ADDL CIT 17(2), MUMBAI V. RAJANI SHRIDHAR IYER, MUMBAI

ITA 6775/MUM/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8128 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 09-09-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 06-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Keywords: Business income

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE HONBLE S/SHRI H.L. KARWA, PRESIDENT AND B. R.BASKARAN (AM) . . , . . , ./I.T.A. NO.6775/MUM/2012 ( / ASSESSMENT YEAR :2008-09) ASSTT. COMMISSIONER OF INCOME TAX,17(2), ROOM NO.217, 2 ND FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI-400012 / VS. MRS. RAJANI SHRIDHAR IYER, 14/222, BHASKAR BHAVAN, SIR BHALCHANDRA ROAD, MATUNGA, MUMBAI. ( / APPELLANT) .. ( ! / RESPONDENT) ./ '# ./ PAN/GIRNO.:AAOPI9178D $ / APPELLANT BY : SHRI LOVE KUMAR ! % $ /RESPONDENT BY: SHRI HARIDAS BHAT & ' % ( ) / DATE OF HEARING : 9.9.2014 *+ % ( ) /DATE OF PRONOUNCEMENT : 26.9.2014 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 27.08.2012 PASSED BY LD CIT(A)-34, MUMBAI AND IT RE LATES TO THE ASSESSMENT YEAR 2008-09. 2. THE REVENUE IS AGGRIEVED BY THE DECISION OF LD C IT(A) IN RESPECT OF THE FOLLOWING ISSUES:- (A) WHETHER LD CIT(A) WAS JUSTIFIED IN HOLDING THA T THE SHARES HAVING A VALUE OF RS.60,87,326/- WAS TO BE TREATED AS INVES TMENTS INSTEAD OF STOCK IN TRADE. (B) WHETHER THE LD CIT(A) WAS JUSTIFIED IN HOLDING THAT THE GAIN OF RS.26,37,140/- ARISING ON SALE OF M/S PRAJ INDUSTRI ES LTD IS ASSESSABLE AS LONG TERM CAPITAL GAIN ONLY. 3. WE HEARD THE PARTIES AND PERUSED THE RECORD. TH E FACTS RELATING TO THE FIRST ISSUE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SHARE TRADING. THE ASSESSEE HAS ALSO TREATED SOME SHARES AS HER INVEST MENT. THE ASSESSING I.T.A. NO.6775/MUM/2012 2 OFFICER NOTICED THAT THE ASSESSEE HAD BORROWED FUND S AND ALSO AVAILED CREDIT FACILITIES FROM THE BROKING FIRMS TO PURCHASE SHARE S. FURTHER, THE ASSESSEE DID NOT DISCLOSE ANY OPENING OR CLOSING STOCK OF SHARES IN HER BALANCE SHEET. ACCORDINGLY, THE AO CAME TO THE CONCLUSION THAT THE ASSESSEE HAS BEEN SHOWING THE SHARES THAT ARE AVAILABLE ON HAND AS AT THE YEA R END WAS SHOWN AS INVESTMENTS INSTEAD OF STOCK IN TRADE. THE ASSE SSEE HAD SHOWN THE VALUE OF INVESTMENTS AS AT 31.3.2008 AT RS.1,56,03,537/- AC CORDINGLY, THE AO TOOK THE VIEW THE ABOVE SAID SHARES SHOULD BE TAKEN AS STOC K IN TRADE IN THE HANDS OF THE ASSESSEE AND ACCORDINGLY HELD THAT THE SAME SHA LL BE TAKEN AS STOCK IN TRADE FOR THE PURPOSE OF SUCCEEDING ASSESSMENT YEAR. 4. THE LD CIT(A) NOTICED THAT THE ASSESSEE HAS BEEN ACTIVELY TRADING IN SHARES OF SEVEN COMPANIES AND THE VALUE OF SHARES O F THOSE COMPANIES HELD BY THE ASSESSEE AS AT THE YEAR END WAS RS.95,16,210/-. THE LD CIT(A) CONFIRMED THE ASSESSMENT ORDER IN RESPECT OF THE SEVEN SHARES HAVING VALUE CITED ABOVE. THE REMAINING AMOUNT OF RS.60,87,326/- PERTAINED TO 25 SCRIPS, THE LD CIT(A) NOTICED THAT THE ASSESSEE WAS NOT SEEN TRADING IN T HOSE SHARES. ACCORDINGLY THE LD CIT(A) HELD THAT THE SHARES OF 25 COMPANIES HAVI NG A VALUE OF RS.60,87,326/- SHOULD BE TREATED AS INVESTMENTS ONLY. THE REVENUE IS AGGRIEVED BY THE SAID DECISION. 5. FROM THE FOREGOING DISCUSSIONS, IT CAN BE NOTI CED THAT THE ASSESSING OFFICER HAS ONLY CLASSIFIED THE SHARES HELD AS INV ESTMENTS INTO SHARES HELD AS STOCK IN TRADE. THE SAID CLASSIFICATION IS TAX NE UTRAL DURING THE YEAR UNDER CONSIDERATION. IT IS A WELL SETTLED PROPOSITION TH AT THE SHARE TRADERS CAN ALSO MAINTAIN TWO PORTFOLIOS, ONE FOR INVESTMENTS AND ANOTHER ONE FOR STOCK IN TRADE. THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHA SE OF SHARES AS TO HOLD THE SHARES AS STOCK IN TRADE OR AS INVESTMENT IS TO BE SEEN IN ORDER TO EXAMINE THE CORRECTNESS OF THE CLASSIFICATION. WHAT WE NOTICE IS THAT THE ASSESSING OFFICER HAS DECIDED TO CHANGE THE CLASSIFICATION ON THE BASIS O F THE FINANCIAL POSITION, ACTIVITIES ETC. IN EFFECT, THE ASSESSING OFFICER HAS NOT EXAMINED THE INTENTION OF THE ASSESSEE AT THE TIME OF MAKING PURCHASES. WE H AVE ALREADY NOTICED THAT THE SAID CLASSIFICATION IS TAX NEUTRAL. THE TAXABILITY OF GAINS / LOSS ARISING ON SALE OF THOSE SHARES SHALL ARISE IN THE SUBSEQUENT YEARS ON LY. ACCORDINGLY WE ARE OF THE I.T.A. NO.6775/MUM/2012 3 VIEW THAT THIS GROUND OF THE REVENUE IS PREMATURE. ACCORDINGLY, WE DECLINE TO INTERFERE WITH THE ORDER OF LD CIT(A) ON THIS ISSUE . 6. THE NEXT ISSUE RELATES TO THE ASSESSMENT OF GA INS ARISING ON SALE OF M/S PRAJ INDUSTRIES. THE ASSESSEE HAD PURCHASED THE SH ARES IN 2000 AND SOLD THEM DURING THE YEAR UNDER CONSIDERATION AFTER HOLDING T HEM FOR ABOUT 8 YEARS AS INVESTMENT. THE AO, HOWEVER, NOTICED THAT THE HAS BEEN PURCHASING AND SELLING FURTHER SHARES OF M/S PRAJ INDUSTRIES LTD ON SHORT TERM BASIS AND HAD DECLARED THE PROFIT ARISING THERE FROM AS BUSINESS INCOME. HENC E, THE AO TOOK THE VIEW THAT THE LONG TERM CAPITAL GAIN ARISING ON SALE OF SHARE S OF M/S PRAJ INDUSTRIES LTD SHOULD BE TREATED AS BUSINESS INCOME ONLY AND ACCOR DINGLY ASSESSED THE SAME AS BUSINESS INCOME OF THE ASSESSEE. HOWEVER, THE L D CIT(A) REVERSED THE ORDER OF THE AO. 7. WE NOTICE THAT THE LD CIT(A) HAS CONSIDERED THE PROPOSITION THAT A SHARE TRADER IS ALSO ENTITLED TO MAINTAIN TWO PORTFOLIOS, ONE FOR INVESTMENT AND OTHER ONE FOR STOCK IN TRADE. FURTHER THE LD CIT(A) HAS NO TICED THAT THE ASSESSEE HAS HELD THE ABOVE SAID SHARES FOR ABOUT 8 YEARS AND SH E HAS ALSO TREATED THE SAME HER INVESTMENT IN ALL THESE YEARS. UNDER THESE SET OF FACTS, THE LD CIT(A) HAS REVERSED THE ORDER OF THE AO ON THIS ISSUE AND HAS DIRECTED HIM TO TREAT THE GAINS ARISING ON SALE OF THE ABOVE SAID SHARES AS LONG TE RM CAPITAL GAIN. ON GOING THROUGH THE REASONING GIVEN BY LD CIT(A), WE DO NOT FIND ANY INFIRMITY IN IT. THE FACT THAT THE ASSESSEE HAS BEEN HOLDING THE ABOVE S AID SHARES AS HER INVESTMENT IS PROVED BY THE ENTRIES MADE IN THE BOOKS OF ACCOU NT AND ALSO BY LONG PERIOD OF HOLDING. HENCE, WE UPHOLD THE ORDER OF LD CIT(A) O N THIS ISSUE. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPE N COURT ON 26TH SEPT, 2014 . *+ & , -. / 0 26TH SEPT, 2014 + % 1' 2 SD SD ( . . / H.L. KARWA) ( . . ,/ B.R. BASKARAN) / PRESIDENT / ACCOUNTANT MEMBER - & ' MUMBAI : 26TH SEPT,2014. I.T.A. NO.6775/MUM/2012 4 . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. ! / THE RESPONDENT. 3. & 3( ( ) / THE CIT(A)- CONCERNED 4. & 3( / CIT CONCERNED 5. 6. 45 1 (6 , ) 6 , - & ' / DR, ITAT, MUMBAI CONCERNED 1 7 ' / GUARD FILE. 8 & / BY ORDER, TRUE COPY 9 ' (ASSTT. REGISTRAR) ) 6 , - & ' /ITAT, MUMBAI