DCIT, New Delhi V. M/s Consolidated Photo & Finvest Ltd., New Delhi

ITA 5519/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3932 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 09-05-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 07-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Assessee Lawyers: RUPESH J AIN
• Keywords: Business income; Depreciation; Earning of tax free income
• Section: 14A; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B NEW DELHI) BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI K.G. BANSAL, ACCOUNTANT MEMBER I.T.A. NO.5519/D/2010 ASSESSMENT YEAR :2007-08 DY. CIT. VS. M/S CONSOLIDATED PHOTO & CIRCLE 3(1), FINVEST LTD., PLOT NO.12, NEW DELHI LOCAL SHOPPING COMPLEX, SECTOR B-1, VASANT KUNJ, NEW DELHI PAN NO.AAACC 4815C (APPELLANT) (RESPONDENT) APPELLANT BY : MS. Y. KAKKAR, SR. DR RESPONDENT BY : S/SHRI RUPESH JAIN & GAURAV JAIN, ADVOCATES ORDER PER K.G. BANSAL: AM: IN THIS APPEAL, THE REVENUE HAS TAKEN TWO SUBSTANTIVE GR OUNDS. THE FIRST GROUND IS IN RELATION TO THE DISALLOWANCE TO BE MADE U/S 14A OF THE INCOME-TAX ACT, 1961 (THE ACT). THE SECOND GROUND IS REGARDING THE PRO FIT OF `38,38,245/- SHOWN BY THE ASSESSEE AS SHORT-TERM CAPITAL GAINS, BUT ASSESSED BY THE ASSESSING OFFICER (THE A.O.) AS BUSINESS PROFIT. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE-COMPANY FI LED ITS RETURN ON 25.10.2007 DECLARING TOTAL INCOME OF `44,81,660/-. THE RETURN WAS PROCESSED U/S 143(1) ON 02.03.2009. THEREAFTER, THE CASE WAS TAKEN UP FOR SCRUTINY BY ISSUING NOTICE U/S 143(2) ON 18.09.2008. IN THE ASSESSMENT ORD ER, IT IS MENTIONED THAT THE ASSESSEE IS A NON-BANKING FINANCE COMPANY (NBFC), ENGAGED IN THE BUSINESS OF 5519-2010-CPF 2 ADVANCING LOANS FOR EARNING INTEREST INCOME. IT HAS AL SO EARNED INCOME BY WAY OF COMMISSION AND TRADING IN GOODS AND INVESTMENTS IN M UTUAL FUNDS. 2.1 IN THIS YEAR, THE ASSESSEE EARNED DIVIDEND INCOME OF `88 ,53,317/-. THE ASSESSEE ALSO SHOWED INCOME BY WAY OF LONG-TERM CAPITAL G OODS AMOUNTING TO `3,71,00,919/-. BOTH THESE INCOMES WERE NOT INCLUDED IN THE TOTAL INCOME BY DINT OF THE PROVISION CONTAINED IN SECTION 10(38) OF THE ACT . THE ASSESSEE WAS REQUIRED TO FURNISH THE DETAILS OF EXPENDITURE RELATABLE TO EARNING OF THE AFORESAID EXEMPT INCOMES IN VIEW OF THE PROVISIONS CONTAINED IN SECTION 1 4A OF THE ACT READ WITH RULE 8D OF THE I.T. RULES, 1962 (THE RULES). IT WAS SUBMITT ED THAT THE ASSESSEE HAD SUO MOTO DISALLOWED AN EXPENDITURE OF `36,64,485/- IN COMPU TATION OF INCOME, WHICH RELATED TO THE EARNING OF THE EXEMPT INCOMES. HOWEVER, IT WA S CONTENDED THAT THE PROVISION OF RULE 8D, NOTIFIED ON 24.03.2008, WERE NOT APPLICABLE TO THE PROCEEDINGS OF THIS YEAR. THE ASSESSING OFFICER DID NOT ACCEPT THIS CONTENTION IN VIEW OF THE DECISION OF THE SPECIAL BENCH OF MUMBAI TRIBUN AL IN THE CASE OF INCOME TAX OFFICER VS. DAGA CAPITAL MANAGEMENT (P) LIMITED, DA TED 20.10.2008, IN WHICH IT HAS BEEN HELD THAT THE RULE IS APPLICABLE RETROSPECTIVELY . ACCORDINGLY, HE COMPUTED THE AMOUNT TO BE DISALLOWED AT `78,70,570/-, L EADING TO FURTHER DISALLOWANCE OF A SUM OF `42,06,085/-. THE DETAILS O F COMPUTATION MADE BY THE ASSESSING OFFICER ARE REPRODUCED BELOW:- I) EXPENSES DIRECTLY ATTRIBUTABLE NIL II) INTEREST EXPENSE A*B/C 1666067 III) .5% OF THE AV. INVESTMENTS=.5%B 6204503 DISALLOWABLE EXPENSE 7870570 A TOTAL INTEREST 85327 B OPENING VALUE OF INVESTMENT 120710997 9 CLOSING VALUE OF INVESTMENT 127469134 3 AV. VALUE OF T HE INVESTMENT 12409006 61 C OPENING VALUE OF THE ASSET 63642266 CLOSING VALUE OF THE ASSET. 63462220 5519-2010-CPF 3 AVG. VALUE OF THE ASSET. 63552243 2.2 THE ASSESSEE HAD SHOWN SHORT-TERM CAPITAL GAINS OF ` 38,38,245/- AND LONG- TERM CAPITAL GAINS OF `3,71,00,919/-. THE ASSESSEE WAS REQUESTED TO JUSTIFY THAT THE ALLEGED SHORT-TERM CAPITAL GAINS WERE PROPERLY ASSESSABLE A S SUCH AND NOT AS BUSINESS INCOME. IT WAS INTER ALIA SUBMITTED THAT THE A SSESSEE COMPANY IS A NBFC AND IT NORMALLY HELD INVESTMENTS ON LONG-TERM BASIS. A LL THE SHARES WERE HELD WITH THE INTENTION TO EARN INCOME BY WAY OF CAPITAL GAINS A RISING ON ACCOUNT OF APPRECIATION IN THE VALUE OF INVESTMENTS OVER A LONG PERIO D OF TIME, AND NOT WITH A VIEW TO TRADING IN THEM. THE ASSESSEE HAD ALSO REDEEMED UNIT S OF MUTUAL FUNDS, ON WHICH SHORT-TERM CAPITAL GAINS ACCRUED TO IT. THIS A CCRUAL WAS ON CAPITAL ACCOUNT AND NOT ON TRADING ACCOUNT. THEREFORE, IT WAS ARGUED T HAT THE INCOME SO EARNED WAS PROPERLY ASSESSABLE AS SHORT-TERM CAPITAL GAINS. 2.3 THE ASSESSING OFFICER DID NOT ACCEPT THE SUBMISSION OF THE ASSESSEE. HE REFERRED TO BOARD CIRCULAR NO.4/2007 DATED 15.06.2007, WHICH DEALS WITH GENERAL PRINCIPLES REGARDING CLASSIFICATION OF INCOME. HE ALSO REFERRED TO VARIOUS DECIDED CASES IN THE MATTER AND CAME TO THE CONCLUSION THA T THREE FACTORS HAVE TO BE TAKEN INTO ACCOUNT FOR MAKING A PROPER CLASSIFICATI ON I.E., -(I) WHETHER THE SHARES ARE SHOWN IN THE BOOKS AS INVESTMENTS OR STOCK IN TRADE AND VALUED ACCORDINGLY (II) WHETHER THE MAGNITUDE OF THE TRANSACTIONS IS SUBSTANTIAL WHEN COMPARED WITH THE BUSINESS TRANSACTIONS OF THE ASSESSEE AND (III) WHETHER TH E INTENTION IS TO DERIVE INCOME BY WAY OF DIVIDENDS AND CAPITAL GAINS OR TO DEA L IN SCRIPTS. IT IS MENTIONED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING AS WELL AS INVESTMENT IN SHARES AND SECURITIES. IT BOUGHT VARIOUS SHARES OF LI STED COMPANIES IN THIS YEAR AND SOLD THEM AFTER A PERIOD OF FEW DAYS TO FEW MONTHS. NO DIVIDEND WAS RECEIVED BY THE ASSESSEE ON SUCH SHARES. THEREFORE, THE SURPLUS REALIZED WAS BROUGHT TO TAX AS BUSINESS INCOME. 5519-2010-CPF 4 2.4 AGGRIEVED BY THIS ORDER, THE ASSESSEE MOVED APPEAL BEFOR E THE LEARNED CIT(A). 3. COMING TO DISALLOWANCE U/S 14A READ WITH RULE 8D, T HE LEARNED CIT(A) MENTIONED THAT THE DECISION IN THE CASE OF DAGA CAPITAL M ANAGEMENT (P) LTD., HAS BEEN REVERSED BY THE HONBLE MUMBAI HIGH COURT IN THE CASE O F GODREJ AND BOYCE MANUFACTURING COMPANY LIMITED VS. DCIT IN WRIT PETITI ON NO.758 OF 2010, IN WHICH IT HAS BEEN HELD THAT THE PROVISIONS OF RULE 8D ARE APPLI CABLE WITH EFFECT FROM ASSESSMENT YEAR 2008-09. THEREFORE, THIS RULE IS NOT A PPLICABLE TO THE PROCEEDINGS OF THIS YEAR. ACCORDINGLY, THE FURTHER DISA LLOWANCE MADE BY THE ASSESSING OFFICER HAS BEEN DELETED. 3.1 COMING TO THE TAXATION OF SURPLUS OF `38,38,245/ -, IT IS MENTIONED THAT THE ASSESSEE ALSO EARNED LONG-TERM CAPITAL GAINS OF `3,71,00, 919/-, WHICH HAVE BEEN ASSESSED AS SUCH. THE ASSESSEE TREATED MOST OF THE SHARES AS INVESTMENTS IN THE ACCOUNTS. SHORT-TERM CAPITAL GAINS OF `17,12,857/- I N RESPECT OF UNITS OF MUTUAL FUNDS WERE EARNED AFTER PAYMENT OF SECURITIES TRANSACTION TA X (STT) AND PROFIT OF `21,25,378/- WAS ALSO EARNED IN RESPECT OF UNITS OF MUT UAL FUNDS, WHICH DID NOT INVOLVE THE PAYMENT OF STT. THE ASSESSEE HAD BEEN SHOWING T HE ASSET AS INVESTMENTS IN THE BALANCE SHEET. THE TRANSACTIONS LEADING TO LONG-TERM CAPITAL GAINS HAVE BEEN ASSESSED AS SUCH. NO DISTINCTION HAS B EEN MADE OUT BETWEEN THESE INVESTMENTS AND INVESTMENTS LEADING TO SHORT-TERM CAP ITAL GAINS. THEREFORE, IT HAS BEEN HELD THAT THE GAINS WERE RIGHTLY DECLARED AS SHOR T-TERM CAPITAL GAINS. 4. AGGRIEVED BY THIS ORDER, THE REVENUE IS IN APPEAL BEFORE US. 5519-2010-CPF 5 4.1 IN RESPECT OF DISALLOWANCE U/S 14A, THE LEARNED DR DR EW OUR ATTENTION TO PAGE NOS.1 & 2 OF THE ASSESSMENT ORDER WHICH RECORD THE F ACTS REGARDING EARNING OF DIVIDEND INCOME OF ABOUT `88.53 LACS AND LONG-TERM CAP ITAL GAINS OF ABOUT `3.71 CRORES, BOTH OF THEM NOT INCLUDIBLE IN THE TOTAL U/S 10 (38). THE ASSESSEE DISALLOWED A SUM OF ABOUT `36.64 LACS, BEING EXPENDITURE RELATING TO EARNING OF EXEMPT INCOMES. A REFERENCE IS MADE TO PAGE NO.6 OF THE PAPER BOOK FILED BY THE ASSESSEE, BEING THE PROFIT AND LOSS ACCOUNT FOR THIS YEAR. THE ACCOU NT SHOWS DIVIDENDS RECEIVED IN RESPECT OF TRADE INVESTMENT AT ABOUT `88.53 LACS AND PRO FIT ON SALE/REDEMPTION OF INVESTMENTS AT ABOUT `4.09 CRORES. THE CASE OF THE LEARN ED DR IS THAT THESE TWO INCOMES COMPRISED THE BULK OF TOTAL INCOME CREDITED IN P ROFIT AND LOSS ACCOUNT AMOUNTING TO ABOUT `5.73 CRORES. THEREFORE, IT IS ARGU ED THAT THE BULK OF EXPENDITURE DEBITED IN PROFIT AND LOSS ACCOUNT PERTAINS T O THE EARNING OF THESE INCOMES. 4.2 IN REPLY, THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED T O PAGE NO.9 OF THE PAPER BOOK AND MENTIONED THAT ALL THE HOLDINGS HAVE B EEN SHOWN AS INVESTMENTS AND VALUED AT COST. FURTHER, HE REFERRED TO PAGE NO.3 OF THE PAPER BOOK WHICH FURNISHES THE DETAILS IN RESPECT OF THE DISALLOWANCE OF AB OUT `36.64 LACS MADE BY THE ASSESSEE AS EXPENDITURE RELATED TO EARNING OF EXEMPT INCOMES . THE DETAILS ARE AS UNDER:- TAXABLE INCOME LTCG DI VIDEND TOTAL REMARKS 6,937,716 37,100,919 8,853,317 52,891,953 EXPENSES 116,630 116,630 DEPRECIATION 41,400 41,400 RATED & TAXES 35,072 35,072 BUSINESS PROMOTION EXPENSES 246,745 246,745 SECURITIES TRANS - ACTION TAX 504,785 2,69 9,443 644,163 3,848,390 BALANCE EXPENSES 11,192 59,852 14,282 85,327 INTT. & FINANCIAL CHARGES 709,079 3,006,040 658,445 4,373,564 5519-2010-CPF 6 4.3 IT IS SUBMITTED THAT THE COMPUTATION MADE BY THE A SSESSEE IS IN LINE WITH THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GO DREJ AND BOYCE MANUFACTURING COMPANY LIMITED (SUPRA). THEREFORE, IT I S ARGUED THAT THE ASSESSING OFFICER ERRED IN MAKING ANY FURTHER DISALLOWANCE. IN FA CT, THE DISALLOWANCE MADE BY HIM IS MORE THAN THE EXPENDITURE ACTUALLY INCURRED BY THE ASSESSEE. 5. WE HAVE CONSIDERED THE FACTS AND SUBMISSIONS MADE BEF ORE US. RULE 8D WAS NOTIFIED ON 24.03.2008. IT IS A SUBSTANTIVE PROV ISION, HAVING IMPACT ON COMPUTATION OF THE TOTAL INCOME OF THE ASSESSEE. THE HON BLE BOMBAY HIGH COURT HAS HELD THAT THE PROVISION, BEING NOTIFIED ON 24.03.2 008, IS APPLICABLE TO THE PROCEEDINGS OF ASSESSMENT YEAR 2008-09 AND ONWARDS. IT DOES NOT HAVE RETROSPECTIVE OPERATION. IN VIEW OF THIS JUDGMENT, WHIC H IS THE ONLY JUDGMENT FROM A HIGH COURT ON THE ISSUE, IT IS HELD THAT THE ASSESSING OFFICER WAS NOT RIGHT IN INVOKING THE PROVISION OF THIS RULE. COMING TO THE ACTUAL COMP UTATION OF THE AMOUNT TO BE DISALLOWED, THE LEARNED DR HAS NOT BEEN ABLE TO POINT OUT ANY ERROR IN THE COMPUTATION FILED BY THE ASSESSEE ALONGWITH THE RETURN OF INCOME, WHICH HAVE ALREADY BEEN REPRODUCED BY US. IN SUCH A SITUATION, THER E IS NO NEED FOR US TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A). 5.1 IN RESULT, GROUND NO.1 IS DISMISSED. 6. IN REGARD TO GROUND NO.2, THE LEARNED DR DREW OUR ATT ENTION TO PAGE NOS. 4 TO 7 OF THE ASSESSMENT ORDER, WHICH DEAL WITH THE BOARD C IRCULAR, VARIOUS CASE LAWS AND THE PRINCIPLES ASCERTAINED BY HIM FOR CLASSIFICATI ON OF THE INCOME. THESE MATTERS HAVE ALREADY BEEN STATED BY US. FURTHER, SHE REFERRED TO PA GE NO.17 OF THE PAPER BOOK, WHICH FURNISHES THE COMPUTATION OF LONG-TERM CAP ITAL GAINS, AND SHORT-TERM CAPITAL GAINS. WE HAVE ALREADY REPRODUCED THE DETAILS REG ARDING SHORT-TERM 5519-2010-CPF 7 CAPITAL GAINS. THE LONG-TERM CAPITAL GAINS ARE IN RESP ECT OF FIDELITY EQUITY FUND - DIVIDEND OPTION AND FIDELITY EQUITY FUND DIVIDEND REIN VESTMENT PLAN. THE CAPITAL GAINS HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER AS LONG-T ERM CAPITAL GAINS. THE SHORT-TERM CAPITAL GAINS ARE IN RESPECT OF UNITS OF SI X MUTUAL FUNDS. IN RESPECT OF P- 24 PRUDENTIAL ICICI STP CUMULATIVE OPTION, FIVE CRORE UNITS HAVE BEEN PURCHASED ON 17.11.2006. OUT OF THIS LOT, VARIOUS NUMBER OF U NITS HAVE BEEN SOLD ON 13.12.2006, 15.12.2006, 12.03.2007, 20.03.2007 AND 29.03.2007. IT IS HER CASE THAT SALE OF VARIOUS PORTIONS OF THE HOLDING ON D IFFERENT DATES AMOUNTS TO DEALING IN UNITS. 6.1 IN REPLY, THE LEARNED COUNSEL SUBMITTED THAT VARIOUS FINDINGS IN THE ASSESSMENT ORDER ARE WRONG. THE GAIN HAS ACCRUED ON REDEMPTION OF U NITS AND NOT SALE OF SHARES. THE ASSESSEE HAS SHOWN THESE UNITS AS INVESTMENTS I N THE BALANCE SHEET AND AT NO POINT OF TIME ANY INVESTMENT WAS CONVERTED INTO ST OCK IN TRADE. THE SHORT-TERM ASSETS WERE HELD FOR A PERIOD OF ONE MONTH TO SIX MONTHS AND NOT FOR A FEW DAYS TO A FEW MONTHS AS MENTIONED BY THE ASSESSING OFFICER. THESE UN ITS ALONG WITH OTHER ASSETS HAVE BEEN VALUED AT COST SHOWING THAT THE INTENTION WAS TO TREAT THEM AS INVESTMENTS. THUS, IT IS ARGUED THAT THE INCOME IS RIG HTLY TAXABLE AS SHORT-TERM CAPITAL GAINS. 7. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSION S MADE BEFORE US. THE FACTS ARE THAT THE ASSESSEE HAS BEEN INVESTING IN SHARES AND UNITS, WHICH HAVE BEEN SHOWN AS INVESTMENTS AND VALUED AT COST. IN THE REL EVANT SCHEDULE-D, THE DETAILS OF INVESTMENTS FOR THIS YEAR AND IMMEDIATELY PREC EDING YEAR ARE AVAILABLE. THE ASSESSEE HAS ALSO FURNISHED THE DETAILS OF COMPUTATION OF SHORT-TERM CAPITAL GAINS. THE INVESTMENTS IN THE UNITS OF SIX MUTUAL FUND S HAVE BEEN PARTLY REDEEMED IN THIS YEAR. IN CASE OF P-24 PRUDENTIAL ICICI STP CUMU LATIVE OPTION, FIVE CRORE UNITS 5519-2010-CPF 8 WERE PURCHASED ON 17.11.2006. PART OF THIS HOLDING HA S BEEN REDEEMED ON FIVE DATES BETWEEN 13.12.2006 AND 29.03.2007. AS THE UNITS H AVE BEEN REDEEMED, STT WAS NEITHER PAYABLE NOR PAID. THE QUESTION IS WHETH ER SURPLUS REALIZED BY THE ASSESSEE CONSTITUTES SHORT-TERM CAPITAL GAINS FOR BUSINES S PROFIT? 7.1 IN THE CASE OF SMT. SADHANA NABERA VS. ACIT, 2010-TI OL-251-ITAT-MUM DATED 26.03.2010, RELIED UPON BY THE LEARNED DR, THE FACTS ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND DIRECTOR/SHARE HOLDER IN TWO COMPAN IES. HER HUSBAND IS ALSO DIRECTOR AND SHAREHOLDER IN THREE COMPANIES. ALL THESE COM PANIES ARE ENGAGED IN THE BUSINESS OF TRADING IN SHARES. IN THE RETURN OF IN COME, THE ASSESSEE INTER ALIA SHOWED SHORT-TERM CAPITAL GAINS OF `79,74,441/- AFTER 01.10.2004. THE ASSESSING OFFICER FOUND THAT A LARGE NUMBER OF TRANSACTIONS OF P URCHASE AND SALE WERE UNDERTAKEN AND SOME TRANSACTIONS WERE SETTLED WITHOUT DELIV ERY. THE SURPLUS/DEFICIENCY WERE SHOWN AS SHORT-TERM CAPITAL GAIN AND LOSS. THE ASSESSING OFFICER TREATED SHORT-TERM CAPITAL GAIN AS BUSINESS IN COME. THE TRIBUNAL CONSIDERED VARIOUS TRANSACTIONS UNDERTAKEN BY THE ASSESSEE IN DIFFEREN T YEARS. IN PARAGRAPH 7, IT HAS BEEN MENTIONED THAT LOOKING TO FREQUENCY OF TRANSA CTIONS AND SMALL PERIOD OF HOLDING, THE MOTIVE WAS TO EARN PROFIT IN A SHORT PERIO D. THERE WERE ALSO TRANSACTIONS SETTLED ON THE SAME DAY WITHOUT DELIVERY. T HEREFORE, IT HAS BEEN HELD THAT THE TRANSACTIONS ARE IN THE NATURE OF BUSINESS. TH E FACTS OF THIS CASE ARE DISTINGUISHABLE. IN THE FIRST PLACE, THE ASSESSEE HAS REDEEM ED UNITS OF VARIOUS MUTUAL FUNDS. IT IS NOT A CASE OF FREQUENT PURCHASE AN D SALE OF SHARES. IT IS ALSO NOT A CASE WHERE ANY TRANSACTION HAS BEEN SETTLED WITHOUT DELI VERY. 7.2 ON THE OTHER HAND, IN THE CASE OF CIT VS. ESS JAY E NTERPRISES (P) LTD., (2008) 173 TAXMAN 1 (DELHI), RELIED UPON BY THE LEARNED COUNSEL, THE FACTS ARE THAT THE ASSESSEE HAD PURCHASED 95,000 SHARES OF JAY PRAKASH INDU STRIES LTD. IN THE YEAR 1990-91. SUBSEQUENTLY, 20,000 RIGHT SHARES WERE PURCHASED IN THE YEAR 1993-94. THESE SHARES WERE SOLD IN THE PREVIOUS YEARS RELEVANT TO ASSES SMENT YEARS 1996-97 5519-2010-CPF 9 AND 1997-98. THE ASSESSING OFFICER ASSESSED THE INCOME OF `65,78,619/- AS BUSINESS INCOME. THE APPEAL OF THE ASSESSEE WAS ALLOWED BY THE CIT(A). THE TRIBUNAL ALSO DISMISSED THE APPEAL OF THE REVENUE. THE HON BLE COURT MENTIONED THAT THE SHARES WERE SHOWN AS INVESTMENTS AND THERE IS NOTH ING TO SHOW THAT THE INVESTMENTS HAVE BEEN CONVERTED INTO STOCK IN TRADE OF THE BUSINESS. THE ASSESSEE HAD BEEN RUNNING THE BUSINESS OF RESTAURANT. ONE OF THE OB JECTS WAS REGARDING BUYING AND SELLING OF SHARES. HOWEVER, THIS BUSINESS WA S NOT CONDUCTED AND THERE IS NO MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE REGULA RLY DEALT IN SHARES. RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RAJ A BAHADUR KAMAKHYA NARAIN SINGH VS. CIT, (1970) 77 ITR 253, TO THE EFFECT THAT TREATMENT GIVEN TO A TRANSACTION IN THE BOOKS OF ACCOUNT IS OF IMPORTANCE, IT WAS HELD THAT THE SHARES WERE HELD BY THE ASSESSEE AS INVESTMENTS AND, THEREFORE, THERE WA S NO ERROR IN THE ORDER OF THE TRIBUNAL. THE FACTS OF THIS CASE ARE NEARER TO THE FACTS OF THE ASSESSEE. THE ASSESSEE HAD SHOWN UNITS AS INVESTMENTS AND VALUED AT COST ALONG WITH OTHER ASSETS. THERE IS NO SYSTEMATIC ACTIVITY OF SUBSCRIBING TO AND REDEEMING OF THE UNITS. THEREFORE, IT IS HELD THAT THE LEARNED CIT(A) WAS RIGHT IN HOLDING THAT THE SURPLUS IS TO BE TAXED AS SHORT-TERM CAPITAL GAINS. 7.3 IN RESULT, GROUND NO.2 IS DISMISSED. 8. THE RESULT OF AFORESAID DISCUSSION IS THAT THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN OPEN COURT ON 13.05.2011. SD/- SD/- ( C.L. SETHI ) ( K.G. BANSAL ) JUDICIAL MEMBER ACCOUNTANT ME MBER DT.13.05.2011. NS 5519-2010-CPF 10 COPY FORWARDED TO:- 1. DY. CIT, CIRCLE 3(1), NEW DELHI. 2. M/S CONSOLIDATED PHOTO & FINVEST LTD., PLOT NO.12, LO CAL SHOPPING COMPLEX, SECTOR B-1, VASANT KUNJ, NEW DELHI. 3. THE CIT 4. THE CIT (A), NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY BY ORDER (ITAT, NEW DELHI).