DCIT, Circle - 10, Kolkata, Kolkata V. M/s. Eterna Steel & Investments Pvt. Ltd., Kolkata

ITA 817/KOL/2010

• Counselvise Citation: 81723514 RSA 2010
• Duration Of Justice: 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 04-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 26-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K MISHRA
• Assessee Lawyers: VIKASH SURANA
• Keywords: Business income; Advance ruling; Condonation of delay
• Section: 14A

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA ( ) . . , , . . , , ) [BEFORE HONBLE SRI B.R. MITTAL, J.M. & HONBLE S RI C.D. RAO, A.M.] ! / I.T.A NO. 817/KOL/2010 '# $% / ASSESSMENT YEAR : 2006-07 DEPUTY COMMISSIONER OF INCOME TAX, -VS.- M/S. ETERNA STEEL & INVESTMENTS PVT. LTD., CIRCLE-10, KOLKATA KOLKATA (PAN : AAACE 689 4 P) ( &' /APPELLANT ) ( ()&' / RESPONDENT ) & C.O. NO. 148/KOL./2010 (ARISING OUT OF I.T.A. NO. 817/KOL./2010) ASSESSMENT YEAR : 2006-2007 ETERNA STEEL & INVESTMENTS PVT. LTD., -VS.- DE PUTY COMMISSIONER OF INCOME TAX, KOLKATA CIRCLE-10, KOLKATA (CROSS OBJECTOR) (RESPONDENT) FOR THE ASSESSEE : SHRI VIKASH SURANA, A.R. FOR THE DEPARTMENT : SHRI P.K. MISHRA, SR. D.R. * / ORDER PER SHRI B. R. MITTAL, JUDICIAL MEMBER/ . . , :- THE DEPARTMENT HAS FILED THIS APPEAL FOR THE ASSES SMENT YEAR 2006-07 AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XII, KO LKATA DATED 27.01.2010 ON THE FOLLOWING GROUNDS :- (1) THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A.) HAS NOT ERRED IN TREATING BUSINESS INCOME OF RS.33,85,463/- AS CAPITAL GAINS. (2) THAT UNDER THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, LD. CIT(A.) HAS ERRED IN TREATING THE TRANSACTIONS IN SHARES AN D MUTUAL FUNDS AS CAPITAL GAIN WHEREAS THOSE WERE UNDERTAKEN WITH A P ROFIT MOTIVE AND AT REGULAR INTERVALS. RELIANCE IS PLACED IN THE CASE O F CIT VS.- DISTRIBUTORS BARODA REPORTED IN 83 ITR 377 WHERE HONBLE SUPREME COURT HELD THAT THE REAL, SUBSTANTIAL AND SYSTEMATIC OR ORGANIZED I NVESTMENT WOULD CONSTITUTE BUSINESS. THE ASSESSEE HAS ALSO FILED THE CROSS OBJECTION ALO NG WITH AN APPLICATION FOR CONDONATION OF DELAY OF 120 DAYS ON FOLLOWING GROUNDS :- ITA NO.817/KOL./2010 & C.O. 148/KOL./2010 2 (1) FOR THAT THE LD. CIT(A.) ERRED IN CONFIRMING TH E ADDITION OF RS.68,511/- MADE BY THE LD. ASSESSING OFFICER U/S. 14A OF I.T. ACT, WHEN THE ASSESSEE DENIED OF HAVING INCURRED ANY SPECIFIC EXPENSES FOR EARNING TAX FREE DIVIDEND INCOME. (2) FOR THAT THE DISALLOWANCE BE RESTRICTED TO 1% O F THE DIVIDEND INCOME RS.3,12,264/-. 2. AT THE TIME OF HEARING, THE LD. A.R. SUBMITTED T HAT HE COULD NOT JUSTIFY THE DELAY OF 120 DAYS. HE FURTHER SUBMITTED THAT HE DOES NOT PRESS F OR CROSS OBJECTION AND THE ASSESSEE IS READY TO WITHDRAW THE SAME. THE LD. D.R. SUBMITTED THAT H E HAS NO OBJECTION IF THE ASSESSEE WITHDRAWS THE CROSS OBJECTION. 3. IN VIEW OF THE ABOVE, THE CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED AS WITHDRAWN. 4. NOW COMING TO THE APPEAL FILED BY THE DEPARTMENT , THE RELEVANT FACTS ARE THAT THE ASSESSEE FILED THE RETURN DECLARING TOTAL INCOME OF RS.31,33,220/-. THE ASSESSING OFFICER HAS STATED THAT IN THE DETAILS OF INCOME ENCLOSED, THE ASSESSEE HAS SHOWN (I) SHORT-TERM CAPITAL GAIN OF RS.32,27,667/- AND (II) LONG-TERM CAPITAL GAIN O F RS.1,57,796/-, AGGREGATING THE CAPITAL GAIN OF RS.33,85,463/-. THE ASSESSING OFFICER HAS STATED THAT THE ASSESSEE WAS ASKED TO EXPLAIN WHY THE CAPITAL GAIN OF RS.33,85,463/- SHOULD NOT BE TR EATED AS INCOME FROM BUSINESS AND PROFESSION. THE ASSESSEE FILED THE REPLY STATING, I NTER ALIA, THE GROUNDS AS UNDER :- (1) LEVEL OF ACTIVITIES AND THE NUMBER OF TRANSACTI ONS ARE JUSTIFIABLE TO PROTECT THE SAVINGS AND AT THE TIME ACHIEVE APPRECI ATION/ RETURN. (2) NO TRANSACTIONS WAS MADE DURING THE FIRST 4 MON THS AND TRANSACTIONS WERE EFFECTED ON 9 OCCASIONS DURING TH E YEAR. (3) TRANSACTIONS ARE IN CRORES BUT THE TOTAL SALE I S RS.52.97 LACS. (4) PURCHASES ARE MADE FOR THE INTENTION OF INVESTM ENT AND SHARES OF 3 COMPANIES IN FULL AND 3 COMPANIES IN PART OUT OF SH ARES HELD IN 17 COMPANIES WERE SOLD DURING THE YEAR. (5) THE SHARES ARE BEING SHOWN AS INVESTMENT FROM Y EAR TO YEAR AND THE GAIN ARISING FROM ANY TRANSACTIONS ARE BEING AC CEPTED BY THE DEPARTMENT AS CAPITAL GAIN REGULARLY. (6) THE MAGNITUDE OF TRANSACTION WILL NOT DECIDE IN THE NATURE. ITA NO.817/KOL./2010 & C.O. 148/KOL./2010 3 5. THE ASSESSING OFFICER AFTER CONSIDERING THE SUBM ISSION OF THE ASSESSEE STATED AS UNDER :- FROM THE ABOVE SUBMISSION, IT IS APPARENT THAT THE ASSESSEE TRANSACTED IN SHARE TO EARN PROFIT. IT FURTHER PROV ES THAT THE ASSESSEE HAD CARRIED ON TRANSACTION IN A SYSTEMATIC AND ORGA NIZED MANNER. TRANSACTIONS OF BUYING AND SELLING OF SHARES FOR SH ORT-TERM AND LONG- TERM GAIN AS DISCLOSED BY THE ASSESSEE IS CARRIED. THIS CONSTITUTES BUSINESS ACTIVITIES. THE STATEMENT INDICATES THAT N OT ONLY HAS THE ASSESSEE CARRIED OUT A NUMBER OF TRANSACTION WITH L ARGE VOLUMES. IT IS ALSO NOTED THAT SOME OF THE TRANSACTIONS ARE COMPLE TED WITHIN IN SHORT PERIOD. THIS CLEARLY PROVES AS ADMITTED BY THE ASSE SESE REPLY SUPRA THAT THE MOTIVE OF THE ASSESSEE WHILE BUYING AND SE LLING THESE SHARES WAS TO EARN PROFIT. THUS, IT IS ESTABLISHED THAT TH ESE FREQUENT TRANSACTIONS RUNNING ON A NUMBER OF OCCASIONS WITH LARGE VOLUME ARE CARRIED OUT BY THE ASSESSEE ARE IN THE NATURE OF BU SINESS ACTIVITIES AND NOT CAPITAL INVESTMENT AS CLAIMED BY HIM. REGARDING CLAIM OF THE ASSESSEE THAT SUCH INCOME ARE ACCEPTED BY THE ASSES SEE AS CAPITAL GAIN IN PAST IS IN NO WAY ACCEPTABLE AS THE INCOME DISCL OSED WAS ACCEPTED BY THE DEPARTMENT WITHOUT EXAMINING THE ISSUE ON TH IS LINE. WHATEVER IS SHOWN BY THE ASSESSEE WITH ITS NATURE IS ACCEPTE D WITHOUT ANY INTERFERENCE. IN THE LIGHT OF THE ABOVE FACTS, IT IS CONCLUDED T HAT THE TRANSACTIONS UNDERTAKEN BY THE ASSESSEE IS IMPRESSE D WITH THE CHARACTER OF COMMERCIAL TRANSACTIONS ENTERED INTO W ITH A VIEW TO EARN PROFIT. THE TRANSACTIONS ARE NUMEROUS AND CARRIED I N A PLANNED, SYSTEMATIC AND ORGANIZED MANNER. ACCORDINGLY THESE PROFITS ARISING TO THE ASSESSEE FROM THE ABOVE TRANSACTIONS IN SHARE A ND UNITS OF MUTUAL FUNDS ARE TREATED AS PROFIT FROM BUSINESS & PROFESS ION. 5.1. FURTHER, THE ASSESSING OFFICER AFTER CONSIDERI NG THE DECISION OF THE HONBLE APEX COURT IN THE CASES OF CIT VS.- DISTRIBUTORS BARODA [83 I TR 377], CIT VS.- SUTLEZ COTTON MILLS SUPPLY AGENCY LTD. [100 ITR 706], G. VENKATASWAMI N AIDI & CO. VS.- CIT [35 ITR 594], RAJPUTANA TEXTILES (AGENCIES) LIMITED VS.- CIT [42 ITR 743] AND RAJA BAHADUR VISHESHWARA SINGH VS.- CIT [41 ITR 685] AND ALSO T HE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS.- AMALGAMATIONS PVT. L TD. [108 ITR 885], CIT VS.- K.S. VENKATASUBBAIAH REDDIAR [221 ITR 18], DECISION OF T HE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS.- MINAL RAMESHCHANDRA [167 ITR 507] OBSE RVED THAT SHARES PURCHASED AND SOLD BY THE ASSESSEE WERE WITH THE MOTIVE OF EARNING PROFIT AND NOT WITH THE OBJECT OF INVESTING ITS CAPITAL. THE ASSESSING OFFICER ALSO STATED THAT AS PER MAIN OBJECTS OF THE MEMORANDUM OF ASSOCIATION, THE BUSINESS OF THE ASSESSEE IS OF SHA RES AND SECURITIES, THAT THE ASSESSEE ACQUIRED LARGE QUANTITY OF SHARES AND SUBSEQUENTLY DISPOSED THE SAME IN A SYSTEMATIC MANNER TO EARN ITA NO.817/KOL./2010 & C.O. 148/KOL./2010 4 PROFITS. ACCORDINGLY, THE ASSESSING OFFICER HELD TH AT THE ASSESSEES TRANSACTIONS OF BUYING AND SELLING OF UNITS/ SHARES AMOUNT TO BUSINESS ACTIVIT IES AND CONSIDERED PROFIT SHOWN BY THE ASSESSEE AS BUSINESS PROFIT. BEING AGGRIEVED, THE A SSESSEE FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 6. ON BEHALF OF THE ASSESSEE, IT WAS CONTENDED THAT NO INVESTMENTS HAVE BEEN MADE FROM ANY BORROWED FUNDS AND THE ENTIRE INVESTMENT HAD BE EN MADE OUT OF OWN FUNDS. THAT THE INTENTION OF THE ASSESSEE WAS TO INVEST ITS OWN MON EY INTO EQUITY OF LISTED COMPANIES, MUTUAL FUNDS, ETC. THEREBY EARNING DIVIDEND INCOME, BESIDE S BONUS, ETC. THAT, IN THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION , THE ASSESSEE-COMPANY PURCHASED EQUITY SHARES OF ONLY 7 COMPANIES. THAT THERE WERE ONLY 9 TRANSACTIONS TO PURCHASE EQUITY SHARES AND THERE WERE 11 TRANSACTIONS TO SALE SHARES OF ONLY 6 COMPANIES. THE ASSESSEE ALSO MADE INVESTMENT IN MUTUAL FUNDS AND THERE WAS NOT A SING LE MUTUAL FUND SOLD. THAT THE ASSESSEE- COMPANY NEVER CARRIED OUT ANY BUSINESS ACTIVITY SUC H AS TRADING IN FUTURES & OPTIONS, HEDGING TRANSACTIONS, SHORT-SELLING ACTIVITY, ETC. THAT THE ASSESSEE EMPLOYS PEOPLE TO ASSIST IN ITS SHARE ANALYSIS ACTIVITIES. THAT THE ASSESSEE-CO MPANY ALWAYS TREATED ITS SHARE TRANSACTIONS AS INVESTMENT AND ACCEPTED BY THE DEPARTMENT IN THE PR ECEDING ASSESSMENT YEARS AS WELL AS IN SUCCEEDING ASSESSMENT YEARS RELEVANT TO THE ASSESSM ENT YEAR UNDER CONSIDERATION. IN THE LAST 10 ASSESSMENT YEARS, ALL ALONG THE PROFIT FROM THE SAL E OF INVESTMENT WAS ASSESSED BY THE DEPARTMENT AS CAPITAL GAINS. THE ASSESSEE ALSO CONT ENDED THAT THE TAX TREATMENT GIVEN TO A PORTFOLIO MANAGEMENT SCHEME INVESTOR IS THE SAME AS THAT GIVEN TO A MUTUAL FUND INVESTOR. IT WAS ALSO CONTENDED THAT AS PER STATEMENT OF SHORT-T ERM CAPITAL GAINS AND LONG-TERM CAPITAL GAINS, FILED BEFORE THE LD. CIT(APPEALS), THE ASSES SEE PURCHASED EQUITY SHARES/ MUTUAL FUNDS AT ONE INSTANCE, I.E. AT ONE GO AND SUBSEQUENT SALES W ERE MADE AFTER A REASONABLE TIME PERIOD. THAT THE WEIGHTED AVERAGE PERIOD OF HOLDING FOR EQUITY S HARES IN THE CATEGORY OF SHORT-TERM CAPITAL GAIN WAS 3.06 MONTHS AND IN THE LONG-TERM CAPITAL G AINS CATEGORY, THE WEIGHTED AVERAGE LENGTH OF HOLDING WAS 41 MONTHS. THE ASSESSEE ALSO FILED A CALCULATION SHEET BEFORE THE LD. CIT(APPEALS). IT WAS ALSO CONTENDED THAT NOT A SING LE MUTUAL FUND WAS SOLD WHICH HAD BEEN HELD FOR LESS THAN A YEAR. THE ASSESSEE ALSO STATED THAT THE CASES RELIED UPON BY THE ASSESSING OFFICER DO NOT APPLY TO THE FACTS OF THE CASES OF T HE ASSESSEE, WHICH HAVE BEEN DISCUSSED BY THE LD. CIT(APPEALS) AT PAGES 12 TO 14 OF THE IMPUGNED ORDER. THE LD. CIT(APPEALS) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND ALSO RELYING ON THE FOLLOWING CASES ITA NO.817/KOL./2010 & C.O. 148/KOL./2010 5 (A) CIT VS.- N.S.S. INVESTMENTS (P) LTD. [277 ITR 149 (MAD.)]; (B) CIT VS.- TRISHUL INVESTMENTS LTD. [305 ITR 434 ]; (C) BOMBAY GYMKHANA LTD. VS.- ITO [115 TTJ (MUM.) 639]; (D)VESTA INVESTMENTS & TRADING CO. (P) LTD. VS.- C IT [70 ITD 200 (CHD.)]; (E)CIT VS.- REWASHANKER A. KOTHARI [283 ITR 338 (G UJ.)]; (F) CIT VS.- GIRISH MOHAN GANERIWALA [260 ITR 417 (P &H); (G)JANAK S. RANGWALLA VS.- ACIT [11 SOT 627 (MUM.) ] HELD THAT THE GAINS ON ACCOUNT OF SALE OF SHARES/ M UTUAL FUNDS SHOULD BE TREATED AS CAPITAL GAINS AS AGAINST BUSINESS INCOME ASSESSED BY THE ASSESSIN G OFFICER. HENCE, THE DEPARTMENT IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 7. DURING THE COURSE OF HEARING, LD. D.R. SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE PROFIT SHOWN BY THE ASSESSEE ON SALE AND PURCHASE OF SHARES AND MUTUAL FUNDS HAS RIGHTLY BEEN ASSESSED BY THE ASSESSING OFFICER AS BUSINESS INCOME. HE SUBMITTED THAT THE ASSESSEE WAS CARRYING ON ITS ACTIVITIES IN A SYSTEM ATIC AND ORGANIZED WAY AND HENCE, IT HAS RIGHTLY BEEN HELD THAT THE ASSESSEE PURCHASED AND S OLD SHARES/ MUTUAL FUNDS DURING THE COURSE OF ITS REGULAR TRADING. 8. ON THE OTHER HAND, LD. A.R. MADE HIS SUBMISSIONS ON THE LINES OF THE SUBMISSION MADE BEFORE THE LD. CIT(APPEALS). HE FURTHER SUBMITTED T HAT THE ASSESSEE ALWAYS VALUED ITS INVESTMENTS AT COST PRICE. HE FURTHER SUBMITTED THA T IN THE BALANCE-SHEET OF THE ASSESSMENT YEAR 2005-06 PLACED AT PAGE 36 OF THE PAPER BOOK, THE AS SESSEE HAS SHOWN HOLDING OF SHARES AND MUTUAL FUNDS AS INVESTMENT AND NOT AS STOCK-IN-TRAD E. HE FURTHER REFERRED PAGE 37 OF THE PAPER BOOK, WHICH IS A COPY OF THE PROFIT & LOSS A/C. FOR THE ASSESSMENT YEAR 2006-07 AND SUBMITTED THAT THE LOSS SHOWN BY THE ASSESSEE WAS ONLY ON SAL E OF INVESTMENTS AND THERE WAS NO BUSINESS INCOME SHOWN AND THE DEPARTMENT ALSO ACCEPTED THE C OMPUTATION OF INCOME SHOWN BY THE ASSESSEE AS CAPITAL LOSS. HE FURTHER REFERRED PAGE 26 OF THE PAPER BOOK IN WHICH THE ASSESSEE HAS STATED THE WEIGHTED AVERAGE OF NUMBER OF DAYS OF TH E SHARES HELD IN THE ASSESSMENT YEAR UNDER CONSIDERATION. HE SUBMITTED THAT IN RESPECT OF SHOR T-TERM CAPITAL GAINS WEIGHTED AVERAGE OF HOLDING OF SHARES WAS 4.6 MONTHS AND WHEREAS IN THE CASE OF THE SHARES RESULTED IN LONG-TERM CAPITAL GAINS THE WEIGHTED AVERAGE WAS OF 1.26 YEAR S. THE LD. A.R. FURTHER SUBMITTED THAT THE ASSESSEE ALSO INVESTED ITS FUNDS IN MUTUAL FUNDS. H E SUBMITTED THAT IN THE ASSESSMENT YEAR UNDER ITA NO.817/KOL./2010 & C.O. 148/KOL./2010 6 CONSIDERATION, ONLY THE UNITS OF THE MUTUAL FUNDS W ERE PURCHASED AND THERE WAS NO SALE. THE LD. A.R. FURTHER SUBMITTED THAT IN THE PRECEDIN G ASSESSMENT YEAR AS WELL AS IN THE SUCCEEDING ASSESSMENT YEAR TO THE ASSESSMENT YEAR U NDER CONSIDERATION, THE ASSESSEE HAD DECLARED THE CAPITAL GAINS ON PURCHASE AND SALE OF SHARES/ MUTUAL FUNDS AS CAPITAL GAIN AND THE SAME HAD BEEN ACCEPTED BY THE DEPARTMENT. H E SUBMITTED THAT THERE IS NO CHANGE OF FACTS IN THE ASSESSMENT YEAR UNDER CONSID ERATION AND, THEREFORE, THE LD. CIT(APPEALS) HAS RIGHTLY HELD THE PROFIT IN RESPECT OF SHARES AS CAPITAL GAINS AS AGAINST BUSINESS PROFIT ASSESSED BY THE ASSESSING OFFICER. HE ALSO RELIED ON THE CASE LAWS, WHICH WERE CITED BY THE LD. CIT(APPEALS). 9. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE PARTIES, ORDERS OF AUTHORITIES BELOW AND THE CASES CITED BY THE AUTHORITIES BELOW AS ALSO RELIED BEFORE US (SUPRA). WE OBSERVE THAT THE STRES S OF THE LD. D.R. TO JUSTIFY THE ORDER OF THE ASSESSING OFFICER THAT THE SHORT-TERM/LONG-TERM CAPITAL GAIN CLAIMED BY THE ASSESSEE IS TO BE CONSIDERED AS BUSINESS INCOME ONLY BECAUSE THERE ARE LARGE NUMBER OF PURCHASE AND SALE OF SHARES BY THE ASSESSEE IN A SYSTEMATIC AND ORGANIZED MANNER. HOWEVER, WE OBSERVE THAT IN THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE-COMPANY PURCHASED EQUITY SHARES OF ONL Y 7 COMPANIES, BY WAY OF 9 TRANSACTIONS AND THERE WERE 11 TRANSACTIONS TO SALE SHARES OF ONLY 6 COMPANIES. THE ASSESSEE MADE INVESTMENT IN MUTUAL FUNDS AND THERE WAS NOT A SINGLE MUTUAL FUND SOLD. THAT THE ASSESSEE-COMPANY NEVER CARRIED OUT ANY BUS INESS ACTIVITY SUCH AS TRADING IN FUTURES & OPTIONS, HEDGING TRANSACTIONS, SHORT-SELL ING ACTIVITY, ETC. THAT THE ASSESSEE EMPLOYS PEOPLE TO ASSIST IN ITS SHARE ANALYSIS ACTI VITIES AND ALWAYS TREATED ITS SHARE TRANSACTIONS AS INVESTMENT BY THE DEPARTMENT IN THE PRECEDING ASSESSMENT YEARS AS WELL AS IN SUCCEEDING ASSESSMENT YEARS RELEVANT TO THE A SSESSMENT YEAR UNDER CONSIDERATION. IN THE LAST 10 ASSESSMENT YEARS, ALL ALONG THE PROF IT FROM THE SALE OF INVESTMENT WAS ASSESSED BY THE DEPARTMENT AS CAPITAL GAINS. THE DE PARTMENT HAS NOT DISPUTED THAT THE TAX TREATMENT GIVEN TO A PORTFOLIO MANAGEMENT SCHEM E INVESTOR IS THE SAME AS THAT GIVEN TO A MUTUAL FUND INVESTOR. FROM THE RECORD, IT IS A LSO FOUND THAT AS PER STATEMENT OF SHORT-TERM CAPITAL GAINS AND LONG-TERM CAPITAL GAIN S, FILED BEFORE THE LD. CIT(APPEALS), ITA NO.817/KOL./2010 & C.O. 148/KOL./2010 7 THE ASSESSEE PURCHASED EQUITY SHARES/ MUTUAL FUNDS AT ONE INSTANCE, I.E. AT ONE GO AND SUBSEQUENT SALES WERE MADE AFTER A REASONABLE TIME PERIOD AND THE WEIGHTED AVERAGE PERIOD OF HOLDING FOR EQUITY SHARES IN THE CATEGORY OF SHORT-TERM CAPITAL GAIN WAS 3.06 MONTHS AND IN THE LONG-TERM CAPITAL GAINS CATEGORY, THE WEIGHTED AVERAGE LENGTH OF HOLDING WAS 41 MONTHS. IT IS ALSO OBSERVED THAT NO INVESTMENTS HAVE BEEN MADE FROM ANY BORROWED FUNDS AND THE ENTIRE INVESTMENT HAD BE EN MADE OUT OF OWN FUNDS. THE INTENTION OF THE ASSESSEE WAS TO INVEST ITS OWN MON EY INTO EQUITY OF LISTED COMPANIES, MUTUAL FUNDS, ETC. THEREBY EARNING DIVIDEND INCOME, BESIDES BONUS, ETC. FURTHER IT IS OBSERVED THAT THE CASES RELIED UPON BY THE ASSESSIN G OFFICER HAVE BEEN CONSIDERED BY THE LD. CIT(APPEALS) AT PAGES 12 TO 14 OF THE IMPUG NED ORDER AND AT THE TIME OF HEARING, THE LD. D.R. COULD NOT DISPUTE THE OBSERVATIONS OF THE LD. CIT(APPEALS) THAT THE SAID CASES DO NOT FIT TO THE FACTS OF THE CASE OF THE AS SESSEE AS ON RECORD. WE ALSO OBSERVE ON PERUSAL OF THE DETAILS OF THE TRANSACTIONS OF SALE AND PURCHASE OF SHARES, PLACED AT PAGES 23 & 24 OF THE PAPER BOOK, THERE WERE NOT MUCH NUMB ER OF TRANSACTIONS TO ESTABLISH THAT THE ASSESSEE MADE PURCHASES OF THE SHARES UNDER CON SIDERATION AS STOCK-IN-TRADE. WE OBSERVE THAT SOME OF THE SHARES WERE PURCHASED IN T HE PRECEDING ASSESSMENT YEAR AND THE DEPARTMENT HAS NOT DISPUTED THE FACT THAT THOSE SHARES WERE SHOWN AS AN INVESTMENT AS ON 31.03.2005. WE ARE OF THE CONSIDERED VIEW THA T WHEN THE DEPARTMENT HAS ACCEPTED THOSE SHARES AS INVESTMENT IN THE PRECEDIN G ASSESSMENT YEAR, THE SAME VERY SHARES COULD NOT BE CONSIDERED AS STOCK-IN-TRADE IN THE ASSESSMENT YEAR UNDER CONSIDERATION MERELY BECAUSE THERE WAS PROFIT WHEN THE SHARES WERE SOLD BY THE ASSESSEE. THE AUTHORITY FOR ADVANCE RULINGS IN THE CASE OF FIDELITY NORTHSTAR FUND & OTHERS IN RE (2007) 288 ITR 641 HAS HELD THAT WHILE DISTINGUISHING A TRADING COMPANY WITH THAT OF AN INVESTMENT COMPANY, THE INTENTION O F THE INVESTOR IS AN IMPORTANT FACTOR TO DETERMINE THE QUESTION OF TRADER OR INVESTOR. TH E HONBLE MADRAS HIGH COURT HAS ALSO HELD IN THE CASE OF CIT VS.- N.S.S. INVESTMENTS (P VT.) LTD. (SUPRA) THAT WHEN SHARES IN QUESTION WERE NEVER TREATED BY THE ASSESSEE AS STOC K-IN-TRADE AND THE SHARES WERE HELD FOR EARNING DIVIDEND, GAIN ARISING ON SALE WAS A CA PITAL GAIN. IN THE CASE BEFORE US ALSO, THE LD. A.R. CONTENDED THAT THE SHARES WERE PURCHAS ED BY THE ASSESSEE WITH AN INTENTION TO EARN DIVIDEND AND/OR BONUS SHARES AND NOT TREATE D AS STOCK-IN-TRADE AT ANY POINT OF ITA NO.817/KOL./2010 & C.O. 148/KOL./2010 8 TIME. SINCE THE DEPARTMENT HAS FAILED TO BRING ANY EVIDENCE ON RECORD TO CONTRADICT THE ABOVE SUBMISSION OF THE ASSESSEE, WE ARE OF THE CON SIDERED VIEW THAT THE LD. CIT(APPEALS) HAS RIGHTLY HELD THAT THE SUM OF RS.33 ,85,463/- SHOWN BY THE ASSESSEE IS TO BE ASSESSED AS CAPITAL GAIN AND NOT AS BUSINESS PROFIT. HENCE, WE UPHOLD THE ORDER OF THE LD. CIT(APPEALS) AND REJECT THE GROUND OF APPEA L TAKEN BY THE DEPARTMENT. 10. IN THE RESULT, THE APPEAL OF THE DEPARTMENT AS WELL AS THE CROSS OBJECTION OF THE ASSESSEE BOTH ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 08.04. 2011. SD/- SD/- [C. D. RAO/ ( . . )] [ B.R. MI TTAL / . . ] ACCOUNTANT MEMBER/ JUDICIAL MEMBER/ DATED : 08/ 04 / 2011 COPY OF THE ORDER FORWARDED TO: 1. M/S. ETERNA STEEL & INVESTMENTS PVT. LTD., 11-C, BU RDWAN ROAD, KOLKATA- 700 027. 2 DCIT, CIRCLE-10, KOLKATA, P-7, CHOWRINGHEE SQUARE, KOLKATA-69 3. CIT(A)- ,KOLKATA 4. CIT, KOLKATA- 5. DR, KOLKATA BENCHES, KOLKATA (TRUE COPY) BY ORDER ASSISTANT REGISTRAR, I.T.A.T., KOLKATA LAHA, SR. P.S.