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Income Tax Appellate Tribunal, MUMBAI BENCHES “A”, MUMBAI
Before: SHRI G.S.PANNU (AM) & SHRI. RAM LAL NEGI (JM)
These appeal and Cross Objection have been preferred by the revenue and the assessee respectively against order dated 21/11/2011 passed by Ld. CIT CO 04/MUM/2013 Assessment Year: 2008-09 (Appeals)-24, Mumbai for the Asst. Year 2008-09, whereby the Ld. CIT(A) has allowed the appeal filed by the assessee against assessment order dated 24/12/2010 passed by the Assessing Officer.
Brief facts of the case are that the assessee filed its return of income for the assessment year under consideration, declaring the total income of Rs. 2,94,57,754/-. The assessee had claimed short term capital gain of Rs. 63,60,937/- and long term capital gain of Rs. 19,90,96,309/-on purchase and sale of shares and securities. Taking into account, the frequency and the volume of transaction in shares, the AO asked the assessee to explain as to why the capital gains should not be treated as business income. After considering the submission of the assessee, the A.O. treating both the short term capital gain and long term capital gain as business income, determined the total income of the assessee at Rs. 22,43,49,080/- In appeal the Ld. CIT(A) allowed the appeal of the assessee and directed the A.O. to assess the income from share transactions under the head capital gains instead of income from business.
3. The revenue is in appeal before the Tribunal on the following effective grounds of appeal:-
“(i) On the facts and in the circumstances of the case, and in law, the learned CIT(A) has erred in directing the A.O to assess income from share transactions under the head Capital Gains instead of income from business.
(ii) While doing so, the Ld. CIT(A) has erred in not appreciating the factors like volume, period of holding, expertise, and intention of the CO 04/MUM/2013 Assessment Year: 2008-09 assessee as criteria to determine the nature of transactions as adventure in the nature of trade and not as investment and also not appreciating the fact that the decision of the ITAT in earlier year was on facts available in those years and cannot be applied to facts available in those years and cannot be applied to fact of this year.”
4. The Ld. Departmental Representative (DR) relying on the assessment order submitted that the Ld. CIT(A) has wrongly allowed the appeal of the assessee ignoring the factors like volume, period of holding, expertise, and intention of the assessee as criteria to determine the nature of transactions as adventure in the nature of trade and not as investment and also not appreciating the fact that the decisions of the ITAT in earlier years were based on facts of those particular cases and the same cannot be applied to facts of the present case.
On the other hand the Ld. Counsel for the assessee submitted that the case of the assessee is squarely covered by the assessee’s own cases, i.e., for the A.Y. 2007-08, ITA No. 801/Mum/2010 for the A.Y. 2006-07 & ITA No. 6545/Mum/2008 for the A.Y. 2005-06.Ld. In the said cases the identical issue was decided in favour of the assessee and against the revenue.
We have heard the rival submissions and also perused the material placed on record including the orders relied upon by the parties. The co-ordinate Bench in assessee’s own case in for the A.Y. 2007- 08, has decided the identical issue in favour of the assess by following the earlier orders passed by the co-ordinate Bench dated 28/04/2009, passed in assessee’s own case ITA 6545/Mum/2008 for the A.Y. 2005-06. Similarly, the co-ordinate Bench has decided the said issue in favour of the assessee in CO 04/MUM/2013 Assessment Year: 2008-09 assessee’s own case, ITA 801/Mum/2010 for the A.Y. 2006-07 by following the decision of the Tribunal for the A.Y. 2005-06 aforesaid. The identical issue has been decided by the Co-ordinate Bench in assessee’s own case for the A.Y. 2005-06 holding as under:-
“3. We have considered the rival submissions and perused the relevant material on record. The assessee's Balance Sheet for the year under consideration has been placed at page 44 of the paper book, on the perusal of which, it can be seen that the shares and other securities have been shown under the head "Investment". Similarly for the immediately preceding year i.e. assessment year 2004-2005, the shares etc. were shown under the head ‘Investment'. In one year prior to that also i.e. A.Y. 2003-2004 the shares were shown under the head "Investment in the Balance Sheet. It can also be seen from these Balance Sheet for three years that there are no borrowed funds which have been deployed by the assessee for the purchase of shares. Except for Capital, there is no other item of Loan on the liability side of the balance sheet. It is further observed that the assessment for the immediately preceding year was completed u/s 143(3). Copy of the assessment order dated 28.12.2006 for A.Y. 2004-05 has been placed at pages 47 onwards of the paper book. There is a categorical discussion about the capital gain earned by the assessee from sale of shares in the last year was declared at Rs. 9.27 crores and short term capital gain on sale of shares etc. was offered at Rs. 51.55 lakhs. The Assessing Officer has thoroughly discussed the issue of capital gain and thereafter determined the short term capital gain at Rs.79.38 lakhs by not allowing the set off of loss to the extent of Rs.27.83 lakhs. Page No.7 CO 04/MUM/2013 Assessment Year: 2008-09 of the paper book is a' chart showing comparison of volumes of the investments in shares etc. for the instant year vis-a-vis the immediately preceding year. Number of scrips purchased and sold in this year are at 213 and 173 respectively as against 194 and 177 respectively for the assessment year 2004-2005. The value of purchase and sale of shares in total is at Rs. 20.08 crores and Rs.10.59 crores in this year as against Rs.8.23 crores and Rs.5.84 crores in the immediately preceding year. It shows that the pattern in which the shares were purchased and sold in this year is almost similar to that of the preceding year. The assessment order passed u/s. 143 (3) in relation to assessment year 2004-2005 clearly depicts that the Assessing Officer has accepted the assessee's version about the profit on sale of shares as liable to be taxed as short term capital gain and long term capital gain respectively. The learned Counsel has submitted that in the assessment years 2003- 2004 and 2002-2003 also the profit on sale of shares held for less than one year was shown as Short term capital gain which was not disturbed by the Revenue, though the assessments were made u/s 143(1).
The Mumbai bench of the Tribunal in Shri. Gopal Purohot vs. JCIT in vide its order dated 10.02.2009, a copy of which has been provided by the learned A.R. and is on record, has held that where the nature of activities, modus operandi of the assessee, manner of keeping records and presentation of shares as investment at the year end is same in all the years, there cannot be any reason as to why the claim made by the assessee for treating the profit on sale of shares held for lower period be not taken as taxable as head “short term capital gain”. It has further been held in CO 04/MUM/2013 Assessment Year: 2008-09
this case that there should be unity in the treatment and the consistency under the same facts and circumstances. We find that in that case also the assessment year involved was 2005-2006 and the Tribunal specifically observed that the character of income shall not undergo change due to amendments made through the Finance Act, 2004, by which the Securities transaction tax on sale of purchase of shares was introduced and further long term capital gain was made exempt u/s 10(38) and short term capital gain was sought to be taxed at concessional rate of 10% u/s 111A. The learned Counsel for the assessee contended that the .facts and circumstances of the instant case are mutatis mutandis similar to those of the assessee by which the treatment to profit on sale of shares has been changed in this year due to the changes brought in by the Finance Act, 2004. The learned A.R. has also relied on another order passed by the Mumbai Bench of the Tribunal in Mrs. Amita A.Kapadia Vs. ITO in for the same proposition. On the perusal of this order dated 3.2.2009. a copy of which has been made available by the learned A.R., we find that the facts and circumstances are similar and even the assessment year is also the same i.e. assessment year 2005-2006. In this case also the department sought to change the treatment to be given to the profit on sale of shares from short term capital gains to “Profits and gains of business or profession”, which was not allowed by the Tribunal. On the same pattern some other orders have also been place on record which have the same ratio decidendi. In view of this overwhelming position settled in favour of the assessee and the learned D.R. not bringing on record any contrary view, we hold that since in identical circumstances the Revenue authorities have CO 04/MUM/2013 Assessment Year: 2008-09 accepted the profit arising from the sale of shares as short term capital gain in the assessment made u/s143(3), there is no reason as to why a different treatment be given in this year. It is true that res judicata is not applicable in the income tax proceedings, but at the same time we cannot brush aside the 'Principle of consistency', which requires that when the facts and circumstances continue to remain the same, then there should not be any variation in the treatment from the earlier year. We therefore, respectfully following the aforesaid orders of the Mumbai Tribunal, set aside the impugned order and direct that the profit on sale of shares offered by the assessee as short term capital gain be accepted as such. It is however directed that the AO shall ensure that the' transactions resulting into the amount of long term capital gain claimed as exempt u/s 10(38) and the short term capital gain taxable at the reduced rate of 10% u/s 111A have duly suffered the Securities transactions tax (STT) and further the assessee has not claimed any benefit u/s 88E in respect of such STT. This ground is allowed for statistical purposes. Needless to say the assessee will be allowed opportunity of hearing in the fresh proceedings.”
In our considered view, the Ld. CIT(A) has passed the impugned order in accordance with the aforesaid decisions rendered by the co-ordinate Benches of the Tribunal. Therefore, we do not find any reason to interfere with the same. Hence, consistent with the view taken by the co-ordinate Bench of ITAT in earlier years, i.e., in the A.Y. 2005-06, 2006-07, 2007-08, we uphold the impugned order passed the Ld. CIT(A) and dismissed the appeal filed by the revenue.
CO 04/MUM/2013 Assessment Year: 2008-09 CO No. 04/Mum/2013 A.Y. 2008-09
The assessee has filed the present Cross Objection on the following grounds:-
1) The ld A.O. and the ld.CIT(A) erred in law and on facts in not applying the provisions of section 45(2) for computing the capital gains in respect of the shares held as capital asset which by the action of the ld. A.O. were treated as stock in trade. Your appellant prays that full effect be given to the provisions of section 45(2) in assessing the total income.
2) The ld A.O and the ld. CIT(A) erred in law and on facts in not giving the credit for STT paid of Rs. 14,56,679/- u/s 88-E. Your appellant prays that credit for STT paid be given.
3. The ld. A.O and the ld. CIT(A) erred in law and on facts in not giving the deduction for Protfolio Management Charges of Rs. 4,61,308/-, Demat Charges of Rs. 37,588/-, Service Tax of Rs. 6,98,698/- and other expenses of Rs. 1,51,379/- being expenses incurred wholly and exclusively for earning income. Your appellant prays that the deduction for above expenses be given.
2. Since, we have upheld the impugned order passed by the Ld. CIT(A), we do not find any merit in the cross objections filed by the assessee. Hence, we dismiss the same as infrutuous.
CO 04/MUM/2013 Assessment Year: 2008-09
In the result, the appeal filed by the department and the cross objection filed by the assessee for the A.Y. 2008-09 are dismissed.
Order pronounced in the open court on 4th August, 2016