The ITO, Ward-8(1), Ahmedabad V. Shri Akil Dawoodbhai Gandhi, Ahmedabad

ITA 3026/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89279 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 16-04-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 02-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD 00 , ! ' #$, % & BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER !./ ITA NO. 3026/AHD/2011 WITH CO NO.25/AHD/2012 % ) *)/ ASSESSMENT YEAR: 2008-2009 ITO, WARD - 8(1) AHMEDABAD. VS SHRI AKIL DAWOODBHAI GANDHI C/O. TAIYAB & CO., 416, SUGARWALA BUILDING CHOKHA BAZAR, KALUPUR AHMEDABAD 380 002. PAN : ABKPG 1277 A +, / (APPELLANT) -. +, / (RESPONDENT) REVENUE BY : SHRI NIMESH YADAV, SR.DR ASSESSEE(S) BY : SHRI TUSHAR HEMANI / DATE OF HEARING : 16/04/2015 / DATE OF PRONOUNCEMENT: 29/04/2015 // O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE REVENUE AND CROSS OBJECTION FILED BY THE ASSESS EE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX-XIV, AHMEDABAD DA TED 20/09/2011 FOR THE ASSTT.YEAR 2008-2009, 2. IN THE APPEAL OF THE REVENUE, THE FIRST GROUND O F APPEAL IS THAT THE CIT(A) ERRED IN DIRECTING TO TREAT A SUM OF RS. 8,71,139/- AS LONG TERM CAPITAL GAIN AS SHOWN BY THE ASSESSEE, AND NOT AS BUSINESS INCOME. ITA NO.3026/AHD/2011 WITH CO 2 3. BRIEF FACTS OF THE CASE ARE THAT THE AO OBSERVED THAT THE ASSESSEE HAD SHOWN SHORT TERM CAPITAL GAIN OF RS.98,544/- AN D LONG TERM CAPITAL GAIN OF RS.8,71,139/- FROM SALE AND PURCHASE OF SH ARES. ACCORDING TO THE AO ON PERUSAL OF THE DETAILS OF CAPITAL GAINS, IT IS SEEN THAT THE MAIN MOTIVE WAS TO EARN PROFIT BY PURCHASING AND SELLING OF SHARES RATHER THAN EARNING DIVIDEND. HE OBSERVED THAT THIS COULD BE CORROBORATED BY THE FACT THAT THE DIVIDEND INCOME EARNED BY THE ASS ESSEE WAS ONLY RS.2,85,070/- AS AGAINST CAPITAL GAIN OF RS.9,69,78 3/-. THE AO FURTHER OBSERVED THAT THE SHARES WERE PURCHASED AND SOLD SH ORTLY WHEN THE PRICES OF THE SHARES HAVE RISEN, WHICH SHOWED THAT THE PURCHASE AND SALES OF SHARES HAD BEEN MADE ONLY TO EARN PROFIT. HE ALSO OBSERVED THAT TO MAKE THE TRANSACTIONS IN SHARES, THE ASSESS EE HAD OBTAINED LOANS FROM BANKS, AND HAD PAID INTEREST AMOUNTING T O RS.1,37,459/-. HE ALSO OBSERVED THAT THE ASSESSEE WAS THE DIRECTOR OF THE COMPANY, WHICH WAS DOING THE BUSINESS OF SHARE TRADING. T HE AO FURTHER OBSERVED THAT FROM THE ACCOUNTS, IT IS SEEN THAT TH E ASSESSEE WAS DOING DAY-TO-DAY TRANSACTION IN SHARES. HE, THEREFORE, H ELD THAT THE TRANSACTION IN SHARES SHOULD BE HELD AS ADVENTURE I N THE NATURE OF TRADE, AND THEREFORE, HE TREATED THE PROFIT FROM SA LE AND PURCHASE OF SHARES AS BUSINESS INCOME OF THE ASSESSEE. 4. ON APPEAL, THE CIT(A) HELD THAT LONG TERM CAPITA L GAIN EARNED FROM THE SALE AND PURCHASE OF SHARES SHOULD BE TREA TED AS LONG TERM CAPITAL GAIN, AND THE SHORT TERM CAPITAL EARNED BY THE ASSESSEE FROM SALE AND PURCHASE OF SHARES SHOULD BE TREATED AS BU SINESS INCOME OF THE ASSESSEE. 5. BEING AGGRIEVED BY THIS ORDER, REVENUE IS IN APPEAL BEFORE US. ITA NO.3026/AHD/2011 WITH CO 3 6. THE DR VERY FAIRLY CONCEDED THAT THE ISSUE WAS C OVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE ITSELF IN THE ASSESSMENT YEAR 2006-07 IN ITA NO.908 /AHD/2010 ORDER DATED 6.7.2012, AND THEREFORE, FOLLOWING THE SAME, THE APPEAL OF THE REVENUE IS LIABLE TO BE DISMISSED. 7. WE FIND THAT THE CIT(A) WHILE HOLDING THAT LONG TERM CAPITAL GAINS FROM SALE AND PURCHASE OF SHARES SHOULD BE TREATED AS CAPITAL GAINS, HAS RELIED ON THE DECISION OF HIS PREDECESSOR IN THE AS SESSMENT YEAR 2005- 06. THE DR HAS BROUGHT NO MATERIAL BEFORE US TO SH OW THAT THE REVENUE HAS FIELD APPEAL AGAINST THE ORDER OF THE C IT(A) FOR THE ASSTT.YEAR 2005-06, AND THE SAME WAS VARIED IN APPE AL BY ANY HIGHER AUTHORITIES. FURTHER, WE FIND THAT THE TRIBUNAL IN THE ASSTT.YEAR 2006-07 IN THE CASE OF THE ASSESSEE ITSELF, HAS HELD AS UND ER: 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERU SED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND THE JUDGMENT CITED BY THE LD. A.R. IN THE LIGHT OF THESE FACTS THAT EXCEPT OF FEW SHARES, ALL THE SHARES WERE HELD FOR 10 YEARS OR MORE, IT CANNOT BE SAID THAT T HESE SHARES WERE HELD BY THE ASSESSEE AS BUSINESS ASSET OR STOC K IN TRADE. IN THE LIGHT OF THESE FACTS OF THE PRESENT CASE, IT HA S TO BE ADMITTED THAT THE PROFIT EARNED BY THE ASSESSEE AFTER HOLDIN G THE SHARES FOR SUCH A LONG PERIOD CANNOT BE ASSESSED AS BUSINESS I NCOME. THE JUDGMENT CITED BY THE LD. A.R. IS ALSO SUPPORTING T HE CASE OF THE ASSESSEE AND HENCE, WE DECLINE TO INTERFERE IN THE ORDER OF LD. CIT(A). 8. THE DR COULD NOT BRING ANY MATERIAL TO SHOW THAT THE PERIOD OF HOLDING OF SHARES IN RESPECT OF WHICH LONG TERM CAP ITAL GAINS WAS EARNED BY THE ASSESSEE WAS OF SHORT DURATION. RATHER, THE INCOME HAS BEEN DECLARED AS LONG TERM CAPITAL GAINS SHOWS THAT THE PERIOD OF HOLDING OF SHARES WAS ATLEAST OF 12 MONTHS AND MORE THAN THAT, THEREFORE, IN THE ABSENCE OF ANY MATERIAL BROUGHT ON RECORD TO SHOW T HAT THE SHARES IN QUESTION WERE PURCHASED FOR DEALING IN SHARES AND N OT AS INVESTMENT, WE, FOLLOWING THE ORDER OF THE TRIBUNAL, DISMISS TH IS GROUND OF APPEAL OF THE REVENUE. ITA NO.3026/AHD/2011 WITH CO 4 9. IN THE GROUND NO.2, THE GRIEVANCE OF THE REVENUE IS THAT THE CIT(A) ERRED IN LAW AND FACTS IN DELETING THE DISAL LOWANCE OF RS.1,37,459/- ON ACCOUNT OF INTEREST EXPENDITURE. 10. BRIEF FACTS OF THE CASE ARE THAT THE AO DISALLO WED INTEREST EXPENDITURE OF RS.1,37,459/- ON THE GROUND THAT THE ASSESSEE HAD ADVANCED RS.33,81,330/- AS INTEREST FREE FUNDS TO H IS FAMILY MEMBERS AND GROUP CONCERNS. 11. ON APPEAL, THE CIT(A) OBSERVED THAT THE ASSESSE E HAS PAID INTEREST EXPENDITURE OF RS.1,37,459/-, BUT IN THE R ETURN OF INCOME HAS CLAIMED DEDUCTION OF RS.1,25,058/-. HE FURTHER OBS ERVED THAT THE ASSESSEE HAS CLAIMED THAT THE APPELLANT HAS EARNED REMUNERATION INTEREST FROM THE FIRM WHEREIN HE WAS A PARTNER. H E HAS RECEIVED INTEREST OF RS.1,25,058/-, AND ACCORDINGLY, CLAIMED THE SAME AMOUNT OF INTEREST AS DEDUCTION. THE CIT(A) HELD THAT THERE WAS A DIRECT NEXUS BETWEEN EARNING AND PAYMENT OF INTEREST, AND THEREF ORE, DELETED THE DISALLOWANCE OF RS.1,37,459/- MADE BY THE AO. 12. THE DR SUPPORTED THE ORDER OF THE AO. 13. WE FIND THAT THE DR COULD NOT POINT OUT ANY ERR OR IN THE ORDER OF THE CIT(A). NO MATERIAL COULD BE BROUGHT BEFORE US TO SHOW THAT THE BORROWED FUNDS ON WHICH THE INTEREST WAS PAID BY TH E ASSESSEE WERE NOT UTILIZED FOR MAKING INVESTMENT IN THE FIRM, FRO M WHICH, THE ASSESSEE DERIVED TAXABLE INTEREST INCOME. THEREFORE, WE FIN D NO INFIRMITY IN THE ORDER OF THE CIT(A), WHICH IS CONFIRMED AND THE GRO UND OF APPEAL OF THE REVENUE IS DISMISSED. ITA NO.3026/AHD/2011 WITH CO 5 CO NO.25/AHD/2012 (ASSESSEES CO) 14. IN THE CROSS-OBJECTION, THE SOLE GROUND TAKEN B Y THE ASSESSEE IS THAT THE CIT(A) ERRED IN CONFIRMING THE ORDER OF TH E AO IN TREATING THE SHORT TERM CAPITAL GAIN OF RS.98,544/- AS BUSINESS INCOME AFTER HOLDING THAT THE ASSESSEE WAS AN INVESTOR AND NOT TRADER IN SHARES. 15. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSEE DECLARED RS.98,544/- AS SHORT TERM CAP ITAL GAINS BEING PROFIT EARNED ON SALE OF SHARES. THE AO HELD THAT THE AFORESAID INCOME IS ASSESSABLE AS BUSINESS INCOME, AND NOT AS SHORT TERM CAPITAL GAIN. 16. ON APPEAL, THE CIT(A) CONFIRMED THE ACTION OF T HE AO ON THE GROUND THAT THE SHARES WERE SOLD WITHIN A SHORT PER IOD OF TIME FROM ITS PURCHASE. 17. BEFORE US, THE ONLY CONTENTION OF THE ASSESSEE IS THAT IF THE INCOME IS FOUND AS ASSESSABLE UNDER THE HEAD BUSIN ESS INCOME THEN THE ASSESSEE SHOULD BE ALLOWED DEDUCTION FOR INTERE ST EXPENDITURE OF RS.1,37,459/-. 18. WE FIND THAT THE ASSESSEE HAS NOT SERIOUSLY DIS PUTED THE ISSUE OF ASSESSMENT OF RS.98,544/- UNDER THE HEAD BUSINESS INCOME. IN THE ABSENCE OF SERIOUS PROSECUTION BY THE ASSESSEE, ON THIS ISSUE, WE FIND NO GOOD REASON TO INTERFERE WITH THE FINDING OF THE CIT(A). 19. AS FAR AS THE CLAIM OF THE ASSESSEE IN RESPECT OF ALLOWANCE OF DEDUCTION OF INTEREST, WE FIND THAT THE CIT(A) HAS ALREADY, WHILE DECIDING THE GROUND NO.3 OF THE APPEAL, HAS ALLOWED THE DEDUCTION OF RS.1,25,058/- OUT OF RS.1,37,459/-, AS CLAIMED BY T HE ASSESSEE. WE ITA NO.3026/AHD/2011 WITH CO 6 THUS DO NOT FIND ANY FORCE IN THIS ARGUMENT OF THE AR OF THE ASSESSEE. ACCORDINGLY, THE GROUND OF CROSS-OBJECTION OF THE A SSESSEE IS DISMISSED. 20. IN THE RESULT, THE APPEAL OF THE REVENUE AS WEL L AS THE CROSS OBJECTION OF THE ASSESSEE, BOTH ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON WEDNESDAY THE 29 TH APRIL, 2015 AT AHMEDABAD. SD/ SD/- (KUL BHARAT) JUDICIAL MEMBER ( N.S. SAINI) ACCOUNTANT MEMBER