DCIT 4(2)(2), MUMBAI V. VIMLA S. JAJOO, MUMBAI

ITA 515/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1543 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 21-09-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 22-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: INDRA C ANAND
• Keywords: Business income; Rule of consistency
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH J, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI N. K. PRADHAN, ACCOUNTANT MEMBER ITA NO.515/M/2015 ASSESSMENT YEAR: 2011-12 DCIT 4(2)(2), R.NO.642, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 VS. SMT. VIMAL S. JAJOO, 7/10, BOTAWALA BLDG., 1 ST FLOOR, HORNIMAN CIRCLE, MUMBAI-400 001 PAN: ADAPJ 8747J (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI RAJESH OJHA, A.R. REVENUE BY : SHRI INDRA C. ANAND, D.R. DATE OF HEARING : 17.10.2016 DATE OF PRONOUNCEMENT : 16.12.2016 O R D E R PER C.N. PRASAD, JUDICIAL MEMBER: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-8, MUMBAI [HER EINAFTER REFERRED TO AS THE CIT(A)] DATED 14.11.2014 FOR THE ASSESSMENT YEA R 2011-12. 2. THE ONLY ISSUE IN THE APPEAL OF THE REVENUE IS T HAT THE LD. CIT(A) ERRED IN HOLDING THAT THE GAIN ON SALE OF SHARES IS ASSES SABLE AS SHORT TERM CAPITAL GAIN AND NOT AS BUSINESS INCOME. 3. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET S UBMITS THAT THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT TREATED THE GAIN ON SALE OF SHARES AS INCOME FROM BUSINESS OF THE ASSESSEE UNDER THE HEAD INCOME FROM BUSINESS AS AGAINST THE SHORT TERM CAPITAL GAIN SHOWN BY THE ASSESSEE. THE LD. COUNSEL SUBMITS THAT AN IDENTICAL ISSUE HAS BEEN DECIDED IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2005-06 TO 2008-09 WHEREIN THE CO- ORDINATE BENCH OF THE TRIBUNAL BENCH IN ITA NOS.5441 OF 2008, 2469 OF 200 9, 4476 OF 2012 & 5302 ITA NO.515/M/2015 SMT. VIMAL S. JAJOO 2 OF 2011 BY ORDER DATED 22.01.16 AFFIRMED THE ORDER OF THE LD. CIT(A) IN HOLDING THAT THE GAIN ON SALE OF SHARES IN THE CASE OF THE ASSESSEE IS TO BE ASSESSED UNDER THE HEAD SHORT TERM CAPITAL GAIN A ND NOT UNDER THE HEAD INCOME FROM BUSINESS. 4. THE LD. D.R. PLACES RELIANCE ON THE ORDERS OF TH E ASSESSING OFFICER. 5. WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES BE LOW AND THE CO-ORDINATE BENCH DECISION IN ASSESSEES OWN CASE AND ALSO ONE MR. SURESH K. JAJOO WHICH IS THE COMBINED ORDER OF THE CO-ORDINATE BENCH RELA TING TO BOTH THESE ASSESSEES AND FOUND THAT THE CO-ORDINATE BENCH HELD THAT THE GAIN ON SALE OF SHARES IN BOTH THESE ASSESSEES CASES HAS TO BE ASSESSED UNDER THE HEAD SHORT/LONG TERM CAPITAL GAINS AND NOT UNDER THE HEAD BUSINESS INC OME. WE OBSERVE FROM THE ORDER OF THE CO-ORDINATE BENCH THAT IN THE CASE OF SURESH K. JAJOO IN ITA NO.442 OF 2008 FOR THE ASSESSMENT YEAR 2005-06 THE CO-ORDINATE BENCH HELD AS UNDER: 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THERE IS NO DISPUTE RELATING TO THE FACT THAT THE ASSESSEE IN EARLIER YEARS HAS BEE N TREATED BY THE DEPARTMENT AS AN INVESTOR. THE ASSESSEE, AS DISCUSSED ABOVE, HAS BE EN CONTINUOUSLY ALLOWED THE SET OFF OF SHORT TERM CAPITAL LOSS AND LONG TERM CAPITA L LOSS IN THE EARLIER ASSESSMENT YEARS. THE ASSESSEE HAD BEEN DEALING IN TWO TYPES OF TRANSACTIONS IN SECURITIES. THE ASSESSEE HAD SHOWN INVESTMENTS AND HAD CLAIMED CAPITAL GAINS RELATING TO THE SHARES. IT IS ALSO A FACT ON THE FILE THAT BY THE AMENDMENT BROUGHT BY FINANCE ACT, 2004, BY INSERTION OF PROVISIONS OF SECTION 111A AN D SECTION 10(38), THE LEVY OF TAX HAS BEEN REDUCED TO 10% ON SHORT TERM CAPITAL GAINS AND LONG TERM CAPITAL GAINS HAVE BEEN MADE EXEMPT. UNDER THE OLD PROVISIONS OF THE ACT, PROFITS OR GAINS ARISING TO AN INVESTOR FROM THE TRANSFER OF SECURIT IES WERE CHARGED DEPENDING ON THE PERIOD OF HOLDING OF THE SAID SECURITIES. SHORT TE RM CAPITAL GAINS WERE TAXED AT APPLICABLE RATES (NORMAL RATES) AND LONG TERM CAPIT AL GAINS WERE TAXED AT THE RATE OF 20% AFTER ADJUSTING FOR INFLATION BY INDEXING THE C OST OF ACQUISITION. FOR LISTED SECURITIES, THE TAX PAYER HAD AN OPTION TO PAY TAX ON LONG TERM CAPITAL GAINS AT THE RATE OF 10% BUT WITHOUT INDEXATION. IN CASE OF TRA DER IN SECURITIES, HOWEVER, THE CAPITAL GAINS WERE TAXED AS ANY OTHER NORMAL BUSINE SS INCOME. THUS, TAX LIABILITY ON THE INCOME FOR SALE AND PURCHASE OF SHARES AS REGAR DS TO SHORT TERM CAPITAL GAINS AND BUSINESS INCOME WAS AT PAR. THE ISSUE OF TREAT MENT OF INCOME FROM SHARE TRANSACTION AS SHORT TERM CAPITAL GAINS OR BUSINESS INCOME HAS IN FACT ARISEN AFTER THE AMENDMENT BROUGHT WITH FINANCE ACT, 2004 W.E.F. 01.10.2004. IT IS AN ADMITTED FACT ON THE FILE THAT PRIOR TO THE AMENDMENT WHEN T HE TAX OF SHORT TERM CAPITAL GAINS, AS DISCUSSED ABOVE, WAS AT PAR WITH THAT OF BUSINESS INCOME, THE DEPARTMENT HAS BEEN CONSISTENTLY ACCEPTING THE TREATMENT OF IN COME BY THE ASSESSEE AS CAPITAL ITA NO.515/M/2015 SMT. VIMAL S. JAJOO 3 GAINS. MERELY BECAUSE THE RATE OF TAX HAS BEEN RED UCED IN RESPECT OF SHORT TERM CAPITAL GAINS AND LONG TERM CAPITAL GAINS HAVE BEEN EXEMPT DURING THE YEAR BY WAY OF AN AMENDMENT TO THE PROVISIONS AS DISCUSSED ABOV E, THAT ITSELF, CANNOT BE A GROUND FOR THE AO TO DEPART FROM ITS CONSISTENT STA ND OF TREATING THE ASSESSEE AS AN INVESTOR AND THEREBY TO CHARGE THE INCOME EARNED BY THE ASSESSEE FROM SHARE TRANSACTIONS AS BUSINESS INCOME. AS DISCUSSED ABOV E, AT THE TIME OF PURCHASE OF SHARES EVEN DURING THE YEAR BUT PRIOR TO 01.10.2004 , THE ASSESSEE WAS NOT GUIDED OR INFLUENCED BY LOWER TAX RATE IN CASE OF SHORT TERM CAPITAL GAINS AS THE RATE FOR BUSINESS INCOME AND SHORT TERM CAPITAL GAINS WAS AT PAR. THE ASSESSEE, HOWEVER, WAS TREATING HIMSELF AS AN INVESTOR AND KEEPING THE SHARES AS INVESTMENTS IN HIS ACCOUNT IRRESPECTIVE OF THE PROBABLE TAX IMPLICATIO N AS THERE WERE NO SUCH TAX IMPLICATIONS AS DISCUSSED ABOVE. THE INTENTION OF THE ASSESSEE, WHILE PURCHASING THE SHARE, IS THE IMPORTANT AND GUIDING FACTOR AS T O WHETHER THE SAME WAS PURCHASED WITH AN INTENTION OF INVESTMENT OR FOR TR ADING. THE FACTS OF THE CASE AS DISCUSSED ABOVE, CLEARLY REVEAL THAT THE ASSESSEE H AD TREATED THE SHARES AS INVESTMENTS IN HIS ACCOUNT. AS DISCUSSED ABOVE, IF DURING THE MID OF THE RELEVANT FINANCIAL YEAR, CERTAIN TAX BENEFITS HAVE BEEN GIVE N IN RESPECT OF CAPITAL GAINS, THAT CANNOT, IN ANY WAY, LEAD TO AN ASSUMPTION OR PRESUM PTION THAT THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE OF SHARES WAS THAT OF A TRADER AND NOT OF AN INVESTOR. THE TREATMENT OF THE INVESTMENT IN THE A CCOUNT BOOKS OF THE ASSESSEE WAS ALSO A RELEVANT GUIDING FACTOR. THE AO HAS ALS O NOT POINTED OUT AS TO IN WHAT MANNER THE ACTIVITY OF THE ASSESSEE FOR THE YEAR UN DER CONSIDERATION HAD BEEN CHANGED FROM INVESTOR TO THAT OF A TRADER ESPECIALL Y WHEN THE DEPARTMENT HAD CONSISTENTLY BEEN TREATING HIM AS AN INVESTOR. IT IS ALSO PERTINENT TO MENTION HERE THAT AS DISCUSSED ABOVE, IN SUBSEQUENT ASSESSMENT Y EARS THE DEPARTMENT HAS AGAIN ACCEPTED THE ASSESSEE AS AN INVESTOR. IT IS FOR TH E FIRST TIME THAT IN THIS YEAR UNDER CONSIDERATION I.E. A.Y. 2005-06 THE ASSESSEE HAD BE EN TREATED AS A TRADER BECAUSE OF CERTAIN TAX BENEFITS GRANTED TO AN INVESTOR IN S ECURITIES BY WAY OF AMENDMENT IN THE RELEVANT PROVISIONS OF THE INCOME TAX ACT AND S UBSEQUENTLY FOR THE A.YS 2006- 07 TO 2008-09, THE ASSESSEE WAS TREATED AS TRADER. HOWEVER, THE LD. CIT(A) FOLLOWING THE PRINCIPLE OF CONSISTENCY HAS HELD THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEARS I.E. A.Y. 2005-06 TO A.Y. 2008-09 AS INVESTOR. THOUGH THE PRINCIPLE OF RESJUDICATA IS NOT APPLICABLE IN INCOME TAX PROC EEDINGS BUT THE PRINCIPLE OF CONSISTENCY REQUIRES THAT THE VIEW TAKEN IN ONE YEA R SHOULD BE FOLLOWED IN SUBSEQUENT YEARS UNLESS THE FACTS OR THE LEGAL POSI TION JUSTIFY DEPARTURE THERE FROM; RELIANCE CAN BE PLACED IN THIS RESPECT ON THE AUTHO RITIES OF THE HONBLE BOMBAY HIGH COURT IN CIT VS. DARIUS PANDOLE [(2011 330 I TR 485 (BOM.)] AND IN CIT VS. GOPAL PUROHIT [(2011) 336 ITR 287 (BOM.). 9. IN VIEW OF OUR ABOVE DISCUSSION OF THE MATTER, W E ARE OF THE VIEW THAT THE ASSESSEE IS TO BE TREATED AS AN INVESTOR FOR THE A. Y. 2005-06 TO A.Y. 2008-09 ALSO. WE HOLD ACCORDINGLY. THE AO, THEREFORE, IS DIRECTE D TO TREAT THE INCOME FROM SALE AND PURCHASE OF SHARES AS SHORT TERM CAPITAL GAINS AND LONG TERM CAPITAL GAINS ACCORDING TO THE PERIOD OF HOLDING AS PER THE PROVI SIONS OF LAW FOR THESE ASSESSMENT YEARS ALSO. 6. THIS DECISION IN THE CASE OF SURESH K. JAJOO (SU PRA) WAS FOLLOWED IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2005-0 6, 2006-07 & 2008-09 AND ITA NO.515/M/2015 SMT. VIMAL S. JAJOO 4 HELD THAT THE GAIN ON SALE OF SHARES IS TO BE ASSES SED AS CAPITAL GAINS AND NOT BUSINESS INCOME AS THE FACTS BEING IDENTICAL TO THA T OF THE CASE IN SURESH K. JAJOO (SUPRA) THE CO-ORDINATE BENCH OBSERVED AS UND ER: ITA NOS.5441/M/2008 (A.Y. 2005-06) & 4476/M/2012 (A .Y. 2006-07) REVENUES APPEALS) 24. THE COMMON ISSUE RAISED IN BOTH THE APPEALS IS AS TO WHETHER THE INCOME FROM SHARE TRANSACTIONS IS TO BE ASSESSED AS BUSINE SS INCOME OR CAPITAL GAINS. THE FACTS AND ISSUES INVOLVED IN THESE APPEALS ARE IDEN TICAL TO THAT OF THE APPEALS IN RELATION TO SHRI SURESH K. JAJOO. EVEN THE LD. CIT (A) HAS ALSO DISCUSSED THE CASE OF THE PRESENT ASSESSEE IN THE IMPUGNED ORDER WHICH HA S ALSO BEEN REPRODUCED ABOVE WHILE DECIDING THE APPEAL OF THE ASSESSEE SHRI SURE SH K. JAJOO. SINCE THE FACTS AND CIRCUMSTANCES IN THIS CASE ARE IDENTICAL TO THE CAS E OF SHRI SURESH K. JAJOO, HENCE IN VIEW OF OUR FINDINGS GIVEN ABOVE, THESE APPEALS OF THE REVENUE ARE HEREBY DISMISSED. ITA NO.5302/M/2011 (FOR A.Y. 2008-09) (REVENUES AP PEAL) 25. THE REVENUE IN THIS APPEAL HAS RAISED TWO EFFEC TIVE GROUNDS OF APPEAL. THE FIRST GROUND IS AS TO WHETHER THE INCOME EARNED BY THE ASSESSEE FROM SALE AND PURCHASE OF SHARES IS TO BE ASSESSED AS CAPITAL GAI NS OR BUSINESS INCOME. SINCE THE FACTS AND CIRCUMSTANCES ARE IDENTICAL AS IN THE CAS E OF SHRI SURESH K. JAJOO AND IN VIEW OF OUR FINDINGS GIVEN ABOVE, THIS GROUND OF TH E REVENUES APPEAL IS HEREBY DISMISSED. 7. FOLLOWING THE ORDER OF THE CO-ORDINATE BENCH, WE AFFIRM THE ORDER OF THE LD. CIT(A) FOR THIS YEAR ALSO IN HOLDING THAT THE I NCOME FROM SALE OF SHARES IS TO BE ASSESSED AS INCOME FROM SHORT TERM CAPITAL G AIN AND NOT AS BUSINESS INCOME. 8. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16.12.2016. SD/- SD/- (N. K. PRADHAN) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 16.12.2016. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI ITA NO.515/M/2015 SMT. VIMAL S. JAJOO 5 THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.