SAROH BABUBHAI SHAH, MUMBAI V. ACIT 13(1), MUMBAI

ITA 3992/MUM/2012

• Counselvise Citation: 399219914 RSA 2012
• Duration Of Justice: 2 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 22-01-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 07-06-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR BORA
• Assessee Lawyers: REPAL TRALSHAWALA
• Keywords: Capital asset; Business income; Transactions in derivatives; Question of law
• Section: 143(3)

Judgement Text

, BZ BZBZ BZ INCOME TAX APPELLATE TRIBUNAL,MUMBAI - E BENCH , !' , ! BEFORE S/SH.JOGINDER SINGH, JUDICIAL MEM BER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.3992/MUM/2012, # # # # $ $ $ $ / ASSESSMENT YEAR-2008-09 SMT. SAROJ BABUBHAI SHAH, 29, 2ND FLOOR, 67, HANUMAN BUILDING, MUMBADEVI ROAD, PYDHONIE, MUMBAI-400003 PAN: ABDPS0217K # VS. DCIT-RANGE 4(3), R. NO. 649, 6TH FLOOR, AAYAKAR BHAVAN, MUMBAI-400020 ( %& / APPELLANT) ( '(%& / RESPONDENT) #)* #)* #)* #)* + + + + ! !! ! / ASSESSEE BY :SHRI REPAL TRALSHAWALA , + ! / REVENUE BY : SHRI VIJAY KUMAR BORA # # # # , ,, , *- *- *- *- / DATE OF HEARING : 03 -02-2015 .$ , *- / DATE OF PRONOUNCEMENT :11 -02-2015 # # # # , 1961 , ,, , 254(1) ! !! ! ** ** ** ** !/ !/ !/ !/ ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, A.M. ! !' ! # : CHALLENGING THE ORDER DATED 06.03.2012 OF THE CIT(A )-24,MUMBAI,THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS, CIRCUMSTANCES AND LEGALITY OF THE CAS E, THE HON'BLE CIT(A) ERRED IN CONFIRMING THE SHORT TERM CAPITAL GAIN AMOUNTING TO RS. 40,29,724/ - AS BUSINESS INCOME WHILE IN FACT, THE SAME IS TAXABLE UNDER THE HEAD 'CAPITAL GAIN'. THE SHORT TERM CAPITAL GAIN AMOUNTING TO RS. 40,29, 724/- TREATED AS A BUSINESS INCOME BE TREATED AS SHORT TERM CAPITAL GAIN. ASSESSEE,AN INDIVIDUAL,DEALING IN SECURITIES-FUTURE AND OPTIONS (F&O),FILED HER RETURN OF INCOME ON 29.09.2008 DECLARING TOTAL INCOME OF RS. 43.28 L AKHS. THE ASSESSING OFFICER (AO) COMPLETED THE ASSESSMENT ON 24.12.2010 U/S 143(3) OF THE ACT DETERMINING THE INCOME OF THE ASSESSEE AT RS. 79.32 LAKHS. 2. THE EFFECTIVE GROUND OF APPEAL IS ABOUT CONFIRMING THE DECISION OF THE AO OF TREATING SHORT TERM CAPITAL GAIN(STCG)OF RS.40.29 LAKHS,AS BUSINES S INCOME.DURING THE ASSESSMENT PROCEEDI -NGS,THE AO FOUND THAT ASSESSEE HAD SUFFERED A LOSS FROM TRADING IN F & O SEGMENT,AMOUNTING TO RS.7.52 LAKHS,THAT SHE HAD EARNED INCOME FROM SPECU LATION ACTIVITIES OF RS. 1.27 LAKHS, THAT SHE HAD SHOWN GAIN FROM TRANSACTION ON SALE AND PURCHAS E OF SHARES OF RS.40,29,724/- UNDER THE HEAD STCG AND HAD ALSO CLAIMED LTCG OF RS.36.03 LAKHS.TH E AO OBSERVED THAT THE ASSESSEE WAS INVOLVED IN FREQUENT PURCHASE AND SALE OF SHARES DU RING THE YEAR UNDER APPEAL,THAT SHE HAD TRANSACTED INTO SHARES OF MORE THAN 91 COMPANIES ON THE SHORT TERM BASIS WHICH INCLUDED TOTAL SALE OF 2,24,431 SHARES FOR THE RS.3,00,26,439/-,THAT PU RCHASE COST FOR THE SHARES WAS RS.2.53 CRORES, THAT IT RESULTED GAIN OF RS.47.26 LAKHS.THE AO FOUN D THAT ASSESSEE HAD PAID INTEREST OF RS. 6.7 LAKHS ON THE AMOUNT OUTSTANDING WITH THE BROKER WIT H WHOM SHE MAINTAINED RUNNING LEDGER ACCOUNT AND HAD CLAIMED THE SAME AS SELLING EXPENSE S ALONG WITH THE DEMAT CHARGES.HE FURTHER FOUND THAT SHE HAD ENTERED INTO 55 TRANSACTIONS OF SALE/PURCHASE OF SHARES AND FOR MORE THAN 1 YEAR FOR TOTAL NUMBER OF 45,174 SHARES, THAT SALE VALUE OF TRANSACTION WAS RS. 57.76 LAKHS AND COST OF PURCHASE WAS RS.20.72 LAKHS,THAT ASSESSEE HAD,ON AN AVERAGE,MADE AT LEAST ONE TRANSACTION EVERYDAY IN THE SHARES,THAT IF THE TOTAL F & O TRAN SACTIONS ENTERED INTO DURING THE AY.UNDER CONSID -ERATION WERE ACCOUNTED FOR THE FREQUENCY OF TRANSA CTION WOULD BECOME CLEAR,THAT SHE HAD ENTERED INTO TRANSACTION TO SALE THE SHARES AT PROFIT, THAT BY NO STRETCH OF IMAGINATION IT COULD BE SAID THAT 2 ITA NO. 3992/M/2012 SMT. SAROJ BABUBHAI SHAH SHE WAS INVESTING IN SHARES.ABOUT THE PERIOD OF HOL DING OF THE SHARES,THE AO FOUND THAT IT VARIED FROM 1 DAY TO 40 DAYS, THAT THE SHARES HELD FOR 240 DAYS WERE VERY LESS.THE AO TABULATED THE SUMMARY OF TRANSACTIONS,SALE AND PURCHASE OF THE SH ARES ALONG WITH THE PERIOD OF HOLDING AS UNDER: SR. NO. HOLDING PERIOD (DAYS) NO.OF TRANSACTIONS ENTERED AVERAGE PERIOD OF HOLDING (DAYS) TOTAL SALE VALUE(RS.) FOR THESE TRANSACTIONS % OF TOTAL TRANSACTIONS % OF THE TOTAL SALE VALUE TOTAL PROFIT (RS.) 1 1-5 43 2.67 1,07,02,197 27.22% 35.64% 3,02,291 2 6-10 14 7.43 20,40,952 8.86% 6.77% 1,47,714 3 11-30 23 20.30 33,92,971 14.55% 11.30% 3,77,447 ANALYSING THE TABLE, THE AO OBSERVED THAT THERE WER E 15 TRANSACTION WHERE SHE HAD HELD THE SHARES FOR A PERIOD OF 1 DAY ONLY,THAT CONSIDERABLE TRANSA CTIONS WERE ENTERED INTO WHERE THE PERIOD OF HOLDING WAS ONLY 2-5 DAYS,THAT THE ASSESSEE HAD NO INTENTION TO HOLD THE SHARES FOR LONG, THAT 80% OF THE TOTAL SALE VALUE OF SHARES WAS DISPOSED WITH IN A PERIOD OF 60 DAYS, THE AVERAGE HOLDING PERIOD WAS 18.33 DAYS. HE HELD THAT THE BEHAVIOR OF THE ASSESSEE PROVED THAT SHE WAS A TRADER AND WAS NOT AN INVESTOR,THAT IT WAS ORGANIZED ACTIVITY CLEARLY IN THE NATURE OF TRADE AND HAD TO BE CATEGORISED AS BUSINESS INCOME. REFERRING TO CBDT CIRCULAR NO.4/07,THE AO MENTIONED THE VARIOUS PARAMETERS AS DISCUSSED IN THE CIRCULAR OF THE BOARD AND HELD THAT STCG DECLARED B Y THE ASSESSED COULD NOT BE TERMED AS CAPITAL GAIN,THAT THOSE TRANSACTIONS WERE IN THE NATURE OF BUSINESS INCOME. HE DIRECTED THE ASSESSEE TO EXPLAIN AS TO WHY THE TRANSACTIONS ENTERED INTO BY HER SHOULD NOT BE TAKEN AS BUSINESS.THE ASSESSEE VIDE HER LETTER MADE CERTAIN SUBMISSIONS.A FTER CONSIDERING THE SAME, THE AO HELD THAT PROFIT ARISING OUT OF SALE OF SHARES WAS TO BE ASSE SSED UNDER THE HEAD BUSINESS INCOME. HE REFERRED TO DECISION OF DECISION OF REKHA KHANDELWAL (ITA/78 5/MUM/2009),HARESH & MEHTA (ITA/ 1859/MUM/2009-AY-2005-06 ORDER DT. 16.07.2010) AND SHAILESH L. SHAH HUF (ITA/3991/ MUM/ 2008).HE HELD THAT THERE WAS HIGH FREQUENCY OF SALE AND PURCHASE OF SHARES,THAT APART FROM SHARE TRANSACTIONS THERE WAS NO OTHER BUSINESS ACTIVITY C ARRIED OUT BY THE ASSESSEE,THAT SHE HAD UTILISED SUBSTANTIAL AMOUNT OF BORROWED FUNDS,THAT SHE HAD E NTERED INTO TRANSACTION IN F & O SEGMENT. 3. AGGRIEVED BY THE ORDER OF THE ASSESSEE, THE ASSESSE E PREFERRED AN APPEAL BEFORE THE FAA. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER THE FAA HELD THAT THE QUESTION WHETHER THE TRANSACTIONS OF SALE AND PURCH ASE OF SHARES WERE TRADING TRANSACTIONS OR WHETHER THEY WERE IN THE NATURE OF INVESTMENTS I S A MIXED QUESTION OF LAW AND FACTS,THAT THE INTENTION AT THE TIME OF PURCHASE WAS THE MOST IMPORTANT FACTOR TO DECIDE WHETHER THE PURCHASE WERE MADE AS A TRADER OR WHETHER THE SAME WERE MADE AS AN INVESTOR,THAT INTENTION COULD TO BE GATHERED FROM SUBSEQUENT CONDUCT OF THE ASSESSEE IN DEALING WITH THE SHARES,THAT FOR DECIDING THE QUESTION WHETHER THE PROFIT FROM S ALE OF SHARE WAS CAPITAL GAIN OR BUSINESS INCOME NO SINGLE THUMB RULE COULD BE APPLIED AS HEL D BY THE DIFFERENT HON'BLE COURTS AS WELL AS BY THE CBDT IN CIRCULAR NO. 4/2007, THAT VARIOUS HO N'BLE COURTS AND BENCHES OF THE HON'BLE TRIBUNAL AND CBDT HAD LAID DOWN PARAMETERS/CRITERIA FOR JUDGING WHETHER THE ACTIVITY OF THE ASSESSEE WAS IN THE NATURE OF AN INVESTMENT ACTIVIT Y OR A TRADING ACTIVITY,THAT THOSE PARAM -ETERS INCLUDED INTENTION OF THE ASSESSEE AT THE TI ME OF PURCHASE OF SHARES,FREQUENCY OF TRANSACTION, CONTINUITY,VOLUME, HOLDING PERIOD, TRE ATMENT IN THE BOOKS OF ACCOUNT, USE OF BORROWED/OWN FUNDS AND DEVOTION OF TIME TO THE A CTIVITY, ETC.,THAT THE VARIOUS COURTS AND TRIBUNALS AS WELL AS THE CBDT HAVE ACCEP TED THE PRINCIPLE THAT AN ASSESSEE COULD HAVE TWO PORTFOLIOS OF SHARES-ONE FOR TRADING AND ONE FO R INVESTMENT PURPOSES, THAT THE ASSESSEE COULD BE BOTH A DEALER IN SHARES AS WELL AS AN INVESTOR I N SHARES AT THE SAME TIME. 3.1. ADVERTING TO THE FACTS OF THE CASE,THE FAA HELD THA T THE ASSESSEE HAD DISCLOSED AN INCOME OF RS.36,03,320/-UNDER LTCG,THAT PERUSAL OF THE SAID D ETAILS REVEALED THAT THE SHARES HAD BEEN HELD 3 ITA NO. 3992/M/2012 SMT. SAROJ BABUBHAI SHAH FOR MORE THAN 1 YEAR TO AS LONG AS AROUND 15 YEARS, THAT THE SHARES ON WHICH LTCG HAD BEEN DISCLOSED BY THE ASSESSEE HAD BEEN HELD FOR PERIODS MUCH MORE THAN 365 DAYS,THAT SAME WERE LONG TERM CAPITAL ASSETS AS DEFINED IN SEC. 2(29A) R.W.S . 2(42A) OF THE ACT,THAT IT WAS NOT THE CASE OF THE AO THAT THE SHARES WERE NOT DISCLOSED AS INVESTMENT S IN THE BALANCE SHEET OF THE ASSESSEE,THAT THE ASSESSEE HAD ALL ALONG BEEN SHOWING THESE SHARES AS INVESTMENTS IN HER BALANCE SHEET,THAT THE CONDUCT OF THE ASSESSEE IN DEALING WITH THESE SHARE S ALSO SHOWED THAT HER INTENTION WAS TO HOLD THESE SHARES AS INVESTMENTS AND NOT AS TRADING ASSETS,THA T ALL THE SHARES IN RESPECT OF WHICH THE ASSESSEE H AD CLAIMED LONG TERM CAPITAL GAINS WERE BOUGHT AT LEAS T ONE YEAR BEFORE THEIR SALES AND IN A LARGE NUMBER OF CASES, THE HOLDING PERIOD WAS SUBSTANTIALLY MUCH MORE THAN ONE YEAR BEFORE THEIR SALE,THAT HOLDING PERIOD OF THE SHARES ITSELF SHOWED THAT THE SHARES WERE PURCHASED FOR THE PURPOSE OF INVESTMENTS,THAT THE CONDUCT OF THE ASSESSEE SHOWED THAT THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE WAS TO DEAL WITH THE SAME AS AN INVESTOR I N THE SHARES AND NOT AS A TRADER IN THE SHARES, THA T THE ASSESSEE HAD NOT TAKEN ANY LOAN FOR MAKING INVE STMENTS IN THE SHARES,THAT SHARES HAD BEEN BOUGHT FROM THE FUNDS AVAILABLE WITH THE ASSESSEE,THAT IT WAS AN IMPORTANT PARAMETER TO BE TAKEN INTO CONSIDERATION FOR DECIDING THE QUESTION AS TO WHETH ER A PERSON IS AN INVESTOR OR TRADER, THAT THE GAIN S IN RESPECT OF SHARES HELD FOR MORE THAN 1 YEAR HAD BEEN RIGHTLY DISCLOSED BY THE ASSESSEE AS LONG TERM CAPITAL GAINS.THE FAA RELIED UPON THE MATTER O F TRISHUL INVESTMENTS LTD.(305 ITR 434),OF THE HON'BLE MADRAS HIGH COURT HAD HELD THAT THE TEST TO DECIDE WHETHER AN ACTIVITY WAS IN THE NATURE OF INVESTMENT OR AN ADVENTURE IN THE NATURE OF TRADE HAD A VERY THIN LI NE OF DEMARCATION. 3.B. AS REGARDS THE CLAIM OF STCG,HE HELD THAT THE ONLY SUBSTANTIAL ACTIVITY OF THE ASSESSEE DURING THE YEAR WAS FROM HER ACTIVITY IN THE PURCHASE AND SALE OF SHARES,THAT SHE WAS A NON-WORKING PARTNER IN SOME REGISTERED FIRMS FROM WHICH SHE WAS DERIVIN G INTEREST AND SHARE OF PROFIT,THAT DURING THE CURRENT FINANCIAL YEAR IN QUESTION, THE ASSESSEE WA S PRIMARILY AND ENTIRELY ENGAGED IN DEALING IN SHARES,WHETHER IN THE F&O SEGMENT OR IN THE PURCHAS E AND SALE OF SHARES IN WHICH SHE HAD TAKEN DELIVERY,THAT IT WAS AN IMPORTANT PARAMETER WHICH C OULD NOT BE IGNORED WHILE DECIDING WHETHER THE ASSESSEE HAD ACTED AS A TRADER OR AS AN INVESTOR IN RESPECT OF THE SHARES, GAINS/INCOME FROM WHICH WAS CLAIMED BY HER TO BE IN THE NATURE OF CAPITAL GAINS ,THAT THE ACTIVITIES OF THE ASSESSEE WERE PRIMARILY CONFINED TO THE SHARE MARKET AND SHE WAS NOT ENGAGE D IN ANY BUSINESS OR ACTIVITY OUTSIDE THE SHARE MARKET,THAT SHE WAS FOUND TO BE ACTIVELY AND REGULA RLY ENGAGED IN THE ACTIVITY OF PURCHASE AND SALE OF SHARES THROUGHOUT THE YEAR, INCLUDING THE SPECUL ATIVE TRANSACTIONS AND IN THE F&O SEGMENT,THAT TIME DEVOTED BY THE ASSESSEE TO HER DEALINGS IN SHA RES WAS SUBSTANTIAL,THAT RATHER HER ENTIRE TIME AND ATTENTION WAS DEVOTED TO THE ACTIVITY OF PURCHA SE AND SALE OF SHARES.AS REGARDS FREQUENCY AND VOLUME OF TRANSACTIONS,THE FAA HELD THAT FROM THE D ETAILS FILED IT WAS CLEAR THAT THE SAME WERE SUBSTANTIAL, ALTHOUGH THOSE MIGHT NOT BE THE O NLY DETERMINING FACTOR,THAT THOSE WERE IMPORTANT CONSIDERATIONS FOR DECIDING WHETHER THE A SSESSEE WAS A TRADER OR INVESTOR IN SHARES.WITH REGARD TO THE INTENTION OF THE ASSESSEE ,HE HELD THAT THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE OF ASSET WAS THE MOST IMPOR TANT CRITERIA TO DECIDE WHETHER THE SAME WERE PURCHASED AS TRADING ASSETS OR WERE BOUGHT AS AN INVESTMENT, THAT ONLY BECAUSE THE SHARES HAD BEEN DISCLOSED IN THE BALANCE SHEET AS A N INVESTMENT WOULD NOT DETERMINE OR PROVE THAT THE SHARES WERE PURCHASED AS A CAPITAL A SSET,THAT ENTRIES IN THE BOOKS OF ACCOUNTS WERE NOT DETERMINATIVE OF THE TRUE NATURE OF THE TRANSAC TIONS,THAT TO DETERMINE THE NATURE OF THE TRANSACTIONS OR WHETHER THE ASSESSEE HAD ACTED AS A TRADER OR INVESTOR WHAT HAD TO BE EXAMINED WAS AS TO HOW HE HAD DEALT OVERALL WITH HIS ASSETS AFTER THE PURCHASE.HE HELD THAT OUT OF TOTAL 158 TRANSACTIONS OF SALE OF SHARES ENTERED IN TO BY THE ASSESSEE, 80 TRANSACTIONS OF SHARES RELATED TO SHARES WHICH WERE HELD BY HER FOR 30 DAYS OR LESS,THAT IT TRANSLATED TO MORE THAN 50% OF THE TRANSACTIONS,THAT OUT OF THIS IN 57 TRAN SACTIONS THE SHARES WERE HELD FOR 10 DAYS OR LESS WHICH WAS 36% OF THE SUCH TRANSACTIONS,THAT IT WAS QUITE ABNORMAL FOR AN INVESTOR,THAT AN INVESTOR WOULD TAKE A CONSIDERED DECISION BEFORE HE WOULD IN VESTS IN A SHARE WITH A CERTAIN SHORT-TERM, MEDIUM TERM OR LONG TERM PERSPECTIVE IN MIND, THAT LESS THAN 50% OF THE SHARES WERE HELD FOR MORE 4 ITA NO. 3992/M/2012 SMT. SAROJ BABUBHAI SHAH THAN 30 DAYS,THAT TO SELL SHARES AFTER HOLDING THE M ONLY FOR A FEW DAYS IN MAJORITY OF THE CASES PROVED THAT THE CHARACTER AND TRAITS OF THE ASSESS EE WAS OF A TRADER,THAT THE ASSESSEE HAD BASICALLY ACTED AS A TRADER IN RESPECT OF THE SHARE TRANSACTI ONS IN QUESTION, IT WAS NOT THE PERCENTAGE OF GAINS ALONE WHICH WAS TO BE CONSIDERED FOR ANSWERING THE QUESTION,IT WAS ALSO THE PERCENTAGE OF HOLDING PERIOD IN RESPECT OF THE SHARES WHICH WAS TO BE EXA MINED FOR THAT PURPOSE,THAT VARIOUS FACTORS WERE TO BE TAKEN INTO CONSIDERATION FOR DECIDING THE ISSUE, THAT IN THE CASE UNDER CONSIDERATION MAJORITY OF TH E SHARES WERE SOLD OFF WITHIN A FEW DAYS OF PURCHASE, THE OVERALL CONCLUSION THAT COULD BE DRAWN IS THAT THE ASSESSEE HAD DEALT WITH THE SHARES AS A TRADER. AS REGARDS THE ASSESSEE'S CLAIM THAT SHE WAS HELD AS AN INVESTOR IN THE EARLIER YEARS,THE FAA HELD TH AT IN THE EARLIER YEARS, NO SCRUTINY ASSESSMENT WAS CARRIED OUT, THAT ALMOST THE ENTIRE PURCHASE ON WHI CH STCG HAD BEEN CLAIMED TO HAVE BEEN EARNED WERE EFFECTED IN THE PERIOD 01/04/ 2007 TO 3 1/03/2008,THAT OTHER THAN A VERY FEW INSTANCES (11 TRANS -ACTIONS IN ALL OUT OF 158 TRAN SACTIONS), NONE OF THE SALES WERE OUT OF THE SHARES HELD AS ON 31/ 03/2007,THAT THE CLAIM MADE B Y THE ASSESSEE-THAT THE SHARES WERE SHOWN AS INVESTMENT IN THE BALANCE SHEET-WAS FACTUALLY CO RRECT. 3.C. THE FAA FURTHER HELD THAT THE ASSESSEE HAD PAID INT EREST FOR PURCHASING SHARES,THAT THE ASSESSEE HAD NOT DENIED THE FACT,THAT TAKING OF NOR NOT TAKING OF LOANS WAS NOT THE SOLE DETERMINING FACTOR FOR COMING TO THE CONCLUSION WHE THER THE ASSESSEE WAS A TRADER OR AN INVESTOR IN SHARES, THAT IT WAS AN IMPORTANT PARAME TER TO BE TAKEN INTO CONSIDERATION FOR DECIDING THE QUESTION WHETHER A PERSON IS AN INVEST OR OR TRADER,THAT NORMALLY, AN INVESTOR WOULD NOT USE BORROWED FUNDS FOR MAKING INVESTMENTS ,THAT USING BORROWED FUNDS WAS GENERALLY THE ATTRIBUTE OF A TRADER. THE FAA DISTINGUISHED THE FACTS OF THE CASE OF MAHE NDRA.C.SHAH RELIED UPON BY HER.WITH REGARD TO OTHER CASES HE HELD THAT RELIANCE ON A LA RGE NUMBER OF JUDICIAL DECISIONS WOULD NOT COME TO HER RESCUE SINCE SAME WERE RENDERED IN LIGH T OF THE FACTS PRESENT IN THOSE INDIVIDUAL CASES,THAT IT WAS SETTLED POSITION OF LAW THAT WHET HER A PERSON WAS A TRADER OR AN INVESTOR WAS A MIXED QUESTION OF FACTS AND LAW. THE FAA SUMMED UP THE CASE BY HOLDING THAT THE ASS ESSEE'S ONLY ACTIVITY EFFECTIVELY WAS HER ACTIVITY OF DEALING IN SHARES,BOTH IN THE F&O A ND SPECULATIVE SEGMENTS OR OTHERWISE, THAT SHE HAD CARRIED ON BUSINESS IN THE F&O AND SPECULAT IVE SEGMENTS,THAT HER DEALINGS IN SHARES OUTSIDE OF THESE SEGMENTS COULD NOT BE SAID TO BE I NSIGNIFICANT,THAT IN MAJORITY OF THE CASE THE SHARES HAD BEEN SOLD WITHIN JUST A FEW DAYS RANGING FROM 1 DAY TO 30 DAYS OF THEIR PURCHASE,THAT IN ALMOST 36% OF THE TRANSACTIONS THE SHARES HAD BEEN SOLD WITHIN 10 DAYS OF THE PURCHASE,THAT THE ASSESSEE COULD NOT BE SAID TO HAD ACTED AS AN INVESTOR,THAT SHE HAD BORROWED LOANS WHICH HAD BEEN UTILISED TO MAKE PURCHASE OF T HOSE SHARES ON WHICH SHORT TERM PROFITS HAD BEEN MADE,THAT ALMOST ALL THE SHARES WHICH WERE SOLD AND ON WHICH SHORT TERM CAPITAL GAINS WAS CLAIMED WERE BOUGHT DURING THE PRESENT YE AR IN APPEAL AND NOT IN THE EARLIER YEAR AND WERE NOT DISCLOSED AS INVESTMENTS IN THE BALANC E SHEET AS ON 31/03/2007.FINALLY,HE HELD THAT THE ASSESSEE WAS A TRADER AND NOT AN INVE STOR IN THE SHARES IN RESPECT OF WHICH SHE HAD CLAIMED SHORT TERM CAPITAL GAINS AND WHICH IS T HE SUBJECT MATTER OF THE APPEAL. 4. BEFORE US,THE AUTHORISED REPRESENTATIVE(AR) CONTEND ED THAT FOR DECIDING THE ISSUE OF TRADE INVESTOR OVERALL PICTURE HAD TO BE SEEN,THAT ASSESS EE WAS AN INVESTOR,THAT HER INVESTMENT WAS INCREASING DURING LAST FOUR YEARS,THAT PROFITABILIT Y OF THE ASSESSEE HAD TO BE LOOKED IN TO,THAT MAJORITY OF PROFIT UNDER STCG WAS FROM THE SHARES T HAT WERE HELD FOR MORE THAN 30 DAYS.HE REFERRED TO THE MATTER OF HITESH SATISHCHANRDA DOS HI(ITA/6497/MUM/2009 DTD.15.06.2011) DELIVERED BY THE MUMBAI TRIBUNAL(PG.94 OF THE PB.) BESIDES RELYING UPON THE MATTER OF MAHENDRA C SHAH(SUPRA).HE FURTHER STATED THAT IN ONE OF THE FAMILY MEMBERS CASE PRAMILA R SHAH 5 ITA NO. 3992/M/2012 SMT. SAROJ BABUBHAI SHAH (ITA/3991/MUM/2012) MATTER WAS REMITTED BACK TO THE FILE OF THE AO BY THE TRIBUNAL. DEPARTMENTAL REPRESENTATIVE (DR)SUPPORTED THE ORDER S OF THE FAA.HE RELIED UPON THE JUDGMENT OF HONBLE DELHI HIGH COURT OF MANOJKUMAR SAMDARIA (35 TAXMANN.394)AND STATED THAT THE DIVIDEND INCOME EARNED BY THE ASSESSEE FOR THE YEAR WAS MEAGER. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.THE ONLY ISSUE TO BE DECIDED BY US IS AS TO WHETHER THE PROFITS ON THE S ALE OF SHARES DURING THE YEAR WHICH HAD BEEN SHOWN BY THE ASSESSEE AS CAPITAL GAINS ARISING OUT OF INVESTMENT IN THE SHARES IN QUESTION IS TO BE ASSESSED UNDER THE HEAD INCOME FR OM BUSINESS OR UNDER THE HEAD CAPITAL GAINS.WE ARE OF THE FIRM OPINION THAT THERE IS NO C LEAR CUT CRITERIA OR DEMARCATION THAT COULD SEGREGATE THE TRANSACTIONS RELATED WITH THE S HARES UNDER THE HEAD BUSINESS TRANSACTION/ CAPITAL GAIN TRANSCTION.EVEN AFTER SERIES OF CASES DECIDED BY THE TRIBUNAL AND THE HONBLE HIGH COURT NO ONE CAN SAY WITH CERTAINTY THAT AN AS SESSEE UNDERTAKING SHARE TRANSACTIONS COULD BE ASSESSED AS INVESTOR OR TRADER.COURTS ARE OF THE VIEW THAT INTENTION OF THE ASSESSEE HAS TO LOOKED IN TO.INTENTION AT BEST CAN BE DECIDE D FROM THE SURROUNDING CIRCUMSTANCES. BROADLY,AN INVESTOR PURCHASE A SHARE WITH A VIEW TO EARNING INCOME IN THE FORM OF DIVIDEND AND FOR APPRECIATION IN VALUE OVER A LONG PERIOD OF TIME AND IS NOT MOTIVATED TO SELL SHARES ON EACH AND EVERY RISE IN THE VALUE OF SHARES WHICH ARE, IN FACT, THE ATTRIBUTES OF A TRADER.TO PURCHASE SHARES AND THEN WAIT FOR APPRECIATION IN T HEIR VALUE IN THE LONG TERM IS THE CLASSIC EXAMPLE OF AN INVESTOR.THERE MAY BE CRITERIA AND PA RAMETERS,BUT INDIVIDUAL PARAMETERS WOULD NOT BE DECISIVE AND IT IS ONLY THE CUMULATIVE EFFEC T OF ALL THOSE CRITERIA WHICH WOULD BE IMPORTANT TO DECIDE WHETHER THE ASSESSEE WAS AN INV ESTOR OR A TRADER.IN SHORT,TOTALITY OF FACTS AND PARAMETERS,AS LAID DOWN BY THE HON'BLE COURTS A S WELL AS CBDT HAVE TO BE TAKEN INTO CONSIDERATION IN DECIDING THE QUESTION.IN THE MATTE R OF SONIA UPPAL THE HONBLE P & H HIGH COURT HAS(367ITR70)HELD AS UNDER: THERE IS A NO STRAITJACKET FORMULA FOR CONCLUDING WHETHER A TRANSACTION WOULD FALL WITHIN THE DOMAIN OF PROFITS DERIVED FROM AN ADVENTURE IN THE NATURE OF TRADE OR OUTSIDE ITS AMBIT. THE FACTS AND CIRCUMSTANCES OF EACH CASE WOULD BE DETERMINATI VE OF THE CHARACTER OF THE RECEIPT. THE PRIMARY CONSIDERATION IN SUCH CASES RELATES TO EXAM INING THE NATURE OF THE TRANSACTION. WHERE A PERSON INVESTS MONEY IN AN ASSET WITH INTENTION TO HOLD IT, ENJOYS ITS USUFRUCT FOR SOME TIME AND THEN SELLS IT AT AN ENHANCED PRICE, IT WOULD BE A C ASE OF CAPITAL ACCRETION OUTSIDE THE SCOPE OF PROFITS RESULTING FROM AN ADVENTURE IN THE NATURE O F TRADE. ON THE OTHER HAND, WHERE INCOME ACCRUES ON REALISATION OF INVESTMENTS CONSISTING OF PURCHASE AND RESALE, INCOME ACCRUING COULD BE TREATED AS FROM AN ADVENTURE IN THE NATURE OF TRADE . THE CARDINAL QUESTION WHICH WOULD REQUIRE TO BE ANSWERED WOULD BE WHETHER THE PURCHASER WAS A TR ADER AND HAD PURCHASED THE COMMODITY WITH THE CLEAR UNDERSTANDING THAT IT WAS HIS USUAL TRADE OR BUSINESS OR INCIDENTAL TO IT. WE FIND THAT THE FAA HAS GIVEN CATEGORICAL FINDING OF FACTS ABOUT THE INTENTION OF THE ASSESSEE AFTER CONSIDERING THE FACTORS LIKE PERIOD OF HOLDING,VOLU ME AND FREQUENCY OF SHARES,TIME DEVOTED BY THE ASSESSEE FOR SHARE TRADING ACTIVITIES,INTEREST PAID BY HER ON THE LOAN TAKEN FOR MAKING INVESTMENT IN SHARES, PASSING OF ASSESSMENT U/S.143(1)IN EARLIER ASSESSMENT YEARS.WE FIND THAT THE FAA HAS HELD THAT THE SHARES HELD FOR MORE THAN ONE YEAR HAD TO BE ASSESSED UNDER THE HEAD LTCG.THUS,IT IS CLEAR THAT HE HAS TAKEN A BALANCED AND JUDICIOUS VIEW OF SHARE TRANSACTION.IT IS ALSO A FACT THAT THE ASSESS EE WAS DEALING IN F&O SEGMENT.BESIDES,THE DIVIDEND EAR NED BY THE ASSESSEE DURING THE YEAR,WHICH IS ALSO ONE OF THE PARAMETERS OF DECIDING THE TRADER/I NVESTOR ISSUE,IS NOT VERY HIGH.GENERALLY,THE INVESTORS EARNS HANDSOME DIVIDEND AS THEY HOLD THE SHARES FOR A LONG PERIOD FOR APPRECIATION.WE HOLD THAT T HE PURCHASE AND SALE OF SHARES WAS NOT AN OCCASIONA L INDEPENDENT ACTIVITY, BUT THE ASSESSEE WAS ENGAGED IN REAL, SUBSTANTIAL AND SYSTEMATIC BUS INESS ACTIVITY.AS SHE HAD PURCHASED THE SHARES WITH THE INTENTION OF RESELLING THEM AT A PR OFIT,SO,SHE HAS TO BE CONSIDERED A TRADER AND NOT A INVESTOR.IN PARAGRAPHS 3.D.,WHILE SUMMING UP THE ISSUE THE FAA HAS NARRATED THE FACTS FOR REJECTING THE CLAIM MADE BY THE ASSESSEE.WE ARE OF THE OPINION THAT THERE IS NO LEGAL OR FACTUAL INFIRMITY IN THE ORDER OF THE FAA.IF THE CARDINAL QUESTION,AS SUGGESTED BY THE HONBLE P & H 6 ITA NO. 3992/M/2012 SMT. SAROJ BABUBHAI SHAH HIGH COURT IN THE MATTER OF SONIA UPPAL(SUPRA),IS T O BE ANSWERED AFTER CONSIDERING THE FACTS OF THE CASE UNDER APPEAL,THEN IT BECOMES CLEAR THAT SHE WA S A TRADER AND HAD PURCHASED THE COMMODITY WITH THE CLEAR UNDERSTANDING THAT IT WAS HER USUAL TRADE OR BUSINESS.IN OTHER WORDS IT WAS NOT INCIDENTAL TO HER TRADE. AS FAR AS THE CASES RELIED UPON BY THE ASSESSEE ARE CONCERNED,WE FIND THAT THEY DEAL WITH SINGLE PARAMETER OR DEAL WITH THE FACTS ARISING IN THAT AP PEAL.THUS,THEY ARE NOT SIMILAR OR IDENTICAL TO THE FACTS OF THE CASE.WE FIND THAT OUT OF TOTAL 158 TRA NSACTIONS OF SALE OF SHARES ENTERED INTO BY THE ASSESSEE,ABOUT 80 TRANSACTIONS OF SHARES RELATE D TO SHARES WHICH WERE HELD BY HER FOR 30 DAYS OR LESS.SHE USED BORROWED FUNDS FOR SHARE BUSINESS. THESE ARE SOME OF THE PARAMETERS FOR DECIDING THE ISSUE.AS STATED EARLIER,THERE IS NO SIMILARITY OF F ACTS BETWEEN THE CASES RELIED UPON BY THE ASSESSEE AND THE FACTS OF THE CASE UNDER APPEAL.SO,CONSIDERING T HE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE,WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE A SSESSEE. AS A RESULT, APP EAL FILED BY THE ASSESSEE STANDS DISMISSED. 0*1 #)* 2 3 , # 4 , * 5 . ORDER PRONOUNCED IN THE OPEN COURT ON 11TH, FEBRUAR Y,2015. !/ , .$ ! 6 7# 11 08- , 201 5 , 9 SD/- SD/- ( /JOGINDER SINGH) ( !' / RAJENDRA) / JUDICIAL MEMBER ! ! ! ! / ACCOUNTANT MEMBER / MUMBAI, 7# /DATE: 11.02.2015 SK !/ !/ !/ !/ , ,, , '*: '*: '*: '*: ;!:$* ;!:$* ;!:$* ;!:$* / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / %& 2. RESPONDENT / '(%& 3. THE CONCERNED CIT(A)/ < = , 4. THE CONCERNED CIT / < = 5. DR E BENCH, ITAT, MUMBAI / :> '*# BZ BZBZ BZ , . . . 6. GUARD FILE/ 0 (:* '* //TRUE COPY// !/# / BY ORDER, ? / DY./ASST. REGISTRAR , /ITAT, MUMBAI