Ilyasbhai Ismailbhai Gandhi, ... vs Department Of Income Tax

ी एन0एस0 सैनी, लेखा सद य एवं ी कुल भारत, या%यक सद य के सम& BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER आयकर अपील सं./ ITA No. 3025/Ahd/2011 With CO No.24/Ahd/2012 %नधा)रण वष)/Assessment Year: 2008-2009

ITO, Ward-8(1) Shri Ilyasbhai Ismailbhai Gandhi Ahmedabad. Vs B-5, Jasmine Flats, Nr.Khanpur Darwaja Ahmedabad 380 001. PAN : ABNPG 1830 C

अपीलाथ,/ (Appellant) -.यथ,/ (Respondent)

Revenue by : Shri Nimesh Yadav, Sr.DR Assessee(s) by : Shri Tushar Hemani

सन ु वाई क तार ख/ Dateof Hearing : 16/04/2015 घोषणा क तार ख / Date of Pronouncement: 29/04/2015

आदे श/O R D E R

PER N.S. SAINI, ACCOUNTANT MEMBER: This appeal is filed by

the Revenue and Cross Objection filed by the assessee against the order of the Commissioner of Income-Tax-XIV, Ahmedabad dated 20/09/2011 for the Asstt.Year 2008-2009,

2. In the appeal of the Revenue, the first ground of appeal is that the CIT(A) erred in directing to treat a sum of Rs.7,40,998/- as long term capital gain as shown by the assessee, and not as business income.

3. Brief facts of the case are that the AO observed that the assessee had shown short term capital gain of Rs.48,638/- and long term capital gain of Rs.7,40,998/- from sale and purchase of shares. According to ITA No.3025/Ahd/2011 with CO 2

the AO on perusal of the details of capital gains, it is seen that the main motive was to earn profit by purchasing and selling of shares rather than earning dividend. He observed that this could be corroborated by the fact that the dividend income earned by the assessee was only Rs.3,12,764/- as against capital gain of Rs.8,12,136/-. The AO further observed that the shares were purchased and sold shortly when the prices of the shares have risen, which showed that the purchase and sales of shares had been made only to earn profit. He also observed that to make the transactions in shares, the assessee had obtained loans from banks, and had paid interest amounting to Rs.4,16,065/-. He also observed that the assessee was the director of the company, which was doing the business of share trading. The AO further observed that from the accounts, it is seen that the assessee was doing day-to-day transaction in shares. He, therefore, held that the transaction in shares should be held as adventure in the nature of trade, and therefore, he treated the profit from sale and purchase of shares as business income of the assessee.

4. On appeal, the CIT(A) held that long term capital gain earned from the sale and purchase of shares should be treated as long term capital gain, and the short term capital earned by the assessee from sale and purchase of shares should be treated as business income of the assessee.

5. Being aggrieved by this order, Revenue is in appeal before us.

6. The DR very fairly conceded that the issue was covered in favour of the assessee by the order of the Tribunal in the case of the Shri Akil Dawoodbhai Gandhi in the assessment year 2006-07 in ITA No.908/Ahd/2010 order dated 6.7.2012, and therefore, following the same, the appeal of the Revenue is liable to be dismissed.

ITA No.3025/Ahd/2011 with CO 3 7. We find that the CIT(A) while holding that long term capital gains from sale and purchase of shares should be treated as capital gains, has relied on the decision of his predecessor in the assessment year 2005- 06 in the case of brother of the assessee, Shri Akil D. Gandhi. The DR has brought no material before us to show that the Revenue has field appeal against the order of the CIT(A) for the Asstt.Year 2005-06, in the case of Shri Akil D. Gandhi and the same was varied in appeal by any higher authorities. Further, we find that the Tribunal in the Asstt.Year 2006-07 in the case of Shri Akil D. Gandhi, has held as under:

"5. We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below and the judgment cited by the Ld. A.R. In the light of these facts that except of few shares, all the shares were held for 10 years or more, it cannot be said that these shares were held by the assessee as business asset or stock in trade. In the light of these facts of the present case, it has to be admitted that the profit earned by the assessee after holding the shares for such a long period cannot be assessed as business income. The judgment cited by the Ld. A.R. is also supporting the case of the assessee and hence, we decline to interfere in the order of Ld. CIT(A)."

8. The DR could not bring any material to show that the period of holding of shares in respect of which long term capital gains was earned by the assessee was of short duration. Rather, the income has been declared as long term capital gains shows that the period of holding of shares was atleast of 12 months and more than that, therefore, in the absence of any material brought on record to show that the shares in question were purchased for dealing in shares and not as investment, we, following the order of the Tribunal, dismiss this ground of appeal of the Revenue.

9. In the ground no.2, the grievance of the Revenue is that the CIT(A) erred in law and facts in deleting the disallowance of Rs.4,16,065/- on account of interest expenditure.

ITA No.3025/Ahd/2011 with CO 4 10. Brief facts of the case are that the AO disallowed interest expenditure of Rs.4,16,065/- on the ground that the assessee had advanced Rs.75,98,533/- as interest free funds to his family members and group concerns.

11. On appeal, the CIT(A) observed that the assessee has paid interest expenditure of Rs.4,16,065/-, but in the return of income has claimed deduction of Rs.26,902/-. He further observed that the assessee has claimed that the appellant has earned remuneration interest from the firm wherein he was a partner. He has received interest of Rs.26,902/-, and accordingly, claimed the same amount of interest as deduction. The CIT(A) held that there was a direct nexus between earning and payment of interest, and therefore, deleted the disallowance of Rs.4,16,065/- made by the AO.

12. The DR supported the order of the AO.

13. We find that the DR could not point out any error in the order of the CIT(A). No material could be brought before us to show that the borrowed funds on which the interest was paid by the assessee were not utilized for making investment in the firm, from which, the assessee derived taxable interest income. Therefore, we find no infirmity in the order of the CIT(A), which is confirmed and the ground of appeal of the Revenue is dismissed.

CO No.25/Ahd/2012 (Assessee's CO)

14. In the cross-objection, the sole ground taken by the assessee is that the CIT(A) erred in confirming the order of the AO in treating the short term capital gain of Rs.48,638/- as business income after holding that the assessee was an investor and not trader in shares.

15. We have heard rival submissions and perused the orders of the lower authorities and material available on record. In the instant case, ITA No.3025/Ahd/2011 with CO 5

the assessee declared Rs.48,638/- as short term capital gains being profit earned on sale of shares. The AO held that the aforesaid income is assessable as business income, and not as short term capital gain.

16. On appeal, the CIT(A) confirmed the action of the AO on the ground that the shares were sold within a short period of time from its purchase.

17. Before us, the only contention of the assessee is that if the income is found as assessable under the head "Business Income" then the assessee should be allowed deduction for interest expenditure of Rs.4,16,065/-.

18. We find that the assessee has not seriously disputed the issue of assessment of Rs.48,638/- under the head "Business Income". In the absence of serious prosecution by the assessee, on this issue, we find no good reason to interfere with the finding of the CIT(A).

19. As far as the claim of the assessee in respect of allowance of deduction of interest, we find that the CIT(A) has already, while deciding the ground no.2 of the appeal, has allowed the deduction of Rs.26,902/- out of Rs.4,16,065/-, as claimed by the assessee. We thus do not find any force in this argument of the AR of the assessee. Accordingly, the ground of cross-objection of the assessee is dismissed.

20. In the result, the appeal of the Revenue as well as the Cross Objection of the assessee, both are dismissed.

Order pronounced in the Court on Wednesday the 29th April, 2015 at Ahmedabad.

Sd/ Sd/- (KUL BHARAT) ( N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER

Ahmedabad; Dated 29/04/2015