ITO WARD - 3(3), KALYAN, KALYAN V. MIHIR INVESTMENT AND FINANCIAL CONSULTANTS, KALYAN

ITA 6474/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6847 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2011-2012
• Appeal Filed On: 04-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SANJIV G BRAHME
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JM AND SHRI N. K. PRADHAN, AM ./ I.T.A. NO. 6474/MUM/2016 ( / ASSESSMENT YEAR: 2011 - 12 ) INCOME TAX OFF ICER, WARD 3(3), 2 ND FLOOR, RANI MANSION, MURBAD ROAD, KALYAN (W) - 421 301 / VS. M/S. MIHIR INVESTMENT AND FINANCIAL CONSULTANTS, 02, SUCHAK CHAMBERS, AGRA ROAD, KALYAN (W) - 421 301 ./ ./ PAN/GIR NO. AAFFM 8696 M ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI ANOOP HIWASE / RESPONDENT BY : SHRI JAYANT BHATT & SHRI SANJIV G. BRAHME / DATE OF HEARING : 08.05.2018 / DATE OF PR ONOUNCEMENT : 01.06 .2018 / O R D E R PER SA KTIJIT DEY , J . M.: THIS IS AN A PPEAL BY THE DEPARTMENT AGAINST THE ORDER DATED 29.08.2016 OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 3, NASIK FOR THE ASSESSMENT YEAR 2011 - 12. 2. THE BASIC ISSU E ARISING IN THE PRESENT APPEAL IS , WHETHER THE INCOME DERIVED FROM SALE OF SHARES IS TO BE ASSESSED UNDER THE HEAD CAPITAL GAIN AS CLAIMED BY THE ASSESSEE OR AS BUSINESS INCOME AS HELD BY THE ASSESSING OFFICER. 2 ITA NO. 6474/MUM/2016 M/S. MIHIR INVESTMENT AND FINANCIAL CONSULTANTS, 3. BRIEFLY, THE FACTS ARE THAT THE ASSE SSEE , A PARTNERSHIP FIRM , IS ENGAGED IN THE BUSINESS OF SALE AND PURCHASE OF SHARE S AND SECURITIES, INVESTMENT AND FINANCIAL CONSULTANCY ETC . FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 29.09.2011 DECLARING TOTAL INCOM E OF RS.22,51,430/ - . DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ON THE BASIS OF DETAILS FURNISHED BY THE ASSESSEE NOTICED THAT THE ASSES SEE HAS INDULGED IN HUGE NUMBER OF TRANSACTIONS IN SALE AND PURCHASE OF SHARES . THEREFORE, H E CALLED UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY THE INCOME EARNED FROM SHARE TRANSACTION SHOWN UNDER THE HEAD SHORT TERM AND LONG TERM CAPITAL GAIN SHOULD NOT BE TAXED UNDER THE HEAD INCOME FROM BUSINESS . IN RESPONSE TO THE SAID SHOW CAUSE NOTICE, IT WAS SUBMITTED BY THE ASSESSEE THAT FROM THE VERY INCEPTION, THE ASSESSEE HAS UNDERTAKEN THE SHARE TRANSACTION AS AN INVESTMENT ACTIVITY AND SHARES ARE VALUED AT COST. THE AFORESAID METHOD WAS CONSISTENTLY FOLLOWED BY THE ASSESSEE OVER THE YEARS AND THE SHARES WERE NEVER TREATED AS STOCK IN TRADE AND THE ASSESSEE NEVER TOOK THE BENEFIT OF VALUING THE STOCK AS ON THE YEAR END , AT COST OR MARKET VALUE , WHICHEVER IS LOWER. THUS, IT WAS SUBMITTED , SINCE THE SHARE TRANSACTION IS AN INVESTMENT ACTIVITY OF THE ASSESSEE, THE INCO ME DERIVED FROM SUCH TRANSACTION HAS TO BE ASSESSED AS CAPITAL GAIN. IN SUPPORT OF SUCH SUBMISSION, THE ASSESSEE RELIED UPON A NUMBER OF JUDICIAL PRECEDENT S LAYING DOWN CERTAIN PRINCIPLE AS TO HOW TO TREAT THE INCOME FROM SHARE TRANSACTION AS CAPITAL GAIN OR BUSINESS INCOME. T HE ASSESSING OFFICER, HOWEVER, WAS NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE AND HELD THAT DUE TO NUMBER OF TRANSACTIONS ENTERED INTO BY THE ASSESSEE AND SUCH OTHER FACTORS 3 ITA NO. 6474/MUM/2016 M/S. MIHIR INVESTMENT AND FINANCIAL CONSULTANTS, AS MENTIONED IN PARA 3.12 OF THE ASSESSMENT ORDER, TH E ASSESSEE IS TO BE TREATED AS A TRADER IN SHARES AND INCOME DERIVED FROM SHARE TRANSACTION HAS TO BE TREATED AS BUSINESS INCOME. ACCORDINGLY , HE TAXED THE INCOME OF RS.1 , 07 , 53 , 754/ - DERIVED FROM SHARE TRANSACTION AS INCOME UNDER THE HEAD BUSINESS AND COMP LETED THE ASSESSMENT ACCORDINGLY. 4. BEING AGGRIEVED OF THE AFORESAID DECISION OF THE ASSESSING OFFICER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 5. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AFTER CONSIDE RING THE SUBMISSIONS OF THE ASSESSEE AND ANALYZING THE PATTERN OF SHARE TRANSACTION ENTERED INTO BY THE ASSESSEE FOUND THAT THE ASSESSEE HAS CONSISTENTLY M AINTAINED TWO PORTFOLIOS, O NE FOR TRADING AND ONE FOR INVESTMENT. THE ASSESSEE HAS SHOWN INCOME FROM DERIVATE TRANSACTION UNDER THE HEAD BUSINESS AGAINST WHICH IT HAS CLAIMED EXPENDITURE. AS FAR AS INVESTMENT PORTFOLIO IS CONCERNED, THE ASSESSEE HAS SHOWN THE INCOME UNDER THE HEAD CAPITAL GAIN. HE FOUND THAT THE SHARE TRANSACTIONS UNDER THE INVESTMENT POR TFOLIO ARE DELIVERY BASED AND THE PERIOD OF HOLDING OF SHARES FOR LONG TERM CAPITAL GAIN IS 1000 DAYS AND FOR SHORT TERM CAPITAL GAIN IS 200 DAYS. HE ALSO NOTED THAT IN THE ASSESSEES OWN CASE , UNDER SIMILAR FACTS AND CIRCUMSTANCES, THE TRIBUNAL HAS ACCEPT ED ASSESSEES CLAIM OF INCOME FROM SHARE TRANSACTION SHOWN UNDER THE HEAD CAPITAL GAIN . ACCORDINGLY, HE DIRECTED THE ASSESSING OFFICER TO ACCEPT THE INCOME SHOWN BY THE ASSESSEE UNDER THE HEAD CAPITAL GAIN . 4 ITA NO. 6474/MUM/2016 M/S. MIHIR INVESTMENT AND FINANCIAL CONSULTANTS, 6. WE HAVE HEARD BOTH THE PARTIES AND PERU SED THE MATERIALS ON RECORD. AT THE OUTSET, THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED BEFORE US THAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007 - 08 UNDER IDENTICAL FACTS AND CIRCUMSTANCES, THE TRIBUNAL HAS DIRECTED THE ASSESSING OFFICER TO ASSESS TH E INCOME DERIVED FROM SHARE TRANSACTIONS HELD UNDER THE INVESTMENT PORTFOLIO UNDER THE HEAD CAPITAL GAIN. HE SUBMITTED THERE BEING NO DIFFERENCE IN THE FACTUAL POSITION , SIMILAR VIEW HAS TO BE TAKEN IN THE IMPUGNED ASSESSMENT YEAR. THE LD. DEPARTMENTAL REP RESENTATIVE HAS AGREED THAT IN THE ASSESSMENT YEAR 2007 - 08, THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN SIMILAR FACTS AND CIRCUMSTANCES. 7. HAVING CONSIDERED RIVAL SUBMISSIONS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). AS COULD BE SEEN FROM THE FACTS ON RECORD , FROM THE VERY INCEPTION THE ASSESSEE IS MAINTAINING TWO PORTFOLIOS WITH REGARD TO THE SHARE TRANSACTION , ONE FOR TRADING ACTIVITY AND ONE FOR INVESTMENT ACTIVITY . THE INCO ME DERIVED FROM TRADING ACTIVITY HAS BEEN OFFERED AS BUSINESS INCOME AND THE INCOME DERIVED FROM INVESTMENT ACTIVIT Y HA S BEEN OFFERED UNDER THE HEAD CAPITAL GAIN. THERE IS NO CHANGE IN THE METHOD FOLLOWED BY THE ASSESSEE IN THE IMPUGNED ASSESSMENT YEAR AS WELL. AS COULD BE SEEN , THE ASSESSING OFFICER BY MAKING GENERAL OBSERVATION THAT THE ASSESSEE HAS INDULGED IN HUGE SHARE TRANSACTION H AS TREATED THE INCOME DERIVED FROM SHARE TRANSACTIONS UNDER THE INVESTMENT PORTFOLIO AS BUSINESS INCOME. HOWEVER, AS RIGHT LY OBSERVED BY THE LD. COMMISSIONER OF INCOME TAX 5 ITA NO. 6474/MUM/2016 M/S. MIHIR INVESTMENT AND FINANCIAL CONSULTANTS, (APPEALS), THE SHARE TRANSACTIONS UNDER THE INVESTMENT PORTFOLIO ARE DELIVERY BASED AND THE ASSESSEE HAS HELD SHARES FOR PERIOD OF 1000 DAYS AND 200 DAYS FOR LONG TERM AND SHORT TERM CAPITAL GAIN RESPECTIVE LY. THE AFORESAID FACTUAL POSITION HAS NOT BEEN CONTROVERTED BY THE DEPARTMENT . W HILE DECIDING IDENTICAL ISSUE IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007 - 08 IN ITA NO. 2575/MUM/ 2011 AND 5884/MUM/2011 DATED 24.07.2015 , T HE TRIBUNAL HAS ACCEPTED ASSESSE ES CLAIM. IN VIEW OF THE AFORESAID, WE UPHOLD THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) BY DISMISSING THE GROUNDS RAISED. 8. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMENT IS DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON 01.06.2018 SD/ - SD/ - ( N. K. PRADHAN ) (S A KTIJIT DEY ) / A CCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 01.06.2018 . . ./ ROSHANI , SR. PS 6 ITA NO. 6474/MUM/2016 M/S. MIHIR INVESTMENT AND FINANCIAL CONSULTANTS, / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI