LALCHAND SIRALDAS ROHRA, MUMBAI V. THE DY. COMM. OF INCOME TAX-14(2), MUMBAI

ITA 422/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3424 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 06-06-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 14-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Earning of tax free income; Advance ruling; Question of law
• Section: 2(14); 28

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUM BAI BEFORE S/SHRI B.R.MITTAL(JM) AND SANJAY ARORA (AM) . . , , ./I.T.A. NO.422/M/2011 ( / ASSESSMENT YEAR:2005-06) LATE LALCHAND SIRALDAS ROHRA, THROUGH LEGAL HEIR MRS.BEENA A.SACHDEV, 101-A, EMBASSY APARTMENTS, 46, NEPEANSEA ROAD, MUMBAI. / VS. DCIT, 14(2), MUMBAI. ./ ./PAN/GIR NO. : AASPR 0251 L ( & / APPELLANT) .. ( ' & / RESPONDENT) & / APPELLANT BY : SHRI VIMAL PUNMIYA ' & ) /RESPONDENT BY : MS NEERAJA PRADHAN ) + / DATE OF HEARING : 6.6.2013 ) + /DATE OF PRONOUNCEMENT : 12.6.2013 / O R D E R PER B.R.MITTAL, JM: THE LEGAL HEIR OF DECEASED ASSESEE HAS FILED THIS APPEAL RELATING TO ASSESSMENT YEAR 2005-06 AGAINST ORDER DATED 3.12.2010 OF LD CIT(A ). 2. IN GROUND NO.1 OF APPEAL, THE DISPUTING IS RELAT ING TO CONFIRMATION OF ORDER OF THE ASSESSING OFFICER IN TAXING THE SHORT TERM CAPITAL GAIN (STCG) OF RS.10,16,274/- AS BUSINESS INCOME INSTEAD OF SHORT TERM CAPITAL GAIN SHOWN BY THE ASSESSEE. 3. THE RELEVANT FACTS ARE THAT THE DECEASED ASSESSE E FILED RETURN OF INCOME ON 23.8.2005 DECLARING TOTAL INCOME OF RS.12,24,791/-, WHICH, IN TER ALIA, INCLUDES SHORT TERM CAPITAL GAIN OF 2 RS.10,16,274/-. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS, THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH REASONS AS TO WHY SHORT TERM CA PITAL GAIN SHOWN BY THE ASSESSEE SHOULD NOT BE TAXED AS BUSINESS INCOME. ASSESSEE FILED ITS RE PLY AND AO HAS STATED THAT THE REPLY FILED BY ASSESSEE VIDE LETTER DATED 12.12.2007, IS KEPT ON R ECORD. HE HAS STATED THAT ASSESSEES REPLY IS NOT ACCEPTABLE. THAT ASSESSEE INVESTED IN LARGE S CALE DURING THE YEAR, HAS DONE PURCHASE AND SALE OF SHARES ON HIGH FREQUENCY AND PERIOD OF HOLD ING IS ALSO NOT VERY LONG. AO TREATED THE SAID SHORT TERM CAPITAL GAIN AS BUSINESS INCOME AND TAXED @ 30% INSTEAD OF @ 10% SHOWN BY THE ASSESSEE. BEING AGGRIEVED, ASSESSEE FILED APPE AL BEFORE LD CIT(A). HOWEVER, LD CIT(A) HAS CONFIRMED THE ACTION OF AO. HENCE, ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING, LD A.R. FILED A STATEMEN T OF FACTS STATING THAT ASSESSEE HAS SHOWN SHORT TERM CAPITAL GAIN AS WELL AS LONG TERM CAPITA L GAIN. HE SUBMITTED THAT IN RESPECT OF LONG TERM CAPITAL GAIN SHOWN BY THE ASSESSEE, AO HAS ACC EPTED THE SAME AND THERE IS NO DISPUTE IN REGARD THERETO. LD A.R FURTHER STATED FROM PAGE 2 OF STATEMENT OF FACTS FILED, THAT PRIOR TO 01.10.2004, THERE IS A SHORT TERM CAPITAL GAIN OF R S.3,80,665/- WHICH IS ASSESSED @ 30%. HE FURTHER SUBMITTED THAT AFTER 1.10.2004, THERE IS A SHORT TERM CAPITAL GAIN OF RS.6,35,609/-, WHICH IS ASSESSABLE @ 10%. LD A.R. SUBMITTED THAT ASSESS EE HAS SPECULATIVE PROFIT OF RS.2,90,664/- AND SAME HAS BEEN ASSESSED AS BUSINESS INCOME AND THERE IS NO DISPUTE IN REGARD THERETO. LD A.R. SUBMITTED THAT ASSESSEE IS MAINTAINING SEPARAT E PORTFOLIOS IN RESPECT OF SHARES HELD AS INVESTMENT AND ALSO SHARES HELD ON TRADING ACCOUNT. HE SUBMITTED THAT ASSESSEE VALUED THE SHARES HELD IN INVESTMENT PORTFOLIOS ON COST WHILE SHARES HELD IN TRADING ACCOUNT HAD BEEN VALUED ON MARKET PRICE OR COST PRICE WHICHEVER IS L OWER. LD A.R. REFERRED PAGE 4 OF PB WHICH IS A COPY OF BALANCE SHEET FOR THE FINANCIAL YEAR REL EVANT TO ASSESSMENT YEAR UNDER CONSIDERATION TO SUBSTANTIATE HIS ABOVE SUBMISSIONS. HE SUBMITTE D THAT THERE IS AN INVESTMENT IN SHARES OF RS.55,94,573.17 AS ON 31.3.2005 AND THE SAME HAVE B EEN SHOWN SPECIFICALLY UNDER THE INVESTMENT. LD A.R. FURTHER REFERRED PAGE 5 OF P B WHICH IS A COPY OF PROFIT AND LOSS ACCOUNT AND SUBMITTED THAT THE LONG TERM CAPITAL GAIN, SHOR T TERM CAPITAL GAIN AND SPECULATIVE DEALING ON SHARES ARE SPECIFICALLY STATED THEREIN. LD A.R. REFERRED PAGE 2 OF PB, WHICH CONTAINS DETAILS OF SHARES HELD AS STOCK-IN-TRADE. LD A.R. SUBMIT TED THAT ASSESSEE IS MAINTAINING SEPARATE PORTFOLIO IN RESPECT OF DETAILS OF SHARES HELD AS I NVESTMENT IN SHARES AGGREGATING TO RS.55,94,573.17 AND REFERRED PAGES 22 TO 23 OF PB. HE FURTHER REFERRED PAGE 24 OF PB WHICH CONTAINS DETAILS OF STATEMENT OF SHORT TERM CAPITAL GAIN FOR THE PERIOD 1.4.2004 TO 30.9.2004 3 AND SUBMITTED THAT THERE IS NO DIFFERENCE IN RATE O F TAX IN RESPECT OF SHORT TERM CAPITAL GAIN AS WELL AS THE INCOME TO BE ASSESSED UNDER THE HEAD B USINESS INCOME. LD A.R. SUBMITTED THAT ASSESSEE IS MAINTAINING SEPARATE DETAILS IN RESPECT OF SHORT TERM CAPITAL GAIN FOR THE PERIOD 1.10.2004 TO 31.3.2005, WHICH IS ASSESSED @ 10% AND REFERRED PAGE 25 OF PB GIVING DETAILS OF SHORT TERM CAPITAL GAIN OF RS.6,35,609.19. LD REFE RRED PARA 10 OF CBDT CIRCULAR NO.4/2007 DATED 15.6.2007, COPY PLACED AT PAGES 198-199 OF PB , WHICH READS AS UNDER: INCOME TAX CIRCULAR NO. 4/2007, DATED 15-6-2007 THE INCOME TAX ACT, 1961 MAKES A DISTINCTION BETWEE N A CAPITAL ASSET AND A TRADING ASSET. 2. CAPITAL ASSET IS DEFINED IN SECTION 2(14) OF THE ACT. LONG-TERM CAPITAL ASSETS AND GAINS ARE DEALT WITH UNDER SECTION 2(29A) AND SECTION 2(2 9B). SHORT-TERM CAPITAL ASSETS AND GAINS ARE DEALT WITH UNDER SECTION 2(42A) AND SECTI ON 2(42B). 3. TRADING ASSET IS DEALT WITH UNDER SECTION 28 OF THE ACT. 4. THE CENTRAL BOARD OF DIRECT TAXES (CBDT) THROUGH INSTRUCTION NO.1827 DATED AUGUST 31, 1989 HAD BROUGHT TO THE NOTICE OF THE ASSESSING OFFICERS THAT THERE IS A DISTINCTION BETWEEN SHARES HELD AS INVESTMENT (CAPITAL ASSET) A ND SHARES HELD AS STOCK-IN-TRADE (TRADING ASSET). IN THE LIGHT OF A NUMBER OF JUDICI AL DECISIONS PRONOUNCED AFTER THE ISSUE OF THE ABOVE INSTRUCTIONS, IT IS PROPOSED TO UPDATE THE ABOVE INSTRUCTIONS FOR THE INFORMATION OF ASSESSEES AS WELL AS FOR GUIDANCE OF THE ASSESSING OFFICERS. 5. IN THE CASE OF COMMISSIONER OF INCOME TAX (CENTRAL), CALCUTTA VS A SSOCIATED INDUSTRIAL DEVELOPMENT COMPANY (P) LTD (82 ITR 586), THE SUPREME COURT OBSERVED THAT: WHETHER A PARTICULAR HOLDING OF SHARES IS BY WAY OF INVESTMENT OR FORMS PART OF THE STOCK-IN-TRADE IS A MATTER WHICH IS WITHIN THE KNOWLEDGE OF THE ASSESSEE WHO HOLDS THE SHARES AND IT SHOULD, IN NORMAL CIRCUMSTA NCES, BE IN A POSITION TO PRODUCE EVIDENCE FROM ITS RECORDS AS TO WHETHER IT HAS MAINTAINED ANY DISTINCTION BETWEEN THOSE SHARES WHICH ARE ITS STOCK-IN-TRADE A ND THOSE WHICH ARE HELD BY WAY OF INVESTMENT. 6. IN THE CASE OF COMMISSIONER OF INCOME TAX, BOMBAY VS H. HOLCK LARS EN (160 ITR 67), THE SUPREME COURT OBSERVED : 4 THE HIGH COURT, IN OUR OPINION, MADE A MISTAKE IN O BSERVING WHETHER TRANSACTIONS OF SALE AND PURCHASE OF SHARES WERE TRADING TRANSACTIO NS OR WHETHER THESE WERE IN THE NATURE OF INVESTMENT WAS A QUESTION OF LAW. THIS WA S A MIXED QUESTION OF LAW AND FACT. 7. THE PRINCIPLES LAID DOWN BY THE SUPREME COURT IN THE ABOVE TWO CASES AFFORD ADEQUATE GUIDANCE TO THE ASSESSING OFFICERS. 8. THE AUTHORITY FOR ADVANCE RULINGS (AAR) (288 ITR 641), REFERRING TO THE DECISIONS OF THE SUPREME COURT IN SEVERAL CASES, HAS CULLED O UT THE FOLLOWING PRINCIPLES :- (I) WHERE A COMPANY PURCHASES AND SELLS SHARES, IT MUST BE SHOWN THAT THEY WERE HELD AS STOCK-IN-TRADE AND THAT EXISTENCE OF THE POWER T O PURCHASE AND SELL SHARES IN THE MEMORANDUM OF ASSOCIATION IS NOT DECISIVE OF THE NA TURE OF TRANSACTION; (II) THE SUBSTANTIAL NATURE OF TRANSACTIONS, THE MA NNER OF MAINTAINING BOOKS OF ACCOUNTS, THE MAGNITUDE OF PURCHASES AND SALES AND THE RATIO BETWEEN PURCHASES AND SALES AND THE HOLDING WOULD FURNISH A GOOD GUIDE TO DETERMINE THE NATURE OF TRANSACTIONS; (III) ORDINARILY THE PURCHASE AND SALE OF SHARES WI TH THE MOTIVE OF EARNING A PROFIT, WOULD RESULT IN THE TRANSACTION BEING IN THE NATURE OF TR ADE/ADVENTURE IN THE NATURE OF TRADE; BUT WHERE THE OBJECT OF THE INVESTMENT IN SHARES OF A COMPANY IS TO DERIVE INCOME BY WAY OF DIVIDEND ETC. THEN THE PROFITS ACCRUING BY C HANGE IN SUCH INVESTMENT (BY SALE OF SHARES) WILL YIELD CAPITAL GAIN AND NOT REVENUE REC EIPT. 9. DEALING WITH THE ABOVE THREE PRINCIPLES, THE AAR HAS OBSERVED IN THE CASE OF FIDELITY GROUP AS UNDER:- WE SHALL REVERT TO THE AFOREMENTIONED PRINCIPLES. THE FIRST PRINCIPLE REQUIRES US TO ASCERTAIN WHETHER THE PURCHASE OF SHARES BY A FI I IN EXERCISE OF THE POWER IN THE MEMORANDUM OF ASSOCIATION/TRUST DEED WAS AS STO CKIN-TRADE AS THE MERE EXISTENCE OF THE POWER TO PURCHASE AND SELL SHARES WILL NOT BY ITSELF BE DECISIVE OF THE NATURE OF TRANSACTION. WE HAVE TO VERIFY AS TO HOW THE SHARES WERE VALUED/HELD IN THE BOOKS OF ACCOUNT I.E. WHETHER TH EY WERE VALUED AS STOCK-IN- TRADE AT THE END OF THE FINANCIAL YEAR FOR THE PURP OSE OF ARRIVING AT BUSINESS INCOME OR HELD AS INVESTMENT IN CAPITAL ASSETS. THE SECOND PRINCIPLE FURNISHES A GUIDE FOR DETERMINING THE NATURE OF TRANSACTION BY VERIFYING WHETHER THERE ARE SUBSTANTIAL TRANSACTIONS, THEIR MAGNITUDE, ETC., MA INTENANCE OF BOOKS OF ACCOUNT AND FINDING THE RATIO BETWEEN PURCHASES AND SALES. IT WILL NOT BE OUT OF PLACE TO MENTION THAT REGULATION 18 OF THE SEBI REGULATIONS ENJOINS UPON EVERY FII TO KEEP AND MAINTAIN BOOKS OF ACCOUNT CONTAINING TRUE AND FAIR ACCOUNTS RELATING TO REMITTANCE OF INITIAL CORPUS OF BUYING AND SELLING AND REALIZING CAPITAL GAINS ON INVESTMENTS AND ACCOUNTS OF REMITTANCE TO INDIA FOR INVESTMENT IN INDIA AND REALIZING CAPITAL GAINS ON INVESTMENT FROM SUCH REM ITTANCES. THE THIRD PRINCIPLE SUGGESTS THAT ORDINARILY PURCHASES AND SALES OF SHA RES WITH THE MOTIVE OF REALIZING PROFIT WOULD LEAD TO INFERENCE OF TRADE/A DVENTURE IN THE NATURE OF TRADE; WHERE THE OBJECT OF THE INVESTMENT IN SHARES OF COM PANIES IS TO DERIVE INCOME BY 5 WAY OF DIVIDENDS ETC., THE TRANSACTIONS OF PURCHASE S AND SALES OF SHARES WOULD YIELD CAPITAL GAINS AND NOT BUSINESS PROFITS. 10. CBDT ALSO WISHES TO EMPHASISE THAT IT IS POSSIB LE FOR A TAX PAYER TO HAVE TWO PORTFOLIOS, I.E., AN INVESTMENT PORTFOLIO COMPRISIN G OF SECURITIES WHICH ARE TO BE TREATED AS CAPITAL ASSETS AND A TRADING PORTFOLIO COMPRISIN G OF STOCK-IN-TRADE WHICH ARE TO BE TREATED AS TRADING ASSETS. WHERE AN ASSESSEE HAS TW O PORTFOLIOS, THE ASSESSEE MAY HAVE INCOME UNDER BOTH HEADS I.E., CAPITAL GAINS AS WELL AS BUSINESS INCOME. 11. ASSESSING OFFICERS ARE ADVISED THAT THE ABOVE P RINCIPLES SHOULD GUIDE THEM IN DETERMINING WHETHER, IN A GIVEN CASE, THE SHARES AR E HELD BY THE ASSESSEE AS INVESTMENT (AND THEREFORE GIVING RISE TO CAPITAL GAINS) OR AS STOCK-IN-TRADE (AND THEREFORE GIVING RISE TO BUSINESS PROFITS). THE ASSESSING OFFICERS ARE FU RTHER ADVISED THAT NO SINGLE PRINCIPLE WOULD BE DECISIVE AND THE TOTAL EFFECT OF ALL THE P RINCIPLES SHOULD BE CONSIDERED TO DETERMINE WHETHER, IN A GIVEN CASE, THE SHARES ARE HELD BY THE ASSESSEE AS INVESTMENT OR STOCK-IN-TRADE. 12. THESE INSTRUCTIONS SHALL SUPPLEMENT THE EARLIER INSTRUCTION NO. 1827 DATED AUGUST 31, 1989. 5. LD A.R. SUBMITTED THAT CBDT CIRCULAR ITSELF PROV IDES THAT A TAX PAYER CAN HAVE TWO PORTFOLIOS I.E. AN INVESTMENT PORTFOLIO FOR WHICH S ECURITIES ARE TO BE TREATED AS CAPITAL ASSETS AND TRADING PORTFOLIO COMPRISING OF SECURITIES HELD AS STOCK IN TRADE. LD A.R. FURTHER REFERRED PAGES 203 TO 206 OF PB WHICH CONTAINS GIST OF NUMBER OF C ASES AND SUBMITTED THAT AS PER RATIO LAID DOWN IN THOSE CASES, SAID SHARES ARE TO BE CONSIDER ED AS INVESTMENT AND THE PROFIT IS TO BE CONSIDERED AS SHORT TERM CAPITAL GAIN. HE FURTHER SUBMITTED THAT THERE NO BORROWED MONEY WAS USED BY THE ASSESSEE FOR THE PURPOSE OF INVESTMENT IN SHARES. HE SUBMITTED THAT ASSESSEE RETIRED FROM THE BUSINESS AND WHATEVER FUND HE HAD, WAS INVESTED IN SHARES. LD A.R. FURTHER SUBMITTED THAT IN THE PRECEDING ASSESSMENT YEAR I.E . 2004-05, SHORT TERM CAPITAL GAIN AS WELL AS LONG TERM CAPITAL GAIN SHOWN BY THE ASSESSEE WAS AC CEPTED BY THE DEPARTMENT AND FILED A COPY OF THE ASSESSMENT ORDER DATED 11.8.2006 TO SUBSTANT IATE HIS ABOVE SUBMISSION. LD A.R. SUBMITTED THAT SHORT TERM CAPITAL GAIN SHOWN BY THE ASSESSEE SHOULD BE ACCEPTED INSTEAD OF TREATING IT AS BUSINESS INCOME. 6. ON THE OTHER HAND, LD D.R. RELIED ON ORDERS OF A UTHORITIES BELOW. 7. WE HAVE CONSIDERED SUBMISSIONS OF LD REPRESENTAT IVES OF PARTIES AND ORDERS OF AUTHORITIES BELOW AS WELL AS RELEVANT PAGES OF PAPE R BOOK. 6 8. WE OBSERVE THAT THE DISPUTE IS MAINLY IN RESPECT OF TAXING THE SHORT TERM CAPITAL GAIN SHOWN BY THE ASSESSEE BETWEEN 1.10.2004 TO 31.3.200 5 OF RS.6,35,609.19 AS SHORT TERM CAPITAL GAIN PRIOR TO 1.10.2004, WAS ASSESSABLE @ 30%, THE SAME RATE AT WHICH BUSINESS INCOME WAS TO BE ASSESSED. ON PERUSAL OF BALANCE SHEET AT PAGE 4 OF PB AS WELL AS PROFIT AND LOSS ACCOUNT PLACED AT PAGE 5 OF PB, WE OBSERVE THA T ASSESSEE HAS SPECIFICALLY STATED INVESTMENT IN SHARES AT RS.55,94,573 AND HAS SHOWN IN THE CURRENT ASSETS THE STOCK IN TRADE OF MUTUAL FUND. HOWEVER, ASSESSEE HAS ALSO STATED SPE CIFICALLY IN THE PROFIT AND LOSS ACCOUNT, DETAILS OF LONG TERM CAPITAL GAIN, SHORT TERM CAPIT AL GAIN AND SPECULATIVE DEALINGS IN SHARES, BESIDES SHOWING INTEREST AND DIVIDEND INCOME BY THE ASSESSEE IN THE ASSESSMENT YEAR UNDER CONSIDERATION. FURTHER, IT IS ALSO OBSERVED THAT A SSESSEE IS MAINTAINING SEPARATE DETAILS IN RESPECT OF SHARES, HELD BY THE ASSESSEE UNDER THE H EAD STOCK-IN-TRADE AND SHARES HELD UNDER THE HEAD INVESTMENT. THEREFORE, WE FIND SUBSTANC E IN THE SUBMISSION OF LD A.R. THAT ASSESSEE IS MAINTAINING SEPARATE PORTFOLIO OF SHARES HELD AS INVESTMENT AND SHARES HELD AS STOCK IN TRADE. THE ABOVE FACTS HAVE NOT BEEN CONTROVERTED BY THE A UTHORITIES BELOW. WE OBSERVE THAT AUTHORITIES BELOW HAVE NOT ACCEPTED THE PROFIT SHOW N BY THE ASSESSEE AS SHORT TERM CAPITAL GAIN MAINLY FOR THE REASON THAT IN RESPECT OF SOME OF TH E SHARES, THE PERIOD OF HOLDING WAS SMALL AND ALSO CONSIDERING NUMBER OF SCRIPTS, IN WHICH TRANSA CTION TOOK PLACED IN THE ASSESSMENT YEAR UNDER CONSIDERATION. HOWEVER, ON PERUSAL OF SAID S TATEMENT, PLACED AT PAGES 24-25 OF PB, WE OBSERVE THAT THERE ARE NOT REPETITIVE TRANSACTIONS IN THE SAME SCRIPS. THE DEPARTMENT HAS NOT DISPUTED THE FACT THAT ASSESSEE HAS NOT USED ANY BO RROWED FUNDS FOR THE PURPOSE OF PURCHASE OF SHARES AND SAME IS ALSO FORTIFIED ON PERUSAL OF PROFIT AND LOSS ACCOUNT, THAT NO INTEREST HAS BEEN CLAIMED TOWARDS EXPENSES. THE ITAT MUMBAI HAS HELD IN THE CASE OF JANAK S RANGWALA VS ACIT, 11 SOT 627 THAT MERE VOLUME OF TRANSACTION D OES NOT MEAN THAT ASSESSEE IS A TRADER. THE INTENTION WITH WHICH PURCHASE HAS BEEN MADE HAS TO BE SEEN. IT IS HELD THAT IF IN EARLIER YEAR, THE DEPARTMENT HAS TREATED THE ASSESSEE AS AN INVESTOR, IT CANNOT TAKE A DIFFERENT VIEW IN SUBSEQUENT YEAR. IN THE CASE BEFORE US, IT ALSO OB SERVED THAT IN ASSESSMENT YEAR 2004-05, ASSESSEE HAS SHOWN SHORT TERM CAPITAL GAIN AS WELL AS LONG TERM CAPITAL GAIN AND DEPARTMENT WHILE MAKING THE ASSESSMENT U/S.143(3) OF THE ACT V IDE ORDER DATED 11.8.2006, COPY PLACED ON RECORD, ACCEPTED THE CAPITAL GAIN SHOWN BY THE ASSE SSEE. IN THE CASE OF GOPAL PUROHIT VS JCIT, 29 SOT 117(MUM), ITAT HAS HELD THAT MOST CRUCIAL SO URCE OF GATHERING INTENTION OF ASSESSEE AS REGARDS NATURE OF TRANSACTION IS THE ACCOUNTS MAINT AINED BY THE ASSESSEE. IT IS FURTHER HELD THAT DELIVERY BASED TRANSACTIONS SHOULD BE TREATED AS IN VESTMENT TRANSACTIONS. THE SAID FINDING OF 7 THE TRIBUNAL HAS BEEN UPHELD BY HONBLE BOMBAY HIGH COURT IN THE ABOVE CASE REPORTED AT 228 CTR 582(BOM), AND THE APPEAL FILED BY THE DEPARTME NT AGAINST SAID DECISION OF HONBLE BOMBAY HIGH COURT WAS ALSO REJECTED BY HONBLE SUPR EME COURT VIDE ORDER DATED 15.11.2010. FURTHER, IN THE CASE OF DCIT VS. SMK SAHRES & STOCK BROKING PVT LTD., (I.T.A. NO.799/M/2009) ORDER DATED 24.11.2010, ITAT MUMBAI HAS HELD THAT M ERE VOLUME OF TRANSACTIONS IS NOT THE SOLE CRITERIA TO HOLD THE ASSESSEE TO BE A TRADER. THE MANNER OF SHOWING SHARES IN ACCOUNTS IS RELEVANT WE OBSERVE THAT IN THE CASE BEFORE US, DE PARTMENT HAS NOT ACCEPTED THE PROFITS SHOWN BY THE ASSESSEE AS CAPITAL GAIN, MERELY ON T HE GROUND OF VOLUME OF TRANSACTIONS BUT HAS NOT DISPUTED THE MANNER OF SHOWING THE SHARES IN ITS ACCOUNT UNDER THE HEAD INVESTMENT. WE ARE OF THE CONSIDERED VIEW THAT ABOVE DECISIONS OF ITAT SQUARELY APPLY TO THE CASE OF THE ASSESSEE. CONSIDERING THE FACTS OF THE ASSESSEE, W E HOLD THAT THE SHORT TERM CAPITAL GAIN AGGREGATING TO RS.10,16,274/- SHOWN BY THE ASSESSE E , BE ASSESSED UNDER THE HEAD SHORT TERM CAPITAL GAIN INSTEAD OF BUSINESS INCOME. HENCE, GROUND NO.1 OF APPEAL IS ALLOWED. 9. IN GROUND NO.2 OF APPEAL, ASSESSEE HAS DISPUTED THE ACTION OF LD CIT(A) IN CONFIRMING 50% OF THE DISALLOWANCES MADE BY THE AO IN RESPECT OF POSTAGE EXPENSES AND PROFESSIONAL FEES. 10. WE OBSERVE THAT AO HAS MADE 50% DISALLOWANCE IN RESPECT OF POSTAGE EXPENSES AND PROFESSIONAL FEES CLAIMED BY THE ASSESSEE ON THE GR OUND THAT ASSESSEE HAS NOT SHOWN ANY EXPENDITURE PERTAINING TO EXEMPT INCOME. LD CIT(A) ALSO CONFIRMED THE ACTION OF AO. WE ALSO OBSERVE THAT AO IS DUTY BOUND TO DISALLOW SOME REAS ONABLE EXPENSES IN REGARD TO THE EXEMPT INCOME. HOWEVER, CONSIDERING THE TRANSACTIONS MAD E BY THE ASSESSEE, WE ARE OF THE VIEW THAT IT WILL MEET THE ENDS OF JUSTICE TO RESTRICT THE DI SALLOWANCE TO 20% OF THE TOTAL CLAIM OF THE ASSESSEE. HENCE, THIS GROUND IS PARTLY ALLOWED. 11. GROUND NO.3 OF APPEAL RELATES TO CONFIRMATION O F 20% DISALLOWANCE OF TELEPHONE EXPENSES. 12. HAVING HEARD BOTH SIDES AND CONSIDERING THE FAC TS OF THE ASSESSEES CASE, WE ARE OF THE VIEW THAT THE DISALLOWANCE OF 20% OF TELEPHONE EXPE NSES MADE BY AUTHORITIES BELOW ON THE GROUND THAT SOME EXPENSES ARE REQUIRED TO BE MADE I N REGARD TO EXEMPT INCOME IS ON HIGHER 8 SIDE. HOWEVER, WE OBSERVE THAT PERSONAL USE OF TEL EPHONE IS NOT RULED OUT. HENCE, WE REDUCE THE DISALLOWANCE OF EXPENSES TO 10%. AO IS DIRECT ED ACCORDINGLY. GROUND NO.3 IS ALLOWED IN PART. 13. GROUND NO.4 OF APPEAL RELATES TO CONFIRMATION OF DISALLOWANCE ON ACCOUNT OF DEMAT CHARGES OF RS.1,143/-. 14. HAVING HEARD BOTH THE SIDES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD CIT(A) TO CONFIRM THE DISALLOWANCE OF RS.1,143/- ON ACCOUNT O F DEMAT CHARGES AS INCOME OF THE ASSESSEE HAS BEEN ASSESSED UNDER THE HEAD CAPITAL GAIN EX CEPT SPECULATIVE PROFIT OF RS.2,90,664/-. HENCE, GROUND NO.4 IS REJECTED. 15. IN GROUND NO.5 OF APPEAL, ASSESSEE HAS DISPUTED THE CONFIRMATION OF DISALLOWANCE ON ACCOUNT OF STAMP DUTY CHARGES OF RS.6,565/-. 16. HAVING HEARD BOTH SIDES, WE ARE OF THE CONSIDER ED VIEW THAT DISALLOWANCE ON ACCOUNT OF STAMP DUTY CHARGES IS NOT JUSTIFIED AS GENUINE OF THE SAID EXPENDITURE IS NOT JUSTIFIED BY THE AUTHORITIES BELOW, HENCE DISALLOWANCE OF RS.6,565/ - IS DELETED BY ALLOWING GROUND NO.5 OF THE APPEAL. 17. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLO WED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 12TH JUNE, 2013 . ) . / 12TH JUNE, 2013 ) SD/- SD/- ( /SANJAY ARORA) ( . . /B.R.MITTAL) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; / DATED 12 / 06/2013 . . ./ PARIDA , SR. PS 9 / COPY OF THE ORDER FORWARDED TO : 1. & / THE APPELLANT 2. ' & / THE RESPONDENT. 3. 3 ( ) / THE CIT(A)- 4. 3 / CIT 5. 4 '6 , + 6 , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, # //TRUE COPY// (ASSTT. REGISTRAR) , /ITAT, MUMBAI