Shri Mukundbhai Manubhai Patel, Baroda V. The ACIT.,Circle-5, Baroda

ITA 3466/AHD/2010

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1240 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-06-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 29-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Business income; Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) ITA. NO: 3466 & 3382/AHD/2010 (ASSESSMENT YEAR: 2007-08) MUKUNDBHAI M. PATEL MANUSMRUTI B/H KARELIBAUG POST OFFICE KARELIBAUG BARODA THE ACIT CIRCLE-5, BARODA V/S V/S THE ACIT CIRCLE-5, BARODA MUKUNDBHAI M. PATEL MANUSMRUTI B/H KARELIBAUG POST OFFICE KARELIBAUG BARODA (APPELLANT) (RESPONDENT) PAN: ACZPP3935E APPELLANT BY : SHRI S. N. SOPARKAR, AR RESPONDENT BY : SHRI KAMLESH MAKWANA, SR. D. R. ( )/ ORDER DATE OF HEARING : 09 -06-2 016 DATE OF PRONOUNCEMENT : 20 -06-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: ITA NO. 3466 & 3382/AHD/2010 . A.Y. 2007-0 8 2 1. ITA NOS. 3466 & 3382/AHD/2010 ARE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE PREFERRED AGAINST THE ORDER OF THE LD. CIT(A)-V, BARODA DATED 07.10.2010 PERTAINING TO A.Y. 2007-08. 2. THE ASSESSEE IS AGGRIEVED BY THE TREATMENT OF SHORT TERM CAPITAL GAIN AS BUSINESS INCOME AND THE REVENUE IS AGGRIEVED BY THE TREATMENT OF BUSINESS INCOME AS LONG TERM CAPITAL GAIN. 3. AT THE VERY OUTSET, WE FIND THAT THE TAX EFFECT IN REVENUES APPEAL IS LESS THAN RS. 10 LAKHS AND, THEREFORE, THE APPEAL O F THE REVENUE IS HIT BY CBDT CIRCULAR NO. 21/2015 DATED 10.12.2015 BY WH ICH THE BOARD HAS DIRECTED TO THE REVENUE AUTHORITIES NOT TO FILE APPEAL IN CASES WHERE THE TAX EFFECT DOES NOT EXCEED THE MONETARY L IMIT OF RS. 10 LAKHS. 4. DRAWING SUPPORT FROM THE AFOREMENTIONED CIRCULAR OF THE CBDT, THE APPEAL OF THE REVENUE IS DISMISSED. 5. COMING BACK TO THE ASSESSEES APPEAL, WHILE SCRUTIN IZING THE RETURN OF INCOME, THE A.O FOUND THAT THE ASSESSEE HAS SHOWN C APITAL GAINS ON SALE OF SHARES. THE ASSESSEE WAS ASKED TO EXPLAIN W HY THE CAPITAL GAIN SHOULD NOT BE TREATED AS BUSINESS INCOME. AFTER CON SIDERING THE FACTS AND THE SUBMISSIONS, THE A.O. WAS OF THE OPINION TH AT THE MAGNITUDE, FREQUENCY THE HOLDING PERIOD CLEARLY SHOWS THAT THE ASSESSEE WAS INDULGED IN TRADING IN SHARES AND ACCORDINGLY TREAT ED THE CAPITAL GAIN FROM SALE OF SHARES AS BUSINESS INCOME OF THE ASSES SEE. ITA NO. 3466 & 3382/AHD/2010 . A.Y. 2007-0 8 3 6. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT ANY SUCCESS. BEFORE US, THE LD. COUNSEL FOR THE ASSESSE E DREW OUR ATTENTION TO THE FACT THAT THE ASSESSEE HAS ENGAGED THE SERVI CES OF A PORTFOLIO MANAGER WHO WAS MAKING REQUISITE . THEREFORE , IT IS INCORRECT TO SAY THAT THE ASSESSEE INDULGED IN HIGH VOLUME TRANS ACTIONS. IN SUPPORT OF ITS CONTENTION, RELIANCE WAS PLACED ON THE DECIS ION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF KAPUR INVESTMEN TS (P.) LTD. 61 TAXMANN.COM 91. 7. PER CONTRA, THE LD. D.R. COULD NOT BRING ANY DISTIN GUISHING DECISION IN FAVOUR OF THE REVENUE. 8. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTH ORITIES BELOW AND HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE RELEVA NT DOCUMENTARY EVIDENCES ON BROUGHT ON RECORD AND REFERRED TO DURI NG THE COURSE OF HEARING. WE HAVE ALSO CAREFULLY PERUSED THE DECISIO N OF THE HONBLE HIGH COURT OF KARNATAKA HIGH COURT (SUPRA). WE FIND FORCE IN THE CONTENTION OF THE LD. COUNSEL. WE FIND THAT THE ENT IRE TRANSACTIONS IN SHARES WERE DONE BY EMPLOYING PORTFOLIO MANAGEMENT SERVICES. THE RELEVANT FINDING OF THE HONBLE HIGH COURT READ AS UNDER:- 10. AS REGARDS THE FIRST QUESTION THAT MERELY BECAU SE OF EMPLOYMENT OF PORTFOLIO MANAGEMENT SERVICE FOR INVESTMENT IN SHAR ES, THE SAME WOULD BECOME BUSINESS INCOME, WE ARE OF THE OPINION THAT THE SAID ISSUE HAS BEEN DEALT WITH AT LENGTH BY THE DELHI HIGH COURT I N THE CASE OF RADIALS INTERNATIONAL (SUPRA), WHEREIN, IN SIMILAR FACTS, T HE QUESTION HAS BEEN ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. DETAILED REASONS FOR THE SAME HAVE BEEN GIVEN IN THE SAID JU DGMENT WITH WHICH WE CONCUR. EVEN OTHERWISE, IT IS ADMITTEDLY NOT A CASE WHERE THE ASSESSEE HAD ENGAGED ITS OWN PERSONS OR HAD A SEPARATE BUSIN ESS INFRASTRUCTURE TO CARRY OUT ITS SHARE TRANSACTIONS FOR THE PURPOSE OF BUSINESS. IT IS MERELY A ITA NO. 3466 & 3382/AHD/2010 . A.Y. 2007-0 8 4 CASE WHERE THE ASSESSEE HAS INVESTED FUNDS THROUGH THE PORTFOLIO MANAGEMENT SERVICE. 11. IN OUR OPINION, INVESTMENT THROUGH PORTFOLIO MA NAGEMENT SERVICE, WHICH MAY DEAL WITH THE SHARES OF THE ASSESSEE SO A S TO DERIVE MAXIMUM PROFITS CANNOT BE TERMED AS BUSINESS OF THE ASSESSE E BUT WOULD ONLY BE A CASE OF A MORE CAREFUL AND PRUDENT MODE OF INVESTME NT, WHICH HAS BEEN DONE BY THE ASSESSEE. FUNDS WHICH LIE WITH THE ASSE SSEE CAN ALWAYS BE INVESTED (FOR EARNING HIGHER RETURNS) IN THE SHARES EITHER DIRECTLY OR THROUGH PROFESSIONALLY MANAGED PORTFOLIO MANAGEMENT SCHEME AND BY DOING SO. IT WOULD NOT MEAN THAT THE ASSESSEE IS CARRYING ON THE BUSINESS OF INVESTMENT IN SHARES. PROFITS FROM SUCH INVESTMENT, EITHER DIRECTLY OR THROUGH PROFESSIONALLY MANAGED FIRM, WOULD STILL RE MAIN AS PROFITS TO BE TAXED AS CAPITAL GAINS AS THE SAME WILL NOT CHANGE THE NATURE OF INVESTMENT WHICH IS IN SHARES, AND THE LAW PERMITS IT TO BE TAXED AS CAPITAL GAINS AND NOT AS BUSINESS INCOME. 9. RESPECTFULLY FOLLOWING THE FINDINGS OF THE H ONBLE HIGH COURT (SUPRA), WE SET ASIDE THE FINDINGS OF THE LD. CIT(A ) AND DIRECT THE A.O TO TREAT THE GAINS FROM THE SALE OF SHARES UNDER TH E HEAD CAPITAL GAINS, LONG TERM OR SHORT TERM AS THE CASE MAY BE. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AND THAT OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 20- 06 - 2016. SD/- SD/- (RAJPAL YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY