DCIT 20(2), MUMBAI vs. MANISHA RAMESH RAO, MUMBAI

Smt. Manisha Ramesh DCIT 20(2) Room No. 217, 2nd floor, Rao, बिधम/ 21 BIT Bldg, Piramal Chambers, Lalbaug Laminarayan Lane, Parel, Mumbai-400012 Vs. Matunag(E), Mumbai-400019 स्थायीलेखासं./जीआइआरसं./ PAN No. ACCPR8031Q (अपीलाथी/Appellant) (प्रत्यथी / Respondent) : अपीलाथीकीओरसे/ Appellant by : Shri Suman Kumar प्रत्यथीकीओरसे/Respondentby : Shri Shailesh N. Doshi सुनवाईकीतारीख/ : 26/02/2018 Date of Hearing घोषणाकीतारीख / 28/02/2018 : Date of Pronouncement आदेश / O R D E R

Per Sandeep Gosain, Judicial Member:

Smt. Manisha Ramesh Rao (1) "On the fact and in the circumstances of the case and in law the Ld.CIT(A) has failed to appreciate that looking at the volume, frequency, continuity and regularity of the transactions of purchase and sale in shares by the assessee, it cannot be said that these transactions were entered into only for the purpose of investment and there was no motive of the assessee to earn profit"

(2) "On the fact and in the circumstances of the case and in law the Ld. CIT(A) erred in treating business income as STCG without appreciating the fact that the assessee has also treated the profitl loss from the transactions where the shares were sold within very short holding period." - (3) "On the fact and in the circumstances of the case and in law the Ld. CIT(A) also erred in treating business income as STCG without appreciating the fact that the transaction in question are not isolated ones. Rather there is a regularity in these transactions and the assessee's intention to continue these transactions in future is also discernible."

Smt. Manisha Ramesh Rao total income at Rs. 89,30,743/-. The same was processed u/s 143(1) of the I.T. Act, 1961. Later on, the case was selected for scrutiny under cash in the computation of income, the assessee has income from STCG and income from other sources. The AO during the course of assessment proceedings, called for the details of STCG and after considering the details filed by the assessee, the AO held that the activities in which the assessee is involved i.e. purchase and sale of shares, in reality, represent a ‘trade’ or ‘business’, therefore the profits were assessed under the head ‘business income’.

Aggrieved by the order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the case of both the parties partly allowed the appeal of the assessee thereby holding that the gain on sale /purchase of shares were treated as STCG. Now before us, the revenue has preferred the present appeal by raising the above grounds. Ground No. 1 to 3 3. These grounds raised by the revenue relates to challenging the order of Ld. CIT(A) in treating the gain on sale /purchase as Smt. Manisha Ramesh Rao Short Term Capital Gain (STCG), therefore we thought it fit to dispose of these grounds by this common order.

4.3 I have perused facts of the case and appellant's submissions carefully. I find that the CIT(A)- 29 vide order dated 30.05.2014 [Appeal No. C1T(A)-29/ Rg.17/ 39/ 13-14] in appellant's own case for A.Y. 2010-11 has held in para 30 of the said order as under:

“In view of the facts and circumstances explained above, it is clear that the appellant is an investor in shares and not the trader during the period tinder

Smt. Manisha Ramesh Rao consideration. This is the view of the department in the case of the appellant in all the earlier years. Therefore the action of the AO treating the capital gain of Rs. 1,33,11,982/- us the business income of the appellant is not correct and the such conclusions arrived at by the ,40 are not based on any facts brought on record and there/ore cannot be accepted. ..111 the actions of the appellant during the period in respect of the ,salei purchase of shares is that of an investor and she cannot be termed as trader in shares in view of the above slated facts. This ground 0/ appeal is accordingly, decided infiiveur of the appellant.

Before giving the aforesaid judgment, the CIT(A)-29 discussed the submissions of the appellant in detail. In the said assessment year also the observation regarding period of holding, and frequency of trades were almost similar, as in present assessment year. It was held "That the holding period cannot he criteria for terming the transactions as business transactions, as the more important to see is as to whether the appellant had taken delivery of shares transacted or not The appellant is an active investor and modifies her portfolio from tirñ16Ifne with the intention to get maximum gains from such investments. The CIT(A) relying upon the decision of Hon'ble 1TAT, Mumbai in the case of Shri Bharat Kunverji Kenia vs. ACIT (ITA

Smt. Manisha Ramesh Rao No. 65441Muml2008 dated 15.05.2009) and some other case laws held that frequency and volume of share sale/purchase cannot he the criteria for terming any investor as trader. It was held that borrowing of money for the purpose of making transactions of sale/purchase is another criteria which indicates the intention of a person as investor or trader, and in that case it was observed that the appellant is using her own funds out of the accretion of share transactions and making re-investments to earn further gains through the sale/purchase of shares. It was held that there is no justification for treating the capital gains as business income ignoring the hooks of accounts of appellant. It was also considered that the appellant is a housewife with no office or business infrastructure. It was also observed that the appellant has been showing the capital gains on similar share sale/purchase transactions since A.Y. 1997-98, which has been accepted all along, and even in scrutiny assessment orders for 2005-06 & 2007-08, the appellant was explicitly accepted as an investor. The. C!T(A) bseived that there was no material change in fLicts of the case during that year. Hence 15111r.e upon various case laws it was held that on the principal of consistency too the 'appellant need to be treated as an investor because the department has accepted that position

Smt. Manisha Ramesh Rao The appellant as an investor in shares for last many years, and that the same position cannot be changed all of a sudden with the same set of facts without placing on record any concrete evidence for adopting a different view in the matter.

I concur with the aforesaid decision of CIT(A)-29 on the identical issue in appellant's own case for A. Y. 20l0- I, and observe that no concrete evidence has been brought on record by ,,the AO in A.Y. 2011-12 under consideration so as to change the aforesaid stand. Hence, the treatment given in the assessment order is reversed and the gain on sale/purchase of shares is to be treated as Short Term Capital Gain as returned. Therefore, the ground no 2 of appeal is allowed. ' Apart from above, it was pointed out by Ld. AR that identical issue has already been decided by the coordinate bench of Hon’ble ITAT in for AY 2010-11. The operative portion of the order of Hon’ble ITAT is reproduced below:-

Smt. Manisha Ramesh Rao arising on sale of shares. The assessee claims the same to be capital gains, whereas the AO has assessed the same as business income of the assessee. It is well settled that the true nature of the transactions has to be determined by considering various factors. In this regard, the Hon’ble Courts as well as the CBDT has prescribed various criteria on the basis of which the true nature of transactions could be ascertained. Hence the nature of transactions would be dependent upon the facts prevailing in each case. Though the practice adopted in the past years may be a guiding factor in determining the true nature of transactions, yet it is not necessary that the nature of transacations shall always remain constant. One of the most important criteria is the intention of the assessee at the time of purchase of shares. If the assessee had purchased the shares as a dealer, then the profit should be assessed as business income of the assessee. On the contrary, if the intention was to hold the shares as investment, then the profit shall be assessed as Capital gains. The intention of the assessee should be ascertained by his conduct and other criteria prescribed by the Courts and CBDT.

Smt. Manisha Ramesh Rao for the purpose of making investment in shares. During the year under consideration, the assessee has dealt in 94 scrips only. According to Ld. AR the broker has some times executed single order in more than one instalment. The average holding period is about 30 days. Further, it is an undisputed fact that the assessee’s declartiona of capital gains from investment made in shares has been accepted by the AO in the scrutiny assessment completed for AY 2005-06 and 2007-08 and also in other years since AY 1997-98.

After having gone through the facts of the present case as well as considering the orders passed by revenue authorities and Hon’ble ITAT as mentioned above in assessee’s own case, we find that the identical issue has already been decided by the Hon’ble ITAT in assessee’s own case in ITA No.

Smt. Manisha Ramesh Rao 4851/Mum/2014 for AY 2010-11. Therefore respectfully following the decision of the coordinate bench and in order to maintain judicial consistency which is applicable mutatis mutandis in this case, we see no reasons to interfere into or deviate from the findings recorded by the Ld. CIT (A). Hence, we are of the considered view that the findings so recorded by the Ld. CIT (A) are judicious and are well reasoned. Resultantly, these grounds raised by the revenue stands dismissed.