The DCIT, Central Circle-1(3), Ahmedabad V. Smt. Smruti Shreyans Shah, Ahmedabad

ITA 170/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94504 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 18-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 21-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Salary income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD , BEFORE: SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER SHRI KUL BHARAT, JUDICIAL MEMBER ITA NOS. 170 & 2692/AHD/2011 ASSESSMENT YEARS :2007-08 &2008-09 DY. CIT, CENTRAL CIRCLE 1(3), ROOM NO.304, 3 RD FLOOR, AAYKAR BHAVAN, AHMEDABAD ACIT, CENTRAL CIRCLE 1(3), ROOM NO.304, 3 RD FLOOR, AAYKAR BHAVAN, ASHRAM ROAD, AHMEDABAD V/S . & V/S. SMT. SMRUTI SHREYANS SHAH GUJARAT SAMACHAR BHAVAN, KHANPUR, AHMEDABAD SMT. SMRUTI SHREYANS SHAH GUJARAT SAMACHAR BHAVAN, KHANPUR, AHMEDABAD - 380001 (APPELLANT) .. (RESPONDENT) & C. O. NO.43/AHD/2011 (IN ITA NO. 170/AHD/2011 ASSESSMENT YEAR :2007-08 SMT. SMRUTI SHREYANS SHAH GUJARAT SAMACHAR BHAVAN, KHANPUR, AHMEDABAD V/S . DY. CIT, CENTRAL CIRCLE 1(3), ROOM NO.304, 3 RD FLOOR, AAYKAR BHAVAN, AHMEDABAD PAN NO. ACKPS9275P (APPELLANT) .. (RESPONDENT) ITA NOS. 170 & 2692/AHD/11 & C.O. NO.43/AHD/11 FOR A.Y.07-08 &08-09 PAGE 2 /BY REVENUE SHRI NARENDRA SINGH,SR. D.R. /BY ASSESSEE SHRI S. N. SOPARKAR WITH SHRI P. M. MEHTA, A.R. /DATE OF HEARING 18.08.2015 /DATE OF PRONOUNCEMENT 30.09.2015 O R D E R PER :KUL BHARAT, JUDICIAL MEMBER THE REVENUE AND ASSESSEE HAVE FILED APPEAL AND CROS S OBJECTION RESPECTIVELY AGAINST THE ORDER OF CIT(A)-I, AHMEDAB AD, DATED 29.11.2010 PERTAINING TO ASSESSMENT YEAR 2007-08 & CIT(A)-III, AHMEDABAD, DATED 12.09.2011 PERTAINING TO ASSESSMENT YEAR 2008-09. BOTH THE APPEALS AND CROSS OBJECTION ARE TAKEN UP TOGETHER AND BEING DISPOSED OF BY WAY OF CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE TAKE UP APPEAL FILED BY REVENUE FOR A.Y . 2007-08. 3. THE REVENUE IN ITA NO.170/AHD/2011 HAS RAISED FO LLOWING GROUNDS OF APPEAL: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE A.O. TO CONSIDER THE INCOME OF RS. 19,59,688/- FROM LONG TERM CAPITA L GAIN FROM SALE OF SHARES AS 'INCOME FROM CAPITAL GAINS' ONLY. 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE A.O. TO CONSIDER THE SHORT TERM CAPITAL GAIN RS.13,90,773/- F ROM SALE OF SHARES HELD FOR PERIOD MORE THAN ONE MONTH TO BE ASSESSED AS INCOME CHARGEABLE AS SHORT TERM CAPITAL GAIN. 3. THE LD.CLT(A) HAS ERRED IN LAW AND ON FACTS IN D IRECTING THE AO TO VERIFY THE WORKING SUBMITTED BY THE ASSESSEE AND IF THE SAME I S FOUND CORRECT, AO IS DIRECTED TO ALLOW INTEREST EXPENDITURE OF RS. 13,85 ,842/-OUT OF DISALLOWING THE CLAIM OF DEDUCTION OF RS.20,28,945/- ON ACCOUNT / O F OVERDRAFT. ITA NOS. 170 & 2692/AHD/11 & C.O. NO.43/AHD/11 FOR A.Y.07-08 &08-09 PAGE 3 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE A.O. 5. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE C IT(A) MAY BE SETASIDE AND THAT OF THE A.O. MAY BE RESTORED TO THE ABOVE EXTENT. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS TAKEN UP FOR SCRUTINY ASSESSMENT AND ASSESSMENT U/S.143(3)OF THE INCOME TAX ACT, 1961, (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED V IDE ORDER DATED 30.11.2009. THE ASSESSING OFFICER TREATED THE LONG TERM CAPITAL GAIN OF RS.19,59,688/- AND SHORT TERM CAPITAL GAIN OF RS.13,90,773/- AS BUSINE SS INCOME OF ASSESSEE ON THE SURPLUS ARISING ON SALE OF SHARES. IN VIEW OF ASSE SSING OFFICER, IT WAS NOTHING BUT THE BUSINESS INCOME OF ASSESSEE AND SHARES AS T RADING ASSETS. ASSESSING OFFICER ALSO DISALLOWED THE DEDUCTION OF RS.20,28,9 45/- CLAIMED BY ASSESSEE AS EXPENDITURE TOWARDS EARNING INTEREST INCOME OR FDRS . 3. ASSESSEE AGGRIEVED BY THIS ORDER PREFERRED AN AP PEAL BEFORE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS PARTLY ALLOWE D THE APPEAL. THE LD. CIT(A) BY FOLLOWING THE DECISION OF THE TRIBUNAL IN CASE OF SHRI SUGAMCHAND C. SHAH IN ITA NO. 3554/AHD/2008 VIDE ORDER DATED 2 9 TH JANUARY, 2010 DIRECTED THE ASSESSING OFFICER TO TREAT THE INCOME OF RS.19 ,59,688/- AS LONG TERM CAPITAL GAIN FROM SALE OF SHARES. THE LD. CIT(A) ALSO DIRE CTED THE ASSESSING OFFICER TO CONSIDER THE SHORT TERM CAPITAL GAIN OF RS.13,90,77 3/- FROM THE SALE OFSHARES HELD FOR THE PERIOD MORE THAN ONE MONTH TO BE ASSES SED AS INCOME CHARGEABLE AS SHORT TERM CAPITAL GAIN. HOWEVER, IN RESPECT OF RS .20,28,945/- AS CLAIMED BY ASSESSEE. LD. CIT(A) ALLOWED DEDUCTION TO THE EXTE NT OF RS.13,85,842/- SUBJECT TO VERIFICATION OF THE WORKING GIVEN BY THE ASSESSE E. 4. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE AND AS SESSEE ARE IN APPEAL BEFORE THIS TRIBUNAL. 5. GROUND NOS. 1 & 2 OF REVENUES APPEAL ARE AGAINS T DIRECTING THE ASSESSING OFFICER TO TREAT SURPLUS FUND THE SALE OF SHARES OF RS.19,59,688/- AS ITA NOS. 170 & 2692/AHD/11 & C.O. NO.43/AHD/11 FOR A.Y.07-08 &08-09 PAGE 4 LONG TERM CAPITAL GAIN AND ALSO SURPLUS FUND FROM S ALE OF SHARES HELD FOR PERIOD MORE THAN ONE MONTH AS INCOME CHARGEABLE AS SHORT T ERM CAPITAL GAIN AMOUNTING TO RS.13,90,773/-. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT IN A.YS. 2005-06 AND 2006-07 AS WELL THE ASSESSING OFF ICER HAD TREATED THE SALE OF SHARES AS BUSINESS INCOME AND THERE IS NO CHANGE IN TO FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. LD. COUNSEL SUBMITTED THE ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN ITA NOS. 3295 & 3296/AHD/2010 FOR A.Y.2 005-06 & 2006-07. HE SUBMITTED THAT THE TRIBUNAL IN PARA 10 OF THIS ORDE R HAS HELD THAT THE ASSESSEE IS AN INVESTOR AND IS NOT ENGAGED IN THE BUSINESS OF S ALE OF SHARES AND MUTUAL FUND. ON THE CONTRARY, LD. SR. D.R. SUPPORTED THE ORDER O F ASSESSING OFFICER. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE WRITTEN SUBMISSION AND MATERIAL AVAILABLE ON RECORD. WE FIND THAT IN PARA 5.6 OF THE ORDER OF LD. CIT(A) HAS DIRECTED THE ASSESSING OFFICER AS UNDER: 5.6 IN THE CASE OF APPELLANT, SO FAR AS THE INCOME FROM LONG TERM CAPITAL GAIN FROM SALE OF SHARES OF RS.19,59,688/-, IS CONCERNED, THE PERIOD OF HOLDING UNDISPUTEDLY IS GREATER THAN ONE MONTH HENCE APPLYING THE RATIO OF THE CASE OF SUGAMCHAND C. SHAH (SUPRA), I DIRECT THE ASSESSING OFFICER TO CONSIDER THE SAID INCOME OF RS.19,59,688/- FROM LONG TERM CAPITAL GAIN FROM SALE OF SHARES AS 'INCOME FROM CAPITAL GAINS' ONLY. IN CASE OF INCOME SHOWN AS SHORT TERM CAPITAL GAIN, THE APPELLANT WAS ASKED TO SUBMIT THE WORKING OF THE SHARES HELD FOR LESS THAN A MONTH. FROM THE WORKING SUBMITTED BY THE APPELLANT, IT IS GATHERED THAT THE ENTIRE SHORT TERM CAPITAL GAIN SHOWN AT RS.13,90,773/-IS FROM THE SALE FROM SALE OF MUTU AL FUNDS WHICH ARE HELD FOR MORE THAN 1 MONTH, ACCORDINGLY APPLYING THE DECISION OF AHMEDABAD ITAT IN THE CASE OF SUGAMCHAND C. SHAH (SUPRA), I DIRECT THE ASSESSING OFFICER TO CONSIDER THE SHORT TERM CAPITAL GAIN RS.13,90,773/- FROM SALE OF SHARES HEL D FOR PERIOD MORE THAN ONE MONTH TO BE ASSESSED AS INCOME CHARGEABLE AS SHORT TERM C APITAL GAIN. WE FIND THAT THE CO-ORDINATE BENCH IN A.Y. 2006-07 HAS REPRODUCED THE FINDING OF LD. CIT(A) WHICH IS AS UNDER: 9. THE PREFERRED TWO SEPARATE APPEALS IN BOTH ASSES SMENT YEARS. THE CIT(A) HAS PARTLY ACCEPTED HER CONTENTIONS AS UNDER: '3.6 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORD ERS PASSED BY ASSESSING OFFICER AND SUBMISSIONS MADE BY APPELLANT. THE APPE LLANT HAS SHOWN INCOME FROM SHORT TERM CAPITAL GAIN FROM SALE OF SHARES AN D MUTUAL FUNDS FOR RS.8,86,194/- IN A.Y . 2005-2006 AND RS.1,13,61,717/- A.Y.2006-07. IT IS NOTICED THAT THE ASSESSING OFFICER HAS NOT ACCEPTED THE CONTENTION OF THE ITA NOS. 170 & 2692/AHD/11 & C.O. NO.43/AHD/11 FOR A.Y.07-08 &08-09 PAGE 5 APPELLANT THAT THE IMPUGNED SURPLUS WAS CAPITAL GAI NS MAINLY ON THE GROUND THAT THE VOLUME INVOLVED WAS LARGE AND, THEREFORE, ACCORDING TO HIM, IT BECAME COMMODITY FOR THE ASSESSEE IN WHICH IT IS TRADING. HE HAS FURTHER GONE BY THE CRITERIA THAT PERIOD OF HOLDING IS SHORT AND FREQUE NCY AND NUMBER OF TRANSACTIONS IS MORE. HE HAS THEREFORE COME TO THE CONCLUSION THAT THE MOTIVE IS TO EARN MAXIMUM PROFIT AND NOT TO HAVE INVESTMEN T. 3.7 IN THE PRESENT CASE, THE ISSUE OF DETERMINATION IS AS TO WHETHER THE SURPLUS ARISING FROM SALE OF SHARES & MUTUAL FUNDS IS TO BE TAXED AS SHORT TERM OR LONG TERM CAPITAL GAIN OR THE SAME SHOULD BE TAXED AS BU SINESS INCOME AT NORMAL RATES. RECENTLY THE HON'BLE AHMEDABAD ITAT IN CASE OF SHRI SUGUMCHAND C. SHAH IN ITA NO.3554/AHD/2008 VIDE ORDER DATED 29 TH JANUARY, 2010 ON ISSUE IDENTICAL TO THIS CASE, HAS HELD AS UNDER: 11. WHEN WE EXAMINE THE FACTS OF THE CASE, WE FIND ASSESSEE HAS MAINTAINED THE BOOKS OF ACCOUNT IN RESPECT OF DEALI NG IN SHARES AND ASSESSEE HAS SHOWN THE TRANSACTIONS IN SHARES AS IN VESTMENT AND NOT AS STOCK-IN-TRADE, IT HAS BEEN SHOWN CONSISTENTLY FOR SEVERAL YEARS IN THE PAST AND DEPARTMENT HAS NOT CHALLENGED THE BOOK KEE PING OR OF SHARES AS INVESTMENT. NO CONTRARY MATERIAL OR FACTS HAVE B EEN POINTED OUT BY THE REVENUE TO SHOW THAT FACTS IN THE CURRENT YEAR ARE DIFFERENT THAN THE FACTS IN EARLIER YEARS. IT IS ALSO NOT POINTED OUT BY THE REVENUE THAT FREQUENCY AND NUMBER OF TRANSACTIONS ARE ABNORMALLY HIGH IN THE CURRENT YEAR AS COMPARED TO WHAT WAS DONE IN EARLIE R YEARS. 12 THERE IS ALSO NO MATERIAL TO COME TO THE CONCLUS ION THAT THE VALUATION OF INVESTMENT HAS BEEN DONE ON COST OR NE T REALIZABLE VALUE WHICHEVER IS LOW. THE ASSERTION OF THE ASSESSEE IS THAT ENTIRE PORT-FOLIO HAS BEEN VALUED AT COST AS AT THE END OF ACCOUNTING YEAR WHICH REMAINED UNCHALLENGED. 13. THE SHARES WHICH ARE SOL D OUT OF SUCH INVESTMENT THIS YEAR WERE MOSTLY PURCHASED A YEAR O R EARLIER SHOWING THAT THE ASSESSEE HAD INTENTION WHILE PURCHASING TH EM TO HOLD THEM AND THEY WERE REFLECTED IN THAT BALANCE-SHEET AS INVEST MENT. THE ASSESSEE HAS ENJOYED DIVIDEND INCOME AND DECLARED THE SAME I N THE RETURN OF INCOME TRADING THE TRANSACTIONS AS INVESTMENT, EVEN IF FREQUENCY OF SELLING OF SHARES MAY BE MORE BUT IN RESPECT OF SHA RES HELD FOR A CONSIDERABLE LONGER PERIOD (FOR MORE THAN 366 DAYS) AS PER FINDING GIVEN BY THE LEARNED CIT(APPEALS). THIS FINDING REM AINED UNCONTROVERTED. THE ASSESSEE HAS EARNED GAIN OF RS. 37,52,281/-, ON SALE OF THOSE SHARES WHICH WERE HELD FOR MORE THAN 366 DAYS AND UPTO 6832 DAYS. IN ANY CASE, WHEN THOSE SHARES WERE PURC HASED IT COULD NOT BE SAID THAT INTENTION OF THE ASSESSEE WAS TO DEAL IN THEM AND NOT TO HOLD THEM AS INVESTMENT. EVEN IN, THE CASE OF INVES TMENT IT IS FOR THE ASSESSEE TO DECIDE WHEN TO DISPOSE THEM OFF SO THAT TO GIVE MAXIMUM RETURN OUT OF THEM. THERE IS NO THEORY THAT ASSET H ELD ON LONG-TERM BASIS SHOULD BE SOLD ONLY AT THE TIME OF NEED OR IN EMERGENCY. HE CAN VERY WELL SALE THEINVESTMENTS TO REAP THE BENEFIT W HEN PRICES OF SHARES ARE HIGHSO AS TO EARN BETTER GAINS AND MAKE INVESTM ENT ELSEWHERE. IN OUR CONSIDERED VIEW, IT IS THE DECISION OF THE ASSE SSEE TO DISPOSE OF AN INVESTMENT, IF ACCORDING TO HIM, MARKET VALUE THERE OF HAVE REACHED A PLATEAU SO AS TO MAKE INVESTMENT IN OTHER ASSETS WH ICH HAVE POTENTIAL ITA NOS. 170 & 2692/AHD/11 & C.O. NO.43/AHD/11 FOR A.Y.07-08 &08-09 PAGE 6 OF APPRECIATION IN MARKET VALUE. THIS DECISION TO S ELL HIS INVESTMENT AT HIGH MARKET PRICE CANNOT CONVERT AN OTHERWISE INVES TMENT INTO TRADING. IF IN THE PAST, THE DEPARTMENT HAS ACCEPTED THE SAL E OF SHARES OF HOLDINGS OF MORE THAN A YEAR AS INVESTMENT AND PROF ITS THEREON HAS BEEN ASSESSED UNDER THE HEAD 'CAPITAL GAIN ', THEN THERE IS NO REASON TO HOLD DIFFERENTLY THIS YEAR. WE ACCORDINGLY CONFI RM THE ORDER OF THE LEARNED CIT(APPEALS) IN RESPECT OF HOLDING THAT PRO FIT OF RS.37,52,281/- SHOULD BE ASSESSED AS 'LONG-TERM CAP ITAL GAIN'. 14 IN RESPECT OF PROFIT OF RS.55,40,679/- BEING 'SH ORT-TERM CAPITAL GAIN AS CLAIMED BY THE ASSESSEE AND HELD AS PROFITS ASSESSED UNDER THAT BUSINESS BY TWO AUTHORITIES, WE FOUND THAT IN MANY CASES THERE IS DELIVERY OF SHARES AND SHARE WERE REGISTERED IN THE NAME OF THE ASSESSEE. THE HOLDING PERIOD OF THE SHARES IS FROM 'O' DAYS TO '366' DAYS, FN SOME CASES, THE FREQUENCY OF TRANSACTIONS ARE APPARENTLY SUBSTANTIAL AS THAT ASSESSEE IS DE FACTO SELLING AN D PURCHASING SHARES AS TRADER. HE IS ALSO HOLDING SHARES FOR LONG PERIO D - INDICATING THAT THEY ARE HELD AS INVESTMENT. THEREFORE, A CRITERIA HAS TO BE FIXED FOR DETERMINING AS TO WHEN HE IS ACTING AS TRADER AND W HEN AS INVESTOR. ACCORDINGLY, WE DECIDE FOLLOWING CRITERIA TO HOLD W HEN GAINS ARE TO BE TAXED AS PROFIT TO BE EARNED UNDER THE BUSINESS OR TO BE TAXED AS SHORT TERM CAPITAL GAIN. WE'HOLD THAT IF SHARES ARE NOT H ELD EVEN SAY FOR A MONTH, THEN THE INTENTION IS CLEARLY TO REAP PROFIT BY ACTING AS A TRADER AND HE DID NOT INTEND TO HOLD THEM IN INVESTMENT PO RT-FOLIO. WE BELIEVE THAT IF A PERSON INTENDS TO HOLD HIS PURCHASES OF S HARES AS INVESTMENT, HE WOULD WATCH THE FLUCTUATION OF RATES IN THE MARK ET FOR WHICH A MINIMUM TIME IS NECESSARY, WHICH WE ESTIMATE AT ONE MONTH. WHERE SHARES ARE HELD FOR MORE THAN A MONTH, THEY SHOULD BE TREATED AS INVESTMENT AND ON THEIR SALE SHORT TERM CAPITAL GAI N SHOULD BE CHARGED. WHEN SHARES ARE HELD FOR LESS THAN A MONTH, GAIN ON THEM SHOULD BE TREATED AS PROFIT FROM BUSINESS. 3.8 THE ASSESSING OFFICER HAS TREATED INCOME FROM S ALE OF SHARES AS WELL MUTUAL FUNDS, AS INCOME FROM BUSINESS & PROFESSION, WHEREAS,THE LEARNED COUNSEL OF APPELLANT HAS SUBMITTED THAT GAIN FROMIN VESTMENT PORTFOLIO SHOULD BE TAXED AS INCOME FROM CAPITAL GAIN. IN THE CASE O F APPELLANT, IT IS NOTICED THAT ASSESSEE HAS SHOWN INCOME FROM SALE OF SHARES AS CAPITAL GAINS AS WELL AS INCOME FROM BUSINESS & PROFESSION AS PER BOOKS OF ACCOUNT MAINTAINED. THE CLAIM OF APPELLANT THAT ANY ASSESSEE CAN HOLD TWO P ORTFOLIOS IS SUPPORTED BY PARA 10 OF CIRCULAR NO 4/2007 DATED 15/06/2007 WHIC H READS AS UNDER: 10. 'CBDT ALSO WISHES TO EMPHASIZE THAT IT IS POSSI BLE FOR A TAX PAYER TO HAVE TWO PORTFOLIOS, I.E. AN INVESTMENT PORTFOLI O COMPRISING OF SECURITIES WHICH ARE TO BE TREATED AS CAPITAL ASSET S AND A TRADING PORTFOLIO COMPRISING OF STOCK-IN-TRADE WHICH ARE TO BE TREATED AS TRADING ASSETS. WHERE AN ASSESSEE HAS TWO PORTFOLIO S, THE ASSESSEE MAY HAVE INCOME UNDER BOTH HEADS I.E., CAPITAL GAINS AS WELL AS BUSINESS INCOME.' 3.9 APPLYING THE RATIO OF DECISION OFAHMEDABAD ITA T REFERRED HEREIN ABOVE, PROFIT ON SALE OF SHARES WHEREIN SHARES ARE HELD FO R LESS THAN ONE MONTH IS ITA NOS. 170 & 2692/AHD/11 & C.O. NO.43/AHD/11 FOR A.Y.07-08 &08-09 PAGE 7 TREATED AS INCOME FROM BUSINESS AND PROFESSION AND REMAINING AMOUNT OF INCOME IS CONSIDERED AS CAPITAL GAIN. FROM THE DETA ILS OF CAPITAL GAIN SUBMITTED BY APPELLANT, IT IS EVIDENT THAT APPELLAN T HAS EARNED LOSS OF RS 14,69,622 FROM SALE OF SHARES & MUTUAL FUNDS IN A.Y . 2005-2006 AND PROFIT OF RS 23,26,630 IN A.Y. THAT ASSESSEE IS DE FACTO SELL ING AND PURCHASING SHARES AS TRADER. HE IS ALSO HOLDING SHARES FOR LONG PERIOD I NDICATING THAT THEY ARE HELD AS INVESTMENT. THEREFORE, A CRITERIA HAS TO BE FIXE D FOR DETERMINING AS TO WHEN HE IS ACTING AS TRADER AND WHEN AS INVESTOR. ACCORD INGLY, WE DECIDE FOLLOWING CRITERIA TO HOLD WHEN GAINS ARE TO BE TAXED AS PROF IT TO BE EARNED UNDER THE BUSINESS OR TO BE TAXED AS SHORT TERM CAPITAL GAIN. WE HOLD THAT IF SHARES ARE NOT HELD EVEN SAY FOR A MONTH, THEN THE INTENTION I S CLEARLY TO REAP PROFIT BY ACTING AS A TRADER AND HE DID NOT INTEND TO HOLD TH EM IN INVESTMENT PORT-FOLIO. WE BELIEVE THAT IF A PERSON INTENDS TO HOLD HIS PUR CHASES OF SHARES AS INVESTMENT, HE WOULD WATCH THE FLUCTUATION OF RATES IN THE MARKET FOR WHICH A MINIMUM TIME IS NECESSARY, WHICH WE ESTIMATE AT ONE MONTH. WHERE SHARES ARE HELD FOR MORE THAN A MONTH, THEY SHOULD BE TREA TED AS INVESTMENT AND ON THEIR SALE SHORT TERM CAPITAL GAIN SHOULD BE CHARGE D. WHEN SHARES ARE HELD FOR LESS THAN A MONTH, GAIN ON THEM SHOULD BE TREATED A S PROFIT FROM BUSINESS. ' 3.8 THE ASSESSING OFFICER HAS TREATED INCOME FROM S ALE OF SHARES AS WELL MUTUAL FUNDS, AS INCOME FROM BUSINESS & PROFESSION, WHEREAS, (HE LEARNED COUNSEL OF APPELLANT HAS SUBMITTED THAT GAIN FROMIN VESTMENT PORTFOLIO SHOULD BE TAXED AS INCOME FROM CAPITAL GAIN. IN THE CASE O F APPELLANT, IT IS NOTICED THAT ASSESSEE HAS SHOWN INCOMEFROM SALE OF SHARES A S CAPITAL GAINS AS WELL AS INCOME FROM BUSINESS & PROFESSION AS PER BOOKS OF ACCOUNT MAINTAINED. THE CLAIM OF APPELLANT THAT ANY ASSESSEE CAN HOLD TWO PORTFOLIOS IS SUPPOR TED BY PARA 10 OF CIRCULAR NO 4/2007 DATED 15/06/2007 WHICH READS AS UNDER: 10. 'CBDT ALSO WISHES TO EMPHASIZE THAT IT IS POSSI BLE FOR A TAX PAYER TO HAVE TWO PORTFOLIOS, I.E. AN INVESTMENT PORTFOLIO C OMPRISING OF SECURITIES WHICH ARE TO BE TREATED AS CAPITAL ASSETS AND N TRA DING PORTFOLIO COMPRISING OF STOCK-IN-TRADE WHICH ARE TO BE TREATE D AS TRADING ASSETS. ' WHERE AN ASSESSEE HAS TWO PORTFOLIOS, THE ASSESSEE MAY HAVE INCOME UNDER BOTH HEADS I.E., CAPITAL GAINS AS WELL AS BUS INESS INCOME. ' 3.9 APPLYING THE RATIO OF DECISION OFAHMEDABAD ITAT REFERRED HEREIN ABOVE, PROFIT ON SALE OF SHARES WHEREIN SHARES ARE HELD FO R LESS THAN ONE MONTH IS TREATED AS INCOME FROM BUSINESS AND PROFESSION AND REMAININ G AMOUNT OF INCOME IS CONSIDERED AS CAPITAL GAIN. FROM THE DETAILS OF CAP ITAL GAIN SUBMITTED BY APPELLANT, IT IS EVIDENT THAT APPELLANT HAS EARNED LOSS OF RS 14,69,622 FROM SALE OF SHARES & MUTUAL FUNDS IN A.Y. 2005-2006 AND PROFIT OF RS 23,26,630 IN A.Y. 2006- 2007 WHEREIN HOLDING PERIOD IS LESS THAN ONE MONTH, HENCE IDIRECT ASSESSING OFFICER TO TAX SUCH INCOME/LOSS AS INCOME FROM BUSI NESS & PROFESSION. 3.10 THE ASSESSING OFFICER AT PAGE NO 14 OF THE ASS ESSMENT ORDER FOR A. Y. 2005-2006 HAS STATED THAT APPELLANT HAS ACQUIRED SH ARES OF TCS, NTPC AND PNB IN IPO FOR WHICH BORROWED FUNDS WERE UTILIZED. SUCH AN ACTIVITY HAS TO BE TERMED AS AN ORGANIZED AND SYSTEMATIC ACTIVITY, CAR RIED ON CONTINUOUSLY WITH TO EARN PROFITS. THE SOLE INTENTION AT .THE TIME OF ACQUISITION OF SHARES THROUGH SUCH MODE WAS TO SELL THESE SHARES AT A PROFIT AND SUCH ACTIVITY HAS TO BE CONSTRUED AS ADVENTURE IN THE NATURE OF TRADE. IN F . Y2004-2005, THE APPELLANT HAS EARNED GAIN OF RS 19,48,364 FROM SALE OF TCS SH ARES, HENCE, ITA NOS. 170 & 2692/AHD/11 & C.O. NO.43/AHD/11 FOR A.Y.07-08 &08-09 PAGE 8 ASSESSING OFFICER IS DIRECTED TO CONSIDER SUCH GAIN AS INCOME FROM BUSINESS & PROFESSION. SO FAR AS PROFIT FROM PNB IS CONSIDERED , APPELLANT HAS INCURRED LOSS OF RS 14,97,820 AND AS SAME HAS BEEN SOLD WITH IN ONE MONTH, SUCH- TRANSACTION IS ALREADY CONSIDERED AS BUSINESS INCOM E /LOSS IN PARA 3.9 HEREIN ABOVE. THE TRANSACTIONS IN NTPC HAS ALREADY BEEN CO NSIDERED AS INCOME FROM BUSINESS & PROFESSION HENCE NO ADVERSE INFERENCE IS CALLED. CONSIDERING THESE, I DIRECT ASSESSING OFFICER TO CONSIDER INCOME OF RS .4,78,742(RS19,48,364 LESS RS 14,69,622) AS INCOME FROM BUSINESS & PROFESSION AND REMAINING INCOME OF RS 4,07,452 AS INCOME FROM CAPITAL GAINS. 3.11 SIMILARLY IN A. Y. 2006-2007, APPELLANT HAS ACQUIRED SHARES OF IDFC AND YES BANK FROM BORROWED FUNDS AS OBSERVED BY ASS ESSING OFFICER AT PAGE NO 13 & 14 OF ASSESSMENT ORDER. CONSIDERING THESE, INC OME OF RS 2,71,418 FROM SALE OF YES BANK IS TREATED AS INCOME-FROM BUSINESS & PROFESSION. SO FAR AS PROFIT FROM IDFC IS CONCERNED, SAME IS ALREADY TREA TED AS INCOME FROM BUSINESS IN PRECEDING PARA. IN VIEW OF SUCH OBSERVA TION, GAIN OF RS 25,98,048 (23,26,630 AND RS. 2,71,418) IS CONSIDERED AS INCOM E FROM BUSINESS & PROFESSION AND REMAINING INCOME OF RS 87,63,671 IS TREATED AS INCOME FROM CAPITAL GAIN. THE ASSESSING OFFICER IS DIRECTED TO ALLOW CREDIT FOR STT PAID BY APPELLANT REGARDING TRANSACTIONS TREATED AS INCOME FROM BUSINESS OR PROFESSION. HENCE, GROUNDS OF APPEAL IN BOTH THE YE ARS ARE PARTLY ALLOWED.' THIS LEAVES BOTH PARTIES AGGRIEVED. THE ONLY DISTIN CTION BEING THE ASSESSEE HAS FILED APPEALS IN BOTH ASSESSMENT YEARS ASAGAINST TH E REVENUE'S GRIEVANCE CONFINED IN LATTER ASSESSMENT YEAR ONLY. AFTER CONSIDERING THESE FACTS ON RECORD, THE CO-ORD INATE BENCH HELD AS UNDER: THE SHORT QUESTION THAT ARISES FOR OUR ADJUDICATIO N IN THESE APPEALS IS AS TO WHETHER THE ASSESSEE'S INCOME DERIVED FROM SALE OF SHARES/M UTUAL FUNDS IS TO BE TREATED AS SHORT TERM CAPITAL GAINS OR BUSINESS INCOME. IN OUR CONSIDERED OPINION, THIS IS A PERENNIAL ISSUE TO BE DECIDED AS PER FACTS OF EACH CASE. THE HON'BLE JURISDICTIONAL HIGH COURT IN CASE TAX APPEAL NO.77 OF 2010 DECIDED ON 2 7.6.2012 CIT VS. VAIBHAV J. SHAH HOLDS THAT THE MOST IMPORTANT TEST FOR JUDGING NATURE OF PROFITS ARISING FROM SALE PURCHASE OF SHARES HAS TO BE BASED ON VOLUME, FREQU ENCY, CONTINUITY AND REGULARITY OF TRANSACTIONS WITHHOLDING PERIOD, USAGE OF BORROWED FUNDS, ASSESSEE'S BOOKS MAINTAINED ETC. IT TRANSPIRES THAT THE ASSESSEE HAD CHOSEN TO INVEST INTEREST AND NON INTEREST BEARING FUNDS ON SHARE INVESTMENTS ACQUIRE D AT IPO STAGE IN HN1 CATEGORY. THE ASSESSEE'S SALARY INCOME IS MORE THAN SHARE PRO FITS IN THESE YEARS. THIS PROVES HER TO BE ONLY A PRUDENT INVESTOR INSTEAD OF A TRAD ER. THERE IS NO EVIDENCE IN THIS CASE FILE DEMONSTRATING THE ASSESSEE TO BE ENGAGED IN AN Y ORGANIZED ACTIVITY OF SHARE TRADING. NO EVIDENCE OF ANY REPETITION OF HER SHARE TRANSACTIONS IN THE IMPUGNED ASSESSMENT YEAR OR REINVESTMENT OF THE CAPITAL GAIN IS FORTHCOMING. SHE HAS ALSO BEEN MAINTAINING STOCK PORTFOLIO QUA SOME OF HER SHARE I NVESTMENTS (SUPRA). THESE PROFITS FROM SALE OF SHARES HAVE ARISEN FROM THE SHARES NOT FORMING PART OF HER STOCK. ALL THE ASSESSEE HAD DONE IS TO SELL THESHARES IN A PERIOD OF LESS THAN THREE MONTHS. RATHER ONE SCRIP HAS BEEN SOLD WITHIN THREE DAYS IN THE FO RMER ASSESSMENT YEAR. AND IN A SIMILAR SPAN OF HOLDING PERIOD IN THE LATTER ASSESS MENT YEAR WHEREIN SHE PURCHASED IDFC, IL & FS SHARES ON 8.8.2005 AND 20.7.2005 AND SOLD THEM ON 18.8.2005 FOR PROFITS OF RS.11,23,961/-. THE CASE FILE REVEALS TH AT THE ASSESSEE IN VAIBHAV SHAH CASE HAD ENTERED INTO 64 SALE TRANSACTION IN 27 SCRIPS A ND 17 SALE TRANSACTIONS IN 11 SCRIPS ITA NOS. 170 & 2692/AHD/11 & C.O. NO.43/AHD/11 FOR A.Y.07-08 &08-09 PAGE 9 IN TWO CONSECUTIVE ASSESSMENT YEARS WHICH HAD BEEN HELD TO HAVE RESULTED IN CAPITAL GAINS INSTEAD OF BUSINESS INCOME. A CO-ORDINATE BEN CH IN IDENTICAL CASE OF HITESH DOSHI 46 SOT 336 (MUM.) HELD THAT WHEN AN ASSESSEE MAINTAINS SIMILAR NUMBER OF COMPANIES AND ONLY NUMBER OF SHARES THEREIN INCREAS E OR DECREASE, HE IS ONLY A PRUDENT INVESTOR. WE TAKE INTO ACCOUNT ALL THE ABOV ESTATED FACTS, CIRCUMSTANCES AND CASE LAW QUOTED HEREINABOVE TO HOLD THAT THE ASSESS EE IS AN INVESTOR NOT ENGAGED IN THE BUSINESS OF SALE PURCHASE OF SHARES AND MUTUAL FUNDS. THE QUESTION IS ACCORDINGLY DECIDED AGAINST THE REVENUE BOTH ASSESSMENT YEAR. T HE ASSESSING OFFICER IS DIRECTED TO TREAT HER INCOME FROM SALE OF SHARES AND MUTUAL FUNDS IN THE TWO ASSESSMENT YEARS AS SHORT TERM CAPITAL GAINS AND PASS A CONSEQUENTIA L ORDER. THE ASSESSEE'S GROUNDS SUCCEED IN HER TWO APPEALS AND THAT OF THE REVENUE FAIL. THERE IS NO CHANGE INTO FACTS AND CIRCUMSTANCES IN THE PRESENT CASE, THEREFORE, TAKING A CONSISTENT VIEW, WE DO NOT SEE ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A). SAME IS HEREBY AFFIRMED. GROUND NOS.1 & 2 OF THE REVENUES APPEAL ARE DISMISSED. 7. APROPOS TO GROUND NO.3, LD. SR. D.R. SUPPORTED T HE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE LD. CIT(A) WAS NOT J USTIFIED IN REDUCING THE DISALLOWANCE. HE SUBMITTED THAT THE ASSESSING OFFI CER HAS GIVEN A FINDING THAT ASSESSEE HAS NOT DEMONSTRATED THE NEXUS BETWEEN INT EREST INCOME EARNED AND THE EXPENDITURE INCURRED. ON THE CONTRARY, THE LD. COU NSEL FOR THE ASSESSEE SUBMITTED THAT AT PAGE 6 OF THE ASSESSMENT ORDER TH E FIGURES OF RECEIPT OF INTEREST AND PAYMENT OF INTEREST IS REFLECTED. HE SUBMITTED THAT AS PER THE FIGURE OF INTEREST RECEIVED ON FDS WITH BANKS IS RS.40,96,486 /- AND INTEREST PAID ON OVERDRAFT ACCOUNT OF RS.20,25,250/-. IT WAS EXPLAI NED TO THE ASSESSING OFFICER THAT THE ASSESSEE TOOK LOAN FROM THE BANKS AGAINST THE FDS KEPT AND THE LOAN TAKEN ON OVERDRAFT IS AGAIN PUT AS FD ALSO AGAIN LO AN TAKEN ON OVERDRAFT ACCOUNT AND SIMILAR PROCESS IS CONTINUED. HE SUBMITTED THA T THIS SYSTEM HAD GENERATED TOTAL INTEREST OF RS.40.96 LACS AGAINST WHICH INTER EST PAYABLE ON OD ACCOUNT IS RS.20.29 LACS. THE SUM RECEIVED ON FDS IS MUCH MOR E THAN THE INTEREST PAYABLE ON OD ACCOUNTS. HE SUBMITTED THAT IN ACCOUNTING AS WELL AS IN LAW NETTING OF INTEREST IS REQUIRED. LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF HONBLE SUPREME COURT DECISION IN CASE OF KESHAVJI RAVJI & CO. VS. CIT (1990) 183 ITR 1 (SC). LD. COUNSEL ALSO RELIED ON THE DECISION OF GUJARAT ITA NOS. 170 & 2692/AHD/11 & C.O. NO.43/AHD/11 FOR A.Y.07-08 &08-09 PAGE 10 HIGH COURT IN CASE OF CIT VS. WINTEX MILLS LTD. (20 00) 245 ITR 266 (GUJ.). LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE COURTS, ON THE BASIS OF PRINCIPLE OF NETTIN G THE WHOLE INTEREST OUT OF RS.20.25 LACS ON OVERDRAFT WAS REQUIRED TO BE DEDUC TED FROM MUCH BIGGER SUM OF INTEREST RECEIVED ON FDS RS.40.96 LACS. HE SUBM ITTED THAT THE FINDING THAT THERE IS NO NEXUS BETWEEN SUMS OF OVERDRAFT ACCOUNT AND THE FDS MADE WITH VARIOUS BANKS, SAME IS NOT BORNE OUT FROM THE RECOR DS. HE SUBMITTED THAT UNDER THESE FACTS, THE ENTIRE INTEREST AS CLAIMED BY THE ASSESSEE IS REQUIRED TO BE ALLOWED. 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PER USED THE MATERIAL ON RECORD. THERE IS NO DISPUTE WITH REGARD TO THE POS ITION OF LAW THAT THE EXPENDITURE NOT BEING IN THE NATURE OF CAPITAL EXPE NDITURE MADE OUT OR EXTENDED WHOLLY OR EXCLUSIVELY FOR THE PURPOSE OF EARNING IN TEREST INCOME IS ALLOWABLE FOR DEDUCTION U/S.57 OF THE ACT. THE CONTENTIONS OF TH E ASSESSEE IS THAT THE INTEREST PAID TO THE BANKS IN RESPECT OF OVER DRAFT ACCOUNTS WAS EXTENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING OF THE INTER EST INCOME. THEREFORE, IT WAS REQUIRED TO BE ALLOWED. ON THE CONTRARY, THE ASSES SING OFFICER DISALLOWED THE CLAIM ON THE BASIS THAT THE FACILITIES WERE NOT USE D FOR MAKING INVESTMENT IN FD AND SUM WAS NOT WHOLLY OR EXCLUSIVELY FOR THE PURPO SE OF EARNING OF INTEREST INCOME OF FDS. ON THE CONTRARY, THE LD. CIT(A) HAD GIVEN THE FINDING THAT SO FAR INTEREST PAID ON BANK OVERDRAFT WITH HSBC BANK, ICI CI BANK AND, PNB. THE NEXUS HAS BEEN ESTABLISHED BETWEEN THE INTEREST PAI D AND INTEREST EARNED. THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE IN TO THIS FINDING OF LD. CIT(A). THIS GROUND OF REVENUES APPEAL IS REJECTED. 9. NOW, COMING TO THE CROSS OBJECTION NO.43/AHD/201 1, ASSESSEE HAS RAISED FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) HAS ERRED IN NOT ALLOWING DEDUCTION OF TOTAL OUTGO FOR INTEREST IN A SUM OF RS.20,25,250 ON BANK OVER DRAFTS (ODS) WHICH IS CLAIMED BY ITA NOS. 170 & 2692/AHD/11 & C.O. NO.43/AHD/11 FOR A.Y.07-08 &08-09 PAGE 11 THE ASSESSEE AGAINST INTEREST RECEIPTS OF RS.40,96, 486 ON FIXED DEPOSITS (FDS) WITH VARIOUS BANKS AND HAS FURTHER E RRED IN UPHOLDING DISALLOWANCE OF RS.6,43,103. 2. WITHOUT PREJUDICE, ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE, TIE CIT(A) HAS ERRED IN PROCEEDING ON THE FOO TING THAT THE OD INTEREST PAID TO HDFC BANK WAS NOT RELATABLE TO THE FDS PUT IN VARIOUS BANKS. 3. THE RESPONDENT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR WITHDRAW ANY GROUND OR GROUNDS OF CROSS OBJECTIONS EITHER BE FORE OR DURING THE COURSE OF HEARING OF THE CROSS-OBJECTION. THE ONLY EFFECTIVE GROUND IS AGAINST UPHOLDING THE DISALLOWANCE OF RS.6,43,103/-. LD. COUNSEL FOR THE ASSESSEE REITER ATED THE SUBMISSIONS AS WERE MADE IN ITA NO.170/AHD/2011. ON THE CONTRARY, LD. SR. D.R. SUPPORTED THE ORDER OF AUTHORITIES BELOW. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT TH E EXPENDITURE EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING THE INTE REST INCOME IS ELIGIBLE DEDUCTION/S.57 OF THE ACT. THE ASSESSEE IN PARA 5 O F HIS STATEMENT OF FACT HAS GIVEN A TABLE DEMONSTRATING THE DEPOSITS OF HSBC BA NK, ICICI BANK AND, PNB AND ALSO FD AND OD ACCOUNTS. THE CONTENTION OF THE ASSESSEE IS THAT THE OVERDRAFT FACILITIES WERE USED ONLY FOR THE PURPOSE OF MAKING BANK FDS AND SUCH FACILITY WAS UTILIZED FOR ANY OTHER PURPOSES. TH E ASSESSEE HAS DEMONSTRATED THROUGH ACCOUNTS THAT THE FD AND OD FACILITY WAS UT ILIZED FOR THE PURPOSE OF MAKING FDS ONLY. UNDER THESE FACTS, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION OF THE INTEREST INCOME. MOREOVER, IN THE LIGHT OF RATIO LAID DOWN BY THE HONBLE APEX COURT IN CAS E OF KESHAVJI RAVJI & CO. VS. CIT (SUPRA) AND HONBLE GUJARAT HIGH COURT IN C ASE OF CIT VS. WINTEX MILLS LTD.(SUPRA), ON THE BASIS OF PRINCIPLE OF NETTING, THE ASSESSEE WAS ENTITLED FOR DEDUCTION IN RESPECT OF THE INTEREST PAID ON OVERDR AFT ACCOUNT. THEREFORE, WE ITA NOS. 170 & 2692/AHD/11 & C.O. NO.43/AHD/11 FOR A.Y.07-08 &08-09 PAGE 12 HEREBY DIRECT THE ASSESSING OFFICER TO DELETE THE D ISALLOWANCE OF RS.6,43,103/-. THE GROUND OF ASSESSEES CROSS OBJECTION IS ALLOWED . 11. NOW WE TAKE UP REVENUES APPEAL IN ITA NO. 2692 /AHD/2011 FOR A.Y. 2008-09. 12. THE ONLY GROUND IN THIS APPEAL IS AGAINST DIREC TING THE ASSESSING OFFICER TO ALLOW THE INTEREST EXPENDITURE OF RS.19,37,686/- . LD. SR. D.R. SUBMITTED THAT LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE DISALL OWANCE AND STRONGLY SUPPORTED THE ORDER OF ASSESSING OFFICER. ON THE CONTRARY, L D. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD. CIT(A) HAS GIVEN FINDING IN FACT WHICH IS NOT CONTROVERTED BY THE REVENUE. THEREFORE, HE SUBMITTED THAT THERE IS NO ILLEGALITY IN THE ORDEROF CIT(A). SAME MAY BE UPHELD. 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE LD. CIT(A) IN PARA 4 OF THIS ORDER HAS DECIDED THE ISSUE AS UNDER: 4. AS REGARDS THE FD WITH PNB OF RS. 6 CRORES I NVESTED ON 3/1/2007, THE FD WAS MATURED ON 18/4/2007 FOR RS.606,51,866/-. T HIS AMOUNT HAS BEEN UTILIZED BY THE APPELLANT FOR THE REPAYMENT OF OD ACCOUNT WITH PNB ON 18/4/2007 WHICH RESULTED INTO THE CREDIT BALANCES OF RS.65,0,122/- . SIMILARLY, THE OD OF RS.3,23,10,000/- AS ON 31/1/2007 WAS REPAID BY THE APPELLANT FROM HER SAVING ACCOUNT WITH BANK OF BARODA BY DEPOSITING THE AMOUN T OF RS.59 LAKHS, RS.2.30 CRORES AND RS.55,29,166/- FROM ICICI BANK ON ACCOUNT OF MA TURITY OF FIXED DEPOSIT. SIMILARLY, THE HSBC OD ACCOUNT OF RS.222 LAKHS WAS REPAID BY THE APPELLANT OUT OF MATURITY OF VARIOUS FIXED DEPOSITS MAINLY IN THE MO NTH OF OCTOBER, NOVEMBER AND DECEMBER, 2007. FOR THIS PURPOSE, THE APPELLANT HAS ENCLOSED THE ACCOUNT OF ICICI BANK DEPOSIT ACCOUNT, HSBC BANK FDR ACCOUNT, HSBC B ANK FD OD ACCOUNT, PNB DEPOSIT ACCOUNT 4726, PNB DEPOSIT A/C NO. 13262, PN B FD A/C NO. 15891 AND PNB FD OD A/C. NO. 15882. ALL THESE BANK ACCOUNTS HAVE BEEN VERIFIED BY ME PERSONALLY. AFTER VERIFICATION OF EACH AND EVERY ENTRY, I AM CO NVINCED THAT THE OD ACCOUNTS HAVE BEEN UTILIZED BY THE APPELLANT FOR EARNING INTEREST WITH FD IN BANKS AND THE REPAYMENT OF THE OD ACCOUNT HAS BEEN MADE OUT OF TH E MATURITY OF FIXED DEPOSIT, ACCOUNT. THEREFORE, THERE IS A DIRECT NEXUS BETWEEN THE INTEREST INCOME ON FIXED DEPOSIT AND THE INTEREST EXPENDITURE CLAIMED ON THE OD ACCOUNT. THE SAME IS ALLOWABLE U/S. 57(III) OF THE I.T. ACT. THEREFORE, AFTER FOLLOWING THE ORDER OF THE CIT(A)-I/CC-L(3)/267/09-10 DATED 29/11/2010 IN THE CASE OF THE APPELLANT FOR A.Y. 2007-08, THE AO IS DIRECTED TO ALLOW THE INTEREST E XPENSES OF RS. 19,37,686/-IN THE YEAR UNDER CONSIDERATION. ITA NOS. 170 & 2692/AHD/11 & C.O. NO.43/AHD/11 FOR A.Y.07-08 &08-09 PAGE 13 THE ABOVE FINDING OF CIT(A) WAS NOT CONTROVERTED BY THE REVENUE BY PLACING ANY CONTRARY MATERIAL ON RECORD. WE HAVE DECIDED TH E SIMILAR ISSUE IN ASSESSEES OWN CASE IN ITA NO.170/AHD/2011 FOR A.Y. 2007-08. AS THE FACTS ARE IDENTICAL, SO FOLLOWING SAME REASONING, WE DO NOT SEE ANY REAS ON TO INTERFERE INTO THE ORDER OF LD. CIT(A). SAME IS HEREBY UPHELD. THE G ROUND RAISED IN THIS APPEAL BY REVENUE IS REJECTED. THE OTHER TWO GROUNDS ARE GENERAL IN NATURE NEEDS NO ADJUDICATION. 14. IN THE RESULT, BOTH APPEALS OF THE REVENUE ARE DISMISSED AND CROSS OBJECTION OF ASSESSEE IS ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 30/09/2015 SD/- SD/- (ANIL CHATURVEDI) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER S.K.SINHA / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. ! '# $ / CONCERNED CIT 4. $ - / CIT (A) 5. %&'(('# , '# , ! / DR, ITAT, AHMEDABAD 6. '+,-. / GUARD FILE. BY ORDER/ , //TRUE COPY// / '# , !