Rajoo V. Shah, Mumbai vs Department Of Income Tax
- CitationI.T.A. No.5098/Mum/2012
Ratio decidendi
The rule this decision rests on
The Tribunal's reasoning rests on the following principles: Whether a gain on sale of shares is taxable as business income or as short-term capital gain turns on the assessee's intention and the nature of the transactions, judged by the criteria prescribed by the CBDT and the courts: the frequency and volume of transactions, the period for which shares were held, whether there is day-to-day or speculative trading, whether borrowed funds were used for trading, and how the shares are treated in the books of account. Where the assessee has consistently declared short-term capital gains in earlier years and the Assessing Officer accepted that treatment and the assessee's status as an investor, the same treatment should be maintained for the year under appeal where the facts are materially the same.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
BEFORE S/SHRI B.R.BASKARAN (AM) AND SANJAY GARG, (JM) सव ी बी.आर.बा करन, लेखा सद य एवं ी संजय गग , या यक सद य के सम
आयकर अपील सं./I.T.A. No.5098/Mum/2012 ( नधा रण वष / Assessment Year : 2008-09)
Assistant Commissioner of बनाम/ Shri Rajoo V Shah, Income Tax 17(2), Vs. 14/43 Vashindevi, Room No.217, 2nd Floor, Behind Don Bosco High School, Piramal Chambers, Parel, Matunga, Mumbai-400012. Mumbai-400019 (अपीलाथ /Appellant) .. ( यथ / Respondent)
थायी ले ख ा सं . /जीआइआर सं . /PAN/GIR No. :ABBPS2719L
अपीलाथ ओर से / Appellant by Shri Love Kumar यथ क# ओर से/ Respondent by Shri Prakash Pandit
सन ु वाई क# तार'ख / Date of Hearing : 2.3.2015 घोषणा क# तार'ख /Date of Pronouncement : 11.3.2015
आदे श / O R D E R
Per B.R.BASKARAN, Accountant Member:
The appeal by the Revenue is directed against the order dated
10.5.2012 passed by the ld. CIT(A)-29, Mumbai and it relates to
assessment year 2008-09.
2. the revenue is aggrieved by the decision of ld.CIT(A) in holding that
the gain realized on sale of shares is to be assessed as "Short Term 2 ITA. No.5098/Mum/2012
Capital Gain" (STCG) instead of "business income" as held by the
Assessing Officer.
3. We have heard the parties and perused the record. The assessee
had declared "Long Term Capital Gain" (LTCG) as well as Short term
Capital Gains (STCG) on sale of shares. The assessee had also received the
dividend income of Rs.2,85,911/-. The AO allowed the claim of LTCG but
held that STCG has to be assessed as business income, since the assessee
conducted the activities in share dealings as a trader. The ld. CIT(A),
however, held that the assessee is not a trader and he was only investing
in shares. Accordingly, he directed the AO to assess the gains as STCG.
Aggrieved, the Revenue has filed this appeal before us.
4. Before us, the ld. DR placed strong reliance on the assessment order
whereas the ld. AR strongly supported the order of ld. CIT(A).
5. The ld. AR further submitted that the assessment of immediately
proceeding three years have been completed u/s 143(3) of the Act and
AO has accepted the STCG declared by the assessee.
6. We notice that the ld.CIT(A) has granted the relief to the assessee
with the following observations:
"3.3 I have carefully considered the facts of the case, arguments of the Assessing Officers and the written submissions of the Authorised Representative of the appellant. The addition made by the Assessing Officer cannot be sustained for the following reasons.
(i) The appellant has made short term investment in shares and has mostly stayed invested for periods exceeding two months. Only in 9 instances the period of holding is less than one month. Even the uncertainties of stock market only an 3 ITA. No.5098/Mum/2012
investor can hold the shares for such a long period.
(ii) There is no day-to-day trading in shares or any speculative transactions.
(iii) No interest has been claimed as expenditure.
(iv) The issue of borrowed capital was not towards trading in shares. There were borrowings for investment in IPO.
There are only two IPO applications. The IPO subscription cannot said to be a business. The appellant has applied for IPO in Power Grid Corporation and has been allotted 81968 shares. Only 5000 shares have been sold after 63 days. The rest of the shares are still in investment portfolio. As regards IPO in Mundra Port entire shares of 3269 in number has been held as investment in Balance Sheet.
(v) The outstanding loan of Rs.5,04,30,065/- does not relate to trading in shares. They are for investment in properties.
(vi) The appellant has disclosed the shares as investment in the Balance Sheet and he has consistently done so from year to year.
(vii) The appellant is also supported by the decision of Hon'ble Bombay High Court in the case of Gopal Purohit in ITA No. 1121 of 2009 wherein it is held that there should be uniformity in treatment and consistency when the facts and circumstances are identical from year to year.
From the facts above, it can be seen that appellant is an investor in shares and not a trader. Therefore the gain has to be taxed as short term capital gain. The treatment given by the Assessing Officer is deleted."
7. Thus, we notice that the assessee has been declaring Short term
Capital gains since last three years and his status as "Investor" has been
accepted by the assessing officer. Further the Long term capital gains
declared by the assessee has also been accepted. With regard to the
Short term Capital gains, we notice that the Ld CIT(A) has analysed the 4 ITA. No.5098/Mum/2012
transactions as per the criteria prescribed by the CBDT/Courts and has
come to the conclusion that the Share transactions carried on by the
assessee fall in the category of Investments. Hence, we do not find any
infirmity in the decision of Ld CIT(A).
8. In the result, the appeal filed by the revenue is dismissed.
The above order was pronounced in the open court on 11th Mar, 2015.
घोषणा खल ु े यायालय म+ ,दनांकः 11th March, 2015 को क# गई ।
sd sd
(संजय गग /SANJAY GARG) ( बी.आर.बा करन / B.R. BASKARAN) या यक सद य / JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER मंब ु ई Mumbai: 11th March,2015. व. न.स./ SRL , Sr. PS
आदे श क !त#ल$प अ%े$षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आयु0त(अपील) / The CIT(A)- concerned
4. आयकर आयु0त / CIT concerned
5. 1वभागीय त न3ध, आयकर अपील'य अ3धकरण, मुंबई / DR, ITAT, Mumbai concerned
6. गाड फाईल / Guard file.
आदे शानस ु ार/ BY ORDER, true copy सहायक पंजीकार (Asstt. Registrar) आयकर अपील'य अ3धकरण, मुंबई /ITAT, Mumbai
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