The ITO, Ward-3(1), JAMNAGAR V. Shri Brijesh Bhagwatilal Lavti, JAMNAGAR

ITA 422/RJT/2009

• Counselvise Citation: 42224914 RSA 2009
• Duration Of Justice: 1 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 04-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 05-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N R SONI
• Assessee Lawyers: J C RANPURA
• Keywords: Business income; Salary income; Earning of tax free income
• Section: 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI N.R.S. GANESA N (JM) I.T.A. NO.422/RJT/2009 (ASSESSMENT YEARS 2006-07) ITO, WD.3(2) VS SHRI BRIJESH BHAGWATILAL LAVTI JAMNAGAR SUBHAM, PLOT NO.45, PLAN NO.9 AMBAVIJAY ESTATE JAMNAGAR PAN : ACDPL3970D (APPELLANT) (RESPONDENT) I.T.A. NO.424/RJT/2009 (ASSESSMENT YEARS 2006-07) ITO, WD.3(2) VS SHRI SAURABHBHAI RAMESHCHANDRA L AVTI JAMNAGAR PLOT NO.9, SHIVAM, PLAN NO.9 OPP. ARPIT APARTMENT AMBAVIJAY CO-OP SOCIETY JAMNAGAR PAN : ACDPL3970D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI NR SONI RESPONDENTS BY: SHRI JC RANPURA O R D E R PER N.R.S. GANESAN, JM THESE TWO APPEALS OF THE REVENUE IN CASE OF TWO DI FFERENT ASSESSEES ARE DIRECTED AGAINST THE SEPARATE BUT IDENTICAL ORDERS OF CIT(A), JAMNAGAR BOTH DATED 26-03-2009 AND PERTAIN TO ASSESSMENT YEAR 2006-07. SINCE IDENTICAL ISSUE IS INVOLVED, FOR THE SAKE OF CONVENIENCE THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OFF BY THIS COMMON ORDER. THE ONLY ISSUE FOR CONSIDERATION IS CLASSIFICATION OF INCOME ON SALE OF SHARES. 2. SHRI NR SONI, THE LD.DR SUBMITTED THAT THE ASSES SEES SOLD SOME OF THE SHARES DURING THE YEAR UNDER CONSIDERATION AND CLAI MED THE PROFIT AS CAPITAL GAIN. ITA NO.422/RJT/2009 ITA NO.424/RJT/2009 2 ACCORDING TO THE LD.DR, THE ACTIVITIES CARRIED ON B Y THE ASSESSEES ARE ADVENTURE IN THE NATURE OF TRADE AND THEREFORE, THE PROFIT AR ISING ON SALE OF SHARES HAS TO BE TAXED AS BUSINESS PROFIT U/S 28 OF THE INCOME-TAX A CT. REFERRING TO THE ASSESSMENT ORDER, THE LD.DR SUBMITTED THAT THE ASSE SSEES THEMSELVES HAVE SHOWN ALL THE TRANSACTIONS IN THE SHARE TRADING ACC OUNT AND NOT IN THE INCOME AND EXPENDITURE ACCOUNT. THEREFORE, ACCORDING TO THE L D.DR, THE ASSESSEES ARE ONLY SHARE TRADERS AND NOT INVESTORS. ACCORDING TO THE LD.DR, AN INVESTOR IS NOT REQUIRED TO MAINTAIN ANY TYPE OF ACCOUNTS. THEREFO RE, ACCORDING TO THE LD.DR, THE PROFIT ON SALE OF SHARES HAS TO BE TAXED AS BUSINES S PROFIT AND NOT AS CAPITAL GAIN. 3. ON THE CONTRARY, SHRI JC RANPURA, THE LD.REPRESE NTATIVE FOR THE ASSESSEES SUBMITTED THAT FOR THE PURPOSE OF CLASSIFICATION OF PROFIT ON SALE OF SHARES THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE H AS TO BE ASCERTAINED. IF THE INTENTION OF THE ASSESSEE IS TO MAKE INVESTMENT THE N THE PROFIT ON SALE OF SHARES HAS TO BE CLASSIFIED AS CAPITAL GAIN. REFERRING TO THE ORDERS OF CIT(A) AND THE ASSESSMENT, THE LD.REPRESENTATIVE SUBMITTED THAT TH E ASSESSING OFFICER HIMSELF TREATED THE PROFIT ON SALE OF SHARES WHICH WERE HEL D FOR LESS THAN 12 MONTHS UNDER SHORT TERM CAPITAL GAIN. WHEN THE ASSESSING OFFICER HIMSELF TREATED THE SHARES AS SHORT TERM CAPITAL GAIN THERE WAS NO REAS ON FOR TREATING THE LONG TERM CAPITAL GAIN AS BUSINESS INCOME. THE CIT(A), AFTER REFERRING TO THE MATERIAL AVAILABLE ON RECORD FOUND THAT THE ASSESSEES ARE ON LY INVESTORS, AND THEREFORE, THE SALE OF SHARES HAS TO BE TREATED ONLY AS CAPITA L GAIN AND NOT BUSINESS PROFIT. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND HAVE ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. FOR THE PURPOSE OF FINDING OUT THE NATURE OF TRANSACTION AS TO WHETHER IT IS AN INVEST MENT OR ADVENTURE IN THE NATURE OF TRADE, ONE HAS TO SEE THE INTENTION OF THE ASSES SEE AT THE TIME OF PURCHASE OF THE SHARES. THE ASSESSEES ARE ONLY EMPLOYEES HAVIN G SALARY INCOME. IN THE RETURNS OF INCOME AS SEEN FROM THE ASSESSMENT ORDER S, THE ASSESSEES HAVE CLAIMED RS.75,876 FROM SHARE TRADING AND ANOTHER SU M OF RS.69,99,072 AS EXEMPT INCOME ON SALE OF CERTAIN SALES IN THE CASE OF SRI BRIJESH B LAVTI RS. ITA NO.422/RJT/2009 ITA NO.424/RJT/2009 3 68,192 FROM SHARE TRADING AND RS. 69,79,292 AS EXEM PT INCOME ON SALE OF CERTAIN SALES IN THE CASE OF SHRI SAURABH RAMESHCHA NDRA LAVTI. THESE AMOUNTS OF RS. 69,99,072 AND RS. 69,79,292 IN THE CASE OF RESPECTIVE ASSESSES WERE TREATED BY THE ASSESSING OFFICER AS BUSINESS INCOME ON SALE OF SHARES. WE FIND THAT THE CBDT IN ITS CIRCULAR NO.4/2007 DATED 15-06 -2007 EXAMINED THIS ISSUE AND AFTER REFERRING TO THE JUDGMENT OF THE APEX COU RT, INSTRUCTED ALL ITS OFFICERS THAT IT IS POSSIBLE FOR THE TAXPAYER TO HAVE TWO PORTFOL IOS, I.E. INVESTMENT PORTFOLIO AND TRADING PORTFOLIO. WHEN THE ASSESSEES HAVE TWO POR TFOLIOS, THE INCOME HAS TO BE ASSESSED BOTH UNDER THE HEAD CAPITAL GAINS AS WEL L AS BUSINESS INCOME. IN THESE CASES, THE ASSESSEES ARE SALARIED EMPLOYEES. THEREFORE, THE QUESTION OF MAINTAINING TWO PORTFOLIO AMOUNTS DOES NOT ARISE FO R CONSIDERATION. THE ASSESSEES INVESTED THEIR FUNDS AS INVESTMENTS AND W HENEVER IT WAS CONVENIENT, IT WAS SOLD. THE INTENTION OF THE ASSESSEES AT THE TIME OF PURCHASE IS VERY CLEAR THAT IT IS AN INVESTMENT AND NOT TO TRADE IN SHARES . MERELY BECAUSE, ON ONE OR TWO OCCASIONS THERE WAS ALSO PURCHASE AND SALE OF S HARES, WE CANNOT SAY THAT THE ASSESSEES ARE TRADING IN SHARES. THE TRANSACTI ONS AS EXTRACTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDERS SHOW THA T THE ASSESSEE NEVER INTENDED TO TRADE IN SHARES AND BEING SALARIED PERS ONS INTENDED TO INVEST IN THE SHARES AS INVESTORS. THEREFORE, THE PROFIT ON SALE OF SHARES HAS TO BE CLASSIFIED AS CAPITAL GAIN EITHER AS SHORT TERM CAPITAL GAIN O R LONG TERM CAPITAL GAIN DEPENDING UPON THE PERIOD OF HOLDING. SINCE THE CI T(A) HAS DIRECTED THE ASSESSING OFFICER TO TREAT THE SAME AS CAPITAL GAIN WE DO NOT FIND ANY INFIRMITY IN THE ORDERS OF LOWER AUTHORITY. ACCORDINGLY THE ORD ERS OF THE CIT(A) ARE CONFIRMED. 5. IN THE RESULT, THE APPEALS OF THE REVENUE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27-05-2011. SD/- SD/- (A.L. GEHLOT) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER RAJKOT, DT : 27 TH MAY, 2011 PK/- ITA NO.422/RJT/2009 ITA NO.424/RJT/2009 4 COPY TO: 1. ASSESSEE 2. REVENUE 3. THE CIT(A), JAMNAGAR 4. THE CIT, JAMNAGAR 5. THE DR, I.T.A.T., RAJKOT (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT