M/S. OCEANIC MARKETING AGENCIES INDIA LTD.,DELHI V. THE DY. COMMISSIONER OF INCOME TAX, (OSD), CIRCLE 2(2), MUMBAI

ITA 4542/MUM/2025

AI Insights

The case involves M/s. Oceanic Marketing Agencies India Ltd., which appealed against the order of the Commissioner of Income Tax Appeals-5, Mumbai, for the assessment year 2008-09. The primary issue was whether the gains from the sale of shares should be treated as capital gains or business income. The Tribunal had to decide on the condonation of a significant delay in filing the appeal and the substantive issue of the nature of the assessee's activities concerning share transactions. The Tribunal found that the assessee had consistently treated shares as investments, not as stock-in-trade, and had not engaged in activities typical of a trader.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 787497 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 16-07-2025
• Other Referred Cases: CIT Vs. Sutlej Cotton Mills Supply Agency Ltd., Karam Chand Thapar & Bros. (P) Limited Vs. CIT, CIT Vs. ESS Jay Enterprises (P) Ltd., Radhasoami Satsang vs. CIT, Sardar Kehar Singh CIT, CIT vs. Neo Poly Pack (P) Ltd., CIT vs. Belpahar Refractrorles Ltd., M.A. Namazie Endowment vs. CIT, CIT vs. Shree Nirmal Commercial Ltd., Turaben Ramanbhal Patel & Anr. Vs. ITO, Dhansiram Agarwalla vs. CIT, Gopal Purohit vs.Jt. CIT, Janak S. Rangwala vs. ACIT, CIT Vs. Gopal Purohit, Mr. Nehal V. Shah vs, ACIT, Hitesh Satishchandra Doshi vs JCIT, Bharat Kuverji Kenia Vs. Add.CIT, DCIT vs. SMK Shares & Stock Broking
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIRABHADRA S MAHAJAN
• Assessee Lawyers: S KRISHNAN
• Keywords: Condonation of delay; Business income; Capital asset; Cost of acquisition; Rule of consistency; Capital receipt; Capital Gains; Earning of tax free income; Rule 8D
• Section: 10; 14A

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, ‘C’ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI ARUN KHODPIA, ACCOUNTANT MEMBER ITA No.4777/Mum/2025 & 4542/Mum/2025 (Assessment Year :2008-09) M/s. Oceanic Marketing Agencies India Ltd., DSC-260, DLF South Court Saket, New Delhi-110017 Vs. DCIT (OSD) Central Circle-2(2) Mumbai PAN/GIR No.AAACO6877C (Appellant) .. (Respondent) Assessee by Shri S Krishnan Revenue by Shri Virabhadra S Mahajan, Sr. DR (virtually appeared) Date of Hearing 11/09/2025 Date of Pronouncement 17/11/2025 आदेश / O R D E R PER AMIT SHUKLA (J.M): These appeals have been preferred by the assessee challenging the order dated 23 January 2012 passed by the learned Commissioner of Income Tax Appeals- 5 Mumbai for assessment year 2008-09. Two appeals had inadvertently been filed against the same order. At the very outset the learned counsel for the assessee fairly submitted that one of them was filed by mistake and may be treated as withdrawn. Accordingly ITA No. 4542 Mum 2025 is dismissed as Printed from counselvise.com ITA No.4777/Mum/2025 & 4542/Mum/2025 Oceanic Marketing Agencies India Ltd., 2 withdrawn and only ITA No. 4777 Mum 2025 survives for adjudication. 2. The assessee seeks condonation of delay of 4855 days in filing the surviving appeal. The learned counsel for the assessee submitted that the assessee was never aware that the order of the learned CIT(A) dated 23 January 2012 had been passed and at no point was it communicated to the assessee. It was pointed out that on 6 November 2012 the assessee wrote to its then counsel enquiring about the status of the appeal for assessment year 2008-09 which shows that even ten months after the order the assessee still believed that the appeal was pending. The learned counsel further submitted that again on 2 January 2025 the assessee wrote another communication seeking details of proceedings for assessment years 2007-08 and 2008-09 thereby reaffirming that even after more than a decade the assessee still had no knowledge of any appellate disposal. 3. The learned counsel for the assessee also pointed out that the very issue involved in the present appeal had already been decided by the Tribunal in the assessees favour in assessment year 2007-08 by order dated 9 May 2014. However even this favourable order had not come to the assessees knowledge and the department itself gave appeal effect only on 4 March 2025 nearly eleven years later. This long delay on the departmental side itself indicates that neither party was aware of the earlier appellate developments and the record had remained static for a considerable period. Printed from counselvise.com ITA No.4777/Mum/2025 & 4542/Mum/2025 Oceanic Marketing Agencies India Ltd., 3 4. It was further submitted that only upon receiving a proposal dated 19 March 2025 to adjust refunds of subsequent years against an alleged outstanding demand for assessment year 2008 09 did the assessee realise that something had transpired. The assessee immediately applied for inspection of records received incomplete pages of the appellate order on 21 May 2025 pointed out the missing pages through a written communication dated 4 July 2025 and finally received the complete order only on 14 July 2025. The appeal was then filed without delay on 16 July 2025. The learned counsel submitted that the assessees actions were prompt and consistent once knowledge of the order arose. 5. The learned Senior Departmental Representative opposed condonation contending that a delay of thirteen years is extraordinary and cannot be condoned lightly and that alleged lapses of counsel cannot amount to sufficient cause. It was argued that the assessee should demonstrate continuous diligence and a proper explanation for the entire period of delay which according to him had not been done. 6. For better appreciation of facts the relevant sequence of events is reproduced herein below: DATE PROCEEDING REFERENCE 02.02.2011 Appeal filed before CIT(A) V, Mumbai. Form 35 05.08.2011 Counsel before CIT(A) seeks documents for drafting PB 82 Printed from counselvise.com ITA No.4777/Mum/2025 & 4542/Mum/2025 Oceanic Marketing Agencies India Ltd., 4 submissions. 15.08.2011 Assessee responds, requesting counsel to seek adjournment, committing to send documents by end of week. PB 83 30.08.2011 Counsel intimates that appeal is listed for hearing mid-September, seeks details and documents. PB 84 17.10.2011 Counsel forwards notice from CIT(A) in the matter. PB 85 15.11.2011 Correspondence amongst counsel, as to documents received and pending. PB 86 06.11.2012 Assessee's email, enquiring as to status of appeals for AY 2007-08 (before ITAT) & AY 2008-09 (before CIT(A). PB 87 09.05.2014 ITAT disposes off appeal for AY 2007-08. As on this date, the issue in appeal for AY 2008-09 became covered in Assessee's favour. PB 38 25.09.2020 All pending cases of first appeal migrated to faceless medium, vide S. O. 3926E. 02.01.2025 Assessee writes to counsel, seeking documents relating to AY 2007-08, and enquiring into status of AY 2008-09 appeal before CIT(A). PB 88 09.01.2025 Application moved before DCIT, Circle 2(2)(1), PB 89 Printed from counselvise.com ITA No.4777/Mum/2025 & 4542/Mum/2025 Oceanic Marketing Agencies India Ltd., 5 Mumbai, seeking inspection of records for AY 2007-08 & AY 2008-09. 14.01.2025 Reminder sent to counsel's office. PB 88 04.03.2025 Intimation as to appeal effect pursuant to ITAT's order dated 09.05.2014 for AY 2007-08 PB 90 19.03.2025 Proposal for adjustment of refunds against demand for AY 2008-09. PB 92 05.04.2025 Assessee’s email disagreeing with proposal for adjustment of refund against demand for A.Y.2008-09 PB 93 21.05.2025 Extracts of CIT(A)’s order dated 23.01.2012 received by Assessee pursuant to inspection applications. Pages 7,9,13,14,17,20,25,26,27, 28 missing PB 94 04.07.2025 Assessee writes to AO, informing that copy of order received 22.05.2025 was not complete, and seeking further documents and details PB 112 14.07.2025 Copy of CIT(A) order for A.Y.2008-09 received 16.07.2025 Appeal filed before ITAT, disclosing 21.05.2025 as date of receipt of CIT(A)’s order Form 36 Printed from counselvise.com ITA No.4777/Mum/2025 & 4542/Mum/2025 Oceanic Marketing Agencies India Ltd., 6 7. Having considered the above submissions and the detailed sequence of events we find that the explanation is fully supported by documentary evidence. The email dated 6 November 2012 clearly shows that the assessee was unaware of the appellate order even months after it had been passed. The email of 2 January 2025 shows that even after thirteen years the assessee genuinely believed that the appeal remained pending. The Revenue has not produced any evidence that the order was ever served. 8. It is also significant that the Tribunal’s favourable order for assessment year 2007-08 dated 9 May 2014 was given effect only on 4 March 2025 after almost eleven years. When even a favourable order of the Tribunal did not move through the departmental system for over a decade it is entirely reasonable that the appellate order for assessment year 2008 09 also remained uncommunicated. This supports the assessees explanation that neither side was aware of the appellate outcome. 9. The immediate steps taken by the assessee after receiving the refund adjustment proposal demonstrate diligence. The assessee sought inspection pointed out missing pages obtained the complete order and filed the appeal within two days thereafter. This conduct shows promptness and sincerity once knowledge was acquired. There is no evidence of any deliberate withholding or conscious delay. Printed from counselvise.com ITA No.4777/Mum/2025 & 4542/Mum/2025 Oceanic Marketing Agencies India Ltd., 7 10. The contention of the learned Senior Departmental Representative that lapses of counsel cannot constitute sufficient cause does not apply here because the delay is not due to any singular lapse of counsel but due to non service of the appellate order procedural transitions migration of appellate records and the absence of any departmental action for more than a decade. These combined circumstances constitute sufficient cause. 11. The fact that the identical issue stood decided in favour of the assessee by the coordinate bench in assessment year 2007-08 further reinforces that there was no motive for the assessee to deliberately delay filing the appeal. If the assessee had known of the appellate order it would certainly have filed the appeal promptly because the coordinate bench order fully supported its position. 12. In these circumstances and consistent with the principle that substantial justice must prevail when the explanation is bona fide and supported by record we hold that the assessee has shown sufficient cause for the delay. The delay of 4855 days is accordingly condoned and the appeal is admitted for adjudication on merits. 13. On merits the learned counsel for the assessee submitted that the assessee has always been an investor and not a trader. It was pointed out that the object clause of the company does not contemplate trading in shares that shares have consistently been shown as investments in the balance Printed from counselvise.com ITA No.4777/Mum/2025 & 4542/Mum/2025 Oceanic Marketing Agencies India Ltd., 8 sheet that they have always been valued at cost and not at cost or market value whichever is lower and that the assessee has earned significant dividend income. These factors according to the learned counsel show that the intention was to hold investments and earn income and appreciation and not to carry on business. It was further submitted that in earlier scrutiny assessments the department has accepted the treatment of gains as capital gains and that the coordinate bench in assessment year 2007-08 on identical facts held that the gains were taxable as capital gains. On section 14A it was submitted that the assessee had already disallowed most of the relevant expenditure suo motu and the Assessing Officer invoked Rule 8D mechanically without recording satisfaction. 14. The learned Senior Departmental Representative supported the orders of the lower authorities and relied on frequency and multiplicity of transactions and the CBDT circular but did not bring any distinguishing facts that could justify a departure from the coordinate bench order. 15. We have carefully considered all material and find that the assessee has consistently held shares as investments. In the audited financial statements the shares are reflected under the head investments and valued at cost. This is a significant indicator of investment intention because a trader in shares usually values stock in trade at cost or market value whichever is lower. The method adopted by the Printed from counselvise.com ITA No.4777/Mum/2025 & 4542/Mum/2025 Oceanic Marketing Agencies India Ltd., 9 assessee is consistent and reinforces the stand that shareholdings were capital assets. 16. The assessee has used its own surplus funds and not borrowed funds for making investments. This is typical of an investor. The assessee has also earned reasonable dividend income which supports the intention of holding shares for appreciation and income. These factors together show that the conduct of the assessee is that of an investor and not of a trader. 17. The learned Senior Departmental Representatives emphasis on frequency of transactions is not sufficient because an investor may also buy or sell shares depending on market conditions without becoming a trader. The coordinate bench in assessment year 2007-08 had already examined similar facts and held that the assessee was an investor. The facts for the present year are identical and no new material has been brought by the department. 18. The rule of consistency also applies. In earlier scrutiny years the department has accepted capital gains treatment. When there is no change in facts a different view cannot be taken unless justified by new material. No such material exists. The Assessing Officer has largely relied on frequency and the circular but these do not override other decisive indicators. Following the coordinate bench decision and considering the legislative scheme of section 111A and Printed from counselvise.com ITA No.4777/Mum/2025 & 4542/Mum/2025 Oceanic Marketing Agencies India Ltd., 10 section 10(38) we hold that the gains are assessable as capital gains. 19. For sake of ready reference the order of the Tribunal for the earlier year is reproduced herein below: “6. We have considered the rival contentions, perused the record as well as the orders of the authorities below. We have also deliberated on the judicial pronouncements referred to by the lower authorities in their respective orders, as well as the decisions cited by the learned AR and DR during the course of hearing before us, in the context of the factual matrix of the instant case. From the record, we found that assesses company was incorporated to carry on business on distribution, marketing and trading in automobiles. During the year under consideration, the assessee has income by way of interest, dividend and short term and long term capital gains on shares/securities. From the object clause, we found that assessee company was not incorporated to carry on business of dealing in shares. It has no power to carry on business on dealing in shares. The short term and long term capital gains/loss earned by the assessee was declared under the head 'capital gains depending upon the period of holdings of the shares sold during the year. However, the AO assessed the net gain as 'business income. It is settled law that for the purpose of assessability of profit derived from sale of shares, it is predominantly the intention of the assessee which is relevant. Such intention of the assessee is to be gathered from the facts and circumstance of each case. The issue whether shares/securities held by an assessee as 'Investment or as 'stock-in-trade' and whether the profit derived from sale of shares/securities is assessable as 'capital gains' or 'business income, depends upon the intention of the assessee which is to be ascertained predominantly. from the objective of the assessee in acquiring the shares. Whether the objective was to acquire shares as an investment and enjoyed income therefrom or to make profit by buying and selling shares in the short term The manner in which such shares has been classified in the financial statements are also relevant factor. Whether distinction has been maintained between the investment Printed from counselvise.com ITA No.4777/Mum/2025 & 4542/Mum/2025 Oceanic Marketing Agencies India Ltd., 11 portfolio and stock in trade or Is also relevant. The period for which the shares have been held, frequency of transaction, how the shares have been acquired whether out of own funds or borrowed funds are also required to be examined in the light of intention of assessee in acquiring the shares. The Hon'ble Supreme Court in the case of CIT Vs. Sutlej Cotton Mills Supply Agency Ltd., [1975] 100 ITR 706 (SC), observed that a capital Investment and resale do not lose their capital nature merely because the resale was foreseen and contemplated when the investment was made and the possibility of enhanced values motivated the investment. The Hon'ble Supreme Court in the case of Karam Chand Thapar & Bros. (P) Limited Vs. CIT, 82 ITR 899, observed that the manner of disclosure in the balance sheet though not conclusive, is a relevant circumstance. It was held that where the shares were shown by the assessee as 'Investment in the balance sheet, while holding that the fact that the assessee was showing shares as 'investment in its books as well as in its balance sheet, though by itself not a conclusive circumstance, was a relevant circumstance for drawing inference as to the nature of loss. The Hon'ble Delhi High Court in the case of CIT Vs. ESS Jay Enterprises (P) Ltd. 173 Taxman 1 (Del.) observed that conduct of the assessee is the determinative factor in judging whether shares were held on capital or trading account Considering all these legal proposition and applying the same to the facts of the instant case. we found that the assessee has consistently shown investment in shares and the profit arising out of these investments were not only offered by the assessee as capital gains but was accepted by the department under scrutiny assessment in earlier assessment year i.e. Α.Υ. 2005-06 & 2006-07 as capital gains and not as business income. As the assessee was having surplus funds, the management of the assessee decided to invest available funds in various shares/securities to eam dividend income and also to earn appreciation in the capital value, rather than keeping the funds idle. A resolution was passed in the Board Meeting of assessee company wherein it was resolved that surplus funds to be held as part of investment portfolio. The shares so purchased held as investment and not as 'stock-in-trade' and assessee also earned substantial dividend Income of Rs.41,98,958/- on such investment. Thus, the quantum of dividend Income earned by assessee also supports its intention of investment in shares. Furthermore, in the audited financial statement of the assessee Printed from counselvise.com ITA No.4777/Mum/2025 & 4542/Mum/2025 Oceanic Marketing Agencies India Ltd., 12 company, the entire investment portfolio was reported under the head 'investment and not as 'stock-in-trade'. The assessee has recorded the script name of each investment. We had also verified the audited financial statement of the assessee, in Note 1(v) in Schedule 8- notes to accounts forming part of audited accounts, it was clearly stated that assessee has been valuing the investment at cost and not at cost or market price, whichever is lower. The sale proceeds of the shares have not been reflected as turnover, while rejecting the assessee's contention regarding capital gains on shares, the CIT(A) has argued that principles of 'estoppel or \"res judicata\" do not apply to tax proceedings. There can be no quarrel with this basic proposition of law, but at the same time it is well settled that the Rule of consistency cannot he ignored in tax proceedings. This rule is an exception to the above rule, and has been well recognized in various judicial rulings cited below: 1. Radhasoami Satsang vs. CIT/1991/193 ITR 321 (SC) 2. Sardar Kehar Singh CIT/1991/195 ITR 769 (Raj.) 3. CIT vs. Neo Poly Pack (P) Ltd. (2000/245 ITR 492 (Delhi) 4. CIT vs. Belpahar Refractrorles Ltd., [1981/128/ITR 610(Ori) 5. M.A. Namazie Endowment vs. CIT /1988/174 ITR 58 (Mad) 6. CIT vs. Shree Nirmal Commercial Ltd./1994/213 ITR 361 (Bom) (FB) 7. Turaben Ramanbhal Patel & Anr. Vs. ITO [1995] 215 ITR 323 (Guj) 8. Dhansiram Agarwalla vs. CIT/1996/217 ITR 4 (Gau) In the context of the dispute whether the share transactions resulted in trading profit or capital gains, the rule of consistency has been applied in the following two decisions of the Mumbai Bench of the Tribunal: (Gopal Purohit vs.Jt. CIT/2009/20 DTR 99(Mumbai Trib.) Janak S. Rangwala vs. ACIT/2007] 11 SOT 627 (Mumbai) Following the rule of consistency, the Tribunal in above cases, accepted the assessee's contention that assessee was investor in shares and not trader because in the earlier years, the Revenue had accepted that the assessee was investor. In Janak Rangawala's case (Supra), the Tribunal quoted the following passage from the judgement in Radhasoami Satsang (Supra): ...... Strictly speaking, res judicata does not apply to Printed from counselvise.com ITA No.4777/Mum/2025 & 4542/Mum/2025 Oceanic Marketing Agencies India Ltd., 13 income tax proceedings- Though, each assessment year being a unit what was decided in one year might not apply in the following vear where a fundamental aspect permeating through different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year.\" 7 The profit derived from sale has been shown as 'profit on sale of Investment and offered in return of income as short term or long term capital gains depending on period of holding shares held in investment account as on 31-3-2006 and which were sold during the year and profit/loss thereon was offered under head of long term capital gain/loss, were value at cost only, and at cost or market price whichever is lower. Had the assessee valued such shares at cost or market price, whichever is lower, there would have been justification in the inference drawn by the AO to the effect that assessee was doing business in shares. All these facts substantiated the stand of the assessee with regard to holding of shares as investment with an intention to earn appreciation in value and also earn dividend income and not to earn profit by trading in shares/securities. 8. Hon'ble Supreme Court in the case of CIT Vs. Associated Industrial Development Company (P) Ltd. 82 ITR 586(SC), has held as under :- \"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\" From the record, we found that being a prudent investor, the assessee purchased shares when prices were falling and sold shares when the scrip achieved its target or it had anticipated further erosion in value. The transactions of purchase and sale of shares were to nurse investment and to avoid erosion of capital, surplus arising from sale of shares is to be treated as capital receipt in such circumstances. Printed from counselvise.com ITA No.4777/Mum/2025 & 4542/Mum/2025 Oceanic Marketing Agencies India Ltd., 14 9. The frequency and magnitude of purchase and sale transactions, no doubt, play important role, but the same is not conclusive and other factors like main business/profession of assessee, intention while purchasing shares, holding the same as investment, funds used for such transaction le. borrowed funds at interest or own funds etc. are required to be seen for reaching to the conclusion regarding assessee being investor or trader in shares. In the case of Bharat Kuverji Kenia Vs. Add.CIT, 130 TTJ 86 (Mum), the Mumbai Bench of the Tribunal observed that, \"There is no justification for treating the activity of purchase and sale of shares as 'business' merely on the reason of the' volume of transactions. As per well settled principles of law, the frequency of transactions cannot be per se decisive.\" 10. Speaking on number of transactions in the case of Mr. Nehal V. Shah vs, ACIT (ITA. No.2733/Mum/2009), the Mumbai Bench of the Tribunal held \"that a single transaction would be split by the computers trading of the stock exchanges into many smaller transactions, but that does not mean that assessee has carried so many transactions in the Hitesh Satishchandra Doshi vs JCIT (ITA No. 64971Mum/2009), the Tribunal held that the frequency of purchase and sale of shares, transactions through the electronic system of Stock Exchange split a single transaction into numerous transactions. This gives an unrealistic figure of the number of transactions.\" 11. In the case of CIT Vs. Gopal Purohit [2010] 228 CTR 582, an issue came up for consideration before the Hon'ble Bombay High Court, as to whether the transactions of purchase and sale of shares is assessable as business profits or as capital gains. The Hon'ble Jurisdictional High Court upheld the decision of the tribunal that the resultant gain is assessable as Capital gains instead of Business Income, inter alia, in view of the followings: i) the delivery based transactions have been shown as investments in the books, ii) the shares shown as investments were valued at cost; iii) nature of activities, modus operandi of share transactions, manner of keeping records and presentation of shares as Printed from counselvise.com ITA No.4777/Mum/2025 & 4542/Mum/2025 Oceanic Marketing Agencies India Ltd., 15 investments is same in all the years and hence apparently there appears no reason as to why the claims made by the appellant should not be accepted; The Hon'ble Bombay High Court also accepted tribunal's observations that the principle of res judicata is not attracted since each year is separate in itself, however, there ought to be uniformity in treatment and consistency when the facts and circumstances are identical, particularly in the case of the assessee Special Leave Petition filed by the Department against this order of Hon'ble Bombay High Court has also been dismissed by the Supreme Court vide order dated 15th November, 2010. 12. In case of DCIT vs. SMK Shares & Stock Broking (ITA No. 799/Mum/2009) the Hon'ble Mumbai tribunal held that \"the fact that the AO accepted the appellant's claim in earlier years that it was an investor is material because though the principles of res judicata do not strictly apply to income tax proceedings it is well settled law that the principles of consistency should not be ignored. Uniformity in treatment and consistency under the same facts and circumstances is one of the fundamentals of the judicial principles which cannot be brushed aside without proper reason. 13. The CIT(A) has relied on the decision of Wallfort Financial Services Ltd. Vs. ADCIT, 41 SOT 200 for coming to the conclusion that the profit earned on sale of shares was business income. In this case, it was held by Mumbai. Bench of the Tribunal that where the assessee had dealt in more than 300 scripts during the year and the turnover was about Rs.3500 crores and the assessee had regularly dealt in purchase and sales of shares with high frequency and volume for repetitive purchase and sales in the same scripts, with no shares being held for more than 1 year, profit accruing on sale of shares was liable to be taxed as business income. However, the facts of the instant case are entirely distinguishable wherein total number of scripts was only 29 as against the number of scripts in case of decision relied by the CIT(A), which was more than 300. Further, turnover in the instant case was only of Rs 56.73 crores, whereas fumover in the case relled by the CIT(A) was more than Rs.3500 crores. Furthermore, In the Instant case the assessee had also declared long term capital Printed from counselvise.com ITA No.4777/Mum/2025 & 4542/Mum/2025 Oceanic Marketing Agencies India Ltd., 16 gain/loss which means these shares were held for more than 1 year, whereas in the case relied on by CIT(A) as discussed above, there was no share held for more than 1 year. As the facts of instant case are distinguishable from the facts of the case relied by the learned CIT(A). the same will not help the Revenue for coming to the conclusion that profit arising on sale of shares was liable to tax as business income. 14. The decision to dispose of investment at a short interval is being taken by the assessee keeping in view the eventuality of down trend in the market sentiments over a particular script. Merely because the assessee was able to realize better prices of its investment at a short interval, cannot be solitary yardstick for treating such action as an adventure in the nature of trade, giving rise to business profits, when all the surrounding circumstances, Indicate otherwise. No where the AO has indicated any transaction of purchase of shares without taking delivery and making full payment of such investment. Even in the case of investment it is for the assessee to decide when to dispose them off so as to have a maximum return out of them. There is no theory that the shares held as investment should be disposed of only at the time of need or in emergency The assessee had all the nghts to dispose the investment to reap the maximum benefit when the prices of scripts are high so as to eam better gain. It is true that frequency and volume of transaction is one of a guiding factors to find out as to whether assessee deal in shares as trading asset or hold shares as investor, but certainly not a criteria. A prudent investor always keep a watch on the market trend and, therefore, not barred under law from liquidating his investment in shares. The law itself has recognized this fact by taxing these transactions under the head \"Short Term Capital gains\" being shares which are sold within 12 months of its acquisition. Under these circumstances, if the contention of the AO and CIT(A) is accepted, then it would be against the legislative intent itself. 15. If the conclusion drawn in the Impugned order, observations made from the assessment order, assertions made by respective counsels, proposition of law laid down in various judicial pronouncements as discussed above, and the material available on record are kept in juxtaposition and analyzed, we find that the assessee had been consistently Printed from counselvise.com ITA No.4777/Mum/2025 & 4542/Mum/2025 Oceanic Marketing Agencies India Ltd., 17 investing in shares and Income arising from delivery based transaction of sale and purchase of shares had been shown as capital gains ie. LTCG and STCG deperiding upon period of holding and same was accepted by department under scrutiny assessment proceedings. Analysis of balance sheet of assessee reflects holding of shares as investment. In the speech by Hon'ble Finance Minister regarding Direct Tax Cases (Union Budget -2004-05), especially clause 111, the intention of Government for introducing the security transaction tax and exempting the long term capital gain from sale of share and levying 10% tax on short term capital gain from sale of shares also supports the case of assessee The idea behind introduction of security transaction tax is to end the litigation on the issue, whether the profit earned from delivery based sale of shares is capital gains or business profit. 16. Here, it is pertinent to mention the intention of Government for Introducing the security transaction tax and exempt the long term capital gain earned from sale of shares and levying 10% tax on short term capital gain and earned on sale of shares. It is noted that under the old provisions of the Income-tax Act, profits or gains arising to an investor from the transfer of securities were charged to tax either as long term capital gains or short term capital gains depending on the period of holding of the said securities; Short-term capital gains arising from transfer of securities were taxed at the applicable rates (normal rate) and Long-term capital gains were taxed @ 20%, after adjusting for inflation by indexing the cost of acquisition. For listed securities, the taxpayer had an option to pay tax on long- term capital gains @ 10% but without indexation. For Foreign Institutional Investors (FIls), the long-term capital gains and short-term capital gains were taxed at the rate of 10% (without indexation) and 30% respectively. In case of a trader in securities, however, the gains were taxed as any other normal business income. Thus tax liability on the income from purchase & sale of shares as regards to the STCG & business income was at par However the issue of treatment of income from share transaction as capital gain or business income has in-fact arisen after the amendment brought with Finance Act 2004 by insertion of provisions of section 111A and 10(38) as regards to levy of Transaction tax and exemption /concession on capital gain arising from securities entered in a recognized stock exchange. With a view to simplify the tax regime on Printed from counselvise.com ITA No.4777/Mum/2025 & 4542/Mum/2025 Oceanic Marketing Agencies India Ltd., 18 securities transactions, a tax at the rate of 0.015 per cent. (see: change in rates on securities transactions, by Finance Acts, at appropriate head) is levied on the value of all the transactions of purchase of securities that take place in a recognized stock exchange in India, This tax is collected by the stock exchange from the purchaser of such securities and paid to the exchequer. The provisions relating to the securities transactions tax are contained in Chapter VII of the Finance (No.2) Bill, 2004, and came into effect from 01.10.2004. Further, clause (38) has been inserted in section 10 of the Income-tax Act, so as to provide exemption from long-term capital gains arising out of securities sold on the stock exchange. A new section 111A has also been inserted and section 115AD is amended, so as to provide that short-term capital gains arising from sale of such securities to an investor including Flls shall be charged at the rate of ten per cent. These amendments apply to assessment year 2005-2006 and subsequent years. Through Finance Act, 2008, sections 111A and 115AD have further been amended whereby the-rate-of-lax-on-such short-term capital gain has been raised to fifteen percent. Thus, wef 01 10.2004, on the share transactions subjected to STT concessional tax rate of 10% ( which has been increased to 15% from A.Y.2009-10) are applicable in respect of STCG whereas no tax is chargeable in respect of LTCG. 20. On the issue of disallowance under section 14A we find that the Assessing Officer invoked Rule 8D without recording the satisfaction required under section 14A(2). The assessee had claimed only Rs 1,26,528 after making a suomoto disallowance of Rs. 19,62,918 out of total expenditure. The dividend income was Rs. 7,26,804. When the assessee has already disallowed substantial expenditure on its own the Assessing Officer must show why the claim is incorrect. No such satisfaction has been recorded in the assessment order. The approach is mechanical and contrary to settled law. Printed from counselvise.com ITA No.4777/Mum/2025 & 4542/Mum/2025 Oceanic Marketing Agencies India Ltd., 19 21. It is also well settled that disallowance under section 14A cannot exceed the expenditure actually claimed. There is nothing on record to show that any further specific expenditure was incurred for earning the exempt income. The assessee had already covered almost the entire administrative costs by making a large suomoto disallowance. The further disallowance made therefore has no basis. We accordingly delete the entire disallowance under section 14A. 22. In the result ITA No. 4542/Mum/2025 is dismissed as withdrawn and ITA No. 4777/Mum/2025 is allowed both on condonation and on merits. Order pronounced on 17th November, 2025. Sd/- (ARUN KHODPIA) Sd/- (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 17/11/2025 KARUNA, sr.ps Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Printed from counselvise.com "