MUKUND N. SHAH, MUMBAI V. ACIT 20(2),

ITA 5428/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87850 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 05-01-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 21-07-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIVEK BATRA
• Assessee Lawyers: NEELAM C JADHAV
• Keywords: Business income

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE S/SHRI I.P. BANSAL, (JM) AND B.R.BASKARAN (AM) . . , . . , ./ I.T.A. NO.5428/MUM/2011 ( / ASSESSMENT YEAR : 2007-08) MR.MUKUND N SHAH, A-7, NANDDHAM INDUSTRIAL, ESTATE, MAROL MAROSHI ROAD, ANDHERI (E), MUMBAI. / VS. ADDL. COMMISSIONER OF INCOME TAX -20(2), LALBAUG, MUMBAI-400011 ( / APPELLANT) .. ( / RESPONDENT) ./ !' ./PAN/GIR NO. :AAGPS8024G # / ASSESSEE BY: MS.NEELAM C JADHAV $ # / REVENUE BY:: SHRI VIVEK BATRA % & $ ' ( / DATE OF HEARING : 5.1.2015 )* $ ' ( / DATE OF PRONOUNCEMENT : 5.1.2015 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE IS AGGRIEVED BY THE ORDER OF LD CIT(A)-31, MUMBAI PASSED FOR ASSESSMENT YEAR 2007-08 IN RESPECT OF TH E FOLLOWING ISSUES:- (A) ASSESSMENT OF SHORT TERM CAPITAL GAIN TO THE EXTEN T OF RS.2,29,311/- AS BUSINESS INCOME. (B) NON-ADJUDICATION OF THE CLAIM FOR SET OFF OF BROUG HT FORWARD LOSS. 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. WE NOTICE THAT THE ASSESSEE IS AN INDIVIDUAL HAVING INCOME FROM HOUSE PROPERTY, SHARE INCOME FROM PARTNERSHIP FIRM, CAPITAL GAIN AND OTHE R SOURCES INCOME. HE DECLARED SHORT TERM CAPITAL GAIN OF RS.5,19,057/- A ND LONG TERM CAPITAL ITA NO.5428/M/11 2 GAIN OF RS.8,19,486/- FROM OUT OF PURCHASE AND SALE OF SHARES. THE AO ASSESSED THE ENTIRE AMOUNT OF SHORT TERM CAPITAL GA IN OF RS.5,19,057/- AS BUSINESS INCOME ON THE REASONING THAT THE VOLUME OF TRANSACTIONS OF PURCHASE AND SALE ARE HUGE AND THE SHARES HAVE BEEN HELD FOR SHORTER PERIOD OF LESS THAN 30 DAYS. IN THE APPELLATE PROC EEDINGS, THE LD CIT(A) NOTICED THAT THE ASSESSEE HAS APPLIED SHARES UNDER INITIAL PUBLIC OFFER (IPO) AND UPON ALLOTMENT OF SHARES, HE HAS SOLD THE M. THE PROFIT EARNED TO THE EXTENT OF RS.1,37,751/- WAS ACCEPTED BY THE LD CIT(A) AS SHORT TERM CAPITAL GAIN. THE ASSESSEE HAD EARNED PROFIT OF RS.23,914/- OUT OF INTRA DAY TRANSACTIONS, THE LD CIT(A) HELD THAT TH E SAME WAS ASSESSABLE AS BUSINESS PROFITS. OUT OF THE REMAINING AMOUNT O F PROFIT, THE LD CIT(A) NOTICED THAT A SUM OF RS.2,29,311/- WAS EARNED OUT OF TRANSACTIONS OF SHARES HELD FOR LESS THAN 30 DAYS. THE LD CIT(A) H ELD THAT THE SAME IS TO BE CONSIDERED AS BUSINESS INCOME. 3. IT IS A SETTLED PROPOSITION THAT THE QUESTION, WHETHER THE NATURE OF TRANSACTION FALLS IN THE CATEGORY OF BUSINESS ACTIV ITY OR INVESTMENT ACTIVITY WOULD DEPEND UPON THE FACTS AND CIRCUMSTANCES OF EA CH CASE. IT IS ALSO WELL SETTLED PROPOSITION THAT A PERSON CAN ACT BOTH AS TRADER AND INVESTOR IN RESPECT OF SHARE TRANSACTIONS. THE INTENTION O F THE ASSESSEE AT THE TIME OF PURCHASE OF SHARES IS MORE RELEVANT HERE. IF TH E INTENTION OF THE ASSESSEE WAS NOT CLEAR, THEN WE HAVE TO APPLY THE VARIOUS CRITERION LISTED OUT BY THE COURTS AS WELL AS BY THE CBDT IN ITS CIR CULAR TO THE ACTIVITIES OF THE ASSESSEE AND BASED UPON THAT, THE QUESTION AS T O WHETHER THE ASSESSEE WAS AN INVESTOR OR TRADER IS REQUIRED TO B E ANSWERED. 4. IN THE INSTANT CASE, WE NOTICE THAT THE LD CIT( A) HAS ACCEPTED THE FACT THAT THE ASSESSEE HAS PURCHASED SHARES THROUGH IPO ALSO, WHICH ACTIVITY IS NORMALLY CARRIED ON BY THE INVESTORS ON LY, BECAUSE NORMALLY, THE MIND OF A TRADER WOULD NOT ACCEPT THE LONG WAITING PERIOD FOR ALLOTMENT OF SHARES UNDER IPO. FURTHER IT IS NOTICED THAT THE L D CIT(A) WAS GUIDED BY A ITA NO.5428/M/11 3 SINGLE FACT THAT THE PROFIT TO THE EXTENT OF RS.2,2 9,311/- WAS EARNED OUT OF SHARE TRANSACTIONS, WHERE THE HOLDING PERIOD WAS LE SS THAN 30 DAYS. IN OUR VIEW, THE HOLDING PERIOD IS ONLY ONE OF THE FAC TORS TO BE CONSIDERED, BUT NOT, THE ONLY FACTOR THAT WOULD DECIDE THE NATU RE OF TRANSACTION. 5. IN THE INSTANT CASE, IT IS SUBMITTED THAT THE ASSESSING OFFICER HAS ACCEPTED THE ASSESSEE AS AN INVESTOR AND ACCORDINGL Y ASSESSED THE CAPTIAL GAIN ARISING ON SALE OF SHARES IN AY 2006-07. THE COPY OF THE ASSESSMENT ORDER PERTAINING TO AY 2006-07 IS PLACED IN THE PAP ER BOOK. FURTHER, IT IS NOTICED THAT THE ASSESSEE HAS ALSO APPLIED SHARES I N IPO AND THE SHARES ALLOTTED HAVE BEEN SOLD, WHICH ACTIVITY IS NORMALLY CARRIED OUT BY INVESTORS. THE BALANCE SHEET PLACED BY THE ASSESSEE AT PAGE 4 OF THE PAPER BOOK SHOWS THAT THE ASSESSEE DOES NOT HAVE ANY BORROWING S AND HIS OWN CAPITAL IS AVAILABLE TO THE EXTENT OF RS.10.05 CRORES. THE ASSETS SIDE SHOW THE FOLLOWING INVESTMENTS:- BONDS 4.05 CRORES COMPANYS CAPITAL 1.42 CRORES MUTUAL FUND 2.95 CRORES SHARES 0.40 CRORES THE ABOVE SAID INVESTMENT PATTERN SHOWS THAT THE AS SESSEE IS MAKING INVESTMENTS IN SAFER ZONE ONLY, SINCE THE INVESTMEN T IN SHARES CONSTITUTES A MINICULE PORTION OF HIS CAPITAL, WHERE AS THE INV ESTMENT IN BONDS AND MUTUAL FUND IS TO THE EXTENT OF 70% OF HIS CAPITAL. HENCE, CONSIDERING THESE FACTS, WE ARE OF THE VIEW THAT THE ASSESSEE S HOULD BE CONSIDERED AS INVESTOR ONLY AND NOT AS TRADER. 6. HOWEVER, THE PROFIT EARNED ON INTRA-DAY TRANSA CTIONS ACQUIRE THE COLOUR OF TRADER IN RESPECT OF THAT PROFIT. ACCORD INGLY, WE ARE OF THE VIEW THAT THE LD CIT(A) WAS JUSTIFIED IN UPHOLDING THE A SSESSMENT OF PROFIT EARNED ON INTRA DAY TRANSACTIONS AS BUSINESS INCOME . IN RESPECT OF THE REMAINING AMOUNT OF SHORT TERM CAPITAL GAIN DECLARE D BY THE ASSESSEE, WE ITA NO.5428/M/11 4 HOLD THAT THE SAME SHOULD ASSESSED AS SHORT TERM CA PITAL GAIN ONLY AND NOT AS BUSINESS INCOME. ACCORDINGLY WE MODIFY THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO ASSE SS THE SHORT TERM CAPITAL GAIN DECLARED BY THE ASSESSEE UNDER THE HEAD SHORT TERM CAPITAL GAIN EXCEPT THE AMOUNT RELATING TO INTRA DAY PROFITS, WH ICH SHALL BE ASSESSED AS BUSINESS INCOME. 7. THE NEXT GROUND RELATES TO THE SETTING OFF OF BROUGHT FORWARD LOSS. IT IS NOTICED THAT THE LD CIT(A) DID NOT ADJUDICATE THIS GROUND. HOWEVER, SINCE IT IS A STATUTORY CLAIM, THE SAME REQUIRES TO BE EXAMINED AT THE END OF THE ASSESSING OFFICER. ACCORDINGLY, WE DIRECT T HE ASSESSING OFFICER TO EXAMINE THE ABOVE SAID CLAIM OF THE ASSESSEE IN ACC ORDANCE WITH THE RECORD AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH THE LAW. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 5TH JAN, 2015 . )* % + , - 5 TH JAN, 2015 * $ .& / SD SD ( . . /I.P. BANSAL ) ( . . ,/ B.R. BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER % & MUMBAI: 5TH JAN,2015. . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. % 2' ( ) / THE CIT(A)- CONCERNED 4. % 2' / CIT CONCERNED 5. 6. 34 . '5 , ( 5 , % & / DR, ITAT, MUMBAI CONCERNED . 6 7 & / GUARD FILE. 8 % / BY ORDER, TRUE COPY 9 ! (ASSTT. REGISTRAR) ( 5 , % & /ITAT, MUMBAI