ACIT, New Delhi V. M/s. Uma Rani, New Delhi

ITA 2467/DEL/2012

• Counselvise Citation: 246720114 RSA 2012
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 05-08-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 22-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUMIT GOEL CAS
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI B.C. MEENA ITA NO. 2467/DEL/2012 ASSTT. YR: 2008-09 ACIT CIRCLE 28(1), VS. MS. UMA RANI NEW DELHI. 4435/7, ANSARI ROAD DARYA GANJ, DELHI-110002. PAN: AAEPR 4240 D ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI SUNIL GAUTAM SR. DR RESPONDENT BY : S/SHRI RAJ KUMAR & SUMIT GOEL CAS. O R D E R PER R.P. TOLANI, J.M : THIS IS REVENUES APPEAL AGAINST CIT(A)S ORDER DA TED 22-3-2012 RELATING TO A.Y. 2008-09. SOLE GROUND RAISED IS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-XXV, NEW DELHI HAS ERRED IN THE FACTS BROUGH T BY THE A.O. ON RECORD TO CONCLUDE SHARE TRADING AS BUSINES S INCOME INSTEAD OF CAPITAL GAIN. 2. BRIEF FACTS ARE: THE ASSESSEE IS A HOUSE WIFE AN D CARRIES ON OCCASIONAL PURCHASE AND SALE OF SHARES SINCE PAST SEVERAL YARS , WHICH IS OFFERED FOR TAXATION AS LONG TERM CAPITAL GAINS BEING PROFITS O N INVESTMENTS. ACCORDINGLY THIS YEAR ALSO, THE PROFITS THEREON WERE OFFERED BY HER AS LONG TERM CAPITAL GAINS. ASSESSING OFFICER, HOWEVER, WAS OF THE VIEW THAT LOOKING AT THE FREQUENCY OF SHARE TRANSACTIONS, THE ASSESSEE WAS C ARRYING ON BUSINESS 2 ACTIVITY, WHICH WAS TO BE TAXED AS BUSINESS INCOME BY FOLLOWING OBSERVATIONS: IN THE BACKDROP OF THE ABOVE DISCUSSION, IT IS AMP LY CLEAR THAT THE ASSESSEES CONTENTION THAT THE ALLEGED SHORT TE RM CAPITAL GAIN AND LONG TERM CAPITAL GAIN CANNOT BE TREATED AS HER BUSINESS INCOME IS NOT BACKED BY ANY CREDIBLE PIECE OF EVIDENCE. THE SURROUNDING CIRCUMSTANCES POINT TO TH E CONTRARY. THE AMOUNT OF RS. 835746 CLAIMED TO BE SHORT TERM C APITAL GAIN AND RS. 1828992/- CLAIMED TO BE EXEMPT FROM TAX BEI NG CLAIMED AS LONG TERM CAPITAL GAIN ARE HEREBY TREATED AS THE BUSINESS INCOME OF THE ASSESSEE, TAXABLE @ 30 PERCENT. 2.1. AGGRIEVED, ASSESSEE PREFERRED FIRST APPEAL, WH ERE IT WAS PLEADED THAT: (I) ASSESSEE HAS BEEN PURCHASING SHARES BY WAY OF INVES TMENT SINCE LAST TEN YEARS AND THE PROFITS THEREON HAVE ALWAYS BEEN ASSESSED AS LONG TERM CAPITAL GAINS. THUS, THE PAST RECORD O F THE ASSESSEE INDICATES THAT SHE WAS ENGAGED IN INVESTMENT AND TH E SALE AND PURCHASE WAS LIABLE ONLY TO THE CAPITAL GAINS. (II) ASSESSEE MAINTAINS A BALANCE SHEET. ALL THESE SHAR ES ARE SHOWN AS INVESTMENT IN THE BALANCE-SHEETS FROM YEAR TO YEAR. HER OWN CAPITAL OF RS. 67,96,321/- ARE VALUED AT COST AND N OT MARKET PRICE, WHICH WAS THE INVESTMENT IN THESE SHARES IS MADE OU T FROM TIME TO TIME. (III) WHAT IS DETERMINATIVE IN DECIDING THE INVESTMENT IS THE INTENTION WHICH THE ASSESSEE HOLDS THE SHARES WHICH IN THIS C ASE IS UNDISPUTEDLY INVESTMENT ONLY. OCCASIONAL INTRA-DAY SHARE SALES AND SOME FREQUENT TRANSACTIONS OF SHORT TERM CANNOT CONVERT THE INVESTMENTS INTO BUSINESS ACTIVITY. 3 2.2. ASSESSEE RELIED ON VARIOUS CASE LAWS WHICH ARE MENTIONED IN PARA 3 OF THE CIT(A)S ORDER, WHICH INCLUDE TWO CASES ARE OF HONBLE DELHI HIGH COURT VIZ. CIT VS. GULMOHAR FINANCE LTD. 170 TAXMAN 483 (DEL); AND CIT VS. ESS JAY ENTERPRISES P. LTD. 173 TAXMAN 1 (DEL). 2.3. CIT(A) AFTER HEARING THE ASSESSEE HELD THAT TH E INCOME FROM SHARES WAS LIABLE TO BE TAXED AS CAPITAL GAINS AND NOT THE BUSINESS INCOME, BY OBSERVING AS UNDER: 4.3. I HAVE CONSIDERED THE DISALLOWANCE/ ORDER OF THE AO AND THE SUBMISSIONS OF THE ASSESSEE AND I FIND CONSIDER ABLE MERIT IN THE SUBMISSION OF THE ASSESSEE THAT THE AO IS NOT J USTIFIED IN DISALLOW THE CLAIM OF CAPITAL GAIN OF STCG AND ALSO OF THE LTCG AS APPARENTLY THE AO HAS NOT BROUGHT ANY MATER IAL ON RECORD TO SHOW THAT THE ASSESSEE IS A BUSINESSMAN A ND IS INVOLVED IN ANY BUSINESS ACTIVITY. IT IS ALSO APPAR ENT THAT THE ASSESSEE IS A HOUSE WIFE AND IS ONLY INVOLVED IN P URCHASE AND SALE OF SHARES AS AN INVESTOR WHICH IS A NORMAL ACT IVITY OF ANY INVESTOR. THERE ARE MAY HAVE BEEN SOME SHORT TIME T RANSACTIONS OR NON-DELIVERY BASED TRANSACTIONS OR INTRA-DAY TRA NSACTIONS BUT THESE ARE DECISIONS WHICH ARE TAKEN BY ANY INVE STOR AND THIS BY ITSELF DOES NOT MAKE AN INVESTOR TOA BUSINESSMAN AND THERE ARE MANY CASE LAWS AS RELIED ON BY THE ASSESSEE A A BOVE WHICH SUPPORT THE CLAIM OF THE ASSESSEE BEING AN INVESTOR . IT MAY ALSO BE NOTED THAT WITH THE DEVELOPMENT OF TECHNOLOGY TH E ONLINE TRANSACTION OF THE INVESTOR HAS BECOME EASIER FOR I NVESTMENT IN THE SHARE MARKET AND AS SUCH LARGE NUMBER OF PEOPLE ARE INVOLVED IN THE ACTIVITY OF SHARES INVESTMENT COMPA RED TO THE EARLIER YEARS. AFTER CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW THAT THERE IS CONSIDE RABLE MERIT IN THE SUBMISSION OF THE ASSESSEE AND AS SUCH IT IS NO T POSSIBLE TO SUSTAIN THE ORDER OF THE AO AS THE AO HAS DISALLOWE D THE CLAIM OF THE ASSESSEE OF STCG AND LTCG WITHOUT ANY VALID OR PROPER REASONS AND ACCORDINGLY, THE ADDITIONS MADE BY THE AO ARE DELETED. 4 AGGRIEVED, REVENUE IS BEFORE US. 3. LD. DR RELIED ON THE ORDER OF ASSESSING OFFICER. 4. LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT THE B ALANCE-SHEET OF THE ASSESSEE CLEARLY DEMONSTRATES THE SHARES PORTFOLIO ALL ALONG, SINCE LAST MORE THAN TEN YEARS HAS BEEN HELD AS INVESTMENT BY THE A SSESSEE. MANY OF THE SHARES SOLD ARE OUT OF OPENING BALANCES WHICH WERE HELD AS INVESTMENT IN EARLIER YEARS. THE ASSESSEE HAS NOT UTILIZED ANY B ORROWED FUNDS FOR INVESTMENT IN THESE SHARES WHICH FURTHER SUPPORTS T HE CONTENTION THAT THEY WERE HELD FOR INVESTMENT PURPOSE. THE ASSESSEE HAS THOUGH PAID ST TAX ON SUCH SALES BUT IT HAS NOT BEEN CLAIMED AS EXPENDITU RE AGAINST THE INCOME AS THE ASSESSEE ALWAYS CONSIDERED IT AS INVESTMENT ACT IVITY. NEVER IN THE PAST THE ASSESSEE CONVERTED ANY INVESTMENT INTO STOCK IN TRADE AND THE AVERAGE HOLDING PERIOD OF THE SHARES WAS 1036 DAYS I.E. AB OUT THREE YEARS WHICH IS AGAIN EVIDENCED THAT THE PURPOSE AND INTENTION WAS HOLDING THEM AS PREDOMINANTLY LONG TERM INVESTMENT. EXCEPT FEW INTR A DAY TRANSACTIONS NO TRANSACTION IS NON-DELIVERY BASIS, THE SAME DOES NO T MITIGATE AGAINST THE HOLDING OF INVSTMMENTS. 4.1. THE CBDT CIRCULARS CLARIFIED THAT IT IS NOT TH E NUMBER OF TRANSACTIONS OR NUMBER OF SCRIPS TRANSACTION BUT IT IS THE INTEN TION OF HOLDING INVESTMENT AND THE TREATMENT IN ACCOUNT BOOKS WHICH WILL BE DE TERMINATIVE FACTOR. 5 GOING BY THE CBDT CIRCULARS AND ABOVE CASE LAWS ASS ESSEES CASE CLEARLY FALLS IN THE CATEGORY OF LONG TERM CAPITAL GAINS AN D NOT BUSINESS INCOME. RELIANCE IS PLACED ON HONBLE SUPREME COURT JUDGMEN T IN THE CASE OF RADHA SWAMI SATSANG 193 ITR 321 FOR THE PROPOSITION THAT A SETTLED TREATMENT GIVEN BY THE INCOME-TAX DEPARTMENT TO A PROPOSITION CANNOT BE UNSETTLED UNLESS THERE EXIST EXTRAORDINARY CIRCUMSTANCE. IN T HIS CASE FACTS AND CIRCUMSTANCES ARE SIMILAR TO EARLIER HOLDING THE IN COME CHARGEABLE AS CAPITAL GAINS AND NO EXTRAORDINARY CIRCUMSTANCES HAVE BEEN BROUGHT ON RECORD. FURTHER RELIANCE IS PLACED ON HONBLE DELHI HIGH CO URT JUDGMENTS CITED BY THE LD. CIT(A) AND OTHER CASE LAWS WHICH ARE CITED IN THE CIT(A)S ORDER. 5. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE PAST RECORD, ACCOUNTING TR EATMENT AND THE DEPARTMENTS ACCEPTANCE OF ASSESSEES LONG STANDIN G TREATMENT OF HOLDING THE SHARES AS INVESTMENT AND TAXING THE INCOME AS LONG TERM CAPITAL GAINS CLEARLY INDICATES THAT THE PROFITS IN QUESTION ARE LIABLE TO BE TAXED AS CAPITAL GAINS AND NOT BUSINESS INCOME. WE FIND MERIT IN THE ARGUMENT OF LD. COUNSEL THAT CBDT CIRCULAR NO. 4 OF 2007 DATED 15-6-2007 SU PPORTS THE CLAIM OF THE ASSESSEE. IN VIEW OF THE ABOVE AND HONBLE DELHI H IGH COURT JUDGMENTS IN THE CASES OF GULMOHAR FINANCE AND ESS JAY ENTERPRIS ES (SUPRA), WE ARE INCLINED TO HOLD THAT THE PROFITS IN QUESTION ARE C APITAL GAINS , TO BE TAXED 6 UNDER THE LAW AS. WE FIND NO INFIRMITY IN THE ORDE R OF CIT(A) WHICH IS UPHELD. 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 08-08-2013. SD/- SD/- ( B.C. MEENA ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 8 TH AUGUST 2013. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR