ITO 19(2)(1), MUMBAI V. ALKA KIRITKUMAR UPADHYAY, MUMBAI

ITA 3520/MUM/2010

• Counselvise Citation: 352019914 RSA 2010
• Duration Of Justice: 4 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 01-01-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 05-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PAVAN KUMAR BEER LA
• Keywords: Business income

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A , BENCH MUMBAI , BEFORE SHRI R.C.SHARMA , A M & SHRI SANJAY GARG , J M ITA N O. 3520 / MUM/20 1 0 ( ASSESSMENT YEAR : 2006 - 07 ) ACIT - 19(2), MUMBAI VS. SMT. ALKA KIRITKUMAR UPADHYAY, 6 TH FLOOR, 15 TH ROAD, SOUTH AVENUE, SANTACRUZ (W), MUMBAI - 400 054 PAN/GIR NO. : A A APU 0228 Q ( APP ELLANT ) .. ( RESPONDENT ) /REVENUE BY : SHRI PAVAN KUMAR BEERLA /ASSESSEE BY : SHRI NISHIT GANDHI DATE OF HEARING : 22 ND JANUARY , 201 5 DATE OF PRONOUNCEMENT 18/02/2015 O R D E R PER R.C.SHARMA (A.M) : TH IS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) , DATED 16 - 2 - 2010 FOR THE ASSESSMENT YEAR 200 6 - 0 7 , IN THE MATTER OF ORDER PASSED U/S. 143 ( 3 ) OF THE I.T. ACT , WHEREIN FOLLOWING GROUNDS HAVE BEEN T AKEN BY THE REVENUE : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING TO TREAT THE ST C GAIN ON SALE OF SHARES OF RS. 13,60,155/ - AS A STC GAIN INSTEAD OF BUSINESS INCOME MADE BY AO IN HIS ASSESSM ENT ORDER, IGNORING THE FACT THAT: - A) THE ASSESSEE HAS DEPLOYED HIS FUND WITH AN INTENTION OF EARNING PROFIT OF SUCH FUNDS AND THERE WAS NO INTENTION OF THE ASSESSEE TO APPRECIATE THE INVESTMENT SO MADE DURING THE YEAR. ITA NO. 3520 / 1 0 2 B) THE ASSESSEE HAD NO INTENTIO N TO HOLD HER SHARES IN ORDER TO EARN REGULAR INCOME OUT OF SUCH PURCHASES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THE IN DEPTH ANALYSIS MADE BY THE AO BEFORE TREATING THE GAINS AS BU SINESS INCOME AND THAT CIRCULAR NO. 4 OF 2007 HAS BE TAKEN INTO CONSIDERATION TO DECIDE WHETHER THE GAINS ARE TO BE TREATED AS SUCH OR AS BUSINESS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) FAILED TO APPRECIATE THE FACT THAT THE TRANSACTION IS SHOWN WHETHER BY HIMSELF OR THROUGH HIS AGENT HAS TO BE TREATED AS ASSESSEE'S OWN TRANSACTION AND THE MOTIVE BEHIND SUCH TRANSACTION WAS TO EARN MAXIMUM PROFIT AND NOT INVESTMENT. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AO BE RESTORED. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. THE SHORT TERM CAPITAL GAIN DECLARED BY THE ASSESSEE WAS TREATED BY THE AO AS BUSINESS INCOME. BY THE IMPUGNED ORDER, THE CIT(A) DIRECTED THE AO TO TREAT THE SAME AS SHORT TERM CAPITAL GAIN AFTER HAVING THE FOLLOWING OBSERVATIONS : - 3.3 I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER, SUBMISSIONS MADE BY THE A.R ON BEHALF OF THE APPELLANT AND THE FACTS OF THE CASE. THE ISSUE INVOLVED IS IN RESPECT OF TREATMENT OF LONG TERM CAPITAL GAINS ON SALE OF SHARES AND SALE OF MUTUAL FUNDS, SOLD AFTER 01.10.2004 AGGREGATING TO RS.14,10,430/ - [ON SALE OF SHARES RS.5,87,180/ - & ON MUTUAL FUNDS RS.8,23,250/ - AS BUSINESS INCOME BY THE A.O AN D THEREBY DENYING EXEMPTION TO THE APPELLANT ULS.10(38) OF THE ACT. THE OTHER ISSUE INVOLVED IS IN RESPECT OF TREATMENT OF SHORT TERM CAPITAL GAINS ON SALE OF SHARES AND REDEMPTION OF MUTUAL FUNDS SOLD AFTER 01.10.2004 AGGREGATING TO RS.15,25,348/ - [ON SAL E OF SHARES RS.13,60,155/ - & REDEMPTION OF MUTUAL FUNDS RS.1,65,193/ - ] AS BUSINESS INCOME BY THE A.O INSTEAD OF APPLYING A SPECIAL RATE @ 10% AS PROVIDED ULS.111A OF THE ACT. THE A.R OF THE APPELLANT VIDE HIS LETTER DTD. 20.12.09 CONTENDED THAT THE SHORT T ERM CAPITAL GAIN OF RS.1 5 ,25,348/ - [13,60,155/ - + 1,65,193] IS NOT CORRECT AND IN SUPPORT OF HIS CLAIM HE HAS CONTENDED THAT THE CORRECT FIGURE OF SHORT TERM CAPITAL GAIN SHALL BE RS.12,86,854/ - [11,21,661+1,65,193]. THE AO AFTER RELYING ON THE CBDT'S CIRC ULAR BEARING NO .4 /2007 DATED 15.6.2007 AND AFTER HAVING GIVEN OTHER REASONINGS TREATED THE LONG TERM CAPITAL GAIN OF RS.14,10,430/ - AND SHORT TERM CAPITAL GAIN OF RS.15,25,348/ - AS BUSINESS INCOME IN THE HANDS OF THE APPELLANT. THE A.R OF THE APPELLANT HAS CONTENDED BEFORE ME THAT IN THE EARLIER ASST. YEAR THE APPELLANT WAS TREATED AS AN INVESTOR AND NOT A TRADER OF THE SHARES AND ACCORDINGLY PROFIT AND GAINS ARISING ON SALE OF THOSE INVESTMENT ITA NO. 3520 / 1 0 3 WERE OFFERED FOR TAXATION UNDER THE HEAD CAPITAL GAINS AND HAS BEEN ASSESSED AS SUCH. THE A.R OF THE APPELLANT HAS ALSO PRODUCED COPY OF THE ASSESSMENT ORDERS PASSED U/S.143(3) FOR EARLIER TWO YEARS VIZ. A.Y. 2004 - 05 & 2005 - 06. THE A.R OF THE APPELLANT HAS RELIED ON THE HON'BLE BOMBAY HIGH COURT'S JUDGEMENT IN THE CAS E OF CIT VS. GOPAL PUROHIT DELIVERED ON 6TH JANUARY, 2010' AND HAS PRAYED THAT INCOME DERIVED BY THE APPELLANT FROM INVESTMENT ACTIVITY BE TREATED AS LONG TERM AND SHORT TERM CAPITAL GAINS RESPECTIVELY AND THE SAME SHOULD NOT BE TREATED AS INCOME FROM BUSI NESS. BASED ON THE FINDING RECORDED BY ITAT IN THE CASE OF CIT VS. GOPAL PUROHIT 122 TTJ MUMBAI 87, 'IT IS OPEN TO AN ASSESSEE TO MAINTAIN TWO SEPARATE PORTFOLIOS ONE RELATING TO INVESTMENTS IN SHARES AND OTHER RELATING TO BUSINESS ACTIVITIES INVOLVING DEA LING IN SHARES. THE ONLY DELIVERY BASED TRANSACTIONS FALL WITHIN THE PURVIEW OF NATURE OF INVESTMENT TRANSACTIONS GIVING RISE TO CAPITAL GAINS'. AS STATED ABOVE, IN THE PAST THE DEPARTMENT HAS ACCEPTED THE CLAIM OF THE APPELLANT OF BEING AN INVESTOR. DURIN G THE YEAR UNDER CONSIDERATION, THE AO HAS TREATED THE APPELLANT AS A TRADER WITHOUT BRINGING ON RECORD ANY REASON FOR DEVIATING FROM THE EARLIER STAND OF THE DEPARTMENT. I HAVE OBSERVED THAT THE CASE OF THE APPELLANT IS SQUARELY COVERED BY THE RATIO LAID DOWN IN THE CASE OF CIT VS. GOPAL PUROHIT MENTIONED SUPRA, THEREFORE, THE AO IS DIRECTED TO TREAT THE LONG TERM CAPITAL GAINS ON SALE OF SHARES AND SALE OF MUTUAL FUNDS, SOLD AFTER 01.10.2004 AGGREGATING TO RS.14,10,430/ - [ON SALE OF SHARES RS.5,87,180/ - & ON MUTUAL FUNDS RS.8,23,250/ - ] AS SUCH AND ALLOW THE EXEMPTION TO THE APPELLANT U/S. 1 0(38) OF THE ACT. APART FROM THE ABOVE, THE AO IS ALSO DIRECTED TO VERIFY THE TRANSACTION OF SHARES AND MUTUAL FUNDS WHICH ARE DELIVERY BASED AND TREAT THE SAME AS GIVING RISE TO CAPITAL GAINS AND CHARGE THE STCG AT CONCESSIONAL RATE OF 10% AS PROVIDED U/S. 111 A OF THE ACT. THE OTHER TRANSACTIONS INVOLVING NON-DELIVERY SPECULATIVE TRANSACTIONS WILL BE TREATED AS FORMING PART OF SPECULATION BUSINESS AND WILL BE TAXED AS SUCH . THE AO IS DIRECTED TO VERIFY AND QUANTIFY THE PROFIT/LOSS IN NON - DELIVERY BASED TRANSACTION AN D CHARGE IT AS BUSINESS INCOME/LOSS. THE GROUNDS OF APPEAL ARE, ACCORDINGLY, ALLOWED 4. GROUND NO.4 READS AS UNDER: 'ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AS WELL AS IN IAW: - THE LEARNED ITO ERRED IN CONSIDERING SHARES & MUTUAL FUNDS AS STOCK IN TRADE INSTEAD HELD AS INVESTMENTS IN THE BOOKS OF ACCOUNTS AND THEREBY GAIN MADE ON THE TRANSFER/REDEMPTION AS BUSINESS PROFIT IN DISREGARD OF THE FACTS OF THE C ASE OF APPELLANT. HE FAILED TO APPRECIATE THE FACTS THAT THE APPELLANT IS NOT A TRADER IN SHARES & THE UNITS OF MUTUAL FUNDS IN INVESTOR. IN THIS RESPECT HE OUGHT TO HAVE APPRECIATED THAT THERE IS NO JUSTIFICATION FOR CONSIDERING SHARES AS STOCK IN TRADE A S PER CIRCULAR NO. 4/2007, DATED 15.6.2007. 4.1 WHILE DISPOSING OFF GROUND NO. 2& 3, NECESSARY RELIEF HAS BEEN ALLOWED TO THE APPELLANT. THEREFORE , THIS GROUND OF APPEAL HAS BECOME INFRUCTUOUS AND IS DISMISSED. ITA NO. 3520 / 1 0 4 3. AGAINST THE ABOVE ORDER OF CIT(A), THE REVENUE IS IN FURTHER APPEAL BEFORE US. 4. WE HAVE CONSIDERED RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT THE ASSESSEE WAS CONSISTENTLY INVESTING IN SHARES. CAPITAL GAINS OFFERED BY THE ASSE SSEE EITHER AS LONG TERM OR SHORT TERM WAS ACCEPTED BY THE DEPARTMENT IN ALL THE EARLIER ASSESSMENT YEARS U/S.143(3). THE ASSESSEE HAS ALSO PLACED ON RECORD THE ASSESSMENT ORDER FRAMED U/S.143(3) FOR THE A.Y.2005 - 06 & 2006 - 07. AFTER GIVING DETAILED FINDING AT PARA 4, THE CIT(A) FOUND THAT ASSESSEE HAS EARNED LONG TERM CAPITAL GAINS OF RS. 14,10,430/ - ON SALE OF SHARES AND MUTUAL FUNDS WHICH IS LIABLE TO EXEMPTION U/S.10(38). THE CIT(A) HAS ALSO DIRECTED AO TO VERIFY THE TRANSACTION OF SHARES AND MUTUAL FUNDS HELD FOR LESS THAN TWELVE MONTHS, WHICH ARE DELIVERY BASED AND TREAT THE SAME AS GIVING RISE TO SHORT TERM CAPITAL GAINS. THE FINDINGS RECORDED BY CIT(A) HAVE NOT BEEN CONTROVERTED BY LD. DR. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDE R OF CIT(A) FOR ALLOWING ASSESSEES CLAIM OF LONG TERM AND SHORT TERM CAPITAL GAINS EARNED ON SALE OF SHARES AND MUTUAL FUNDS. 5 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18/02 201 5 . SD/ - SD/ - ( ) ( SANJAY GARG ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 18/02 /201 5 /PKM , PS ITA NO. 3520 / 1 0 5 COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMB AI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, M UMBAI 6. GUARD FILE. //TRUE COPY//