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Income Tax Appellate Tribunal, MUMBAI BENCHES “SMC, MUMBAI
Before: Shri R P Tolani
O R D E R Per R P Tolani, Judicial Member
These are appeals by two different assessees’ being husband and wife. The grounds of appeal raised in the case of Nirav J Vakharia [ ] is as under:
“On the facts and in the circumstances of the case and in law, the learned CIT(A) - 41, Mumbai, erred in confirming the action of the learned Assessing Officer treating the assessee’s income of Rs.28,44,419/- from sale of shares as business income instead of short term capital gain as claimed by the assessee without appreciating the nature of transactions and fact that the assessee has purchased shares with the intention of investment and not for the purpose of business.” The disallowance in the case of Jeshma S Vakharia in is Rs.26,20,832/-.
The learned counsel for the assessee contends that the assessee Shri Nirav J Vakharia, maintains regular books of account and derives income from salary, house property, commission and investment in shares. In the case of the assessee Smt Jesham S Vakharia, she derives income from salary, capital gains and other sources.
The income from sale of shares has been treated by the department under the head long term or short term capital gain as applicable in past many years. However, in the year under consideration, the AO asked the details about the share transactions, which were duly furnished. The AO took adverse inference from the fact that frequency of purchase and sale of shares indicated that the assessee had purchased shares with a motive to earn profit in short period, therefore, the income was treated as business income instead of short term capital gain. Aggrieved, the assessee preferred first appeal where learned CIT(A) also did not appreciated that in balance sheet, the assessee had claimed investment in shares under investment portfolio and not business portfolio. It is contended that CBDT has repeatedly issued circulars to the effect that if the assessees maintain investment portfolio then income cannot be treated as business income merely because of the frequency of transactions and number of scripts. Reliance is placed on jurisdictional Bombay High Court in the case of CIT vs. Gopal Purohit [2010] 188 Taxman 140 (Bom.), which taking into notice of CBDT Circulars has held in favour of the assessee. The learned DR, on the other hand, relied on the orders of the authorities below.
I have heard the rival submissions and perused the material available on record. The fact that the assessees’ were maintaining proper details and holding the shares in question under investment portfolio is not disputed, the CBDT time and again, by way of Circulars, has clarified that if the assessee’s are maintaining proper details about investment portfolio then the income from the sale of such shares is to be taxed under the head capital gains and not business income, even if the frequency of transaction is more. In these cases by taking adverse inference from the fact of frequency of transactions and ignoring the CBDT Circulars the income has been treated as business income. In my considered view, the action of authorities below is not justified as Hon’ble Bombay High Court has laid down a proposition taking note of the CBDT Circulars favour of the case of the assessees facts. In these circumstances, respectfully following the Bombay High Court judgment in the case of Gopal Purohit (supra), the additions may be deleted.
In the result, both the appeals are allowed.
Order pronounced in the open court on this day of 03.02.2017.