Trident Commerce(P)Ltd, Kolkata V. ITO, Kolkata

ITA 360/KOL/2023

AI Insights

The case involves Trident Commerce Pvt. Ltd., which appealed against the order of the Learned Commissioner of Income-tax (Appeals) - NFAC, Delhi, concerning the Assessment Year 2010-11. The primary issue was the classification of Rs. 20,66,939 gained from the sale of shares, initially treated as business income by the Assessing Officer, but shown as short term capital gain by the assessee. The Tribunal examined the assessee's maintenance of two distinct portfolios - investment and trading - and their respective treatments in the books of accounts. The Tribunal's decision was influenced by similar cases adjudicated by the Hon'ble Calcutta High Court, which favored the assessee under comparable circumstances.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 128726 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 30-07-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 12-04-2023
• Other Referred Cases: CIT Vs. HK Financers Pvt. Ltd. [2015] 375 ITR 577 (Cal), PCIT Vs. Purvanchal Leasing Ltd. 2022 (2) TMI 437 (Cal)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Set aside

Judgement Text

आयकर अपीलीय अधिकरण कोलकाता 'एसएमसी' पीठ, कोलकाता म ें IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘SMC’ BENCH, KOLKATA श्री राज े श क ु मार, ल े खा सदस्य एवं श्री संजय शमा ा , न्याधयक सदस्य क े समक्ष Before SRI RAJESH KUMAR, ACCOUNTANT MEMBER & SONJOY SARMA, JUDICIAL MEMBER I.T.A. No.: 360/KOL/2023 Assessment Year: 2010-11 Trident Commerce Pvt. Ltd.......................................Appellant [PAN: AAACT 9662 L] Vs. ITO, Ward-8(3), Kolkata........................................Respondent Appearances by: Sh. Miraj D. Shah, A/R, appeared on behalf of the Assessee. Sh. Gautam Patra, Addl. CIT, appeared on behalf of the Revenue. Date of concluding the hearing : July 31 st , 2023 Date of pronouncing the order : August 22 nd , 2023 ORDER Per Rajesh Kumar, Accountant Member: This is an appeal preferred by the assessee against the order of Learned Commissioner of Income-tax (Appeals)- NFAC, Delhi [hereinafter referred to Ld. ‘CIT(A)’] dated 13.03.2023 for the Assessment Year (in short ‘AY’) 2010-11. I.T.A. No.: 360/KOL/2023 Assessment Year: 2010-11 Trident Commerce Pvt. Ltd. Page 2 of 5 2. Ground no. 1 is general in nature and needs no specific adjudication. 3. The issue raised in ground no. 2 is against the order of Ld. CIT(A) confirming the addition of Rs. 20,66,939/- made by The Assessing Officer (in short ld. 'AO') wherein the amount was treated as business income as against short term capital gain shown by the assessee from sale of shares. 4. The facts in brief are that Ld. AO observed from the details furnished by the assessee that the assessee has shown income from long term capital gain, short term capital gain and speculation profit from sale of shares in the return of income. Ld. AO issued notice to the assessee to show cause as to why the short term capital gain shown on sale of shares during the financial year 2009-10 which were purchased during the year itself and sold within a period of one to two months should not be treated as business income. The aggregate short term capital gain on sale of shares was to the tune of Rs. 20,66,939/- and a complete detail was given in the assessment order at page 3 & 4. The assessee replied to the show cause notice by submitting that the assessee is maintaining two portfolios; one is investment portfolio and the second is trading portfolio and accordingly showing the earning the income from investment portfolio as well as trading portfolio in the return of income. The assessee submitted that full and complete books of accounts were being maintained showing all these transactions and it is the assessee’s decision to treat a particular purchase of shares as investment or under trading account and accordingly, the profit earned from these portfolios have been dealt I.T.A. No.: 360/KOL/2023 Assessment Year: 2010-11 Trident Commerce Pvt. Ltd. Page 3 of 5 with. The reply of the assessee did not find favour and Ld. AO treated the short term capital gain of Rs. 20,66,939/- as business income. 5. In the appellate proceedings, Ld. CIT(A) deleted the addition by observing and holding as under: “5.2.1 Grounds 2 & 3: Rs. 20,66,939 held as Business Profit:- These grounds pertain to the income of Rs. 20,66,939/- shown by the appellant as Short Term Capital Gain, which has been considered as Business profit by the Assessing Officer. The appellant had shown Rs. 78,44,950/- as Short Term Capital Gain. The Assessing Officer analyzed the transactions in detail and observed that in respect of 30 transactions, the shares were held for very short period, i.e. only one or two months. Looking at the frequency, magnitude and volume of the transactions, the Assessing Officer held that these transactions were to be considered as Business Profit and not Short Term Capital Gain. Hence, profit of Rs. 20,66,939/- was held as Business Profit. This amount was reduced from the Short Term Capital Gain shown. 5.2.2 The appellant has given detailed arguments as to why the profit should be considered as Short Term Capital Gain and not business profit. The appellant has claimed that the purchase of these shares had been shown in the books as investments and not stock-in-trade. It had followed AS-13 of ICAI and has considered the value at cost instead of AS-2 required to be followed for ‘stock-in-trade’. In the Audit Report also these have been shown as investments. The appellant has relied upon various judicial decisions to support his claim. 5.2.3 I have carefully considered the facts of the case. The Assessing Officer has given detailed reasoning for holding that the transactions were in the nature of business activity. The appellant has claimed that the Assessing Officer has made an artificial classification in respect of shares held for 60 days. On the other hand, the frequency of the transactions clearly show that the appellant did not intend to hold these shares as investment, but to earn profit by way of purchase and sale. Hence, how the valuation has been done and how these shares are shown in the Audit Report is immaterial. The action of the Assessing Officer is scientific and supported by proper logic and detailed analysis. The action by the Assessing Officer in holding these I.T.A. No.: 360/KOL/2023 Assessment Year: 2010-11 Trident Commerce Pvt. Ltd. Page 4 of 5 transactions as business activity and not short term capital gain is upheld. These grounds are rejected.” 6. After hearing rival contentions and perusing the material on record, we find that the assessee has categorized the purchases of shares/securities in two categories; one is investment portfolio and the second is trading portfolio and has shown the gain/income these shares under these two sections as and when the shares were sold. The income is shown according to the classification made in the books of accounts. We have examined the records placed before us and find that the assessee has clearly maintained the purchases between the two portfolios. In our opinion, it is the decision of the assessee as to which purchase to be treated as investment and which to be treated in trading section. The mere fact that the assessee has purchased shares and disposed them off within a short span of time will not justify the gain to be treated as business income while the same was shown in the investment portfolio in the books of the assessee. In our opinion, the decision of both the authorities below is not sustainable as this being a factual issue and the assessee has maintained the books clearly maintaining the dichotomy in the purchase of securities in the books of accounts. The case of the assessee finds support from the decision of Hon'ble Calcutta High Court in the case of CIT Vs. HK Financers Pvt. Ltd. reported in [2015] 375 ITR 577 (Cal) and PCIT Vs. Purvanchal Leasing Ltd. reported in 2022 (2) TMI 437 (Cal). In all these decisions the Hon'ble Court has the issue has been decided in favour of the assessee under similar facts and circumstances. Accordingly, we set aside the order of Ld. CIT(A) and direct Ld. AO to treat Rs. 20,66,939/- as short term capital gain. I.T.A. No.: 360/KOL/2023 Assessment Year: 2010-11 Trident Commerce Pvt. Ltd. Page 5 of 5 7. Ground no. 3 is not pressed at the time of hearing and therefore, dismissed as not pressed. 8. Other grounds are general in nature therefore, need no adjudication. 9. In the result, the appeal filed by the assessee is allowed. Kolkata, the 22 nd August, 2023. Sd/- Sd/- [Sonjoy Sarma] [Rajesh Kumar] Judicial Member Accountant Member Dated: 22.08.2023 Bidhan (P.S.) Copy of the order forwarded to: 1. Trident Commerce Pvt. Ltd., 25A, Camac Street, 4 th Floor, Room No. 408A, Kolkata-700 016. 2. ITO, Ward-8(3), Kolkata. 3. CIT(A)-NFAC, Delhi. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. //True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata