ASST CIT 18(2), MUMBAI V. NALIN P. SHAH, MUMBAI

ITA 4109/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8554 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 02-07-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Assessee Lawyers: MIHIR SHAH
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI PAWAN SINGH , JM ITA NO. 4109 / MUM/20 15 ( ASSESSMENT YEAR : 2011 - 12 ) ASST.CIT18(2) EARNEST HOUSE, R.NO.302, 3 RD FLOOR, NARIMAN POINT MUMBAI 400 021 VS. SHR I NALIN P. SHAH 95B MEGHDOOT 1 ST FLOOR, N.S.R.D.MARINE DRIVE MUMBAI - 400 002 PAN/GIR NO. AAHPS3860K APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI MIHIR SHAH REVENUE BY SHRI SUMAN KUMAR DATE OF HEARING 14 / 11 /201 7 DATE OF PRON OUNCEME NT 14 / 11 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY REVENUE AGAINST THE ORDER OF CIT(A) - 29, MUMBAI DATED 10/04/2015 FOR A.Y.2011 - 12 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE IT ACT. 2. THE FOLLOWING GRO UNDS HAVE BEEN TAKEN BY THE REVENUE: - I. ON THE FACTS AND IN THE CIRCUMSTANCES, THE CIT(A) HAS ERRED IN HOLDING THE INCOME EARNED BY THE ASSESSEE FROM SALE OF SHARES & SECURITIES THROUGH PORTFOLIO M ANAGEMENT SERVICES (PWIS) AS CAPITAL GAINS INSTEAD OF BUSINESS INCOME WITHOUT APPRECIATING THE FACTS THAT: - I) THE ASSESSEE IS EARNING CAPITAL GAINS ON SHARE INVESTMENT OUT OF PMS SCHEME THROUGH INTERMEDIARIES DOING AGENCY BUSINESS OF TRADING IN SHARES ON BEHALF OF THE ASSESSEE WHEREIN THE AVERAGE HO LDING PERIOD IS VERY LESS ENTAILING TO QUICK PROFIT MOTIVE BY ROTATING THE FUND MANY TIMES IN A YEAR ATTRIBUTING TO THE BUSINESS AND NOT INVESTMENT. - ITA N O. 4109/MUM/2015 SHRI NALIN P SHAH 2 II) THE SHORT TERM CAPITAL GAIN EARNED BY THE ASSESSEE FROM SALE OF SHARES AFTER HOLDING THE STOCKS LESS THAN TWO MONTHS AND AFTER ACCEPTING THAT BOOKS OF THE ASSESSEE WILL NOT BE CONCLUSIVE AND IF THE VOLUME, FREQUENCY AT WHICH TRANSACTION ARE CARRIED OUT INDICATE SYSTEMATIC AND ORGANIZED ACTIVITY WITH PROFIT MOTIVE, THEN IT BECOMES BUSINE SS PROFIT AND NOT CAPITAL GAINS. III) THE YIELD OF DIVIDEND IN COMPARE TO CAPITAL INVESTED WAS VERY LOW, HENCE THERE WAS NO DOUBT THAT THE TRANSACTIONS WERE CARRIED OUT WITH THE PROFIT MOTIVE. IV) THE DECISIONS OF THE ID. CIT(A) AND HON'BLE ITAT IN THE ASSESSEE'S O WN CASE OF EARLIER YEARS ON THE SIMILAR ISSUE, ON WHICH THE CIT(A) HAS RELIED UPON, WERE NOT ACCEPTED BY THE DEPARTMENT AND APPEALS BEFORE HON'BLE ITAT AND HON'BLE BOMBAY HIGH COURT, RESPECTIVELY, HAVE BEEN FILED BY THE DEPARTMENT. 2. FOR THE ABOVE MENTIONED REASON AND ANY OTHER REASONS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS REQUESTED THAT THE ORDER OF THE CIT(A) BE QUASHED AND THAT OF THE A.O. BE RESTORED. 5. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUN D, WHICH MAY BE NECESSARY.' 3. THE GRIEVANCE OF REVENUE RELATES TO CIT(A)S ACTION FOR TREATING THE INCOME EARNED FROM SALE OF SHARE S AND SECURITIES THROUGH P ORT F OLIO M ANAGEMENT AS CAPITAL GAINS INSTEAD OF BUSINESS INCOME. 4. RIVAL CONTENTIONS HAVE BEE N HEARD AND RECORD PERUSED. 5. THE ISSUE UNDER CONSIDERATION OF THE GROUNDS RAISED BY THE REVENUE ARE SQUARELY COVERED BY THE ORDER THE TRIBUNAL IN ASSESSEES OWN CASE AND WHILE PASSING THE ORDER, THE CIT(A) HAS ALSO RELIED ON THE ORDER OF THE TRIBUNAL. TH E PRECISE OBSERVATION OF THE CIT(A) IS AS UNDER: - DURING APPEAL, LD. A.R. OF THE APPELLANT HAS SUBMITTED THAT ASSESSABILITY OF INCOME FROM PORT FOLIO MANAGEMENT IS AN ISSUE SETTLED IN FAVOUR OF THE APPELLANT VIDE VARIOUS ITAT ORDERS IN EARLIER ASSESSMENT YEARS BEING A.Y.2004 - 05 TO A.Y.2008 - 0 9 AND ALSO BY THE ITA N O. 4109/MUM/2015 SHRI NALIN P SHAH 3 ORDER OF THE CIT(A) IN A.Y.2009 - 10 AND 2010 - 11. THE COPIES OF THE ORDERS OF EARLIER YEARS HAVE BEEN FILED. 3.3. CONSIDERING THE FACTS OF THE CASE AND THE SEVERAL ORDERS OF THE ITAT AND CIT(A) AS FILE D, THE AO IS DIRECTED TO ASSESS INCOME FROM PMS UNDER THE HEAD CAPITAL GAINS AND ACCORDINGLY GROUND NOS. 1 AND 2 ARE THEREFORE ALLOWED. 4.1. 3 RD AND 4 TH GROUNDS OF THE APPEAL ARE AGAINST ASSESSMENT OF SHORT TERM CAPITAL GAIN RS.3,10,839/ - SHOWN UNDER THE HEAD CAPITAL GAIN BUT ASSESSED UNDER THE HEAD - 'INCOME FROM BUSINESS AND PROFESSION'. IN THIS REGARD, AO IN THE ASSESSMENT ORDER HAS RECORDED THE FACTS A UNDER: 'LOOKING AT THE FREQUENCY AND THE PATTERNS OF TRANSACTIONS AND AMOUNT OF PERSONAL DECISION MAK ING INVOLVED, I AM OF THE OPINION THAT THE GAINS MADE FROM THE TRANSACTIONS WITH A HOLDING PERIOD OF A MONTH AND LESSER ARE TAXABLE AS PROFIT AND GAINS FROM BUSINESS AND NOT AS SHORT TERM CAPITAL GAINS. ACCORDINGLY, THE GAINS OF RS.3,10,839/~ ARE TREATED AS BUSINESS PROFITS, AND EXCLUDED FROM SHORT TERM CAPITAL GAINS.' 4.1.1 SUBSEQUENTLY, AO HAS APPLIED THE DECISION OF ITAT IN THE CASE OF SADHANA NABERA AND HELD THE INCOME FROM TRANSACTIONS IN SHARES AND MFS ETC. ASSESSABLE UNDER THE HEAD 'PROFITS, AND GAINS OF BUSINESS AND PROFESSION'. 4.2. IN THISJEGARDTHE APPELLANT HAS SUBMITTED AS UNDER: - '3. YOUR HONOUR WILL APPRECIATE THAT THE APPELLANT HAS EARNED SHORT TERM CAPITAL GAIN OF RS.2,41,291/ - BY TRANSACTING IN 7 EQUITY SHARES CHARGEABLE TO TAX U/S. 111A @ 15% AND SHORT TERM CAPITAL GAIN OF RS.69,548/ - BY TRANSACTING IN 6 MUTUAL FUNDS CHARGEABLE TO TAX AT NORMAL RATE OF 30%. FURTHER, YOUR HONOUR WILL APPRECIATE THAT THERE WERE NO REPETITIVE TRANSACTION IN ANY OF THE ABOVE SCRIPS, 4. FURTHER, AS MENTIONED IN OUR SUBMISSIONS TO GROUND NO. 1 ABOVE, IN APPELLANT'S OWN CASE FOR AY. 2004 - 05, AY.2005 - 06, AY 2006 - 07, AY 2007 - 08 AND AY 2008 - 09 IN ITA N0.2122/M/2008, ITA NO..5636/M/2009, . ITA NO.5642/M/2009, ITA NO.1575/MUM/2012, ITA NO.1576/MUM/2012 R ESPECTIVELY, THE HON'BLE ITAT HAS DECIDED THIS ISSUE IN FAVOUR OF THE APPELLANT AND HAS HELD THAT GAIN - FROM SUCH TRANSACTIONS TO GIVE RISE TO CAPITAL GAIN AND NOT' INCOME FROM BUSINESS. 5. THIS ALSO PERTINENT TO MENTION THAT YOUR HONOUR, IN APPELLANT'S OWN CASE FOR AY 2009 - 10 Y 2010 - 11 VIDE PARA 5.3. HAS HELD THAT WHETHER THE ASSET ACQUIRED IS INVESTMENT OR STOCK - IN - TRADE WOULD DEPEND ON ITA N O. 4109/MUM/2015 SHRI NALIN P SHAH 4 INTENTION AT THE TIME OF ACQUISITION AND SINCE THE LEARNED AO HAS GIVEN A FINDING THAT MAJORITY OF INVESTMENTS HAV E BEEN HELD BY THE ASSESSES FOR A CONSIDERABLE PERIOD; THEREFORE, MERELY BECAUSE A FEW SHARES ARE SOLD WITHIN A SHORT PERIOD, IT WOULD NOT BE APPROPRIATE TO TAX THE SAME UNDER THE HEAD 'BUSINESS INCOME' 6. DEPARTMENT WHILE CONTESTING THE ORDER OF CIT(A) FO R AY - 2009 - 1 0 BEFORE THE MUMBAI ITAT, HAS NOT TAKEN ANY GROUND AGAINST RELIEF GRANTED BY YOUR HONOUR IN RESPECT OF SHORT TERM CAPITA L ARISING FROM SHARES HELD FOR A PERIOD LESS THAN 30 DAYS (COPY OF GROUNDS OF APPEAL FOR AY 2009 - 10 ENCLOSED AT PAJA NO.49 ). HENCE DEPARTMENT HAS ACCEPTED INCOME FROM OWN INVESTMENT AS CAPITAL GAIN AS OFFERED BY THE ASSESSEE. ' 4.3. IN PARA 5.3 OF THE APPELLATE ORDER FOR AY 2010 - 11 SIMILAR ISSUE HAS BEEN DECIDED AS UNDER: - ' ON PERUSAL OF APPELLANT'S SUBMISSIONS, I A GREE WITH THE CONTENTION OF APPELLANT THAT TO DECIDE WHETHER THE ASSET ACQUIRED IS INVESTMENT OR STOCK - IN - TRADE, IN HANDS OF ASSESSEE WOULD DEPEND UPON THE INTENTION AT THE TIME OF ACQUISITION OF SAID ASSET, TN THE PRESENT CASE, THE AO HIMSELF HAS STATED T HAT MAJORITY OF INVESTMENTS HAVE BEEN HELD BY THE APPELLANT FOR A CONSIDERABLE PERIOD. THEREFORE, MERELY BECAUSE A FEW SHARES ARE SOLD WITHIN A SHORT PERIOD, IT WOULD NOT BE APPROPRIATE TO TAX THE SAME UNDER THE HEAD 'BUSINESS INCOME'. THEREFORE, THIS GROU ND NO. 3 OF APPEAL IS. ALLOWED.' 4.3.1 RESPECTFULLY FOLLOWING THE ORDER OF THE PREDECESSOR CIT(A) ON THE ISSUE THE INCOME FROM SHARES TRANSACTIONS IS DIRECTED TO BE ASSESSED UNDER THE HEAD CAPITAL GAINS. ACCORDINGLY, THIS GROUND IS ALLOWED. 6. LEARNED DR FAIRLY CONCEDED THAT ALL THE ISSUES RAISED BY THE REVENUE ARE COVERED BY THE ORDER OF THE TRIBUNAL AS STATED ABOVE. IT APPEARS THAT ONLY BECAUSE REVENUE IS IN APPEAL BEFORE THE HONBLE HIGH COURT AGAINST THE EARLIER ORDER OF THE TRIBUNAL, THE PRESENT APPEAL HAS BEEN FILED. 7. WE HAVE GONE THROUGH THE ORDER OF THE AUTHORITIES BELO W AND FOUND THAT ALL THE ISSUES UNDER CONSIDERATION ARE COVERED BY THE ORDER OF THE TRIBUNAL ITA N O. 4109/MUM/2015 SHRI NALIN P SHAH 5 AS STATED ABOVE AND LEARNED DR ALSO FAIRLY CONCEDED THE SAME, ACCORDINGLY WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A). 8. IN THE RESULT, APPEAL O F THE REVENUE IS DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 14 / 11 /2017 SD/ - ( PAWAN SINGH ) SD/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 14 / 11 /201 7 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//