Shri Bherulal Lalchand Bhandari, Satara V. ACIT, Satara Circle, Satara

ITA 955/PUN/2011

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0995 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 08-01-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 15-07-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Business income; Question of law; Prejudicial to interest; Capital receipt
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE . . , , , BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO. 955 /PN/201 1 / ASSESSMENT YEAR : 20 05 - 06 SHRI BHERULAL LALCHAND BHANDARI, MARKET YARD, SATARA PAN : ABHPB7887L ....... / APPELLANT / V/S. DY. COMMISSIONER OF INCOME TAX, SATARA CIRCLE, SATARA / RESPONDENT ASSESSEE BY : SHRI M.K. KULKARNI REVENUE BY : SHRI B.C. MALAKAR / DATE OF HEARING : 2 9 - 07 - 2015 / DATE OF PRONOUNCEMENT : 16 - 10 - 2015 / ORDER PER VIKAS AWASTHY, JM : THE APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - III, PUNE DATED 29 - 10 - 2010 FOR THE ASSESSMENT YEAR 20 05 - 06. 2. IN APPEAL, THE ASSESSEE HAS RAISED 8 GROUNDS ASSAIL ING THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) . HOWEVER AT THE TIME OF MAKING SUBMISSIONS, THE LD. COUNSEL FOR THE ASSESSEE RESTRICTED HIS SUBMISSIONS ON THE FOLLOWING TWO ISSUES ONLY: 2 ITA NO. 955/PN/2011, A.Y. 20 05 - 06 1 ) INCOME FROM SALE OF SHARES RS.7,19,166/ - TREATED AS CAPITAL GAIN BY THE ASSESSEE, WHEREAS THE DEPARTMENT HAS ASSESSED THE SAME UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION . 2 ) DISALLOWANCE OF RS.30,292/ - U/S. 40(A)(IA) OF THE ACT. 2 ) DISALLOWANCE OF RS.30,292/ - U/S. 40(A)(IA) OF THE ACT. THE OTHER GROUNDS RAISED IN APPEAL WERE EITHER NOT PRESSED OR CONSEQUENTIAL TO THE ABOVE MENTIONED ADDITIONS/DISALLOWANCES . 3 . THE BRIEF FACTS OF THE CASE ARE : THE ASSESSEE IS A WHOLESALE TRAD ER OF BHUSAR AND RAJMA. THE ASSESSEE FILED HIS RETURN OF INCOME ON 31 - 10 - 2005 FOR THE ASSESSMENT YEAR 2005 - 06 DE CLARING INCOME OF RS.8,25,810/ - . THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY. ACCORDINGLY, NOTICE U/S. 143(2) WAS ISSUED TO THE ASSES SEE ON 07 - 08 - 2006. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE ASSESSING OFFICER INTER ALIA MADE ADDITIONS/DISALLOWANCES ON ACCOUNT OF INCOME FROM SALE OF SHARES BY TREATING THE SAME AS INCOME FROM BUSINESS AND DISALLOWANCE OF RS.30,292/ - U/S. 40(A)(I A ) OF THE ACT FOR NON - DEDUCTION OF TAX AT SOURCE ON THE PAYMENT OF INTEREST . AGGRIEVED BY THE ASSESSMENT ORDER DATED 12 - 09 - 2007, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) VID E IMPUGNED ORDER UPHELD THE FINDINGS OF THE ASSESSING OFFICER ON BOTH THE ABOVE ORDER UPHELD THE FINDINGS OF THE ASSESSING OFFICER ON BOTH THE ABOVE COUNTS. AGAINST, THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) THE ASSESSEE HAS COME IN SECOND APPEAL BEFORE THE TRIBUNAL. 4 . SHRI M.K. KULKARNI APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED , THAT THE ASSESSEE HAS BEEN MAKING INVESTMENT IN SHARES SINCE LONG. THE ASSESSEE HAS HELD THE SHARES AS INVESTMENT AND HAS SINCE LONG. THE ASSESSEE HAS HELD THE SHARES AS INVESTMENT AND HAS BEEN EARNING DIVIDEND INCOME FROM THE SHARES. THE INTENTION OF THE 3 ITA NO. 955/PN/2011, A.Y. 20 05 - 06 ASSESSEE IS TO HOL D THE SHARES AS INVESTMENT. THE ASSESSEE HAS NOT USED BORROWED FUNDS FOR THE PURCHASE OF SHARES. THE SHARES WERE PURCHASED OUT OF IDL E FUNDS THAT WERE NOT REQUIRED IN THE BUSINESS. THE ASSESSEE HAS BEEN RECORDING SHARES IN HIS BOOKS OF ACCOUNT AS INVEST MENT AND NOT AS STOCK - IN - TRADE. THE ASSESSEE HAS BEEN PURCHASING AND SELLING SHARES THROUGH AUTHORIZED STOCK BROKERS AND THROUGH RECOGNIZED STOCK EXCHANGE. ALL THE SHARE TRANSACTION S CARRIED OUT BY THE ASSESSEE WERE ON DELIVERY BAS IS . THE SHORT/LONG TERM CAPITAL GAIN ARISING FROM SALE OF SHARES HAS BEEN DULY REFLECTED IN THE BOOKS AS WELL AS IN THE RETURN OF INCOME. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AUTHORITIES BELOW HAVE ERRED IN HOLDING THAT THE INCOME FROM SALE OF SHARES IS TO BE ASSE SSED UNDER THE HEAD , INCOME FROM BUSINESS PROFESSION . THE LD. COUNSEL IN SUPPORT OF HIS SUBMISSIONS PLACED RELIANCE ON THE FOLLOWING DECISIONS: I . ITO VS. ROHIT ANAND, 34 SOT 42 (DELHI - TRIB.); AND II . CIT VS. N.S.S. INVESTMENTS (P.) LTD., 158 TAXMAN 13 (MAD H .C.) IN RESPECT OF DISALLOWANCE U/S. 40(A)(IA) OF THE ACT THE LD. COUNSEL SUBMITTED THAT THE AMENDMENT TO SECTION 194C WAS MADE W.E.F. 01 - 06 - 2007 TO INCLUDE THE INDIVIDUALS . THEREFORE, THE PROVISIONS OF SECTION 40(A)(IA) WILL NOT BE APPLICABLE TO THE ASSESSEE IN THE ASSESSMENT YEAR 2005 - 06 I.E. THE ASSESSMENT YEAR UNDER APPEAL. IN SUPPORT OF HIS YEAR 2005 - 06 I.E. THE ASSESSMENT YEAR UNDER APPEAL. IN SUPPORT OF HIS SUBMISSIONS, THE LD. COUNSEL PLACED RELIANCE ON THE DECISION OF THE TRIBUNAL IN THE CASE OF DY. CIT V S. SRI SURVE SHRIRAM KRISHN AJI IN ITA NO. 1207/PN/2010 FOR THE ASSESSMENT YEAR 2005 - 06 DECIDED ON 17 - 05 - 2012. 5 . ON THE OTHER HAND SHRI B.C. MALAKAR REPRESENTING THE 5 . ON THE OTHER HAND SHRI B.C. MALAKAR REPRESENTING THE DEPARTMENT VEHEMENTLY SUPPORTED THE FINDINGS OF THE COMMISSIONER OF 4 ITA NO. 955/PN/2011, A.Y. 20 05 - 06 INCOME TAX (APPEALS). THE LD. DR SUBMITTED TH AT A PERUSAL OF TRANSACTION CARRIED OUT BY THE ASSESSEE IN SALE AND PURCHASE OF SHARES WOULD CLEARLY SHOW THAT THE SALE AND PURCHASE OF SHARES WAS CARRIED OUT IN A SYSTEMATIC MANNER. MOREOVER, THE VOLUME , VELOCITY , AND VALUE OF SHARE TRANSACTIONS MADE BY THE ASSESSEE WOULD NOT LEAVE ANY DOUBT THAT THE PROFIT FROM SALE OF SHARES HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS AND NOT AS CAPITAL GAINS. THE LD. DR FURTHER SUBMITTED THAT ON THE ONE HAND THE ASSESSEE HAS TAKEN LOAN F O R RUNNING BUSINESS AND ON THE OTHER THE ASSESSEE HAS DIVERTED FUNDS FROM THE BUSINESS STATING IT TO BE IDLE FOR TRADING IN SHARES. THE LD. DR CONTENDED THAT THE ENTRIES IN THE BOOKS OF ACCOUNT ARE NOT CONCLUSIVE. THEREFORE, THE CONTENTION OF THE ASSESSEE THAT THE SHARES AR E HELD AS INVESTMENT SHOULD NOT BE ACCEPTED. IN SUPPORT OF HIS SUBMISSIONS , THE LD. DR PLACED RELIANCE ON THE FOLLOWING DECISIONS: I . MAZAGAON DOCK LTD. VS. CIT EXCESS PROFIT TAX: 34 ITR 3 6 8 (SC); II . CIT VS. SUTLEJ COTTON MILLS SUPPLY AGENCY LTD: 100 ITR 706 ( S C ); III . UNITED COMMERCIAL BANK LTD. VS. CIT: 32 ITR 688 (SC); AND IV . ORNATE TRADERS (P) LTD. VS. ITO MUMBAI: 24 SOT 125 (MUM) 6. THE LD. COUNSEL FOR THE ASSESSEE RAISED AN OBJECTION THAT THE AUTHOR OF THE ASSESSMENT ORDER CANNOT DEFEND HIS OWN ORDER IN APPELLAT E PROCEEDINGS. THE LD. COUNSEL FURTHER SUBMITTED THAT THE DECISIONS ON WHICH THE LD. DR HAS PLACED RELIANCE ARE NOT APPLICABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. W E HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW . WE HAVE ALSO CONSIDERED THE DECISIONS ON WHICH THE RIVAL SIDES HAVE PLACED 5 ITA NO. 955/PN/2011, A.Y. 20 05 - 06 RELIANCE. PROFIT FROM SALE OF SHARES , WHETHER REVENUE OR A CAPITAL RECEIPT IS A MIXED QUESTION OF LAW AND FACT . THE QUESTION AS T O WHETHER THE ASSESSEE HAS EARNED CAPITAL GAIN OR BUSINESS PROFITS ON THE SHARES SOLD BY HIM DEPEND ON THE FACTS AND CIRCUMSTANCES OF EACH CASE. SUCH DECISION IS TO BE ARRIVED AT BY TAKING INTO ACCOUNT THE INTENTION OF THE ASSESSEE WHILE PURCHASING THE SHA RES, AS TO WHETHER THE SAME W ERE ACQUIRED FOR HOLDING AS INVESTMENT OR FOR DOING BUSINESS THEREIN. THE TREATMENT GIVEN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT IS ALSO ONE OF THE DECISIVE FACTORS TO FIND OUT WHETHER THE SHARES WERE HELD AS INVESTMENT OR STO CK IN TRADE. IF THE SHARES ARE BOUGHT WITH THE INTENTION OF EARNING CAPITAL GAINS THEREON AND ALSO DIVIDEND INCOME BY HOLD ING THE SAME AS INVESTMENT, THE GAIN ARISING THERE FROM IS REQUIRED TO BE TREATED AS CAPITAL GAINS. ON THE OTHER HAND, IF THE SHARES A RE PURCHASED WITH THE INTENTION TO EARN PROFIT THEREON BY TRADING AND ARE HELD AS STOCK IN TRADE IN THE BOOKS OF ACCOUNT, THE PROFIT ARISING ON SALE OF SUCH SHARES IS LIABLE TO BE TREATED AS BUSINESS INCOME. 8. IN THE PRESENT CASE, THE ASSESSEE IS A COMM ISSION AGENT AND IS A WHOLESALE TRADER OF BHUSAR AND RAJMA. DURING THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE HA D PURCHASED SHARES WORTH RS. 34,20,978/ - AND SOLD SHARES TO THE TUNE OF RS.19,86,943/ - . THE ASSESSEE EARNED PROFIT OF RS.7,19,166/ - . THE ASSESSEE HAS TREATED THE INCOME FROM SALE OF SHARES AS CAPITAL GAIN WHEREAS THE REVENUE HAS ASSESSED THE SAME UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION . THE MAIN REASON FOR TREATING THE INCOME FROM SALE OF SHARES AS INCOME FROM BUSINESS BY THE DEPARTMENT IS THE LARGE VOLUME AND VALUE OF SHARE TRANSACTIONS. A NOTHER CONTENTION OF THE REVENUE FOR TREATING THE INCOME FROM SALE OF SHARES AS BUSINESS INCOME IS THAT THE 6 ITA NO. 955/PN/2011, A.Y. 20 05 - 06 ASSESSEE HAS DIVERTED BUSINESS FUNDS FOR PURC HASE OF SHARES AND FOR BUSINESS PURPOSES THE ASSESSEE HAS TAKEN LOAN. ON THE OTHER HAND THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE IS THAT THE SHARES ARE PURCHASED BY THE ASSESSEE AS INVESTMENT. THE INTENTION OF THE ASSESSEE IS TO EARN DIVIDEN D FROM SHARES . N O BORROWED FUNDS WERE USED FOR PURCHASE OF SHARES. IT HAS BEEN FURTHER CONTENDED THAT ALL THE SHARES PURCHASED BY THE ASSESSEE ARE DELIVERY BASED. 9. THE CBDT AFTER TAKING INTO CONSIDERATION JUDICIAL PRONOUNCEMENTS RENDERED BY THE HONB LE SUPREME COURT OF INDIA AND VARIOUS HONBLE HIGH COURTS , ISSUED CIRCULAR NO. 4/2007, INDICATING THE PRINCIPLES TO DETERMINE THE NATURE OF TRANSACTION IN SHARE. THE BROAD CRITERIA SET OUT IN THE SAID CIRCULAR IS : 1 . INTENTION OF THE ASSESSEE AT THE TIME OF P URCHASE OF THE SHARES. THIS CAN BE FOUND OUT FROM THE TREATMENT GIVEN TO THE PURCHASE IN THE ASSESSEE'S BOOKS OF ACCOUNT. 2 . WHETHER THE ASSESSEE USED BORROW ED MONEY TO PURCHASE THE SHARES, AND PAID INTEREST FOR IT. MONEY IS GENERALLY BORROWED TO PURCHASE GOODS FOR THE PURPOSES OF TRADE BORROWED TO PURCHASE GOODS FOR THE PURPOSES OF TRADE AND NOT FOR INVESTING IN AN ASSET FOR RETAINING. 3 . VOLUME AND FREQUENCY OF THE PURCHASES AND SALE/DISPOSALS. IF PURCHASE AND SALE S ARE FREQUENT, OR THERE ARE SUBSTANTIAL TRANSACTIONS SHARES, IT INDICATE S TRADE. LIKEWISE, RATIO BETWEEN THE PURCHASES AND SALES AND THE HOLDINGS MAY SHOW WHETHER THE ASSESSEE IS AND THE HOLDINGS MAY SHOW WHETHER THE ASSESSEE IS TRADING OR INVESTING (HIGH TRANSACTIONS AND LOW HOLDINGS 7 ITA NO. 955/PN/2011, A.Y. 20 05 - 06 INDICATE TRADE WHEREAS LOW TRANSACTIONS AND HIGH HOLDINGS INDICATE INVESTMENT). ANOTHER RELATED FACTOR IS THE DURATION FOR WHICH THE SHARES ARE HELD. 4 . WAS THE PURCHASE AND SALE MADE FOR REALIZING PROFIT, OR FOR RETENTION AND APPRECIATION IN ITS VALUE. THE FORMER INDICATES THE PURCHASES BEING PART OF TRADE; AND THE LATTER IS INDICATIVE OF THE PURCHASES BEING AN INVESTMENT. 5 . WHETHER THE INTENTION BEHIND THE PURCHASE WAS TO ENJOY DIVIDEND, OR MERELY TO EARN PROFIT ON SALE OF SHARES. 6 . WHETHER THE SHARES WERE VALUED AT COST. IF SO, IT WOULD INDICATE THAT THEY WERE INVESTMENTS. WHERE THEY WERE VALUED AT COST OR MARKET VALUE OR NET REALIZABLE VALUE, WHICHEVER IS LESS, IT WILL INDICATE THAT SHARES WERE TREATED AS STOCK - IN - TRADE. 10. THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF DCIT V. SMK SHARES AND STOCK BROKING PVT. LTD. IN ITA NO.799/MUM/09 FOR A.Y. 2005 - 06 DECIDED ON 24.11.2010 HAS HELD AS UNDER : '13. CBDT, VIDE CIRCULAR NO. 4/2007 DATED 15TH JUNE 2007 HAS OBSERVED THAT WHETHER A PARTICULAR HOLDING OF SHARES IS BY WAY OF INVESTMENT OR FORM PART OF THE STOCK IN TRADE IS A MATTER WHICH IS WITHIN INVESTMENT OR FORM PART OF THE STOCK IN TRADE IS A MATTER WHICH IS WITHIN THE KNOWLEDGE OF THE ASSESSEE WHO HOLDS HIS SHARES AND HE SHOULD, IN NORMAL CIRCUMSTANCES, BE IN A POSITION TO PRODUCE EVIDENCE FROM HIS RECORDS AS TO WHETHER HE IS MAINTAINING ANY STOCK - IN - TRADE OR HOLDING THE SHARES BY WAY OF INVESTMENT. IN THE PRESENT CASE, IT IS NOT DISPUTED THAT THE ASSESSEE HAD MAINTAINED THIS DISTINCTION IN ITS RECORDS. IT IS TRUE THAT VOLUM E OF TRANSACTION. IS AN IMPORTANT INDICATOR OF THE INTENTION OF THE ASSESSEE WHETHER TO DEAL IN SHARES AS TRADING ASSET OR TO HOLD THE SHARES AS INVESTOR BUT CERTAINLY NOT THE SALE CRITERION. IN OUR CONSIDERED OPINION, THE ASSESSING OFFICER'S CONCLUSION TH AT SINCE SALE AND PURCHASE HAD BEEN DETERMINED BY THE VOLATILITY IN THE MARKET THE SAME IS AGAINST 8 ITA NO. 955/PN/2011, A.Y. 20 05 - 06 THE BASIC FEATURE OF INVESTOR IS NOT BASED ON THE SOUND RATIONAL REASONING. A PRUDENT INVESTOR ALWAYS KEEPS A WATCH ON THE MARKET. TRENDS AND, THEREFORE) IS NOT BARRED UNDER LAW FROM LIQUIDATING HIS INVESTMENTS IN SHARES ALWAYS A VEXED QUESTION TO FIND OUT AS TO WHETHER THE ASSESSEE WAS HOLDING THE SHARES AS STOCK IN TRADE OR UNDER AN THE ASSESSEE WAS HOLDING THE SHARES AS STOCK IN TRADE OR UNDER AN INVESTMENT PORTFOLIO PARTICULARLY BECAUSE ONE HAS TO INFER THE INTENTION OF THE ASSESSEE WHICH IS PRIMARILY WITHIN HIS OWN KNOWLEDGE. THE CONDUCT OF THE ASSESSEE ASSUMES SIGNIFICANCE IN THIS REGARD. IT HAS BEEN LAID DOWN IN VARIOUS JUDICIAL PRONOUNCEMENTS THAT THERE IS NO ACID TEST TO DECIDE THIS ISSUE. IN THE PRESENT CASE WE FIND THAT THE ASSESSING OFFICER WHILE PASSING ASSESSMENT ORDER UNDER SECTION 143(3) FOR ASSESSMENT YEARS 2001 - 02 AND 2004 - 05, DID NOT DISPUTE ASSESSEE'S CLAIM REGARDING PROFIT ON SALE OF INVESTMENT. ONE MORE IMPORTANT ASPECT IS THAT THE ASSESSEE HAD NOT BORROW ED ANY FUND FOR INVESTMENT IN SHARES AND THIS FACT CANNOT BE LOST SIGHT OFF WHILE DECIDING THE TRUE INTENTION OF THE ASSESSEE.' WE FIND THAT T HE A FOREMENTIONED DECISION OF TRIBUNAL SUPPORTS THE CASE OF THE ASSESSEE . T HERE IS NO EVIDENCE TO SHOW THAT BORROW ED FUNDS WERE UTILIZED FOR INVESTMENT IN SHARES. IT IS TRUE THAT THE ASSESSEE HAD AVAILED LOAN BUT THE SAME W AS FOR THE ASSESSES BUSINESS AND NOT HAD AVAILED LOAN BUT THE SAME W AS FOR THE ASSESSES BUSINESS AND NOT FOR INVESTMENT PURPOSE. THE DEPARTMENT HAS NOT BEEN ABLE TO SHOW ANY NEXUS BETWEEN THE BORROWINGS AND PURCHAS E OF SHARES. THUS, IT CANNOT BE SAID THAT FUNDS WERE BORROWED FOR MAKING INVESTMENT IN SHARES. THERE IS NO DOUBT THAT V OLUME AND FREQUENCY OF TRANSACTION IS ONE OF THE GUIDING FACTORS TO FIND OUT WHETHER THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF SHARES OR MAKING INVESTMENT TO HAVE BUSINESS OF PURCHASE AND SALE OF SHARES OR MAKING INVESTMENT TO HAVE CAPITAL GAINS THEREON . B UT IT IS NOT THE SOLE CRITERION TO DETERMINE THE NATURE OF INVESTMENT. IT IS NOT THE CASE OF THE REVENUE THAT THE SHARES WERE VALUED BY THE ASSESSEE IN HIS BOOKS OF ACCOUNT AT COST OR MARKET VALUE, WHICHEVER IS LESS . THEREFORE, THE PROFIT FROM SALE OF SHARES HELD BY THE ASSESSEE CANNOT BE SAID TO BE REVENUE RECEIPT. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS SHOWN SHARES AS INVESTMENT IN UNDISPUTED FACT THAT THE ASSESSEE HAS SHOWN SHARES AS INVESTMENT IN THE BOOKS. 9 ITA NO. 955/PN/2011, A.Y. 20 05 - 06 11. THE LD. DR HAS ARGUED THAT TH E ENTRIES IN THE BOOKS ARE NOT CONCLUSIVE. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE ASSESSING CONCLUSIVE. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE ASSESSEE HAS TO SHOW FROM THE RECORDS HIS INTENTION TO TREAT THE SHARES AS INVESTMENT O R STOCK IN TRADE. THE HONBLE SUPREME COURT OF INDIA I N THE CASE OF COMMISSIONER OF INCOME - TAX (CENTRAL), CALCUTTA V. ASSOCIATED INDUSTRIAL DEVELOPMENT CO. (P.) LTD. REPORTED AS 82 ITR 586 HAS OBSERVED: HAS OBSERVED: WHETHER A PARTICULAR HOLDING OF SHARES IS BY WAY OF INVESTMENT OR FORMS PART OF THE STOCK - IN - TRADE IS A MATTER WHICH IS WITHIN THE KNOWLEDGE OF THE ASSESSEE WHO HOLDS THE SHARES AND IT SHOULD, IN NORMAL CIRCUMSTANCES, BE IN A POSITION TO PRODUCE EVIDENCE FROM ITS RECORDS AS TO WHETHER IT HAS MAINTAINED ANY DISTINCTION BETWEEN THOSE SHARES WHICH ARE ITS STOCK - IN - TRADE AND THOSE WHICH ARE HELD BY WAY OF INVESTMENT. 12. WE WOULD ALSO LIKE TO OBSERVE HERE THAT T HE ASSESSEE IS ENGAGED IN TRADING OF BHUSAR AND RAJMA FROM WHICH HE IS HAVING TURNOVER OF MORE THAN RS.1.6 8 CRORES DURING THE PERIOD RELEVANT TO ASS ES S MENT YEAR UNDER APPEAL. THE TURNOVER FROM SALE OF SHARES IS RS.19.86 LACS , WHICH IS LESS THAN 12% OF THE TOTAL BUSINESS TURNOVER OF THE ASSESSEE. THUS, IT IS APPARENT THAT THE MAIN BUSINESS OF THE ASSESSE IS TRADING IN THUS, IT IS APPARENT THAT THE MAIN BUSINESS OF THE ASSESSE IS TRADING IN BHUSAR AND RAJMA AND NOT TRADING IN SHARES. IN VIEW OF THE FACTS OF THE CASE AND THE JUDICIAL DECISIONS DISC USSED ABOVE WE HOLD THAT IN THE PRESENT CASE THE INCOME FROM SALE OF SHARES IS CAPITAL RECEIPT . ACCORDINGLY, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. ASSESSEE IS ALLOWED. 10 ITA NO. 955/PN/2011, A.Y. 20 05 - 06 13 . THE SECOND ISSUE RAISED BY THE ASSESSEE IN APPEAL IS WITH REGARD TO DISALLOWANCE U/S. 40 (A)(IA). THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT NO DISALLOWANCE COULD BE MADE UNDER SECTION 40(A)(IA) IN THE AY 2005 - 06 IN VIEW OF THE AMENDMENT TO SECTION 194C OF THE ACT W.E.F . 01 - 06 - 2007 . WE DO NOT CONCUR WITH THE SUBMISSIONS OF THE LD. COUNSE L. THE ISSUE IN APPEAL RELATES TO DEDUCTION OF TAX AT SOURCE ON PAYMENT OF INTEREST. THE PROVISIONS RELATING TO DEDUCTION OF TAX AT SOURCE ON INTEREST PAYMENT ARE CONTAINED IN SECTION 194A OF THE ACT. THE PROVISIONS OF SECTION 194C RELATE TO TDS ON PAYMENT S TO THE CONTRACTORS, THUS THE SAME ARE NOT APPLICABLE IN THE PRESENT CASE. THEREFORE, THE CASE LAW DY. CIT VS. SRI SURVE SHRIRAM KRISHNAJI (SUPRA) ON WHICH THE LD. COUNSEL HAS PLACED RELIANCE HAS NO RELEVANCE IN THE FACTS OF THE PRESENT CASE. A PERUSAL OF FIRST PROVISO TO SECTION 194A OF THE ACT MAKES IT CLEAR THAT SECTION 194A SHALL ALSO APPLY TO INDIVIDUALS, WHERE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM BUSINESS OR PROFESSION EXCEED THE MONETARY LIMIT SP ECIFIED U/S 44AB OF THE ACT. THE PROVISO HAS BEEN INSERTED BY THE FINANCE ACT, 2002 W.E.F. 1 - 6 - 2002. WE FIND NO MERIT IN THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE ON THE SECOND ISSUE , ACCORDINGLY THIS GROUND OF APPEAL IS DISMISSED. 1 4 . THE LD. COUNSEL FOR THE ASSESSEE HAS RAISED AN OBJECTION THAT THE AUTHOR OF ASSESSMENT ORDER CANNOT DEFEND HIS OWN ORDER BEFORE THE APPELLATE FORUM. THE OBJECTION HAS BEEN RAISED IN VIEW OF THE FACT THAT THE LD. DR REPRESENTING THE DEPARTMENT IS THE AUTHOR OF THE ASSESSMENT ORDER IN THE PRESENT APPEAL AND W AS THE ASSESSING OFFICER OF THE ASSESSEE WHEN HE WAS POSTED AS DY. COMMISSIONER OF INCOME TAX, 11 ITA NO. 955/PN/2011, A.Y. 20 05 - 06 SATARA CIRCLE, SATARA. WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO BAR ON THE LD. DEPARTMENTAL REPR ESENTATIVE I N DEFENDING THE ORDER AUTHORED BY HIM . THERE IS NO CONFLICT OF INTEREST IN DEFENDING ONES OWN ORDER. ACCORDINGLY, WE REJECT THIS OBJECTION RAISED BY THE LD. COUNSEL FOR THE ASSESSEE. THE OTHER GROUNDS RAISED IN THE APPEAL HAVE NOT BEEN PRES SED BY THE LD. COUNSEL FOR THE ASSESSEE , A CCORDINGLY, THE SAME ARE DISMISSED AS NOT PRESSED. 1 5 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTY ALLOWED. ORDER PRONOUNCED ON FRIDAY , THE 16 TH DAY OF OCTOBER, 2015. SD/ - SD/ - ( . . / R.K. PANDA) ( / VIKAS AWASTHY) ( . . / R.K. PANDA) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 16 TH OCTOBER, 2015 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT . 2. / THE RESPONDENT . 3. ( ) / THE CIT(A) - III, PUNE 3. ( ) / THE CIT(A) - III, PUNE 4. / THE CIT - I II, PUNE 5. , , , / DR, ITAT, A BENCH, PUNE . 6. / GUARD FILE. / BY ORDER, // // TRUE COPY// / / PRIVATE SECRETARY, , / ITAT, PUNE