The ITO, Ward-3(2), JAMNAGAR V. Shri Miteshbhai Nathulal Lavti, JAMNAGAR

ITA 425/RJT/2009

• Counselvise Citation: 42524914 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.425/RJT/2009 (ASSESSMENT YEARS 2006-07) ITO, WD.3(2) VS SHRI MITESHBHAI NATHULAL LAVTI JAMNAGAR PLOT NO.9, OPP MILK DAIRY AMBAVIJAY CO-OP SOCIETY JAMNAGAR PAN : ACCPL9700G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI NR SONI RESPONDENT BY: SHRI JC RANPURA O R D E R PER N.R.S. GANESAN, JM THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A), JAMNAGAR DATED 26-03-2009 AND PERTAINS TO ASSESSMEN T YEAR 2006-07. THE ONLY ISSUE FOR CONSIDERATION IS CLASSIFICATION OF INCOME ON SALE OF SHARES. 2. SHRI NR SONI, THE LD.DR SUBMITTED THAT THE ASSES SEE SOLD SOME OF THE SHARES DURING THE YEAR UNDER CONSIDERATION AND CLAI MED THE PROFIT AS CAPITAL GAIN. ACCORDING TO THE LD.DR, THE ACTIVITIES CARRIED ON B Y THE ASSESSEE IS ADVENTURE IN THE NATURE OF TRADE THEREFORE, THE PROFIT ARISING O N SALE OF SHARES HAS TO BE TAXED AS BUSINESS PROFIT U/S 28 OF THE INCOME-TAX ACT. R EFERRING TO THE ASSESSMENT ORDER, THE LD.DR SUBMITTED THAT THE ASSESSEE HIMSEL F HAS SHOWN ALL THE TRANSACTIONS IN THE SHARE TRADING ACCOUNT AND NOT I N THE INCOME AND EXPENDITURE ACCOUNT. THEREFORE, ACCORDING TO THE LD.DR, THE AS SESSEE IS ONLY A SHARE TRADER AND NOT AN INVESTOR. ACCORDING TO THE LD.DR, AN IN VESTOR IS NOT REQUIRED TO MAINTAIN ANY TYPE OF ACCOUNTS. THEREFORE, ACCORDIN G TO THE LD.DR, THE PROFIT ON SALE OF SHARES HAS TO BE TAXED AS BUSINESS PROFIT A ND NOT AS CAPITAL GAIN. ITA NO.425/RJT/2009 2 3. ON THE CONTRARY, SHRI JC RANPURA, THE LD.REPRESE NTATIVE FOR THE ASSESSEE 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 ORDER 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 ASSESSEE IS ONLY AN INVESTOR, 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 ASSESSEE IS ONLY AN EMPLOYEE HAVIN G SALARY INCOME. IN THE RETURN OF INCOME AS SEEN FROM THE ASSESSMENT ORDER, THE ASSESSEE HAS CLAIMED RS.83,712 FROM SHARE TRADING AND ANOTHER SUM OF RS. 53,84,239 AS EXEMPT INCOME ON SALE OF CERTAIN SALES. THIS RS.53,84,239 WAS TREATED BY THE ASSESSING OFFICER AS BUSINESS INCOME ON SALE OF SHARES. WE F IND THAT THE CBDT IN ITS CIRCULAR NO.4/2007 DATED 15-06-2007 EXAMINED THIS I SSUE AND AFTER REFERRING TO THE JUDGMENT OF THE APEX COURT, INSTRUCTED ALL ITS OFFICERS THAT IT IS POSSIBLE FOR THE TAXPAYER TO HAVE TWO PORTFOLIOS, I.E. INVESTMENT PO RTFOLIO AND TRADING PORTFOLIO. WHEN THE ASSESSEE HAS TWO PORTFOLIOS, THE INCOME HA S TO BE ASSESSED BOTH UNDER THE HEAD CAPITAL GAINS AS WELL AS BUSINESS INCOME. IN THIS CASE, THE ASSESSEE IS A SALARIED EMPLOYEE. THEREFORE, THE QU ESTION OF MAINTAINING TWO PORTFOLIO DOES NOT ARISE FOR CONSIDERATION. THE AS SESSEE INVESTED HIS FUNDS AS INVESTMENT AND WHENEVER IT WAS CONVENIENT, IT WAS S OLD. THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE IS VERY CLEAR THAT IT IS AN INVESTMENT AND NOT TO ITA NO.425/RJT/2009 3 TRADE IN SHARES. MERELY BECAUSE, ON ONE OR TWO OCC ASIONS THERE WAS ALSO PURCHASE AND SALE OF SHARES, WE CANNOT SAY THAT THE ASSESSEE IS TRADING IN SHARES. THE TRANSACTION AS EXTRACTED BY THE ASSESS ING OFFICER IN THE ASSESSMENT ORDER SHOWS THAT THE ASSESSEE NEVER INTENDED TO TRA DE IN SHARES AND BEING SALARIED PERSON INTENDED TO INVEST IN THE SHARES AS AN INVESTOR. THEREFORE, THE PROFIT ON SALE OF SHARES HAS TO BE CLASSIFIED AS CA PITAL GAIN EITHER AS SHORT TERM CAPITAL GAIN OR LONG TERM CAPITAL GAIN DEPENDING UP ON THE PERIOD OF HOLDING. SINCE THE CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO TREAT THE SAME AS CAPITAL GAIN WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF L OWER AUTHORITY. ACCORDINGLY THE SAME IS CONFIRMED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS 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/- 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