ACIT 19(3), MUMBAI V. VIDYASAGAR M. SHAH, MUMBAI

ITA 4721/MUM/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6390 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 21-09-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 12-08-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R M TIWARI
• Assessee Lawyers: JITENDRA SHAH; K GOPL
• Keywords: Business income; Question of law; Speculation loss
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI R.V. EASWAR, HONBLE PRESIDENT AND SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER I.T.A. NO. 4721/MUM/2009 ASSESSMENT YEAR : 2006-07. ASSTT. COMMISSIONER OF INCOME-TAX, S HRI VIDYASAGAR M. SHAH, 19(3), MUMBAI. VS. 2-C, GIRNAR APARTMENTS, 2 ND FLOOR, PLOT NO. 55, PALI HILL, BAND RA (W), MUMBAI- 400 050. PAN AAFPS5412H. APPELLANT. RESPONDENT. APPELLANT BY : SHRI R.M. TIWARI. RESPONDENT BY : SHRI K. GOPL AND SHRI JITENDRA S HAH. O R D E R PER J. SUDHAKAR REDDY, A.M. : THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AG AINST THE ORDER OF THE CIT(APPEALS)-XIX, MUMBAI DATED 04-06-2009 FOR ASSES SMENT YEAR 2006-07. 2. FACTS IN BRIEF: THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSIN ESS OF DESIGNING OIL WELL PROFILES FOR FOREIGN COMPANIES WHICH ARE ENGAGED IN THE OIL AND GAS INDUSTRIES. FOR THE ASSESSMENT YEAR 2006-07, THE ASSESSEE FILED A R ETURN OF INCOME ON 3 RD AUGUST, 2006 DECLARING TOTAL LOSS OF RS.7,17,460/- AND SPE CULATION LOSS OF RS.6,85,339/- 2 AND SHORT TERM CAPITAL GAINS OF RS.1,17,43,201/-. T HE AO PASSED AN ORDER U/S 143(3) ON 24 TH DEC., 2008 AND ASSESSED THE TOTAL INCOME OF THE AS SESSEE AT RS.1,10,25,740/-. THE AO ASSESSED THE SHORT TERM CA PITAL GAIN DECLARED IN THE RETURN, AS BUSINESS INCOME, ON THE FOLLOWING GROUND S : A) THE ASSESSEE WAS CARRYING OUT TRANSACTIONS IN SHARE S REGULARLY AND FREQUENTLY AND HAS VERY HIGH TURNOVER IN SHARE TRANSACTIONS. B) THE AVERAGE HOLDING PERIOD OF SHARES IS 26 DAYS ON LY AND HENCE THESE ARE NOT INVESTMENTS. C) QUANTITY OF PURCHASE AND SALES OF SHARES ARE GENERA LLY LARGE. D) THE ASSESSEE HAS CONTACT, ACCESS TO INFORMATION & N ECESSARY QUALIFICATION AND COMPETENCE, TO CARRY OUT BUSINESS OF PURCHASE AND SALE OF SHARES. E) THE ASSESSEE HAS SOLD THE SHARES IN SOME OCCASIONS EVEN FOR LOSS, WHEREAS A PRUDENT INVESTOR NORMALLY NEVER SELLS ON LOSS. 3. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN A PPEAL. THE FIRST APPELLATE AUTHORITY CONSIDERED THE GUIDELINES OF TH E CBDT VIDE CIRCULAR NO. 1827 OF 1989 AND CIRCULAR NO. 4 OF 2007 AND AT PARA 3.2 GRANTED RELIEF TO THE ASSESSEE. WHILE DOING SO HE HELD THAT A) WHERE THE ASSESSEE HAS TWO PORTFOLIOS, HE MAY H AVE INCOME FROM BOTH HEADS I.E. CAPITAL GAINS AND BUSINESS INCOME AND TH AT THE ASSESSEE IS OFFERING INCOME BOTH IFOEDEALING IN SHARES UNDER SPECULATION , AS WELL AS, ON ACCOUNT OF SHORT TERM CAPITAL GAINS. B) THE ASSESSEES MAIN SOURCE OF INCOME IS FROM OI L WELL DESIGNS AND THE RECEIPTS ARE IN FOREIGN EXCHANGE AND HENCE IT CANNO T BE SAID THAT HE IS PRIMARILY INVOLVED IN SHARE BUSINESS. C) PURCHASES OF SHARES ARE MADE FROM SURPLUS FUNDS AVAILABLE WITH THE ASSESSEE AS NO BORROWINGS HAVE BEEN MADE FOR PURCHA SES IN ANY OF THE YEARS. 3 D) SHARES PURCHASED HAVE BEEN SHOWN UNDER THE HEAD INVESTMENT PORTFOLIO IN ITS BALANCE SHEET SINCE INCEPTION AND INVESTMENTS ARE VALUED AT COST. E) DIVIDEND EARNED ON INVESTMENT IS SHOWN AS EARNE D ON CAPITAL ACCOUNT. F) THESE THREE FACTORS I.E. PRIMARY ACTIVITIES, DE PLOYMENT OF SURPLUS FUNDS AND DEPICTION IN THE ACCOUNTS, OVERWHELMING POINT TO THE INTENTION OF THE ASSESSEE AS A PERSON ENGAGED IN INVESTMENT OF SHARE S. G) THE AO HAS WRONGLY GIVEN WEIGHTAGE TO THE PERI OD OF HOLDING I.E. 26 DAYS AND THE QUANTITIES PURCHASED AND SOLD AND THAT THESE TWO CRITERIA WOULD NOT CARRY PRIMACY, IN DECIDING THE ISSUE. H) THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSE SSEE BY THE DECISION OF THE TRIBUNAL IN THE CASE OF JANAK S. RANGWALA VS. A CIT IN ITA NO. 1164/MUM/2004 DATED 19-12-2006 AND OTHERS. THUS HE GRANTED RELIEF TO THE ASSESSEE. 4. AGGRIEVED, THE REVENUE IS IN APPEAL ON THE FOLLO WING GROUNDS : (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) HAS ERRED IN ACCORDING PRIMACY TO THE ASSESS EES RECEIPT OF PROFESSIONAL FEES OF RS.11.29 LAKHS AND TREATING DE SIGNING OIL WELL AS ASSESSEES PRIMARY ACTIVITY THEREBY IGNORING THE FA CT THAT THE ASSESSEE IS IN THE BUSINESS OF TRADING IN SHARES FOR THE LAST 7 YEARS AND ALSO THE QUANTUM INVOLVED IN SHARE TRADING IN THIS YEAR I.E. RS.1.17 CRORES. (2) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW THE LEARNED CIT(A) ERRED IN IGNORING THE FACT THAT THE ASSESSEE S AVERAGE PERIOD OF HOLDING OF SHARES IS ONLY 26 DAYS AND ALSO THAT THE ASSESSEE HAS ENTERED INTO 175 TRANSACTIONS OF PURCHASE AND SALE OF SHARE S DURING THE CURRENT YEARS. (3) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW THE LEARNED CIT(A) ERRED IN IGNORING THE FACT THAT THERE WAS AS MANY AS 15 SAME DAY 4 TRANSACTIONS IN PURCHASE AND SALE OF SHARES THAT AR E TREATED AS PECULATION TRANSACTIONS. THIS FACT FURTHER BUTTRESSES THE CASE OF THE DEPARTMENT THAT THE ASSESSEE IS PERIODICALLY TRANSACTING IN SHARES. (4) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASSESSEES USE OF OWN FUNDS FOR PURCHASE OF SHARES WOULD IMPLY THAT THE SHARES ARE PROCURED FOR THE PURPOSE OF INVESTMENT, THEREBY IGNORING THE FACT THAT THE ASSE SSEE BEING A HIGH NET WORTH INDIVIDUAL MAY NOT REQUIRE LOAN FUNDS. (5) THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AO BE RESTORED. 5. THE LEARNED DR, MR. R.M. TIWARI, TOOK THIS BENC H THROUGH THE FACTS RECORDED BY THE AO. FURTHER HE REFERRED TO THE PAPE R BOOKS FILED BY THE ASSESSEE WHICH RUNS INTO 65 PAGES AND SPECIFICALLY PAGES 12 TO 22 WHICH GIVES A COPY OF THE CAPITAL GAINS STATEMENT IN SHARES AND POINTED OUT T HAT NONE OF THE SHARES WERE HELD FOR MORE THAN SIX MONTHS. HE POINTED OUT THAT IN TH E CASE OF THE APTECH LTD. THE SHARES IN QUESTION WERE HELD FOR 3 DAYS TO 7 DAYS A ND SOLD AT A LOSS. HE REFERRED TO THE DATES OF PURCHASE OF SHARES IN MANY CASES AND P OINTED OUT THAT THE SHARES IN SOME CASES WERE SOLD IMMEDIATELY ON THE NEXT DAY. H E POINTED OUT THAT IN THE CASE OF INDIA BULLS LTD. AND PETRONET LNG LTD. AS WELL A S IN THE CASE OF SESA GOA, REPEATED TRANSACTIONS OF SALES AND PURCHASES WERE D ONE AND AT TIMES INTRADAY TRANSACTIONS WERE UNDERTAKEN. HE POINTED OUT TO TH E VOLUME OF THE TRANSACTIONS, PERIOD OF HOLDING AND SUBMITTED THAT THE BEHAVIOR A ND INTENTION OF THE ASSESSEE IS NOT THAT OF AN INVESTOR. HE SUBMITTED THAT THE SHOR T TERM CAPITAL GAIN EARNED BY THE ASSESSEE WAS RS.1.17 CRORES AND WHEREAS THE DIVIDEN D EARNED DURING THE YEAR WAS ONLY RS.3.82 LAKHS. THESE FIGURES, AS PER THE LEARN ED DR, DEMONSTRATE THAT THE ASSESSEE HAS NOT INVESTED FOR THE PURPOSE OF DIVIDE NDS OR FOR THE APPRECIATION IN VALUE, BUT ONLY FOR THE PURPOSE OF TRADING IN SHARE S. HE POINTED OUT THAT THERE IS NO LONG TERM CAPITAL GAIN IN THIS CASE AND THE ASSESSE E HAS SOLD SOME SHARES FOR A LOSS, WHICH NO INVESTOR WOULD DO. HE FURTHER POINTED OUT THAT ALL THE PURCHASES WERE 5 MADE IN THE SECONDARY MARKET. HE RELIED ON THE DEC ISION OF THE I-BENCH OF THE TRIBUNAL IN THE CASE OF SMT. SADHANA NABERA VS. ACI T IN ITA NO. 2586/MUM/2009, ORDER DATED 26 TH MARCH, 2010 AND SUBMITTED THAT UNDER IDENTICAL CIRCUMSTANCES THE TRIBUNAL HELD THAT INCOME IS FROM BUSINESS AND NOT FROM CAPITAL GAINS. HE SUBMITTED THAT EVEN IN THE CASE OF A SIN GLE TRANSACTION, IT COULD BE HELD THAT IT IS AN ADVENTURE IN THE NATURE OF TRADE. HE TOOK THIS BENCH THROUGH THE ORDER OF THE AO AND RELIED ON THE SAME. HE PRAYED THAT TH E ORDER OF THE FIRST APPELLATE AUTHORITY BE REVERSED AND THAT OF THE AO BE RESTORE D. 6. THE LEARNED COUNSEL FOR THE ASSESSEE MR. K. GOP AL APPEARED ALONG WITH MR. JITENDRA SHAH, OPPOSED THE CONTENTION OF THE LEARNED DR. HE REFERRED TO PAGES 43 TO 52 OF THE ASSESSEES PAPER BOOK WHICH G IVES THE PARTICULARS OF TRANSACTIONS IN SHARES AND SUBMITTED THAT THE FACTS CAN BE GATHERED FROM THE SAME. HE FURTHER REFERRED TO PAGE 4 OF THE PAPER BOOK WH ICH REFERS TO COMPUTATION OF INCOME. HE SUBMITTED THE CHART SHOWING CAPITAL GAIN S/LOSS ON INVESTMENTS IN SHARES MADE BY THE ASSESSEE FOR THE ASSESSMENT YEAR S 2003-04 TO 2007-08 AND ARGUED THAT IN ALL THE EARLIER YEARS AND THE SUBSEQ UENT YEARS THE REVENUE HAS ACCEPTED THE CONTENTION OF THE ASSESSEE THAT THE IN COME FROM PURCHASE AND SALE OF SHARES IS ASSESSABLE UNDER THE HEAD CAPITAL GAINS ONLY. HE RELIED ON THE DECISION OF THE MUMBAI-B BENCH OF THE TRIBUNAL IN THE CASE O F BHARAT KUNVERJI KENIA VS. ADDL.CIT 130 TTJ (MUMBAI) 86 FOR THE PROPOSITION TH AT MERELY FOR THE REASON THAT THE VOLUME OF TRANSACTIONS ARE HIGH, THE INCOME THE REFROM CANNOT BE CALLED BUSINESS INCOME. IN OTHER WORDS, THE BENCH HAS HEL D THAT FREQUENCY IN TRANSACTIONS IS NOT BY ITSELF DECISIVE . HE POINTED OUT THAT THE MAXIMUM PERIOD OF HOLDING WAS AROUND 176 DAYS AND ON A QUERY FROM THE BENCH HE AD MITTED THAT THE AVERAGE HOLDING PERIOD OF SHARES IS 26 DAYS. ON THE ARGUMEN T OF THE LEARNED DR THAT THE ASSESSEE HAD INDULGED IN INTRADAY TRADING, HE SUBMI TTED THAT SUCH INTRADAY TRADING 6 WAS DONE ONLY IN THE CASE OF SHARES OF PETRONATE AND THIS WAS DUE TO THE REASON THAT THE ASSESSEE WAS IN THE BUSINESS OF PETRO AND OIL RELATED BUSINESS. HE REFERRED TO PAGE 11 OF THE ASSESSEES PAPER BOOK WHICH GIVES THE STATEMENT OF HOLDINGS AS ON 31-03-2006 AND SUBMITTED THAT THE ASSESSEE HAS C LASSIFIED THE SAME AS INVESTMENT. HE ARGUED THAT THE RATIO OF DIVIDEND EA RNED TO THE INVESTMENTS MADE IS NOT IMPORTANT. HE RELIED ON THE DECISION OF THE JUR ISDICTIONAL HIGH COURT IN THE CASE OF GOPAL PUROHIT 228 CTR 582 (BOM.). HE DISTINGUISH ED THE DECISION OF THE I- BENCH OF THE TRIBUNAL IN THE CASE OF SMT. SADHANA N ABERA (SUPRA) AND ARGUED THAT THE CASE IS DISTINGUISHABLE FOR THE REASON THAT IN THE CASE ON HAND THE ASSESSEE HAS NOT BORROWED FUNDS FOR THE PURPOSE OF INVESTMENT. H E VEHEMENTLY CONTENDED THAT THE GOVERNMENT, AS A MATTER OF POLICY, TO ENCOURAGE SHORT TERM INVESTMENT IN SHARE MARKET, DECIDED TO TAX SHORT TERM CAPITAL GAIN AT A LESSER AMOUNT, AND THIS ENCOURAGED THE CITIZENS TO INVEST IN SHARES FOR L ESSER PERIOD. THUS HE SUBMIT THAT THIS PURCHASE AND SALE OF SHARES IS NOT TRADE BY IN VESTMENT. HE RELIED ON THE ORDER OF THE LEARNED CIT(APPEALS). 7. OPPOSING THIS CONTENTION MR. TIWARI, THE LEARNE D DR, SUBMITTED THAT THE ASSESSEE HAS NO LONG TERM CAPITAL GAINS WHICH I NDICATES THAT THE ASSESSEE IS NOT AN INVESTOR. HE CONTENDED THAT A PERSON NEED NOT BO RROW AND CAN DO BUSINESS WITH ITS OWN FUNDS AND WHAT IS IMPORTANT IS PROFIT MOTIV E. HE POINTED OUT THAT THE RATIO OF PURCHASES TO SALES IS 1 : 1. 8. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERA TION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND A PERUSAL OF THE PAPE RS ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE CASE LAWS CIT ED, WE HOLD AS FOLLOWS : 9. THE ISSUE AS TO WHETHER THE ASSESSEE IS AN INVE STOR OR A TRADER HAS TO BE DECIDED BASED ON THE FACTS OF EACH CASE. IN THIS CA SE THE ASSESSEE HAS SUBMITTED A 7 STATEMENT OF HOLDING AS ON 31-03-2006. HE HAS NOT F URNISHED THE PERIOD OF HOLDING OF EACH SCRIP, THOUGH THE DATE OF PURCHASE HAS BEEN MENTIONED. FROM THE DETAILS FURNISHED, IT CAN BE NOTICED THAT CERTAIN SHARES, H AVE BEEN HELD, FOR A PERIOD OF MORE THAN 24 MONTHS, AS IN THE CASE OF DAEWOO MOTOR S. IN THE CASE OF VIKAS S.W.P. AND NIRLON AND SOUTHERN HERBALS, SHARES WERE PURCHASED IN THE YEARS 2001, 2002, 2003. THE SHARES OF INFOQUEST SOFT WERE PUR CHASED IN 2003. THUS AS PER THE STATEMENT OF HOLDING ON 31-03-2006, EXCEPT FOR THE SHARES OF GUJARAT ALKALIES OF VALUE OF RS.1.58 LAKHS AND INDIABULLS WHICH IS VALU ED RS.45.22 LAKHS APPROXIMATELY, ALL THE OTHER SHARES ARE HELD AS LON G TERM INVESTMENT. IT IS WELL SETTLED THAT THE ASSESSEE CAN BE BOTH A INVESTOR IN SHARES AS WELL AS A TRADER. WHEN CERTAIN SHARES ARE HELD FOR A LONG PERIOD OF TIME, THE ASSESSEE CAN BE CALLED AN INVESTOR, AS FAR AS THESE SHARES ARE CONCERNED. 10. THOUGH THE ASSESSEE HAS CERTAIN INVESTMENTS WH ICH HE HAS HELD AS LONG TERM CAPITAL GAINS IN THIS YEAR, THE ASSESSEE HAS NOT TRANSFERRED ANY OF THESE SHARES AND HENCE WE ARE NOT CONCERNED WITH THIS CAT EGORY. THE ASSESSEE HAS INDULGED IN VOLUMINOUS TRANSACTION OF PURCHASE AND SALE OF SHARES. THERE WERE INTRADAY TRANSACTIONS AS WELL AS PURCHASE AND SALES OF SHARES WITHIN A VERY SHORT PERIOD. THE DETAILS ARE FURNISHED BY THE ASSESSEE F ROM PAGE 12 TO 22 OF HIS PAPER BOOK. A PERUSAL OF THESE SHOW THAT THE ASSESSEE HAS PURCHASED AND SOLD SHARES AT FREQUENT INTERVALS, SOMETIMES WITH A SMALL HOLDING PERIOD AS 2 TO 3 DAYS. IN THE CASES LIKE BOMBAY DYEING, THE ASSESSEE HAS PURCHASE D AND SOLD SHARES ON THE SAME DAY I.E. 5-11-2005 AND INCURRED A LOSS. SIMILARLY I N THE CASE OF BHARAT ELECTRONIC THE PURCHASE AND SALE WAS MADE ON THE SAME DAY AND THE ASSESSEE INCURRED A LOSS. WE OBSERVE THAT IN MANY CASES, THE ASSESSEE HAS S OLD THE SHARES THE VERY NEXT DAY. THE AVERAGE PERIOD OF HOLDING OF SHARES AS POINTED OUT BY THE AO AND AS ACCEPTED BY THE ASSESSEE IS ONLY 26 DAYS AND THERE WERE REP EATED TRANSACTIONS IN CERTAIN 8 SCRIPS. THE ASSESSEE HAS ALSO SPECULATION LOSS IN M ANY TRANSACTIONS WHICH HE HAS RETURNED AS SUCH. BY DOING SO, THE ASSESSEE HIMSEL F AGREED THAT HE IS NOT A INVESTOR IN ALL CASES OF DEALING IN SHARES AND AT TIME HE DO ES IT AS A BUSINESS. ENTRIES IN THE BOOKS ARE NOT DECISIVE. NOT BORROWING FUNDS IS ALSO NOT DECISIVE FACTOR IN THIS CASE. THIS IS A CASE OF THE ASSESSEE DOING VERY HIGH VOLU ME OF TRADE IN SHARES AND THAT TOO HOLDING THE SHARES FOR VERY SHORT PERIOD. INVESTORS DO NOT SELL SHARES THE SAME DAY OR THE NEXT DAY FOR A LOSS. THE FACT THAT THE ASSES SEE HAS NON-DELIVERY BASED TRANSACTION SHOW THAT HE IS USING HIS KNOWLEDGE, SK ILL AND RESOURCES TO DEAL IN SHARES. ON THIS FACTUAL MATRIX, WE ARE UNABLE TO AG REE WITH THE FINDINGS OF THE CIT(APPEALS) THAT THE ASSESSEE IS A MERE INVESTOR I N SHARES. JUST BECAUSE THE ASSESSEE HAS INCOME FROM CERTAIN OTHER SOURCE, IT D OES NOT MEAN THAT THE ASSESSEE WOULD NOT HAVE INCOME FROM TRADING IN SHARES. WHEN A PERSON HAS GROSS PROFESSIONAL FEE OF RS.11.29 LAKHS AND TURNOVER OF PURCHASE AND SALE OF SHARES RUNNING INTO CRORES OF RUPEES AND WHEN SUCH TRADE R ESULTS IN A PROFIT OF RS.1.17 CRORES, IT CANNOT BE SAID THAT THE ASSESSEE IS NOT IN THE BUSINESS OF PURCHASE AND SALE OF SHARES AS IT IS NOT HIS MAIN OCCUPATION. THE FAC T S SHOW THAT THE MAIN OCCUPATION OF THE ASSESSEE IS TO BUY AND SELL SHARES. 11. IT IS WELL SETTLED THAT EACH CASE HAS TO BE DE CIDED BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE. IN THE CASE OF BHARA T KUNVERJI KENIA (SUPRA) THE CASE IS DIFFERENT ON FACTS AS THE ASSESSEE HAD NOT EMPLOYED ANY INFRASTRUCTURE FOR PURCHASE AND SALE OF SHARES AND HAS ALSO EARNED SUB STANTIVE DIVIDEND FROM THE INVESTMENT. IN FACT THE PERIOD OF HOLDING OF SHARES WAS MUCH HIGHER IN THAT CASE, THAN IN THE CASE ON HAND. ON THOSE FACTS, THE TRIBU NAL UPHELD THE CLAIM OF THE ASSESSEE THAT THE INCOME FROM SALE AND PURCHASE SHO ULD BE ASSESSED UNDER THE HEAD CAPITAL GAINS. ON THE OTHER HAND, IN THE CASE OF SADHANA NABERA, THE TRIBUNAL 9 ANALYZED THE VARIOUS TRANSACTIONS DONE BY THE ASSES SEE AND AT PAGE 9 PARA 13 AND 14, HELD AS FOLLOWS : 13. IT IS HELD THAT WHETHER A TRANSACTION OF SALE AND PURCHASE OF SHARES WERE TRADING TRANSACTIONS OR THEY WERE IN THE NATUR E OF INVESTMENT IS A MIXED QUESTION OF LAW AND FACTS AS HELD BY THE HONBLE SU PREME COURT IN THE CASE OF CIT VS. H. HOLCK LARSEN 160 ITR 67. IT IS FURTHE R HELD IN THE CASE OF CIT VS. ASSOCIATED INDUSTRIAL DEVELOPMENT CO. P. LTD. 8 2 ITR 586 THAT IT IS POSSIBLE THAT THE ASSESSEE TO BE BOTH AN INVESTOR A S WELL AS DEALER IN SHARES. WHETHER A PARTICULAR HOLDING IS BY WAY OF INVESTMEN T OR FORM PART OF STOCK- IN-TRADE IS A MATTER WITHIN THE KNOWLEDGE OF THE AS SESSEE AND IT IS FOR THE ASSESSEE TO PRODUCE EVIDENCE FROM THE RECORDS AS TO WHETHER HE MAINTAINED ANY DISTINCTION BETWEEN SHARES WHICH ARE HELD AS IN VESTMENT AND THOSE HELD AS STOCK-IN-TRADE. IT IS ALSO HELD IN THE CASE OF MOTILAL HIRABHAI SPG. & SVG. CO. LTD. 113 ITR 173 (GUJ) AND RAJA BAHADUR VISHESH WARA SING 41 ITR 685 (SC) THAT TREATMENT IN THE BOOKS BY AN ASSESSEE WIL L NOT BE CONCLUSIVE AND IF THE VOLUME, FREQUENCY AND REGULARITY AT WHICH TRANS ACTIONS ARE CARRIED OUT INDICATE SYSTEMATIC AND ORGANISED ACTIVITY WITH PRO FIT MOTIVE THEN IT BECOMES BUSINESS PROFIT NOT CAPITAL GAIN. IN THE CASE OF CI T VS. PKN CO. LTD. 60 ITR 65 IT WAS HELD THAT PURCHASE WITH AN INTENTION TO R ESALE WILL ALSO, UNDER THE CHANGED CIRCUMSTANCE, WOULD BE CAPITAL GAINS. IT IS ALSO HELD IN THE CASE OF SAROJ KUMAR MAZUMDAR VS. CIT 37 ITR 242 BY THE HON BLE SUPREME COURT THAT PURCHASE WITH AN INTENTION TO RESALE IN ORDER TO GAIN PROFIT WILL BE BUSINESS PROFIT DEPENDING ON THE CIRCUMSTANCES OF T HE CASE LIKE NATURE QUANTITY OF PURCHASE AND NATURE OPERATION INVOLVED. IT WAS ALSO HELD IN THE CASE OF JANKI RAM BAHADUR RAM VS. CIT 57 ITR 21(SC) THAT NO SINGLE FACT HAS ANY DECISIVE SIGNIFICANCE AND THE QUESTION MUST BE ANSWERED DEPENDING ON THE COLLECTIVE EFFECT OF ALL RELEVANT MATERIAL B ROUGHT ON RECORD. 14. KEEPING IN VIEW THE ABOVE PRINCIPLES, THE FACTS IN THE PRESENT CASE OF THE ASSESSEE ARE EXAMINED. THE ASSESSEE DURING THE ENTIRE PREVIOUS YEAR HAD ENTERED INTO TRANSACTION OF PURCHASES AND SALE OF S HARES OF ABOUT 32 COMPANIES TOTALLING TO RS.1,87,83,440/- AND THESE S HARES WERE SOLD FOR A VALUE OF RS.2,69,71,368/-. THE ABOVE TRANSACTIONS W ERE EFFECTED BY ACTUAL DELIVERY OF SHARES AT THE TIME OF PURCHASE AND SALE OF SHARES EXCEPT IN THE CASE OF HIRAN ORGO CHEM, WHERE THERE ARE 19 TRANSAC TIONS OF PURCHASES AND SALE ON THE SAME DAY OF VARIOUS NUMBER OF SHARES IN VOLVING A TOTAL PURCHASE 10 OF RS.7,00,457/- AND SALE OF RS.6,95,224/- WITH A L OSS OF RS.5,232/-. THERE WERE EXPENSES INCURRED WITH REFERENCE TO BROKERAGE, INTEREST, SECURITY, TRANSACTIONS, BANK CHARGES, ETC. TOTALLY TO RS.1,6 7,829/-. IN ALL THE TRANSACTIONS WHER CAPITAL GAIN SHOWN DURING THE YEA R THE HOLDING PERIOD WAS LESS THAN EVEN 6 MONTHS. MOST OF THE GAIN EARNED BY THE ASSESSEE IS IN THE SHARES HELD FOR A PERIOD 31 DAYS TO 90 DAYS TO AN E XTENT OF RS.30.81 LAKHS AND 90 DAY TO 180 DAYS, I.E. RS.51.29 LAKHS. IN FAC T THERE WERE NO SHARES WHICH WERE HELD FOR MORE THAN 6 MONTHS PERIOD ON WH ICH GAINS WERE EARNED. THUS THE MAXIMUM HOLDING PERIOD WAS FROM 1 DAY TO A MAXIMUM OF 180 DAYS. . AT PARA 17 THE TRIBUNAL HELD THAT THE FREQUENCY IN SHORT PERIOD DOES INDICATE THAT THE ASSESSEE HAS PURCHASED THE SHARES WITH A MOTIV E TO EARN PROFIT IN SHORT PERIOD. THIS DECISION APPLIES TO THE CASE ON HAND. 12. IN OUR HUMBLE OPINION, THE JUDGMENT OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF GOPAL PUROHIT ALSO DOES NOT CO ME TO THE RESCUE OF THE ASSESSEE FOR THE REASON THAT THE FACTS ARE ENTIRELY DIFFEREN T IN THAT CASE. IT IS NOT A CASE WHERE THERE WAS INTRA-DAY TRADING, SPECULATION AND SALE W ITHIN 1 TO 2 DAYS FOR A LOSS ALSO. 13. IN VIEW OF THE ABOVE DISCUSSION, WE ARE UNABLE TO AGREE WITH THE FINDINGS OF THE CIT(APPEALS) THAT THE ASSESSEE HAD NO INTENTION OF DOING BUSINESS IN SHARES. THE FACT THAT THE ASSESSEE HAD IN HIS PE RSONAL BALANCE SHEET, CLASSIFIED THESE SHARES AS INVESTMENTS, ALSO IS NOT DECISIVE. ONLY THOSE SHARES WHICH ARE HELD AS INVESTMENT, DEPENDING ON THE PERIOD OF HOLDING, CAN BE CLAIMED AS INVESTMENT. THIS IS A SEPARATE CATEGORY. THE TRANSACTIONS OF PU RCHASE AND SALE OF SHARES INDULGED BY THE ASSESSEE DURING THE YEAR, CANNOT BE , IN OUR HUMBLE OPINION, CONSIDERED AS INVESTMENT IN SHARES. THE FACT THAT T HE ASSESSEE IS A PROFESSIONAL DOES 11 NOT PROVE THAT HE CANNOT BE A TRADER IN SHARES. TH US WE UPHOLD THE FOLLOWING FINDING OF THE AO AT PARA 4.9 PAGE 23, WHICH IS EXT RACTED BELOW : 4.9 IN VIEW OF THE ABOVE DISCUSSIONS AND CONSIDERI NG THE VOLUME OF TRANSACTIONS, NUMBER OF SHARES INVOLVED, THE SHORT PERIOD OF ITS HOLDINGS AND THE REGULARITY OF TRADING OF SHARES DONE, I AM OF T HE OPINION THAT THE PROFIT MOTIVE IS CLEARLY PATENT IN THESE TRANSACTIONS AND UNDER THE CIRCUMSTANCES, I HOLD THAT THE PROFIT ON THE SALE OF THE AFORESAID S HARES CANNOT BE TREATED AS CAPITAL PROFIT AND THUS INCLUDED IN THE TOTAL INCOM E OF THE ASSESSEE AS REVENUE PROFIT FROM SALE OF SHARES ASSESSABLE UNDER THE HEA D PROFITS AND GAINS OF BUSINESS OR PROFESSION. HENCE, THE SHORT TERM CAPI TAL GAIN OF RS.1,17,43,201/- IS TREATED AS ASSESSEES BUSINESS INCOME. 14. THUS THE ORDER OF THE FIRST APPELLATE AUTHORIT Y IS SET ASIDE AND THE ORDER OF THE AO RESTORED. 15. IN THE RESULT, THE APPEAL OF THE REVENUE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH NOV. , 2010. SD/- S D/- (R.V. EASWAR) (J. SUDHAK AR REDDY) PRESIDENT AC COUNTANT MEMBER MUMBAI, DATED: 26 TH NOV., 2010. WAKODE 12 COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, F-BENCH (TRUE COPY) BY ORDER ASSTT. R EGISTRAR, ITAT, MUMBAI B ENCHES, M UMBAI.