Pivotal Securities Pvt.Ltd., Mumbai vs Department Of Income Tax
- CitationITA NO.2815/Mum/2009
Ratio decidendi
The rule this decision rests on
The question whether gains from the sale of shares are to be assessed as capital gains or as business profits turns on the assessee's intention at the time of the transactions, judged from the nature of the holding, the manner in which the shares are recorded in the books of account, and the assessee's consistent treatment of them in earlier years. Where the shares are held and recorded as investment, and the department has accepted them as capital gains in earlier years, the gains are to be assessed under the head capital gains, and not as profits of business. A taxpayer may maintain separate portfolios of securities, one held as investment (a capital asset) and another held as stock-in-trade, and the characterisation of each transaction follows the portfolio to which the shares belong and the intention with which they were held. Where the principal question is decided in the assessee's favour, a consequential claim to set off brought-forward unabsorbed capital losses against the gains so recharacterised falls with it, and an identical ground in a later assessment year, resting on the same reasoning, is disposed of in the same way.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
ACIT OSD 2(2), M/s Pivotal Securities Pvt. Aaykar Bhavan, बनाम Ltd. बनाम/ Room No.545, 5th Floor, 22, Raja Bahadur Mansion, M.K.Raod, Vs. 3rd Floor, Mumbai Samachar Mumbai-400020 Marg, Mumbai-400001 (राजःव /Revenue) (िनधा()रती /Assessee) P.A. No.AAACP3754F 2 M/s Pivotal Securities Pvt. Ltd.
राजःव क+ ओर से / Revenue by Smt. J. Premanand & Smt. Perminder CIT-DR
िनधा()रती क+ ओर से / Assessee by): Shri Hiro Rai
सुनवाई क+ तार-ख / 28/01/2015 Date of Hearing :
घोषणा क+ तार-ख / 28/01/2015 Date of Pronouncement : आदे श / O R D E R
PER JOGINDER SINGH (Judicial Member):
The Revenue is in appeal for assessment year 2005-06 to 2007-08 challenging the respective orders of the ld. First Appellate Authority, Mumbai, dated 13/02/2009, 25/05/2009 and 21/10/2010.
2. For Assessment Year 2005-06 (ITA No.2815/Mum/2009), the first ground raised pertains to holding that the profit from sale of shares is to be assessed as income under the head "capital gains" instead of "the profit and gains of business and profession" as assessed in the assessment order. The crux of argument advanced by Shri J. Premanand, ld. DR and Ms. Parminder Kaur, ld. CIT-DR is identical to the ground raised i.e. in support to the assessment order. It was also submitted that it was a business income and was also a non-delivery transactions.
2.1. On the other hand, Shri Hiro Rai, ld. counsel for the assessee, defended the conclusion arrived at in the impugned order by submitting that the assessee is a investor for which our attention was invited to para 9.1 of the impugned order.
3 M/s Pivotal Securities Pvt. Ltd.
2.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee company in its memorandum of association has its primary object to invest in shares and securities. The investment so made was categorically year marked, in its books of accounts, as investment and even similar in its accounts. The assessee in a separate schedule of investment also showed the same as investment. We note that even the Assessing Officer in earlier years has accepted the investment as income from shares by holding the same under the head 'capital gains'. There is categorical finding in the impugned order that the ld. Commissioner of Income tax (Appeals) examined the documents/evidences, filed by the assessee before him, and found that they were only two transaction of long term capital gains and 26 transactions of short term capital gains and the long term capital gains were held for more than twelve months. The ld. Commissioner of Income tax (Appeals) further found that majority of the shares under the head short term capital gains were held from four months to eleven months. It is also noted that the ld. Commissioner of Income tax (Appeals) has already considered the CBDT Circular, which states that the Assessing Officer has to examine the shares and is expected to examine whether the shares were held as investment or stock in trade. Even there is no bar in maintaining two portfolios i.e. as investment portfolio, comprising of securities, which are treated to be capital asset and trading portfolio for stock in trade, which is to be treated as trading asset. The decision of Shri Janak S. Rangbala vs ACIT (ITA No.1163/Mum/2004) and Motilal Oswal (ITA No.3860 to 3863/Mum/2001), which is on identical fact, has already been considered by the ld. Commissioner of Income 4 M/s Pivotal Securities Pvt. Ltd.
tax (Appeals) in the impugned order, wherein it was held that intention of the assessee has to be seen regarding nature of transaction. Even otherwise, in the case of assessee itself, the Department had been accepting the claim of the assessee in the past, thus, the income from sale of shares out of investment has to be treated as long term capital gains/short terms capital gains, as the case may be and not as a business income. Even otherwise, the case of the assessee is covered by the ratio laid down in Gopal Purohit vs JCIT (2009)(122 TTJ (Mum. Tribunal)
87) and CIT vs Gopal Purohit (2011) 336 ITR 287 (Bom.) from Hon'ble jurisdictional High court, wherein it was held that two separate portfolios are permissible. Thus, we find no infirmity in the direction of the ld. Commissioner of Income tax (Appeals).His stand is affirmed.
2.3. So far as, (ground no.2) directing the Assessing Officer to allow set off of brought forward unabsorbed capital losses, against the profit of such sale of shares, assessed under the head "profit and gains of business and profession" by the Assessing Officer is concerned, since, we have decided the aforesaid ground in favour of the assessee, therefore, it is consequential in nature more specifically when we have held that assessee is a investor and there is nothing on record to suggest that same scrips were transacted again and again. This ground of the Revenue is also dismissed.
3. Now we shall take up the appeal of the Revenue for Assessment Year 2006-07 (ITA No.4507/Mu/2009), wherein, identical ground has been raised and the ld. Commissioner of Income tax (Appeals) has relied upon the earlier Assessment 5 M/s Pivotal Securities Pvt. Ltd.
Year i.e. 2005-06. In view of the our aforesaid order for Assessment Year 2005-06, this appeal of the Revenue is automatically disposed off, consequently, dismissed.
4. Identical is the situation for Assessment Year. 2007-08 (ITA No.187/Mum/2011), therefore, on the reasoning contained in the impugned order, we find no infirmity, consequently, the stand of the ld. Commissioner of Income tax (Appeals) is upheld.
Finally, all these appeals of the Revenue are dismissed.
This Order was pronounced in the open court in the presence of ld. representatives from both sides at the conclusion of the hearing on 28/01/2015.
आदे श क+ घोषणा 2दनांकः 28/01/2015 को क+ गई ।
Sd/- Sd/- (N.K.Billaiya) (Joginder Singh) लेखा सदःय / ACCOUNTANT MEMBER याियक सदःय / JUDICIAL MEMBER
मुंबई Mumbai; 2दनांक Dated : 28/01/2015 f{x~{tÜ? P.S/.िन.स.
आदे श क+ ूितिल प ूितिल प अमे षत/Copy षत of the Order forwarded to : 1. अपीलाथ= / The Appellant 2. ू>यथ= / The Respondent.
3. आयकर आयु?(अपील) / The CIT, Mumbai.
4. आयकर आयु? / CIT(A)- , Mumbai
5. वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai
6. गाड( फाईल / Guard file.
आदे शानुसार/ ार BY ORDER, स>या पत ूित //True Copy//
उप/ उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अिधकरण, मुब ं ई / ITAT, Mumbai
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