Shri Amrit Lal Batra, Srinagar V. The Dy. Commissioner of Income-tax-3, Srinagar

ITA 482/ASR/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 85932 (ITAT-AMRITSAR)
• Duration Of Justice: 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 24-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Salary income; Advance ruling; Question of law
• Section: 143(3); 2(14); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.482(ASR)/2014 ASSESSMENT YEAR:2010-11 PAN :ABWPB5198B SH.AMRIT LAL BATRA, VS. DY. COMMR. OF INCOME TAX, C/O M/S. AISHI RAM BATRA, CIRCLE-3, UNIT II, RAM MUNSHI BAGH, SRINAGAR. SRINAGAR. (APPELLANT) (RESPONDENT) APPELLANT BY:SH.SUDHIR SEHGAL, RESPONDENT BY:SH.TARSEM LAL, DR DATE OF HEARING:09/03/2015 DATE OF PRONOUNCEMENT: 17/03/2015 ORDER PER B.P.JAIN,AM: THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF THE CIT(A), JAMMU, DATED 18.06.2014 FOR THE ASSESSMENT YEAR 20 10-11. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE WORTHY CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN ASSIGN THE INCOME FROM SHORT TERM CAPITAL GAIN AT RS.180,87,707/- AS BUSINESS INCOME DISREGARDING THE FACT THAT IN THE EARLIER YEAR, THE ISSUE ON THE SIMILAR FACTS AN D CIRCUMSTANCES HAVE BEEN DECIDED IN FAVOUR OF THE ASSESSEE. ITA NO.482(ASR)/2014 2 2. THAT THE WORTHY CIT(A) WHILE TREATING THE INCOME AS BUSINESS INCOME HAS ERRED IN NOT FOLLOWING THE EARLIER YEAR ORDER OF THE ITAT, AMRITSAR BENCH, FOR THE AY 2007-08 AND, THERE FORE, THE FINDING OF THE CIT(A) DESERVES TO BE QUASHED. 3. THAT THE LD. CIT(A) IS NOT CORRECT IN NOT FOLLOW ING THE ORDER OF THE ITAT, AMRITSAR FOR THE AY 2007-08. 2. THE BRIEF FACTS OF THE CASE AS ARISING FROM THE ORDER OF THE AO ARE REPRODUCED AS UNDER: (2) THE ASSESSEE HAS DECLARED INCOME FROM SALARY, BUSIN ESS AND PROFESSIONS CAPITAL GAINS AND INCOME FROM OTHER SOU RCES. FROM A PERUSAL OF THE RETURN OF INCOME FURNISHED BY THE AS SESSEE IT WAS SEEN THAT THE ASSESSEE HAS DECLARED CAPITAL GAINS OF RS. 18480318/- AS INCOME FROM CAPITAL GAINS WHICH AFTER SET OFF CAPIT AL LOSS FOR A.Y.2009-10 GAVE THE TAXABLE CAPITAL GAINS AT RS.78 71557/-. IT IS PERTINENT TO MENTION HERE THAT IN RESPECT OF THE TO TAL TRANSACTIONS IN RESPECT OF THESE SHARES A TRADING AND PROFIT AND LO SS ACCOUNT FOR THE PERIOD ENDING 31.3.2010 HAS BEEN FURNISHED BY THE A SSESSEE AND IS PLACED ON RECORDS. FROM THIS TRADING ACCOUNT, IT IS SEEN THAT AN OPENI NG STOCK OF SHARES AT RS.18024495/- HAS BEEN DECLARED AGAINST WHICH A CLO SING STOCK AT RS.262550/- HAS BEEN DECLARED THE ASSESSEE HAS INCU RRED TOTAL PURCHASES OF SHARES AT RS.226193197/- AND TOTAL SAL E OF SHARES AT RS.260770471/-. THIS TRADING AND PROFIT AND LOSS AC COUNT IS PLACED ON RECORDS. AGAINST THIS TRANSACTION OF SHARES A DIVID END OF RS.59,77,094/- HAS BEEN DECLARED BY THE ASSESSEE OU T OF WHICH 4285400/- IS THE DIVIDEND EARNED FROM M/S AB HOTELS LTD. IN WHICH THE ASSESSEE IS DIRECTOR. (3) THE ASSESSEE HAS PRODUCED THE DETAILS REGARDING THE TRANSACTIONS AND SHARES THROUGH ITS BROKERS M/S PNR SECURITIES L TD. AND M/S KARVEY STOCK BROKING LTD. FROM THE PERUSAL OF THESE DETAILS IT WAS OBSERVED THAT THE FREQUENT TRANSACTIONS HAD BEEN IN CURRED BY THE ASSESSEE IN RESPECT OF THE SALE AND PURCHASE OF THE SHARES. A LARGE NUMBER OF TRANSACTIONS HAD BEEN ENTERED INTO BY THE ASSESSEE WHICH CAN BE REFLECTED FROM THE TOTAL TURNOVER OF T HE ASSESSEE. IT IS FURTHER SEEN THAT THE FREQUENCY OF THE TRANSACTIONS IS VERY HIGH ITA NO.482(ASR)/2014 3 MEANING THEREBY THAT THE INVESTMENTS HAD BEEN MADE WITH A PROFIT EARNING MOTIVE AND NOT WITH A VIEW TO EARN THE DIVI DEND OR AS MEANS OF LONG TERM INVESTMENTS WITH A VIEW TO EARN CAPITAL GAINS. KEEPING IN VIEW THESE FACTS IT WAS OPINED THAT THES E TRANSACTIONS AND SHARES CARRIED OUT BY THE ASSESSEE WERE IN THE NATURE OF BUSINESS. ACCORDINGLY VIDE ORDER SHEET ENTRY DATED 05.03.3013 THE ASSESSEE WAS GIVEN A JUSTIFICATION AS TO WHY INCOME FROM SALE AND PURCHASE OF SHARES HAS BEEN TREATED AS CAPITAL GAIN S INSTEAD OF BUSINESS INCOME. VIDE REPLY DATED 06.03.2013 THE AS SESSEE HAD SUBMITTED AS UNDER:- THE ASSESSEE HAS DECLARED SHORT TERM CAPITAL GAIN ON SALE AND PURCHASE OF SHARES. DETAIL IF SALE AND PURCHASE OF SHARES AND EXPENSES INCURRED WAS FILED ON THE LAST HEARING. FO R ALL THE SHARES UNDER CONSIDERATION, THE PAYMENT HAS BEEN MADE, DEL IVERY OF SHARES HAVE ALSO BEEN TAKEN THROUGH DEMAT ACCOUT AN D ON ALL THESE SHARES TRANSACTIONS, THE SIT ALSO STANDS PAID . THUS, IT WAS INVESTMENT IN DIFFERENT SHARES OVER A PERIOD OF TIM E AND THE IDEA WAS TO HOLD THESE SHARES AS AN INVESTMENT AND NOT T O TRADE IN SHARES. AS AND WHEN, IT SUITED THE ASSESSEE VIS--V IS REQUIREMENT OF FUNDS OR ON ACCOUNT OF FLUCTUATION IN THE PRICES OF SHARES AND THE MARKET TREND, THE SHARES WERE SOLD TO AVOID ANY LOS SES WHICH MAY HAVE OCCURRED. HOWEVER, THE INTENTION OF THE ASSESS EE HAD BEEN TO MAKE THE INVESTMENT IN SHARES ONLY. BESIDES, IT MAY ALSO BE BROUGHT TO YOUR KIND NOTICE THAT THE ASSESSEE HAS I NTEREST IN THE FOLLOWING BUSINESS AND HE IS DEEPLY INVOLVED IN VAR IOUS BUSINESS AFFAIRS SHARE BUSINESS REQUIRES FILL TIME ATTENTION AND THE ASSESSEE HAD NO TIME TO BE INVOLVED IN THE BUSINESS OF SALE PURCHASE OF SHARES AS WOULD BE EVIDENT FROM THE FOLLOWING FACT S. I. THE ASSESSEE IS PARTNER IN THE FIRM M/S BATRA BROS. HAVING 51% SHARE, WHICH IS CARRYING ON THE BUSINESS OF TRANSPORTATION AND LPG BATTLING PLANT AND HAVING PE TROL PUMP AT MUMBAI AND ITS TURNOVER IS APPROXIMATELY RS .5 CRORES. II. M/S. CH. AISHI RAM BATRA, UNIT-II IS PARTNERSHIP C ONCERN, HAVING 51% SHARES WHICH IS CARRYING ON THE BUSINESS OF TRANSPORT AND SALE OF TREE SPRAY OIL AND PETROL PUM P OF ITA NO.482(ASR)/2014 4 SRINAGAR AND HAVING TURNOVER OF RS.10.CRORES APPROXIMATELY. III. M/S. CH. AISHI RAM BATRA, B.C. RAOD, JAMMU, WHICH I S RUNNING A PETROL PUMP IN WHICH THE ASSESSEE IS HAVI NG 51% SHARE AND ITS TURNOVER IS ABOUT RS.3 CRORES. IV. M/S JAI CHEMICALS IN WHICH THE ASSESSEE IS HAVING 1 5% SHARE AND WHICH IS ENGAGED IN THE FORMULATION OF PE STICIDES AT FARIDABAD AND ITS TURNOVER IS RS.10 TO 15 CRORES . V. M/S INDIAN GAS CYLINDER, WHICH IS A PARTNERSHIP CON CERN IN WHICH THE ASSESSEE IS HAVING 19% SHARE AND WHICH IS CARRYING ON THE BUSINESS OF MANUFACTURE OF LPG CYLI NDER OF FARIDABAD AND ITS TURNOVER IS RS.5 CRORES APPROX. VI. M/S BATRA CAR CARE CENTRE IS A PARTNERSHIP CONCERN CARRYING ON THE BUSINESS OF PETROL PUMP OF DELHI IN WHICH THE ASSESSEE IS HAVING 17% SHARE AND ITS TURNOVER I S ABOUT 10 CRORES. (4) THE SUBMISSION MADE BY THE ASSESSEES MADE BY T HE ASSESSEES COUNSEL ALONG WITH THE FACTS ON THIS ISS UE HAVE BEEN CONSIDERED. THE CIRCULAR NO.4 FOR 2007 DATED 15.06. 2007 OF CBDT WHICH IS ON THE SUBJECT F DISTINCTION BETWEE N SHARES HELD AS STOCK-IN-TRADE AND SHARES HELD AS INVESTMENT-TES TS FOR SUCH A DISTINCTION. THE CIRCULAR NO.4 4 AS REFERRED ABOVE HAS LAID DOWN CERTAIN PARAMETERS TO MAKE DISTINCTION BETWEEN SHAR ES AND AS STOCK IN TRADE AND SHARES HELD AS INVESTMENT. THE A FOREMENTIONED CIRCULAR NO.4 DATED 15.06.2007 READ AS UNDER:- CIRCULAR NO.4 OF 2007, DT. 15 TH JUNE 2007 SUB:- DISTINCTION BETWEEN SHARES HELD AS STOCK-IN T RADE AND SHARES HELD AS INVESTMENT-TEST FOR SUCH A DISTINCTION. SECTION: - THE INCOME TAX ACT, 1961 MAKES A DISTINCTION BETWEE N A CAPITAL ASSET AND A TRADING ASSET. ITA NO.482(ASR)/2014 5 (I) CAPITAL ASSET IS DEFINED IN SECTION 2(14) OF THE AC T, LONG TERM CAPITAL ASSETS AND GAINS ARE DEALT WITH U/S 2(29A) AND SECTION 2(29B). SHORT-TERM CAPITAL ASSETS AND GAINS ARE DEALT U/S. 2(42A) AND SECTION 42(B). (II) TRADING ASSET IS DEALT WITH U/S 28 OF THE INCOME TAX ACT. (III) 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) AND SHARES HELD AS STOCK-IN-TRADE (TRADING ASSET). IN THE LIGHT OF A NUMBER OF JUDICIAL DECISIONS PROPOSED TO AFTER THE ISSUE OF THE ABOVE INSTRUCTION OF ASSESSEES AS WELL AS FOR GUIDANCE O F THE ASSESSING OFFICERS. (IV) IN THE CASE OF CIT VS. ASSOCIATED INDUSTRIAL DEVELOPMENT COMPANY (P) LTD.1972 CTR (SC) 239. (1971) 82 ITR 586 (SC), THE SUPREME COURT OBSERVED THAT. WHETHER A PARTICULAR HOLDING OF SHARES IS A WAY OF INVESTMENT OF FORMS PART OF STOCK-IN-TRADE IS A MAT TER WHICH IS WITHIN THE KNOWLEDGE OF THE ASSESSEE WHO HOLDS T HE SHARES AND IT SHOULD. IN NORMAL CIRCUMSTANCES BE IN POSITION TO PRODUCE EVIDENCE FROM ITS RECORDS AS TO WHETHER IT HAS MAINTAINED ANY DISTINCTION BETWEEN THOSE SHA RES WHICH ARE IN STOCK-IN-TRADE AND THOSE WHICH ARE HEL D BY WAY OF INVESTMENT. (5) IN THE CASE OF CIT VS. HOLDING LARSEN (1986) 5 8 CTR (SC) [53 .. 1986] 160 ITR 67 (SC). THE SUPREME COURT OBS ERVED: THE HIGH COURT, IN OUR OPINION, MADE A MISTAKE IN OBSER VING WHETHER TRANSACTIONS OF SALE AND PURCHASE OF SHARES WERE TR ADING ITA NO.482(ASR)/2014 6 TRANSACTIONS OF WHETHER THESE WERE IN THE NATURE OF INVESTMENT WAS A QUESTION OF LAW. THIS WAS A MIXED QUESTION OF LAW AND FACT 6. THE PRINCIPAL LAID DOWN BY THE SUPREME COURT IN THE ABOVE TWO CASES AFFORD ADEQUATE GUIDANCE TO THE ASSESSING OFF ICER. 7. THE AUTHORITY FOR ADVANCE RULING (AAR) IN FIDELITY NORTHSTAR FUNDS & ORS., IN RE(2007) 207 CTR (AAR) 297; (2007) 288 ITR 641 (AAR), REFERRING TO THE DECISIONS OF THE SUPREM E COURT IN SEVERAL CASES, HAS CALLED OUT THE FOLLOWING PRINCIP LES. A. WHERE A COMPANY PURCHASES AND SELL SHARES, IT MUST BE SHOWN THAT THEY WERE HELD AS STOCK-IN-TRADE AND THA T EXISTENCE OF THE POWER OF PURPOSE AND SELL SHARES I N THE MEMORANDUM OF ASSOCIATION IS NOT DECISIVE OF THE NA TURE OF TRANSACTION: B. THE SUBSTANTIAL NATURE OF TRANSACTIONS, THE MANNER OF MAINTAINING BOOKS OF ACCOUNTS, THE MAGNITUDE AND PURCHASES AND SALES AND THE RATIO BETWEEN PURCHASES AND SALES AND THE HOLDING WOULD FURNISH A GOOD GUIDE TO DETERMINE THE NATURE OF TRANSACTIONS. C. ORDINARILY THE PURCHASE AND SALE OF SHARES WITH THE MOTIVE OF EARNING OF PROFIT, WOULD RESULT IN THE TRANSACTI ONS BEING IN THE NATURE OF TRADE/ADD VENTURE IN THE NATURE OF TR ADE; BUT WHERE THE OBJECT OF THE INVESTMENT IN SHARES A COMP ANY IS TO DERIVE INCOME BY WAY OF DIVIDEND ETC. THEN THE PROF ITS ACCRUING BY CHANGE IN SUCH INVESTMENT (BY SALE OF S HARES) WILL YIELD CAPITAL GAIN AND NOT REVENUE RECEIPT. 8. DEALING WITH THE ABOVE THREE PRINCIPLES, THE AR HAS OBSERVED IN THE CASE OF FIDELITY GROUPS AS UNDER:- WE SHALL REVERT TO THE AFOREMENTIONED PRINCIPLES. THE FIRST PRINCIPLE REQUIRES US TO ASCERTAIN WHETHER THE PURCHASE OF SH ARES BY FIL IN THE EXERCISE OF THE POWER IN THE MEMORANDUM OF ASSOCIAT ION/TRUST DEED WAS AS STOCK-IN-TRADE AS THE MERE EXISTENCE OF THE POWER TO PURCHASE AND SELL SHARES WILL NOT BY ITSELF BE DECISIVE OF T HE NATURE OF ITA NO.482(ASR)/2014 7 TRANSACTIONS. WE HAVE TO VERIFY AS TO HOW THE SHARE S WERE VALUED/HELD IN THE BOOKS OF ACCOUNT I.E. WHETHER THEY WERE VALU ED AS STOCK-IN-TRADE AT THE END OF THE FINANCIAL YEAR FOR THE PURPOSE OF ARRIVING AT BUSINESS INCOME OF HELD AS INVESTMENT IN CAPITAL ASSETS. THE SECOND PRINCIPLE FURNISHES A GUIDE FOR DETERMINING THE NATURE OF TRA NSACTIONS BY VERIFYING WHETHER THERE ARE SUBSTANTIAL TRANSACTION , THEIR MAGNITUDE, ETC. MAINTENANCE OF BOOKS OF ACCOUNT AND FINDING TH E RATION BETWEEN PURCHASES AND SALES. IT WILL NOT BE OUT OF PLACE TO MENTION THAT REGULATION 18 OF THE SEBI REGULATIONS ENJOINS UPON EVERY FIL TO KEEP AND MAINTAIN BOOKS OF ACCOUNT CONTAINING TRUE AND F AIR ACCOUNTS RELATING TO REMITTANCE TO INITIAL CORPS OF BUYING A ND SELLING AND REALIZING CAPITAL GAINS ON INVESTMENT IN INDIA AND REALIZING CAPITAL GAINS ON INVESTMENT FROM SUCH REMITTANCES. THE THIR D PRINCIPLE SUGGESTS THAT ORDINARILY PURCHASES AND SALES OF SHA RES WITH THE MOTIVE OF REALIZING PROFIT WOULD LEAD TO INFERENCE OF TRAD E/ADVENTURE IN THE NATURE OF TRADE: WHERE THE OBJECT OF THE INVESTMENT IN SHARES OF COMPANIES IS TO DERIVE INCOME BY WAY OF DIVIDENDS E TC. THE TRANSACTIONS OF PURCHASES AND SALES WOULD YIELD CAP ITAL GAINS AND NOT BUSINESS PROFITS. 9. CBDT ALSO WISHES TO EMPHASIS THAT IT IS POSSIBLE FO R A TAX PAYER TO HAVE TWO PORTFOLIOS I.E., AN INVESTMENT PORTFOLIO C OMPRISING OF SECURITIES WHICH ARE TO BE TREATED AS CAPITAL ASSET S AND A TRADING PORTFOLIO COMPRISING OF STOCK-IN-TRADE WHICH ARE TO BE TREATED AS TRADING ASSETS. WHERE AN ASSESSEE HAS TO PORTFOLIO THE ASSESSEE MAY HAVE INCOME UNDER BOTH HEADS I.E., CAPITAL GAIN S AS WELL AS BUSINESS INCOME. 10. ASSESSING OFFICERS ARE ADVISED THAT THE ABOVE PRINC IPLES SHOULD GUIDE THEM, IN DETERMINING WHETHER IN A GIVEN CASE, THE SHARES ARE HELD BY THE ASSESSEE AS INVESTMENT (AND THEREFORE G IVING RISE TO CAPITAL GINS) OR AS STOCK-IN-TRADE AND THEREFORE GI VING RISE TO BUSINESS PROFITS). THE ASSESSING OFFICERS ARE FURTH ER ADVISED THAT NO SINGLE PRINCIPLE WOULD BE DECISIVE AND THE TOTAL EF FECT OF ALL THE PRINCIPLES SHOULD BE CONSIDERED TO DETERMINE WHETHE R, IN GIVEN, THE SHARES ARE HELD BY THE ASSESSEE AS INVESTMENT OR ST OCK-IN-TRADE. 11. THOSE INSTRUCTIONS SHALL SUPPLEMENT THE EARLIER INS TRUCTION NO.1827 DATED AUGUST,31,1989. ITA NO.482(ASR)/2014 8 IN THE AFOREMENTIONED CIRCULAR FOLLOWING PRIN CIPLES HAVE BEEN LAID TO DIFFERENTIATE BETWEEN SHARES AS STOCK IN-T RADE INVESTMENT. I. THE SUBSTANTIAL NATURE OF TRANSACTIONS THE MANNER O F MAINTAINING BOOKS OF ACCOUNT, THE MAGNITUDE OF PURCHASE AND SALES AND THE RATIO BETWEEN PURCHASES AND THE HOLDING WOULD FURNISH A GOOD GUIDE TO DETERMINE THE NATURE OF TRANSACTIONS. II. ORDINARILY THE PURCHASE AN SALE OF SHARES WITH THE MOTIVE OF EARNING A PROFIT, WOULD RESULT IN THE TRANSACTION BEING IN THE NATURE OF TRADE/ADVENTURE IN THE NATURE OF TRADE, BUT WHERE THE OBJECT OF THE INVESTMENT IN SHARES OF COMPANY IS TO DERIVE INCOME BY WAY OF DIVIDEND ETC THEN THE PROFIT ACCRUING BY CHANGE IN SUCH INVESTMENT (BY SALE OF SHARES WILL Y IELD CAPITAL GAIN HAD NOT REVENUE RECEIPT. THE ABOVE PRINCIPLE HAS ALSO BEEN LAID BY THE AUTHO RITY FOR ADVANCE RULINGS (AAAR) IN FIDELITY NORTHSTAR FUNDS & ORS., IN RE [2007]207 CTR (AAAR) 297; (2007)288 ITR (AAR), REFERRING TO THE DECISIONS OF THE HONBLE SU PREME COURT IN SEVERAL CASES. FURTHER HONBLE SUPREME COURT HAS LAID DOWN GUIDE LINES TO MAKE DISTINCTION BETWEEN STOCK IN TRADE IN VESTMENT IN SHARE IN THE CASE OF RAJ BAHADUR VISHESWARA SING H (DECEASED) AND OTHERS VS. COMMISSIONER OF INCOME TA X, BIHAR AND ORISSA 41 ITR 586. THE HONBLE SC HELD TH AT THE SUBSTANTIAL NATURE OF THE TRANSACTIONS, THE MAN NER IN WHICH THE BOOKS HAD BEEN MAINTAINED, THE MAGNITUDE OF THE SHARES PURCHASED AND SAID AND THE RATIO BETWEEN THE PURCHASE AND SALES AND THE HOLDING IS TO BE SEEN TO SUPPORT THE FINDING THAT THE ASSESSEE WAS DEALING IN SHARE AS A BUSINESS. THIS VIEW WAS FURTHER FORFEITED BY THE DE CISION OF THE HONBLE SC IN THE CASE OF COMMISSIONER OF INCOM E TAX BOMBAY VS. H. HOLCK LARSEN 160 WHEREIN THE HONBLE SC HAD THE OCCASION TO GO THROUGH THE CASE LAWS AVAILA BLE ON THE SUBJECT THE HONBLE SC OBSERVED THAT THE FREQUE NCY OF THE ACQUISITION OF RIGHT SHARES AND THE SALES IN LA RGE NUMBER IN QUICK SUCCESSION ESTABLISHED THE MOTIVE T O MAKE ITA NO.482(ASR)/2014 9 PROFIT AND THAT ALL THE DEALING IN SHARES WERE PART AND PARCEL OF A PROFIT MAKING SCHEME. THE ASSESSEE HAS CARRIED OUT NUMEROUS TRANSACTIONS OF SALE AND PURCHASE IN THE ENTIRE YEAR. THE ASSESSEE HAS NOT FURNISHED ANY PROOF TO PROVE THAT INTENTION OF THE ASSESSEE WAS TO HOLD THESE TO HOLD THESE SHARES AS INVESTMENT AND NOT AS STOCK IN TRADE. THE ONUS IS ON THE ASSESSEE TO PROVE THAT LOTS OF SHARES PURCHASED BY HIM WERE INVESTMENT. THE ANALYSIS OF NATURE OF TRANSACTIONS AND THEIR PATTERN AND THE PATTERNS OF SALE AND PURCHASE OF SHARE REVEALS THAT THE TRANSACTIONS HAVE BEEN SETTLED IN A VERY SHORT PERIOD THROUGH PURCHASE/SALE AND THE PERIOD OF HOLDING WAS IN DAYS ONLY. THE DETAILS SHOW THAT THE SHARES HAVE BEEN TRANSACTED NOT BE HOLD THEM AS INVESTMENT BUT LIKE AS BUSINESS ACTIVITY. THE DETAILS COMPLIED ARE ONLY INDICATIVE TO FIND OUT THE TRUE NATURE OF THE TRANSACTIONS CARRIED OUT BY THE ASSESSEE. THE SAME PATTERN IS ALSO FOUND ON GOING THROUGH THE MOST THE TRANSACTIONS CARRIED OUT IN THE YEAR AS APPEARING IN THE COPY OF ACCOUNT OF THE BROKER. IT IS SEEN THAT THE TOTAL DIVIDEND EARNED BY THE ASSESSEE IS AT RS.54 LACS OUT OF WHICH 43 LACS DIVIDEND HAD BEEN EARNED FROM M/S AB HOTELS LTD. IN WHICH THE ASSESSEE IS A DIRECTOR. THEREFORE, THE DIVINED EARNED BY THE ASSESSEE IN RESPECT OF THE TRANSACTIONS IN SHARES IS ONLY RS.16 LACS WHICH IS VERY MEAGURE CONSIDERING THE TOTAL TURNOVER OF THE ASSESSEE. THEREFORE, THE ITA NO.482(ASR)/2014 10 MOTIVE OF THE ASSESSEE IS NOT TO EARN THE DIVIDEND AND NEITHER TO REAP THE BENEFITS A LONG TERM INVESTMENTS BUT THESE INVESTMENTS MADE WERE IN THE NATURE OF ADVENTURE IN THE TRADE. IN ORDER TO FURTHER UNDERSTAND THE NATURE OF TRANSACTIONS IN SHARE CARRIED OUT BY THE ASSESSEE, IT WAS NOTED THAT THE ASSESSEE HAS BEEN MAKING CONTINUOUS SUBSTANTIAL TRANSACTIONS TO MAKE A PURCHASES AND SALES IN LARGE VOLUMES. IN PARTICULARS SCRIPT AND TRANSACTIONS ARE SETTLED IN QUICK SUCCESSION. FROM THE FACTS AND COPY OF ACCOUNT OF THE BROKER, IT IS NOTED THAT THE ASSESSEE IN HABITUALLY DEALING IN SHARES AND IT IS STRONG INDICATIVE OF TRADE. THE INTENTION OF THE ASSESSEE IN THIS CASE HAS BEEN TO TRANSACT IN SHARES FOR THE PROFIT AND NOT TO HOLD THEM TO EARN DIVIDEND OR ANY LONG TERMS APPRECIATION. THE ASSESSEE HAS CARRIED SUBSTANTIAL VOLUME IN TRANSACTIONS ON SHARES. LARGE BLOCK OF SHARES HAVE BEEN EITHER PURCHASES OR SOLD AT A VERY HIGH FREQUENCY/HIGH SUCCESSION. 12. ON THE BASIS OF THE FACTS AND CIRCUMSTANCES IN T HIS CASE IT IS CLEAR THAT THESE SHARES WERE PURCHASED AND SOLD BY THE AS SESSEE WITH THE MOTIVE OF EARNING PROFIT FROM SUCH PURCHASES AND SA LES AND NOT WITH THE OBJECT OF INVESTING ITS CAPITAL IN THESE S HARES IN ORDER TO DERIVE INCOME FROM THAT INVESTMENT. IN THE PRESENT CASE TRANSACTIONS HAVE BEEN CARRIED OUT WITH THE CHARACT ER OF A COMMERCIAL TRANSACTION ENTERED INTO WITH A VIEW TO EARN PROFIT. LARGE BLOCKS OF SHARES WERE PURCHASED OF THE PREVAI LING RATES, AND THEREAFTER THE SHARES WERE DISPOSED OFF AND NEWS BL OCKS WERE ITA NO.482(ASR)/2014 11 PURCHASED AND SO ON. BOTH THE QUANTUM AND THE FREQU ENCY SUGGEST, THAT THE TRANSITIONS ARE IN THE NATURE OF BUSINESS. ALL THE SHARES WERE SOLD THROUGH BROKERS LIKE PNR. KARVEY STOCK BR OKING LTD. ETC. TO THE MARKET. 13. IN VIEW OF ABOVE DISCUSSION AND FACTS OF THE CASE, THE NET PROFIT EARNED BY THE ASSESSEE FROM THE TRANSACTION IN SHAR ES THROUGH M/S PNR SECURITIES PVT. LTD. AND M/S KARVY STOCK BROKER IS ASSESSED AS BUSINESS INCOME. FURTHER THE ASSESSEE HAS CLAIME D BROKERAGE OF RS.499074/- PAID TO THE BROKER ON WHICH TDS HAS NOT BEEN DEDUCTED. THIS AMOUNT IS ACCORDINGLY DISALLOWED U/S 40(A)(IA) OF THE I.T. ACT. ON THIS ACCOUNT THE TOTAL INCOME OF A SSESSEE FROM SHARE TRADING IS ASSESSED AT RS.18979392/-. 3. THE LD. CIT(A), CONFIRMED THE ACTION OF THE ASSE SSING OFFICER. 4. THE LD. COUNSEL FOR THE ASSESSEE, SH. SUDHIR SEH GAL, ARGUED AT THE OUTSET THAT THE MATTER AT HAND IS COVERED BY THE DE CISION OF THE ITAT, AMRITSAR BENCH, IN ASSESSEES OWN CASE FOR THE ASSE SSMENT YEAR 2007-08 IN ITA NO.211(ASR)/2013 DATED 27.06.2013 ON SIMILAR F ACTS AND CIRCUMSTANCES. A COPY OF THE SAID ORDER OF THE TRIB UNAL IS PLACED ON RECORD. 5. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITT ED THAT THE AO PASSED ORDER ON 13.03.2013 AND ASSESSED THE SAME AS BUSINE SS INCOME, AS THE CIT(A) HAD NOT GRANTED ANY RELIEF TO THE ASSESSEE F OR THE AY 2007-08 BUT THE ITAT, AMRITSAR BENCH VIDE ORDER DATED 27.06.2013 HA D ALLOWED THE APPEAL OF THE ASSESSEE ON THE SIMILAR ISSUE AND THE FACTS ARE IDENTICAL AS WOULD BE SEEN FROM THE FOLLOWING CHART: ITA NO.482(ASR)/2014 12 FACTS IN AY 2007-08 FACTS IN AY 2010-11 SHORT TERM CAPITAL GAIN RS.49,39,023/- SHORT TERM C APITAL GAIN RS.78,71,557/-. AFTER SET OFF SHORT TERM CAPITAL LOSS OF RS.1.06,08,761/- DIVIDEND INCOME RS.1,72,86,993/- OUT OF WHICH FROM OTHERS RS.1,34,68,400/- (AB HOTEL) FROM SHARES RS.38,18,593/- DIVIDEND INCOME RS.59,77,094/- FROM AB HOTELS RS.42,85,400/- FROM SHARES RS.16,91,694/- PURCHASES OF SHARES VALUING RS.39,07,93,020/- SALE VALUE RS.39,71,41,441/- PURCHASES RS.22,61,96,197/- SALE VALUE RS.26,07,07,471/- SHARE BROKER WERE M/S. PNR SECURITY AND CAVERI STOCK BROKER ( AS PER PARA 3 PAGE 4 OF THE ORDER OF THE ITAT THE SHARE BROKER ARE THE SAME AS PER PARA-3 PAGE 2 OF THE ORDER OF THE ASSESSING OFFICER THE CBDT CIRCULAR NO.4 OF 2007, DATED 15.06.2007 DISCUSSED AS PER PARA 4 PAGE 4 OF THE ORDER OF THE ITAT SAME CIRCULAR DISCUSSED BY THE AO AT PAGE 4 OF THE ORDER. FOLLOWING JUDGMENTS DISCUSSED IN AY 2007-08: FIDELTY NORTHSTAR FUND & ORS (2007) 288 ITR 641 (AAR) RAJA BAHADUR VISHESHWARA SINGH (DECD.) AND OTHERS VS. CIT, BIHAR & ORISSA 41 ITR 585. H.HOLCK LARSSEN 160 ITR 67 (SC) THE SAME JUDGMENT HAS BEEN DISCUSSED BY THE AO AT PAGE 4 & 7 OF THE ORDER. REASONS FOR TREATING THE BUSINESS INCOME ARE FREQUENCY OF TRANSACTIONS AND VOLUME OF TRANSACTIONS AND PROFIT MOTIVE. SAME REASONS. 5.1. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMI TTED THAT THE LD. CIT(A) AT PAGE 2 OF THE ORDER HAS MENTIONED THAT SIMILAR I SSUE WAS IN A.Y. 2007-08 AND THE TRIBUNAL DECIDED THE SAME IN FAVOUR OF THE ASSESSEE BUT HAS NOT FOLLOWED THE ORDER OF THE TRIBUNAL WHILE DECIDING T HE ISSUE AT HAND. HE, THEREFORE, SUBMITTED THAT THE ISSUE IN QUESTION IS DIRECTLY COVERED BY THE AFORESAID ORDER OF ITAT, AMRITSAR BENCH. ITA NO.482(ASR)/2014 13 6. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE O RDERS OF THE AUTHORITIES BELOW. HE FURTHER ARGUED THAT THE FACTS OF EVERY YEAR ARE DIFFERENT AND EVERY YEAR IS AN INDEPENDENT YEAR AND THEREFORE , THE MATTER SHOULD BE DECIDED BY THE BENCH FROM THE FACTS OF THE CASE FOR THE ASSESSMENT YEAR 2010-11. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE UNDISPUTED FACTS IN THE IMPUGNED YEAR ARE THAT THE ASSESSEE HAS DECLARED THE SHORT-TERM CAPITAL GAINS AT RS.78,71,557 AFTER SET OFF THE SHORT TERM CAPITAL LOSS OF RS.1,06,08,761/- APART FROM DECLARA TION OF DIVIDEND INCOME OF RS.58,77,094/- FROM A.B. HOTELS AND FROM DIFFERENT SHARES AMOUNTING TO RS.26,07,07,471/-, WHEREAS THE ITAT, AMRITSAR BENCH , ON SIMILAR FACTS HAS DECIDED THE ISSUE FOR THE ASSESSMENT YEAR 2007-08 I N FAVOUR OF THE ASSESSEE IN ITA NO.211(ASR)/2013, DATED 27.06.2013. THE ASSE SSEE DURING THE ASSESSMENT YEAR 2007-08 HAS ALSO DECLARED SHORT TER M CAPITAL GAIN, DIVIDEND INCOME FROM HOTEL AND SHARES AND PURCHASED SHARES AMOUNTING TO RS.39,07,93,020/- AND SOLD SHARES AT A VALUE OF RS .39,71,41,441/-. THE FACTS OF THE PRESENT YEAR ARE SIMILAR AS IN THE ASSESSMEN T YEAR 2007-08. SHARE BROKERS ARE ALSO THE SAME. THE CBDT CIRCULAR DISCUS SED DURING THE ASSESSMENT YEAR 2007-08 IS THE SAME AS FOLLOWED BY THE ASSESSEE IN THE ASSESSMENT YEAR UNDER CONSIDERATION, INCLUDING MOST OF THE DECISIONS OF ITA NO.482(ASR)/2014 14 VARIOUS COURTS OF LAW FOLLOWED IN THE ASSESSMENT YE AR 2007-08 HAVE BEEN FOLLOWED BY THE AO DURING THE IMPUGNED YEAR. ALL TH E REASONS FOR TREATING THE BUSINESS INCOME WITH REGARD TO FREQUENCY OF TR ANSACTIONS, VOLUME OF TRANSACTIONS AND PROFIT MOTIVE FOLLOWED IN THE ASSE SSMENT YEAR 2007-08 BY THE AO HAS BEEN HELD AS THE SAME IN THE IMPUGNED YE AR. FOR THE SAKE OF CONVENIENCE, WE REPRODUCE HEREINBELOW, OUR ORDER D ATED 27.06.2013 IN ITA NO.211(ASR)/2013 FOR THE ASSESSMENT YEAR 2007-08: 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE ASSESSEE HAS CLAIMED SHORT TERM CAPIT AL GAIN AND ON IDENTICAL FACTS, THE DEPARTMENT HAS ACCEPTED THE IN VESTMENT IN SHARES AND SHORT-TERM CAPITAL GAIN IN THE PAST. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE IS ACTIVELY INVOLVED IN THE VARIOUS OT HER BUSINESSES WHICH ARE EITHER CONDUCTED BY HIM IN HIS INDIVIDUAL CAPAC ITY OR AS PARTNER IN VARIOUS FIRMS. THERE IS NO DISPUTE TO THE FACT THAT INTENTION TO RESELL AT A PROFIT WOULD BE MATERIAL BUT NOT DECISIVE CONSIDE RATION TO HOLD THAT THE ASSESSEE IS CARRYING ON THE BUSINESS IN HOLDING SHARES IN THE NATURE OF TRADE. THE GUIDELINES IN CBDT CIRCULAR NO .4 OF 2007 DATED 15.06.2007 ARE THE GOOD GUIDELINES TO DETERMINE THE NATURE OF TRANSACTIONS. IN THIS REGARD, WE ARE OF THE VIEW TH AT EVERY PERSON WOULD MAKE AN INVESTMENT NOT TO MAKE LOSS BUT TO MA KE A PROFIT AND CERTAINLY INVESTMENT IF DISPOSED OF IN A SHORT SPAN OF TIME, DOES NOT CHANGE THE INTENTION OF THE ASSESSEE. THE AMOUNT OF INVESTMENT CAN ALSO NOT BE THE ONLY CRITERIA FOR CALCULATING THE T RANSACTION OF SALE AND PURCHASE OF SHARES AS TRADING AND NOT AS INVESTMEN T. THE RELIANCE WAS PLACED IN THE CASE OF ACIT VS. SH. S.K. KAINTAL IN ITA NO.846 & 1063/CHANDI/2007 (CHD.TRIB.) WHERE IT HAS BEEN HELD THAT THE INTENTION OF AN ASSESSEE AT THE TIME OF PURCHASE OF AN ASSET IS IMPORTANT TO CONSIDER THE NATURE OF TRANSACTION. TH E MERE FACT THAT THE LAND HAS BEEN SOLD IN PIECEMEAL IN A PERIOD OF TWO YEARS IS NOT SUFFICIENT TO JUSTIFY THE CONCLUSION THAT THE PURCH ASE AND SALE OF LAND BY THE ASSESSEE WAS AN ADVENTURE IN THE NATURE OF T RADE. THE RELIANCE WAS ALSO PLACED ON THE DECISION OF ITAT, CHANDIGARH BENCH, IN THE CASE OF ACIT VS. RAJESH KUMAR AGGARWAL & OTHERS IN ITA ITA NO.482(ASR)/2014 15 NO.538/CHD/2006 (CHD. TRIB.). THE RELIANCE WAS ALSO PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF G. VENKATASWAMI NAIDU & CO. 35 ITR 594 WHERE IT HAS BEEN HELD THAT IF A PERSON INVESTS MONEY IN LAND INTENDING TO HOLD IT, ENJOYS ITS INCOME FOR SOME TIME AND THEN SELLS IT AT A PROFIT, IT WOULD BE A C LEAR CASE OF CAPITAL ACCRETION AND NOT PROFIT DERIVED FROM AN ADVENTURE IN THE NATURE OF TRADE. IN THE SAID ORDER OF ITAT, CHANDIGARH BENCH, IT WAS HELD THAT THE ASSESSEES MAIN LINE OF BUSINESS WAS NOT TO PUR CHASE AND SALE OF PROPERTY AND IN SUCH FACTS AND CIRCUMSTANCES, THE O BITER DICTA LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF SA ROJ KUMAR MAUMDAR, 37 DTR 242 TO THE EFFECT THAT THE ONUS IS ON THE REVENUE TO PROVE THAT THE TRANSACTION WAS AN ADVENTURE IN THE NATURE OF TRADE. IT IS ALSO A MATTER OF RECORD THAT THE ASSESSEE HAS DE CLARED DIVIDEND INCOME OF RS.1,72,86,993/- AND OUT OF THE SAME RS.3 8,18,593/- HAS BEEN EARNED FROM INVESTMENT AND THE AO IS FACTUALL Y WRONG IN STATING THAT NO INCOME FROM DIVIDEND INCOME HAS BEEN EARNE D AND THEREFORE, THE FINDING OF THE A.O. CANNOT BE ACCEPTED AND ARE AGAINST THE FACTS OF THE PRESENT CASE AND THEREFORE, IT CANNOT BE SAID T HAT THE ASSESSEE HAS MADE PURCHASE AND SALE OF SHARES IN THE NATURE OF T RADE. ON IDENTICAL FACTS, THE DEPARTMENT HAS ACCEPTED IN ASSESSEES OW N CASE FOR THE ASSESSMENT YEAR 2005-06 IN THE ASSESSMENT FINALIZED UNDER SECTION 143(3) OF THE ACT. INVESTMENT IN SHARES, THE COMPU TATION OF INCOME AND ASSESSMENT ORDER PLACED AT PB 1 TO 6 WHERE DIVI DEND INCOME FROM SALE OF SHARES IS CLEARLY VISIBLE AND ALSO THE SHOR T TERM CAPITAL GAIN. THE COMPUTATION OF INCOME FOR THE A.Y. 2006-07 IS P LACED AT PB 7-8 WHERE THE DISCLOSED DIVIDEND INCOME AND THE CAPITAL GAINS ON THE IDENTICAL FACTS HAVE BEEN ACCEPTED BY THE DEPARTMEN T. 9.1 THE DEPARTMENT HAS NOT POINTED OUT ANY DIFFERENT FA CTS AS COMPARED TO THE ASSESSMENT YEAS 2004-05 & 2006-07 I N ASSESSEES OWN CASE. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE AO CANNOT TAKE A DIFFERENT VIEW. THE RELIANCE I S PLACED ON THE DECISIONS OF VARIOUS COURTS OF LAW RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE IN THE WRITTEN SUBMISSIONS MENTIONED HEREINABOVE. THEREFORE, IN THE FACTS AND CIRCUMSTAN CES OF THE CASE, THE INVESTMENT MADE BY THE ASSESSEE AND DECLA RED IN THE BALANCE SHEET IS TO BE TREATED AS INVESTMENT PORTFO LIO AND NOT TRADE PORTFOLIO ON WHICH THE ASSESSEE RECEIVED SUBS TANTIAL DIVIDEND INCOME DURING THE PRECEDING YEAR AS WELL A S DURING THE IMPUGNED YEAR. AS REGARDS THE MENTION OF THE A O THAT THE ITA NO.482(ASR)/2014 16 ASSESSEE HAD MADE SUBSTANTIAL TRANSACTION AND HAS E ARNED HUGE PROFIT. THIS CAN HAPPEN EVEN IN THE CASE OF INVESTM ENT PORTFOLIO. THE ELEMENT OF UNCERTAINTY IS ALREADY THERE WHEN A PERSON DEALS IN SECURITY. BUT THIS FACTOR CANNOT BE DETERMINANT FACTOR WHETHER THE ASSESSEE IS TRADING IN SHARE OR IS AN I NVESTOR. SOME INVESTMENTS DO TAKE THIS. THE PURCHASE AND SALE OF SHARES IN THE IMPUGNED YEAR CANNOT BE ESTABLISH THE OBJECTIVE FO R ACQUIRING SHARES AS INVESTOR OR AS A TRADER. THE RATIO OF SAL ES TO THE PURCHASE MAY BE RELEVANT IN A PARTICULAR CASE. REPE ATING OUR FINDING THAT IN EARLIER ASSESSMENT YEAR WHEN INVES TMENTS IN PORTFOLIO WERE ACCEPTED BY THE DEPARTMENT AND OUR F INDING HEREINABOVE ARE SUPPORTED BY THE DECISION OF HONBL E DELHI HIGH COURT IN THE CASE OF CIT VS. VINAY MITTAL AND OTHERS DECISIONS RELIED UPON BY THE LD. COUNSEL FOR THE AS SESSEE IN HIS ARGUMENTS AND THE SUBMISSIONS, WE ARE OF THE VIEW T HAT THE ASSESSEE HAS RIGHTLY DECLARED THE CAPITAL GAIN AND THE SHARES ARE HELD AS INVESTMENT AND NOT AS STOCK IN TRADE. T HE ORDER OF THE LD. CIT(A) IS ACCORDINGLY REVERSED AND GROUNDS NO. 1 & 2 OF THE ASSESSEE ARE ALLOWED. 8. SINCE THE FACTS IN THE PRESENT CASE ARE SIMILAR TO THE FACTS AS IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2007-0 8 AND IN SIMILAR FACTS DURING THE ASSESSMENT YEARS 2004-05 & 2006-07, THE DEPARTMENT HAS ACCEPTED THE SAID INCOME ARISING FROM THE SALE OF S HARES AS CAPITAL GAINS AND NO DIFFERENT FACTS HAVE BEEN POINTED OUT DURING THE IMPUGNED YEAR BY EITHER OF THE AUTHORITIES BELOW. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES, THE ASSESSEE HAS RIGHTLY DECLARED CAPITAL GAINS AND SH ARES HELD AS INVESTMENT AND NOT AS STOCK IN TRADE. THEREFORE, THE ORDER OF THE LD. CIT(A) IS DIRECTED TO BE REVERSED AND ALL THE GROUNDS OF THE ASSESSEE ARE AL LOWED IN VIEW OF OUR ITA NO.482(ASR)/2014 17 FINDINGS GIVEN HEREINABOVE AND OUR DECISION IN ASSE SSEES OWN CASE FOR THE ASSESSMENT YEAR 2007-08. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.482(ASR)/2014 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17TH MARCH, 2015. SD/- SD/- (A.D.JAIN) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 17TH MARCH, 2015 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:SH. AMRIT LAL BATRA, SRINAGAR. 2. THE DCIT, CIR-3, SRINAGAR. 3. THE CIT(A) 4. THE CIT 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.