ADDL CIT 19(2), MUMBAI V. DR. RAMESH C. SHAH, MUMBAI

ITA 727/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4953 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 03-06-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 03-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SALMAN KHAN
• Assessee Lawyers: SANJAY G SHAH
• Keywords: Business income; Question of law

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D MUMBAI . . , , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER . / ITA NO.727/MUM/2012 ' ' ' ' # # # # / ASSESSMENT YEAR 2008-09 THE ACIT 19(2), ROOM NO.315, 3 RD FLOOR, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI 400012 ' ' ' ' / VS. DR. RAMESH C. SHAH, 9, BHUPENDRA MANSION, 10, PHIROZSHA STREET, SANTACRUZ (W), MUMBAI 400 054. $ ./ % ./ PAN/GIR NO. : AAFPS 8772A ( $& / APPELLANT ) .. ( '($& / RESPONDENT ) $& ) / APPELLANT BY: SHRI SALMAN KHAN '($& * ) / RESPONDENT BY : SHRI SANJAY G. SHAH ' * + / DATE OF HEARING : 16/09/2013 ,-# * + / DATE OF PRONOUNCEMENT : 16/09/2013 . / O R D E R PER I.P.BANSAL, J.M THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DIR ECTED AGAINST THE ORDER DATED 14/11/2011 PASSED BY LD. CIT(A)-30, MUMBAI FOR THE ASSESSMENT YEAR 2008-09. THE GROUNDS OF APPEAL READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING TO TREAT THE SHORT TE RM CAPITAL GAIN DECLARED BY THE ASSESSEE AT RS.2,68,53,4961- AS SUCH AND NOT AS BUS INESS INCOME, RELYING ON THE . / ITA NO.727/MUM/2012 ' ' ' ' # # # # / ASSESSMENT YEAR 2008-09 2 DECISION OF THE HONBLE ITAT FOR Y 2004-05 AND CIT (A)-XIX FOR Y 2006-07 RESPECTIVELY IN THE ASSESSEES OWN CASE IGNORING TH E FACTS THAT THE SAID DECISIONS HAVE NOT BEEN ACCEPTED BY THE DEPARTMENT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE A SSESSEE HAS MADE FREQUENT TRANSACTIONS OF SALE AND PURCHASE OF SHARES AND THE MAGNITUDE OF TRANSACTION IS ALSO HUGE WHICH CLEARLY ESTABLISH TAT THE MOTIVE FO R TRANSACTIONS WAS TO EARN PROFIT BY PURSUING AN ADVENTURE IN THE NATURE OF TR ADE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) HAS ALSO ERRED IN RELYING ON THE DECISION OF HONBLE ITAT, MUMBAI IN THE CASE OF GOPAL PUROHIT [29 SOT 117(MUM)] WITHOUT APP RECIATING THE FACT THAT THE SAID DECISION HAS NOT BEEN ACCEPTED BY THE DEPARTME NT. 2. AT THE OUTSET IT WAS SUBMITTED BY LD. AR THAT THE ISSUE RAISED BY THE REVENUE RELATES TO ASSESSABILITY OF SHORT TERM CAPI TAL GAIN ARISING OUT OF SALE AND PURCHASE OF SHARES WHICH THE AO HAD ASSESSED AS BUSINESS INCOME. THE LD. CIT(A) RELYING UPON THE DECISION RENDERED BY IT AT IN RESPECT OF ASSESSMENT YEAR 2004-05 AND DECISION OF LD. CIT(A) IN RESPECT OF A.Y 2006-07 HAS HELD THIS ISSUE IN FAVOUR OF ASSESSEE AGAINST WHICH DE PARTMENT IS AGGRIEVED AND HAS FILED AFOREMENTIONED GROUND. IT WAS SUBMITTED BY LD. AR THAT THIS ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE NOT ONLY B Y THE ORDER OF ITAT WHICH IS FOLLOWED BY LD. CIT(A), BUT ALSO THE SAID ORDER OF THE TRIBUNAL HAS BEEN CONFIRMED BY HONBLE BOMBAY HIGH COURT VIDE THEIR O RDER DATED 14/02/2013 IN INCOME TAX APPEAL NO. 1063 OF 2011 VIDE WHICH THE D ECISION OF THE TRIBUNAL HAS BEEN UPHELD IN WHICH IT WAS HELD THAT GAIN ARI SING TO THE ASSESSEE ON SALE OF SHARES WAS ASSESSABLE AS SHORT TERM CAPITAL GAIN AND NOT AS BUSINESS INCOME. LD. AR HAS PLACED BEFORE US COPY OF THE S AID ORDER. 2.1 LD. AR ALSO SUBMITTED THAT AO HIMSELF FOR AS SESSMENT YEAR 2010-11, BASED UPON AFOREMENTIONED DECISIONS HAS ACCEPTED T HE CLAIM OF THE ASSESSEE THAT THE GAIN ARISING OUT OF SALE AND PURCHASE OF SHARES IS IN THE NATURE OF SHORT TERM CAPITAL GAIN. LD. AR IN THIS REGARD HAS REFERRED TO ASSESSMENT ORDER DATED 28/3/2013 AND HAS FURNISHED COPY OF THE SAID ORDER ON OUR RECORD. COPY OF THE ORDER OF HONBLE HIGH COURT AS WELL AS ASSESSMENT ORDER FOR . / ITA NO.727/MUM/2012 ' ' ' ' # # # # / ASSESSMENT YEAR 2008-09 3 ASSESSMENT YEAR 2010-2011 WAS ALSO GIVEN TO LD. DR. THUS IT WAS CLAIMED THAT THE ISSUE IS NOW COVERED IN FAVOUR OF THE ASSE SSEE, THEREFORE, ORDER OF LD. CIT(A) HAS TO BE UPHELD. 3. ON THE OTHER HAND, LD. DR DID NOT DISPUTE THE AF OREMENTIONED FACTUAL POSITION. HOWEVER, HE RELIED UPON THE ORDER PASSED BY AO. 4. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY CONSIDERED. THE ORDER OF THE TRIBUNAL HAS UPHELD B Y HONBLE JURISDICTIONAL HIGH COURT VIDE AFOREMENTIONED ORDER DATED 4/2/2 013 WITH THE FOLLOWING OBSERVATIONS: PC: IN THIS APPEAL BY THE REVENUE THE BASIC ISSUE IS W HETHER INCOME EARNED BY THE RESPONDENT ASSESSEE IS TO BE TAXED ON SALE OF SHARE S AS SHORT TERM CAPITAL GAIN AS CONTENDED BY THE ASSESSEE OR INCOME FROM BUSINES S AS CONTENDED BY THE REVENUE. 2) THE RESPONDENT-ASSESSEE IS DOCTOR BY PROFESSION . IN HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2004-05 THE RESPONDENT ASSESSEE DEC LARED SHORT CAPITAL GAIN TO THE EXTENT OF RS.70.43 LACS. THE ASSESSING OFFICER HELD THAT THE GAIN TO THE EXTENT OF RS.55.18 LACS OUT OF RS.70.43 LACS HAS TO BE CON SIDERED AS BUSINESS INCOME AND NOT AS SHORT TERM CAPITAL GAIN AS THE SCRIPS WE RE HELD FOR A PERIOD OF LESS THAN SIX MONTHS. IN APPEAL, CIT(APPEALS) ALLOWED T HE RESPONDENT-ASSESSEES APPEAL. ON FURTHER APPEAL BY THE REVENUE TO THE TR IBUNAL, BY THE IMPUGNED ORDER THE TRIBUNAL WHILE UPHOLDING THE ORDER OF THE CIT(A PPEALS) RELIED UPON CBDT CIRCULAR NO.4-2007 DATED 15/06/2007 AND ON THE BASI S OF TESTS LAID DOWN THEREIN CONCLUDED THAT THE GAIN ON SALE OF SHARES I S TO BE TAXED AS CAPITAL GAIN AND NOT AS BUSINESS INCOME. 3) THE CIT(A) AS WELL AS THE TRIBUNAL FOUND AS A MA TTER OF FACT THAT CONSIDERING THE CBDT CIRCULAR AND THE TEST LAID DOW N THEREIN THE INCOME EARNED ON SALE OF SHARES WOULD HAVE TO BE TAXED AS GAIN F ROM SHORT TERM CAPITAL GAIN AND NOT AS BUSINESS INCOME. THE TRIBUNAL FOUND THA T ALMOST 95% OF THE FUNDS FOR INVESTMENT IN SHARES BELONGS TO THE ASSESSEE. FURT HER, THE SHARES WERE ALWAYS SHOWN AS INVESTMENT IN HIS BALANCE SHEET AND CONSI DERED TO BE AN INVESTMENT. THE DIVIDEND EARNED WAS RS.8.36 LACS ON THE INVESTM ENT OF RS.2.77 CRORES ALSO ESTABLISHES THAT THE INTENTION OF THE RESPONDENT WA S TO EARN DIVIDEND INCOME. MOREOVER, AS OBSERVED BY THE CIT(A) THE RESPONDENT ASSESSEE WAS A BUSY DOCTOR AND WOULD NOT HAVE TIME TO DEAL IN SHARE TRANSACTIO N ON DAY TO DAY BASIS. THUS, THE TRIBUNAL ON THE ABOVE FACTS CONCLUDED THAT INCO ME EARNED ON SALE OF SHARES HELD FOR LESS THAN SIX MONTHS ARE TO BE TAXED UNDER THE HEAD CAPITAL GAIN. . / ITA NO.727/MUM/2012 ' ' ' ' # # # # / ASSESSMENT YEAR 2008-09 4 MOREOVER, WE ARE INFORMED THAT EVEN FOR THE EARLIER ASSESSMENT YEARS GAIN ON SALE OF SHARES HAS BEEN TAXED BY THE REVENUE AS SHO RT TERM CAPITAL GAIN AND NOT AS BUSINESS INCOME. 4. IN VIEW OF THE FACT THAT THE DECISION OF THE TRI BUNAL TAXING THE GAIN MADE ON SALE OF SHARES UNDER THE CAPITAL GAIN IS BASED O N A CONCURRENT FINDING OF FACT, NO QUESTION OF LAW ARISES. THUS WE DO NOT ENTERTAIN THIS APPEAL. 5) ACCORDINGLY, THE APPEAL IS DISMISSED WITH NO OR DER AS TO COSTS. 4.1 EVEN AO FOR ASSESSMENT YEAR 2010-11 HAS ASSESSE D THE GAIN ARISING TO THE ASSESSEE FROM SALE AND PURCHASE OF SHARES AS S HORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN. THE SHORT TERM CAPITAL GAI N ASSESSED BY THE AO WITH REGARD TO THIS ACTIVITY FOR ASSESSMENT YEAR 2010-11 IS A SUM OF RS.2,33,19,981/-. THEREFORE, THE FACTS CANNOT BE S AID TO BE DIFFERENT FROM THE YEAR UNDER CONSIDERATION. RESPECTFULLY FOLLOWING T HE AFOREMENTIONED ORDER OF THE TRIBUNAL WHICH HAS BEEN UPHELD BY THE HONBLE H IGH COURT, WE SEE NO INFIRMITY IN THE ORDER PASSED BY LD. CIT(A)VIDE WHI CH NECESSARY RELIEF HAS BEEN GIVEN TO THE ASSESSEE. WE DECLINE TO INTERFERE AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16/09/2013 . * ,-# / 0'1 16/09/2013 - * 2 3 SD/- S D/- ( / RAJENDRA ) ( . . / I.P. BANSAL ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 0' DATED 16/09/2013 . / ITA NO.727/MUM/2012 ' ' ' ' # # # # / ASSESSMENT YEAR 2008-09 5 . . . . * ** * '+45 '+45 '+45 '+45 65#+ 65#+ 65#+ 65#+ / COPY OF THE ORDER FORWARDED TO : 1. $& / THE APPELLANT 2. '($& / THE RESPONDENT. 3. 7 ( ) / THE CIT(A)- 4. 7 / CIT 5. 582 '+' , , / DR, ITAT, MUMBAI 6. 29 : / GUARD FILE. .' .' .' .' / BY ORDER, (5+ '+ //TRUE COPY// ; ;; ; / < < < < (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . ' . ./ VM , SR. PS