NARMADA PRAKASHAN P. LTD, MUMBAI V. ACIT 5(2), MUMBAI

ITA 6177/MUM/2009

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88582 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2015
• Appeal Filed By: Assessee
• Bench Allotted: G
• Next Hearing Date: 11-02-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 27-11-2009
• Court: TRIBUNAL
• Department Lawyers: PAVAN KUMAR BEER LA
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G, MUMBAI , BEFORE SHRI B R BASKARAN, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER . : . : . : . : 6177 6177 6177 6177/ // / / // / 2009, 2005-06 ITA NO. : 6177/MUM/2009 , ASSESSMENT YEAR 2005-06 NARMADA PRAKASHAN PVT LTD, A-32, MANDHANA MANOR, MATUNGA WEST, MUMBAI - 400 016 PAN: AAACN 1197 J VS ACIT 5(2), AAYAKAR BHAVAN, MUMBAI -400 020 (APPELLANT) (RESPONDENT) . : . : . : . : 6178 6178 6178 6178/ // / / // / 2009 , 2005-06 ITA NO. :6178/MUM/2009 , ASSESSMENT YEAR 2005-06 NARMADA APPLIANCES PVT LTD, A-32, MANDHANA MANOR, MATUNGA WEST, MUMBAI -400 016 PAN: AAACN 1893 M VS ACIT 5(2), AAYAKAR BHAVAN, MUMBAI -400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MADHUR AGARWAL RESPONDENT BY : SHRI PAVAN KUMAR BEERLA ! ' #$% /DATE OF HEARING : 11-02-2015 &' ' #$% / DATE OF PRONOUNCEMENT : 04 -03-2015 ORDER , , , , : :: : PER VIVEK VARMA, JM: THE TWO APPEALS ARE FILED BY THE ASSESSEE AGAINST T HE ORDERS OF CIT(A) 9, MUMBAI, BOTH DATED 12.10.2009. THE ISSUES RAISED IN BOTH THE ASSESSEES CASES ARE SAME, I.E. TREATING GAIN O N THE SALE OF SHARES AS BUSINESS INCOME IN PLACE OF CAPITAL GAINS, CLAIM ED BY THE ASSESSEE. WE, THEREFORE, ARE DISPOSING OFF BOTH THE APPEALS T HROUGH THIS COMMON AND CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. NARMADA PRAKASHAN PVT LTD ITA NO. 6177/MUM/2009 NARMADA APPLIANCES PVT LTD ITA NO. 6178/MUM/20009 2 2. THE RELEVANT FACTS ARE THAT THE ASSESSEE COMPANY WAS EARLIER ENGAGED IN THE BUSINESS OF TRADING IN SHARES AND GRANTING L OANS AND ADVANCES. HOWEVER, NO SUCH BUSINESS ACTIVITY WAS CARRIED OUT BY THE ASSESSEE IN THE CURRENT YEAR. IN THE CURRENT YEAR, THE ASSESSEE HAS SHOWN INCOME OF RS. 24,82,465/- AS SHORT TERM CAPITAL GAINS AND INCOME OF RS. 6,64,144/- UNDER THE HEAD LONG TERM CAPITAL GAINS ON THE SALE OF SHA RES. OTHER THAN CAPITAL GAINS THE ASSESSEE HAS SHOWN DIVIDEND INCOME OF RS. 1,99,958/- AND DEBENTURE INTEREST AT RS. 484/- 3. IN THE ASSESSMENT PROCEEDING, AO ASKED THE ASSE SSEE TO EXPLAIN AS TO WHY PROFITS ON THE PURCHASE AND SALE OF SHARES, SHO WN UNDER THE HEAD SHORT TERM CAPITAL GAINS, SHOULD NOT BE BROUGHT TO TAX UN DER THE HEAD BUSINESS INCOME. THE ASSESSEE FILED DETAILED SUBMISSIONS VI DE LETTERS DATED 17.122007 AND 26.122007. THE AO ALSO NOTICED THAT T HE ASSESSEE HAS USED BORROWED FUNDS FOR THE PURCHASE OF SHARES. THE FREQ UENCY OF PURCHASE AND SALE OF SHARES WAS CONSIDERED TO BE HIGH AND THIS A CTIVITY BEING THE MAIN SOURCE OF INCOME OF THE ASSESSEE. THE AO FURTHER NO TICED THAT THE ASSESSEE HAS PAID SERVICE TAX, TRANSACTION CHARGES AND TURNO VER TAX AND D-MAT CHARGES ON THESE TRANSACTIONS. THE AO HELD THAT THE ASSESSEE WAS TRADING IN SHARES. ACCORDING TO THE AO, I) THE SOLE INTENTION WAS TO BOOK PROFIT, II) TRADING IN REGULAR INTERVALS AND PAYMENT OF PROFESSIONAL CHARGES, III) RATIO OF SALES AND PURCHASES I.E. ONE TO ONE SALES AND PURCHASES, IV) DEVOTION OF TIME AND MONEY IN THE ACTIVITY AS A MEANS OF LIVELIHOOD OF ASSESSEE, ETC. 4. THE AO FURTHER HELD THAT THE ASSESSEE CARRIED OU T THE TRANSACTIONS ONLY TO AVOID PAYMENT OF TAXES AND TO REDUCE THE TAX BURDEN. THE AO HELD THAT THE ASSESSEE HAD SHOWN THE SE TRANSACTION OF PURCHASE AND SALE OF SHARES WHEN SECURITY TRANSA CTION ACT WAS INTRODUCED. THIS CLEARLY MEANS THAT THE INTENTION O F THE ASSESSEE WAS TO EARN PROFITS FROM TRADING ACTIVITY. THE AO THERE FORE, NEGATED THE CLAIM OF THE ASSESSEE OF CLAIMING THE STCG AND TREA TED THE PROFIT OF NARMADA PRAKASHAN PVT LTD ITA NO. 6177/MUM/2009 NARMADA APPLIANCES PVT LTD ITA NO. 6178/MUM/20009 3 THE ASSESSEE FROM THE PURCHASE AND SALE OF SHARES A S BUSINESS INCOME TO BE TAXED UNDER THE HEAD PROFIT AND GAINS OF BUSINESS AND PROFESSION . 5. THE AO, THEREFORE HELD THAT THE GAINS ON SALE OF SHARES IS BUSINESS INCOME AND CANNOT BE CHARACTERIZED AS CAPI TAL GAINS. 6. THE ASSESSEE APPROACHED THE CIT(A), BEFORE WHOM, THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AO. THE ASSESSEE ALSO SUBMITTED THAT IT WAS INVESTING IN SHARES AND SECUR ITIES SINCE 1995 AND WAS ALSO DOING TRADING IN SHARES TILL 31.03.2003. SINCE THEN, THERE IS NO SIT AND THERE IS NO ACTIVITY BY THE ASSESSEE IN THE NATURE OF TRADE. THE ASSESSEE ALSO SUBMITTED THAT THE TRANSAC TIONS WERE DELIVERY BASED AND THERE WERE NO BORROWED FUNDS. 7. THE ASSESSEE ALSO POINTED OUT THAT THE AVERAGE P ERIOD OF HOLDING IN THE CASE OF STCG WAS 84 DAYS AND IN LTCG, IT WAS MORE THAN 16 MONTHS. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAD NEITHER EMPLOYED ANY HUMAN OR MECHANICAL RESOURCES FOR THE PURCHASE AND SALE OF SHARE HELD AS INVESTMENT. TO STRENGTHEN ITS ARGUMENTS, THE ASSESSEE RELYING ON THE DECISION OF HD AGARWALA & S ONS, REPORTED IN 169 ITR 617, WHEREIN, HONBLE PATNA HIGH COURT HELD THAT WHEN THERE IS NO CONTROL OR DIRECTION GIVEN TO THE ACTIVITY OF THE PERSON NOR THERE IS A DIRECT NEXUS TO EARN PROFIT, IN SUCH A CASE, THE ASSESSEE CANNOT BE HELD TO BE CARRYING ON THE BUSINESS. THE ASSESSEE A LSO RELIED ON THE FOLLOWING CASE LAWS: SR. NO. CASE LAW CITATION A JANAK S RANGWALA 11 SOT 624 B FID E LITY NORTHSTAR FUND & ORS. 288 ITR 641(AAR) C BIKHA M CHAND BAGRI VS CIT 44 ITR 746 D CIT VS NSS INVESTMENT (P) LTD 277 ITR 149(MAD) 8. THE CIT(A), AFTER CONSIDERING THE DETAILED ARGUM ENTS OF THE ASSESSEE, HELD, NARMADA PRAKASHAN PVT LTD ITA NO. 6177/MUM/2009 NARMADA APPLIANCES PVT LTD ITA NO. 6178/MUM/20009 4 I HAVE CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND PERUSED THE FACTS OF THE CASE. THE QUESTION WHETHER PARTICULAR TRANSACTIONS ARE TRADE TRANSACTIONS OR ARE IN THE N ATURE OF INVESTMENTS ONLY IS NOT ALWAYS EASY TO ANSWER. VARI OUS COURT OF THIS COUNTRY HAS LAID DOWN PRINCIPLES THAT SHOULD G UIDE AND ASSIST THE AO TO DETERMINE THE TRUE NATURE OF TRANSA CTIONS CARRIED OUT BY THE ASSESSEE. THESE ARE ONLY GUIDELI NES AND ULTIMATELY ANSWER TO THE QUESTION WILL REST ON THE FACTS OF EACH CASE AND THIS QUESTION HAS TO BE ANSWERED BY TAKING ALL FACTS INTO CONSIDERATION. REFERENCE CAN BE MADE TO THE DEC ISION OF THE SUPREME COURT IN THE CASE OF G. VENKATSWAMY NAIDU A ND COMPANY 35 ITR 594 WHEREIN HONORABLE SUPREME COURT OBSERVED THAT 'THE PRESENCE OF ALL THESE FACTORS MA Y HELP THE COURT TO DRAW AN (INFERENCE THAT A TRANSACTION IS I N THE NATURE OF TRADE, BUT IT IS NOT A MATTER OF MERELY COUNTING TH E NUMBERS OF FACTS AND CIRCUMSTANCES PRO AND CONS, WHAT IS IMPOR TANT IS TO CONSIDER THEIR DISTINCTIVE CHARACTER.' CBDT BAS ALS O ISSUED CLARIFIED THIS ISSUE FROM TIME TO TIME. FIRST CLARI FICATION WAS IN THE FORM OF INSTRUCTION 1827, DATED AUGUST 31, 1989 AND SECOND CLARIFICATION WAS BY CIRCULAR NO 4.12.2007. IN THE CIRCULAR CERTAIN LEGAL PRINCIPLES WERE BROUGHT TO THE KNOWLEDGE OF T HE AO AND IT WAS EMPHASIZED THAT ULTIMATELY IT THE AO WHO HAS TO DECIDE THE ISSUE BY TAKING INTO CONSIDERATION ALL FACTS OF EAC H CASE. 3.1 LEGAL PRINCIPLES, WHICH MAY GUIDE THE AO TO DECI DE THE ISSUE IN A PARTICULAR CASE, MAY BE SUMMARIZED AS UNDER (I) INTENTION OF THE ASSESSEE AT THE TIME OF PURCH ASE OF ASSETS. IF INTENTION IS TO PURCHASE AND HOLD THE AS SETS, IT SHOULD NORMALLY BE TREATED AS CAPITAL TRANSACTION. IF PURCHASES ARE MADE WITH A VIEW TO RESELL IT MAY BE TREATED AS TRADE TRANSACTIONS. (II) WHETHER THE ASSESSEE IS A TRADER IN COMMODITY AND THE TRANSACTION OF PURCHASE AND SALE OF COMMODITY ARE A LLIED TO HIS USUAL TRADE OR BUSINESS OR INCIDENTAL TO IT. (III) WHETHER THE ASSESSEE HAS CARRIED OUT ANY ACT SUBSEQUENT TO PURCHASE TO IMPROVE THE QUALITY OF PR ODUCT AND WHETHER THESE ACTS ARE USUALLY CARRIED OUT IN T HAT TRADE. (IV) THE PERIOD OF HOLDING OF ASSETS. (V) SUBSTANTIAL NATURE OF TRANSACTIONS. (VI) MAGNITUDE OF PURCHASE AND SALE. (VII) RATIO BETWEEN SALE AND PURCHASE AND BETWEEN T URNOVER AND CAPITAL INVESTED. (VIII) FREQUENCY OF TRANSACTIONS. IF THE FREQUENCY OF TRANSACTION IS HIGH IT MAY BE STRONG INDICATOR THAT PERSON IS C ARRYING OUT TRADING TRANSACTIONS. (IX) TREATMENT GIVEN IN BOOKS OF ACCOUNTS. (X) IT IS POSSIBLE FOR A PERSON TO HAVE TWO PORTFOL IOS, ONE FOR TRADING TRANSACTIONS AND OTHER FOR INVESTMENT PORTF OLIO AND -PERSON SHOULD BE IN A POSITION TO TELL THE REA SONS FOR GIVING DIFFERENT TREATMENT. THIS -POINT HAS ALSO BE EN EMPHASIZED IN THE BOARD CIRCULAR NO 4/2007 DATED 15.6.2007. P NARMADA PRAKASHAN PVT LTD ITA NO. 6177/MUM/2009 NARMADA APPLIANCES PVT LTD ITA NO. 6178/MUM/20009 5 (XI) CONTINUITY OF TRANSACTIONS. IF THERE IS-CONTIN UITY AND- REGULARITY THEN IT CAN BE HELD THAT A PERSON IS CAR RYING OUT BUSINESS IN THOSE TRANSACTIONS. (XII) SOURCES OF INVESTMENTS. IT BORROWED FUNDS ARE UTILIZED IN THE TRANSACTIONS ARE TRADING IN NATURE. COURT HAS TIME AND AGAIN HELD THAT IT IS NOT POSSIB LE TO ENUMERATE ALL THE LEGAL PRINCIPLES THAT SHOULD GUID E THE AO. THESE LEGAL PRINCIPLES-WERE FOUND IN FOLLOWING JUDG MENT:' 1. G. VENKATASWAMI NAIDU AND COMPANY 35 IIR 594 - (SUPREME COURT) 2. SUTLEJ COTTON MILLS SUPPLY AGENCY LIMITED 100 ITR 706 (SC) 3. COMMISSIONER OF INLAND REVENUE VS FRASER 224 IC 498 4. RAJA BAHADUR KAMAKHAY NARAINSINGH VS CIT 77 ITR 253 5. ASHOK KUMAR JALAN VS CIT 187 ITR 316 (BOMBAY) 6. CIT VS BANARSHI DAS KASHI PRASAD 217 ITR 365 7. ARJUN KAPUR VS DCIT 70 ITD 161 8. CIT VS ASSOCIATED INDUSTRIAL DEVELOPMENT COMPANY 82 ITR 586 (SC) 9. KARAMCHAND THAPAR & BROS PVT. LIMITED VS CIT 82 ITR 899 10. FIDELITY NORTHSTAR FUND, IN RE 288 IIR 641 12. N S S INVESTMENT PVT LIMITED 277 ITR 149 (MAD) 13. CIT VS MOTLEY FINANCE LIMITED. 190ITR 719 THESE LEGAL PRINCIPLES ARE ONLY ILLUSTRATIVE AND NO T EXHAUSTIVE. THEREFORE THE AO HAS TO DECIDE THE ISSUE ON THE FAC TS AND CIRCUMSTANCES OF EACH CASE. 3.2 IN THE CASE OF THE ASSESSEE IT HAS SHOWN SHORT T ERM CAPITAL GAINS OF RS. 24,82465/-. THE AO HAS WRONGLY TAKEN THE FIGURE AT RS. 23,12,026/-. IT IS SEEN THAT THE ASSESSEE HAS FREQUENTLY AND CONTINUOUSLY INDULGED IN PURCHASE AND SALE OF S HARES. EVEN THE TURNOVER OF THE ASSESSEE IS MANY TIMES MORE THA N THE AVERAGE FUND EMPLOYED BY THE ASSESSEE FOR INVESTMENT . THE ASSESSEE HAS INDULGED IN PURCHASE AND SALE OF SHARE S OF 48 COMPANIES. THE TURNOVER OF THE ASSESSEE OF THOSE SH ARES, PROFIT FROM WHICH WAS SHOWN BY THE ASSESSEE UNDER THE HEAD 'SHORT TERM CAPITAL GAIN' IS RS. 2,43,32,164/-; WHEREAS THE AVERAGE INVESTMENT OF THE ASSESSEE IN SHARES IS ONLY RS. 98 .77 LACS. THUS THE TURNOVER OF THE ASSESSEE IS NEARLY THREE TI MES OF AVERAGE FUND USED FOR INVESTMENT. IT IS FURTHER SEE N THAT THE ASSESSEE COMPANY HAS ONLY TWO SHAREHOLDERS. THESE T WO PERSONS ARE ALSO THE DIRECTORS OF THE ASSESSEE COMPA NY. THESE PERSONS ARE MR. S.P. TULSIAN AND HIS WIFE TULSIAN. SHRI S. P. TULSIAN IS A MEMBER OF NATIONAL STOCK EXCHANGE AND THIS MAIN INCOME IS EARNED FROM BROKERAGE HE EARNED BROKERAGE OF RS. 31,09,770/- FROM SHARES. HE IS ALSO A WELL KNOWN TV PERSONALITY APPEARING ON CNBC TELEVISION CHANNEL AN D EXPRESSES HIS VIEW ON TRENDS IN STOCK MARKET. HE IS ALSO CONTROLLING ALL ACTIVITIES OF THE ASSESSEE COMPANY. NATURALLY WHEN DECISION OF PURCHASE AND SALE OF SHARES ARE UN DERTAKEN BY SUCH PERSON THERE IS ELEMENT OF TRADING. THE PER IOD OF HOLDING OF SHARES IS QUITE SHORT. THE INVESTMENTS ARE NOT M ADE TO EARN DIVIDEND INCOME WHICH IS EVIDENT FROM THE FACT THAT THE ASSESSEE EARNED DIVIDEND INCOME OF RS.1,99,958/- WHER EAS THE INVESTMENT OF THE ASSESSEE IN SHARES ON AVERAGE IS RS. 80 NARMADA PRAKASHAN PVT LTD ITA NO. 6177/MUM/2009 NARMADA APPLIANCES PVT LTD ITA NO. 6178/MUM/20009 6 LAKHS. IN COMPARISON TO DIVIDEND INCOME, THE GAIN O F THE ASSESSEE ON IN PURCHASE AND SALE OF SHARES IS RS. 31 ,46,605/-. THE CLAIM OF THE ASSESSEE THAT IT INDULGED FREQUENT LY IN PURCHASE AND SALE OF SHARES TO PROTECT THE VALUE OF ITS INVE STMENT, IS NOT SUSTAINABLE IN VIEW OF HIGH PROFIT EARNED BY THE AS SESSEE FROM THE PURCHASE AND SALE OF SHARES. THE ASSESSEE CAME T O PROFITS OF RS. 24,82,465/- ON AVERAGE INVESTMENT OF RS. 80 L ACS. ALL THESE 'FACTS OF THE CASE SHOWS THAT THE ASSESSEE IS A TRADER IN SHARES AND THE AO HAS RIGHTLY TREATED INCOME OF THE ASSESSEE FROM PURCHASE AND SALE OF SHARES AS BUSINESS INCOME . ACCORDINGLY, THE INCOME OF RS. 24,82,465/- IS LIABLE TO BE TAXED UNDER THE HEAD 'BUSINESS INCOME. 9. THE CIT(A), THEREFORE, SUSTAINED THE ORDER OF TH E AO. AGAINST THIS ORDER OF CIT(A), THE ASSESSEE IS NOW BEFORE THE ITA T. 10. BEFORE US, THE AR REITERATED THE BASIC FACTS AN D SUBMITTED THAT THE AO HAD MADE THE WRONG BASIS FOR TREATING THE CA PITAL GAINS AS BUSINESS INCOME AS HE HAD SURMISED THAT THE ASSESSE E WAS USING BORROWED FUNDS TO FUND ITS INVESTMENTS. THE AR TOOK US THROUGH APB 17 TO SHOW THAT THERE WAS NO LOAN AT ALL, BUT THERE HAS BEEN AN INCREASE IN THE INVESTMENT PORTFOLIO FROM RS. 73,27 ,350/- TO RS. 98,77,083/-. THE AR ALSO POINTED OUT COMPLETE DETAI LS OF SALE AND PURCHASE IN THE INVESTMENT PORTFOLIO WAS SUBMITTED BEFORE THE REVENUE AUTHORITIES, WHICH SHOWED 48 TRANSACTIONS IN ALL IN THE ENTIRE YEAR. 11. THE AR THEREFORE SUBMITTED THAT CONSIDERING THE FACTS AS STATED, THE REVENUE AUTHORITIES WERE IN ERROR TO HOLD THAT CONDUCT OF THE ASSESSEE WAS THAT OF A TRADER AND NOT AS AN INVESTO R. 12. THE DR ON THE OTHER HAND SUPPORTED THE ORDERS O F THE REVENUE AUTHORITIES. 13. WE HAVE HEARD THE ARGUMENTS AND HAVE PERUSED TH E MATERIAL PLACED BEFORE US AND THE ORDERS OF THE REVENUE AUTH ORITIES. ON GOING THROUGH THE ORDER OF THE CIT(A) AND THE MATERIAL PL ACED ON RECORD, WE FIND THAT THE CIT(A) HAS TAKEN INTO CONSIDERATION T HE FACTS AS WELL AS LEGAL POSITION AND THE CIRCULARS OF THE CBDT, BUT D ID NOT INTERPRET THE NARMADA PRAKASHAN PVT LTD ITA NO. 6177/MUM/2009 NARMADA APPLIANCES PVT LTD ITA NO. 6178/MUM/20009 7 SAME JUDICIOUSLY, AS PER THE APPARENT FACTS OF THE CASE. SINCE THE NUMBER OF TRANSACTIONS WERE 48 IN THE ENTIRE YEAR, THIS ACCORDING TO THE CIT(A) WAS HIGH IN THE CASE OF THE INVESTOR. TH IS VIEW BY THE CIT(A) BALDLY SUSTAINING THE OBSERVATION OF THE AO. WHEN W E LOOK INTO THE FACTS, WE FIND THAT THE ASSESSEE IS NEITHER HOLDING ANY SIT PORTFOLIO, NOR WAS HE INDULGING INTO SALE AND PURCHASE ON A RE GULAR INTERVAL BASIS. WE ALSO FIND THAT THE DEPARTMENT HAS ACCEPTE D THE STATUS OF THE ASSESSEE AS THAT OF AN INVESTOR IN THE PRECEDING YE ARS AS WELL AS IN THE SUBSEQUENT YEARS. 14. THIS SHOWS THE CONSISTENCY OF THE APPROACH BY T HE ASSESSEE AS WELL AS BY THE DEPARTMENT. HOWEVER, IN THE INSTANT YEARS, THE REVENUE AUTHORITIES DID NOT SPECIFY ANYTHING TO SUGGEST THA T SOMEHOW THE FACTS WERE DIFFERENT, OR CONDUCT OF THE ASSESSEE WAS SO D IFFERENT, TO HOLD DIFFERENTLY. WE FIND OURSELVES GAINFULLY SUPPORTED BY THE DECISION OF SPECIAL BENCH OF THE ITAT AT MUMBAI IN THE CASE OF GOPAL PUROHIT VS JCIT, REPORTED IN 122 TTJ 87 (MUM-SB), WHICH HAS SI NCE BEEN APPROVED BY THE HONBLE BOMBAY HIGH COURT, DISMISSI NG THE APPEAL FILED BY THE DEPARTMENT U/S 260A, REPORTED IN 336 I TR 287, WHEREIN THE BASIC RATIO AS LAID DOWN WAS IN THE CASE OF CON SISTENT APPROACH TO BE ADOPTED IN CASE OF SEPARATE PORTFOLIOS MAINTAINE D BY THE ASSESSEE. 15. AS MENTIONED EARLIER EVEN IN THE SUBSEQUENT YEA R, IN ASSESSMENT YEARS 2006-07 & 2008-09 THE RETURN AS SUCH HAD BEEN ACCEPTED, THROUGH U/S 143(1) AND IN ASSESSMENT YEARS 2002-03 U/S 143(3). 16. IN SUCH A CIRCUMSTANCE, IT WOULD BE ERRONEOUS T O SUSTAIN THE ORDERS OF THE REVENUE AUTHORITIES. IN THE COURSE OF PROCEEDINGS BEFORE US, THE AR HAD POINTED OUT THAT THE ASSESSEE HAD NE ITHER TAKEN ANY LOANS NOR IT HAD ANY EMPLOYEES NOR IT CONDUCTED ITS ACTIVITIES IN AN ORGANIZED AND IN ANY CONTINUITY. BESIDES THIS ONE O F THE MOST NARMADA PRAKASHAN PVT LTD ITA NO. 6177/MUM/2009 NARMADA APPLIANCES PVT LTD ITA NO. 6178/MUM/20009 8 IMPORTANT FACTORS IS THE INTENTION THE ASSESSEE. TH E INTENTION HAS TO BE SEEN AT THE TIME OF ACQUISITION OF SHARES, I.E. WHE THER TO HOLD OR DISPOSE OFF. THIS HAS TO BE GATHERED FROM THE ACTUA L CONDUCT OF THE ASSESSEE WHILE DEALING WITH THE SHARES, WE ARE SUPP ORTED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CIT VS MADANGOPAL RADHEYLAL, REPORTED IN 73 ITR 642. IN THE INSTANT CASE THE HOLDING PERIOD IS SHOWN TO BE 86 DAYS IN STCG AND I N EXCESS OF 16 MONTHS IN LTCG, THIS BY ITSELF SHOWS THE INTENTION OF THE ASSESSEE AT THE TIME OF ACQUISITION OF SHARES AND SUBSEQUENT CO NDUCT OF THE ASSESSEE. TAKING INTO THE SURROUNDING CIRCUMSTANCES AS WELL, WE ARE OF THE OPINION THAT THE REVENUE AUTHORITIES COMMITTED AN ERROR TO TREAT THE GAINS AS BUSINESS INCOME INSTEAD OF CAPITAL GAI NS. 17. AS MENTIONED IN THE BEGINNING, GOA IN BOTH THE CASES/APPEALS ARE IDENTICAL ON IDENTICAL FACTS, IDENTICAL DECISIO N SHALL PREVAIL IN ITA NO. 6178/MUM/2009, IN THE CASE OF M/S NARMADA APPLI ANCES PVT. LTD. 18. WE, THEREFORE, SET ASIDE THE ORDERS OF THE CIT( A) IN BOTH THE CASES BEFORE US AND DIRECT THE AO TO ALLOW THE CAPITAL GA INS/LOSS AS CLAIMED BY THE ASSESSEE. 19. AS A RESULT, THE APPEALS AS FILED BY BOTH THE A SSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04/03/2015. SD/- SD/- ( ) ( ) *% +, *% +, *% +, *% +, -! +, -! +, -! +, -! +, (B R BASKARAN) ( VIVEK VARMA ) ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 04/03/2015 NARMADA PRAKASHAN PVT LTD ITA NO. 6177/MUM/2009 NARMADA APPLIANCES PVT LTD ITA NO. 6178/MUM/20009 9 #/ COPY TO:- 1) / THE ASSESSEE. 2) / THE RESPONDENT. 3) THE CIT (A)-9, MUMBAI. 4) . 5 , MUMBAI / THE CIT-5, MUMBAI. 5) THE D.R. G BENCH, MUMBAI. 6) /01! COPY TO GUARD FILE. +*2 / BY ORDER / / TRUE COPY / / 3/4 5 , 6! DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *894 .. * CHAVAN, SR. PS