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आयकर आयकर अपीलीय अपीलीय अिधकरण अिधकरण, " ई” खंडपीठ खंडपीठ मुंबई मुंबई आयकर आयकर अपीलीय अपीलीय अिधकरण अिधकरण खंडपीठ खंडपीठ मुंबई मुंबई INCOME TAX APPELLATE TRIBUNAL,MUMBAI-“E”,BENCH सव"ी राजे"", लेखा सद"य एवं एवं संजय गग", "याियक सद"य एवं एवं Before S/Sh. Rajendra,Accountant Member & Sanjay Garg,Judicial Member आयकर आयकर अपील अपील संसंसंसं/.ITA No.5085/Mum/2012,िनधा"रण िनधा"रण वष" वष"/Assessment Year-2008-09 आयकर आयकर अपील अपील िनधा"रण िनधा"रण वष" वष" Shri Sobhagya Mal Singhvi The DCIT-12(3) 2nd Floor, Jeevan Sahakar Bldg. Vs. Aayakar Bhavan, M.E. Road Sir P.M. Road, Fort,Mumbai-1. Mumbai-400 020. PAN:AAJPS 5136 N िनधा"रती िनधा"रती ओर ओर सेसेसेसे/Assessee by : Shri N. Jayendra (AR) िनधा"रती िनधा"रती ओर ओर राज"व क" ओर से/ Revenue by : Shri B.S.N. Raju-(DR) सुनवाई सुनवाई क" क" तारीख तारीख / Date of Hearing : 09- 11 -2015 सुनवाई सुनवाई क" क" तारीख तारीख घोषणा क" तारीख / Date of Pronouncement : 01.01.2016 आयकर आयकर अिधिनयम अिधिनयम,1961 क" क" धारा धारा 254(1)केकेकेके अ"तग"त अ"तग"त आदेश आदेश आयकर आयकर अिधिनयम अिधिनयम क" क" धारा धारा अ"तग"त अ"तग"त आदेश आदेश Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा सद"य सद"य राजे"" राजे"" केकेकेके अनुसार अनुसार PER RAJENDRA, AM- लेखा लेखा लेखा सद"य सद"य राजे"" राजे"" अनुसार अनुसार Challenging the order dt.7.5.2012 of CIT(A)-23,Mumbai the Assessee has filed the present appeal.During the course of hearing before us the Authorised Representative (AR) stated that assessee was not interested in pursuing Ground No.2 considering the smallness of tax effect. Hence,same stands dismissed. 2.Assessee,an individual,engaged in the business of running an advertising agency,filed his return of income on 30.3.2009,declaring income of Rs.3.20crores.The AO completed the assessment on 20.12.2010 u/s. 143(3) of the Act determining the income of the assessee at Rs.3. 29 crores. The first effective ground of appeal is about taxing a sum of Rs.1.73 crores as business income instead of Short Term Capital Gain(STCG).During the assessment proceedings,the AO asked the assessee to furnish reasons as to why income from STCG should not be treated as income from business.Vide his letter,dt.16.12.10,the assessee contended that he was showing investment in shares for the last few years and was offering STCG thereon, that he had earned substantial dividend and had not borrowed any funds for the purpose of investment,that the books of account maintained by him showed shares as investment.The assessee furnished DMAT statement in his support to prove that delivery of shares and units of mutual fund taken and given. However, the AO did not agree with the assessee and held that the assessee had shown certain income from F&O transactions as income from business,that rest of the income was shown under the head STCG,that the differentiation was only as per the convenience of the assessee, that treatment given to a transaction in the books of account of the assessee was not determinative with regard to head of income or taxability of such income, that principle of res judicata did not apply to proceedings under the Act,that list of STCG ran into five pages and had 100 entries approximately,that the assessee was active in frequent trading of shares on day to day basis,that he had squared up several transactions within a period of few days -200 days, that the assessee had borrowed money and had invested in making investment, that he had borrowed Rs.42.70 lacs from different parties.Finally, he held that the assessee was actively engaged in the business of share trading which was wrongly offered as STCG/LTCG, that the sum of Rs.1.73crores was to be treated as income from non-speculative business.
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Aggrieved by the order of the Assessing Officer,the assessee preferred an appeal before the First Appellate authority(FAA).Before him,the assessee placed reliance upon the decisions of ITAT Mumbai,wherein similar transactions were taxed under the head Capital Gains.The assessee also referred to assessments made u/s. 143(3) in the AY.s.2006-07,07-08 and 2009-10. The FAA,after considering the submissions made before him,referred to the case of Associated Industrial Development Co.Ltd. (82ITR586) and Holck & Larsen (160ITR67) and CBDT Cir. No.4/2007,dated 15.6.2007 and held that each case had to be decided based on particular facts of the said case,that there could not be any precedent in the matter of adjudication of the issue of nature of transaction with regard to purchase and sale of shares and securities.He referred to the case of Harsha & Mehta( ITA1859/Mum/2009)-dt.16.7.2010 and Sadhana Nabera,Immortal Financial Services P.Ltd.(8Taxmann32)and observed that assessee had dealt in 33 scrips involving 122 transactions under the head capital gains,that in case of certain scrips it was found that there had been repeated purchase and sale.He further held that assessee had also dealt in F&O segment,that the assessee had used borrowed funds, that the principles of res judicata were not applicable to income tax proceedings.Finally, he held that the AO was justified in treating the share transaction as business activity.
Before us,the Authorised Representative (AR) stated that the assessee had Rs.26 Crores in his capital account,that no new funds were borrowed during the year under consideration,that transactions of F&O segment were shown under the head business income,that all the shares of STCG category were delivery based,that the assessee had not entered into day today trading,that in case of two scripts there were repetitive transactions and that the investment was not substantial,that the AO had accepted the claim made by the assessee with regard to the capital gains in subsequent and earlier years.He referred to the page no.2,3,31,50 and 53 of the paper book and relied upon the cases of Vanguard Capital Ltd.(ITA/4735/Mum/2010), Nagindas P. Sheth(HUF)(ITA/961/Mum/2010), BMW Holdings P. Ltd.(ITA/3187/Del/2010), Mrs. Anuradha R.Bhagwat(ITA/1583/Mum/2010),Vineet Sethi(ITA/4324/Mum/2009),Hitesh Satishchandra Doshi(ITA/6497/Mum/2009) and Gopal Purohit(Income Tax Appeal No.1121 of 2009 dated January 6, 2010).Departmental Representative (DR) supported the order of the FAA. 5.We have heard the rival submissions and perused the material on record.We find that the AO had had taxed the profit arising out of share transactions under the head business income, that the assessee had shown F&O segment transactions separately,that income arising out of such transactions was offered as business income,that he had earned substantial dividend during the year and had not borrowed any funds for investment. e find that most of the shares,under the category short term capital assets were held for a period of more than one month,that assessee had not entered into frequent purchase and sale of same scrips,that there are only two or three exceptions.But,such transaction are not substantial in nature.Number of transaction is also not very high.In our opinion,the issue to treat the share transactions under the head business income or capital gains has to be decided after considering various factors.Frequency of the transactions, volume of the shares traded,borrowings for investment purpose and dividend earning are some of the factors that cumulatively decide the issue conclusively.Courts are of the opinion that no single factor can decide the issue.In the case under consideration the AO/FAA had not proved that borrowed funds were utilised for making investment in shares. It is also a fact that income 2
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offered under the head STCG/LTCG has been accepted by the AO in the subsequent and earlier years.We are aware that principle of res-judicata is not applicable to assessment proceedings. But,rule of consistency has to be followed until and unless the AO brings distinguishing facts on record for deviating from the path followed in the earlier years.In the case of Gopal Purohit (supra),the Hon'ble Bombay High Court has approved the above principle.Considering these facts,we are of the opinion, that delivery based shares traded by the assessee have been rightly showed under the head capital gains.The cases relied upon by the AR support the view taken by the assessee . Considering the peculiar facts and circumstances of the case, we are of the opinion that order of the FAA cannot be endorsed.Therefore, reversing his order we decide Ground No.1 in favour of the assessee. 6.Ground No.3 is about adhoc disallowance of Rs.5,62,158/- out of the expenses such as telephone,motor car and depreciation on motor car incurred in Mumbai office and branches. During the assessment proceedings,the AO found that the personal use of telephone and motor car was not recorded by the assessee, that personal uses could not be ruled out in absence of log book,that in the earlier year similar disallowance was made.Out of total expenditure of Rs.56.21 lacs,he disallowed 10% out of motor vehicle,motor car depreciation and telephone expenses. 7.Before the FAA, the assessee argued that he was based in Mumbai, that the expenses incurred at various branches of assessee’s business could not be subject to personal use.The FAA held that in the AY 2006-07 disallowance of 15% of motor car expenses and motor car depreciation was made, that 10% of telephone expenses were also disallowed in that year, that in the earlier year 10% of all such expenses were disallowed,that the assessee had not brought any material on record to show bifurcation of expenses or that expenses were without any personal element, that he had not placed any record before the AO to show that disallowance was made in earlier year was deleted, that the facts and circumstances of the year under appeal were similar to the facts of the preceding AY.s. Finally, he upheld the order of the AO. 8.Before us, the AR stated that the Bench could decide the matter on merits. DR relied upon the order of the FAA. We find that identical disallowances were made in the earlier AY.s, that the assessee had not proved that personal element was absent in the expenditure in dispute,that the AO had made disallowance of 10% of the expenditure only under three heads.Considering these peculiar facts, we are of the opinion that the order of the FAA does not suffer from any infirmity.So,confirming his order we are deciding Ground No.3 against the assessee.
As a result,appeal filed by the assessee stands partly allowed फलतः िनधा"रती "ारा दािखल क" गई अपील अंशतः मंजूर क" जाती है. Order pronounced in the open court on 1st January, 2016. आदेश क" घोषणा खुले "यायालय म" "दनांक 01 जनवरी, 2016 को क" गई । (संजय गग" / Sanjay Garg) (राजे"" / RAJENDRA) "याियक सद"य / JUDICIAL MEMBER लेखा लेखा सद"य सद"य / ACCOUNTANT MEMBER लेखा लेखा सद"य सद"य मुंबई/Mumbai,"दनांक/Date: 01.01.2016 व.िन.स.Jv.Sr.PS.
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आदेश क" क" "ितिलिप "ितिलिप अ"ेिषत अ"ेिषत/Copy of the Order forwarded to : आदेश आदेश आदेश क" क" "ितिलिप "ितिलिप अ"ेिषत अ"ेिषत 1.Appellant /अपीलाथ"
Respondent /""यथ" 3.The concerned CIT(A)/संब" अपीलीय आयकर आयु , 4.The concerned CIT /संब" आयकर आयु 5.DR “E” Bench, ITAT, Mumbai /िवभागीय "ितिनिध, खंडपीठ,आ.अ.अिध.मुंबई 6.Guard File/गाड" फाईल स"यािपत "ित //// आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार Dy./Asst.