES AS INVESTMENT I.E. FOR ASSESSMENT YEARS 2 003-04, 2004-05, 2005-06 AND 2006-07 IN THE ASSESSMENT MADE UNDER SECTION 143(3) OF THE ACT AS IS EVIDENT FROM THE COPIES OF THE ASSESSMENT ORDER PLACED AT P AGES 78 TO 114 OF THE PAPER BOOK. HOWEVER, IN THE ASSESSMENT YEAR UNDER CONSID ERATION THE AO HAS TAKEN A CONTRARY VIEW TO THE EARLIER ASSESSMENT YEARS S TATING THAT THE ASSESSEE IS CARRYING ON OF HIS OWN PURCHASE AND SALE OF SHARE S ACTIVITIES IN A SYSTEMATIC AND ORGANIZED WAY WHICH PARTAKE THE CHARACTER OF B USINESS. WE OBSERVE THAT THE AO AS WELL AS LD. CIT(A) HAVE MENTIONED CBDT CIRCULAR AND THE CASES BUT HAVE NOT DISCUSSED AS TO HOW THOSE CASES ARE RELEV ANT TO THE FACTS OF THE CASE OF THE ASSESSEE BEFORE US. AS MENTIONED HEREINAB OVE THAT THE HONBLE APEX COURT HAS HELD IN THE CASE OF HOLCK LARSEN (SUPRA ) THAT WHETHER THE TRANSACTIONS OF SALE AND PURCHASE OF SHARES WERE TR ADING TRANSACTIONS OR WERE IN THE NATURE OF INVESTMENT IS A MIXED QUESTION OF LA W AND FACTS AND THEREFORE, EACH CASE IS REQUIRED TO BE EXAMINED TO ASCERTAIN THE TRUE NATURE ON THE BASIS OF THE FACTS. WE OBSERVE THAT THE ASSESSEE HAS NOT BORROWED ANY FUNDS TO UNDERTAKE THE ACTIVITIES OF PURCHASE AND SALE OF SH ARES. THAT THE ASSESSEE HAS USED HIS OWN FUNDS IN THE SAID TRANSACTIONS OF PURC HASE AND SALE OF SHARES. WE ITA. NOS.1576,1595 AND 1596/MUM/2012 9 OBSERVE THAT THE AO HAS STATED THAT THE ASSESSEE HAS FREQUENTLY INDULGED IN DEALING IN SHARES AND THE PERIOD OF HOLDING IS ALS O SHORT. HOWEVER, WE OBSERVE THAT IN RESPECT OF LTCG CLAIMED BY ASSESSEE, THE MAXIMUM AMOUNT OF LTCG, IS ON ACCOUNT OF SALE OF SHARES OF FINANCIAL TECHNOLO GIES AND HENKEL SPIC WHICH WERE ACQUIRED IN 2003. WE OBSERVE FROM PARA 6.1 OF THE ORDER OF LD. CIT(A) THAT HE HAS DOUBTED THE LTCG AND CONSIDERED IT AS BUSINESS INCOME ON THE GROUND THAT THE ASSESSEE HAD SOLD THE SHARES OF S AID COMPANY ON A NUMBER OF DATES. WE ARE OF THE CONSIDERED VIEW THAT THE FIN DING OF THE LD. CIT(A) HAS NO MERITS AND PARTICULARLY WHEN WE OBSERVE FROM THE PE RIOD OF HOLDING OF SHARES, WHICH WE HAVE MENTIONED HEREINABOVE IN PARA 13 OF T HIS ORDER. THE LTCG HAD ACCRUED TO THE ASSESSEE, WHERE THE PERIOD OF HOLDIN G IS MORE THAN 24 MONTHS AND THEREFORE, THE ORDER OF LD. CIT(A) TO TREAT T HE SAID LTCG ACCRUED TO THE ASSESSEE AS BUSINESS INCOME IS NOT SUPPORTED BY FAC TS PARTICULARLY WHEN THERE IS NO PURCHASE OF SHARES BY ASSESSEE IN THE ASSESSMENT YEAR UNDER CONSIDERATION AND SAID SHARES WERE HELD BY ASSESSEE FOR A PERI OD OF MORE THAN 24 MONTHS AND HAD ALREADY BEEN CONSIDERED IN THE PRECEDING ASSESSMENT YEAR AS INVESTMENT IN THE ASSESSMENT COMPLETED U/S 143(3) OF THE ACT. HENCE, THE ORDER OF LD. CIT(A) TO CONSIDER THE GAIN OF RS.2,9 8,36,506/- AS BUSINESS INCOME IS NOT BASED ON FACTS. THEREFORE, WE REVERSE THE O RDER OF LD CIT(A) AND DIRECT THAT THE SAME SHOULD BE CONSIDERED AS LTCG. 19. NOW COMING TO THE ISSUE AS TO WHETHER THE AMOUN T OF RS.36,08,276/- AS CLAIMED BY THE ASSESSEE TO BE STCG OR IS TO BE CONSIDERED AS BUSINESS INCOME OF THE ASSESSEE AS CONSIDERED BY THE AUTHORI TIES BELOW, WE OBSERVE THAT THE AMOUNT OF RS.26,56,537/- IS THE PROFIT SHOWN BY THE ASSESSEE FROM SHARE TRANSACTIONS WHERE HOLDING IS MORE THAN 91 DAYS OUT OF THE TOTAL PROFIT OF RS.36,08,276/- SHOWN BY THE ASSESSEE. FURTHER, THE RE IS NO TRANSACTION OF PURCHASE AND SALE OF SHARES WHERE THE HOLDING PERIO D IS LESS THAN 15 DAYS. WE ALSO OBSERVE ON PERUSAL OF THE DETAILS THAT THERE I S NO REPEATED SALES AND PURCHASES OF SHARES IN RESPECT OF THE SAME SCRIPT. CONSIDERING THE ABOVE FACTS AND THE FACTS THAT IN THE PRECEDING ASSESSMENT YEAR S THE SIMILAR KIND OF TRANSACTIONS HAVE BEEN CONSIDERED BY THE AO AS AN INVESTMENT ACTIVITY OF THE ASSESSEE AND THE PROFIT HAS BEEN CONSIDERED AS STCG . WE ARE OF THE CONSIDERED VIEW THAT THE SAID SHARES HAVE BEEN PURCHASED BY T HE ASSESSEE FOR THE PURPOSE OF INVESTMENT AND A DIFFERENT VIEW CANNOT BE TAKEN IN THE ABSENCE OF ANY FRESH MATERIAL ON RECORD. 8. IN VIEW OF AFORESAID DECISIONS IN THE EARLIER ASSESSMENT YEARS, WE NOW PROPOSE TO DECIDE GROUND NO.2 OF ALL THE THREE APPEALS OF THE ABOVE NAMED ASSESSEES. 8.1 IN RESPECT OF APPEAL OF SHRI NALIN PRAVIN SH AH (ITANO.1576/MUM/2012), WE OBSERVE THAT THE ASSESSEE HAS SHOWN SHORT TERM CAPITAL GAIN ON SHARES /MUTUAL FUNDS OF RS.7 5,17,460/- AND LONG TERM CAPITAL GAIN ON EQUITY AND MUTUAL FUNDS OF RS.5,18 ,68,286/- FOR THE PURCHASE AND SALES OF SHARES MADE BY ASSESSEE HIMSELF. AO ACCEPTED THE LONG TERM CAPITAL GAIN AND CONSIDERED OUT OF THE SHORT TERM CAPITAL GAIN A SUM OF RS.3,16,340/- AS BUSINESS INCOME. HOWEVER, LD. CIT(A) ENHANCED THE SHORT TERM CAPITAL GAIN AS WELL AS LONG TERM CAPITAL GAIN BY CONSIDERING THE SAME AS BUSI NESS INCOME. SINCE FACTS WERE ITA. NOS.1576,1595 AND 1596/MUM/2012 10 STATED TO BE SIMILAR TO THE EARLIER PRECEDING YEAR S AND THE LD. CIT(A) HAS ALSO GIVEN SAME REASONING AS GIVEN IN THE PRECEDING ASSESSMEN T YEARS (SUPRA), WE BY FOLLOWING THE REASONING GIVEN IN THE EARLIER ASSESSMENT YEAR S(SUPRA) HOLD THAT THE SAID LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAINS SH OWN BY THE ASSESSEE IS TO BE ASSESSED UNDER THE HEAD CAPITAL GAIN. THUS, GROU ND NO.2 OF THE APPEAL TAKEN BY ASSESSEE IS ALLOWED. 8.2 IN RESPECT OF APPEAL OF SHRI MANAN NALIN SHAH (I.T.A.NOS.1595/MUM/2012), THE ASSESSEE HAS DECLAR ED SHORT TERM CAPITAL GAIN OF RS.1,29,40,876/- AND LONG TERM C APITAL GAIN OF RS.8,05,16,499/-. AO CONSIDERED THE SUM OF RS.29, 42,605/- OUT OF SHORT TERM CAPITAL GAIN DECLARED BY ASSESSEE AS BUSINESS INCOME AND WH EREAS ACCEPTED THE CLAIM OF ASSESSEE OF LONG TERM CAPITAL GAIN. HOWEVER, IN T HE APPEAL, THE LD. CIT(A) ENHANCED THE ASSESSMENT BY CONSIDERING THE ENTIRE SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN AS BUSINESS INCOME OF THE ASSESSEE BY CONSIDERING THE SAME AS BUSINESS INCOME. SINCE FACTS WERE STATED TO BE SIMILAR TO THE EARLIER PRECEDING YEARS AND THE LD. CIT(A) HAS ALSO GIVEN SAME REASONING AS GIVEN IN T HE PRECEDING ASSESSMENT YEARS (SUPRA), WE BY FOLLOWING THE REASONING GIVEN IN TH E EARLIER ASSESSMENT YEARS(SUPRA) HOLD THAT THE SAID LONG TERM CAPITAL GAIN AND SHO RT TERM CAPITAL GAINS SHOWN BY THE ASSESSEE IS TO BE ASSESSED UNDER THE HEAD CAPITAL GAIN. THUS, GROUND NO.2 OF THE APPEAL TAKEN BY ASSESSEE IS ALLOWED. 8.3 IN RESPECT OF APPEAL OF NALIN PRAVIN SHAH(HUF ) (ITA NO.1596/MUM/2012), THE ASSESSEE DECLARED SHORT TERM CAPITAL GAIN OF RS.2,00,523/- AND LONG TERM CAPITAL GAIN OF RS.2,88,83,346/-. AO ACCEPTED TH E CLAIM OF THE ASSESSEE BY TREATING THE SAID SHORT TERM CAPITAL GAIN/LONG TERM CAPITAL GAIN AS CAPITAL GAIN BUT THE FIRST APPELLATE AUTHORITY ENHANCED THE ASSESSMENT BY CON SIDERING THE SAID SHORT TERM CAPITAL GAIN AS WELL AS LONG TERM CAPITAL GAIN AS BUSINESS INCOME OF THE ASSESSEE. SINCE FACTS WERE STATED TO BE SIMILAR TO THE EARLI ER PRECEDING YEARS AND THE LD. CIT(A) HAS ALSO GIVEN SAME REASONING AS GIVEN IN THE PREC EDING ASSESSMENT YEARS (SUPRA), WE BY FOLLOWING THE REASONING GIVEN IN THE EARLIER AS SESSMENT YEARS(SUPRA) HOLD THAT THE SAID LONG TERM CAPITAL GAIN AND SHORT TERM CAPIT AL GAINS SHOWN BY THE ASSESSEE IS TO BE ASSESSED UNDER THE HEAD CAPITAL GAIN. THUS , GROUND NO.2 OF THE APPEAL TAKEN BY ASSESSEE IS ALLOWED. ITA. NOS.1576,1595 AND 1596/MUM/2012 11 8.4 IN VIEW OF ABOVE, THE APPEALS OF ABOVE NAMED ASSESSEES I.E. NALIN PRAVIN SHAH FOR ASSESSMENT YEAR 2008-09 AND MANAN NALIN SHAH AND NALIN PRAVIN SHAH (HUF) FOR HE ASSESSMENT YEAR 2007-08 ARE ALLOWED. 9. IN THE RESULT, ALL THE APPEALS OF THE ABOVE NAME D ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST FEBRUARY, 2014 . 2 3 21ST FEB,2014 * SD SD ( / RAJENDRA) ( . . /B.R.MITTAL) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI: /02/2014 . ./ SRL,SR.PS / COPY OF THE ORDER FORWARDED TO : 1. & / THE APPELLANT 2. ' & / THE RESPONDENT. 3. 7 ( ) / THE CIT(A)- CONCERNED 4. 7 / CIT CONCERNED 5. 8 ': , - : , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) - : , /ITAT, MUMBAI