Utkal Investments Ltd., New Delhi vs Department Of Income Tax

This is an appeal filed by the Department against the order of CIT(A) XXI,, New Delhi dated 23/09/2013 in Appeal No. 301/2011-12 for Assessment Year 2009-10.

2. The brief facts of the case are that assessee had filed its return of income declaring income of Rs.64,85,372/-. The Assessing Officer noticed from the tax audit report that assessee had carried out share trading, investments, financing and power generation during the relevant previous year. Further there was no change in the nature of business of the assessee company. He further observed from Item 5 2 ITA No. 6461/Del/13

of part B (Notes to accounts) of Schedule 14, the following quantitative details in respect of securities traded and derivatives, which are reproduced hereunder:-

Quantitative Details in Respect of Securities Traded:

Securities (Equities) 2008-09 2007-08 No. of Shares Amount (Rs.) No. of Shares Amount (Rs.) Opening Stock 99,933 1,70,67,889 19,000 44,55,580 Purchases 14,83,953 11,80,66,597 7,49,865 16,68,17,319 Sales/Transfer 14,67,873 12,23,90,936 6,68,932 13,60,03,212 Closing Stock 1,16,013 93,22,732 99,933 1,70,67,889

Quantitative Details in respect of Derivatives: Securities(Derivatives 2008-09 2007-08 No. of Shares Amount (Rs.) No. of Shares Amount (Rs.) Opening Stock Nil Nil Nil Nil Purchases 25,99,340 2,80,51,384 23,48,650 1,67,46,431 Sales/Transfer 26,17,676 2,82,28,191 23,48,650 1,27,21,481 Closing Stock 18,336 2.89.553 Nil Nil

3. The Assessing Officer noticed that assessee company had returned business income of Rs.60,28,209/-, speculation loss of Rs.159,905/-, long term capital loss of Rs.4,86,31,790/- and short term capital loss of Rs.31,33,251. The assessee had also returned income of Rs.6,32,163/- as income from other sources and declared share in profit from partnership Rs.91,55,203/- claiming the same as exempt u/s10 (2A) of the Income Tax Act 1961. In addition, long term capital gain of Rs.4,89,38,309/- was claimed exempt u/s 10 (38) of the Income Tax Act. The 3 ITA No. 6461/Del/13

assessee had received dividend income of Rs.3,40,31,627/- which was also claimed exempt. The assesssee had also made addition to the income in respect of security transaction tax paid during the year amounting to Rs.7,76,231/-, proportionate depository charges relating to taxable capital gain Rs.21,126/- and disallowance u/s 14A of the Income Tax Act Rs.73,43,636/-

4. In the back drop of these details, the assessing officer show caused the assessee as to why the profits arising from purchase and sale of shares be not treated as business income. The assessee's detailed reply has been reproduced in Para 5 of the Assessment order. The A.O referred to the Assessment Order for A. Y 2006-07 wherein detailed reasoning had been given for holding that assessee had carried out regular and normal business of purchase and sale of shares and the income arising out of these transactions was to be treated as business income of the assessee from share trading. He further pointed out that the turnover of sale and purchase of shares was Rs.229,72,94,768/- and Rs.205,18,33,625/-

respectively. He further observed that the assessee company was not maintaining stock register and in the absence of stock register it was very difficult to identify which script was held for investment and which script was held for trading. He, therefore, did not accept the assessee's explanation that it had two portfolios viz investment portfolio and trading portfolio. He further observed that from the details submitted by the assessee in regard to sale of investment, it was clear that majority of scripts had been bought during financial year 2004-05 and sold during financial year 2005-06, after holding them hardly for an year. The Assessing Officer also relied on the decision for A. Y 2007-08 for his conclusion. The assessing officer, accordingly, determined the total income at Rs.3,30,44,790/-.

5. Ld. CIT(A) following the order of A.Y 2006-07, 2007-08 and 2008-09 allowed the assessee's appeal holding that there was no proper justification for treatment of the capital gain from the sale of share investment either as business 4 ITA No. 6461/Del/13

income or as speculation income. Being aggrieved with the order of the CIT(A), the Department is in appeal before us. And has raised following grounds of appeal.

"1. On the facts and circumstances of the case and in law, Ld. CIT erred in directing that out of the entire business income of Rs.3,25,77,623/- treated as such by the AO, only a sum of Rs.60,28,209/- assessed as business income and the rest of Rs.2,65,49,414/- by treated as income from Capital Gain."

2. On the facts and circumstances of the case and in law, Ld. CIT(A) erred in directing that the income declared by the assessee company may not be treated as income from speculative transaction as per section 43(5) of the Act.

3. The appellant craves, leave or reserving the right to amend, modify, alter, add, or forego any Ground(s) of appeal at any time before or during the hearing of this appeal."

6. At the outset, Ld. Counsel for the assessee submitted that this issue is covered in favour of assessee by the decision of Tribunal vide ITA Nos. 2558/Del/2011 (A.Y 2006-07), ITA No. 2894/Del/2011 (A.Y 2007-08) and ITA 2662/Del/2012 (A.Y 2008-09) vide consolidated order dated 6th April 2015, a copy of which has been filed in the paper book.

7. Ld. Dr. did not dispute that the issue under consideration is covered by the decision of Tribunal in assessee's own case noted supra.

8. We have considered the submissions of both the parties and perused the record of the case. Tribunal has, inter-alia held as under:-

3. The return of income for assessment year 2006-07 was filed declaring income at Rs.1,33,77,935/- on 23.10.2006 which was processed u/s 143(1) of the Income-tax Act, 1961. The assessee has claimed that investments realized during the relevant period to the assessment year 2006-07 were held as investment portfolio at the close of the previous year relevant to assessment year 2005-06. These investments were also reflected as investment at the beginning of previous year relevant to assessment year 2006-07. These investments have been reflected as investments in the books of accounts. It was also claimed that earlier 5 ITA No. 6461/Del/13

Assessing Officer has accepted this position of investments in the books of accounts. Shares and securities held as investments were valued at cost subject to provision for diminution in their value. The shares held as trading stock-in-trade were valued at cost or market value whichever is lower. Such treatment was being accepted by revenue since long. It was also claimed that most of these investments realized during the year were held as investment for more than a year. Even some of them were held for more than 2 to 4 years. Thus, assessee's intention always was to keep investment in shares and earn dividend. During the year, assessee has earned dividend of Rs.3,51,49,900/-. The assessee submitted complete details towards each investment realized during the year under consideration. The Assessing Officer did not accept the contention of the assessee. The Assessing Officer held these transactions of purchase and sale of shares as business income and not as capital gain. Aggrieved by thisorder, the assessee filed an appeal before the CIT (A). The CIT (A) has granted the relief to the assessee by holding as under :-

"4.4 I have gone through the submission of the assessee, finding of the AO in the assessment order and Remand Report. In my considered opinion, there are various judicial pronouncements from various appellate authorities proposing different proposition which were perused by me. After going through all the judgments made available to me by appellant and by my own efforts. I put my reliance on the judgment of honourable Delhi High Court in the case of CIT Vs. Rohit Anand reported at 327 ITR page 445, The Hon'ble Delhi High Court has held as under:-

"There is no doubt that even a single transaction can be in the nature of trade but the assessee has demonstrated that his intention was never to trade in shares. The intention is manifested by treatment given to such investment that the investment is out of own fund and not borrowed that the investment is not rotated frequently, that the total number of transactions are very few, that all the shares purchased are not sold and rather held for quite number of days. It is to be noted the Income Tax Act itself has provided that when the shares are held for a period of one year or more will be treated as long term capital asset contrary to other assets where the holding period to treat such asset a long term is more than 36 months. Thus, even after holding the shares for more than 12 months and showing such intention from the conduct, the Assessing Officer cannot replace his opinion for that of the assessee in holding that the shares are held as stock in trade and profit from which is to be assessed as business income. In all such cases the intention is 6 ITA No. 6461/Del/13

manifested by the assessee himself by his conduct and other relevant factors as considered by the learned Commissioner of Income Tax (Appeals). It is also seen that the shares were treated as investment in earlier year and which fact has been accepted by the Assessing Officer. The assessee has also earned huge dividend income from such shares. The Assessing Officer merely because of the total volume of transaction is substantial, is guided to hold the income as business income. However, he failed to recognize that the volume of transaction includes the appreciation in shares also and such appreciation has been offered for tax. If volume of transaction is the criteria, what is to be examined is how frequently the transaction is done, whether the transaction is settled in the course of the day of trading itself or in the settlement period itself so as to avoid payment of full purchase price.

Here the assessee has been holding the shares by taking delivery and making full payment for such investment.

In such circumstances, the transactions are to be treated as giving rise to the capital gain and cannot be branded as trading of making investment so as to determine whether the transaction was for dealing in shares or making investment for earning dividend and appreciation from such investment. "

As per Hon'ble Delhi High Court four basic elements to decide the issue are as under.-

1. Volume of transaction

2. Mode of delivery

3. Frequency of transaction

4. Source of payment either from own fund or borrowed fund. 4.5 After taking into consideration the various aspects as mentioned above, the Hon'ble Delhi High Court has decided the issue in favour of assessee that it should be treated as capital gain. In the above mentioned case, though, the Hon'ble Delhi High Court has decided the issue in favour of the assessee but the Hon'ble High Court has laid down the principle that even a single transaction can be in the nature of trade. Taking into consideration the ratio of the above said judgment of the Hon'ble Delhi High Court, I had got the occasion to go through the judgment of the Hon'ble ITAT, Mumbai in the case of Management Structure & Systems Pvt. Ltd. Vs. ITO, Ward 6(3)(2), Mumbai, reported at 201OTIOL-254-ITAT-MUM, wherein, Hon'ble ITA T vide order dated 30-4-2010 has decided the issue vide para 15 of the order as under:-

7 ITA No. 6461/Del/13 "We have given our serious considerations to the different precedents relied on by the AO in the assessment order but in our opinion, the principles laid down in those decisions cannot be applied to the assessee's case to say that the activity of the assessee buying and selling of the shares amount to Trading Activity. It is well settled principle as has held in the case of H. Holsck Larzen (supra) that whether the law and fact. In this case, we have perused the Balance Sheet filed by the assessee and as per the books of account the assessee has treated the entire investment in the shares as an investment only and not as a stock in trade. Another important aspect to be considered here is the assessee is not a share broker nor he is having a registration with any Stock Exchange. Moreover, some scripts are held for more than five years and it is not a case of the AO that there were any derivative transactions by the assessee nor is it a case of the AO that there were transactions without any delivery. In the present case, both the authorities have not disputed that the transactions are completed with the delivery. The intention of the assessee cannot be read from his mind but it reflects in its conduct, the way he treats the transactions. The assessee has not borrowed any money for investing in shares and used his own surplus funds and these facts have not been disputed by the AO. The proposition has been accepted by the Board also in Circular No.4/2007 that the assessee is entitled to maintain two portfolios. In the case of the assessee, in the preceding years, the assessee is consistently declaring the gain/profit on the sale of the shares under the head 'Capital Gain' either Long Term and Short Term and the same has been accepted by the AO. It is true that the rule of res judicata is not applicable to the Income Tax Proceedings, but at the same time, it is also well settled principles that if there is no change in the facts, then, there should be consistency in the approach of the Revenue authorities while deciding the tax liability of the assessee."

4.6. The proposition laid down by the Hon'be Mumbai ITAT in the above mentioned case insists on consistency as well as it has also relied on Circular No.4/2007 of the C.B.D.T., which is an important factor to decide the issue. I have also gone through the latest judgment of Hon'ble Delhi IT AT dated 28.1.2011 in the case of ACIT vs. M/s. Bulls & Bears Portfolios Ltd., reported at 2011-TIOL-1 09-ITA TDEL, wherein in para 6 of the order Hon'ble Tribunal has held as under:-

"We have heard the rival contentions in light of the material produced and decision relied upon. We notethat the assessee is a broker as well as 8 ITA No. 6461/Del/13

investor. It has maintained the investment portfolio separately income for which was liable to be taxed as capital gains, as the intention in respect of this was to hold the investment as investment only and were shown as such in the books of accounts and income therefore was shown and treated as capital gains in the successive assessments. Assessment year 2002-03 and 2004-05 were conducted u/s.143(3) and 1423( 1) in which capital gain was assessed as capital gain. Schedule of investment was duly appearing in the balance sheet as 31.3.2002, 31.3.2003, 31.2.2004, 31.3.2006. The schedule of investment were duly appended in the balance sheet. Assessee has also maintained separate D- mat account for investment and for trading. In these circumstances, we note that assessee has distinctly maintained investment account and trading account."

4.7 After analyzing the issue and considering the various case laws as relied upon by the Id. AR, I find that holding period is the most appropriate factor to decide the issue, whether it should be treated as stock in trade treating it as a business .income or investment so as to treat it as capital gain.

My view gets strength from the order of Hon'ble Ahmedabad Tribunal in the case of Shri Shugam Chand C. Shah Vs. ACIT, ITA NO.3554/Ahd/2008 vide order dated 29.l.2010 Hon'ble Tribunal has laid down the criteria of deciding the share to be taxed as capital gain or business income. Vide para 19 of the above said order the Hon'ble Tribunal has held as under:-

"Considering the totality and peculiarity of the facts of this case, we find that assessee is neither fully acting as a trader nor as fully investor. Demarcation is quite hazy; though in the books he is showing all the purchases as investment but frequency of transaction in several cases is so large and holding period in many cases is so small - from 0 to a week or so that assessee is de facto selling and purchasing shares as trader. He is also holding shares for long period - indicating that they are held as investment. Therefore, a criteria has to be fixed for determining as to when he is acting as trader and when as investor. Accordingly, we decide following criteria to hold when gains are to be taxed as profit to be earned under the business or to be taxed as short term capital gain, we hold that if shares are not held even say for a month, then the intention is clearly to reap profit by acting as a trader and he did not intend to hold them in investment port-folio. We believe that if a person intends to hold his purchases of shares as investment he would watch the fluctuation of rates in the market for which a minimum time is necessary, which we estimate at 9 ITA No. 6461/Del/13

one month. Where shares are held for more than a month, they should be treated as investment and on their sale short term capital gain should be charged. When shares are held for less than a month, gain on them should be treated as profit from business."

The criteria laid down by the Hon'ble Tribunal is very much appropriate so as to decide the issue in this regard. Accordingly, it is held that shares which were held for less than thirty days will be treated as trading income and remaining shares will automatically come under the category of investment to be treated as capital gains."

4.8 In view of the above discussion the bifurcation of the shares held for less than 30 days on the basis of working given by Managing Director of assessee company vide letter dated 6.12.2010, which is enclosed as Annexure-A of this order, is as under :-

Particulars. Amount Short-term capital gain @ 30% 10,96,774/-

Short term capital gain @ 10% Own shares(Bonus shares and/or 21,53,221/-

Right issue shares.

Own shares (Others) 3,34,881/-

PMS Shares Loss. 16,54,669/-

Total gain. 19,30,207/-

Thus, the gain on shares held up to 30 days comes to Rs.19,30,207/-, which will be treated as "Business Income". All the other gains which have been held by the AO in the Own shares (Others) PMS Shares body of order as "Business Income" is allowed as capital gain whether long term or short term. AO is directed to verify the claim of assessee with regard to holding period less than 30 days and gain out of it after proper verification and to allow the claim of appellant.

In view of above discussion grounds No.2 to 5 are partly allowed."

4. Now, the revenue is in appeal by taking the following ground on this issue:-

"On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in holding that out of the income of Rs.38,72,78,020/- from transactions in shares and securities held by the A.O. as business income, lonely an amount of Rs.19,30,207/- would comprise business income and the remaining Rs.38,53,47,813/- would comprise capital gains.

5. Assessee has also filed cross objection by taking the following ground on this issue :-

10 ITA No. 6461/Del/13 "That the learned CIT (Appeals) has erred in holding that interest earned by the assessee company is income from other sources and not income from business."

6. While pleading on behalf of the revenue the ld. DR relied on the order of the Assessing Officer and submitted that whether a particular holding of shares is by way of investment or part of the stock-in-trade is a matter which is within the knowledge of the assessee who holds it and it is on the assessee to produce necessary evidences to establish the claim. Ld. DR submitted that CIT (A) has admitted vital information at the back of Assessing Officer. It was also pleaded that no separate Demat Account was maintained. The copy of agreement with portfolio management service provider/broker was not produced. It was also submitted that borrowed fund was utilized. He pleaded that there was transfer of shares from investment to trading account. It was also pleaded that there was high volume of purchase and sales of shares.

7. On the other hand, ld. AR relied on the order of the CIT (A). Ld. AR has placed reliance on the decision of Hon'ble Supreme Court in the case of CIT vs. Associated Industrial Development Company Pvt. Ltd. - 82 ITR

586. He has also placed reliance on the decision of Hon'ble Supreme Court in the case of Raja Bahadur Visheshwar Singh vs. CIT - 41 ITR 685 for the proposition that an investment made by a person in shares with the intention to resell them in future bringing in a higher price, though motivated for a possibility of enhanced value, will not necessarily render the investment of transaction in the nature of trade. It was also submitted that the gain realized also include gains realized on sale of bonus shares of Tata Iron & Steel Co. Ltd., Federal Bank and K.E.C. Infrastructure Ltd. It was also submitted that the accounts maintained by the assessee company and in the light of ratio laid down by Hon'ble Supreme Court in the cases of CIT vs. Associated Industrial Development Company Pvt. Ltd. - 82 ITR 586 and Raja Bahadur Visheshwar Singh vs. CIT - 41 ITR 685, the investments were realized during the assessment year and the assessee has rightly considered the surplus as a long term capital gain. The ld. AR also pleaded that CIT (A) was even not justified for treating the short term capital gain arising from the shares sold within a period of 30 days. It was also submitted that where shares were held as investment as on 31.03.2005 then there should not be a basis of 30 days for trading the sale of the same as trading. Ld. AR also submitted that the CBDT Circular No.4 of 2007 dated 15th June, 2007 has also clarified the position that a taxpayer can have two portfolios i.e. one investment portfolio comprising securities 11 ITA No. 6461/Del/13

which are to be treated as its capital assets and another, a trading portfolio comprising of stock-in-trade which are to be treated as trading asset. The assessee was having two portfolios and has income under both the heads, i.e., capital gains as well as business income. The ld. AR also submitted that Hon'ble Supreme Court in the case of Dalhausie Investment Trust Company Ltd. vs. CIT - 68 ITR 486 has held that principal consideration in determining whether income from sale of shares is revenue income or capital gain is to find out what was the purpose of purchase of these shares and, if the purpose was investment, the fact that in varying the investment, the sale of those shares resulted in a profit will not make revenue income. It was also submitted before us that what is the intention of the assessee at the time of purchase of shares is very relevant factor in determining whether it was an investment in shares or the shares were held as trading assets. This can be found from the treatment given to such purchases in the books of accounts. In assessee's case, these purchases were held as investment in the previous year as well as during the year and in the subsequent years.

Secondly, these purchases were not made from the borrowed funds on which interest was to be payable. Normally, when the purchases are made from borrowed funds then such purchases are not for investment as nobody will invest by taking borrowed funds and pay interest. In assessee's case, the funds were not borrowed for making the investment. The third issue is the period of retention where the surplus has been realized. In assessee's case, the shares were held for a long period of more than a year and sometimes 2 to 4 years. This fact itself shows that assessee was not having a trading motive which is essential ingredient for a trade. He also submitted that the valuation of these shares at the end of the year whether these were valued at cost or market value or net realizable value whichever is less is also an aspect to determine whether the assets have been held as investment or stock-in-trade. The ld. AR also submitted that CBDT has already clarified in its circular that assessee can have two portfolios of shares, one is trading and another is investment. It was also pleaded that none of the factor alone are sufficient to come on a definite conclusion but it is the cumulative effect of these factors which will determine the character of the holding of the shares.

8. We have heard both the sides on the issue and also considered the material available on record. We have also considered the case laws relied upon by both the sides. It is a fact that assessee is showing these shares in its investment portfolio in the books of accounts. Shares sold were shown 12 ITA No. 6461/Del/13

in the balance sheet for the previous year relevant to assessment year 2005-06 as investment and the same has been carried forward as investment in the beginning of the financial year relevant to assessment year 2006-07. In the earlier years, the revenue has accepted the position of investments as it is in the books of accounts of the assessee. It is also a fact that most of the investments realized during the year were held as investment for more than a year even, in some of the cases, these investments were held for more than 2 to 4 years. The assessee submitted details of these transactions before the Assessing Officer. It is also a fact that during the year, the assessee has earned substantial dividend income of Rs.3,51,49,900/-. The CIT (A) has given the relief to the assessee relying on the judgment of Hon'ble Delhi High Court in the case of CIT vs. Rohit Anand reported in 327 ITR 445 wherein the Hon'ble jurisdictional High Court has held that although even a single transaction can be in the nature of trade, however, where the assessee has demonstrated that his intention was never to trade in shares.

Then, revenue cannot change the position otherwise. The investments have been made by the assessee out of his own fund and the shares were held quite for a long period. The Income-tax Act itself provides that when the shares are held for a period of more than a year or more will be treated as long term capital asset, contrary to the fact that other assets to be called as long term asset have to be held for more than 36 months. These shares were being treated as investment in earlier years and this fact has been accepted by the Assessing Officer. Substantial dividend income was being earned on these investments. All these facts show that facts of the assessee are similar to the facts of case of CIT vs. Rohit Anand, cited supra. The assessee is holding the shares by taking the delivery by making full payment on such investments. All these circumstances suggest that realization of these investments shall give a rise to the capital gains and it cannot be termed as trading of shares. Similarly, the ITAT, Mumbai Bench in the case of Management Structure & Systems Pvt. Ltd. vs. ITO reported in 2010-TIOL-254-ITAT-MUM had also held that although rule of res judicata is not applicable to the income-tax proceedings, however, at the same time, it is also well settled principle that if there is no change in the facts, then, there should be consistency in the approach of Income-tax authorities while deciding the tax liabilities of the assessee.

In this case, the assessee was consistently declaring gain on sale of investments of shares under the head long term capital gain or short term capital gain and this position was being accepted. The CIT (A) has also relied upon the decision of ITAT, Mumbai Bench in the case of ACIT 13 ITA No. 6461/Del/13

vs. M/s. Bulls & Bears Portfolios Ltd. reported in 2011-TIOL-109-ITAT-DEL wherein when the assessee has declared investment in the balance sheet then the realization of the same has held to be capital gain. After analyzing the facts of the case and considering various case laws in terms of facts under consideration, we are of the view that CIT (A) has rightly granted the relief to the assessee. We uphold the order of the CIT (A) on this issue.

At Page 194 of the paper book assessee's annual report for financial year 2008-09 is contained in which at internal page 23 to 26, the details of investments in equity shares is contained. These shares have been valued at cost. At page 130 of the paper book, copy of Form No. 3CD-tax audit report is contained in which at Serial N. 8a in regard to nature of business or profession, it is stated that, assessee is in the business of share trading investments, financing and power generation and in Column No. 8b,it is stated that there is no change in the assessee's business from earlier year. The assessee has given details of long term capital gain (STT) exempt u/ 10(38) (own) at page 159 to 165 of paper book to demonstrate that the period of holding of the shares was more than one. The details of short term capital gains are given at pages 168 to 178 of paper book. From the above details it is evident that there is no change in the facts obtaining in the current year as compared to earlier years and, therefore, the decision of Tribunal in earlier years applies mutatis mutandis to the facts in the present assessment year, particularly because assessee has primarily sold the shares which have been treated as investments in earlier year. It is pertinent to observe that Assessing Officer has also followed the reasoning for A.Ys 2006 & 2007-08 in arriving at his conclusion that the shares were held as business asset and not as investment which has not been accepted by Tribunal as noted earlier. However, one aspect which needs clarification is in regard to Ld. CIT(A)'s finding in earlier years that gain arising out of sale of shares within 30 days is to be treated as business income which finding has been confirmed by Tribunal in earlier years. However, in the current year there is no 14 ITA No. 6461/Del/13

such finding by Ld. CIT(A). Therefore, sale from all shares held as investment is to be assessed as short term or long term capital gain. Accordingly Ground No. 1 raised by the Revenue is dismissed.

9. Apropos Ground No. 2, the Assessing Officer has inter alia observed as under.

" Without prejudice to the above, the facts and circumstances of the assessee case is squarely falls under speculative transactions as defined in sub section (5) of Section 43. ON perusal of broker notes it suggests that transactions are speculative in nature. In this regard, a few samples of brokers notes are reproduced as under...........................

Needless to say that the transactions shown in the brokers notes are speculative in nature as assessee company and the broker have settled the accounts as per the settlement dates with regard to amount is due to the broker or vice a versa is on the settlement date. Thus, the transaction pertain to valan(settlement period) is closed and fresh beginning is made in another settlement date and so on so forth. Therefore, the question of delivery does not arise. Submissions made by the assessee in this regard are without any substance as no supportive evidence has been adduced to treat share transactions as non-speculative. Therefore, I hold that assessee has indulged in speculative transactions and treated as such."

10. We find that Tribunal, in its order has observed from para 9 to para 11 as under:

9. The revenue has also taken a ground with regard to the holding that the provisions of Explanation to Section 73 of the Act are not applicable to the case of the assessee and income from transactions in shares and securities by the assessee is not to be held as income from speculative business.

10. The CIT(A) has dealt this issue in its order at Para 5 which is reproduced as under:-

"5. Ground No. 6" In this regard against the action of AO treating it as a Speculative Profit, Ld. AR of the assessee has submitted a Paper Book, in the relevant para of which it has been contended as under:-

It is submitted that Explanation to Section 73 does not apply9 to the assessee as the assessee falls in the exception in as much as it is a company , the principal business of which was granting of loans or advances as evident from Balance Sheet and as per pleading made vide PB 116 which has not been rebutted by Ld. A.O. 15 ITA No. 6461/Del/13

Second exception also applies to the assessee as it is a company whose GTI (Gross total income) consists mainly of income which is chargeable under the head "Capital Gains"

and "Income from other sources" as is evident from computation of income. Thus, when the appellant falls in both the exceptions of Explanation to Section 73, there is no question of treating the gains as from speculative business." 5.1 As already held while deciding grounds No. 2 to 5 that assessee's income which is chargeable to tax is mainly from capital gain, then its income cannot be treated as speculative business in view of exception provided in Explanation 73 itself. Ground No. 6 is allowed."

11. Since we have dismissed the ground of the revenue on the chargeability of the tax as trading profit against the capital gain declared by the assessee, therefore, we are also not inclined to accept this ground of revenue's appeal and the same is dismissed.

11. It is evident from the balance sheet that loans and advances granted by assessee aggregated to Rs.292,189,865/-on which assessee earned interest amounting to Rs.40,56,653/- which is the main source of Assessee's income. Thus, the principal business of the assessee was granting of loans and advances. Further, we find from the computation contained at pages 126 that the gross total income consists mainly of income which is chargeable under the head capital gains and income from other sources. Therefore, respectfully following the decision of Tribunal for earlier years, we uphold the order of Ld. CIT(A) in holding that the assessee's income was not assessable as speculation profit either.

12. In the result, the Revenue's appeal is dismissed.

The order is pronounced in the open court on 30th of June 2015.

Sd/- Sd/- (H. S. DIDHU) (S. V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated:- 30 /06/2015

*R. Naheed* 16 ITA No. 6461/Del/13

Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI

Date

1. Draft dictated on 23.06.2015 PS

2. Draft placed before author 24.06.2015 PS

3. Draft proposed & placed before the second JM/AM member

4. Draft discussed/approved by Second JM/AM Member.

5. Approved Draft comes to the Sr.PS/PS .06.2015 PS/PS

6. Kept for pronouncement on PS

7. File sent to the Bench Clerk .06.2015 PS

8. Date on which file goes to the AR

9. Date on which file goes to the Head Clerk.

10. Date of dispatch of Order. 17 ITA No. 6461/Del/13