Digvijay Finlease Limited, V. The Dy.CIT(OSD), Range-1, Ahmedabad

ITA 405/AHD/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9254 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 12-01-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 07-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: PF JAIN
• Keywords: Capital asset; Business income; Earning of tax free income
• Section: 143(3); 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD , , BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO.405/AHD/2014 ( / ASSESSMENT YEAR : 2008-09) DIGVIJAY FINLEASE LTD. 21, STRAND ROAD KOLKATA 700 001 WEST BENGAL / VS. THE DCIT (OSD) RANGE-1 AHMEDABAD # ./ ./ PAN/GIR NO. : AAACD 6998 D ( #% / APPELLANT ) .. ( &#% / RESPONDENT ) #%' / APPELLANT BY : MR. P.F. JAIN, AR &#%(' / RESPONDENT BY : MR. PRASOON KABRA, SR.DR )*(+ / DATE OF HEARING 12/01/2017 ,-./(+ / DATE OF PRONOUNCEMENT 06/02/2017 / O R D E R PER PRADIP KUMAR KEDIA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-III, AHMEDABAD [CIT(A) IN SHORT] DATED 18/12/2013 FOR ASSESSMENT YEAR ASSESSM ENT YEAR (AY) 2008-09). 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE RE AD AS UNDER:- ITA NO. 405/AHD/2014 DIGVIJAY FINLEASE LTD. VS. DCIT (OSD) ASST.YEAR 2008-09 - 2 - 1. THE LD.CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN UPLOADING THE DISALLOWANCE OF RS.12,19,173/- OUT OF RS.16,32,367/ - MADE BY THE A.O. U/S.14A WITHOUT PROPERLY APPRECIATING THE FACT S AND CIRCUMSTANCES OF THE APPELLANT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLANT NO DISALLOWANCE U/S.14A OUGHT TO HAVE BEEN MADE. 3. THE LD.CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING ABOUT TREATING INCOME FROM SHORT TERM GAIN FROM S ALE OF SHARES AS INCOME UNDER THE HEAD BUSINESS FOR SUCH SCRIPTS/S HARES WHICH ARE HELD FOR LESS THAN 30 DAYS, INSTEAD OF HOLDING THE INCOME UNDER THE HEAD INCOME FROM SHORT TERM GAIN. 3. THE FIRST AND SECOND GROUND CONCERNS DISALLOWA NCE OF RS.12,19,173/- UNDER SECTION 14AOF THE INCOME TAX ACT, 1961 (HEREI NAFTER REFERRED TO AS 'THE ACT'). THE AFORESAID DISALLOWANCE HAS BEEN WO RKED OUT WITH REFERENCE TO RULE 8D(2)(III) BEING ADMINISTRATIVE A ND GENERAL EXPENSES ESTIMATED AT 0.5% OF THE AVERAGE VALUE OF INVESTMEN T. 4. A FEW FACTS RELEVANT TO CONTROVERSY INVOLVED AS PER GROUND NOS.1 & 2 MAY BE NOTED. THE ASSESSEE-COMPANY IS ENGAGED I N THE BUSINESS OF SALES AND PURCHASE OF SHARES. THE MAJOR INCOME OF THE ASSESSEE IS DERIVED BY WAY OF DIVIDEND INCOME FLOWING FROM INV ESTMENT IN SHARES. OTHER SOURCE OF INCOME INCLUDES INTEREST INCOME FRO M MONEY ADVANCED TO VARIOUS PARTIES. DURING THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE HAS DECLARED RECEIPT OF DIVIDEND INCOME TO THE TUNE OF RS.2,70,17,059/- WHICH IS EXEMPT FROM TAX. THE ASSESSEE HAS SHOWN I NVESTMENT OF RS.24,38,34,685/- AS ON 31.3.2008. THE ASSESSING O FFICER (AO) OBSERVED THAT IN VIEW OF THE TAX-FREE INCOME EARNED BY THE ASSESSEE, ITA NO. 405/AHD/2014 DIGVIJAY FINLEASE LTD. VS. DCIT (OSD) ASST.YEAR 2008-09 - 3 - DISALLOWANCE OF INDIVISIBLE EXPENDITURE ATTRIBUTABL E TO DIVIDEND INCOME IS CALLED FOR IN TERMS OF SECTION 14A READ WITH RUL E FRAMED THEREON BY WAY OF RULE 8D OF THE INCOME TAX RULES, 1962. HE A CCORDINGLY CALCULATED DISALLOWANCE AS PER STATUTORY FORMULA PR ESCRIBED UNDER RULE 8D OF THE IT RULES. THE AGGREGATE DISALLOWANCE AR RIVED AT RS.19,44,064/- INTER ALIA INCLUDED RS.12,19,173/- TOWARDS COMMON ADMINISTRATIVE EXPENSES AS PER RULE 8D (2)(III) OF THE IT RULES. IN THE FIRST APPEAL, THE CIT(A) WHILE GRANTING RELIEF TOWA RDS DISALLOWANCE COMPUTED UNDER OTHER LIMBS, CONFIRMED THE DISALLOWA NCE MADE BY AO UNDER THIRD LIMB FOR RS.12,19,173/-. 5. THE RELEVANT OPERATIVE PARA OF THE ORDER OF THE CIT(A) READS AS UNDER: 9. IT WAS HELD IN THE CASE OF VISUAL GRAPHICS COM PUTING SERVICES (I)(P) LTD. VS. ACIT [21 TAXMANN.COM 145/52 SOT 172 (URO)/15 ITR (TRIB.) 393, BY HONBLE ITAT, CHENNAI BENCH THA T EVEN IF THERE MAY NOT BE ANY DIRECT VISIBLE EXPENDITURE TO EARN DIVIDEND INCOME, A REASONABLE PORTION OF TOP MANAGEMENT TIME /EXPENDITURE COULD BE ATTRIBUTED TO EARNING OF THAT INCOME. THE REFORE, SECOND ARGUMENT OF THE APPELLANT THAT NO DISALLOWANCE IS R EQUIRED OUT OF INDIRECT EXPENSES IS NOT ACCEPTABLE. I THEREFORE H OLD THAT AO HAS RIGHTLY MADE DISALLOWANCE OF RS.12,19,173/- UNDER RULE 8D(2)(III) AND THE DISALLOWANCE IS CONFIRMED. THUS THE TOTAL DISALLOWANCE UNDER RULE 8D IS RESTRICTED TO RS.12,1 9,173/- AS AGAINST 16,32,367/- MADE BY A.O. GROUND NO.2 OF THE APPEAL IS THUS PARTLY ALLOWED. ITA NO. 405/AHD/2014 DIGVIJAY FINLEASE LTD. VS. DCIT (OSD) ASST.YEAR 2008-09 - 4 - 6. AGGRIEVED BY THE ORDER OF THE CIT(A) IN DENYING RELIEF CLAIMED TOWARDS APPLICABILITY OF RULE 8D(2)(III), THE ASSES SEE PREFERRED APPEAL BEFORE THE TRIBUNAL. 7. THE LD.AR FOR THE ASSESSEE MR.P.F. JAIN, AT THE OUTSET, SUBMITTED THAT THE IMPUGNED DISALLOWANCE OF RS.12,19,173/- IS HIGHLY EXCESSIVE IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND THEREFO RE REQUIRES TO BE CANCELLED. THE LD.AR ADVERTED OUR ATTENTION TO THE FINAL STATEMENTS PLACED BY WAY OF PAPER-BOOK AND SUBMITTED THAT THE MAJOR EXPENSES, ARE TOWARDS PROFESSIONAL CHARGES AMOUNTING TO RS.11,2 5,240/- AND RENT RS.2,17,650/-. SUCH EXPENDITURE BY ITS VERY NATURE ARE NOT REQUIRED TO BE INCURRED FOR EARNING SELF GENERATED DIVIDEND INCOME . THE LD.AR NEXT CONTENDED THAT IN THE EARLIER ASSESSMENT YEAR 2005- 06, THE DISALLOWANCE HAS BEEN MADE ON A REASONABLE ESTIMATED BASIS UNLIK E THE STAGGERING AMOUNT DISALLOWED THIS YEAR. IT WAS THUS SUBMITTED THAT ESTIMATION OF ADMINISTRATIVE EXPENSES WITH REFERENCE TO AVERAGE V ALUE OF INVESTMENT IS HIGHLY UNJUST BECAUSE MANY EXPENSES, AS POINTED OUT , ARE NOT RELATABLE AND NOT INCURRED FOR EARNING OF DIVIDEND INCOME. T HE LD.AR NEXT CONTENTED THAT REQUISITE SATISFACTION HAS NOT BEE N RECORDED IN WRITING WHILE APPLYING RULE 8D OF THE IT RULES. IN THE ABS ENCE OF SATISFACTION CONTEMPLATED IN SECTION 14A, THE ACTION OF THE AO F ALLS SHORT OF THE STATUTORY REQUIREMENT AND THUS A NULLITY. THEREFOR E, THE ORDER OF THE ITA NO. 405/AHD/2014 DIGVIJAY FINLEASE LTD. VS. DCIT (OSD) ASST.YEAR 2008-09 - 5 - CIT(A) CONFIRMING THE DISALLOWANCE ON THE BASIS OF RULE 8(2)(III) IS ERRONEOUS AND REQUIRES TO BE VIEWED WITH DISFAVOR. 8. THE LD.DR MR.PRASOON KABRA, ON THE OTHER HAND, S UBMITTED WITH REFERENCE TO THE FINANCIAL STATEMENT THAT MAJOR PAR T OF ITS RESOURCES HAVE BEEN APPLIED TOWARDS INVESTMENTS. VARIOUS EXPENDIT URE INCURRED AS REFLECTED IN PROFIT & LOSS ACCOUNT INCLUDING PROFE SSIONAL CHARGES AND RENT EXPENSES THUS NECESSARILY ARE ATTRIBUTABLE T O THE INVESTMENTS YIELDING EXEMPT INCOME. THEREFORE, THE DISALLOWANC E HAS BEEN RIGHTLY WORKED OUT BY APPLYING NEWLY INTRODUCED FORMULA PRE SCRIBED AS PER RULE 8D OF THE I.T.RULES. THE LD.DR NEXT CONTENDED THAT THE AO HAS DULY ISSUED SHOW CAUSE NOTICE FOR APPLYING RULE 8D OF IT RULES AND THEREFORE PRESENCE OF SATISFACTION OF THE AO CANNOT BE BRUS HED ASIDE. THE SATISFACTION OF THE AO IS IMPLICIT HAVING REGARD TO THE FACTS AND THE CIRCUMSTANCES OF THE CASE NOTWITHSTANDING THAT IT M AY NOT HAVE BEEN REDUCED IN WRITING IN EXPLICIT TERMS. THE LD.DR AC CORDINGLY CONTENDED THAT THE ASSESSEE CANNOT ESCAPE THE APPLICABILITY O F STATUTORY FORMULA PRESCRIBED UNDER RULE 8D OF THE IT RULES. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS WITH RE GARD TO OBJECTION OF THE ASSESSEE ON DISALLOWANCE OF EXPENDITURE INCU RRED IN RELATION TO DIVIDEND INCOME NOT FORMING PART OF TOTAL INCOME IN TERMS OF S. 14A OF THE ACT. FROM THE FACTS CULLED OUT ABOVE AND ON PER USAL OF RECORDS PLACED ITA NO. 405/AHD/2014 DIGVIJAY FINLEASE LTD. VS. DCIT (OSD) ASST.YEAR 2008-09 - 6 - BEFORE US, WE NOTE THAT RULE 8D PRESCRIBES STATUTOR Y FORMULA FOR COMPUTATION OF DISALLOWANCE UNDER S. 14A. RULE 8D H AS COME INTO FORCE WITH EFFECT FROM AY 2008-09. THEREFORE, STATUTORY R ULE 8D WOULD ORDINARILY APPLY FOR COMPUTATION OF DISALLOWANCE BA RRING EXCEPTIONAL CIRCUMSTANCES. AN APPRAISAL OF FINANCIAL STATEMENT S FILED BY THE ASSESSEE WOULD REVEAL THAT MAJOR PORTION OF FUNDS HAVE BEEN APPLIED TOWARDS ACQUISITION AND HOLDING OF INVESTMENTS IN SHARES ET C. THE SOURCE OF TAX FREE DIVIDEND INCOME IS INVESTMENT IN THESE SHARES. THE TOTAL RESOURCES AT THE DISPOSAL OF THE ASSESSEE AS ON 31.03.2008 STAND S AT RS. 25.93 CRORES. THE INVESTMENT IN SHARES STANDS AT RS. 24.38 CORES AS ON THAT DATE. THE MAJOR CONTRIBUTORY OF INCOME COMPRISES OF DIVIDEND AT RS. 270.01 LAKHS AND PROFIT ON SALE OF INVESTMENTS RS. 81.40 LAKHS O UT OF GROSS INCOME RS. 364.10 LAKHS. AS A COROLLARY, THE EXPENDITURE AS RE TURNED IN THE PROFIT & LOSS ACCOUNT HAS BEEN INCURRED FOR THE PURPOSE OF A CQUISITION AND HOLDING THE INVESTMENTS, DIVIDEND INCOME ON WHICH F ORM INTEGRAL PART OF INVESTMENTS. THUS, AS PER FINANCIAL DATA BEFORE US, THE SUBSTANTIVE PART OF EXPENDITURE INCURRED OBVIOUSLY HAS PROXIMATE CONNEC TION WITH THE EARNING OF DIVIDEND INCOME. THE EXPENDITURE INCURR ED IS TOWARDS ALL BUSINESS ACTIVITIES INCLUDING INVESTMENT ACTIVITIES AND REMAINS UNDIVISIBLE. HENCE, WE ARE UNABLE TO GUAGE THE RATI ONALE FOR NOT APPLYING RULE 8D FOR APPORTIONMENT OF EXPENDITURE IN RELATIO N TO DIVIDEND INCOME. THE PROPOSITION TOWARDS REASONABLE ESTIMATED EXPEND ITURE WITH REFERENCE TO DIVIDEND INCOME AS PROPOUNDED ON BEHALF OF ASSES SEE CANNOT BE ITA NO. 405/AHD/2014 DIGVIJAY FINLEASE LTD. VS. DCIT (OSD) ASST.YEAR 2008-09 - 7 - ORDINARILY ACCEPTED IN DEROGATION OF THE STATUTORY FRAME WORK PROVIDED BY THE STATUE. NO TANGIBLE CAUSE HAS BEEN SHOWN BY THE ASSESSEE FOR DOING SO. THUS, IN THE GIVEN SET OF FACTS, IN OUR CONSIDE RED OPINION, THE FORMULA PROVIDED UNDER RULE 8D WOULD COME INTO PLAY. 10. WE SHALL NOW DELINEATE ON THE NEXT LIMB OF ARG UMENT CANVASSED ON BEHALF OF ASSESSEE TOWARDS NON-RECORDING OF REQUISI TE SATISFACTION FOR INVOKING SECTION 14A R.W. RULE8D OF THE I.T.RULES. TO ADDRESS THIS ASPECT OF CONTROVERSY, WE OBSERVE THAT THE AO HAS I SSUED SHOW-CAUSE NOTICE (SCN) FOR DISALLOWANCE UNDER SECTION 14A R.W .RULE 8D AND SOUGHT EXPLANATION FROM THE ASSESSEE IN THIS REGARD . AS NOTED EARLIER, THE PROFIT & LOSS ACCOUNT FILED BY THE ASSESSEE ALSO MA KES ITS MANIFEST THE EXPENDITURE NOTED THEREIN ARE OVERWHELMINGLY ATTRIB UTABLE TO BOTH TAX- FREE AND TAXABLE INCOME AND REMAINS INDIVISIBLE. TH E EXPRESSION ACCOUNTS USED IN SECTION 14A IS NOT CONFINED TO B OOKS OF ACCOUNT BUT INCLUDES FINANCIAL STATEMENTS. THUS, THERE EXISTS A DEQUATE AND PRIMA FACIE MATERIAL TO SUPPORT FORMATION OF SATISFACTION. THE REFORE, PRESENCE OF SATISFACTION CONTEMPLATED UNDER SECTION 14A HAVING REGARD TO ACCOUNTS CANNOT BE DISCREDITED. IT WOULD BE PERTINENT HERE T O SAY THAT PHRASEOLOGY EMPLOYED IN SECTION 14A(2) OF THE ACT SUGGESTS THAT WHAT IS REQUIRED TO TRIGGER SECTION 14A AMONG OTHERS IS THAT AO IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE HAVING REG ARD TO ITS ACCOUNTS. IT NOWHERE INDICATES THAT THE SATISFACTION IS REQUIR ED TO BE EXPLICITLY ITA NO. 405/AHD/2014 DIGVIJAY FINLEASE LTD. VS. DCIT (OSD) ASST.YEAR 2008-09 - 8 - REDUCED IN WRITING. THIS LANGUAGE EMPLOYED IS NOT A KIN TO RECORD HIS REASONS EMPLOYED IN SECTION 148(2) OF THE ACT. WHE N SEEN IN THE CONTEXT, SUCH DIFFERENCE IN PHRASEOLOGY IN THE CONT EXT OF DIFFERENT CLAUSES OF THE ACT WOULD PERMIT US TO DRAW INFERENCE THAT T HE EXPRESSION IS NOT SATISFIED IS IN VARIANCE WITH THE EXPRESSION RECO RD REASONS AS A JURISDICTIONAL REQUIREMENT AS NOTED WITH REFERENCE TO SECTION 148(2) OF THE ACT. THUS, THE INDICATION OF PRIMA FACIE PRESENCE OF SATISFACTION CAN BE DEEMED TO BE SUBSTANTIAL COMPLIANCE OF THE PROVISIO NS WITHOUT THERE BEING ANY EXPLICIT ASSERTION ABOUT THE SAME. AS NOT ED, THE AFFIRMATIVE STEPS BY WAY OF SCN ON THE ISSUE IN THE FIRST INSTA NCE TANTAMOUNT TO SUBSISTENCE OF SATISFACTION IN THE INSTANT CASE. HENCE, IN OUR VIEW, S. 14A AS PRESENTLY CODIFIED DOES NOT PROVIDE IMPETUS ON EXPLICIT RECORDING OF SATISFACTION PER SE . THE REQUIREMENT OF SECTION WOULD STAND ADDRESSED WHEN THE SATISFACTION IS OTHERWISE DISCERNIBLE IN T HE ACTION OF THE AO. APPLYING THE AFORESAID VIEW IN THE CONTEXT, WE ARE OF THE OPINION THAT REQUISITE SATISFACTION WAS SUBSISTING FOR INVOKING SECTION 14A AND RULE 8D. CONSEQUENTLY, WE HOLD THAT THE OBJECTION OF THE ASSESSEE ON THIS SCORE IS NOT SOUND. 11. THUS, IN THE TOTALITY OF THE FACTS AND CIRCUMST ANCES, WE ARE OF THE CONSIDERED OPINION THAT THE AO HAS CORRECTLY APPLIE D FORMULA PRESCRIBED UNDER RULE 8D(2) FOR DETERMINATION OF EXPENDITURE A TTRIBUTABLE TO DIVIDEND INCOME. HENCE, WE DECLINE TO INTERFERE WI TH THE ORDER OF THE ITA NO. 405/AHD/2014 DIGVIJAY FINLEASE LTD. VS. DCIT (OSD) ASST.YEAR 2008-09 - 9 - CIT(A). GROUND NOS.1 & 2 OF THE ASSESSEES APPEAL ARE ACCORDINGLY DISMISSED. 12. GROUND NO.3 CONCERNS TREATING THE SHORT TERM C APITAL GAIN (STCGS) AS BUSINESS INCOME ARISING FROM SALE OF S HARES AND SECURITIES WHICH ARE HELD FOR LESS THAN 30 DAYS. THE AO NOTED THAT THE ASSESSEE HAS INTER ALIA DECLARED GAINS AMOUNTING TO RS.55,79,921/- AS STCG S. IT WAS OBSERVED BY HIM THAT THE ASSESSEE IS ENGAGED IN THE PURCHASE AND SALES OF SHARES AS A CONTINUOUS COURSE OF ACTIVITY WITH A PR OFIT MOTIVE. THUS, IN VIEW OF HIGH VOLUME, FREQUENCY AND MAGNITUDE OF THE TRANSACTIONS, THE AO WAS OF THE VIEW THAT CHARACTER OF TRANSACTIONS G IVING RISE TO IMPUGNED GAINS ARE IN THE NATURE OF BUSINESS AND T HEREFORE REQUIRES TO BE ASSESSED UNDER THE HEAD BUSINESS INCOME. HE ACCO RDINGLY ASSESSED THE STCGS OF RS.55,79,921/- AS BUSINESS INCOME OF THE ASSESSEE. 13. IN FIRST APPEAL, THE CIT(A) HOWEVER ON CONSIDER ATION OF HOST OF FACTORS AS NOTED IN PARAS-11 TO 13 OF ITS ORDER GRA NTED PARTIAL RELIEF. BY THE SAME TOKEN, THE CIT(A), HOWEVER, ENDORSED THE A CTION OF THE AO IN TREATING THE CAPITAL GAINS ARISING ON SALE OF SHA RES AS BUSINESS INCOME WHERE SHARES WERE HELD FOR LESS THAN 30 DAYS DURING THE YEAR. 14. IN SECOND APPEAL BEFORE THE TRIBUNAL, THE LD.AR FOR THE ASSESSEE RELIED UPON THE FACTS PLACED BEFORE THE CIT(A) AND CONTENDED THAT ONLY AT ITA NO. 405/AHD/2014 DIGVIJAY FINLEASE LTD. VS. DCIT (OSD) ASST.YEAR 2008-09 - 10 - SIX INSTANCES, THE ASSESSEE HAS DERIVED GAINS ON SA LE OF SHARES WHICH WERE HELD FOR LESS THAN 30 DAYS. THEREFORE, INFERENCE O F PROFIT MOTIVE CANNOT BE DRAWN ADVERSE TO THE ASSESSEE. THE LD.AR SUBMIT TED THAT THE SCHEME OF THE ACT DOES NOT ALLOW ARTIFICIAL BIFURCATION OF CAPITAL GAINS ARISING ON SALE OF SHARES ON CONSIDERATIONS OF HOLDING FOR MOR E THAN 30 DAYS OR LESS THAN 30 DAYS. IT WAS CONTENDED THAT THE ACTION OF THE CIT(A) IS THEREFORE NOT SUSTAINABLE IN LAW. THE LD.AR FURTHER SUBMITTED THAT THE ASSESSEE HAS INTER ALIA EARNED LONG TERM CAPITAL GAINS (LTCGS) DURING THE YEAR WHICH HAS NOT BEEN CALLED INTO QUESTION. THE ADVER SARIAL ACTION HAS BEEN TAKEN ONLY WITH REFERENCE TO STCGS TO SIMPLY COLLEC T MORE REVENUE FOR THE DEPARTMENT. THE LD. AR POINTED OUT THAT IN THE EARLIER ASSESSMENT YEAR 2005-06, THE ASSESSEE INCURRED LOSS ON SALE OF SHARES AND THEREFORE NO SCN WAS ISSUED WHILE FRAMING THE ASSESSMENT UND ER SECTION 143(3) AS IT WAS CONVENIENT TO THE REVENUE TO ACCEPT THE P OSITION DECLARED BY THE ASSESSEE. THE POSITION IS SOUGHT TO BE ALTERED IN THIS YEAR MERELY BECAUSE THE ASSESSEE COULD EARN SOME SURPLUS FROM SALE OF I TS CAPITAL INVESTMENTS. IT WAS POINTED OUT THAT THE BREAK-UP OF STCGS AS NO TED IN THE ORDER OF THE CIT(A) AT PAGE NO.16 WOULD SHOW THAT OUT OF THE IMP UGNED AMOUNT OF RS.55,79,921/-, GAINS TO THE TUNE OF RS.20,50,788/- IS IN RELATION TO UNLISTED SHARES WHERE THE TAX IS CHARGEABLE AT REGU LAR RATE OF 30%. CONCESSIONAL RATE OF 10% HAS BEEN AVAILED ONLY IN R ESPECT OF REMAINING AMOUNT OF RS.35.29 LAKHS WHERE SECURITY TRANSACTION TAX HAS BEEN PAID. THE LD.AR SUBMITTED THAT IN VIEW OF VERY FEW TRANSA CTIONS HELD FOR LESS ITA NO. 405/AHD/2014 DIGVIJAY FINLEASE LTD. VS. DCIT (OSD) ASST.YEAR 2008-09 - 11 - THAN THIRTY DAYS, THE ACTION OF CIT(A) IN DENYING RELIEF ON GAINS ARISING THEREFROM MERELY OWING TO SMALLER PERIOD OF HOLDING IS NOT QUITE BEFITTING. 15. THE LD.DR, ON THE OTHER HAND, RELIED UPON THE O RDER OF THE CIT(A). 16. TO ADJUDICATE THE ISSUE, WE HAVE CAREFULLY CONS IDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORDS. AS POINTED O UT ON ITS BEHALF, THE ASSESSEE HAS DECLARED INCOME BOTH BY WAY OF LTCGS A S WELL AS BY WAY OF STCGS. THE LTCGS HAVE NOT BEEN DISTURBED DURING THE YEAR OR IN THE PRECEDING YEAR. THE SHORT TERM CAPITAL LOSS (STCL ) HAS BEEN ACCEPTED BY THE REVENUE IN AY 2005-06 WHEREAS GAINS ARISING FROM THE SIMILAR SET OF TRANSACTIONS IS ATTEMPTED TO BE TREA TED DIFFERENTLY AS BUSINESS INCOME. NO COGENT REASONS HAVE BEEN ASI GNED FOR SUCH DEVIATION. THE CIT(A) HAS MECHANICALLY APPLIED A FO RMULA THAT CAPITAL GAINS ARISING ON SALE OF SHARES HELD FOR LESS THAN THIRTY DAYS SHOULD BE TREATED AS BUSINESS INCOME. NO SUCH IMPUGNED FOR MULA IS APPARENTLY KNOWN TO LAW. NEEDLESS TO SAY, THE ISSUE AS TO WHE THER THE SHARES HELD PRIOR TO ITS SALE IS CAPITAL ASSET OR A TRADING ASS ET IS ESSENTIALLY A QUESTION OF FACT. THE ISSUE IS THUS REQUIRED TO BE DECIDED A S PER THE FACTS AND THE CIRCUMSTANCES OF THE INDIVIDUAL CASE AND NOT HAVING REGARD TO THE SMALLER PERIOD OF HOLDING ALONE. AS POINTED OUT BY THE ASSE SSEE BEFORE THE CIT(A), THE ASSESSEE HAS SOLD THE SHARES HELD FOR L ESS THAN THIRTY DAYS IN ITA NO. 405/AHD/2014 DIGVIJAY FINLEASE LTD. VS. DCIT (OSD) ASST.YEAR 2008-09 - 12 - ONLY SIX INSTANCES WHICH IN OUR VIEW DOES NOT GIVE ANY INDICATION OF SYSTEMATIC AND ORGANIZED BUSINESS ACTIVITY. THE LOS S DECLARED ON SIMILAR TRANSACTIONS AS CAPITAL LOSS WHICH IS DETRIMENTAL T O ASSESSEE WAS DULY ACCEPTED BY THE REVENUE IN THE PAST. NO ASPERSIONS HAVE CAST ON LTCG EITHER. THEREFORE, IN THE TOTALITY OF THE FACTS, IT IS DIFFICULT TO AGREE WITH THE VIEW RENDERED BY THE CIT(A). WHILE ONE SET OF TRANSACTION HAVE BEEN TREATED AS CAPITAL ASSETS, THERE IS NO REASON TO TR EAT OTHER SET OF TRANSACTIONS SIMILAR NATURE AS TRADING ASSETS MEREL Y OWING TO LESSER PERIOD OF HOLDING. IN THE CIRCUMSTANCES, THE PLEA OF THE A SSESSEE DESERVES ACCEPTANCE. THE ACTION OF REVENUE IS ACCORDINGLY L IABLE TO BE STRUCK DOWN. 17. AS A RESULT, THE ORDER OF THE CIT(A) IS MODIFIE D AND THE APPEAL OF THE ASSESSEE IS ALLOWED ON THIS SCORE. CONSEQUENTL Y GROUND NO.3 OF ASSESSEES APPEAL IS ALLOWED. 18. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 06/ 02/2017 SD/- SD/- () ( ) (RAJPAL YADAV) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 06/ 02 /2017 3..),.)../ T.C. NAIR, SR. PS ITA NO. 405/AHD/2014 DIGVIJAY FINLEASE LTD. VS. DCIT (OSD) ASST.YEAR 2008-09 - 13 - !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. #% / THE APPELLANT 2. &#% / THE RESPONDENT. 3. 456+ 7+ / CONCERNED CIT 4. 7+ ( ) / THE CIT(A)-III, AHMEDABAD 5. 89:+)56 , 56/ , 4 / DR, ITAT, AHMEDABAD 6. :<* / GUARD FILE. / BY ORDER, &8++ //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 20.1.17 (DICTATION-PAD 30- PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 23.1.17 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.7.2.17 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7.2.17 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER