SHANKAR REALTY P.LTD, MUMBAI V. ASST CIT 5(3), MUMBAI

ITA 828/MUM/2012

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8758 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 03-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 07-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Assessee Lawyers: APURAVA SHAH
• Keywords: Business income; Business expenditure; Source of fund; Question of law
• Section: 143(3); 10

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 828/ MUM/2012 ( / ASSESSMENT YEAR : 2008 - 09) SHANKAR REAL TY P. LTD, 322, PANCHRATNA, OPERA HOUSE, MUMBAI 400004 / V. ACIT, CIRCLE - 5(3) AAYKAR BHAVAN, M.K ROAD, MUMBAI 400020 ./ PAN : AAJCS6371E ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY: SHRI. NITESH JOSHI & APURAVA SHAH REVENUE BY : SHRI. V. JUSTIN / DATE OF HEARING : 08.08.2017 / DATE OF PRONOUNCEMENT : 31.10.2017 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE, BEING ITA NO. 828/MUM/2012, IS DIRECTED AGAINST THE APPELLATE ORDER DATED 14.11.2011 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 9 , MUMBAI (HEREINAFTER CALLED THE CIT(A)), FOR ASSESSMENT YEAR 2008 - 09, APPELLATE PROCEEDINGS HAD ARISEN BEFORE LEARNED CIT(A) FROM THE ASSESSMENT ORDER DATED 13.12.2010 PASSED BY LEARNED ASSESSING OFFICER (HEREINAFTER CALLED THE AO) U/S 143(3) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER CALLED THE ACT). 2. THE GROUNDS O F APPEAL RAISED BY THE ASSESSEE IN THE MEMO OF APPEAL FILED WITH THE INCOME - TAX APPELLATE TRIBUNAL, MUMBAI (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER: - THE COMMISSIONER OF INCOME TAX (APPEALS) - 9, MUMBAI HAS ERRED: - 1. I N TREATING THE CAPITAL GAIN FROM SALE OF SHARES AS BUSINESS INCOME INSTEAD OF AS SHORT TERM CAPITAL GAIN. I.T.A. NO. 828/MUM/2012 2 2. WITHOUT PREJUDICE, IN NOT ALLOWING THE APPELLANT AN ADJUSTMENT FOR SECURITIES TRANSACTION TAX IF THE SAID INCOME WAS TAXABLE AS BUSINESS INCOME MERELY ON THE GROUND THAT THE SAME WAS NOT CLAIMED BEFORE THE AO. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND THE GROUNDS AS MAY BE ADVISED FROM TIME TO TIME. 3. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF RENTING O F PROPERTIES T HEREBY DERIVING INCOME FROM HOUSE PROPERTY AND DEALING IN SHARES . T HE SOLE ISSUE IN THIS APPEAL BETWEEN RIVAL PARTIES IS A DISPUTE BETWEEN THE REVENUE AND THE ASSESSEE AS TO TREATMENT OF INCOME ARISING FROM DEALING IN SHARE TO BE CHARGED TO TAX AS INCOM E FROM CAPITAL GAIN S OR TO BE CHARGED TO TAX AS INCOME FROM BUSINESS . THE REVENUE IS TREATING GAIN S ARISING FROM PURCHASE AND SALE OF SHARE S AS BUSINESS INCOME WHILE THE ASSESSEE IS CONTENDING THAT THE SAID INCOME ARISING FROM SALE AND PURCHASE OF SHARES I S AN INCOME CHARGEAB L E TO TAX AS INCOME FROM CAPITAL GAIN. THE ASSESSEE WAS CALLED UPON TO EXPLAIN THE SAME BY THE A.O AND THE ASSESSEE SUBMITTED BEFORE THE AO AS UNDER: - 'IN THIS CONNECTION, WE RESPECTFULLY SUBMIT THAT THE COMPANY HAS TAKEN DELIVERY OF THE SHARES AND SECURITIES AND ALL SHARES AND SECURITIES ARE HELD BY THE COMPANY AND WHEN THE COMPANY THOUGHT THAT IN THE SCRIPT WHERE THE COMPANY HAS MADE INVESTMENT IS APPRECIATED IN INVESTM ENT. THE COMPANY HAS SOLD SHARES AND SHOWN AS SHORT TERM CAPITAL GAIN. THE COMPANY HAS NOT BORROWED ANY FUND FOR THE INVESTMENT IN THE SHARES AND SECURITIES. THE FUND WHICH WAS BORROWED INVESTED FOR BUYING THE PROPERTY AND THIS FACT CAN BE SEEN THAT THE TOTAL INTEREST PAYMENT IS CLAIMED AGAINST PROPERTY INCOME. THE COMPANY HAS ALSO SHOWN SHARES AS AN INVESTMENT IN THIS BALANCE SHEET AND NOT AS A STOCK IN TRADE. THE COMPANY HAS HELD SOME OF THE INVESTMENT MORE THAN YEARS. THE MAIN PURPOSE OF THE INVESTMENT TO GET APPRECIATION AND DIVIDEN D. THUS, THE SHORT TERM CAPITAL GAIN SHOWN BY THE ASSESSEE COMPANY IS PROPER AND NO DISTURBANCE IS CALLED FOR THE A.O REJECTED THE CONTENTION S OF THE ASSESSEE AND HELD THAT WHETHER THE TAX - PAYER IS A TRADER OR IS A N INVESTOR IS A MIXED QUESTION OF LAW A ND FACTS AND ITS TO BE DECIDED BASED UPON FACTS AND CIRCUMSTANCES OF EACH CASE AND LEGAL PRINCIPALS INVOLVED IN SETTLING THE CONTROVERSY ARE AS UNDER: - I.T.A. NO. 828/MUM/2012 3 I. WHETHER A TRANSACTION OF SALE AND PURCHASE OF SHARES IS TRADING OR INVESTMENT IS A MIXED QUESTION OF LAW AND FACTS. II. IT IS POSSIBLE FOR AN ASSESSEE IS BY WAY OF INVESTMENT OR OF STOCK IN TRADE IS A MATTER WITHIN THE KNOWLEDGE OF THE ASSESSEE AND IT IS FOR THE ASSESSEE TO PRODUCE EVIDENCE FROM THE RECORDS AS TO WHETHER HE MAINTAINED ANY DISTINCTION BETWEEN SHARES HELD AS INVESTMENT AND THOSE HELD AS STOCK IN TRADE. III. THE TREATMENT IN THE BOOKS BY AN ASSESSEE IS NOT CONCLUSIVE AND IF THE VOLUME, FREQUENCY AND REGULARITY AT WHICH TRANSACTIONS ARE CARRIED OUT INDICATE SYSTEMATIC AND ORGANIZED ACTIV ITY WITH PROFIT MOTIVE THEN IT BECOMES BUSINESS PROFIT NOT CAPITAL GAIN. IV . PURCHASE WITH INTENTION TO RESALE CAN CONSTITUTE CAPITAL GAINS OR BUSINESS PROFIT DEPENDING ON CIRCUMSTANCES LIKE QUANTITY OF PURCHASE AND NATURE OF ACTIVITY. V. NO SI N G L E FACT HAS ANY DECISIVE SIGNIFICANCE AND THE QUESTION MUST BE ANSWERED DEPENDING ON THE COLLECTIVE EFFECT OF ALL RELEVANT MATERIAL BROUGHT ON RECORDS. THE AO RELIED UPON SEVERAL DECISIONS OF THE COURTS AS ARE DETAILED IN THE ASSESSMENT ORDER AND SUMMED UP THAT THE ASSESSEE IS IN THE BUSINESS OF DEALING IN SHARE BY HOLDING AS UNDER , VIDE ASSESSMENT ORDER DATED 13 - 12 - 2010 PASSED BY THE AO U/S 143(3) : VARIOUS COURTS HAVE TIME AND AGAIN INTERPRETED THAT THE INTENTION OF THE ASSESSEE IS OF PARAMOUNT IMPORTANCE IN DETERMINING WHETHER THE ASSESSEE HAS BEEN A TRADER OR AN INVESTOR. THE SOURCE OF FUNDS UTILIZED ALSO SHEDS LIGHT ON THE NATURE OF TRANSACTION AN D ITS INTENTION. A SINGULAR TRANSACTION OR MULTIPLE TRANSACTIONS ARE DETERMINED AS TO BE IN THE NATURE OF ADVENTURE FOR EARNING PROFITS OR WITH A VIEW TO INVEST AND ENJOY THE FRUITS THEREOF ON THE BASIS OF INTENTION. TO SUM UP THE ASSESSEE IS TREATED AS T RADER IN SHARES ON FOLLOWING GROUNDS: - (I) THE PURCHASE AND SALE OF SHARES IS NOT AN UNRELATED ACTIVITY BUT MAIN BUSINESS OF THE ASSESSEE. (II) IT IS A WELL SETTLED LAW THAT EVEN A SINGULAR TRANSACTION OF PURCHASE AND SALE COULD BE IN THE NATURE OF TR ADE. BUT HERE THE ASSESSEE HAS CONTINUOUSLY AND SYSTEMATICALLY CARRIED OUT THE ACTIVITY OF TRADING IN SHARES OVER THE PERIOD OF ONE YEAR. (III) THE ASSESSEE HAS BORROWED FUNDS TO FUND HER ACTIVITY FOR PURCHASE AND SALE OF SHARES. THE PR ESENCE OF BORROWE D FUNDS IM PARTS THE ACTIVITY THE COLOUR OF TRADE RATHER THAN INVESTMENT. (IV) IN THE ABSENCE OF DEFINITIVE REASON ON THE PART OF ASSESSEE ABOUT PURCHASE AND SALE OF SHARES, WHAT CAN BE GAUGED FROM THE FACTS IS THAT I.T.A. NO. 828/MUM/2012 4 THE ASSESSEE HAS BOUGHT AND SOLD SHARE S DEPENDING ON THE VOLATILITY OF THE MARKET. THIS BEHAVIOR RESEMBLES THAT OF THE TRADER. THE ASSESSEE HAS ARGUED THAT IT HAD RECORDED THE ABOVE PURCHASES AS INVESTMENT THEREFORE THE INCOME FROM THE SAME SHOULD BE TREATED AS CAPITAL GAINS. THE RECORDING IN THE BOOKS OF ACCOUNTS IS ILLUMINATOR BUT IT IS NOT SACROSANCT. THE INCOME FROM THE SAME CAN BE ASSESSED AS BUSINESS INCOME DEPENDING ON THE FACTS AND CIRCUMSTANCES OF THE CASE. HON'BLE APEX COURT IN THE CASE OF KARANPURA DEVELOPMENT CO. LTD VS. CIT (1962) 44 ITR 362, HAS CLEARLY HELD THAT 'SUBSTANCE OF TRANSACTION SHOULD PREVAIL OVER ITS FORM GIVEN BY THE ASSESSEE.' THEREFORE, IN LIGHT OF ABOVE APEX COURT DECISION IT BECOME CLEAR THAT ASSESSEE'S SUBSTANTIAL BUSINESS, EITHER CHECKED THROUGH NOS, OR THROUGH V OLUMES, OR THROUGH PROFITABILITY, OR THROUGH MONEY EMPLOYED, IS SHARES TRANSACTION ONLY. (V) COMMODITIES AND SCRIPTS, AS HELD BY ROYAL COMMISSION OF ENGLAND ARE NORMALLY THE SUBJECT MATTER OF TRADING AND VERY EXCEPTIONALLY THE SUBJECT OF INVESTMENT. (VI ) USUALLY THE PROFITS ON THIS PROPERTY HAVE BEEN REALIZED IN VERY SHORT DURATION. 8. THE AR OF THE ASSESSEE COMPANY WAS AGAIN SPECIFICALLY ASKED ON 10.12.2010 WHY ITS INCOME FROM THE STCG SHOULD NOT TREATED INCOME FROM BUSINESS ACTIVITIES OF THE TRADING OF SHARES. THE AR OF THE ASSESSEE SUBMITTED WRITTEN SUBMISSION ON DATED 13.12.2010 AND THE RELEVANT CONTENT IS REPRODUCED HEREWITH. ' IN THIS CONNECTION, WE RESPECTFULLY SUBMIT THAT THE COMPANY HAS PURCHASED SHARES AND SECURITIES AND TAKEN DELIVERY THERE OF AND HAS HELD THE SHARES SECURITIES AS A N INVESTMENT AND NOT SO STOCK - IN TRADE. THE AMOUNT INVESTED IN BUYING SHARES AND SECURITIES ARE FOR THE PURPOSE OF EARNING DIVIDEND INCOME AND APPRECIATION IN THE VALUE OF INVESTMENT. THEREFORE , THE ASSESSEE COMPANY HAS TAKEN THE DELIVERY OF SHARES AND IN SUPPORT OF DELIVERY, WE HAVE SUBMITTED DEMAT ACCOUNT OF THE COMPANY WHEREIN SHARES ARE CREDITED AND WHEN THE COMPANY THOUGHT THAT THE APPRECIATION IN INVESTMENT IS GOOD, THE COMPANY HAS SOLD THE SHARES AND THE EXCESS AMOUNT OF INVESTMENT SHOWN AS A SHORT TERM CAPITAL GAIN. THE COMPANY HAS MADE INVESTMENT OUT OF OWNED FUNDS ON WHICH NO INTEREST IS PAID BY THE COMPANY. THE INTEREST PAYMENT IS ON THE BORROWING WHICH IS INVESTED IN BUYING PROPERTY. THEREFORE, THE TOTAL INTEREST PAYMENT CLAIMED AGAINST THE PROPERTY INCOME. ON THE SALE OF SHARES, THE STT IS CHARGED AND SAME IS DISALLOWED BY THE COMPANY WHILE COMPUTING ITS TOTAL INCOME WHICH CLEARLY SHOWN THAT THE INVESTMENT WHICH COMPANY HAS SOLD ARE C APITAL GAIN, LONG - TERM OR SHORT - TERM AND NOT BUSINESS INCOME. AS PER MEMORANDUM OF ARTIC LES OF THE COMPANY, THE COMPANY 'S MAIN ACTIVITIES TO CARRY BUSINESS OF BUILDERS, ENGINEERS, CONTRACTORS, CONSTRUCTION, TO PURCHASE AND LEASE EXCHANGE OR OTHERWISE LA NDS, BUILDING AND HEREDITAMENTS OF ANY TENURE OF DESCRIPTION, ANY STATE OR INTEREST THEREIN. IN THE MEMORANDUM OF ARTICLES, NOWHERE THE MAIN OBJECT OF THE COMPANY TO DEAL IN SHARES AND SECURITIES BUSINESS. SINCE THE ASSESSEE COMPANYS OBJECT IS NOT TO TRAD E IN SHARES AND SECURITIES, I.T.A. NO. 828/MUM/2012 5 IT CANNOT BE TREATED AS BUSINESS INCOME ON SALE OF SHARES AND SECURITIES. IN THE OBJECT OF INCIDENTAL OR ANCILLARY, THE COMPANY CAN INVEST IN SHARES AND SECURITIES TO EARN DIVIDEND AND INTEREST. THUS THE AMOUNT RECEIVED ON SALE OF SHARES IS CORRECTLY SHOWN AS A SHORT - TERM CAPITAL GAIN BY THE ASSESSEE COMPANY AND PAID TAXES ACCORDINGLY. THE INVESTMENT MADE IN SHARES IS ONLY FOR THE INTERIM PERIOD PENDING ACTUAL USAGE OF FUNDS FOR THE OBJECTS OF THE BUSINESS. THE DEPLOYMENT OF F UNDS IN SHARES IN THUS A MERE PASSIVE TEMPORARY ACTION PENDING DISBURSAL OF FUNDS AVAILABLE ON THE BUSINESS OF THE ASSESSEE.. THE ASSESSEE COMPANY COULD NOT OFFER ANY LOGICALLY AND SUPPORTING, VALID REASONS AND FACTS WHICH WILL SUPPORT THEIR CONTENTION A ND CLAIM OF SHORT TERM CAPITAL GAIN. HENCE IN VIEW OF THE ABOVE ONGOING DISCUSSION, FACTS AND CIRCUMSTANCES OF THE CASE AND VARIOUS CASE LAWS I HOLD THAT INCOME DECLARED FROM THE SHORT TERM CAPITAL GAIN SHALL BE ASSESSED AS INCOME FROM THE BUSINESS FROM THE ACTIVITIES OF THE SELLING/TRADING OF SHARES. 4. THE MATTER WAS CARRIED FURTHER BY THE ASSESSEE BY FILING FIRST APPEAL BEFORE LEARNED CIT( A ) WHO DISMISS ED THE APPEAL OF THE ASSESSEE . T HE ASSESS EE ALSO RAISED AN ALTERNATIVE CONTENTION THAT IF THE GAINS ARISING FROM PURCHASE AND SALES OF SHARES ARE HELD TO BE BUSINESS INCOME , THEN THE ASSESSEE BE ALLOWED DEDUCTION OF S ECURITIES T RANSACTION T AX PAID BY IT , WHICH CLAIM OF THE ASSESSEE WAS ALSO DENIED BY LEARNED CIT( A ) AS ASSESSEE DID NOT RA ISED ANY SUCH CLAIM BEFORE THE A.O IN THE RETURN OF INCOME FILED WITH THE R EVENUE , VIDE APPELLATE ORDER DATED 14 - 11 - 2011 PASSED BY LEARNED CIT(A) . 5. AGGRIEVED BY THE APPELLATE ORDER DATED 14 - 11 - 2011 PASSED BY LEARNED CIT(A) , THE ASSESSEE FILED AN APPE AL BEFORE THE TRIBUNAL. IT WAS SUBMITTED BY L D. COUNSEL FOR THE ASSESSEE THAT THE ASS ESSEE IS ENGAGED IN PURCHASE AND SALE OF SHARES AS AN INVESTOR AND INCOME IS TO BE BROUGHT TO TAX AS CAPITAL GAINS INSTEAD OF BUSINESS INCOME. IT WAS SUBMITTED THAT IN T HE ALTERNATIVE IF THE SAID INCOME IS HELD TO BE BUSINESS INCOME , THEN STT PAID BY THE ASSESSEE IS TO BE ALLOWED AS BUSINESS EXPENSES . OUR ATTENTION WAS ALSO DRAWN TO THE ORDERS OF AUTHORITIES BELOW AND IT WAS SUBMITTED THAT ASSESSEE MAIN BUSINESS IS REAL ESTATE AND IT WAS SUBMITTED THAT THE AUTHORITIES BELOW HAS NOT GIVEN ANY REASONS BEFORE BRINGING TO TAX INCOME FROM PURCHASE AND SALE OF SHARES AS BUSINESS INCOME INSTEAD OF INCOME FROM CAPITAL GAINS . THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT I NVESTMENTS IN IMMOVABLE I.T.A. NO. 828/MUM/2012 6 PROPERTY MADE BY THE ASSESSEE AS AT 31 - 03 - 2008 WERE TO THE TUNE OF RS. 4.07 CRORES OUT OF TOTAL INVESTMENTS OF RS. 6.28 CRORES(PB/PAGE7). IT WAS ALSO SUBMITTED THAT INTEREST BEARING D EBENTURES TO THE TUNE OF RS.3.66 CRORES WERE RAI SED WHICH WERE UTILISED BY THE ASSESSEE FOR THE PURPOSE S OF MAKING INVESTMENTS IN PROPERTIES. HE DREW OUR ATTENTION TO THE PAPER BOOK / PAGE NO. 5 WHERE IN AUDITED BALANCE SHEET IS PLACED . H E ALSO DREW OUR ATTENTION TO PAGE 7 OF THE PAPER BOOK WHERE SCHEDULE OF INVESTMENTS IS PLACED WHEREIN THE TOTAL INVESTMENTS HELD BY THE ASSESSEE AS OF 31 - 03 - 2008 WERE TO THE TUNE OF RS. 6.28 CRORES , OUT OF WHICH INVESTMENT S IN PROPERTIES ARE TO THE TUNE OF RS. 4.07 CRORES OUR ATTENTION WAS ALSO DRAWN TO THE SCH EDULE OF UNSECURED LOANS WHICH IS PLACED IN PAPER BOOK / PAGE 7 AND OUR ATTENTION WAS DRAWN TO DETAILS OF FINANCIAL EXPENSES OF RS. 20.02 LACS PAID ON UNSECURED LOAN RAISED ARE PLACED PAGE NO. 9 OF THE PAPER BOOK WHICH CONSTITUTE D INTEREST ON DEBENTURES O F RS.14.65 LAC S AND OTHER INTEREST OF RS. 5.37 LAC S . THE LEARNED COUNSEL FOR THE ASSESSEE ALSO DREW OUR ATTENTION TO PAGE NO. 37 TO 56 WHEREIN ALL THE DETAIL OF CAPITAL GAIN EARNED BY THE ASSESSEE ARE PLACED . HE ALSO DREW OUR ATTENTION TO PAGE NO. 14 TO 34 /PAPER BOOK WHEREIN M EMORANDUM AN D A RTICLE S OF ASSOCIATION OF THE COMPANY IS PACED AND IT WAS CLAIMED THAT MAIN OBJECT CLAUSE OF THE COMPANY IS TO DEAL IN REAL ESTATE . THE LEARNED COUNSEL FOR THE ASSESSEE ALSO DREW OUR ATTENTION TO INTERNAL PAGE NO. 1 5 OF THE A.O ASSESSMENT ORDER WHEREIN INTEREST OF RS. 20, 02, 795/ - IS ALLOWED AS INTEREST PAID ON LOAN FOR BUYING THE PROPERTY UNDER THE HEAD INCOME FROM HOUSE PROPERTY . THUS, IT WAS CONTENDED THAT THE ENTIRE INTEREST BEARING LOANS WERE UTILIZED FOR INVEST MENT IN PROPERTIES AND SUCH INTEREST WAS ALLOWED BY THE AO ITSELF UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND HENCE IT COULD NOT BE IMPUTED THAT INTEREST BEARING BORROWED FUNDS WERE UTILISED BY THE ASSESSEE FOR INVESTMENTS IN SHARES. IT WAS ALSO SUBMITTE D THAT RENTAL INCOME FROM PROPERTIES EARNED BY THE ASSESSEE WAS TO THE TUNE OF RS.80 LACKS WHICH WAS OFFERED FOR TAXATION. THUS, IT WAS CLAIMED THAT NO BORROWED FUNDS WERE UTILISED FOR INVESTMENT IN SHARES. THE ASSESSEE ALSO HAS GIVEN FUND FLOW STATEMENT TO REFLECT INVESTMENTS IN PROPERTIES WHICH IS AT PAGE NO. 36. IT WAS SUBMITTED THAT OUT OF CAPITAL GAIN S ARISING FROM SHARES CLAIM ED BY THE ASSESSEE O F RS. 41,07,492/ - , CA PITAL GAINS TO THE TUNE OF RS.8,62,038/ - WERE EARNED WITHIN 30 DAYS OF BUYING OF THE SHARES AS THE SHARES SO BOUGHT WERE SOLD WITHIN 30 DAYS. IT WAS SUBMITTED THAT IF IT IS HELD THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEALING IN SHARE S WHEREIN INCOME IS HELD TO BE I.T.A. NO. 828/MUM/2012 7 ASSESSED AS BUSINESS INCOME, THEN STT PAID SHOULD BE ALLOWED. IT WAS SUBMITTED THAT THIS GROUND WAS RAISED BEFORE LEARNED CIT( A ) BUT HE DID NOT ALLOW ED THE SAME AS THE CLAIM WAS NOT MADE IN THE RETURN OF INCOME FIL ED WITH THE REVENUE. HE RELIED UPON THE DECISION OF HONBLE BOMB AY HIGH COURT IN THE CASE OF CIT V. PRU TH VI BROKERS & SHAREHOLDERS (2012) 349 ITR 336 (BOM HC) AND IT WAS SUBMITTED THAT THE ADDITIONAL GROUND CAN BE TAKEN UP FOR THE FIRST TIME BEFORE APPELLA TE AUTHORITIES. 6 . THE LD. DR ON THE OTHER HAND SUBMITTED THAT THE CONTROVERSY IS WITH RESPECT TO THE TREATMENT OF GAINS EARNED ON SALES AND PURCHASE OF SHARES WHEREIN THE ASSESSEE IS CLAIMING THE SAME TO BE CAPITAL GAIN WHILE REVENUE IS CONTENDING THE SAME TO BE BUSINESS INCOME . IT WAS SUBMITTED BY LEARNED DR THAT T HE ASSESSEE IS ENGAGED IN TRADING OF SHARES WHEREIN ONLY INTENTION WAS TO MAKE PROFITS AND THE INCOME ARISING THEREFROM IS A N BUSINESS INCOME AND NOT CAPITAL GAIN S AS CONTENDED BY THE ASSE SSEE . IT WAS SUBMITTED THAT MAJORITY OF SHARES WAS SOLD WITHIN 90 DAYS. IT WAS SUBMITTED BY LEARNED DR THAT THERE IS FREQUENT TRANSACTIONS OF SHARE S AND HENCE FREQUENCY OF TRANSACTIONS ITSELF REFLECTED THAT THE ASSESSEE IS DOING THIS ACTIVITY AS BUSINESS A CTIVITY. OUR ATTENTION WAS DRAWN TO PAGE 37 - 56/PAPER BOOK. IT WAS CLAIMED THAT THE ASSESSEE HAS NOT CLAIMED ANY INCOME FROM SALES AND PURCHASE OF REAL ESTATE AND IT IS ONLY INCOME EARNED FROM THE HOUSE PROPERTY WHICH IS OFFERED FOR TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY . THE LEARNED DR PRAYED THAT THE MATTER MAY BE SET ASIDE AND RESTORED TO THE FILE OF THE A.O. 7 . WE HAVE CONSIDERED REVIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD . W E HAVE OBSERVED THAT THE ASSESSEE IS DECLARING INCOME FROM HOUSE PROPERTY AS WELL INCOME FROM CAPITAL GAIN IN THE RETURN OF INCOME FILED WITH THE REVENUE . THE DISPUTE IS WITHIN NARROW COMPASS WHEREIN THE ASSESSEE IS CONTENDING THAT THE INCOME FROM SALE AND PURCHASE OF SHARE S BE TREATED AS CAPITAL GAINS WHILE REVENUE IS CONTENDING THE SAME TO BE BUSINESS INCOME. THE A SSESSEE DULY EXPLAINED BEFORE US THAT NO INTEREST BEARING BORROWED FUNDS WERE UTILISED FOR BUYING THE SHARES . THE ASSESSEE HAS DULY EXPLAINED TH AT THE INTEREST OF RS.20.02 LACS WAS PAID TOWARDS BO RROWED FUNDS WHICH WERE INVESTED IN IMMOVABLE PROPERTIES AND THE SAID INTEREST EXPENSES WERE ALLOWED BY THE REVENUE BY WAY OF DEDUCTION UNDER THE HEAD INCOME FROM I.T.A. NO. 828/MUM/2012 8 HOUSE PROPERTY . WE HAVE GONE THROUGH THE DETAILS OF TRANSACTIONS CARRIED ON BY THE ASSESS EE RELATING TO THE SALE AND PURCHASE OF SHARES WHICH ARE PLACED IN PAPER BOOK PAGE NO. 37 TO 56 . W E HAVE CAREFULLY GONE THROUGH THESE TRANSACTIONS WHICH ARE LARGE NUMBER OF TRANSACTIONS ENTERED INTO BY THE ASSESSEE IN SHARES WHICH WERE ENTERED INTO FREQUEN TLY , REGULARLY AND IN MANY CASES THE TRANSACTIONS ARE SQUARED WITHIN A SHORT SPAN OF BUYING OF THE SHARES . N O DOUBT EVERY INVESTMENT WHICH IS MADE BY THE TAX PAYER , THERE IS ALWAYS AN IN TENTION TO MAKE PROFITS BUT THE SAME CANNOT BE CLASSIFIED AS BUSINESS INCOME MERELY BECAUSE IT WAS CARRIED ON WITH PROFIT MOTIVE AND IT S CLASSIFICATION IS TO BE TESTED BASED ON MOTIVES, FREQUENCY , REGULARITY TRANSACTIONS ENTERED INTO BY THE TAX - PAYER TO COME TO THE CONCLUSION W HETHER THE ACTIVITY IS A BUSINESS ACTIVITY OR AN INVESTMENT TO EARN CAPITAL GAINS . IT IS ALSO NOTED THAT IN MAJORITY OF THE CASES THE ASSESSEE HAS SOLD THE SHARES WITHIN 90 DAYS OF PURCHASE. THIS IS A MIXED QUESTION OF FACT AND LAW AND IS TO BE DECIDED ON THE FACTUAL MATRIX OF EACH CASE. IT IS ALSO UNDISPUTED THAT THE TRANSACTIONS FOR PURCHASE AND SALE OF SHARES ENTERED INTO BY THE ASSESSEE ARE ALL DELIVER Y BASED TRANSACTIONS FOR SALE AND PURCHASE OF SHARES. AFTER CAREFULLY CONSIDERING THE VOLUMINOUS TRANSA CTIONS ENTER ED INTO BY THE ASSESSEE DURING THE YEAR RUNNING INTO SEVERAL PAGES OF PAPER BOOK FROM PAGE NO. 37 TO 56 AND THE OVERALL CONDUCT OF THE ASSESSEE , WE ARE OF THE CONSIDERED VIEW THAT GAINS ARISING FROM PURCHASE AND SALE OF SHARES WHICH ARE SQUAR ED WITHIN 30 DAYS OF PURCHASE BY THE ASSESSEE , THE SAME MAY BE TREATED AS A BUSINESS INCOME AND CORRESPONDINGLY STT PAID BE ALLOWED AS DEDUCTION IN ACCORDANCE WITH LAW , WHILE THE TRANSACTION S FOR PURCHASE AND SALE OF SHARES WHICH ARE SQUARED AFTER 30 D AYS OF ITS PURCHASE, THE SAME MAY BE TREATED AS INCOME FROM CAPITAL GAINS. IN VIEW OF DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. PRUTHVI BROKERS & SHAREHOLDERS (SUPRA) , THE CLAIM OF THE ASSESSEE RAISED FOR THE FIRST TIME BEFORE TRIBUNAL FOR GRANT OF DEDUCTION TOWARDS STT PAID IS ADMITTED AND ALLOWED AS BUSINESS DEDUCTION AFTER VERIFICATION ON MERITS IN ACCORDANCE WITH LAW AND CORRESPONDING STT PAID ON SUCH SHARES INCOME OF WHICH IS HELD TO BE BUSINESS INCOME BE ALLOWED BY THE AO AFTER VE RIFICATION. FOR THE LIMITED PURPOSES WE ARE RESTORING THIS MATTER TO THE FILE OF THE A.O TO MAKE COMPUTATION OF BUSINESS INCOME AS WELL CAPITAL GAINS ON SHARES AFTER VERIFICATION OF PERIOD OF HOLDING OF SUCH SHARES IN ACCORDANCE WITH OUR ABOVE DIRECTIONS. WE ORDER ACCORDINGLY. I.T.A. NO. 828/MUM/2012 9 8 . IN THE RESULT, APPEAL OF THE A SSESSEE IN ITA NO. 828 /M UM/2012 FOR ASSESSMENT YEAR 2008 - 0 9 IS PARTLY ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCE D IN THE OPEN COURT ON 3 1 .1 0 .2017 3 1 .10 .2017 S D / - S D / - (JOGINDER SING H ) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMB AI, DATED: 3 1 .10 .2017 COPY TO 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE CIT(A) CONCERNED, MUMBAI 4 . TH E CIT - CONCERNED, MUMBAI 5 . THE DR BENCH, E 6 . MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI 1 DRAFT DICTATED ON 30 - 10 - 2017 SR PS 2 DRAFT PLACED BEFORE AUTHOR ON 31 - 10 - 2017 SR PS 3 DRAFT PROPOSED & PLACE BEFORE THE 2 ND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY 2 ND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON 3 1 - 10 - 2017 SR PS 7 FILE SENT TO THE BENCH CLERK 3 1 - 1 0 - 2017 SR PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE ON WHICH FILE GOES TO THE AR 10 DATE OF DISPATCH SR PS I.T.A. NO. 828/MUM/2012 10