ADDL CIT RG 20(2), MUMBAI V. RAJAN R. BAHL, MUMBAI

ITA 328/MUM/2010

• Counselvise Citation: 32819914 RSA 2010
• Duration Of Justice: 1 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 13-01-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJAN R BAHL
• Assessee Lawyers: VANDANA SAGAR
• Keywords: Business income; Transactions in derivatives; Speculation loss
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'D' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 36/MUM/2010 (ASSESSMENT YEAR: 2006-07) SHRI RAJAN R. BAHL ADDL. CIT, RANGE 20(2) SAKET, PLOT NO. 84, MIDC PIRAMAL CHAMBERS, 6 TH FLOOR 15 TH ROAD, ANDHERI (E) VS. LALBAUG, PAREL MUMBAI 400013 MUMBAI 400013 PAN - AABPB 9614 L APPELLANT RESPONDENT ITA NO. 328/MUM/2010 (ASSESSMENT YEAR: 2006-07) ADDL. CIT, RANGE 20(2) SHRI RAJAN R. BAHL PIRAMAL CHAMBERS, 6 TH FLOOR SAKET, PLOT NO. 84, MIDC LALBAUG, PAREL VS. 15 TH ROAD, ANDHERI (E) MUMBAI 400013 MUMBAI 400013 PAN - AABPB 9614 L APPELLANT RESPONDENT APPELLANT BY: SHRI RAJAN R. BAHL RESPONDENT BY: SMT. VANDANA SAGAR O R D E R PER B. RAMAKOTAIAH, A.M. THESE ARE CROSS APPEALS BY ASSESSEE AND THE REVENUE AGAINST THE ORDER OF THE CIT(A) XXXI, MUMBAI DATED 15.10.2009. 2. THE ISSUE IN THE CROSS APPEALS IS WHETHER THE INCO ME DERIVED BY THE ASSESSEE FROM THE TRANSACTIONS IN THE SHARE MARKET IS TO BE TREATED AS CAPITAL GAINS OR BUSINESS INCOME. THE A.O. TREATED THE ENTIRE SHORT TERM CAPITAL GAINS AS BUSINESS INCOME WHEREAS THE CIT(A) , AFTER ANALYSING THE TRANSACTIONS, TREATED PARTLY AS BUSINESS INCOME AND PARTLY AS CAPITAL GAINS. THEREFORE BOTH ASSESSEE AND THE REVENUE ARE AGGRIEV ED ON THE ORDER OF THE CIT(A). THE GROUNDS ARE RAISED ACCORDINGLY BY RESPE CTIVE PARTIES. ITA NOS. 36 & 328/MUM/2010 SHRI RAJAN R. BAHL 2 3. BRIEFLY STATED, ASSESSEE, AN INDIVIDUAL, HAS DECLAR ED INCOME OF ` 6,53,13,220. IN ADDITION TO THE INCOME EARNED IN F& O TRADING OFFERED AS BUSINESS INCOME AT `5,48,26,933/-, ASSESSEE ALSO O FFERED SHORT TERM CAPITAL GAINS OF ` 1,17,82,521/- IN THE RETURN OF INCOME. THE A.O. NOT ICED THAT ASSESSEE HAS INVOLVED HIMSELF FULLY IN TRADING OF F &O AND ALSO STOCK MARKET AND RELATED ACTIVITIES AND ANALYSED THE PURCHASES A ND SALES OF SHARES DURING THE YEAR AND CAME TO A CONCLUSION THAT ASSESSEE WAS INVOLVED IN LARGE NUMBER OF PURCHASES OF MORE THAN ` 40 CRORES IN STOCK MARKET, HAVE REPEATED TRANSACTIONS IN SAME COMPANYS SHARES AND THE AVERAGE HOLDING PERIOD IS VERY LESS. IN HIS ORDER, THE A.O. HAS ANA LYSED AND CAME TO A CONCLUSION THAT THE HOLDING PERIOD OF 26 SCRIPS RUN NING ACROSS 84 TRANSACTIONS WAS LESS THAN 30 DAYS HAVING PURCHASE VALUE OF ` 22.5 CRORES. THERE WERE TRANSACTIONS WITH THE PERIOD OF HOLDING OF 1 DAY EVEN. HE ALSO ANALYSED THE FREQUENCY OF TRANSACTIONS, SOURCE OF I NVESTMENT, PORTFOLIO MAINTAINED BY THE ASSESSEE AND OTHER RELATED ASPECT S AND CAME TO A CONCLUSION THAT ASSESSEE IS INDULGING IN SHARE TRAD ING ACTIVITY AS A BUSINESS VENTURE AND THEREFORE, THE CAPITAL GAINS DISCLOSED AS SHORT TERM CAPITAL GAINS IS NOTHING BUT BUSINESS INCOME OR ALTERNATIVELY SUR PLUS FROM THE ADVENTURE/ENTERPRISE IN THE NATURE OF TRADE OR BUSI NESS. WHILE DOING SO HE ALSO DISALLOWED AMOUNTS UNDER SECTION 14A ON THE BA SIS OF RULE 8D TOTALLING TO ` 23,435/-. APART FROM THESE TWO ISSUES THE A.O. ALSO DISALLOWED 1/4 TH OF THE MOTOR CAR EXPENSES OF ` 3,26,074/- AND TELEPHONE EXPENSES OF ` 34,261/-. AS AGAINST THE BUSINESS INCOME OF ` 5,38,26,933/- RETURNED BY THE ASSESSEE THE A.O. COMPUTED THE INCOME FROM BUSINESS AT ` 6,89,17,795/-. AGGRIEVED ON THE SAID ORDER THE MATTER WAS CARRIED TO THE CIT (A). THE CIT(A) VIDE HIS DETAILED ORDER RUNNING TO 31 PAGES ANALYSED ASSESSE ES TRANSACTIONS, LEGAL PRINCIPLES AND DETERMINED THE AMOUNT AT ` 76,94,812/- AS BUSINESS INCOME ON THE BASIS THAT THE EXTENT OF GAINS OR PROFITS RE ALISED ON ACCOUNT OF REPETITIVE SHARE TRANSACTIONS UNDERTAKEN FOR MORE T HAN FOUR TIMES DURING THE YEAR ARE TO BE CONSIDERED AS BUSINESS INCOME. H E CONFIRMED THE ACTION OF THE A.O. TO THAT EXTENT WHILE DELETING THE BALANCE AMOUNT WITH A DIRECTION TO REWORK OUT THE SHORT TERM CAPITAL GAINS ACCORDINGLY . HE ALSO CONFIRMED THE ADDITION MADE UNDER SECTION 14A AND RESTRICTED THE EXPENDITURE ON MOTOR ITA NOS. 36 & 328/MUM/2010 SHRI RAJAN R. BAHL 3 CAR AND TELEPHONE EXPENSES TO 20% AS AGAINST 25% DI SALLOWED BY THE A.O. ON ADHOC BASIS. AGGRIEVED ON THE ORDER OF THE CIT(A ) ASSESSEE RAISED ONE GROUND ON THE ISSUE OF TREATMENT OF INCOME OF ` 76,94,812/- AS BUSINESS INCOME WHICH, ACCORDING TO THE ASSESSEE HAS NO BASI S OR LEGAL AUTHORITY FOR TREATING REPETITIVE SHARE TRANSACTIONS AS BUSINESS INCOME. THE REVENUE IN ITS APPEAL HAS RELIED ON VARIOUS CASE LAWS IN GROUN D NOS. 2 & 3 MAINLY SUPPORTING GROUND NO. 1 ON DELETION OF THE BALANCE AMOUNT AND DIRECTION TO BE TREAT AS SHORT TERM CAPITAL GAINS. THE GROUNDS I N CROSS APPEALS ARE INTER- RELATED. 4. THE LEARNED COUNSEL FOR THE ASSESSEE WHILE CONTESTI NG THE CIT(A)S ORDER SUBMITTED THE DETAILS OF SHARE TRANSACTIONS U NDER TAKEN BY THE ASSESSEE AND HOW THE CIT(A) ERRED IN TREATING THE R EPETITIVE TRANSACTIONS AS IN THE NATURE OF TRADING. REFERRING TO THE STATEMEN T OF THE SHORT TERM PROFIT OR LOSS IT WAS SUBMITTED THAT IN THE CASE OF GLEENM ARK MOST OF THE SHARES SOLD ARE BONUS SHARES ON WHICH THERE WAS A PROFIT O F ABOUT ` 30,00,000/- WHEREAS THERE WAS A LOSS ON SOME TRANSACTIONS. IT W AS SUBMITTED THAT SALE OF BONUS SHARES CANNOT BE CONSIDERED AS TRADING TRANSA CTION. HE ALSO REFERRED TO THE TRANSACTIONS IN BIRLA CASH PLUS, WHICH ACCOR DINGLY TO HIM IS A MUTUAL FUND INVESTMENT AND NOT SHARE TRANSACTIONS ON WHICH ONLY A PROFITS OF ` 3,076/- WAS EARNED ON A TOTAL TRANSACTION OF ` 2.56 CRORES. IT WAS SUBMITTED THAT THESE ARE NOT TRADING TRANSACTIONS BUT INVESTM ENT TRANSACTIONS FOR THE PURPOSE OF EARNING DIVIDEND. HE ALSO SUBMITTED THAT TREATING ARTIFICIALLY REPETITIVE TRANSACTIONS OF MORE THAN FOUR TIMES ALO NE AS BUSINESS TRANSACTIONS IS NOT CORRECT IGNORING THE FACT THAT THERE ARE NUMBER OF SHARES WHICH ARE HELD FOR MORE THAN 300 DAYS WHICH ARE ALS O TREATED AS BUSINESS TRANSACTIONS WHEREAS THE ASSESSEE HAS INVARIABLY MA INTAINED INVESTMENT PORTFOLIO AND TRADING PORTFOLIO SEPARATELY AND CONS ISTENTLY OVER A PERIOD OF TIME AND THE CIT(A) ERRED IN IGNORING THE FACTUAL P OSITION AND TREATING PART OF THE INCOME AS BUSINESS INCOME ON AN ARTIFICIAL BIFU RCATION. IT WAS HIS SUBMISSION THAT ASSESSEE MAINTAINED CONSISTENTLY SE PARATE TRANSACTIONS OF INVESTMENT AND TRADING. IN THE INVESTMENT TRANSACTI ONS ASSESSEE HAS NOT CLAIMED ANY BENEFIT OF INCREASE OR DECREASE IN THE CLOSING STOCK VALUATION AND MAINTAINED SEPARATE BOOKS OF ACCOUNT FOR THESE TRANSACTIONS. IT WAS ITA NOS. 36 & 328/MUM/2010 SHRI RAJAN R. BAHL 4 FURTHER SUBMITTED THAT THE A.O. IN A.Y. 2004-05 HAS ACCEPTED SPECULATION LOSS, SHORT TERM CAPITAL GAINS AND LOSS AS RETURNED BY THE ASSESSEE AND ON CONSISTENCY PRINCIPLE ALONE THE ISSUE IS TO BE DECI DED IN FAVOUR OF THE ASSESSEE. HE RELIED ON VARIOUS CASE LAWS, WHICH ARE ALREADY CONSIDERED BY THE A.O. AND THE CIT(A) IN THEIR DETAILED ORDERS. 5. THE LEARNED D.R. IN REPLY SUBMITTED THAT THE ASSESS EE IS INVOLVED IN SHARE MARKET TRANSACTIONS AND THE PROFITS EARNED ON F&O WAS FIVE TIMES MORE THAN THE SO CALLED SHORT TERM CAPITAL GAINS AN D THERE IS NO DISTINCTION BETWEEN THE INVESTMENT IN SHARES AND TRANSACTIONS O F F&O AS ASSESSEE IS INVOLVED VERY MUCH IN SHARE MARKET TRANSACTIONS. TH E ENTIRE INCOME OFFERED UNDER SHORT TERM CAPITAL GAINS HAS TO BE TREATED AS BUSINESS INCOME AND, THEREFORE, THE CIT(A) ERRED IN DELETING PART OF THE INCOME AS SHORT TERM CAPITAL GAINS. HE ALSO RELIED ON THE DETAILS OF TRA NSACTIONS SUBMITTED TO SUBMIT THAT THE FREQUENCY, VOLUME AND HOLDING PERIO D DO INDICATE THAT ASSESSEE IS INVOLVED IN BUSINESS TRANSACTIONS. HE A LSO REFERRED TO VARIOUS ORDERS OF THE ITAT WHICH ARE IN FAVOUR OF THE REVEN UE. 6. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE RECOR D. THE UNDISPUTED FACTS AS REPORTED BY THE CIT(A) IN PARA 2.3 OF HIS ORDER WERE THAT THE ASSESSEE HAD DISCLOSED INCOME FROM SHARE TRANSA CTIONS CARRIED OUT IN F&O (IN WHICH NO DELIVERY WAS TAKEN PLACE) AS HIS B USINESS INCOME AND GAINS ON PURCHASE AND SALE OF SHARES (IN WHICH DELI VERY IS TAKEN) AS HIS CAPITAL GAINS. IN OTHER WORDS ASSESSEE HAS SHOWN BU SINESS INCOME IN RESPECT OF HIS NON-DELIVERY BASED SHARES OR DERIVAT IVE TRANSACTIONS WHEREAS HE HAS SHOWN CAPITAL GAINS ON THE DELIVERY BASED SH ARE TRANSACTIONS. IT IS ALSO A FACT THAT ASSESSEE HAS MAINTAINED SEPARATE L EDGER ACCOUNTS OF THE RESPECTIVE SHARE TRANSACTIONS IN HIS BOOKS OF ACCOU NT. IT IS ALSO ON RECORD THAT ASSESSEE HAS MAINTAINED SEPARATE PORTFOLIOS OF SHARES HELD AS INVESTMENT WHICH ARE VALUED AT COST PRICE WHEREAS S HARES HELD IN STOCK-IN- TRADE ARE VALUED AS AT COST OR MARKET PRICE, WHICHE VER IS LOWER. THE FOLLOWING ARE THE DETAILS AS AVAILABLE IN PARA 2.3 OF THE CIT (A)S ORDER REGARDING TRANSACTIONS/INVESTMENT UNDERTAKEN BY THE ASSESSEE IN THE EARLIER YEARS - ITA NOS. 36 & 328/MUM/2010 SHRI RAJAN R. BAHL 5 A.Y. STCG LTCG SPECULATIVE INCOME/LOSS BUSINESS INCOME/LOSS 01-02 (-)1,68,98,734 (-)17,65,675 - - 02-03 (-)13,96,521 (-)15,76,972 (-)4,41,232 - 03-04 (-)9,38,562 (-)21,33,956 22,71,077 - 04-05 1,62,94,593 (-)39,31,327 33,15,710 - 05-06 50,18,238 95,32,403 - 33,06,013 06-07 1,17,82,521 29,46,135 - 5,38,26,933 7. IT IS ALSO ON RECORD THAT FREQUENCY AND VOLUME OF S HARES PURCHASED AND SOLD ARE FOUND TO BE SUBSTANTIALLY HIGHER IN TH E RELEVANT YEAR IN COMPARISON TO THE EARLIER ASSESSMENT YEAR. THEREFOR E THE CIT(A) WAS OF THE OPINION THAT THE FACTS AVAILABLE ON THE CASE, EVENT HOUGH ARE IDENTICAL TO THE FACTS RAISED IN THE CASE OF SHRI GOPAL PUROHIT IN I TA NO. 4854/MUM/2008 DATED 10.02.2009 (WHICH WAS SUBSEQUENTLY CONFIRMED BY THE HON'BLE HIGH COURT), HE DIFFERED FROM THE CONSISTENCY PRINCIPLE HOLDING THAT ASSESSEE HAS ENTERED INTO TRANSACTIONS REPEATEDLY AND FREQUENTLY , I.E. ASSESSEE HAS PURCHASED A PARTICULAR SHARE, SOLD IT AND AGAIN PUR CHASED AND SOLD THEREBY INDICATING THAT THE TRANSACTION IS OF TRADING IN NA TURE. THE CIT(A) ALSO ANALYSED VARIOUS CASE LAWS/BOARD CIRCULARS AND ULTI MATELY CAME TO A CONCLUSION THAT ON THE FACTS OF THE CASE, SINCE ASS ESSEE IS HAVING MIXED/CONSOLIDATED BANK ACCOUNTS THROUGH WHICH BOTH NATURE OF TRANSACTIONS ARE CARRIED OUT AND ALSO AS ASSESSEE F AILED TO PROVE THAT BORROWED FUNDS ARE EXCLUSIVELY USED IN HIS F&O BUSI NESS, HE CAME TO THE CONCLUSION THAT REPETITIVE SHARE TRANSACTIONS FALL UNDER THE CATEGORY OF BUSINESS. 8. WE FIND THAT THE ARTIFICIAL CATEGORIZATION MADE BY THE CIT(A) CANNOT BE SUSTAINED AS; (A) AS POINTED OUT BY THE LEARNED COU NSEL THE SHARES OF GLENMARK ALLOTTED TO THE ASSESSEE AS BONUS SHARES O N 20 TH APRIL 2005 TO AN EXTENT OF 10,000 SHARES ON WHICH ASSESSEE GOT ` 30,00,000/- PROFIT CANNOT BE CONSIDERED AS BUSINESS TRANSACTION. NATURALLY TH E SALE OF BONUS SHARES CANNOT YIELD BUSINESS INCOME UNLESS THE SHARES ARE PURCHASED AS STOCK-IN- TRADE. ON THE GIVEN FACTS OF THE CASE THE FINDINGS OF THE CIT(A) TREATING THE ITA NOS. 36 & 328/MUM/2010 SHRI RAJAN R. BAHL 6 GAINS FROM THE TRANSACTIONS OF GLENMARK AS BUSINESS INCOME CANNOT BE UPHELD. LIKEWISE THE TRANSACTIONS IN BIRLA CASH PLU S UNITS. THESE TRANSACTIONS ARE MUTUAL FUND TRANSACTIONS, NOT GENE RALLY UNDERTAKEN IN STOCK EXCHANGES. EVENTHOUGH THERE ARE REPETITIVE TR ANSACTIONS WITH MUCH FREQUENCY MUTUAL FUND TRANSACTIONS BY VERY NATURE A RE NOT TRADED IN THE STOCK EXCHANGES AND CANNOT BE CONSIDERED AS BUSINES S TRANSACTIONS. WHETHER THE ASSESSEE IS INDULGING IN CASH MARKET TR ANSACTIONS OR ONLY PURCHASING UNITS AND REDEEM THEM FOR SHORT TERM CAP ITAL GAINS WITH THE SURPLUS MONEY HAS NOT BEEN EXAMINED AS BOTH THE A.O . AND THE CIT(A) TREATED THESE TRANSACTIONS ON PAR WITH SHARE TRANSA CTIONS. IT IS ALSO NOTICED THAT THE ASSESSEE HAD OTHER TRANSACTIONS LIKE BAJAJ HINDUSTAN WHERE NUMBER OF SHARES WERE PURCHASED OVER A PERIOD OF TI ME AND SOLD ON SIMILAR WAY. ANOTHER SET OF TRANSACTION IN THE CASE OF MORP EN HOTELS LTD. UNDERTAKEN BY THE ASSESSEE DO INDICATE THAT ASSESSE E PURCHASED NUMBER OF SHARES ON 2 ND AUGUST AND 3 RD AUGUST AND SOLD THEM IMMEDIATELY BETWEEN 19 TH AUGUST AND 11 TH NOVEMBER WITH A HOLDING PERIOD OF 17 DAYS TO 33 DA YS. WHY THESE TRANSACTIONS ARE CONSIDERED AS INVESTMENT TRANSACTIONS BY THE CIT(A) CANNOT BE UNDERSTOOD AS HE HAS GONE BY THE R EPETITIVE NATURE OF TRANSACTION WHILE AT THE SAME TIME IGNORING MANY S UCH OTHER TRANSACTIONS. THEREFORE, WE ARE OF THE OPINION THAT THE CIT(A) ER RED IN ARTIFICIALLY SEGREGATING THE INCOME AS BUSINESS INCOME AND CAPIT AL GAINS AND THEREFORE THERE IS VALID GRIEVANCE FROM BOTH ASSESSEE AND RE VENUE. 9. WE ALSO FIND THAT THE ASSESSEE HAS NOT PLACED ON RE CORD ITS COMPUTATION OF INCOME NOR PLACED THE NATURE OF INCO ME EARNED ON F&O TRANSACTIONS. A GOOD INDICATOR TO KNOW WHETHER ASSE SSEE IS INDULGING IN SHARE TRANSACTIONS AS BUSINESS OR AS INVESTMENT IS TO CORRELATE WITH REFERENCE TO THE F&O DEALINGS. IF ASSESSEE IS INDUL GING IN SAME SHARES BOTH IN PHYSICAL DELIVERY AS WELL AS IN F&O ON THE SAME DAY THIS MAY INDICATE THAT THE NATURE OF TRANSACTION IS THAT OF BUSINESS AS AN ADVENTURE. INVESTMENT IN A PARTICULAR SCRIP BOTH IN PHYSICAL D ELIVERY AND IN SPECULATION TRANSACTION OF F&O CANNOT BE CONSIDERED DIFFERENT W HEN UNDERTAKEN AT THE SAME TIME AND SAME NATURE OF TRANSACTION ON THE SAM E DAY. THEREFORE ONE WAY OF ANALYSING THE INTENTION OF THE ASSESSEE OF T RADING OR INVESTMENT IN A ITA NOS. 36 & 328/MUM/2010 SHRI RAJAN R. BAHL 7 PARTICULAR SCRIP IS TO CORRELATE WITH THE F&O TRANS ACTIONS. AS NOTICED EARLIER THE PROFIT IN F&O TRANSACTIONS IS 5 TIMES THE GAINS EARNED IN SHARE TRANSACTIONS. THEREFORE IN THE INTEREST OF JUSTICE, SINCE COMPLETE DETAILS ARE NOT PLACED ON RECORD TO ANALYSE WHETHER THE ASSESSE ES SHARE TRANSACTIONS ARE IN THE NATURE OF BUSINESS TRANSACTION OR INVEST MENT TRANSACTION, WE ARE OF THE OPINION THAT THE MATTER CAN BE RESTORED BACK TO THE FILE OF THE A.O. TO EXAMINE THE FACTS AND ANALYSE THE INTENTION. 10. THE FREQUENCY OF TRANSACTIONS, VOLUME OF TRANSACTIO NS, HOLDING PERIOD OF SHARES ARE ONLY INDICATIVE IN NATURE TO ANALYSE WHETHER ASSESSEE IS TRADING OR INVESTING. NO SINGLE PARAMETER CAN BE CO NSIDERED TO DETERMINE ONE WAY OR THE OTHER. THERE ARE VARIOUS ORDERS OF T HE ITAT, BOTH IN FAVOUR OF THE ASSESSEE AND AGAINST THE ASSESSEE DEPENDING ON THE FACTS OF EACH CASE. THEREFORE, RELYING ALONE ON JUDICIAL PRINCIPLES IS NOT A HEALTHY PRACTICE TO ANALYSE THE INTENTION OF THE ASSESSEE OF KNOWING WH ETHER THE TRANSACTIONS ARE TRADING IN NATURE OR INVESTMENT IN NATURE. NOT ONLY THAT, THE A.O. GIVES A FINDING THAT ASSESSEE HAS NO OTHER WORK EXCEPT SHAR E RELATED TRANSACTIONS WHEREAS BEFORE THE CIT(A) IT WAS CONTENDED THAT ASS ESSEES MAIN ACTIVITY IS THAT OF MANUFACTURING AND EXPORT OF GARMENTS IN WHI CH HE IS ASSOCIATED AS DIRECTOR/PARTNER IN VARIOUS CONCERNS AND ONLY IN TH IS YEAR SHARE MARKET TRANSACTIONS ARE MORE COMPARED TO EARLIER YEARS. SI NCE THESE FACTS ARE NOT EXAMINED BY THE A.O. IN ITS CORRECT PERSPECTIVE, WE ARE OF THE OPINION THAT THE A.O. SHOULD ANALYSE THE TRANSACTIONS AFRESH VIS --VIS THE INCOME EARNED IN F&O SECTION. NOT ONLY THAT, AS SEEN FROM THE STA TEMENT OF INCOME IN EARLIER YEARS THERE WERE ALSO SPECULATION TRANSACTI ONS. IF ASSESSEE IS HAVING SPECULATION TRANSACTIONS IN SHARE MARKET (OTHER THA N F&O) THAT CAN BE AN INDICATION OF INDULGING IN BUSINESS TRANSACTIONS. T HE A.O. IS DIRECTED TO KEEP IN MIND THE FACTS OF THE CASE, ANALYSE THE ISSUE, E XAMINE THE SOURCE OF INCOME VIS--VIS THE RECORD OF THE ASSESSEE IN EARL IER AND LATER YEARS AND ALSO THE TRANSACTIONS UNDERTAKEN IN SPECULATION AND F&O TRADING SO AS TO COME TO A CONCLUSION WHETHER ASSESSEE IS AN INVESTOR OR A TRADER. IN CASE ASSESSEE IS BOTH AN INVESTOR AND A TRADER, THE EXTENT OF TRA NSACTIONS CAN BE ANALYSED DEPENDING ON THE FACTS. WITH THESE DIRECTIONS THE O RDERS OF THE CIT(A) AND ARE SET ASIDE AND THE ISSUE OF TREATMENT OF GAINS ON SHARE TRANSACTIONS AS ITA NOS. 36 & 328/MUM/2010 SHRI RAJAN R. BAHL 8 BUSINESS INCOME OR CAPITAL GAINS IS RESTORED TO THE FILE OF THE A.O. TO DECIDE IT AFRESH. NEEDLESS TO SAY THAT ASSESSEE SHOULD BE GIV EN AN OPPORTUNITY AND A.O. IS DIRECTED TO KEEP VARIOUS LEGAL PRINCIPLES O N THIS ISSUE WHILE DECIDING THE MATTER. 11. RELATED ISSUE WITH REFERENCE TO DISALLOWANCE UNDER SECTION 14A AND DISALLOWANCE OF OTHER EXPENDITURES CONFIRMED BY THE CIT(A) ARE NOT CONTESTED BY THE ASSESSEE. THEREFORE, ONLY THE ISSUE WITH REF ERENCE TO TREATMENT TO BE GIVEN TO THE GAIN ON SHARE TRANSACTIONS IS RESTORED TO THE FILE OF THE A.O. 12. IN THE RESULT, APPEALS ARE CONSIDERED ALLOWED FOR S TATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH MAY 2011. SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED: 20 TH MAY 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXXI, MUMBAI 4. THE CIT XX, MUMBAI CITY 5. THE DR, D BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.