ACIT, Ludhiana V. Sh. Yogesh Chander Munjal, Ludhiana

ITA 705/CHANDI/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57623 (ITAT-CHANDIGARH)
• Duration Of Justice: 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-01-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 24-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUBHASH AGGARWAL
• Keywords: Capital asset; Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND SHRI D.K.SRIVASTAVA, ACCOUNTANT MEMBER ITA NO. 705/CHD/2011 ASSESSMENT YEAR: 2007-08 ACIT, CIRCLE-V, V SHRI YOGESH CHANDER MUNJAL LUDHIANA. C/O M/S HEROCYCLES LTD., G.T.ROAD, HERO NAGAR, LUDHIANA. PAN: ABMPM-8677L (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI AKHILESH GUPTA ASSESSEE BY : SHRI SUBHASH AGGARWAL DATE OF HEARING : 16.01.2012 DATE OF PRONOUNCEMENT : 24.01.2012 ORDER PER H.L.KARWA, VP THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T ORDER OF THE CIT(A)-II LUDHIANA DATED 29.04.2011 RE LATING TO ASSESSMENT YEAR 2007-08. 2. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE IN THIS APPEAL READS AS UNDER : 1. THAT THE LD. CIT(A)-II LUDHIANA, ON FACTS AS WELL AS IN LAW, HAS ERRED IN DIRECTING THE AO TO ASSESS THE INCOME OF RS.23,76,510/- UNDER THE HEAD SHORT TERM CAPITAL GAIN AS AGAINST ASSESSED BY THE AO UNDER THE HEAD INCOME FROM BUSINESS & PROFESSION. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE DERIVES ITS INCOME FROM VARIOUS SOURCES IN CLUDING 2 SALE AND PURCHASE OF SHARES/MUTUAL FUNDS/PMS ETC. THE INCOME DERIVED FROM SALE OF SHARES/MUTUAL FUNDS/PMS WERE SHOWN BY THE ASSESSEE UNDER THE HEAD CAPITAL GAIN , WHEREAS INCOME FROM RECEIPT OF DIVIDEND AND INTERES T WAS SHOWN UNDER THE HEAD INCOME FROM OTHER SOURCES. T HE AO OPINED THAT THE SOLE INTENTION OF ASSESSEE WAS TO M AKE PROFIT AND NOT JUST DERIVE TO INCOME FROM INVESTMENTS. D URING THE ASSESSMENT PROCEEDINGS, THE AO EXAMINED THE ISSUE A S TO WHETHER THE INCOME OF THE ASSESSEE FROM SALE AND PU RCHASE OF SHARES/MUTUAL FUNDS/PMS WOULD BE TAKEN TO THE IN COME UNDER THE HEAD CAPITAL GAINS OR IT CONSTITUTED WI TH BUSINESS INCOME OF THE ASSESSEE. THE AO RELIED ON CBDTS CIRCULAR NO. 4 OF 2007 DATED 15.06.2007 WHEREIN DIS TINCTION HAS BEEN MADE BETWEEN A CAPITAL ASSET AND TRADING A SSET. AS PER THE CIRCULAR, FREQUENT PURCHASE AND SALE OF SHARES WITH THE MOTIVE OF EARNING OF PROFIT WOULD RESULT I N THE TRANSACTION BEING IN THE NATURE OF TRADING/ADVENTUR E IN THE NATURE OF TRADE BUT WHERE THE OBJECT OF THE INVESTM ENT IN SHARES OF A COMPANY WAS TO DERIVE INCOME BY WAY OF DIVIDEND ETC., THEN THE PROFITS ACCRUING BY CHANGE IN SUCH INVESTMENTS (BY SALE OF SHARES) WOULD YIELD CAPITAL GAIN AND NOT REVENUE. ACCORDINGLY, THE AO CONSIDERED THE IN COME OF THE ASSESSEE FROM SALE/PURCHASE OF SHARES, MUTUAL F UNDS AND PMS AS THE BUSINESS INCOME OF THE ASSESSEE AGAI NST THE CLAIM OF THE ASSESSEE THAT SUCH INCOME FELL UNDER T HE HEAD CAPITAL GAIN. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE C ARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) HELD THAT 3 THE INCOME OF RS.23,76,510/- SHOWN BY THE ASSESSEE FROM SALE OF SHARES AND REDEMPTION OF MUTUAL FINDS SHOUL D BE TREATED AS SHORT TERM CAPITAL GAIN. THE RELEVANT F INDINGS OF THE CIT(A) ARE AS UNDER : 3.5 THERE IS CONSIDERABLE FORCE IN CONTENTION O F LD. COUNSEL. ON GOING THROUGH STATEMENTS OF INCOME AND B ALANCE SHEETS FOR AY 2005-06 & AY 2006-07 AND FURTHER ASSES SMENT ORDER FOR AY 2006-07, WHERE THE AO HIMSELF ACCEPTED THE ICOME FROM PMS UNDER HEAD CAPITAL GAINS AND DECISIONS CITED B EFORE ME, I AM OF OPINION THAT UNLESS THERE IS A MATERIAL TO SHOW THAT THE ACCOUNTS WERE MADE UP TO TREAT THE INVESTMENT A S 'CAPITAL ASSET' IS A SMOKE SCREEN OR WAS ARTIFICIAL AND ARBI TRARY; THE ENTRIES MADE IN THE BOOKS COULD NOT BE TAKEN TO BE INCORRECT. THEREFORE, THE INFERENCE DRAWN BY THE AO, THAT IT IS A STOCK IN TRADE, CANNOT BE SUSTAINED. THE INTENTION OF APPLICANT C ANNOT BE READ FROM HIS MIND BUT IT REFLECTS IN HIS CONDUCT, THE WAY HE TREATS THE TRANSACTION. THE APPELLANT HAS NOT BORROWED ANY MONEY FOR INVESTING IN SHARES BUT USED HIS OWN FUNDS. 3.6 AS PER DISCUSSION ABOVE ALL THE THREE GUIDING F ACTORS AS ENUMERATED BY THE BOARD IN CIRCULAR SUPRA ARE NOT A PPLICABLE IN THIS CASE. IT IS TRUE THAT RULES OF RESJUDICATA IS NOT APPLICABLE TO INCOME TAX PROCEEDINGS BUT AT THE SAME TIME IT IS ALSO WELL SETTLED PRINCIPLE THAT IF THERE IS NO CHANGE IN FAC TS THEN THERE SHOULD BE CONSISTENCY IN THE APPROACH OF THE AO WHILE DECIDING THE TAX LIABILITY OF THE APPLICANT. THIS HAS BEEN IN THE DIFFERENT JUDGMENTS OF JURISDICTIONAL H IGH COURT CITED BEFORE ME THAT THE REVENUE COULD NOT BE PERMI TTED TO RAISE AN ISSUE IN ISOLATION ONLY FOR ONE YEAR WHILE A CCEPTING THE FINDINGS IN OTHER YEARS IN THE CASE OF THE APPELLANT. 3.7 REGARDING VOLUME OF TRANSACTIONS, AS ALREADY OBSER VED IN ABOVE PARAGRAPHS, THAT IT HAS BEEN CATEGORICALLY S TATED BEFORE ME THAT APPELLANT HAS CLOSED PMS ACCOUNTS DURING TH E YEAR AND ALL THE INVESTMENTS IN SHARES / MUTUAL FUND HEL D IN THESE PMS ACCOUNTS HAVE BEEN LIQUIDATED, WHICH IS T HE REASON THAT HAS RESULTED THESE TRANSACTIONS. THE APPELLANT HAS OPTED TO EXIT FROM THESE PMS ACCOUNTS IRRESPECTIVE O F MARKET CONDITION AS ON THAT DATE AND INVESTED THE FUNDS RECEIVE D ON LIQUIDATION IN MUTUAL FUNDS ONLY. HAD HE BEEN A TRA DER, HE WOULD NOT HAVE SWITCHED OVER TO MUTUAL FUNDS ONLY. THE AUDITED BALANCE SHEETS FROM PMS ALONGWITH DETAILS OF TRANSACTIONS CLEARLY SHOW THAT THERE ARE NO DAY TO DA Y TRANSACTIONS AND THIS FACT HAS ALSO BEEN CONFIRMED I N THE 4 ASSESSMENT ORDER THAT MINIMUM PERIOD OF HOLDING IS THREE MONTHS, THE APPLICANT HAS SHOWN SHORT TERM GAIN AS PE R SPECIFIC PROVISIONS OF THE INCOME TAX REGARDING LONG TE RM & SHORT TERM CAPITAL GAIN HAS BEEN LAID. THE ARS CON TENTION THAT ALL TRANSACTIONS MADE BY PMS ARE DELIVER}- BASED HAS NO CONSEQUENCE AS THE TRANSACTIONS IN CASE OF INVESTMENTS AS WELL AS BUSINESS TRANSACTIONS BOTH CAN BE OF DELIVERY BASIS. 3.8 THE DECISION RELIED UPON BY THE AO NAMELY DALHOUSIE INVESTMENT TRUST COMPANY LTD VS CIT (CENTRAL) (SUPR A) HAVE BEEN VERY RIGHTLY DISTINGUISHED BY THE LD. COUNSEL IN HIS SUBMISSIONS AS IN THAT CASE THE INVESTMENTS IN QUES TION WERE MADE OUT OF THE BORROWED FUNDS, WHICH WAS THE M AIN REASON ON THE BASIS OF WHICH THE HON'BLE CALCUTTA HI GH COURT AND THE HON'BLE SUPREME COURT DECIDED THAT THESE INVESTMENTS WERE ON ACCOUNT OF BUSINESS TRANSACTIONS, BUT IN THE CASE OF APPELLATE THE INVESTME NTS HAVE BEEN MADE OUT OF OWN SURPLUS FUNDS. THEREFORE THE RATIO OF THIS DECISION CANNOT BE TAKEN TO HELP THE CASE OF THE AO. 3.9 ON THE CONTRARY THE RATIO OF JUDGMENT OF THE HO N'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ESS JAY ENTER PRISES PVT. LTD (DELHI) 165 TAXMAN 465 & OTHER DECISIONS, WHICH HAVE BEEN RELIED UPON BEFORE ME, IT IS HELD THAT SO LONG THERE WAS NOTHING TO SHOW THAT INVESTMENT IN SHARES HAS BEEN CONVERTED INTO STOCK IN TRADE AT ANY TIME DURING THE YEAR, INC OME FROM SALE OF SUCH SHARES IS TO BE ASSESSED AS CAPITAL GA INS AND NOT BUSINESS. IN VIEW OF THE ABOVE POSITION ALSO THE CO NTENTION OF THE APPELLANT DESERVES TO BE ACCEPTED. 3.10 REGARDING A.O'S OBJECTION THAT THE APPLICANT HAS N OT BEEN ABLE TO DISTINGUISH HIS CASE FROM THE OTHER TWO CASE S WHERE INCOME HAS BEEN SHOWN AS 'BUSINESS INCOME'' IN MY OPINION IT IS FOR THE A.O. TO BRING THE FACTS/CIRCUMS TANCES OF OTHER CASES FOR COMPARISON. MOREOVER IT DEPENDS UPON INDIVIDUAL PRESCRIPTION ABOUT HOW TO TREAT INCOME IN PAR TICULAR CASE. HENCE NO ADVERSE INFERENCE CAN BE DRAWN IN THIS R EGARD. BEFORE ME APPELLANT HAS FULLY MADE UP HIS CASE REGARDIN G TRUE CHARACTER OF THE INCOME FROM INVESTMENTS BY EXPLAINING FACTS OF THIS CASE AS WELL AS LEGAL POSITION ON THE ISSUE, WHICH HAS BEEN ELABORATELY DISCUSSED IN FOREGOING PARAGRAPHS. 3.11 THERE IS ANOTHER CONTENTION RAISED BY THE LD. AR THAT THE UNITS OF THE MUTUAL FUNDS ARE NOT TRADABLE NOR THESE CAN BE TRANSFERRED OR REDEEMED BY ANY OTHER-PERSON HAS A FORCE. EVEN THE PURCHASE AND SALE OF MUTUAL FUNDS ARE AT THE PRE DECLARED NAV BY THESE MUTUAL FUND COMPANIES. THE PURCHASE OF UNITS OF MUTUAL FUNDS IS AN INVESTMENT W ITH A VIEW TO RECEIVE THE INCOME BY WAY OF DIVIDEND AND/OR CAPITAL 5 APPRECIATION DEPENDING ON THE MARKET SCENARIO AND NATUR E OF SCHEME. HE HAS ALSO REFERRED THE DECISION OF HON'BLE I TAT DELHI BENCH IN THE CASE OF M/S. MULTIPLEX TRADING & INDUSTRIAL COMPANY LTD VS ITO,33 SOT 123 WHERE IT HAS BEEN HELD THAT THE UNITS OF MUTUAL FUNDS CA NNOT BE EQUATED TO SHARES OF A COMPANY. 3.12 I HAVE CONSIDERED THIS ARGUMENT OF LD. AR. SINCE TH E UNITS OF MUTUAL FUNDS CANNOT BE DEALT IN THE OPEN MA RKET AND WITH ANY OTHER PARTY THERE CANNOT BE ANY TRADING. IT HAS A RESTRICTED MARKET WITH A PREDETERMINED PRICE THEREF ORE THAT PROFITS/ APPRECIATION ON TRANSACTIONS IN MUTUAL FUN DS CANNOT BE REGARDED AS BUSINESS INCOME. 3.13 KEEPING IN VIEW THE ABOVE DISCUSSION, FACTS OF THE CASE, LEGAL POSITION AS ENUMERATED IN JUDGMENT OF JURISDICTIO NAL HIGH COURT IN THE CASE OF CIT VS. RAJA MALWINDER SINGH S UPRA & OTHER CASE LAW CITED, THE FINDING OF THE AO TREATING THE SHORT TERM CAPITAL GAIN OF RS. 23,76,510/- AS 'BUSINESS INCOME' CANNOT BE UPHELD. THE AO IS THEREFORE DIRECTED TO AS SESS THE INCOME OF RS. 23,76,5107- SHOWN BY THE APPELLANT AS SHORT TERM CAPITAL GAIN ACCORDINGLY. THIS GROUND OF APPE AL OF THE APPELLANT HEREBY ALLOWED. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. SHRI SUBHA SH AGGARWAL, LD. COUNSEL FOR THE ASSESSEE SUBMITTED TH AT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF THIS BENCH O F THE TRIBUNAL DATED 29.04.2011 IN ITA NO.669/CHD/2009 IN THE CASE OF ACIT, CIRCLE-II, LUDHIANA V M/S PUJA INVEST MENT PVT.LTD., C/O M/S HERO CYCLES LTD., LUDHIANA, RELAT ING TO ASSESSMENT YEAR 2006-07. WHILE DECIDING SIMILAR IS SUE, THE TRIBUNAL HELD AS UNDER : WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED TH E RECORDS. THE ASSESSEE IS SHOWING INCOME FROM DIVIDE ND AND INTEREST INCOME ALONG WITH SHARE OF PROFIT EARNED F ROM THE FIRMS IN WHICH IT IS A PARTNER. THE ASSESSEE IS ALS O DECLARING FROM CAPITAL GAINS FROM THE MUTUAL FUNDS FROM YEAR TO YEAR. THE ASSESSEE HAD MADE AN INVESTMENT OF RS. 3 CRORES ON 8;3L2005 IN UNITS OF TATA MUTUAL FUND (DIVIDEND PLA N). THE 6 SAID PURCHASE WAS REFLECTED AS 'INVESTMENT' IN THE BALANCE SHEET AS ON 31.3.2005. THE ASSESSMENT FOR THE YEAR 2005-06 WAS COMPLETED U/S 143(3) OF THE ACT AND THE SAID IN VESTMENT SHOWN BY THE ASSESSEE HAS BEEN ACCEPTED. THE SAID U NITS OF TATA MUTUAL FUND WERE REDEEMED ON 21.12.2005 AFTER HOLDING ;FOR A PERIOD OF NINE MONTHS AND GAINS OF R S. 1.24 CRORES WAS MADE ON WHICH TRANSACTION TAX WAS PAID B Y THE ASSESSEE. THE SAID TRANSACTIONS WAS DECLARED AS IN COME FROM SHORT TERM CAPITAL GAIN BY THE ASSESSEE IN ITS RETURN OF INCOME. THE UNITS OF MUTUAL FUND ARE NOT TRADABLE A ND THE PURCHASE AND SALES OF SAID UNITS OF MUTUAL FUNDS AR E TO BE DIRECTLY PURCHASED FROM OR SOLD TO THE COMPANY IN W HICH INVESTMENT IS MADE AND THE SAME IS NOT A COMMODITY WHICH CAN BE TRADED IN THE OPEN MARKET. THE ASSESSES IN T HE PRESENT CASE HAD PURCHASED 3 LAKH UNITS OF TATA MUT UAL FUND (DIVIDEND PLANT) ON 8.3.2005 I.E. IN THE PRECE DING YEAR. THE SAID . INVESTMENT WAS DECLARED BY THE ASSESSEE IN ITS RETURN OF INCOME AND HAS BEEN ACCEPTED AS SUCH IN T HE HANDS OF THE ASSESSEE. ON ITS SALE DURING THE YEAR UNDER APPEAL, THE ASSESSEE RECEIVED A SUM OF RS. 4.24 CRORES AND THE GAIN ARISING ON THE SALE OF SAID SECURITY AT RS. 1.24 CR ORES WAS OFFERED AS INCOME FROM SHORT TERM CAPITAL GAIN BY T HE ASSESSEE. MERELY BECAUSE THE INVESTMENT IN THE SAID SECURITY WAS HELD FOR A SHORT PERIOD AND WAS DISPOSED OF BY THE ASSESSEE TO EARN PROFITS, CANNOT LEAD TO THE CONCLU SION THAT ASSESSEE IS 'A TRADER AND THE GAIN ARISING ON THE S ALE OF THE SAID SECURITY IS-INCOME FROM BUSINESS. THE INTENTIO N OF THE PARTIES WHILE MAKING THE INVESTMENT OR WHILE DEALIN G IN THE SECURITIES IS TO BE SEEN TO DETERMINE THE NATURE OF TRANSACTIONS ENTERED INTO BY THE ASSESSEE. THE AFOR ESAID INVESTMENT WAS MADE BY THE ASSESSEE OUT OF ITS OWN FUNDS AND UNDER THE PROVISIONS OF SECTIONS 2(42A) AND 2(4 2B) OF THE ACT, THE 'SHORT TERM CAPITAL ASSET' AND 'SHORT TERM CAPITAL GAIN' ARE DEFINED. UNDER THE PROVISIONS OF SECTION 2(42A), SHORT TERM CAPITAL ASSET IS A CAPITAL ASSET WHICH I S HELD BY THE ASSESSEE FOR NOT MORE .THAN 36 MONTHS FROM THE DATE OF ITS TRANSFER. HOWEVER, IN RESPECT OF SHARES IN THE COMPANIES OR UNITS OF UTI OR UNITS OF MUTUAL FUNDS OR ZERO CO UPON 7 BONDS, THE PERIOD OF HOLDING IS 12 MONTHS AS AGAINS T 36 MONTHS. THE GAIN ARISING ON TRANSFER OF SUCH SHORT TERM CAPITAL ASSET IS INCOME FROM SHORT TERM CAPITAL GAI NS. THE INVESTMENT BY THE ASSESSEE IS MADE WITH THE MOTIVE OF EARNING GAINS AND SUCH A TRANSACTION WHERE THE ASSE SSEE HAD HELD THE ASSET FOR A SHORT SPAN OF PERIOD AND HAD M ADE GAINS ON ITS TRANSFER, DOES NOT ESTABLISH THE CASE OF THE REVENUE THAT THE ASSESSEE IS INVOLVED IN THE CARRYING ON OF THE BUSINESS ACTIVITY OF SALE AND PURCHASE OF SHARES. T HE FACTS OF THE PARTICULAR CASE NEEDS TO BE SEEN TO DETERMINE T HE NATURE OF TRANSACTIONS. IN THE FACTS BEFORE US, WHERE THE ASSESSEE HAS MADE AN INVESTMENT IN A NON TRADABLE COMMODITY I.E. UNITS OF THE MUTUAL FUND, WHICH WERE SOLD AFTER A H OLDING PERIOD OF NINE MONTHS, THE SAID CAPITAL A SSET OWNED BY THE ASSESSEE IS A SHORT TERM CAPITAL ASSET AND THE TRANSFER OF SHORT TERM CAPITAL ASSET GIVES RISE TO SHORT TERM CAPITAL GAIN BEING EARNED BY THE ASSESSEE. SIMILAR TRANSACTIONS ON SALE OF UNITS OF MUTUAL FUNDS HAVE BEEN ACCEPTED TO BE INCOME FROM CAPITAL GAIN IN THE HAND S OF THE ASSESSEE VIDE ORDER/S PASSED U/S 143(3) OF THE ACT RELATING TO ASSESSMENT YEARS 2004-05 AND 2005-06, COPIES OF WHICH ARE AVAILABLE ON RECORD. FOLLOWING THE RULE OF CONS ISTENCY ALSO, SIMILAR TRANSACTIONS AS IN THE PRESENT CASE A RE ACCEPTED AS INCOME FROM CAPITAL GAINS AND NOT INCOM E FROM BUSINESS. ACCORDINGLY, WE ARE IN CONFORMITY WITH TH E ORDER OF CIT(A) IN HOLDING THAT INCOME ON SALE OF UNITS O F TATA MUTUAL FUNDS (DIVIDEND PLAN) ARE ASSESSABLE AS INCO ME FROM SHORT TERM CAPITAL GAIN IN THE HANDS OF THE ASSESSE E. THUS, THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DIS MISSED. 6. IN THE ABOVE CASE, THE TRIBUNAL HELD THAT INCOME ON SALE OF UNITS OF TATA MUTUAL FUNDS, ARE ASSESSABLE AS INCOME FROM SHORT TERM CAPITAL GAIN IN THE HANDS OF THE ASSESSEE. 7. SHRI SUBHASH AGGARWAL, LD. COUNSEL FOR THE ASSES SEE ALSO POINTED OUT THAT THE DECISION GIVEN BY THE TRI BUNAL IN 8 THE CASE OF M/S PUJA INVESTMENT PVT.LTD. (SUPRA) WA S FOLLOWED BY THE BENCH-B OF THE TRIBUNAL IN THE CASE OF ACIT,CIRCLE-V LUDHIANA V M/S BAHADUR CHAND INVESTME NT (P) LTD., HERO NAGAR, G.T.ROAD, LUDHIANA IN ITA NO. 911/CHD/2009 RELATING TOAY 2006-07. WHILE DECIDING A SIMILAR ISSUE, THE TRIBUNAL VIDE ITS ORDER DATED 30 .12.2011 IN THE CASE OF M/S BAHADUR CHAND INVESTMENT PVT.LTD . (SUPRA) HELD AS UNDER : 27. THE FACTS OF THE PRESENT CASE BEFORE US ARE ID ENTICAL TO THE FACTS BEFORE THE TRIBUNAL (SUPRA) IN M/S PUJ A INVESTMENT PVT. LTD. (SUPRA). THE ASSESSEE IN THE P RESENT CASE HAD MADE INVESTMENT IN MUTUAL FUNDS AND THE SA ID INVESTMENT WAS MADE IN THE EARLIER YEARS OUT OF ITS OWN FUNDS. THE GAIN ARISING ON ITS SALE/REDEMPTION IS T O ASSESSED AS INCOME FROM LONG TERM/SHORT TERM CAPITA L GAINS DEPENDING ON THE PERIOD OF ITS HOLDING. THE RELEVAN T FINDINGS OF CIT(A) IN PARA 5.2 ARE AS UNDER: 5.2 COMING TO THE SHORT TERM CAPITAL GAIN SHOWN BY THE APPELLANT AT RS.45918897/- GAIN OF RS.12375018/- IS ON REDEMPTION OF MUTUAL FUNDS ONLY. THE OTHER SHORT TERM CAPITAL GAIN OF RS.27844797/- AND SHORT TERM CAPITAL LOSS OF RS.(-) 27387631/- IS ALSO ON OTHER MUTUAL FUNDS. FOR THE REASONS DISCUSSED IN PRECEDING PARAGRAPHS PERTAINING TO THE ISSUE OF INVESTMENT AND REDEMPTION OF UNITS OF SUCH MUTUAL FUNDS, SUCH INCOME IS TO BE TAKEN TO BE ASSESSABLE UNDER THE HEAD CAPITAL GAINS ONLY. 28. WE ARE ALSO IN CONFORMITY WITH THE FINDINGS OF CIT(A) IN PARA 5.13, THAT THE SHORT TERM CAPITAL GAINS ON SALE OF MFS HAD ARISEN ON ACCOUNT OF SALE OF REINVESTED DIV IDEND UNITS, WHICH WAS THE PAY OUT ON THE ORIGINAL INVEST MENT IN 9 MFS MADE BY THE ASSESSEE OUT OF ITS SURPLUS FUNDS. SUCH SHORT TERM GAINS ARISING TO THE ASSESSEE CANNOT LEA D TO THE CONCLUSIONS THAT THE ASSESSEE WAS CARRYING ON THE B USINESS OF SALE AND PURCHASE OF MFS. WE FIND NO MERIT IN TH E OBSERVATIONS OF ASSESSING OFFICER IN THIS REGARD. U PHOLDING THE ORDER OF CIT(A), WE HOLD THAT INCOME FROM SALE OF MFS ARE TO BE ASSESSED AS INCOME FROM CAPITAL GAINS-LON G TERM OR SHORT TERM AS THE CASE MAY BE. 8. IN THE CASE OF M/S BAHADUR CHAND (SUPRA) ALSO, T HE TRIBUNAL HELD THAT INCOME FROM SALE OF MUTUAL FUNDS ARE TO BE ASSESSED AS INCOME FROM CAPITAL GAINS AND LONG T ERM OR SHORT TERM, AS THE CASE MAY BE. 8.1 IN OUR CONSIDERED VIEW, THE DECISIONS OF THE TR IBUNAL REFERRED TO ABOVE, ARE SQUARELY APPLICABLE TO THE F ACTS OF THE PRESENT CASE. RESPECTFULLY FOLLOWING ABOVE ORDERS OF THE TRIBUNAL, WE DO NOT FIND ANY INFIRMITY IN THE FINDI NGS OF THE CIT(A) ON THIS ISSUE. ACCORDINGLY, WE UPHOLD THE O RDER AND DISMISS THE APPEAL OF THE REVENUE. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JAN.,2012. SD/- SD/- (D.K.SRIVASTAVA) ( H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED: 24 TH JAN.,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH