Aluru Vamsi Krishna, Hyderabad V. JCIT., Range-8, Hyderabad, Hyderabad

ITA 1746/HYD/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6023 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-02-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 14-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M SITARAM
• Keywords: Gift; Business income; Source of fund

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO. 1746/HYD/2014 ASSESSMENT YEAR: 2010-11 ALURU VAMSI KRISHNA, HYDERABAD. PAN AHDPA6922D VS. JT. COMMISSIONER OF INCOME- TAX, RANGE 8, HYDERABAD. APPELLANT RESPONDENT ASSESSEE BY: SHRI K.C. DEVDAS REVENUE BY: SHRI M. SITARAM DATE OF HEARING: 18/02/2016 DATE OF PRONOUNCEMENT: 23/02/2016 O R D E R PER S.S. VISWANETHRA RAVI, J.M: THIS IS AN APPEAL AGAINST THE ORDER OF CIT(A) II I, HYDERABAD DATED 12/09/2014 ON THE ISSUE OF TAXATION OF GAINS ON SALE OF SHARES AS BUSINESS INCOME. 2. BRIEFLY STATED THE FACTS ARE THAT ASSESSEE AN I NDIVIDUAL AND A STUDENT HAS HIS OWN SOURCES AND ALSO SUBSTANT IAL AMOUNTS OF GIFTS RECEIVED NOT ONLY DURING THE YEAR BUT IN EARLIER YEARS ALSO. BEING A STUDENT, HE HAS INVESTE D THE FUNDS IN FIXED DEPOSITS AS WELL AS IN SHARES. THE SHARES ARE MANAGED BY A SHARE BROKER M/S DURGA PRASAD & CO. AN D A SEPARATE DMAT ACCOUNT IS HELD FOR THAT PURPOSE. ASS ESSEE IS INVOLVED IN PURCHASE AND SALE OF SHARES FROM AY 200 8-09 AS PLACED ON RECORD AND ASSESSMENTS HAVE BEEN ACCEPTED ACCEPTING THE CAPITAL GAINS, BOTH LONG TERM AND SHO RT TERM, IN THE EARLIER YEARS. HOWEVER, IN THIS YEAR, THE ASSES SING OFFICER WAS OF THE OPINION THAT THE ASSESSEE IS TRADING IN SHARES AND AFTER ANALYSING FEW CASE LAW EXAMINED THE ISSUE UND ER THE HEADS, I) PERIOD OF HOLDING, II) FREQUENCY OF TRANS ACTIONS, 3) MOTIVE OF TRANSACTIONS AND IV) SOURCE OF FUNDS. BY ANALYSING I.T.A. NO. 1746/H/14 ALURU VAMSI KRISHNA 2 THESE ISSUES, THE ASSESSING OFFICER WAS OF THE OPIN ION THAT SHORT TERM CAPITAL GAIN SHOWN BY THE ASSESSEE AT RS . 93,53,114/- IS TO BE TAXED AS INCOME FROM BUSINESS. HOWEVER, HE DID NOT DISTURB THE LONG TERM LOSS ON THE SAME T YPE OF TRANSACTIONS, WHICH WAS ALLOWED TO BE CARRIED FORWA RD. 3. ASSESSEE CONTESTED THE SAME BEFORE THE CIT(A) GI VING QUANTITY OF TRANSACTIONS, PERIOD OF HOLDING, PAST R ECORD AND RELYING ON VARIOUS CASE LAW INCLUDING THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GOPAL PUROHIT VS. JCIT, 336 ITR 287. HOWEVER, THE CIT(A) IN HIS BRIEF ORDER, WI THOUT EXAMINING THE FACTS HAS CONFIRMED THE ACTION OF THE ASSESSING OFFICER AND, HENCE, THE ASSESSEE IS IN APPEAL BEFOR E US. 4. ALL THE GROUNDS RAISED BY THE ASSESSEE ARE WITH REFERENCE TO THE ISSUE WHETHER THE INCOME EARNED IS CAPITAL GAINS OR BUSINESS INCOME. 5. WE HAVE HEARD THE LEARNED COUNSEL AND LD. DR IN DETAIL AND CONSIDERED THEIR SUBMISSIONS. WE ARE UNABLE TO APPRECIATE THE ACTION OF THE ASSESSING OFFICER IN D IFFERING FROM THE STAND TAKEN IN EARLIER YEARS AND TREATING ONLY THE SHORT TERM CAPITAL GAIN AS BUSINESS INCOME, WHILE ACCEPTI NG THE LONG TERM CAPITAL LOSS AS SUCH. AS SEEN FROM THE EARLIER YEARS BALANCE SHEET, ASSESSEE HAS INTEREST ON FIXED DEPOS ITS AND DIVIDENDS AND THE INVESTMENT IN SCRIPS AS ON 31/01/ 03/09 WAS TO THE EXTENT OF RS. 93,14,304. THE INVESTMENTS IN FIXED DEPOSITS ARE TO THE TUNE OF RS. 1.70 CRORES. DURING THE YEAR, ASSESSEE NOT ONLY SOLD SOME OF THE SHARES PURCHASED IN EARLIER YEARS BUT ALSO ACQUIRED SOME AND SOLD DURIN G THE YEAR THOUGH NOT COMPLETELY. AS CAN BE SEEN FROM THE STAT EMENT OF PERIOD OF HOLDING OF SHARES FILED FOR THE YEAR UNDE R CONSIDERATION, ASSESSEE HAS HELD SHARES FOR MORE T HAN TWO MONTHS ON AN AVERAGE IN NUMBER OF SHARES, BUT, WHAT WE NOTICE IS THAT THERE ARE NO SHARES WHICH WERE HELD FOR LESS THAN ONE WEEK AND THERE IS ONLY ONE PURCHASE OF SUZ LON ENERGY LTD. OF 5000 SHARES WHICH WERE HELD FOR A PE RIOD OF 8 DAYS. MANY OF THE SHARES PURCHASED DURING THE YEAR HAVE BEEN CARRIED OVER TO LATER YEAR AND THE CLOSING INV ESTMENT WAS TO THE EXTENT OF RS. 60.08 LAKHS. THE FIXED DEPOSIT S DURING THE YEAR WAS TO THE TUNE OF RS.1.35 CRORES. MOREOVER, T HERE IS NO DISPUTE THAT ASSESSEE HIMSELF IS NOT INDULGING IN P URCHASE AND SALE OF SHARES BEING A STUDENT AND HAS ENTRUSTED TH E WORK TO A I.T.A. NO. 1746/H/14 ALURU VAMSI KRISHNA 3 PORTFOLIO MANAGER, WHO WAS UNDERTAKING PURCHASE AND SALE OF SHARES. 6. COMING TO THE ARGUMENTS OF THE ASSESSING OFFICER , HE HAS CATEGORISED THE TRANSACTIONS INTO FOUR HEADS. A S SEEN FROM THE PERIOD OF HOLDING, ASSESSING OFFICER HIMSELF AD MITS THAT AVERAGE PERIOD OF HOLDING IS MORE THAN ONE MONTH. I F THE AVERAGE PERIOD OF HOLDING IS LESS THAN 30 DAYS, THE RE ARE SOME DECISIONS OF THE ITAT HOLDING THAT TRANSACTIONS AS TRADING WHICH ITSELF IS NOT UPHELD BY THE HONBLE BOMBAY HI GH COURT. THEREFORE, ON THAT REASON, THE ASSESSING OFFICERS STAND CANNOT BE UPHELD. COMING TO THE FREQUENCY OF TRANSA CTIONS, PURCHASE OF 25 SCRIPS AND SALE OF 28 SCRIPS CANNOT BE CONSIDERED AS FREQUENT I.E. ON AN AVERAGE, LESS THA N THREE TRANSACTIONS IN A MONTH. SINCE ASSESSEE HAD LARGE A MOUNT OF MONEY TO INVEST, THE QUANTUM OF INVESTMENT MAY BE L ITTLE HIGH BUT THE TRANSACTIONS ARE VERY FEW. THEREFORE, ONE C ANNOT CONSIDER THE PURCHASE OF 25 SHARES AS THAT OF FREQU ENT, SO AS TO CATEGORISE AS TRADING TRANSACTIONS. ASSESSING OF FICER HIMSELF LISTED OUT THE RATIO OF SALES TO PURCHASES VALUE-WISE AT 1.7 AND NUMBER OF SCRIPS AT 1.12. THIS RATIO CANNOT BE CONSIDERED AS HUGE. WITH REFERENCE TO MOTIVE OF TRA NSACTIONS, ASSESSING OFFICER CONSIDERED ONLY DIVIDEND OF RS. 1 ,12,000 RECEIVED DURING THE YEAR. ASSESSING OFFICER HAS NOT CONSIDERED THAT THESE DIVIDENDS CANNOT BE IN PROPOR TION TO THE INVESTMENTS MADE, BECAUSE MOST OF THE SHARE TRANSAC TIONS ARE FOR CAPITAL APPRECIATION AND NOT FOR DIVIDEND. EVEN THEN ASSESSEE HAD RECEIVED DIVIDEND IN THE LAST FOUR YEA RS, WHICH SHOWS THAT ASSESSEE IS HOLDING FOR INVESTMENT PURPO SE. COMING TO SOURCE OF FUNDS, ASSESSING OFFICER HIMSEL F NOTICED THAT ASSESSEE HAS RECEIVED GIFTS FROM VARIOUS FAMIL Y MEMBERS, WHICH ARE ACCEPTED AS SUCH. THEREFORE, THESE ARE TO BE CONSIDERED AS OWN FUNDS AS THEY ARE NOT BORROWALS. WITH REFERENCE TO OVERDRAFT (OD) ACCOUNT IN SBI, IT WAS SUBMITTED THAT NO OD FUNDS WERE UTILIZED FOR SHARE TRANSACTIO NS AND SMALL AMOUNT OF OD INTEREST PAID WAS SET OFF AGAINS T THE INTEREST INCOME RECEIVED FROM THE FIXED DEPOSITS AN D THAT HAS NOT BEEN DISTURBED AND AO HAS NOT CONSIDERED GIVING SET OFF IN TRADING ACCOUNT, IF AT ALL THE FUNDS ARE UTILIZED F OR THE PURCHASE OF SHARES. CONSIDERING THE FACTS OF THE CASE AND FO LLOWING THE PROPOSITION LAID DOWN IN THE CASE OF SPECTRA SHARES AND SCRIPS (P) LTD. VS. CIT, 354 ITR 35 (AP), WE ARE OF THE OPINION THAT THE TRANSACTIONS UNDERTAKEN BY THE ASSESSEE TH ROUGH A I.T.A. NO. 1746/H/14 ALURU VAMSI KRISHNA 4 PORTFOLIO MANAGER CANNOT BE CONSIDERED AS TRADING TRANSACTIONS SO AS TO TAX ONLY THE SHORT TERM CAPIT AL AS BUSINESS INCOME. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ON THIS COUNT ARE ALLOWED. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 23 RD FEBRUARY, 2016 SD/- SD/- (B. RAMAKOTAIAH) (S.S. VISWANETHRA RAVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 23 RD FEBRUARY, 2016 KV COPY FORWARDED TO: 1. A. VAMSI KRISHNA, PLOT NO. 85, SIDDHARTHA NAGAR, AMEERPET, HYDERABAD 500 038 2. ADDL. CIT, RANGE 8, HYDERABAD 3. CIT -III, HYDERABAD 4 CIT - II, HYDERABAD 5 THE DR, ITAT, HYDERABAD