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Income Tax Appellate Tribunal, “SMC” (D
Before: SHRI N.K. BILLAIYA & SHRI MAHAVIR PRASAD
आदेश / O R D E R
PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : This is an appeal by the department against the order of the Commissioner of Income Tax(Appeals)-XX, Ahmedabad, dated 30/01/2014, in the matter of assessment under section 143(3) of the Income tax Act, 1961 (‘the Act hereinafter’), for the Assessment Year (AY) 2010-11, on the Grounds: i. The learned Commissioner of Income Tax (Appeals)-XX, Ahmedabad has erred in law and on facts in deleting the addition
ITA No.955/Ahd/2014 ACIT vs. Alkaben Vasantlal Vora Asst.Year –2010-11 - 2 - made on account of capital gain treated as business income amounting to Rs.74,27,690/- even though all the indicators show that the transactions were in the nature of business/trade ii. On the facts and in the circumstances of the case, the learned Commissioner of Income-Tax(Appeals)-XX, Ahmedabad ought to have upheld the order of the Assessing Officer. 2. The relevant facts as culled out from the materials on record are as under:- In this case, a perusal of return and other documents/evidences placed on record show that the assessee has transacted in sale and purchase of shares. The assessee has shown Short Term Capital Gain of Rs.74,27,690/-.
2.2 During the course of assessment proceedings the assessee vide order sheet entry dated 19/01/2013 was asked to explain why the STCG from transaction in shares should not be treated as income from business and profession keeping in view the volume and frequency of transactions. The assessee replied vide letter dated 15/01/2013 same is attached as Annexure I, Pages 1 to 14 in Assessment Order.
2.3 Learned AO stated that an analysis of the transactions of shares reflected in the so-called ‘Investment portfolio’ was made. It was noted that shares are being continuously transacted. A perusal of detail shows that transactions have been made in 65 shares in the ‘Investment portfolio’. The volume of transactions is as high as 800351 shares. Apex Court has held that systematic and organized course of activity is in the
ITA No.955/Ahd/2014 ACIT vs. Alkaben Vasantlal Vora Asst.Year –2010-11 - 3 - nature of business. The relevant judgments of the Apex Court are reproduced as under: To regard an activity as business, there must be a course of dealings either actually continued or contemplated to be continued with a profit motive, and not for sport or pleasure. Whether a person carries on business in a particular commodity must depend upon the volume frequency, continuity and regularity of transactions of purchase and sale in a class of goods and the transactions must ordinarily be entered into with a profit motive. Business is an activity capable of producing a profit which can be taxed – Sole Trustee, Loka Shikshana Trust vs. CIT[1975] 101 ITR 234 (SC). Thus, the transaction of shares in the so called ‘Investment portfolio’ of the assessee are undoubtedly in the nature of systematic and organized business activity only.
2.4 Learned AO further held in order to examine the contention of the assessee and examination was made of the shares transacted in the so called ‘Investment portfolio.’ This analysis shows that transactions in a majority of the scrips have been affected within a period ranging from 1 day to 30 days. Transactions of the shares during this period is very frequent. Details of scrip-wise period of holding and frequency of transactions within this period of holding is tabulated and attached as per Annexure –II.
From the above analysis it is crystal clear that shares reflected in the so- called ‘Investment portfolio’ have been held for very short periods and transacted very frequently. The claim of the assessee that shares have been held for a long period thus stands negated.
ITA No.955/Ahd/2014 ACIT vs. Alkaben Vasantlal Vora Asst.Year –2010-11 - 4 -
2.5 An exercise was also conducted to analyse the scrips in terms of volume of transactions. The results are detailed as under: TABLE I Sr. Name of the Scheme Volume of No. Transaction (No. of shares) 1. Alok Industries Ltd. 1,50,000 2. Assam Company Ltd. 10,000 3. Austral Coke & Projects 19,565 4. Brand House retails Ltd. 20,000 5. D. S. Kulkarni 10,000 6. First source solutions Ltd. 10,000 7. Hindustan Construction Co. 5000 8. IFCI Ltd. 25,000 9. Ispat Industries 1,05,000 10. IKF technologies Ltd. 25,000 11. Maytas Infra 10,000 12. Nagarjuna Fertilizers Ltd. 26,800 13. Petronet LNG 40,000 14. Satyam Computer Ltd. 10,000 15. Speciality Pper 10,000 16. Sal Sheet 10,000 17. Tamilnadu Petro Products Ltd. 50,000 18. Ugar Sugar 10,000 19. Wire and wireless (India) Ltd. 25,000
From the analysis of the shares as detailed above it is evident that the volume of transactions is substantial, 52 shares have been transacted in the so called ‘investment portfolio’ and the number of shares purchased and sold amounts to 8,00,351. The volume and frequency of the transactions of shares in the so called ‘investment portfolio’ is clearly
ITA No.955/Ahd/2014 ACIT vs. Alkaben Vasantlal Vora Asst.Year –2010-11 - 5 - indicative of the fact that the transactions are in the nature of business activity yielding business income and not capital investment as shown by the assessee. Thus the transactions of the assessee fall within the ambit of indicators laid down by the various judgments and accordingly Short Term Capital Gain of Rs.74,27,690/- from share trading is treated as business income.
Against the said order assessee preferred first statutory appeal before the learned CIT(A). In Para No.5.12, learned CIT(A) allowed the appeal of the assessee, which is reproduced as under: “In view of the above discussion, on facts and legally also the appellant has correctly shown the capital gain for taxation and the income cannot be termed as business income. The identical issue has also been decided in appellant’s own case for A.Y.2008-09 in Appeal No. CIT(A)-XX/17/12-13 dtd. 17/10/2013, whereby the income derived on transaction of shares and securities were held to be as short/long term capital gain and not the business income. In view of the above, the A.O’s action for treating the same as business income is rejected and short term capital gain offered by the appellant is accepted as such. Thus, grounds of appeal are allowed.” 4. We have gone through the relevant record and impugned order. Learned AR cited that a similar appeal was also allowed by the Coordinating Bench of ITAT in ITA No.3026/Ahd/2013 for Asst. Year 2008-09 in assessee’s own case, operative Para is reproduced here under:
“9. In view of the above discussion and lucid findings of learned Commissioner of Income Tax(A) and also referring to the paper book filed by the assessee we find that assessee is consistently showing income from short term and long term capital gain in sales of share and showing the investments at cost price in the balance sheet and not as a stock-in-trade. We further observe that assessee is mainly engaged in
ITA No.955/Ahd/2014 ACIT vs. Alkaben Vasantlal Vora Asst.Year –2010-11 - 6 - the business of diamond trading and apart from she is having income from short term capital gains from sale of shares. Further for Asst Year 2009-10 also profit from shares is shown as long term and short term capital gain. In view of those relevant facts and the consistent approach of assessee showing income from shares under the hear ‘long term and short term capital gain’ and also showing of investments in shares and debentures under the head investment and not as a closing stock, we are of the firm view that ld. Commissioner of Income Tax (A) has rightly allowed the assessee’s claim. Therefore, we find no reason to interfere with the order of ld. Commissioner of Income Tax(A) and we uphold the same. Accordingly, the ground raised by the Revenue is dismissed." On the similar Ground the appeal of the department was dismissed.
Respectfully, following the Coordinating Bench’s order as well as we do not find any infirmity in the order passed by the learned CIT(A). Therefore, we dismiss the appeal of the department.
In the result, appeal filed by the department is dismissed. This Order pronounced in Open Court on 18/08/2017
Sd/- Sd/- एन.के. �ब�लैया महावीर �साद (लेखा सद�य) (�या�यक सद�य) ( MAHAVIR PRASAD ) ( N.K. BILLAIYA ) ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 18/08/2017 Priti Yadav, Sr.PS
ITA No.955/Ahd/2014 ACIT vs. Alkaben Vasantlal Vora Asst.Year –2010-11 - 7 -
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-XX, Ahmedabad. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy//
उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad True Copy 1. Date of dictation 16/08/2017 (dictation-pad 4 pages attached at the end of this appeal-file) 2. Date on which the typed draft is placed before the Dictating Member …17/08/2017 3. Other Member… 4. Date on which the approved draft comes to the Sr.P.S./P.S…………….. 5. Date on which the fair order is placed before the Dictating Member for pronouncement…… 6. Date on which the fair order comes back to the Sr.P.S./P.S……. 7. Date on which the file goes to the Bench Clerk………………… 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order………………