Shri Shewaram Kalumal Suhandani, Ahmedabad V. The Dy.CIT.,Circle-13, Ahmedabad

ITA 534/AHD/2010

• Counselvise Citation: 53420514 RSA 2010
• Duration Of Justice: 3 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 17-10-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 16-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS
• Assessee Lawyers: T H VASA A R
• Keywords: Business income; Opportunity of being heard; Source of fund

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD , , , , BEFORE SHRI MUKUL KR. SHRAWAT , JUDICIAL MEMBER AND , SHRI T.R. MEENA, ACCOUNTANT MEMBER .. , ! ' ! ' ! ' ! ' ITA NO. 534/AHD/2010 ASSESSMENT YEAR : 2006-07 SHEWARAM KALUMAL SUHANDANI 19, GOLDEN HOUSE, S.G.HIGHWAY, NEAR GURUDWARA, THALTEJ, AHMADABAD-380059. V/S . DY. COMMISSIONER OF INCOME TAX, CIRCLE-13, AHMEDABAD PAN NO. A DGPS0290K (APPELLANT) .. (RESPONDENT) #$ % & BY APPELLANT SHRI T. H. VASA, A.R. '(#$ % & /BY RESPONDENT SHRI K. C. MATHEWS, SR. D.R. )* % /DATE OF HEARING 17.10.2013 +,- % /DATE OF PRONOUNCEMENT 17.12.2013 O R D E R PER : SHRI T.R.MEENA, ACCOUNTANT MEMBER THIS IS AN APPEAL AT THE BEHEST OF ASSESSEE WHICH H AS EMANATED FROM THE ORDER OF CIT(A)-XXI, AHMEDABAD, DATED 07.12.200 9 FOR ASSESSMENT YEAR 2006-07. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UN DER: 1. THAT THE LEARNED COMMISSIONER OF INCOME-TAX (A PPEALS) HAS ERRED IN CONFIRMING IN TREATING THE NET SHORT TERM CAPITAL GAIN OF RS. 9,29,511/- AS BUSINESS INCOME OF THE APPELLANT. ITA NO. 534/AHD/2010, A.Y. 06-07 PAGE 2 2. THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APP EALS) HAS ERRED IN COMING TO CONCLUSION THAT THE APPELLANT HA S CARRIED OUT BUSINESS OF TRADING IN SHARES AND IN SECURITIES AND TREATING SHORT TERM CAPITAL GAIN AS BUSINESS INCOME OF THE A PPELLANT. 3. THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APP EALS) DID NOT APPRECIATE THE CONTENTION THAT THE APPELLANT WA S INVESTING IN SHARES AND SECURITIES AND THEREFORE THE SHORT TE RM CAPITAL GAIN SHOULD NOT BE TAXED AS BUSINESS INCOME. THAT T HE LEARNED A.O. IS NOT UNIFORM AND CONSISTENT IN HIS A PPROACH WHILE CONSIDERING INVESTMENTS SOLD BY THE APPELLANT AS BUSINESS INCOME. 4. THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APP EALS) HAS ERRED IN NOT CONSIDERING THAT THE SHARES AND SECURI TIES WERE HELD AS INVESTMENTS AND NOT AS TRADING STOCK BY THE APPELLANT. 2. ALL THE GROUNDS OF THE ASSESSEE ARE REVOLVING AR OUND THE LD. A.O. TREATED SHORT TERM CAPITAL GAIN AS BUSINESS INCOME. THE ASSESSEE HAS DECLARED THE INCOME FROM PENSION, CAPITAL GAIN FROM SALE OF SHARES AND SECURITIES AND INCOME FROM OTHER SOURCES. DURING TH E YEAR UNDER CONSIDERATION, THE ASSESSEE HAD DISCLOSED SHORT TER M CAPITAL GAIN OF RS. 9,29,511/- ON SALE OF SHARES OF INDIAN COMPANIES. T HE ASSESSEE HAD PAID TAX @ 10% FROM THE SHORT TERM CAPITAL GAIN. AFTER EXAMI NING THE DETAILS AND NATURE OF THE TRANSACTION, THE LD. A.O. GAVE THE RE ASONABLE OPPORTUNITY OF BEING HEARD FOR THIS TRANSACTION SHOULD NOT BE TREA TED AS BUSINESS INCOME. THE ASSESSEE FILED REPLY ON 30.12.2008 WHICH HAS BE EN REPRODUCED BY THE LD. A.O. AT PAGE NO. 2 & 3 OF THE ASSESSMENT ORDER. AFT ER CONSIDERING THE DETAILS AND REPLY OF THE ASSESSEE, THE LD. A.O. RELIED UPON THE HONBLE SUPREME ITA NO. 534/AHD/2010, A.Y. 06-07 PAGE 3 COURTS DECISION IN CASE OF THE CIT VS. H. HOLCK LA RSON 160 ITR 67 (SC) AND DISCUSSED THE PARAMETER OF SHARE TRADING IS WHETHER SHORT TERM CAPITAL GAIN OR BUSINESS INCOME. HE FINALLY ANALYZE THIS CASE ON TH E FOLLOWING BASIS : (I) THE SUBJECT MATTER OF REALIZATION. (II) THE LENGTH OF THE PERIOD OF OWNERSHIP. (III) THE FREQUENCY OR NUMBER OF TRANSACTIONS BY TH E SAME PERSON. (IV) SUPPLEMENTARY WORK ON OR IN CONNECTION WITH TH E PROPERTY REALIZED . (V) THE CIRCUMSTANCES THAT WERE RESPONSIBLE FOR THE REALIZATION. (VI) MOTIVE. AFTER APPLYING THESE TESTS ON THE ASSESSEE, HE HEL D THAT THE ASSESSEES SHARE TRADING WAS BUSINESS INCOME AND NOT A SHORT T ERM CAPITAL GAIN AS CLAIMED BY THE ASSESSEE. 3. BEING AGGRIEVED BY THE ORDER PASSED BY THE LD. A .O., THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO HAD CO NSIDERED THE LD. A.OS ORDER AS WELL AS SUBMISSIONS MADE BY THE ASSESSEE A ND WITHOUT RECORDING ANY REASONS HE HAD ACCEPTED ORDER OF THE LD. A.O., HE DISMISSED THE ASSESSEES APPEAL. 4. NOW, THE ASSESSEE IS BEFORE US. THE LD. A.R FILE D WRITTEN REPLY AS UNDER: 1. SHRI S. K. SUHANDANI, AGED 76 YEARS, IS A RETI RED EMPLOYEE RECEIVING PENSION FROM STATE GOVERNMENT. HE HAS NEV ER CARRIED ON HIMSELF OR IN PARTNERSHIP ANY BUSINESS. NO BOOKS OF ACCOUNTS ITA NO. 534/AHD/2010, A.Y. 06-07 PAGE 4 ARE MAINTAINED BY HIM. HE MAINTAINS BANK ACCOUNTS A ND DEMAT ACCOUNTS. 2. HIS INVESTMENTS ARE AT ALL TIMES VALUED AT COST. HE HAS NEVER VALUED THEM AT COST OR MARKET VALUE WHICH EVER IS L OWER AS PER THE GUIDELINES OF ICAI. 3. APPELLANT IS ACCEPTED AS INVESTOR IN ALL THE PRE VIOUS YEARS. HE HAS BEEN MAKING INVESTMENTS SINCE 1985. 4. THE APPELLANT HAS NEVER-EVER MADE ANY BORROWINGS OR TAKEN LOANS TO MAKE INVESTMENTS. ALL HIS INVESTMENTS ARE OUT OF HIS CAPITAL, SAVINGS AND INCOME. 5. APPELLANT EARNED SUBSTANTIAL DIVIDEND INCOME IN THE YEAR UNDER CONSIDERATION AND ALL EARLIER YEARS. ASSESSMENT YEAR DIVIDEND INCOME RS. 2003-04 1,26,150 2004-05 2,27,803 2005-06 2,13,804 2006-07 1,91,814 6. APPELLANT HAS EARNED RS. 13,71,532/- LONG TERM C APITAL GAIN AND RS. 9,29,493/- AS SHORT TERM CAPITAL GAIN WHICH IND ICATES THAT HIS LONG TERM HOLDING GIVING LONG TERM CAPITAL GAIN IS MORE THAN HIS SHORT TERM CAPITAL GAIN. ITA NO. 534/AHD/2010, A.Y. 06-07 PAGE 5 7. APPELLANT IS NEITHER A BROKER OR A SUB-BROKER RE GISTERED UNDER SEBI. 8. APPELLANT HAS NEVER DEAL IN FUTURES, DERIVATIVES , OPTIONS OR HAS MADE HEDGING TRANSACTIONS. 9. APPELLANT HAS TAKEN DELIVERY AND HAS GIVEN DELIV ERY FOR ALL TRANSACTIONS OF PURCHASE AND SALE MADE BY HIM EXCEP T CASES WHERE THERE WERE CORRECTIONS OF WRONG PURCHASES AND WRONG PUNCHING OF SALES MADE BY BROKERS STAFF. 10. ASSESSEE HAS NEVER CLAIMED SET-OFF OF LOSSES AG AINST INCOME UNDER OTHER HEADS OF INCOME. 11. INVESTMENTS MADE IN DIFFERENT ASSETS-FIXED DEPO SITS WITH BANKS, FIXED DEPOSITS WITH COMPANIES, MUTUAL FUNDS, CORPOR ATE AND GOVT. BONDS, POST OFFICE INVESTMENTS. ALL THE ABOVE ASPECTS ARE DEALT WITH DECISIONS FRO M DIFFERENT COURTS IN THE DECISION OF HONBLE ANDHRA PRADESH H IGH COURT IN THE CASE OF SPRECTRA SHARES AND SCRIPTS (P) LTD. VS . COMMISSIONER OF INCOME TAX REPORTED AT (2013) 91 DT R (AP) 289- ISSUE NO, 164 OF 5 TH SEPTEMBER-2013. SALE INCLUDES SHARES PURCHASED, SHARE APPLIED AND A LLOTTED SOLD, BONUS SHARES, RIGHT SHARES ALLOTTED AND SOLD. IN SHORT TE RM CAPITAL GAINS BONUS SHARES, RIGHTS/ SHARES ALLOTTED ON IPO APPLICANTS A RE AS PER STATEMENT ATTACHED. ITA NO. 534/AHD/2010, A.Y. 06-07 PAGE 6 HE ALSO FILED THE DETAILS OF THE SHORT TERM CAPITAL GAIN CLAIMED BY THE ASSESSEE AND ALSO A COPY OF RETURN, COPY OF CHALLAN SHOWING SECURITY TRANSACTION PAID BY THE ASSESSEE, A COPY OF COMPUTATION OF INCOME AND D ETAILS OF CHART OF SALE- PURCHASE OF SHARES AND ALSO DRAWN OUR ATTENTION THA T THE ASSESSEE HAD ALLOTTED BONUS SHARES WHICH WAS ALSO SOLD DURING TH E YEAR AND THERE IS NO PURCHASE PRICE IN CASE OF BONUS SHARES AND WHOLE VA LUE OF SHARES HAD BEEN SHOWN AS SHORT TERM CAPITAL GAIN, WHICH PROVES TH AT THE ASSESSEES INTENTION WAS TO INVEST IN THE SHARES AND SECURITY FOR INVEST MENT PURPOSE AND NOT FOR TRADING PURPOSE. IN PAST ALSO, THE REVENUE HAS ACCE PTED THE ASSESSEES SHORT TERM CAPITAL GAIN AS IT IS. THUS, HE PRAYED TO ALL OW THE SHORT TERM CAPITAL GAIN AS CLAIMED BY THE ASSESSEE. AT THE OUTSET, THE LD. DR SUBMITTED THE ORDER OF THE LD. CIT(A). 5. WE HAVE GONE THROUGH THE PAPER BOOK SUBMITTED BY THE ASSESSEE AND ORDER OF THE LOWER AUTHORITIES. IT IS FOUND FROM TH E DETAILS FURNISHED BY THE ASSESSEE THAT THE LD. A.O. EVEN ON BONUS SHARES HAS ALSO CALCULATED AS BUSINESS INCOME WHICH PROVES THAT THE ASSESSEE HE LD SHARES FOR THE INVESTMENT PURPOSE. BUT ON THE BASIS OF MAGNITUDE OF TRANSACTION, FREQUENCY, LENGTH OF HOLDING, THE SOURCES OF INCOME, MOTIVE, W E HOLD THAT SHARE PURCHASED AND SOLD DURING THE YEAR, IS BUSINESS EXC EPT THE TAX SHOWN ON BONUS SHARES WITH ORIGINAL SHARES, IF ANY. ITA NO. 534/AHD/2010, A.Y. 06-07 PAGE 7 THUS, WE SET ASIDE THE ORDER OF THE LD. A.O. AS PER THE ABOVE DIRECTION TO RE- COMPUTE THE INCOME ACCORDINGLY. 6. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER PRONOUNCED IN OPEN COURT ON 17.12.2013 SD/- SD/- ( MUKUL KR. SHRAWAT) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA . . . . % %% % '/ '/ '/ '/ 0/- 0/- 0/- 0/- / COPY OF ORDER FORWARDED TO:- 1. #$ / APPELLANT 2. '(#$ / RESPONDENT 3. 44 5 / CONCERNED CIT 4. 5- / CIT (A) 5. /9: ') , , / DR, ITAT, AHMEDABAD 6. :< => / GUARD FILE. BY ORDER/ . , ?/ 4A , '