ASHA ASHAR, MUMBAI V. ITO 19(2)(2), MUMBAI

ITA 1810/MUM/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4121 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 30-07-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 15-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: KIRIT R KAMDAR
• Keywords: Capital asset; Business income; Rule of consistency; Advance ruling
• Section: 143(3); 2(14)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI A BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 1810 /MUM/2012 ( / ASSESSMENT YEAR : 2006-07) ASHA ASHAR, MUKTANGAN, 10 TH FLOOR, SAROJINI ROAD, SANTACRUZ (WEST), MUMBAI 400 054. / V. INCOME TAX OFFICER 19(2)(2), MUMBAI. ./ PAN :AFMPA8238H ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY SHRI KIRIT R. KAMDAR REVENUE BY : SHRI GANESH BARE / DATE OF HEARING : 19-01-2016 / DATE OF PRONOUNCEMENT : 01-02-2016 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE, BEING ITA NO. 1810/MUM/2012, IS DIRECTED AGAINST THE ORDER DATED 02-12-2011 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 35, MUMBAI (H EREINAFTER CALLED THE CIT(A)), FOR THE ASSESSMENT YEAR 2006-07. 2. THE GROUNDS RAISED BY THE ASSESSEE IN THE MEMO O F APPEAL FILED WITH THE TRIBUNAL READ AS UNDER:- 1. SHORT TERM CAPITAL GAINS ON SALE OF SHARES ASSE SSED TO TAX UNDER THE HEAD 'PROFITS AND GAINS FROM BUSIN ESS OR PROFESSION' 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ITA 1810/MUM/2012 2 COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOL DING THE ACTION OF THE INCOME TAX OFFICER IN ASSESSING SHORT TERM CAPI TAL GAINS ON SALE OF SHARES UNDER THE HEAD 'PROFITS AND GAINS FROM BUSIN ESS OR PROFESSION INSTEAD OF INCOME UNDER THE HEAD 'SHORT TERM CAPITA L GAINS' AS PER THE RETURN OF INCOME FILED FOR THE YEAR UNDER REFERENCE . 1.2 IN DOING SO, THE COMMISSIONER OF INCOME TAX (AP PEALS) ERRED IN THE FOLLOWING RESPECTS: 1.2.1 IN NOT APPRECIATING THE FACT THAT THE APPELLA NT IS AN INVESTOR HOLDING INVESTMENT IN SHARES AND SECURITIES OVER A PERIOD OF YEARS AS INVESTMENT IN CAPITAL ASSETS AND HAS CONSISTENTLY O FFERED TO TAX PROFIT ON SALE OF SHARES UNDER THE HEAD CAPITAL GAINS WHICH I S ACCEPTED BY THE DEPARTMENT AND NOT A TRADER IN SHARES HOLDING SHARE S AS STOCK IN TRADE OF BUSINESS. 1.2.2 IN NOT APPRECIATING THE FACT THAT MAJOR PORTI ON OF THE SHARES SOLD DURING THE YEAR WERE HELD BY THE APPELLANT FOR A PE RIOD OF 3-4 YEARS AND THE INCOME UNDER THE HEAD LONG TERM CAPITAL GAINS F AR EXCEEDS THE AMOUNT OF PROFITS UNDER THE HEAD SHORT TERM CAPITAL GAINS AND EVEN IN THE CASE OF SHARES SHORT TERM CAPITAL GAINS ON SALE OF SHARES HELD FOR PERIOD LESS THAN ONE YEAR, THE MAJOR PORTION OF GAI NS IS ATTRIBUTABLE TO SHARES HELD FOR PERIOD EXCEEDING ONE MONTH AND UPTO TWELVE MONTHS. 2. RESTRICTING THE DEDUCTION IN RESPECT OF SOCIETY MAINTENANCE CHARGES TO THE EXTENT OF MUNICIPAL TAXE S AMOUNTING TO RS. 62,175/- WHILE COMPUTING INCOME UN DER THE HEAD 'INCOME FROM HOUSE PROPERTY' 2.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOL DING THE ACTION OF THE INCOME TAX OFFICER IN RESTRICTING THE DEDUCTION IN RESPECT OF SOCIETY MAINTENANCE CHARGES AMOUNTING TO RS. 62,175/- WHILE COMPUTING INCOME UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' 2.2 IN DOING SO, THE COMMISSIONER OF INCOME TAX (AP PEALS) ERRED IN THE FOLLOWING RESPECTS. 2.2.1 IN NOT APPRECIATING THE FACT THAT RENT RECEIV ED DURING THE YEAR UNDER REFERENCE AND OFFERED TO TAX IS INCLUSIV E OF SOCIETY MAINTENANCE CHARGES AND ALSO THE FACT THAT THE RENT RECEIVED DURING THE YEAR UNDER REFERENCE, AFTER EXCLUDING TH E SOCIETY MAINTENANCE CHARGES RECEIVED WAS MORE THAN THE LETT ING VALUE FIXED BY THE MUNICIPAL CORPORATION/STANDARD RENT. 2.2.2 IN NOT APPRECIATING THE FACT THAT THE DEDUCTI ON ON ACCOUNT OF SOCIETY MAINTENANCE CHARGES ARE CLAIMED U/ S 23 OF THE ACT AND NOT U/ S 24(A) OF THE ACT. ITA 1810/MUM/2012 3 3. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTI NY U/S 143(3) OF THE INCOME TAX ACT,1961(HEREINAFTER CALLED THE ACT ) READ WITH SECTION 143(2) OF THE ACT .DURING THE PREVIOUS YEAR, THE ASSESSEE HAS DECLARED SHORT TERM CAPITAL GAINS OF RS. 6,76,915/- FROM THE SALES OF S HARES. THE ASSESSEE WAS ASKED TO FURNISH EXPLANATION BY THE LEARNED ASSESSI NG OFFICER (HEREINAFTER CALLED THE AO) AS TO WHY THE PROFITS OUT OF SUCH TRANSACTIONS OF PURCHASE AND SALE OF SHARES SHOULD NOT BE TREATED AS BUSINES S INCOME OF THE ASSESSEE. IN REPLY, THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS AN INVESTOR WHO INVESTS IN SHARES & SECURITIES OVER A PERIOD OF YEARS AND T HE SAME ARE HELD AS INVESTMENT AND MAJOR PORTION OF THE SCRIPS SOLD DUR ING THE YEAR HAVE BEEN HELD FOR OVER 3-4 YEARS, WITH INVESTMENT BEING SUBJ ECT MOTTO. THE PURCHASE AND SALE OF SHARES ARE DULY ACCOMPANIED BY DELIVERY OF SUCH SHARES, WHICH SHOWS THAT THE ASSESSEE IS AN INVESTOR AND NOT A TR ADER. THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS BEEN INVESTING IN S HARES AND SECURITIES OVER A PERIOD OF YEARS AND THE SAME HAS BEEN ACCEPTED BY THE REVENUE IN ALL THE PRECEDING YEARS. THE ASSESSEE IS AN INVESTOR WITH T HE MAIN INTENTION TO EARN CAPITAL GAINS ON THE SALE OF SHARES AND TO EARN DIV IDEND INCOME AND NOT A TRADER IN SHARES AND HENCE THE ASSESSEE REQUESTED T HAT THE PROFIT ON SALE OF THE SHARES IS IN THE NATURE OF CAPITAL GAINS. THE A .O., HOWEVER, REJECTED THE CONTENTIONS OF THE ASSESSEE BY RELYING UPON THE CBD T CIRCULAR NO. 4/2007 DATED 15-6-2007, WHICH READS AS UNDER:- SECTION 2(14) OF THE I. T. ACT, 1961 - CAPITAL A SSET/TRADING ASSET - DISTINCTION BETWEEN SHARES HELD AS STOCK IN TRADE AND SHARES HELD AS INVESTMENT- TEST FOR SUCH DISTINCT ION 'IN THIS CIRCULAR GUIDING PRINCIPLES, WHICH THE AO HAS TO FOLLOW WHILE DECIDING THE ISSUE WHETHER THE TRANSACTION ENTERE D INTO BY THE ASSESSEE IN SHARES AND SECURITIES AMOUNTS TO TRAD ING OR ARE IN NATURE OF INVESTMENT ARE ENUMER ATED. THESE GUIDING PRINCIPLES EMANATE FROM THE VARIOUS JUDICI AL PRONOUNCEMENTS AND ON THE BASIS OF THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT ITA 1810/MUM/2012 4 IN THE CASE OF: 1. COMMISSIONER OF INCOME TAX (CENTRAL) CALCUTTA V. ASSOCIATED INDUSTRIAL DEVELOPMENT COMPANY (P) LTD. (82 ITR 586) 2. CIT BOMBAY V. HOICK LARSEN (160 ITR 67) AND OF T HE AUTHORITY FOR ADVANCE RULINGS (AAR) IN THE CASE OF FIDELITY GROUP. THE BROAD PRINCIPLES CAN BE SUMMARIZED THUS:- A. WHETHER OR NOT THERE IS FREQUENCY IN THE TRANSAC TIONS AND WHETHER THEY ARE NUMEROUS. B. THE TOTAL NUMBER OF SCRIPS INVOLVED I.E. WHETHER TRANSACTIONS ARE EFFECTIVE. C. AVERAGE HOLDING PERIOD OF VARIOUS SCRIPS. D. MOTIVE OF THE ASSESSEE. BASED UPON THE ABOVE, THE A.O. CONCLUDED THAT THE A SSESSEE HAS ENTERED INTO OVER 200 TRANSACTIONS OF PURCHASE AND SALE EACH FOR ACCRUING THE SAID GAINS OF RS. 6,76,915/- WHICH WAS OFFERED FOR TAX BY THE ASS ESSEE AS SHORT TERM CAPITAL GAINS. THE ASSESSEE HAS DEALT IN OVER 100 DIFFERENT SCRIPS DURING THE YEAR UNDER CONSIDERATION. OUT OF THE TOTAL TRANSACT IONS, THE PERIOD OF HOLDING IN OVER 100 INSTANCES IS LESS THAN THREE MONTHS, OU T OF WHICH IN 65 INSTANCES THE HOLDING PERIOD IS LESS THAN ONE MONTH. FROM THE ABOVE, THE A.O. HELD THAT BUYING AND SELLING OF SHARES IS DONE BY THE ASSESSE E WITH AN MOTIVE TO MAXIMIZE PROFITS. AS THE VOLUME AND FREQUENCY OF TH E TRANSACTIONS IS VERY HIGH AS INDICATED HEREINABOVE, IT CAN BE PRESUMED T HAT THE BASIC AIM WAS TO GET THE BEST PROFITS FROM THE MONEY INVESTED AND TH ERE WAS NO INTENTION TO DERIVE INCOME BY WAY DIVIDEND FROM THE SAID SHARES. THE A.O. CONCLUDED THAT INCOME DECLARED BY THE ASSESSEE UNDER THE HEAD 'CAP ITAL GAINS' ON ACCOUNT OF THE BUYING AND SELLING OF SHARES IS ASSESSABLE A S 'BUSINESS INCOME' OR ALTERNATIVELY INCOME GENERATED FROM AN ADVENTURE/EN TERPRISE OF TRADE OR ITA 1810/MUM/2012 5 BUSINESS. THE A.O. HELD THAT THE ACTION OF THE ASSE SSEE TO DECLARE THE GAINS OF SUCH ACTIVITY AS SHORT TERM CAPITAL GAINS IS ACTUAT ED BY THE CONSIDERATION TO REDUCE THE TAX LIABILITY AS THE SHORT TERM CAPITAL GAINS ARE TAXABLE @ 10%, WHEREAS THE BUSINESS INCOME WOULD BE TAXABLE @ 30%, HENCE, THE PROFIT OF RS. 6,76,915/- DERIVED FROM BUYING AND SELLING OF SHARE S WAS ASSESSEE BY THE AO UNDER THE HEAD 'INCOME FROM BUSINESS' INSTEAD OF S HORT TERM CAPITAL GAINS AS OFFERED TO TAXATION BY THE ASSESSEE, VIDE ASSESS MENT ORDERS DATED 30.12.2008 PASSED U/S 143(3) OF THE ACT . 4. THE SECOND ISSUE IN THIS APPEAL RELATES TO THE R ESTRICTION OF THE DEDUCTION IN RESPECT OF SOCIETY MAINTENANCE CHARGES AND MUNICIPAL TAXES OF RS.1,80,000/- CLAIMED BY THE ASSESEE IN THE RETURN OF INCOME FILED WITH THE REVENUE, TO THE AMOUNT OF MUNICIPAL TAXES AMOUNTING TO RS. 62,175/- AND DENIAL OF CLAIM OF DEDUCTION OF SOCIETY MAINTENANCE CHARGES OF RS.1,17,825/- U/S 23 OF THE ACT, BY THE AO WHICH WAS CONFIRMED B Y THE CIT(A). 5. THE ASSESSEE HAS DECLARED INCOME FROM HOUSE PROP ERTY AT RS. 8,82,000/-. THE ASSESSEE HAS SHOWN RENT RECEIVED A T RS. 14,40,000/- AND AGAINST SUCH RENT, THE ASSESSEE HAS CLAIMED AN AMOU NT OF RS. 1,80,000/- ON ACCOUNT OF SOCIETY MAINTENANCE & OTHER CHARGES AND DECLARED THE NET ANNUAL VALUE AT RS. 12,60,000/-. THE ASSESSEE WAS ASKED BY THE AO TO FURNISH JUSTIFICATION IN THIS REGARD. IN REPLY, THE ASSESSE E STATED THAT THE MAINTENANCE & OTHER CHARGES COMPRISED OF MUNICIPAL TAXES OF RS. 62,175/- AND OTHER SOCIETY CHARGES OF RS. 1,17,825/-, WHICH WAS CLAIME D DEDUCTION U/S 23 OF THE ACT. THE ASSESSEE SUBMITTED THAT THAT THE RENT WAS INCLUSIVE OF THE MAINTENANCE CHARGES AND MUNICIPAL TAXES AND THE NET RENT RECEIVED AFTER DEDUCTION OF THE SOCIETY CHARGES IS MORE THAT MUNIC IPAL VALUATION. THE ASSESSEE ALSO PLACED RELIANCE ON THE DECISION OF TH E TRIBUNAL, MUMBAI IN CASE OF NANDITA BANERJEE V. ITO. THE A.O. HELD THAT AS P ER THE PROVISO TO SECTION 23 OF THE ACT, FOR THE PURPOSE OF COMPUTATION OF ANNUA L VALUE, THE ASSESSEE IS ITA 1810/MUM/2012 6 ALLOWED DEDUCTION ONLY FOR PAYMENT OF TAXES LEVIED BY THE LOCAL AUTHORITY IN RESPECT OF THE PROPERTY. THE SAID PROVISO SPEAKS SP ECIFICALLY ABOUT TAXES LEVIED IN RESPECT OF THE PROPERTY. IT IS NOT FOR ANYONE T O STRETCH THE MEANING FURTHER AND INCLUDES SOCIETY CHARGES IN THE AMBIT OF THE PR OVISO. HENCE, THE A.O. MADE ADDITION OF RS. 1,17,825/- AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY VIDE ASSESSMENT ORDERS DATED 30.12.2008 PASSED BY THE AO U/S 143(3) OF THE ACT. HOWEVER, THE AO ALLOWED THE STANDARD DEDUCTION TO THE ASSESSEE AS P ROVIDED U/S 24(A) OF THE ACT, VIDE HIS ORDERS DATED 30.12.2008. 6. AGGRIEVED BY THE ASSESSMENT ORDERS DATED 30.12. 2008 PASSED BY THE AO U/S 143(3) OF THE ACT, THE ASSESSEE FILED HIS FIRST APPEAL BEFORE THE CIT(A). 7. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT T HE ASSESSEE IS AN INVESTOR AND HAS CONSISTENTLY INVESTED IN SHARES AN D SECURITIES OVER A PERIOD OF YEARS AND THE SAME ARE HELD AS INVESTMENTS/CAPIT AL ASSETS. IT WAS SUBMITTED THAT DURING THE PREVIOUS YEAR RELEVANT T O THE ASSESSMENT YEAR, THE ASSESSEE HAS EARNED INCOME FROM SALE OF SHARES AMOU NTING TO RS. 676,915/- WHICH HAS BEEN OFFERED FOR TAXATION UNDER THE HEAD SHORT TERM CAPITAL GAIN. THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS DULY S UBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS , STATEMENT OF SHO RT TERM CAPITAL GAINS ON SALE OF SHARES WITH COMPLETE BIFURCATIONS ALONG WIT H SAMPLE COPY OF CONTRACT NOTES . THE ASSESSEE ALSO SUBMITTED THAT THE DETAIL ED NOTE ON JUSTIFICATION FOR TREATMENT OF THE GAIN AS SHORT TERM CAPITAL GAIN AN D NOT PROFIT AND GAIN OF BUSINESS WAS ALSO SUBMITTED ALONG WITH DETAILS OF H OLDING OF SHARES AS INVESTMENT OF RS.64,66,060/- AS ON 31.03.2005 AND R S.1,58,25,064/- AS AT 31.03.2006. THE ASSESSEE SUBMITTED THAT OUT OF SHOR T TERM CAPITAL GAIN ON SALE OF SHARES AMOUNTING TO RS. 6,76,915/-, A SUM O F RS. 2,13,702/- ONLY PERTAINS TO THE CAPITAL GAIN ON SALE OF SHARES HELD FOR A PERIOD OF LESS THAN ONE MONTH AND THE BALANCE OF CAPITAL GAINS ON SALE OF S HARES AMOUNTING TO RS. ITA 1810/MUM/2012 7 4,63,213/- PERTAINS TO SALE OF SHARES HELD FOR PERI OD EXCEEDING ONE MONTH AND UP-TO 12 MONTHS. THE CIT(A) HELD THAT THE ASSESSEE ENTERED INTO VOLUMINOUS TRANSACTION OF PURCHASE AND SALE OF SHARES DURING T HE PREVIOUS YEAR AND THE ASSESSEE TOOK DELIVERY OF THE SHARES PURCHASED AND THEN SOLD THEM. THE CIT(A) OBSERVED THAT THESE SHARES WERE HELD BY THE ASSESSEE FOR A PERIOD OF LESS THAN 12 MONTHS, THE GAIN ON SALE OF THESE SHAR ES WERE CLAIMED AS SHORT TERM CAPITAL GAIN AND OFFERED TO TAX ACCORDINGLY. THE CIT(A) OBSERVED THAT THE ASSESSEE HAS BEEN PURCHASING AND SELLING SHARES AND DURING THE RELEVANT PREVIOUS YEAR, THERE WERE IN ALL ABOUT NUMEROUS NUM BERS OF TRANSACTIONS OF PURCHASE AND SALE OF SHARES. THE MAXIMUM SALE OF S HARES WAS WITHIN VERY SHORT SPAN OF PURCHASE. THE VOLUME AND RATIO OF PUR CHASE/SALE OF SHARES WAS SUBSTANTIALLY HIGH COMPARED TO VOLUME AND RATIO OF OTHER RECEIPTS IN THE HANDS OF THE ASSESSEE. THE ASSESSEE ENTERED INTO T RANSACTIONS OF PURCHASE AND SALE OF SHARES IN RESPECT OF DELIVERY BASED TRA NSACTIONS AND THE ASSESSEE IS CLAIMING THAT THEY WERE INVESTMENTS AND PROFIT O N SALE OF SUCH SHARES GAVE RISE TO CAPITAL GAINS ONLY BECAUSE OF DELIVERY BASE D TRANSACTIONS. THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR HAD ENTERED INTO TRANSACTIONS OF PURCHASE OF SHARES OF ABOUT 200 COMPANIES. THE TRANSACTIONS WER E EFFECTED BY TAKING AND GIVING DELIVERY OF SHARES AT THE TIME OF PURCHASE A ND SALE. BESIDES SUCH TRANSACTIONS , THE ASSESSEE HAD ALSO ENTERED INTO T RANSACTIONS OF PURCHASE AND SALE OF SHARES WHERE THERE WAS NO ACTUAL DELIVE RY. IT WAS OBSERVED BY THE CIT(A) THAT BOTH THE AFORESAID TRANSACTIONS WERE IN RESPECT OF TRANSACTION OF PURCHASE AND SALE OF SHARES WHERE THE HOLDING PERIO D WAS LESS THAN 12 MONTHS. THE PROFIT ON SALE OF SHARES WHERE THERE WA S NO DELIVERY, WAS OFFERED TO TAX BY THE ASSESSEE AS SPECULATIVE INCOME UNDER THE HEAD 'BUSINESS INCOME'. THE INCOME FROM OTHER TRANSACTIONS WHERE T HERE WAS ACTUAL DELIVERY WAS CLAIMED BY THE ASSESSEE TO BE SHORT TERM CAPITA L GAINS. SUCH TRANSACTIONS WERE ABOUT 800 IN NUMBER DURING THE RELEVANT PREVIO US YEAR AND THE COMPANIES DEALT WITH BY THE ASSESSEE WHOSE SHARES W ERE PURCHASED OR SOLD WERE 200 IN NUMBER. THE HOLDING PERIOD WAS FROM 1 D AY TO MAXIMUM 6 ITA 1810/MUM/2012 8 MONTHS. THE CONDUCT OF THE ASSESSEE IN SHOWING INCO ME FROM DELIVERY BASED TRANSACTIONS AS SHORT TERM CAPITAL GAINS AND NON-DE LIVERY BASED TRANSACTIONS AS BUSINESS INCOME ONLY SHOWED THAT BUT FOR ACTUAL DELIVERY EVEN INCOME FROM THOSE TRANSACTIONS WOULD HAVE BEEN CONSIDERED AS SP ECULATIVE INCOME AND NOT AS BUSINESS INCOME. THE INCOME FROM DELIVERY BASED TRANSACTIONS WERE SOUGHT TO BE PROJECTED AS SHORT TERM CAPITAL GAINS ONLY BECAUSE THERE WAS ACTUAL DELIVERY AND BECAUSE THEY WERE SHOWN AS INVE STMENTS IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE ABOVE TWO ASPECTS WOUL D NOT MAKE ANY DIFFERENCE TO THE NATURE OF THE TRANSACTION WHERE D ELIVERY WAS EFFECTED CONSIDERING THE OTHER FACTS PREVAILING IN THE CASE OF THE ASSESSEE, VIZ. (A) THE VOLUME AND FREQUENCY OF THE TRANSACTIONS WHICH WERE ABOUT 800 IN NUMBER WHERE THE HOLDING PERIOD WAS BETWEEN MINIMUM OF 1 D AY TO MAXIMUM OF 6 MONTHS, (B)SHARES OF MORE THAN 200 COMPANIES HAD BE EN BOUGHT AND SOLD BY THE ASSESSEE DURING THE PREVIOUS YEAR, (C) THE VOLU ME OF PURCHASE AND SALE (DELIVERY BASED) OF THE ASSESSEE DURING THE PREVIOU S YEAR WAS RS. 1.01 CRORES AND RS. 1.10 CRORES RESPECTIVELY. THE VALUE OF INVE STMENT AS ON 31-3-2004 WAS ONLY RS. 11.14IAKHS, (D) THE PURCHASE AND SALE OF SHARES WAS THE ONLY ACTIVITY OF THE ASSESSEE, (E) THE PERIOD OF HOLDING BEING VERY SHORT, IT WAS REASONABLE TO PRESUME THAT THE PURCHASE WAS MADE WI TH AN INTENTION TO RESELL, (F) THE SCALE OF ACTIVITY WAS SUBSTANTIAL, (G) THE TRANSACTIONS WERE CONTINUOUS AND REGULAR BESIDES BEING SYSTEMATIC, (H ) BORROWED FUNDS HAD BEEN USED FOR PURCHASE OF SHARES. THE ASSESSEE'S CO NTENTION THAT BORROWED FUNDS WERE USED TO BUY IMMOVABLE PROPERTY REMAINED UNSUBSTANTIATED AND THE FINDINGS OF THE ASSESSING OFFICER TO THE CONTRA RY SHOULD, THEREFORE, PREVAIL, (I) SUBSTANTIAL TIME DEVOTED BY THE ASSESSEE TO THE ACTIVITY OF PURCHASE AND SALE OF SHARES AND ALL THE SHARES SOLD AND PURCHASE D WERE OF LISTED COMPANIES (J) COMPOSITION OF THE DIVIDEND INCOME BEING MEAGER WHICH SHOWS THAT THE ASSESSEE HAS NOT LOCKED ITS FUNDS IN THE SHARE INVE STMENT. IN THE LIGHT OF THE ABOVE CIRCUMSTANCES, IT WAS HELD BY THE CIT(A) VIDE ORDERS DATED 02.12.2011 THAT THE INCOME FROM SALE OF SHARES DECLARED BY THE ASSESSEE AS SHORT TERM ITA 1810/MUM/2012 9 CAPITAL GAIN WAS HELD TO BE INCOME FROM BUSINESS , AS RIGHTLY BEEN DONE BY THE A.O. 8. WITH RESPECT TO THE OTHER ISSUE REGARDING CLAIM OF THE ASSESSEE FOR DEDUCTION OF SOCIETY MAINTENANCE CHARGES AND MUNICI PAL TAXES OF TOTAL AMOUNT OF RS.1,80,000/- , THE ASSESSEE SUBMITTED TH AT THE CLAIM WAS RESTRICTED BY THE AO TO THE EXTENT OF MUNICIPAL TAX ES TO THE TUNE OF RS.62,175/- . THE ASSESSEE SUBMITTED THAT THE ANNU AL RENT AMOUNTING TO RS. 14,40,000/- WAS OFFERED TO TAX IS ARRIVED AT AFTER TAKING INTO ACCOUNT THE MUNICIPAL TAXES AND SOCIETY MAINTENANCE CHARGES TO BE BORNE BY THE ASSESSEE. THE ASSESSEE CONTENDED THAT THE A.O. WHIL E PASSING THE ORDER U/S 143(3) OF THE ACT HAS RESTRICTED THE DEDUCTION CLAI MED IN RESPECT OF MAINTENANCE CHARGES TO THE EXTENT OF ONLY MUNICIPAL TAXES PAID AMOUNTING TO RS. 62,175/- WHILE COMPUTING INCOME CHARGEABLE UNDE R THE HEAD INCOME FROM HOUSE PROPERTY. THE ASSESSEE RELIED ON THE F OLLOWING DECISIONS:- (I) MS. NANDITA BANERJEE V. ITO, ITA NO. 1360/MUM/2000, A.Y. 1995-96 (ORDER DATED 08-04-2004). MUMBAI TRIBUNAL, SMC BENC H. (II) SHARMILA TAGONE V. COMMISSIONER OF INCOME TAX (2005 ) 93 TTJ (MUM) 483 ITAT MUMBAI BENCH. (III) NEELAM CABLE MANUFACTURING COMPANY V. ASSTT. COMMISSI ONER OF INCOME TAX, ITAT DELHI. (IV) M/S SHERIFF CONSTRUCTIONS V. ASST. COMMISSIONER OF I NCOME TAX ITAT BANGALORE. THUS, THE ASSESSEE PRAYED THAT DEDUCTION WITH RESPE CT TO SOCIETY MAINTENANCE CHARGES AND MUNICIPAL TAXES AMOUNTING TO RS. 1,80,0 00/- BE ALLOWED AS DEDUCTION AS CLAIMED IN THE RETURN OF INCOME FILED WITH THE REVENUE. THE CIT(A), HOWEVER, VIDE ORDERS DATED 02.12.2011 REJEC TED THE CONTENTIONS OF THE ASSESSEE BY RELYING UPON THE DECISION OF THE DELHI TRIBUNAL IN THE CASE OF PICCADILY HOLIDAY RESORT LTD. V. DCIT (2005) 94 ITD 267 (DELHI) AND UPHELD THE ORDERS OF THE AO. ITA 1810/MUM/2012 10 9. AGGRIEVED BY THE ORDERS DATED 02.12.2011 OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 10. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SHORT TERM CAPITAL GAIN OF RS. 6,76,915/- EARNED BY THE ASSESSEE IS TR EATED AS BUSINESS INCOME OF THE ASSESSEE BY THE REVENUE WHICH IS CONFIRMED B Y THE CIT(A). THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE EARNED LONG TER M CAPITAL GAIN OF RS. 42,24,638/- WHICH IS EXEMPT FROM TAX AND THE SAME I S ACCEPTED BY THE REVENUE, THE DETAILS OF THE SAME ARE PLACED IN THE PAPER BOOK FILED BEFORE THE TRIBUNAL AT PAGES 6-8 WHILE DETAILS OF SHORT TERM C APITAL GAIN EARNED ON SALE OF SHARES IS PLACED AT PAPER BOOK PAGE 2-5. THE ASSE SSEE SUBMITTED THAT THE ASSESSEE HAS SUBSTANTIAL HOLDING OF SHARES, DETAILS OF WHICH IS PLACED AT PAPER BOOK PAGE 9 &10. THE LD. COUNSEL OF THE ASSESSEE SU BMITTED THAT IN THE EARLIER YEARS, THE REVENUE HAS ACCEPTED SIMILAR TRA NSACTIONS OF SHORT TERM CAPITAL GAIN VIDE INTIMATION U/S 143(1) OF THE ACT , FOR THE ASSESSMENT YEAR 2005-06 IS PLACED AT PAPER BOOK PAGE NO. 13 AND FOR THE ASSESSMENT YEAR 2003-04, IS PLACED AT PAPER BOOK PAGE 16 AND PRINCI PLES OF CONSISTENCY NEED TO BE FOLLOWED. THE LD. COUNSEL OF THE ASSESSEE RE LIED UPON THE DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF GOPAL PUROHIT V. JCI T, ITA NO. 4854/MUM/2008 FOR THE ASSESSMENT YEAR 2005-06, VID E ORDERS DATED 10-2- 2009 [2009] 122 TTJ (MUMBAI) 87 TO CONTEND THAT THE ASSESSEE HAS MAINTAINED SEPARATE PORTFOLIOS OF SHARES FOR OFFERI NG THE SAME TO TAX AS CAPITAL GAINS OR BUSINESS INCOME. THE LD. COUNSEL SUBMITTE D THAT THE ASSESSEE IS REGULARLY DEALING IN SHARES FOR SEVERAL YEARS TO EA RN CAPITAL GAIN AND DIVIDEND. THE ASSESSEE IS DEALING IN SHARES BASED UPON THE DE LIVERY TAKEN OR GIVEN BOTH AT THE TIME OF PURCHASE AND SALE OF SHARES. THE LD . COUNSEL MADE STATEMENT BEFORE US THAT OWN FUNDS ARE UTILIZED BY THE ASSESS EE FOR THE PURPOSE OF MAKING INVESTMENTS AND STATED THAT NO BORROWED FUND S WERE UTILIZED FOR MAKING INVESTMENT IN THE SHARES. THE ASSESSEE ALSO SUBMITTED THAT IN CASE THE SHARES ARE SOLD WITHOUT EFFECTING DELIVERY, THE N IN THAT CASE THE ASSESSEE ITA 1810/MUM/2012 11 HAS OFFERED THE GAINS (LOSS) TO TAX AS SPECULATIVE INCOME. THE LD. COUNSEL ALSO RELIED UPON THE DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF MRS. SHIKHA GUPTA V. ACIT IN ITA NO. 7711/MUM/2011 FOR THE ASSE SSMENT YEAR 2007-08 ORDER DATED 8-5-2013 AND ALSO IN THE CASE OF ACIT V . MRS. VINEET SETHI IN ITA NO. 4324/MUM/2010 FOR THE ASSESSMENT YEAR 2006-07 V IDE ORDERS DATED 24- 1-2014.THE LD COUNSEL OF THE ASSESSEE ALSO SUBMITTE D THAT DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF GOPAL PUROHIT(SUPRA) HAS BEEN APPROVED BY HONBLE BOMBAY HIGH COURT IN CIT V. GOPAL PUROHIT ( 2010) 188 TAXMAN 140(BOMBAY). THE LD. COUNSEL SUBMITTED THAT RULE OF CONSISTENCY HAS TO BE FOLLOWED AS IN THE EARLIER YEARS AND ALSO SUBSEQUEN T YEARS, THE REVENUE HAS ACCEPTED THE SAID INCOME TO BE FROM CAPITAL GAINS A ND BASED ON THE RULE OF CONSISTENCY THE SAID INCOME IS TO BE TREATED AS SHO RT TERM CAPITAL GAINS. 11. THE LD. D.R., ON THE OTHER HAND, SUBMITTED THAT THE ASSESSEE HAS ENTERED INTO REPETITIVE TRANSACTIONS OF SALE AND PU RCHASE OF SHARES. THE LD. D.R. REFERRED TO PAGE 2-5 OF THE ASSESSEES PAPER B OOK WHEREBY THE PERIOD- WISE DETAILS OF SHORT TERM CAPITAL GAINS ON SALE OF SHARES BY THE ASSESSEE SHOWS THAT ASSESSEE HAS INDULGED IN REPETITIVE TRAN SACTIONS OF PURCHASE AND SALE OF SHARES. THE LD DR POINTED OUT THE INSTANCE THAT SHARES OF ZEE TELEFILMS LIMITED WERE FIRST PURCHASED ON 21.10.200 5 AND SOLD ON 27.10.2005 AND THEREAFTER THE ASSESSEE AGAIN PURCHASED SHARES OF ZEE TELEFILMS LIMITED ON 27.01.2006 WHICH WERE THEN SOLD ON 13.02.2006. T HE LD. DR ALSO POINTED OUT THAT THE PERIOD OF HOLDING OF THE SHARES IN LAR GE NUMBER OF CASES IS EVEN LESS THAN 30 DAYS AND LD. DR PLEADED THAT THE AO HA S RIGHTLY TREATED THE GAINS ON SALE OF SHARES SOLD WITHIN PERIOD OF 12 MO NTHS AS BUSINESS INCOME AS THE MOTIVE OF THE ASSESSEE IS TO MAKE PROFITS AN D NOT TO EARN DIVIDEND, PERIOD OF HOLDING IS SHORT, TRANSACTIONS ARE REPETI TIVE WITH AN INTENT TO MAKE PROFITS. THE LD DR RELIED UPON THE ORDER OF THE CIT (A). ITA 1810/MUM/2012 12 12. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND AL SO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED THAT THE ASSE SSEE HAS BEEN CONSISTENTLY DEALING IN SHARES FOR PAST SEVERAL YEARS. THE REVEN UE HAS ACCEPTED THE GAINS OFFERED ON SHARES BASED ON DELIVERY AS CAPITAL GAIN S IN THE EARLIER YEARS AND SUBSEQUENT YEARS ALBEIT VIDE INTIMATIONS U/S 143(1 ) OF THE ACT WHICH ARE PLACED IN PAPER BOOK PAGE13 & 16 FOR ASSESSMENT YEA R 2005-06 AND 2003-04. THE DETAILS OF SHARES HELD BY THE ASSESSEE ARE PLA CED IN THE PAPER BOOK FILED BY THE ASSESSEE WITH THE TRIBUNAL AT PAGE NUMBER 9- 10. THE ASSESSEE HAS FILED DETAILS OF SHORT TERM CAPITAL GAINS AND LONG TERM CAPITAL GAINS EARNED ON SHARES IN THE PAPER BOOK, PAGE 2-8. WE HAVE ALSO O BSERVED THAT THE ASSESSEE HAS CLASSIFIED THE TRANSACTIONS IN SHARES IN VARIOU S HEADS WHEREBY IN CASE THE ASSESSEE IS NOT EFFECTING DELIVERY OF SHARES AT THE TIME OF PURCHASE OR SALE OF SHARES, THE SAME IS CATEGORIZED AS SPECULATIVE INCO ME AND WHILE WHERE THE DELIVERY BASED TRANSACTIONS OF SALE AND PURCHASED A RE CATEGORIZED AS LONG TERM OR SHORT TERM CAPITAL GAINS BASED ON PERIOD OF HOLDING OF THE SHARES AS PER THE ACT. THE REVENUE HAS ACCEPTED LONG TERM CAP ITAL GAINS OF RS 42,24,638/- OFFERED TO TAX BY THE ASSESSEE AS LONG TERM CAPITAL GAIN CHARGEABLE TO TAX , WHILE SHORT TERM CAPITAL GAINS OF RS.6,76,915/- OFFERED FOR TAX , IS TREATED AS BUSINESS INCOME BY THE REVENUE. FROM THE PERUSAL OF THE STATEMENT OF SHORT TERM CAPITAL GAIN, IT IS OBSERVE D THAT THE ASSESSEE HAS ENTERED INTO OVER 200 TRANSACTIONS OF PURCHASE AN D SALE OF SHARES IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR. WE HAVE OBSERVED THAT THE ASSESSEE IS REGULARLY DEALING IN SHARES WHEREBY THE PERIOD OF HOLDING IN SOME CASES IS EVEN ONE DAY. THE A.O. OBSERVED THAT OUT OF THE TOTAL TRANSACTIONS, THE PERIOD OF HOLDING IN OVER 100 INSTANCES IS LESS THAN THREE MONTHS AND IN 65 INSTANCES, THE HOLDING PERIOD IS LESS THAN ONE M ONTH. THE TRANSACTION IN THE SHARES ARE ALSO REPETITIVE LIKE IN THE SHARES O F ZEE TELEFILMS LIMITED, GARWARE SHIP, GAMMON,CARBORUNDUM UNIVERSAL, SIMBHOL I SUGAR ETC. WHEREBY THE ASSESSEE INDULGED IN REPETITIVE TRANSAC TIONS AND ALSO SOLD THE SHARES AFTER HOLDING FOR SHORT PERIOD . UNDER TH ESE CIRCUMSTANCES IN ORDER ITA 1810/MUM/2012 13 TO DO COMPLETE JUSTICE IN THE INSTANT CASE BASED ON FACTS AND CIRCUMSTANCE OF THE CASE, WE HOLD THAT THE GAINS ARISING FROM SALE OF SHARES HELD BY THE ASSESSEE UP TO ONE MONTH BE CLASSIFIED AS INCOME FR OM BUSINESS DESPITE BEING DELIVERY BASED TRANSACTIONS, WHILE THE GAINS ARISIN G FROM SALE OF SHARES HELD FOR MORE THAN ONE MONTH AND UP-TO TWELVE MONTHS SHO ULD BE CLASSIFIED AS SHORT TERM CAPITAL GAIN. WE HAVE COME TO THE ABOVE DECISION KEEPING IN VIEW THE PECULIAR FACTS AND CIRCUMSTANCES OF THE INSTANT CASE AS WE HAVE OBSERVED THAT IN LARGE NUMBER OF TRANSACTIONS OF PURCHASE AN D SALE OF SHARES, PERIOD OF HOLDING IS FROM 1 DAY TO 30 DAYS, THE TRANSACTIONS OF PURCHASE AND SALE OF SHARES BEING REPETITIVE AND THE ASSESSEE HAS DEALT IN LARGE NUMBER OF COMPANIES, THE PRIME OBJECTIVE OF SUCH TRANSACTIONS WHICH ARE CONCLUDED WITHIN ONE MONTH IN OUR CONSIDERED VIEW IS TO EARN AND MAXIMIZE PROFITS IN SHORTEST PERIOD OF TIME WHICH IS AKIN TO INTENTION OF DOING BUSINESS BY MAXIMIZING PROFITS WHILE DEALING IN SALE AND PURCHA SE OF SHARES RATHER TO HOLD SHARES AS INVESTMENT WITH A VISION TO EARN DIVIDEND AND OTHER BENEFITS ATTACHED TO HOLDING OF SHARES SUCH AS ENTITLEMENT T O RIGHT SHARES, BONUS SHARES ETC.. WE ORDER ACCORDINGLY. 13. REGARDING THE SECOND ISSUE, THE LD. COUNSEL FO R THE ASSESSEE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF SHARMILA TAGORE V. JCIT, (2 005) 93 TTJ (MUMBAI) 483 AND ALSO IN THE CASE OF BOMBAY OIL INDUSTRIES LTD. V. DCIT REPORTED IN (2002) 82 ITD 0626(MUM.). THE LD. COUNSEL FOR THE ASSESSE E SUBMITTED THAT THE RENTAL INCOME OF RS. 14,40,000/- RECEIVED BY THE AS SESSEE FROM THE TENANT INCLUDES THE SOCIETY MAINTENANCE CHARGES AND MUNIC IPAL CORPORATION TAXES AND HENCE THE ASSESSEE HAS RIGHTLY REDUCED THE SAID CHARGES ON ACCOUNT OF SOCIETY MAINTENANCE CHARGES AND MUNICIPAL CORPORAT ION TAXES AMOUNT TO RS.1,80,000/- FROM THE GROSS RENTAL RECEIVED . TH E LD. D.R. SUPPORTED THE ORDERS OF AUTHORITIES BELOW. ITA 1810/MUM/2012 14 14. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND AL SO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED THAT THE ASSE SSEE HAS PAID SOCIETY MAINTENANCE CHARGES OF RS. 1,17,825/- WHICH IS STA TED TO BE THE OBLIGATION OF THE LESSEE AND THE SAME IS DULY INCLUDED IN THE REN T RECEIVED BY THE ASSESSEE. IN OUR CONSIDERED VIEW, THIS ISSUE IS SQUARELY COVE RED BY THE DECISIONS OF THE TRIBUNAL IN THE CASES OF SHARMILA TAGORE (SUPRA) AN D BOMBAY OIL INDUSTRIES (SUPRA). RESPECTFULLY FOLLOWING THE DECISIONS OF T HE TRIBUNAL IN THE CASES CITED (SUPRA), WE HOLD THAT ASSESSEE IS ENTITLED FOR DEDU CTION OF RS. 1,17,825/- U/S 23 OF THE ACT APART FROM THE STANDARD DEDUCTION U/S 24(A) OF THE ACT. WE DIRECT THE AO TO VERIFY THE CLAIM OF DEDUCTION OF T HE ASSESSEE OF THE SAID SOCIETY MAINTENANCE CHARGES OF RS.1,17,825/- PAID B Y THE ASSESSEE BUT STATED TO BE OBLIGATION OF THE LESSEE AND STATED TO BE DUL Y INCLUDED IN THE GROSS RENT RECEIVED BY THE ASSESSEE BEFORE ALLOWING THE CLAIM OF THE ASSESSEE. WE ORDER ACCORDINGLY. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA N0. 1810/MUM/12 FOR THE ASSESSMENT YEAR 2006-07 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON IST FEBRUAR Y, 2016. # $% &' 01-02-2016 ( ) SD/- SD/- (AMIT SHUKLA) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 01-02-2016. .9../ R.K. R.K. R.K. R.K. , EX. SR. PS ITA 1810/MUM/2012 15 !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI H BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI