The ACIT, Indore V. Shri Omprakash Suri, Indore

ITA 443/IND/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 6019 (ITAT-INDORE)
• Duration Of Justice: 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 03-08-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 04-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Keywords: Capital asset; Business income; Transactions in derivatives

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI B.R. KAUSHIK, ACCOUNTANT MEMBER ITA NO.443/IND/2009 A.YS. 2005-06 ASSTT. COMMISSIONER OF INCOME TAX 3(1), INDORE APPELLANT VS SHRI OM PRAKASH SURI INDORE PAN AEXPS-8338C RESPONDENT APPELLANT BY : SMT. APARNA KARAN, SR. DR RESPONDENT BY : NONE O R D E R PER JOGINDER SINGH, JM THIS APPEAL IS BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(A) DATED 23.6.2009 ON THE GROUND THAT THE LEARN ED COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT JUSTIFIED IN DIRECTING THE AO TO TREAT THE BUSINESS INCOME OF RS. 49,89,915/- ON SALE OF SHARE S AS SHORT TERM 2 CAPITAL GAIN WHEN THE AUDITOR IN THE AUDITED ACCOUN TS HAD HIMSELF SHOWN THE TRANSACTION AS TRADING IN SHARES. 2. DURING HEARING OF THIS APPEAL, WE HAVE HEARD SMT . APARNA KARAN, LEARNED SR. DR BUT NEITHER ANYNONE IS PRESEN T ON BEHALF OF THE ASSESSEE INSPITE OF SERVICE OF NOTICE, NOR ANY APPL ICATION FOR ADJOURNMENT HAS BEEN MOVED BY THE ASSESSEE. WE, TH EREFORE, HAVE NO OPTION BUT TO PROCEED EX-PARTE QUA THE ASSESSEE AND DISPOSE OF THIS APPEAL ON THE BASIS OF MATERIAL AVAILABLE ON THE FI LE. ACCORDINGLY, THE LEARNED SENIOR DR WAS HEARD WHO CONTENDED THAT THE DIRECTION OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) TO TRE AT THE AMOUNT OF RS.49,89,915/- ON SALE OF SHARES AS SHORT TERM CAPI TAL GAIN WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE WAS ENGAGED IN MORE THAN 116 SCRIPS, WHICH WERE NOT RECORDED IN THE DMAT ACCOUNT AND ALSO TRUE FACTS, WAS NOT JUSTIFIED. IN NUTSHELL, THE ASSESSM ENT ORDER WAS SUPPORTED. 3. WE HAVE CONSIDERED THE SUBMISSIONS PUT FORTH BY THE LEARNED SENIOR DR AND ALSO PERUSED THE MATERIAL AVA ILABLE ON RECORD. BRIEF FACTS ARE THAT IN THE PAST THE ASSESSEE WAS E NGAGED IN ROAD BUILDING CONTRACTOR AND WAS DERIVING INCOME FROM CO NTRACT RECEIPTS AS WELL AS FROM SALE OF GITTI AND DURING THE IMPUGNED YEAR, VENTURED INTO INVESTMENT IN SHARE MARKET. THE INCOME ARISING FRO M F&O TRANSACTIONS AND DAILY TRADING IN SHARES (WITHOUT PHYSICAL DELIV ERY) REFLECTED AS 3 SPECULATIVE BUSINESS WHEREAS THE INCOME ON DELIVERY BASED TRANSACTIONS OF SALE AND PURCHASE OF SHARES, INCOME WAS SHOWN FROM CAPITAL GAINS. THE LEARNED AO CONSIDERED THE INCOM E WHICH WAS BASED ON PURCHASE AND SALE OF SHARES AS BUSINESS INCOME O N THE GROUNDS AS NARRATED IN THE ASSESSMENT ORDER AS WELL ASAT PAGES 3 AND 4 OF THE APPELLATE ORDER. BROADLY, THE LEARNED AO WAS OF TH E VIEW THAT THE INTENTION OF THE ASSESSEE SINCE BEGINNING WAS SALE OF SHARES AS TRADING ACTIVITIES, AS EVIDENT FROM AUDITED PROFIT AND LOSS ACCOUNT BY NOT SHOWING THE SAME AS SHORT TERM CAPITAL GAIN AND ALSO IN FOR M 3CD THE ASSESSEE HAS MENTIONED THE NATURE OF BUSINESS AS TRADING/DEA LING IN SHARES/SECURITIES AND MUTUAL FUNDS. THE FREQUENCY OF TRANSACTIONS WAS ALSO CONSIDERED, CONSEQUENTLY HE TREATED THE AMOUNT OF RS.49,81,915/- AS BUSINESS INCOME FROM SHARE TRADING. HOWEVER, BE FORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THE BASIS OF A DDITIONS WAS EXPLAINED AS EVIDENT FROM PARA 3.1.1 ONWARDS. THE CRUX OF CLAIM OF THE ASSESSEE IS THAT IN THE AUDITED ACCOUNTS, THE SALE OF SHARES AMOUNTING TO RS. 9.43 CRORES IN WHICH DELIVERY HAD BEEN TAKEN , STT WAS PAID AND THE SHARES WERE SOLD AFTER HOLDING FOR A FEW DAYS/F EW WEEKS. THE MUTUAL FUNDS OF RS. 2.91 LACS WERE SOLD AND WERE TR EATED AS INCOME FROM SHORT TERM CAPITAL GAINS. BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THE ASSESSEE ALSO FILED A DETA ILED NOTE ON THE PURCHASE PROCESS FOR DELIVERY BASE SHARES, DETAILS OF DIVIDEND RECEIVED 4 ON THE BASIS OF RELEVANT STATEMENTS BY PLACING RELI ANCE ON THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF JM SHARES & STOCK BROKERS V. JCIT DATED JANUARY, 2009. BRIEFLY, THE C LAIM OF THE ASSESSEE BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) WAS THAT THE DELIVERY BASED TRANSACTIONS WERE MADE WITH AN INVE STMENT MOTIVE AND AS SUCH THE INCOME THEREFROM WAS IN THE NATURE OF S HORT TERM CAPITAL GAINS WHEREAS THE INCOME AROSE FROM F&O TRANSACTIO NS AND DAILY TRADING IN SHARES WERE WITH THE BUSINESS MOTIVE WHI CH WERE SHOWED AS BUSINESS INCOME ONLY WHICH WAS MAINLY THROUGH STOCK BROKER, ARIHANT CAPITAL MARKETS LIMITED, REGISTERED WITH NSC, NSE A ND BSE. IT IS ALSO SEEN THAT IN THE IMPUGNED ORDER THE BOARD CIRCULAR NO. 4/2007 DATED 15.6.2007 WHEREIN IT WAS EMPHASIZED THAT IT IS POSS IBLE FOR A TAX PAYER TO HAVE TWO PORT FOLIOS I.E. AN INVESTMENT PORT FOLIO COMPRISING OF SECURITIES WHICH ARE TO BE TREATED AS CAPITAL ASSET AND TRADIN G PORT FOLIO COMPRISING STOCK IN TRADE WHICH ARE TO BE TREATED AS TRADING A SSET, WAS CONSIDERED. THE BOARD FURTHER CLARIFIES THAT NO SINGLE PRINCIPL E WOULD BE DECISIVE AND THE TOTAL PROPOSITION NEEDS TO BE CONSIDERED. THE A SSESSEE HAS MAINTAINED ONLY ONE PORT FOLIO AND CLAIMED THAT TO BE AN INVESTMENT FOLIO. UNDISPUTEDLY, THE PERIOD OF HOLDING IS LESS THAN ON E YEAR, CONSEQUENTLY, THERE IS NO INFIRMITY IN HOLDING THAT THESE TRANSAC TIONS WOULD BE TREATED AS SHORT TERM CAPITAL GAIN ON WHICH THE APPLICABLE TAX IS @ 10% ONLY. IN 5 VIEW OF THIS UNCONTROVERTED FACT, THERE IS NO MERIT IN THE APPEAL OF THE REVENUE AND THE SAME IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 4 TH AUGUST, 2010. (B.R. KAUSHIK) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER 4 TH AUGUST, 2010 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, G UARD FILE *DN/