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IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH, MUMBAI
[^ ] , Û Û] ãá, ¢
BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND
SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER
./I.T.A. Nos 4267 & 3762/Mum/2012.
( [ [ / Assessment Years : 2006-07 &2008-09
Shri Premal N. Parikh, / The ITO -19(2)(2),
202, Paras Apartments, Piramal Chambers,
Vs.
4,Dattatray Road, Mumbai-400 012
Santacruz (W),
Mumbai-400 054
. / . / PAN/GIR No. : AAJPP 2248Q
( /Appellant) .. (× / Respondent)
/ Appellant by: Shri S.C. Tiwari
Ms Priyanka Maru
× /Respondent by: Shri R.N. D'Souza
/ Date of Hearing :27.01.2015
/Date of Pronouncement :30.01.2015
/ O R D E R
PER N.K. BILLAIYA, AM:
These two appeals by the assessee are preferred against two
separate orders of the Ld. CIT(A) for Assessment years 2006-07 & 2008-
09. Since issues involved in both these appeals are similar in nature, they
were heard together and disposed of by this common order for the sake of
convenience.
ITA No. 4267/Mum/2012 A.Y. 2006-07
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2. The sole grievance of the assessee is that the Ld. CIT(A) erred in
confirming the action of the AO in considering Short Term Capital Gains
(STCG) from sale of shares amounting to Rs. 33,71,870/- as business
income of the assessee. In the grounds of appeal filed with Form No. 36,
the assessee has shown the figure as 1,45,61,975/-. However, at the time
of hearing, the assessee filed an application to modify the quantum in
dispute which is Rs. 33,71,870/-.
3. The assessee is an individual. The return for the year was filed on
31.10.2006 declaring total income of Rs. 78,89,926/-. The return was
selected for scrutiny assessment and statutory notices were issued and
served upon the assessee. While scrutinizing the return of income, the
Assessing Officer noticed that the assessee has declared STCG of Rs.
33,71,870/- from sale of shares. The assessee was asked to furnish an
explanation as to why the profits out of such transactions of purchases
and sale of shares and units should not be treated as business income.
3.1. The assessee filed a detailed reply vide letter dt. 27.11.2008. It
was explained that the assessee has made investments from time to time
with its own funds. The transactions made by the assessee were delivery
based on which security transaction tax was duly paid. The assessee
contended that since he is an investor, the profit should be taxed under the
head capital gains as returned by the assessee. The contentions of the
assessee did not find any favour from the AO who heavily relied upon the
Circular No. 4/2007 dt. 15.6.2007 issued by the CBDT. The AO
observed that the volume and frequency of the transaction is very high
and there was no intention to derive income by way of dividend from
shares. The AO treated the STCG at Rs. 33,71,870/- as business income
of the assessee.
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4. The assessee carried the matter before the Ld. CIT(A) but without
any success.
5. Aggrieved, the assessee is before us
6. The Ld. Counsel for the assessee stated that the assessee is an
investor from past many years. The investments have been made out of
own funds. It is the say of the Ld. Counsel that the assessee has been
showing profit under the head capital gains since A.Y. 2002-03 and no
adverse inference have been drawn. To substantiate, the assessee has
filed copies of the computation of income for earlier assessment years.
The Ld. Counsel further pointed out that the investments have been made
out of own funds. The only loans taken are from family members on
which the assessee has not paid any interest. The Ld. Counsel further
stated that the Revenue authorities have grossly erred in not accepting the
returned income of the assessee. The Ld. Counsel prayed that the STCG
returned by the assessee should be assessed as such.
7. Per contra, the Ld. Departmental Representative strongly supported
the order of the Revenue authorities.
8. We have carefully perused the orders of the authorities below and
the relevant material brought on record before us. It is not the case of the
AO that the assessee was churning the shares, buying and selling the
same shares again and again. In CIT v/s Madan Gopal Radhey Lal,
[1969] 73 ITR 652 (SC), the Hon'ble Supreme Court has dealt with the
issue and discussed the question: "A trader may acquire a commodity in
which he is dealing, for, his own purposes, and hold it apart from the
stock-in-trade of his business. There is no presumption that such an
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.acquisition, even if it is an accretion to the stock-in-trade of the business,
is an acquisition for the purpose of his business: in each case the question
is one of intention to be gathered from the evidence of conduct and
dealings by the acquirer with the commodity." In Associated Industrial
Development (supra), the Supreme Court observed as follows: "....it
was open to the assessee to contend that even on the assumption that it
had become a dealer and was no longer an investor in shares the
particular holdings which had been cleared and the sales of which had
resulted in the profit in question had always been treated by it as an
investment. It can hardly be disputed that there was no bar to a dealer
investing in shares. But then the matter does not rest purely on the
technical question of onus which undoubtedly is initially on the revenue
to prove that a particular item of receipt is taxable. 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."Mr. Pravin D. Mehta (HUF) Mrs.
Pallavi Pravin Mehta 6 8. The Hon'ble Supreme Court in another case in
P.M. Mohammed Meerakhan (P.M.) v/s CIT, [1969] 073 ITR 735 (SC),
reiterated that it was not possible to evolve any single test or formula
which could be applied in determining the transaction as adventure in
nature of trade or not. The distinction between the two types of
transaction is not always easy to make. Whether the transaction is of one
kind or the other depends on the question whether the excess is an
enhancement of the value by realizing the security or a gain in an
operation of profit making. The assessee might have invested capital in
shares with an intention to resale these if in future their sale brings in a
5 I. T . A . N o s 4 2 6 7 & 3 7 6 2 / M u m / 2 0 1 2 .
higher price. Such an investment though motivated by a possibility of
enhancement value, did not necessarily render the investment a
transaction in the nature of trade.
8.1. It is also an admitted fact that the assessee has been showing
capital gains from the sale of shares since assessment year 2002-03.
Considering the facts of the case in totality, we do not find any reason
why the STCG offered by the assessee should not be assessed as such.
We, therefore, set aside the order of the Ld. CIT(A) and direct the AO to
accept the STCG shown by the assessee from sale of shares under the
head STCG. The appeal filed by the assessee is accordingly allowed.
ITA No. 3762/M/2012- A.Y. 2008-09
9. The grievance of the assessee is similar to the grievance raised in
A.Y. 2006-07 qua ITA No. 4267/M/2012, although the quantum may
differ. On finding the facts and issues being identical, following our own
decision in A.Y. 2006-07, we direct the AO to treat the STCG from sale
of shares as such.
10. In the result, both the appeals filed by the assessee are allowed.
Order pronounced in the open court on 30th January, 2015
Sd/- Sd/-
(JOGINDER SINGH ) (N.K. BILLAIYA)
Û /JUDICIAL MEMBER / ACCOUNTANT MEMBER
Mumbai; Dated :30/01/2015
.../ RJ , Sr. PS
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/Copy of the Order forwarded to :
1. / The Appellant
2. × / The Respondent.
3. () / The CIT(A)-
4. / CIT
5. , ,
/ DR, ITAT, Mumbai
6. [ / Guard file.
/ BY ORDER,
× //True Copy//
/
(Dy./Asstt. Registrar)
, / ITAT, Mumbai
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