FAROKH HOMI COMMISSARIAT, MUMBAI V. DCIT 3(1), MUMBAI

ITA 2419/MUM/2010

• Counselvise Citation: 241919914 RSA 2010
• Duration Of Justice: 1 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 27-07-2011
• Assessment Year: misc
• Appeal Filed On: 26-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T T JACOB
• Assessee Lawyers: DR K SHIVARAM
• Keywords: Salary income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER ITA NO.2419/MUM./2010 (ASSESSMENT YEAR : 2005-06 ) SHRI FAROKH HOMI COMMISSARIAT SYLMOYNE, 3 M.L. DHANUKAR MARG MUMBAI 400 026 PAN AAAPC9595L .. APPELLANT V/S DY. COMMISSIONER OF INCOME TAX CIRCLE-2(2), AAYAKAR BHAVAN M.K. ROAD, MUMBAI 400 020 .... RESPONDENT ASSESSEE BY : DR. K. SHIVARAM REVENUE BY : MR. T.T. JACOB DATE OF HEARING 20.7.2011 DATE OF ORDER O R D E R PER J. SUDHAKAR REDDY, A.M. THIS APPEAL PREFERRED BY THE ASSESSEE, IS DIRECTED AGAINST THE IMPUGNED ORDER DATED 13 TH JANUARY 2010, PASSED BY THE COMMISSIONER (APPEALS)-V, MUMBAI, FOR ASSESSMENT YEAR 2005-06. 2. BRIEF FACTS OF THE CASE ARE THAT, THE ASSESSEE, AN INDIVIDUAL, DERIVES INCOME FROM SALARY. HE ALSO HAS INCOME UNDER THE HE ADS INCOME FROM HOUSE PROPERTY , INCOME FROM CAPITAL GAINS AND INCOME FROM OTHER SHRI FAROKH HOMI COMMISSARIAT SYLMOYNE 2 SOURCES . THE ASSESSEE IS THE MANAGING DIRECTOR OF JAMES MA CKINTOSH & CO. P. LTD. THE SHORT POINT THAT WE REQUIRE TO ADJUDICA TE IS, WHETHER THE INCOME EARNED BY THE ASSESSEE FROM SALE OF SHARES IS TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION OR UNDER THE HEAD SHORT TERM CAPITAL GAINS . THE ASSESSING OFFICER, VIDE PARA-5.3 OF HIS ORDER , OBSERVED THAT THE ASSESSEE HAS DEALT WITH SHARES THROUGH PORTFOLIO MA NAGERS. HE, THUS, HELD THAT THE INCOME IS ASSESSABLE UNDER THE HEAD BUSINESS . 3. ON APPEAL, THE COMMISSIONER (APPEALS) HAS UPHELD TH ESE FINDINGS ON THE GROUND THAT THE PERIOD BETWEEN DATE OF PURCHASE AND SALES VARYING FROM THREE DAYS TO FIVE MONTHS. HE REJECTED THE CONTENTI ON OF THE ASSESSEE THAT THERE IS NO BORROWED CAPITAL AND SIMILAR TRANSACTIO N BOTH IN EARLIER YEARS AND THE LATER YEARS WERE ASSESSED UNDER THE HEAD CAPITAL GAIN , ETC. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUN AL. 4. BEFORE US, LEARNED COUNSEL, DR. K. SHIVARAM, APPEAR ING ON BEHALF OF THE ASSESSEE, SUBMITS THAT THE ASSESSEE DERIVES INC OME FROM SALARY AND HE MADE INVESTMENTS THROUGH A PORTFOLIO MANAGER AND TH AT THE INVESTMENTS WERE MADE ONLY ON THREE OCCASIONS I.E., ON 19 TH AUGUST 2004, 27 TH SEPTEMBER 2004 AND 11 TH JANUARY 2005, AGGREGATING TO ` 43,42,280 AND THAT THE ASSESSEE IS AN INVESTOR AND IS HOLDING THE SHARES AS SUCH FOR A NUMBER OF YEARS AND IT WAS SHOWN AS INVESTMENT IN T HE BOOKS OF ACCOUNT. IT WAS ALSO SUBMITTED THAT THE COMMISSIONER (APPEALS), FOR ASSESSMENT YEAR 2006-07, ACCEPTED THAT THE ASSESSEE IS AN INVESTOR AND THE REVENUE HAS NOT GONE IN APPEAL. A NUMBER OF DECISIONS WERE RELIED U PON BY THE LEARNED COUNSEL. 5. LEARNED DEPARTMENTAL REPRESENTATIVE, MR. T.T. JACOB , ON THE OTHER HAND, RELIED ON PARA-5.1 OF THE ORDER PASSED BY THE COMMISSIONER (APPEALS). 6. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND A PERUSAL OF PAPERS O N RECORD AS WELL AS THE CASE LAWS CITED BEFORE US, WE FIND THAT THE ASSESSE E HAS MADE INVESTMENT SHRI FAROKH HOMI COMMISSARIAT SYLMOYNE 3 THROUGH A PORTFOLIO MANAGER M/S. A.S.K. RAIMON SECU RITIES INDIA P. LTD. THE ENTIRE INVESTMENT OF ` 43,62,280, WAS MADE ONLY ON THREE OCCASIONS I.E., 19 TH AUGUST 2004, 27 TH SEPTEMBER 2004 AND 11 TH JANUARY 2005. THE ASSESSEE HAS BEEN HOLDING THESE INVESTMENTS AS AN I NVESTOR AND OFFERING THE INCOME THEREFROM UNDER THE HEAD CAPITAL GAIN . THE INVESTMENTS HAD BEEN CONSISTENTLY VALUED AT COST. THE TURNOVER IS NEGLIG IBLE AND THERE IS NO TRADING. THE ASSESSEE NEITHER HAS BORROWED FUNDS NOR HAS ANY INFRASTRUCTURE FOR DOING THE BUSINESS. THE ASSESSEE DOES NOT HAVE ANY EMPLOYEES. UNDER THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THA T THE PLEA OF THE ASSESSEE SHOULD SUCCEED. A CO-ORDINATE BENCH OF THE TRIBUNAL IN ITO V/S RADHA BIRJU PATIL, ITA NO.5382/MUM./2009, FOR ASSES SMENT YEAR 2006-07, ORDER DATED 30 TH SEPTEMBER 2010, FOR ASSESSMENT YEAR 2006-07, HELD THAT THE TRANSACTIONS CARRIED OUT BY THE ASSESSEES PORT FOLIO MANAGERS WERE CLEARLY IN THE NATURE OF TRANSACTIONS MEANT FOR MAX IMIZATION OF WEALTH RATHER THAN ENCASHING THE PROFITS ON APPRECIATION OF VALUE OF SHARES. IT HELD THAT NO SUCH SITUATION, IT CANNOT, BY ANY STRETCH OF IMAGIN ATION, BE SAID THAT THE MAIN OBJECT OF HOLDING THE PORTFOLIO IS TO MAKE PROFIT B Y SALE OF SHARES DURING THE COURSE OF MAINTAINING THE PORTFOLIO INVESTMENT OVER THE PERIOD. THOUGH A NUMBER OF CASE LAWS HAVE BEEN RELIED UPON, AS THIS IS A FACTUAL ISSUE AND AS ON FACTS, WE HAVE HELD THAT THE SALARIED EMPLOYEE H AS NOT INDULGED ANY BUSINESS OF TRADING IN SHARES, WE SET ASIDE THE ORD ER OF THE COMMISSIONER (APPEALS) AND ALLOW THE GROUND RAISED BY THE ASSESS EE. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.8.2011 SD/- D.K. AGARWAL JUDICIAL MEMBER SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI, DATED: 12.8.2011 SHRI FAROKH HOMI COMMISSARIAT SYLMOYNE 4 COPY TO : (1) THE ASSESSEE; (2) THE RESPONDENT; (3) THE CIT(A), MUMBAI, CONCERNED; (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, F BENCH, ITAT, MUMBAI. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT, MUMBAI BENCHES, MUMBAI DATE INITIAL 1. DRAFT DICTATED ON 4.8.2011 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 8.8.2011 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 9.8.2011 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 9.8.2011 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 9.8.2011 SR.PS/PS 6. DATE OF PRONOUNCEMENT 12.8.2011 SR.PS 7. FILE SENT TO THE BENCH CLERK 12.8.2011 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER