VENKATESHWARA ENTERPRISES PRIVATE LTD.,,PUNE vs. ASSISTANT COMMISSIONER OF INCOME-TAX,,

Shri Nikhil Pathak appearing on behalf of the assessee submitted that the assessee company is engaged in investment of shares, mutual funds and securities. The investment activities are carried out by the assessee company since inception and the shares/securities are held as investment and not as stock-in-trade. This fact is evident from the financial statements of company. The assessee in its return of income has been consistently showing shares as investments. The shares purchased/sold by assessee are delivery based. The assessee has not utilized borrowed funds for the purpose of making investment in the shares, mutual funds, securities etc. The assessee during the assessment year under appeal sold certain securities and booked Short Term Capital Gain amounting to Rs.58,33,370/-. The assessee duly paid taxes on short term capital gain earned. In assessment proceedings the Assessing Officer treated the Short Term Capital Gain disclosed by the assessee as „business income‟. The ld. AR submitted that the assessee has been consistently disclosing shares as investment and Revenue has accepted the same in the past as well as in the future. The ld. AR furnished copy of the assessment order dated 30-06-2017 u/s. 143(3) for the assessment year 2015-16. The ld. AR asserted that return of income filed by the assessee has been accepted without disturbing the head of income in respect of sale of shares in earlier and subsequent assessment years. The ld. AR to support his submission placed reliance on the decision of Tribunal in the case of ITO Vs. Shri Gaurav Arvind Thakkar in ITA No. 247/PUN/2010 for assessment year 2006-07 decided on 10-11-2017.

On the other hand Shri Achal Sharma representing the Department vehemently defended the impugned order. The ld. DR submitted that the magnitude at which the assessee has carried out transactions in sale and purchase of shares clearly indicate that the shares were held by the assessee as stock-in-trade to book the profits at the earliest point of time. The ld. DR referring to the chart giving details of the transactions in assessment years 2008-09 and 2009-10 at pages 86 to 91 of the paper book submitted that the assessee is indulging in voluminous transactions of shares and the holding period of the shares in some of the cases is as low as 2 to 6 days. The ld. DR contended that under such circumstances the authorities below have rightly concluded that the shares are held by the assessee as stock-in-trade. In support of his submissions the ld. DR placed reliance on the decision of Hon‟ble Supreme Court of India in the case of Manoj Kumar Samdaria Vs. Commissioner of Income Tax reported as 228 Taxman 63 and the decision of Tribunal in the case of Shri Sunil Manakchand Kotecha Vs. ACIT in ITA No. 691/PUN/2013 for assessment year 2006-07 decided on 12-01-2018.

We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. We have also considered the decisions on which the rival sides have placed reliance. The only issue raised in the present appeal by the assessee is against the Revenue‟s action of holding income from sale of shares as „Business Income‟ as against “short term capital gain” declared by assessee.

The documents on record indicate that the assessee is an investment company engaged in investment of shares, mutual funds and securities on behalf of its shareholders. The assessee in its return of income right from

We find that in the case of ITO Vs. Shri Gaurav Arvind Thakkar (supra), the Co-ordinate Bench in similar facts where the assessee was consistently disclosing gain from sale of shares as capital gain and the Revenue accepted the same and in a particular assessment year disturbed the claim of assessee, the Tribunal held : “6. Regarding the AO‟s decision of treating the “short term capital gains” as „business income‟, AO opined that the said gains constitutes business income considering the large number of transactions involving the turnover of the assessee. In the process, the AO disrespected the entries in the books of account. Assessee reflected the relevant shares as investments in the books. AO rejected the assessee‟s intention of booking the gains eared in trading of the said shares shown as investment in books. Before us, it is the claim of the assessee, that the assessee is consistently booking such gains as short term capital gains over the years. It is submitted that such claims are

In the result, the appeal of assessee is allowed.