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Income Tax Appellate Tribunal, “J”
ACIT RG 12(2) Jumana Vahanvati Buckley Court, 21st and 22nd R. No. 123A, Aayakar बिधम/ Bhavan, Duplex, No. 6, Nathalal Vs. Mumbai Parekh Marg, Colaba, Mumbai-39 स्थायीलेखासं./जीआइआरसं./ PAN/GIR No. ABUPV1085D (अपीलाथी/Appellant) (प्रत्यथी / Respondent) : अपीलाथीकीओरसे/ Appellant by : Shri Yogesh A Thar & Ms. Ikshu Shah प्रत्यथीकीओरसे/Respondentby : Ms. Arju Garodia सुनवाईकीतारीख/ : 27/11/2017 Date of Hearing घोषणाकीतारीख / : 03/01/2018 Date of Pronouncement आदेश / O R D E R
Per Sandeep Gosain, Judicial Member:
The present Appeal filed by the assesseeis against the order of Ld. Commissioner of Income Tax (Appeal) – 28, Jumana Vahanvati Mumbai dated 28.10.15 for AY 2010-11 on the grounds mentioned herein below:-
GROUND I : TREATING THE GAIN ON SALE OF SHARES AS PROFITS & GAINS FROM BUSINESS & PROFESSION. AS AGAINST SHORT-TERM CAPITAL GAIN
1. On the facts and circumstances of the case and in law, the Learned Commissioner of Income Tax(Appeals) ("the CIT(A)") erred in upholding the order of the Additional Commissioner of Income-tax, 12(2) , Mumbai ("the AO") in treating the gain on sale of shares as profits and gains from business & professional, as against short term capital gains offered by the Appellant on the alleged ground that the Appellant has substantial number of transactions in shares with high frequency and short period of holding and also that the Appellant's only business is to deal in shares.
2. The Appellant prays that the aforesaid gain be treated as short term capital gain as offered by the Appellant.
Jumana Vahanvati GROUND II: DISALLOWANCE U/S. 14A OF THE ACT CAN BE MADE ON INVESTMENTS AND NOT ON STOCK-IN-TRADE
1. On the facts and circumstances of the case and in law, the Learned CIT(A) erred in upholding the action of the AO in making disallowance u/s. 14A of the Act read with Rule 81)(ii) of the Rules on the investments which were treated as Stock-in-trade by the AO as well as the learned CIT(A).
2. Therefore, the Appellant prays that disallowance u/s. 14A of the Act read with Rule 8D(ii) of the Rules be deleted/ appropriately reduced.
GROUND III: DISALLOWANCE U/S. 14A OF THE ACT
1. On the facts and circumstances of the case and in law, the Learned CIT(A) erred in upholding the disallowance to the extent of Rs. 17,97,134/- u/s. 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 ("the Rules" ) as expenses incurred towards earning the exempt income, without appreciating the fact that the Appellant has claimed interest as deduction only to the extent of Rs. 16,56,781/-.
Jumana Vahanvati 2. The Appellant prays that the disallowance of the expenditure u/s. 14A of the Act read with Rule 8D of the Rules should be deleted/ appropriately reduced.
The brief facts of the case are that the assessee is assessed as an individual as she is engaged in providing professional services in the field of interior designing. The return of income was filed by the assessee on 15.10.10 declaring total income of Rs. 13,90,69,355/- which comprises short term capital gains of Rs. 32,80,252. The return was processed u/s 143(1) of the I.T. Act. The case was selected for scruitiny and after serving statutory notices and seeking reply, order of assessement u/s 143(3) of the I.T. Act was passed on 31.03.13 thereby assessing the total income at Rs. 14,32,21,590/- after making the additions on account of treating the gain on sale of shares as profit and gains from business and profession, as against short term capital gains offered by the assessee at Rs. 32,80,252/-. Apart from above, disallowance u/s 14A r.w.r 8D was also made.
Jumana Vahanvati 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. However, Ld. CIT(A) upheld the order of AO in treating the gain on sale of shares as profits and gains from business and profession, as against short term capital gains offered by the assessee. Now before us, the assessee has preferred the present appeal by raising the above grounds.
Ground No. I 3. This ground raised by the assessee relates to challenging the order of Ld. CIT(A) in upholding the order of the Additional Commissioner of Income-tax, 12(2), Mumbai ("the AO") in treating the gain on sale of shares as profits and gains from business & professional, as against short term capital gains offered by the Appellant on the alleged ground that the Appellant has substantial number of transactions in shares with high frequency and short period of holding Jumana Vahanvati and also that the Appellant's only business is to deal in shares. Ld. AR submitted that the assessee is both, a trader as well as an investor in stock markets. The trading activity of the assessee is limited to the futures and options segment of the market whereas the assessee holds a large portfolio of investment in shares and properties. It was further submitted that the assessee had sold certain shares during the year and based on the period of holding, the gains were offered as short term capital or long term capital gains. The Ld. AR submitted that a sum of Rs. 32,80,252/- was offered as STCG but the AO has treated the same as profit and gains from business and profession, on the ground that the assessee has substantial number of transactions with high frequency and short period of holding by relying upon the few case laws as well as after quoting circular No. 4 of 2007 dated June 15, 2007. Ld. AR further drawn our attention to page no. 46 of the Paper Book which is a chart showing yearwise treatment in case of sale of shares in a period of 12 months by the department and the same is reproduced below:-
Particulars AY AY AY AY AY AY AY 2008- 2009- 2010-11 2011- 2012- 2013- 2014- 09 10 12 13 14 15 Whether 143(1) 143(3) 143(3) 143(3) 143(3) 143(3) 143(3) assessed u/s 143(3) or intimation u/s 143(1) Treatment STCG STCG Business STCG NA NA NA of income income on sale of shares accepted by the Department Apart from above, Ld. AR also relied upon the judgment titled CIT Vrs. Gopal Purohit (188 taxmann 140) (Bom HC), Sanjay Kumar J. Poddar Vrs. ACIT (68 SOT 43) (Mum Trib), Smt Sujata Kapaid Vrs. JCIT (68 SOT 224) (Mum Trib), DCIT Vrs. E Cap Partner (64 SOT 194) (Mum Trib), ACIT Vrs. Sachin Tendulkar (77 taxmann.com 305) (Mum Trib), ACIT Vrs. Chetan K. Mehta (46 SOT 25) (Mum Trib) and Shantilal M. Jain Vrs. ACIT (132 SOT 466) (Mum Trib). Ld. AR reiterated the same arguments as the same were raised before revenue authorities.
Jumana Vahanvati On the other hand, Ld. DR relied upon the orders passed by revenue authorities.
We have heard counsels for both the parties at length and we have also perused the material placed on record as well as the orders passed by revenue authorities. The AO has treated the STCG as profits and gain from business and profession only on the ground that the assessee has substantial number of transaction with high frequency and short period of holding by relying upon circular no. 4 of 2007 dated 15.06.07. However, before us Ld. AR drawn our attention towards page no. 46 of the paper book wherein treatement of income from sale of shares as capital gain by the AO from year to year has been demonstrated. Further as per balance sheet for the year under consideration, the shares on which STCG has been earned are treated as ‘investment’ by the assessee in its books of account. Even the principle of consistency requires that if in the previous and the subsequent years, the treatment of shares has been accepted by the department as capital gain, then the same cannot be treated as business income. In this respect reliance was Jumana Vahanvati place by the assessee on two circulars issued by CBDT i.e. Circular No. 6/2016 dated 29.02.16 and Circular No. 225/12/16/ITA.II dated 02.05.15. We have gone through the circulars as well as judgments cited by the parties and we found that if in the previous and subsequent years treatment of sale of shares as short term capital gain has been accepted, then the same cannot be treated as business income in the current year. In this respect, we draw strength from the judgment of jurisdictional High Court in the case of CIT Vrs. Gopal Purohit (2010) 188 Taxman 140 (Bom) wherein the Hon’ble High Court clearly supports the principle of consistency in the matter of treatment of profit on sale of shares by holding as under:-
Section 143 of the Income-tax Act, 1961 - Assessment - General - Whether though principle of res judicata is not applicable to assessment proceedings, yet there ought to be uniformity in treatment and consistency when facts and circumstances are identical - Held, yes Section 4, read with section 145 of the Income-tax Act, 1961 - Income -Chargeable As - Whether though Jumana Vahanvati entries in books of account alone are not conclusive proof to decide income, yet presentation in books of account is most crucial source of gathering intention of assessee as regards nature of transaction - Held, yes Against the above order passed by Hon’ble Bombay High Court, the revenue had filed the Special Leave Petition which was also dismissed by the Hon’ble Supreme Court vide order Nov 15, 2010. Keeping in view our above discussion and also considering the latest circulars and judgments cited above, we have no hesitation to set aside the order passed by AO in treating the gain on sale of shares as profits and gains from business and profession, as against STCG. Hence we order accordingly. This ground raised by the assessee is allowed.
Ground No. II 5. Since we have already decided ground no. 1 in favour of assessee, therefore this ground is not being pressed by the Assessee. Hence the same stands dismissed as not pressed.