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Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI
Before: SHRI GEORGE MATHAN & SHRI INTURI RAMA RAO
आयकर अपील"य अ"धकरण, ’डी’ "यायपीठ, चे"नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH: CHENNAI "ी जॉज" माथन, "या"यक सद य एवं "ी इंटूर" रामा राव, लेखा सद य के सम(
BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER
आयकर अपील सं./ITA No.1673/Chny/2018 "नधा"रण वष" /Assessment Year: 2013-14
Vs. Mr.Murugesan Chellappa, The Income Tax Officer, #10/38, Sarojini Street, Corporate Ward-3(4), T.Nagar, Chennai-34. Chennai-600 017. [PAN: AAEPC 4591 L] (अपीलाथ*/Appellant) (+,यथ*/Respondent)
: Mr.R.Vijayaraghavan, Adv. अपीलाथ* क- ओर से/ Appellant by : Mr.M.S.Nethrapal, JCIT +,यथ* क- ओर से /Respondent by : 22.08.2019 सुनवाई क- तार"ख/Date of Hearing : 16.09.2019 घोषणा क- तार"ख /Date of Pronouncement आदेश / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER:
This is an appeal filed by the assessee directed against the Order of the Commissioner of Income Tax (Appeals)-11, Chennai, dated
31.01.2018 for the AY 2013-14. 2. At the outset, there was a delay of 28 days in filing of the present
appeal. The assessee has filed a petition stating that the delay has occurred on account of the advice given by the Chartered Accountant to :- 2 -:
file a rectification petition before the Ld.CIT(A). However, on the advice of another Sr.Chartered Accountant, the appeal was filed before the Tribunal
with the delay of 28 days. He submitted that the delay was on account of pursuit alternative remedy which constitutes the reasonable cause for delay in filing of the appeal. On the other hand, the Sr.DR has not raised
any serious objection in condoning the delay. In these circumstances, we
condoned the delay of 28 days in filing of the appeal and proceed to dispose of the appeal on merits.
The assessee raised the following grounds of appeal:
For that the order of the Commissioner of Income-tax (Appeals) 11, Chennai is contrary to law, facts and circumstances of the case and is opposed to the principles of natural justice.
For that the appellant had diligently declared the Long-term Capital Gains on sale of Equity Shares held for more than one year as exempt income in the financials filed for the year covered under this Appeal for which he is entitled for the exemption U/s.10(38) of the Act.
For that the Appellant had submitted the details relevant treating the equity shares as investment during the assessment proceedings along with the evidences in support of the claim of Long Term Capital Gains arose on sale of Shares as per the provisions of section 112 of the Income Tax Act, 1961. 4. For that the assumption of the Ld. AO as well the CIT (Appeals) relying on the errors in the statement which was contrary to the facts and the provisions of Income-tax Act, 1961. 5. For that the CIT (Appeals) had further assumed that the entire capital gains as profit earned on sale of shares disregarding the fact, that the investment was made and held equity shares for more than one year.
Without prejudice to the above, the appellant prays that investment in equity shares as short term investment and the gains as Short Term gains and subject to income tax thereon accordingly.
For that the Appellant objects towards levy of Interest U/s.234 B of the Income tax Act, 1961. 8. For these grounds and such other ground that maybe adduced before or during the hearing of the appeal with the leave of this respectful authority, may be pleased to a) Allow the exemption U/s.10(38) of the I T Act, 1961 on the Long Term Capital gains of Rs.4,81,80,386/-; OR b) Treat the capital gains as Short term capital gains on sale of equity shares of Rs.4,81,80,386/-; OR c) Pass such other orders as this respectful authority may deem fit. :- 3 -:
Briefly the facts of the case are that the assessee is an individual
deriving income from investments. The return of income for the AY 2013-
14 was filed on 29.09.2013 disclosing income of Rs.4,65,400/-. Against
the said return of income, the assessment was completed by the AO vide
order dated 29.03.2016 passed u/s.143(3) of the Act denying the exemption u/s.10(38) in respect of the long term capital gains by holding
that the assessee is only a trader in the shares.
Being aggrieved by the action of the AO, an appeal was preferred
before the Ld.CIT(A) who vide impugned order confirmed the action of the AO by holding that the assessee itself had shown the value of investments
as stock in trade and the Circular No.6/2016 issued by the CBDT is not applicable.
Being aggrieved, the assessee is before us in the present appeal.
The ld.Counsel for the assessee submitted that in view of the beneficial
Circular No.6/2016 dated 29.02.2016 issued by the CBDT, the transaction
of acquisition of shares should be treated as investment where the assessee held his shares for a period of more than 12 months immediately
preceding the date of the sale. Thus, the capital gains arising on sale of such shares should be exempted u/s.10(38) of the Act. On the other
hand, the Sr.DR submitted that the assessee himself had shown the purchase of shares as stock in trade and therefore, the above Circular
cannot be applied to the facts of the present case. :- 4 -:
We heard the rival contentions and perused the materials placed on record.
The only issue involved in the present appeal is whether the transaction of purchase of shares by the assessee is to be considered as investment or stock in trade. The AO gave finding vide Page No.3 of his
Assessment Order that the transaction of purchase by the assessee were shown as stock in trade. The AO further observed that the purchase of shares was debited to the P&L A/c. However, this was explained that this was an accounting error. However, no evidence was filed to show that the contention of the assessee is only to hold the shares as capital asset not as stock in trade. The Circular No.6/2016 dated 29.02.2016 specifically
states that where the assessee itself opts to treat the shares as a stock in trade irrespective of the period of holding listed the shares, the income
arising from the transfer of such shares could be treated as a business
income. In the present case, though the assessee disputes the treatment
given in the books of accounts but admittedly fact remains that the shares
were shown as a part of stock in trade and therefore the Circular
No.6/2016 dated 29.02.2016 issued by the CBDT cannot come to the rescue of the assessee. However, it is settled position of the law that the intention at the time of acquisition of shares is the determinative factor to decide whether the shares are held on stock in trade or investment
account. In the present case, there is a prima facie evidence on record to show that the shares are held as stock in trade on purchase of shares was :- 5 -:
debited to P&L A/c. This would prima facie prove the intention on the part of the assessee that the shares are held on trading account. Nothing is brought on record in rebuttal of this evidence. Therefore, we have no option but to hold that the investments in shares were held in trading account and the surplus arising on sale of such shares is liable to tax as business income.
In the result, the appeal filed by the assessee is dismissed.
Order pronounced on the 16th September, 2019 in Chennai. (जॉज" माथन) (इंटूर" रामा राव) (GEORGE MATHAN) (INTURI RAMA RAO) "या"यक सद य/JUDICIAL MEMBER लेखा सद य/ACCOUNTANT MEMBER
चे"नई/Chennai, 4दनांक/Dated: 16th September, 2019. TLN
आदेश क- +"त5ल6प अ7े6षत/Copy to: 4. आयकर आयु8त/CIT 1. अपीलाथ*/Appellant 5. 6वभागीय +"त"न"ध/DR 2. +,यथ*/Respondent 6. गाड" फाईल/GF 3. आयकर आयु8त (अपील)/CIT(A)