VEENA NIGUDKAR, MUMBAI V. ASST CIOT 21(2), MUMBAI

ITA 9235/MUM/2010

• Counselvise Citation: 923519914 RSA 2010
• Duration Of Justice: 3 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 20-03-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 31-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: MRS AARTI VISSANHJI
• Keywords: Business income; Transactions in derivatives; Difference of opinion
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN (AM) AND SANJAY GARG, (JM) .. , , ./I.T.A. NO.9235/MUM/2010 ( / ASSESSMENT YEAR : 2006-07) VEENA NIGUDKAR, 501, ARAMBAUG, 12 TH ROAD, KHAR, MUMBAI-400052. / VS. ASSTT. COMMISSIONER OF INCOME TAX - 21(2), MUMBAI. ( !' / APPELLANT) .. ( #$!' / RESPONDENT) ! ./ % ./PAN/GIR NO. : AAAPN6364J !' & / APPELLANT BY : MRS. AARTI VISSANHJI #$!' ' & / RESPONDENT BY : SHRI SANJEEV JAIN ( ) ' *+ / DATE OF HEARING : 18.6.2014 ,- ' *+ /DATE OF PRONOUNCEMENT : 25.7.2014 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 2.11.2010 PASSED BY LD. CIT(A)-32, MUMBAI AND IT R ELATES TO THE ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF THE LD. CIT(A) IN CONFIRMING THE ACTION OF AO IN ASSESSING THE INCOME OF RS. 12.11 LAKHS ARISING FROM SALE OF SHARES AS BUSINESS INCOME DISREGARDING THE CLAIM OF THE ASSESSEE THAT IT IS ASSESSABLE AS SHORT TERM CAPITAL GAIN (STCG). 3. THE FACTS RELATING TO THE SAID ISSUE ARE STATED IN BRIEF. THE ASSESSEE IS AN INDIVIDUAL AND SHE FILED HER RETURN OF INCOME DECLA RING INCOME UNDER THE HEAD I.T.A. NO.9235/MUM/2010 2 SALARY, BUSINESS, CAPITAL GAINS AND INCOME FROM OTH ER SOURCES. THE ASSESSEE IS THE PROPRIETOR OF A BUSINESS CONCERN NAMED M/S OPPO RTUNITIES INC AND SHE IS ALSO A PARTNER IN A REGISTERED FIRM NAMED M/S BIO DYNAMI CS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SUFFERED SPECULATIO N LOSS IN FUTURES AND OPTIONS TO THE EXTENT OF RS.14.95 LAKHS. THE ASSESSEE HAD ALSO DECLARED STCG ON SHARES TRANSACTIONS TO THE TUNE OF RS.12.11 LAKHS. THE AO AFTER GOING THROUGH THE VOLUME OF TRANSACTIONS, REPETITION OF TRANSACTIONS, PERIOD OF HOLDING, CONDUCT OF THE ASSESSEE ETC., TOOK THE VIEW THAT THE ASSESSEE HAS INDULGED IN SHARE TRADING OPERATIONS AS A SUSTAINED BUSINESS ACTIVITY. IN TH IS REGARD, THE A.O ALSO TOOK SUPPORT FROM VARIOUS CASE LAWS. ACCORDINGLY, HE HE LD THAT THE INCOME FROM SHARES TRADING ACTIVITY SHOULD BE ASSESSED UNDER TH E HEAD INCOME FROM BUSINESS. ACCORDINGLY, HE ASSESSED THE GAINS ARIS ING ON SALE OF SHARES REFERRED ABOVE I.E. RS.12.11 LAKHS AS BUSINESS INCOME OF T HE ASSESSEE. IN THE APPEAL FILED BY THE ASSESSEE, THE LD. CIT(A) ALSO CONFIRM ED THE ACTION OF THE AO. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFOR E US. 4. THE LD A.R SUBMITTED THAT THE SHARE TRADING IS NOT THE MAIN ACTIVITY OF THE ASSESSEE AND SHE IS ALSO ENGAGED IN OTHER ACTIVITIE S ALSO. REFERRING TO THE STATEMENT OF SHARE TRANSACTIONS, THE LD A.R SUBMITT ED THAT THE SINGLE ORDER PLACED FOR PURCHASE/SALE OF SHARES HAS BEEN EXECUTE D BY MORE THAN ONE PURCHASE/SALE AND HENCE IT HAS LED TO A BELIEF THAT THE ASSESSEE HAS INDULGED IN FREQUENT TRANSACTIONS. THE LD A.R FURTHER SUBMITTE D THAT THE ASSESSEE HAS ALSO APPLIED IN PUBLIC ISSUE OF SHARES AND THE SAME HAS ALSO BEEN SOLD. SHE SUBMITTED THAT THE TIME TAKEN TO ALLOT SHARES AFTER THE COMPLETION OF PUBLIC ISSUE IS MORE AND HENCE THOSE ACTIVITIES ARE NOT NORMALLY UNDERTAKEN BY THE PERSONS I.T.A. NO.9235/MUM/2010 3 INDULGING IN BUSINESS ACTIVITY. ACCORDINGLY, THE L D A.R SUBMITTED THAT THE TAX AUTHORITIES ARE NOT JUSTIFIED IN ASSESSING THE GAIN ARISING ON SALE OF SHARES AS BUSINESS INCOME OF THE ASSESSEE. THE LD A.R FURTHE R SUBMITTED THAT THE ASSESSING OFFICER HAS ASSESSED SUCH INCOME IN THE P AST YEARS AS WELL AS IN THE SUBSEQUENT YEARS AS SHORT TERM CAPITAL GAIN. WHEN IT WAS SPECIFICALLY ASKED AS TO WHETHER THOSE ASSESSMENTS WERE U/S 143(3) OF THE ACT, THE LD A.R FAIRLY ADMITTED THAT THEY WERE 143(1) ASSESSMENTS. 5. ON THE CONTRARY, THE LD D.R STRONGLY DEFENDED THE ORDER PASSED BY LD CIT(A). INVITING OUR ATTENTION TO THE STATEMENT OF SHARE TRANSACTIONS PLACED IN PAGE 6 OF THE PAPER BOOK, THE LD D.R SUBMITTED THE ASSESSEE HAS ENTERED IN REPETITIVE TRANSACTIONS AND HAS SOLD THE SHARES WIT HIN SHORT PERIOD AS LOW AS ONE WEEK. IN SUPPORT OF THE SAID CONTENTIONS, THE LD D .R POINTED OUT THE INSTANCES, WHERE THE SHARES HAVE BEEN SOLD WITHIN A SHORT PERI OD. HE FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS THOROUGHLY EXAMINED THE CONDUCT OF THE ASSESSEE BY APPLYING ALL PARAMETERS PRESCRIBED BY THE CBDT A ND HAS ACCORDINGLY ASSESSED THE GAINS ARISING ON SALE OF SHARES AS BUSINESS INC OME. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE RECORD. THERE SHOULD NOT BE ANY DISPUTE THAT THE MANNER OF ASSESS MENT OF THE GAINS ARISING ON SALE OF SHARES IS DEPENDENT UPON THE NATURE OF ASSE T VIZ., WHETHER IT WAS HELD AS INVESTMENT OR AS STOCK IN TRADE. WHILE THE PROFIT ARISING ON SALE OF FORMER CATEGORY WOULD BE ASSESSED AS CAPITAL GAIN AND THE PROFIT ARISING ON SALE OF LATER CATEGORY WOULD BE ASSESSED AS BUSINESS INCOME. IT IS ALSO A WELL SETTLED PROPOSITION THAT THE ENTRIES MADE IN THE BOOKS OF A CCOUNT CANNOT BE THE SOLE DECIDING FACTOR IN THIS REGARD, THOUGH IT CAN BE TA KEN AS ONE OF THE FACTORS. I.T.A. NO.9235/MUM/2010 4 HENCE, THE COURTS AS WELL AS THE CBDT HAVE PRESCRIB ED DIFFERENT CRITERIA TO DETERMINE THE NATURE OF SHARE TRANSACTIONS, I.E., W HETHER IT IS AN INVESTMENT ACTIVITY OR A IT IS A SUSTAINED BUSINESS ACTIVITY. 7. WE NOTICE THAT THE ASSESSING OFFICER HAS EX AMINED THE ACTIVITIES AND CONDUCT OF THE ASSESSEE AND ACCORDINGLY HAS COME TO THE CONCLUSION THAT THE ASSESSEE IS DRIVEN MAINLY BY PROFIT MOTIVE, AS PR EVALENT IN A BUSINESS VENTURE. THE FOLLOWING VIEWS EXPRESSED BY THE AO ARE RELEVAN T HERE:- 6. IN VIEW OF THE FACT THAT DURING THE YEAR, THE ASSESSEE HAD INDULGED IN BOTH THE SPECULATIVE AND DELIVERY-BASED TRANSACTION S IN THE SAME SCRIP, THE FOLLOWING POINTS ARE RELEVANT: 1. TH E ASS E SSE E DOES N O T K N OW A T TH E TIM E OF PL A CIN G TH E PUR C HAS E O RD E R W H E TH ER S H E I S GO IN G T O S P E CUL A TE IN TH E S HAR E (I . E . PURCH A SE AND SAL E O N THE . SA M E DAY W ITH O UT D EL I VE R Y ) O R W H E THE R S H E IS GOIN G T O T A K E D E LI V ER Y O F TH E SHARES . 2. D EC I S I O N S ABO UT S QU A RIN G OF F DURIN G TH E D AY O R T A KIN G D E LIV E R Y AR E T O T A LL Y GUID E D B Y THE MARKET PRICES OF THE SCRIP IN THE LATER PART OF THE DA Y. 3. NO SCRIP-WI S E AND TR A NSACTION-WISE PA Y MENTS A RE MADE BY THE ASSESSEE. 4. IF THE A S S ESSE E H AS PR O FIT S FROM S PECUL A T IV E TRANSACTIONS DURING THE DA Y , THE S A ME A RE AD J UST E D AG AIN S T THE AMOUNTS PA Y ABL E FOR DELI V ER Y -BASED TR A NS A CTI O N S, IF A N Y. T HI S IMPLI ES TH A T THERE ARE NO S E PARATE BOOKS FOR THE S PECULATI VE BUSIN E S S AND THE DELIVER Y BASED TRANSACTIONS . 5. TH E SPECULATI V E TRANSACTIONS AND TH E DELIVER Y TRANSACTION A R E ALL ROUTED THR O UGH THE S AM E BR O KER IN ALMOST ALL C A SE S . THERE IS NO MENTION ON TH E BILL S RE G ARDIN G TH E D E LIV E R Y O R SQUARIN G O FF O F TRAN S ACTI O N S. 6. AT TH E TIM E OF PURCH A S E OF A PARTICULAR SCRIP DURING A DA Y, NOTHING CAN BE SAID/ NOTHING IS FINAL AS TO WHETHER THE SAID SHARE WOULD BE SOLD DURING THE R E ST PA R T OF THE D AY OR W HETHER IT WO ULD BE RETAINED B Y TAKING DEL I VER Y. 7. THE ONL Y BASIS OF SE G R EG ATION OF THE TRAN S A C TI O NS B Y THE AS SE SS EE IS W HETH E R AT THE END OF THE DAY A DELIVERY WAS TAKEN OR NOT . IF PART OF THE PURCHASES IS SOLD WITHIN THE DAY, HEN SUCH PART IS TREATED AS SPECULATION BUSINESS AND THE BALANCE PAT OF THE PURCHASES FOR WHICH DELIVERY IS TAKEN IS TREATED AS INVESTMENT. I.T.A. NO.9235/MUM/2010 5 8. WH E TH E R A TRAN SAC TI O N IS ' SP EC UL A TI VE' OR ' IN VE STMENT ' IS KNOWN O NLY AT THE E ND O F THE D AY A ND N O T W H E N TH E PU R CHAS E ORDER IS PLACED. .. 13. NOW, WHEN WE LOOK AT THE FACTS OF THE CASE ON H AND IN THE BACKDROP OF THE JUDICIAL PRONOUNCEMENT AND THE ABOV E FINDINGS, THE FOLLOWING SITUATION EMERGES: A) THE ASSESSEE IS HAVING A SYSTEMATIC COURSE OF ACTIV ITY WHICH IS EVIDENT FROM THE FACT THAT REGULAR BOOKS OF ACCOUNTS, BILLI NG SYSTEM, DETAILS OF SALES & PURCHASES ETC. ARE ALL REGULARLY MAINTAINED. B) THE ASSESSEE IS DEEPLY INVOLVED IN THE ACTIVITY OF SHARE TRANSACTIONS. FROM A PERUSAL OF THE DETAILS OF TRANSACTIONS, IT IS SEE N THAT THE ASSESSEE HAD TRANSACTED IN THE STOCK MARKET (SHARE MARKET) ON DA Y-TO-DAY BASIS. IN FACT, ON SEVERAL OCCASIONS, SHE HAS TRANSACTED IN MORE THAN 3-4 SCRIPTS, WITHIN THE SAME DAY, EITHER PURCHASING OR SELLING THEM. C) THERE IS A CLEAR PROFIT MOTIVE IN THE TRANSACTIONS OF THE ASSESSEE. THIS IS EVIDENT FROM THE FACT THAT SHE HAS DISCLOSED AN AMO UNT OF RS.12,11,445/- FROM PURCHASE AND SALE OF SHARES (DISCLOSED AS STCG). D) THERE IS NO INDICATING FACTOR TO SUGGEST THAT THE A SSESSEE HAD ANY INTENTION OF ENJOYING HER INVESTMENT IN THE FORM OF DIVIDEND OR A BONUS/RIGHTS ISSUE. E) THE ASSESSEE'S PAYMENTS FOR ACQUISITION OF SHARES A RE NOT SEPARATE. THERE IS NO BILL-WISE MATCHING OF PAYMENTS. F) EVEN WHERE THE ASSESSEE HAS TRANSACTED IN A SOLITAR Y TRANSACTION, THE COURTS HAVE HELD THAT THEY COULD BE CLASSIFIED AS B USINESS TRANSACTIONS: IN THE CASE OF THE ASSESSEE, WE SEE HUGE TRANSACTIONS INVO LVING A VERY BIG QUANTITY OF SHARES AND ALSO HUGE AMOUNTS OF PAYMENTS AND RECEIP TS. G) THE ASSESSEE'S TRANSACTIONS ARE CHARACTERIZED BY CI RCULATION/ROTATION OF THE SAME MONEY, WHICH IS THE NORMAL FEATURE OF A BUSINE SS. H) THE ASSESSEE CLAIMS TO BE SIMULTANEOUSLY IN THE BUS INESS OF SHARE TRADING AS WELL AS INVESTMENTS, IMPLYING THAT SHE IS ALREAD Y INTO THE BUSINESS OF TRANSACTIONS IN SHARES. HER SO CALLED 'INVESTMENT' ACTIVITY IS AT BEST AN INTEGRAL PART OF THE SHARE TRADING ACTIVITY, OR AT WORST, AN ASSOCIATED PART OF HIS BUSINESS BUT DEFINITELY NOT A 'SEPARATE ACTIVITY'. I) IT IS EVIDENT THAT THERE IS A HIGH FREQUENCY AND RE PETITION OF PURCHASE & SALE OF SHARES. I.T.A. NO.9235/MUM/2010 6 J) AT THE TIME OF PLACING PURCHASE ORDER, THE ASSESSEE IS NOT SURE WHETHER SHE WOULD TAKE DELIVERY OF THE SHARES OR NOT. 14. IT IS RELEVANT HERE TO MENTION THE RECENT CIRC ULAR OF HON'BLE CBDT ON THE ISSUE OF THE SHARES HELD AS STOCK-IN-TRADE A ND THE SHARES HELD AS INVESTMENT. THE INSTRUCTION NO. 1827 DATED 31.8.89 WAS SUPPLEMENTED WITH THIS INSTRUCTION DATED 16.5.2006. THE FACTORS THAT ARE RELEVANT FOR DECIDING THE CASE ARE LISTED BELOW: I) WHETHER THE PURCHASE AND SALE OF SECURITIES WAS ALL IED TO HER USUAL TRADE OR BUSINESS/WAS INCIDENTAL TO IT OR AN OCCASIONAL I NDEPENDENT ACTIVITY. IN THE ASSESSEES CASE PURCHASE AND SALE OF SHARES IS ITSE LF HERE BUSINESS/VOCATION. IN NO WAY, IT CAN BE SAID THAT IT WAS INCIDENTAL TO A NY OTHER BUSINESS. THE SO CALLED INVESTMENT ACTIVITY IS NEITHER AN OCCASIONAL NOR AN INDEPENDENT ACTIVITY. II) WHETHER THE PURCHASE IS MADE SOLELY WITH THE INTENT ION OF RESALE AT A PROFIT OR FOR LONG TERM APPRECIATION AND/OR FOR EAR NING DIVIDENDS AND INTEREST. IN THE CASE OF THE ASSESSEE, IT WAS SOLELY WITH THE INTENTION OF SELLING AT PROFIT. IN THOSE CASES WHERE THE LOSS WAS BOOKED, IT WAS BE CAUSE THE FURTHER RISK OF HOLDING THE SCRIP IS BEYOND THE RISK APPETITE. F ROM THE VERY SHORT PERIOD OF HOLDING SHARES (IN SOME CASES HELD ONLY FOR FEW DAY S), THERE SEEMS ABSOLUTELY NO INTENTION OF HOLDING ON FOR LONG TERM APPRECIATION OR FOR EARNING DIVIDENDS ETC. III) WHETHER THE SALE OF ACTIVITY IS SUBSTANTIAL IT IS ALREADY SEEN EARLIER THAT THE SCALE OF ACTIVI TY AND THE AMOUNTS INVOLVED ARE SUBSTANTIAL, IV) HOLDING PERIOD IT IS ALREADY MENTIONED THAT THE HOLDING PERIOD IS VERY LESS. IN MOST OF THE CASES, IT IS LESS THAN 2 MONTHS. 8 WE NOTICE THAT THE LD CIT(A) ALSO, AFTER EXA MINING THE FACTS PREVAILING IN THE INSTANT CASE HAS ENDORSED THE VIEW TAKEN BY THE AO. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE RELEVANT OBSERVAT IONS MADE BY THE LD CIT(A). 3.14. IF THE ABOVE PRINCIPLES ARE APPLIED TO THE FACTS OF THE APPELLANTS CASES, THEN IT IS SEEN FROM DETAILS OBTAIN ED FROM THE ASSESSEE DURING THE COURSE OF APPELLATE PROCEEDING S THAT THE ASSESSEE HAS DONE 266 TRANSACTIONS DURING THE YEAR INVOLVING 110 SCRIP COMPRISING 2,15,223 SHARES. DESPITE THE ASSESSEE HAVING DEALT IN 266 TRANSACTIONS BUT HAS EARNED LTCG OF RS 1,00,224 I.T.A. NO.9235/MUM/2010 7 ONLY IN 11 TRANSACTIONS WHEREAS THE STCG OF RS. 12,11,445 HAS BEEN EARNED ON 255 TRANSACTIONS. THE SALES TURNOVER IS R S.2,05,58,892/- AND THE PURCHASE TURNOVER IS RS.2,31,18,587/-. B ESIDES THIS THE ASSESSEE HAS ALSO SHOWN SPECULATIVE PROFIT OF RS. 62,489/- ALSO FOR WHICH THE ASSESSEE HAS INDULGED IN 19 TRANSACTIONS IN 29 SCRIP COMPRISING 28470 SHARES WITH SALES TURNOVER OF RS.56,18,550/- THE DISTINCTION BETWEEN INTENTION FOR TREATING THE SHARES PURCHASED AS INVESTMENT AND THOSE PURCHASED AS PART OF SP ECULATIVE BUSINESS IS LACKING IN THE MANNER THE ASSESSEE HA S CONDUCTED ITSELF IN PURCHASE/SALE OF THE SHARES FOR INVESTMENT AND T HOSE FOR SPECULATIVE BUSINESS AT THE TIME OF PURCHASE. EVEN THERE IS NO DISTINCTION IN UTILISTION OF FUNDS FOR THESE TWO AC TIVITIES IF IT WE R E TW O DISTINCT ACT IV I TI ES TR E ATED BY THE ASSESS EE. . IT I S ON L Y AFT E R PURCHASE , IF ASSESSEE DECIDES TO TAKE THE DELIVER Y I T TR EATS S UCH SHARES AS IN VE STMENT . SUCH IS DI S TINCTION IS VERY A R T IFI CIA L AND NOT PRESENT AT THE POINT OF PURCHASE; RATHER IT IS ONL Y A SUBSEQUENT DECISION DEPENDING UPON THE MANNER IN WHICH PR ICES OF THAT SHARES MOVE . HENCE THE TURNOVER AND TRANSACTIONS OF SPECULATIVE BUSINESS ALSO NEED TO B E C ONSIDERED TO DECIDE THE NATURE - OF ACTIVITY BEING CARRIED B Y TH E ASSESSEE. SO THE TOTAL TURNOVER ACHIEVED FOR SHARES I NCLUDIN G T H E SPECULATIVE TRANSACTIONS BUT EXCLUDING , THE DERIVATI VE TRANSACTION IN FUTURE & OPTIONS, COMES TO 2.61 CR INVOLVIN G 28 5 ( 2 66+ 19) TRANSACTIONS. THE SHARES HELD AS CLOSING BALAN CE AR E OF O N LY RS 45 . 45 LACS WHICH IS ONLY 17 . 45 % OF THE TOTAL TU R NOVER OF RS 2.61 CR SUGGESTING THAT A SMALL PORTION OF TH E CAPITAL HAS BEEN ROTATED SEVERAL TIMES TO ACHIEVE A TURNOVER OF M OR E THAN 2.6 CRORES JUST AS DONE IN A TRADING. BUSINESS. BESIDES THIS THE ASSES SEE HAS ALSO DEALT IN FUTURE & OPTIONS. I F T HE TU R N OVER AND THE FUNDS REQUIRED FOR THESE F&O TURNOVER I S CONSIDE RED THAN IT WOULD MEAN THAT ASSESSEE HAS ROT A T ED S T I L L LES S E R AMOUNT TO A C HIE V E THE TURNOVER OF MORE THAN 2 .6 CR FOR THE SHAR E S . SIMILARL Y OUT OF TOTAL 285(266+ 19) TR A NS AC TI ON S (I N CLUDIN G . SPECULATIVE ONES) , THE PERIOD OF HOLDING IS L E SS TH AN 30 DAYS IN 106 ( 87 + 1 9 ) CASES . MOR E OVER IT I S NOT E D TH A T TH E ASSESSEE HAS PURCHASED SHARES OF SAME COMPANY AT MORE T HA SINGLE OCCASIONS OF ONE DA Y . SIMILARLY , THE SHARES PURCH AS E D HAVE BEEN SOLD IN P ARTS ALSO. THIS SHOWS THE INTENTION O F TH E ASSESSEE TO ADOPT THE POLICY OF RISK APPETITE AND MAXIMIZATION OF PROFIT LIKE A CAS E OF NORMAL TRADER WOULD DO WHO IS DEALING IN SHARES. THE CAPITAL BASE OF THE ASSESSEE IS OF RS.71.27 CRORES WHICH SUGGEST THAT MOST OF THE CAPI TAL IS BLOCKED IN OTHER INVESTMENT AND THE FUNDS FOR SALE PURCHASE OF SHARES ARE FROM UNSECURED LOANS OF RS.53 LACS. IT MAKES NO DIFFERENCE WHETHER THE ASSESSEE HAS PAID INTEREST ON BORROWED MONEY OR NOT . THE BROKERS BILL HAS ALSO BEEN SETTLED BY DIFFERENCE. FROM THE LEDGER A/C OF THE APPELLANT IN THE BOOKS OF THE BROKER IT IS NOTED TH AT DURING THE YEAR THERE WERE 69 OCCASIONS WHEN THERE WAS A DR BALANCE I.E. THE AMOUNT WAS DUE FROM THE ASSESSEE TO THE BROKER. AN INVESTOR WOULD BE THE ONE WHO INVEST HIS SURPLUS MONEY BUT IN THIS CASE AT SEVERAL OCCASIONS THE MONEY WAS DUE FROM THE ASSESSEE IN RE SPECT OF THE PURCHASES MADE BY HER. SO IT WAS ALSO AKIN TO AVAILING THE OUTSIDE I.T.A. NO.9235/MUM/2010 8 FUNDS BY WAY CREDIT FACILITY WITHOUT INVESTING MUCH OF OWN FUNDS TO ACHIEVE THE TURNOVER. THIS SUGGESTS THAT THERE WAS NO INTENTION TO INVEST, RATHER THE INTENTION WAS TO MAXIMIZE THE PROFITS BY RO TATING THE TURNOVER ON CREDIT AS A NORMAL TRADER WOULD DO. THEREFORE THE MERE FACT THAT THE ASSESSEE WAS NOT REQUIRED TO PAY INTEREST ON UNSECURED LOANS DOES NOT BY ITSELF MAKE HER AN INVE STOR IN SHARES. IT IS FURTHER NOTED THAT ON MOST OF THE OCCASIONS THE AMOUNT DUE. TO BROKER IS ADJUSTED SUBSEQUENTLY BY THE AMOUNT RECEI VED ON SALE OF SHARES, MEANING THEREBY THAT AT MOST OF THE TIMES T HERE IS NO ACTUAL OUTFLOW OF MONEY FROM ASSESSEE ON PURCHASE OR INFLOW OF MONEY TO THE ASSESSEE ON SALE OF SHARES. IT WOULD MEAN THAT THE ASSESSEE NEVER ENJOYED THE FRUITS OF APPRECIATION IN VALUE O F SHARES, RATHER THE PROCEEDS WERE ALWAYS IMMEDIATELY REDEPLOYED FOR ACQUISITION OF OTHER SHARES AS A NORMAL TRADER WOULD DO. IT IS A LSO NOTED THAT THOUGH THE ASSESSEE IS DEALING IN SPECULATIVE AND N ON-SPECULATIVE TRANSACTIONS, BUT THE ASSESSEE DOES NOT MAKE ANY DI STINCTION WHILE PLACING ORDER FOR PURCHASE OR MAKING PAYMENT TO THE BROKER. BROKERS BILL HAVE BEEN SETTLED BY NETTING OFF IRRESPECTIVE WHETHER THE SALE OR PURCHASE OF SHARES WAS FOR SPECULATIVE BUYING OR FO R INVESTING IN SHARES. THUS NO DISTINCTION HAS BEEN MAINTAINED BY THE ASSESSEE IN ITS CONDUCT OR THE FUNDS UTILIZED. THE DIVIDEND OF RS.38,823 EARNED DURING THE YEAR IS MINISCULE AS COMPARED TO THE PROFIT EAR NED ON THE SALE OF SHARES WHICH SHOWS THAT THE SHARES WERE. NO T HELD FOR ENJOYING THE DIVIDEND ALSO. THE ASSESSEE HAS SHOWN A LOSS OF RS 14.95 LACS IN, DEALING IN DERIVATIVE TRANSACTIONS I N FUTURE & OPTIONS AT NSE. THE ASSESSEE HERSELF IS TREATING THIS LOSS AS NON-SPECULATIVE BUSINESS LOSS. SO ONCE THE ASSESSEE IS DEALING IN O NE TYPE OF ACTIVITY WHICH IS ADMITTEDLY A BUSINESS ACTIVITY WHERE ALSO THE TURNOVER IS IN SEVERAL CRORES AND THE FUNDS DEPLOYED ARE OUT OF TH E SAME CAPITAL, IT CANNOT BE SAID THAT IN RESPECT OF TRANSACTIONS IN S HARES THE ASSESSEE WAS ONLY AN INVESTOR WHEN THERE IS NOTHING TO SHOW THAT THE ACTUAL CONDUCT, INTENTION TO PURCHASE AND FUND UTILIZATION FOR DIFFERENT ACTIVITIES WAS DIFFERENT. HENCE TRANSACTIONS IN SHARES NON-SPECULATIVE AND SPECULATIVE AND T RADING IN DERIVATIVES ARE PART OF BUSINESS ACTIVITY ONLY. IT IS LIKE A TRADER DEALING IN MORE THAN ONE TYPE OF GOODS. THE CUMULATIVE EFFECT OF ALL THE ABOVE FACTORS CLEARLY SUGGESTS THAT THE INTENTION TO PURCHASE THE SHARES WAS FOR TRADING OR AT LEAST IN THE NATURE OF ADVENTURE IN TRADE AND NOT FOR ENJOYMENT OF APPRECIATION IN VALUE INVESTMENT IN SHARES OR TO EARN DIVIDEND. 9 WE NOTICE THAT BOTH THE ASSESSING OFFICER AND LD CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT THE ACTIVITIES CARRIED ON BY THE ASSESSEE IN RESPECT OF SHARE TRANSACTIONS ARE AKIN TO THE BUSINESS ACTIVIT IES. THE STATEMENT OF PROFIT/LOSS ARISING ON SALE OF SHARES FURNISHED AT PAGE 6 TO 10 OF THE PAPER BOOK I.T.A. NO.9235/MUM/2010 9 ALSO SHOWS THAT THE ASSESSEE WAS INDULGING IN SHORT TERM TRADING ACTIVITIES DURING THE YEAR UNDER CONSIDERATION, I.E., THE ASSESSEE HA S BEEN SELLING SHARES WITHIN SHORT SPAN FROM THE DATE OF PURCHASE. WE NOTICE TH AT THE SHARES ALLOTTED UNDER PRIMARY ISSUE WERE ALSO SOLD WITHIN SHORT PERIOD FR OM THE DATE OF ALLOTMENT. THESE KINDS OF TRANSACTIONS, IN OUR VIEW, ADD STREN GTH TO THE VIEW TAKEN BY THE TAX AUTHORITIES. THE AO HAS ALSO SHOWN THAT THE AS SESSEE HAS BORROWED FUNDS TO THE TUNE OF RS.48.30 LAKHS FROM CLOSE RELATIVES AND ACCORDINGLY CONCLUDED THAT THE ASSESSEES OWN FUNDS WERE INSUFFICIENT TO FINAN CE THE INVESTMENT MADE IN SHARES. THOUGH THERE IS DIFFERENCE OF OPINION BETW EEN THE ASSESSEE AND THE AO WITH REGARD TO THE NUMBER OF TRANSACTIONS TRANSA CTED, YET THE FACT REMAINS THAT THE ASSESSING OFFICER HAS OBSERVED THAT THE AS SESSEE HAS INDULGED IN SHORT TERM ACTIVITIES WITH THE MOTIVE TO MAXIMISE THE PRO FIT, WHICH ACCORDING TO US IS ONE OF THE MAIN POINT TO BE CONSIDERED. THE LD C IT(A) HAS POINTED OUT THE ASSESSEE HAS EARNED LONG TERM CAPITAL GAINS IN 11 T RANSACTIONS AND HAS EARNED SHORT TERM CAPITAL GAIN IN 255 TRANSACTIONS, WHICH FACT PROVES THE CASE OF THE AO THAT THE ASSESSEE HAS BEEN INDULGING IN SHORT TERM TRADING ACTIVITIES WITH THE AIM OF MAXIMISING THE PROFIT. THE FACT THAT THE ASSESS EE HAS BEEN INDULGING IN SPECULATIVE ACTIVITIES ALSO, IN FACT, SUPPORT THE C ASE OF THE AO. IT IS PERTINENT TO NOTE THAT THE SPECULATIVE TRANSACTIONS HAVE BEEN AD MITTED AS BUSINESS TRANSACTIONS. ANOTHER IMPORTANT ASPECT THAT WAS BRO UGHT OUT BY THE TAX AUTHORITIES IS ABOUT THE CONDUCT OF THE ASSESSEE, V IZ., THE ASSESSEE DECIDES TO TAKE DELIVERY OF SHARES PURCHASED BY HER ONLY AT TH E END OF THE DAY DEPENDING UPON THE PRICE MOVEMENT OF THOSE SHARES, WHICH MEAN S THAT THE DECISION TO HOLD IT AS INVESTMENT IS NOT TAKEN AT THE TIME OF PURCHA SE, WHICH IS THE CRUCIAL FACTOR TO DETERMINING ABOUT THE NATURE OF TRANSACTIONS. I F THE INTENTION HAD BEEN TO I.T.A. NO.9235/MUM/2010 10 HOLD IT AS INVESTMENT, USUALLY, AN INVESTOR IS LEAS T BOTHERED ABOUT THE SHORT TERM PRICE MOVEMENTS. THE CONDUCT OF THE ASSESSEE IN TH IS REGARD, WHICH WAS BROUGHT OUT BY THE ASSESSEE, STRONGLY MILITATES AGA INST THE STAND TAKEN BY THE ASSESSEE. FURTHER THE LD CIT(A) HAS ALSO POINTED O UT THAT THE ASSESSEE HAS ROTATED THE FUNDS SEVERAL TIME, WHICH IS AKIN TO TH E BUSINESS ACTIVITY. 10 HENCE, ON A CONSPECTUS OF THE MATTER, WE AR E OF THE VIEW THAT, IN THE FACTS AND CIRCUMSTANCES PREVAILING IN THE INSTA NT CASE, THE LD CIT(A) WAS JUSTIFIED IN UPHOLDING THE ORDER OF THE ASSESSI NG OFFICER IN ASSESSING THE GAIN ARISING ON SALE OF SHARES AS THE BUSINESS INCOME OF THE ASSESSEE. ACCORDINGLY WE UPHOLD HIS ORDER ON THIS ISSUE. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSE SSEE IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 25TH JULY, 2014. ,- ( ./ 0 1 25TH JULY, 2014 - ' ) 2 SD SD ( /SANJAY GARG) ( .. / B.R. BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER . ( ) MUMBAI: 25TH JULY,2014. . . ./ SRL , SR. PS ! '#$%& '&($ / COPY OF THE ORDER FORWARDED TO : 1. !' / THE APPELLANT 2. #$!' / THE RESPONDENT. 3. ( 4* ( ) / THE CIT(A)- CONCERNED 4. ( 4* / CIT CONCERNED 5. 56 #* 7 , + 7 , . ( ) / DR, ITAT, MUMBAI CONCERNED 6. 8) / GUARD FILE. I.T.A. NO.9235/MUM/2010 11 9 ( / BY ORDER, TRUE COPY : (ASSTT. REGISTRAR) + 7 , . ( ) /ITAT, MUMBAI