ADDL CIT RG 25(3), MUMBAI V. VIPUL A. SHAH, MUMBAI

ITA 882/MUM/2010

• Counselvise Citation: 88219914 RSA 2010
• Duration Of Justice: 1 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 07-12-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 04-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: STANTAM BOSE
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F , MUMBAI BEFORE SHIRI R. S. PADVEKAR, J.M. AND SHRI RAJENDRA SINGH, A.M. ITA NO. : 882/MUM/2010 ASSESSMENT YEAR : 2006-07 THE ACIT - 25(3), C-11, R.NO.308, PRATYAKSH KAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-400 0051 VS. SHRI VIPUL A. SHAH 301, PADMA PRIYA APT., ABOVE PNB BANK, 42-A, PRESIDENCY SOCIETY, N.S. ROAD, JVPD SCHEME, VILE PARLE (W), MUMBAI-400 049 PAN NO: ABAPS 8115 K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P ARESH SHAPARIA RESPONDENT BY : SHRI STANTAM BOSE DATE OF HEARING : 0 7 .1 2 .2011 DATE OF PRONOUNCEMENT : 23.12.2011 ORDER PER RAJENDRA SINGH (AM) : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 13.11.2009 OF THE LD. CIT(A)-35, MUMBAI FOR THE ASS ESSMENT YEAR 2006-07. THE ONLY DISPUTE RAISED IN THIS APPEAL IS REGARDING THE TREATMENT OF INCOME FROM SALE AND PURCHASE OF SHARE S. 2. THE FACTS IN BRIEF ARE THAT, THE ASSESSEE IN THE RELEVANT YEAR HAD DECLARED SHORT TERM CAPITAL GAIN OF `. 1,29,75,251/-, LONG TERM CAPITAL GAIN OF `. 2,75,81,176/-, INCOME FROM SHARE TRADING BUSINESS OF `. 20,127/-, DIVIDEND INCOME OF `. 36,37,401/- AND SPECULATION ITA NO : 882/MUM/2010 SHRI VIPUL A. SHAH 2 INCOME OF `. 12,614/-. THE AO OBSERVED THAT THE ASSESSEE WAS REG ULARLY BUYING AND SELLING SHARES WITH HIGH VOLUME. THE AO ALSO OBSERVED THAT THOUGH THE ASSESSEE CLAIMED THAT NO INTEREST HAD BE EN PAID ON BORROWED FUNDS, THE FACT WAS THAT THE ASSESSEE HAD BORROWED FUND, WHICH HAD BEEN UTILIZED FOR THE PURPOSE OF MAKING I NVESTMENTS IN SHARES. THE ASSESSEE HAD DEALT IN 70, SCRIPTS RESU LTING INTO LONG TERM CAPITAL GAIN AND 33 SCRIPTS, RESULTING INTO SHORT T ERM CAPITAL GAIN. THE ASSESSEE WAS ALSO INDULGING INTO SPECULATIVE TR ANSACTIONS. CONSIDERING THE FREQUENCY, VOLUME AND REGULARITY OF TRANSACTIONS, THE AO CONCLUDED THAT THE ASSESSEE HAD BEEN BUYING AND SELLING SHARES WITH PROFIT MOTIVE AND ACCORDINGLY TREATED THE ENTI RE SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN AS BUSINESS INCOME. 2.1 THE ASSESSEE DISPUTED THE DECISION OF THE AO AN D SUBMITTED BEFORE THE CIT(A) THAT IT WAS NOT CORRECT TO SAY TH AT THE ASSESSEE WAS SPECULATING IN SHARES. THE INCOME OF `. 27,672/- SHOWN ON ACCOUNT OF SPECULATIVE TRANSACTION WAS THE INCOME FROM BAD DEL IVERIES OR WRONG QUANTITY OF PURCHASES MADE BY BROKERS, WHICH HAD TO BE REVERSED. THE ASSESSEE DID NOT SPECULATE IN SHARES. THE ASSESSEE WAS ONLY AN INVESTOR. IT WAS POINTED OUT THAT INCOME WAS MOSTLY FROM LONG TERM CAPITAL GAIN IN RESPECT OF SHARES HOLD FOR MORE THA N 1 YEAR AND UPTO 10 YEARS. AS REGARDS THE SHORT TERM CAPITAL GAIN, 60% OF SUCH INCOME WAS IN RESPECT OF SHARES HELD FOR MORE THAN 90 DAYS. THE ASSESSEE HAD TO SELL THE SHARES SOMETIMES AT SHORT HOLDING, FOR RESHUFFLE OF PORTFOLIO DUE TO MARKET CONDITIONS, BU T THAT DID NOT CHANGE THE CHARACTER OF INVESTMENT. THE ASSESSEE PLACED RE LIANCE ON THE JUDGMENT OF BOMBAY BENCH OF THE TRIBUNAL IN THE CAS E OF GOPAL PUROHIT VS. JCIT (29 SOT 117) IN SUPPORT OF THE CLA IM. CIT(A), CONSIDERING THE DETAILS OF SHARE TRANSACTIONS WHICH WERE MOSTLY LONG IN NATURE, ACCEPTED THE CLAIM OF THE ASSESSEE THAT HE WAS AN INVESTOR AND ITA NO : 882/MUM/2010 SHRI VIPUL A. SHAH 3 ACCORDINGLY DIRECTED THE AO TO ACCEPT THE LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAIN DECLARED BY THE ASSESSEE AG GRIEVED BY WHICH THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 3. BEFORE US, THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD BEEN AN INVESTOR FOR A LONG TIME AND T HE DEPARTMENT IN THE ASSESSMENT YEARS 2003-04 AND 2004-05 HAD ACCEPT ED THE CLAIM OF THE ASSESSEE AS INVESTOR IN SHARES, IN ORDERS PASSE D U/S.143(3). IN THE ASSESSMENT YEAR 2005-06, CIT(A) HAD TREATED THE SHO RT TERM CAPITAL GAIN AS BUSINESS INCOME, BUT THE DECISION OF THE CI T(A) WAS SET ASIDE BY THE TRIBUNAL, WHO HAD ACCEPTED THE SHORT TERM CA PITAL GAIN DECLARED BY THE ASSESSEE IN THE ORDER DATED 28.02.2 011, IN ITA NO.534/MUM/2009. IT WAS ALSO SUBMITTED THAT THE FAC TUAL POSITION IN THIS YEAR WAS SIMILAR. IN ASSESSMENT YEAR 2007-08, WHICH WAS THE SUBSEQUENT YEAR, SIMILAR INCOME DECLARED BY THE ASS ESSEE AS SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN WAS AC CEPTED BY THE AO IN SCRUTINY ESTIMATION MADE U/S.143(3). IT WAS A CCORDINGLY, SUBMITTED THAT THE CLAIM OF THE ASSESSEE SHOULD BE ACCEPTED. THE LD. DR, ON THE OTHER HAND, PLACED RELIANCE ON THE ORDER OF THE AO. 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE R IVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING THE NATURE OF INCOME FROM SALE AND PURCHASE OF SHARES BY THE ASSESSEE. T HE ISSUE, WHETHER THE INCOME FROM SALE AND PURCHASE OF SHARES IN A PA RTICULAR CASE SHOULD BE TREATED AS CAPITAL GAIN OR AS BUSINESS IN COME HAS BEEN A DEBATABLE ISSUE AND THERE ARE CONFLICTING DECISIONS OF THE TRIBUNAL ON THIS ISSUE. EACH CASE IS, THEREFORE, TO BE BASED ON ITS OWN FACTUAL SITUATION. IN THE PRESENT CASE, THE ASSESSEE HAD HE LD THE MAJORITY OF SHARES FOR A VERY LONG TIME, VARYING FROM MORE THAN 1 YEAR TO 10 YEARS. THE INCOME IS MOSTLY FROM LONG TERM HOLDING OF SHAR ES. IN SOME CASES, ITA NO : 882/MUM/2010 SHRI VIPUL A. SHAH 4 SHARES HAVE ALSO BEEN SOLD AT SHORT INTERVALS OF LE SS THAN 1 YEAR, RESULTING INTO SHORT TERM CAPITAL GAIN AND EVEN IN SUCH CASES, MOSTLY THE SHARES WERE HELD FOR MORE THAN 90 DAYS. IT IS P OSSIBLE FOR AN INVESTOR TO SELL SHARES AFTER HOLDING FOR LESS THAN A YEAR IN ORDER TO RESHUFFLE PORTFOLIO, ETC. IN A SIMILAR SITUATION, T HE TRIBUNAL IN ASSESSMENT YEAR 2005-06 IN ITA NO.534/MUM/2009 ACCE PTED THE CLAIM OF THE ASSESSEE AS AN INVESTOR. IN THAT YEAR, THE ASSESSEE HAD SHOWN LONG TERM CAPITAL GAIN OF `. 1,60,23,772/- AND SHORT TERM CAPITAL GAIN OF `. 26,36,004/-. THE ASSESSEE HAD ALSO SHOWN SMALL INCOME FROM TRADING, FOR WHICH SEPARATE ACCOUNTS HA D BEEN MAINTAINED. FURTHER, IN THE ASSESSMENT YEARS 2002-0 3 AND 2004-05, THE AO HIMSELF ACCEPTED THE SIMILAR INCOME DECLARED BY THE ASSESSEE AS CAPITAL GAIN. THE CAPITAL GAIN DECLARED BY THE ASSESSEE WAS AGAIN ACCEPTED BY THE AO FOR THE ASSESSMENT YEAR 2007-08 U/S.143(3). CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE , IN OUR VIEW, IT WILL NOT BE APPROPRIATE TO ASSESS THE INCOME DECLAR ED BY THE ASSESSEE FROM SALE AND PURCHASE OF SHARES AS BUSINESS INCOME . WE SEE NO INFIRMITY IN THE ORDER OF THE CIT(A) ACCEPTING THE CLAIM OF THE ASSESSEE PARTICULARLY, WHEN THE SIMILAR CLAIM HAD BEEN ACCEP TED BY THE TRIBUNAL IN ASSESSMENT YEAR 2005-06 AND DEPARTMENT HAD ALSO ACCEPTED THE CLAIM IN THE EARLIER YEARS AS WELL AS IN THE SUBSEQ UENT YEAR. WE, THEREFORE, SEE NO INFIRMITY IN THE ORDER OF THE CIT (A) AND THE SAME IS, THEREFORE, UPHELD. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED ON THIS 23 RD DAY OF DECEMBER, 2011. SD/ - S D/ - ( R. S. PADVEKAR ) ( RAJENDRA SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT: 23/12/2011 ITA NO : 882/MUM/2010 SHRI VIPUL A. SHAH 5 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, F - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI