ACIT 18(1), MUMBAI V. JAYA TALAKSHI CHHEDA, MUMBAI

ITA 6583/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9484 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 26-11-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 09-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K SHUKLA
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I : MUMBAI BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI N.K.BILLAIYA, ACCOUNTANT MEMBER ITA. NO.6583/MUM/2010 ASSESSMENT YEAR 2007-2008 ACIT 18 (1) MUMBAI 400 012. VS. MS. JAYA TALAKSHI CHHEDA MUMBAI 400 013 PAN AAJPB7882N (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI P.K.SHUKLA (D.R.) FOR RESPONDENT : SHRI BHUPENDRA SHAH (A.R. DATE OF HEARING : 26-11-2012 DATE OF PRONOUNCEMENT : 27-11-2012 ORDER PER N.K.BILLAIYA, A.M. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)- 29, MUMBAI DATED 24-06-2010 PERTAINING TO THE ASSES SMENT YEAR 2007-2008. THE SOLE GRIEVANCE OF THE REVENUE IS THAT THE CIT(A ) OUGHT NOT TO HAVE TREATED INCOME OF RS.2,78,77,456/- AS SHORT TERM CAPITAL GA IN AS AGAINST THE INCOME FROM BUSINESS TAKEN BY THE ASSESSING OFFICER. 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS UNDE R SECTION 143 (3) OF THE ACT, THE ASSESSING OFFICER NOTICED THAT THE ASS ESSEE HAS CLAIMED STCG OF RS.2,78,77,456/- UNDER SECTION 111A OF THE ACT WHIL E COMPUTING THE TOTAL INCOME FOR THE YEAR UNDER CONSIDERATION. VIDE ORDER SHEET ENTRY DATED 4-11-09 THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF ST CG. AFTER CONSIDERING THE SUBMISSION AND THE DETAILS FURNISHED BY THE ASSESSE E, THE ASSESSING OFFICER 2 WAS OF THE OPINION THAT THE ASSESSEE HAS INDULGED I N HUGE FREQUENCY OF PAYMENTS IN SHARES THROUGHOUT THE YEAR. FURTHER, TH E HOLDING PERIOD OF THESE SHARES WAS ALSO VERY SHORT. THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY STCG SO CLAIMED MAY NOT BE CONSIDERED AS BUSINESS I NCOME. THE ASSESSING OFFICER WENT ON TO DISCUSS CERTAIN JUDICIAL PRONOUN CEMENTS IN SUPPORT OF HIS VIEW AND THE ASSESSING OFFICER CAME TO THE CONCLUSI ON THAT THE CHURNING OF SCRIPS WAS VERY FREQUENT AND THE NOMENCLATURE GIVEN AS INVESTMENT WILL NOT MAKE THE SHARES INVESTMENT, RATHER, ACCORDING TO THE ASSESSING OFFICER, THE TRANSACTIONS WERE IN THE NATURE OF TRADE. THE ASSES SEE EXPLAINED THAT MERE VOLUME OF TRANSACTIONS WOULD NOT ALTER THE NATURE O F THE TRANSACTIONS AND TRANSACTION INVOLVED HAS TO BE TAKEN INTO CONSIDERA TION AND THE MAGNITUDE OF THE TRANSACTIONS DOES NOT ALTER THE NATURE. AS THE EXPLANATION GIVEN BY THE ASSESSEE WAS NOT FOUND SATISFACTORY, THE ASSESSING OFFICER TREATED THE AMOUNT OF RS.2,78,77,456/- AS BUSINESS INCOME. THE ASSESSE E AGITATED THIS MATTER BEFORE THE CIT(A). AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES, THE CIT(A) CAME TO THE FINDING THAT THE ASSESSEE WAS ENGAGED I N PURCHASE AND SALE OF SHARE ONLY FOR 69 DAYS OUT OF TOTAL OF 365 DAYS IN A YEAR. THE CIT(A) FURTHER OBSERVED THAT THERE IS NO BORROWAL OF CAPITAL AND P AYMENT OF INTEREST AND THE HOLDING PERIOD OF TRANSACTIONS ARE FAIRLY LARGE. RE LYING UPON THE DECISION OF THE GOPAL PUROHIT 228 CTR 582 (BOM.) THE CIT(A) HELD TH AT THE ASSESSEE IS AN INVESTOR AND THE ACTIVITIES WERE NOT BUSINESS ACTIV ITIES AND ACCORDINGLY, DIRECTED THE ASSESSING OFFICER TO ASSESS THE INCOME OF RS.2,78,77,456/- AS SHORT TERM CAPITAL GAINS. 3. AGGRIEVED BY THE FINDINGS OF THE CIT(A), THE REV ENUE IS BEFORE US. LEARNED D.R. SUPPORTING THE FINDINGS OF THE ASSESSING OFFIC ER, RELIED UPON THE DECISION OF THE ITAT, JAIPUR BENCH IN ITA.NO. 1103 TO 1105/J P/2010 PERTAINING TO THE ASSESSMENT YEAR 2003-2004 TO 2005-2006 AND ARGUED T HAT THE CO-ORDINATE BENCH HAS HELD THAT THE SHARES WHICH HAD BEEN HELD FOR MORE THAN A YEAR SHOULD BE TREATED AS SHARES HELD AS INVESTMENT AN D THE PROFIT ARISING FROM SALE OF SUCH SHARES HAS TO BE CONSIDERED AS CAPITAL GAIN IN RESPECT OF PURCHASE 3 AND SALE OF THE TRANSACTIONS WHERE HOLDING PERIOD I S LESS THAN 30 DAYS THE PROFIT OR LOSS ARISING FROM SUCH TRANSACTIONS TO BE CONSIDERED AS BUSINESS INCOME. THE LEARNED D.R. POINTED OUT THAT IN THE CA SE OF THE ASSESSEE THE HOLDING PERIOD BEING VERY LESS, THE DECISION OF THE JAIPUR BENCH DESERVE TO BE FOLLOWED. 4. PER CONTRA, COUNSEL FOR THE ASSESSEE RELYING UPO N THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. GOPAL PUROHIT (2010) 188 TAXMAN 140 SUBMITTED THAT THE HONBLE JURISDICT IONAL HIGH COURT HAS CATEGORICALLY LAID DOWN THAT IT IS POSSIBLE THAT AS SESSEE CAN ENGAGE IN TWO DIFFERENT TYPES OF TRANSACTIONS, FIRST SET OF TRANS ACTIONS INVOLVING INVESTMENT IN SHARES AND SECOND SET OF TRANSACTIONS INVOLVING DEA LING IN SHARES FOR THE PURPOSE OF BUSINESS AND POINTED OUT THAT THE HONBL E HIGH COURT HAS CONFIRMED THE FINDINGS OF THE TRIBUNAL WHEREIN THE TRIBUNAL CORRECTLY HELD THAT DELIVERY BASED TRANSACTIONS SHOULD BE TREATED AS TH OSE IN NATURE OF INVESTMENT TRANSACTIONS AND PROFIT RECEIVED THEREFROM SHOULD B E TREATED AS STCG OR AS LTCG DEPENDING UPON THE PERIOD OF HOLDING AND PROFI T FROM OTHER TRANSACTIONS SHOULD BE TREATED AS BUSINESS INCOME. THE LEARNED C OUNSEL POINTED OUT THAT THE CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT THE HOLDING PERIOD OF THE ASSESSEE IS VERY HIGH AND FURTHER THE ASSESSEE HAS NOT BORROWED FUND AND HAS MADE INVESTMENT FROM HIS OWN CAPITAL. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. THE DISPUTE IS REGARDING NATURE OF INC OME FROM SALE AND PURCHASE OF SHARES OF THE ASSESSEE. THE ISSUE IS, WHETHER TH E INCOME FROM SALE AND PURCHASE IN A PARTICULAR CASE SHOULD BE TREATED AS CAPITAL GAIN OR AS BUSINESS INCOME HAS BEEN A DEBATABLE ISSUE AND THERE ARE CON FLICTING DECISIONS OF THE TRIBUNAL ON THIS ISSUE. EACH ISSUE IS, THEREFORE, T O BE BASED ON ITS OWN FACTUAL SITUATION. IN THE PRESENT CASE, THE ASSESSEE HAD DE ALT THE MAJORITY OF SHARES FOR A VERY LONG TIME RESULTING INTO SHORT TERM CAPITAL GAIN. IT IS POSSIBLE FOR AN INVESTOR TO SELL SHARES AFTER HOLDING FOR LESS THAN A YEAR TO RESHUFFLE PORTFOLIO. WE ALSO FIND THAT THE CIT(A) HAS CORRECTLY POINTED OUT THAT THE ASSESSEE HAS 4 ENGAGED THEMSELVES IN SHARE TRANSACTIONS ONLY OF 69 DAYS IN A YEAR WHICH ITSELF SHOWS THAT THE ASSESSEE IS NOT TRADING IN SHARES WH ICH REQUIRES FULL TIME ENGAGEMENT AND A SYSTEMATIC AND TIMELY DEVOTION. IT IS ALSO NOT IN DISPUTE THAT IN ALL THE SHARES, THE ASSESSEE HAS TAKEN DELIVERY AND HAS PAID STT ON EACH TRANSACTION. THERE WAS NO OPENING STOCK NOR THERE I S ANY CLOSING STOCK OF SCRIPS. CONSIDERING ALL THESE FACTS IN TOTALITY, WE AGREE WITH THE FINDINGS OF THE CIT(A) THAT THE ASSESSEE IS AN INVESTOR AND NOT A T RADER. THEREFORE, THE DIRECTION OF THE CIT(A) TO ASSESS THE INCOME AS SHORT TERM CA PITAL GAINS AS DISCLOSED BY THE ASSESSEE IS FOUND TO BE CORRECT AND NEEDS NO IN TERFERENCE FROM US. WE, ACCORDINGLY, CONFIRM THE FINDINGS OF THE CIT(A). TH E APPEAL FILED BY THE REVENUE IS DISMISSED. 6. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27-11-2012. SD/- SD/- (H L KARWA) (N.K.BILLAIYA) PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATE 27 TH NOVEMBER, 2012 VBP/- COPY TO 1. ACIT 18 (1), 1 ST FLOOR, PIRAMAL CHAMBERS, LALBAUG, MUMBAI 400 0 12. 2. MS. JAYA TALAKSHI CHHEDA , 212, JAYANT VILLA, C.S.RANE MARG, WORLI NAKA, MUMBAI 400 013 PAN AAJPB7882N 3. CIT(A) - 29 , C - 10, 7 TH FLOOR, PRATYAKSHA KAR BHAVAN, BANDRA - KURLA COMPLEX, BANDRA EAST, MUMBAI 400 051. 4. CIT - 18 , MUMBAI 5. DR I BENCH 6. GUARD FILE (TRUE COPY) BY ORDER ASST. REGISTRAR, I.T.AT. MUMBAI BENCHE S MUMBAI.