M/S. GYAN TRADERS LTD.,KOLKATA vs. ITO, WARD - 6(2), KOLKATA, KOLKATA

First we take up the appeal of the assessee for A.Y. 2006-07 being . The issue involved in Ground No. 1 of this appeal relates to the determination of head of income, under which profit arising from the purchase and sale of shares is chargeable to tax in the hands of the assessee. & 1015/KOL./2011 Assessment years: 2006-2007 & 2007-2008 Page 2 of 6

The assessee in the present case is a Company, which is engaged in the business of share trading and investment. The return of income for the year under consideration was filed by it on 21.10.2006 declaring total income of Rs.2,20,23,260/-. During the course of assessment proceedings, the claim of the assessee for capital gain arising from the purchase and sale of shares was examined by the Assessing Officer with reference to the different aspects of the relevant share transactions. On such examination, he found that most of the shares were sold by the assessee within a period of 1 to 150 days from the date of purchases. He also found that some of the shares were sold by the assessee even within a period of 10 days from the date of purchases. Keeping in view the period of holding of shares, the frequency of share transactions, etc. the Assessing Officer was of the view that the assessee was entering into the share transactions as trader and not investor and the profit arising from such transactions amounting to Rs.1,22,49,695/- was chargeable to tax in its hands as business income and not short-term capital gain. Accordingly, the said amount was brought to tax by the Assessing Officer in the hands of the assessee as business income in the assessment completed under section 143(3) vide an order dated 17.12.2008.

Against the order passed by the Assessing Officer under section 143(3), an appeal was preferred by the assessee before the ld. CIT(Appeals) and after considering the submissions made by the assessee and perusing the relevant material available on record, the ld. CIT(Appeals) upheld the action of the Assessing Officer in bringing to tax the income of the assessee from the transactions of purchase and sale of shares as business income by following the decision of this Tribunal dated 30.09.2008 in assessee’s own case for A.Y. 2005-06 in wherein a similar issue was decided against the assessee. & 1015/KOL./2011 Assessment years: 2006-2007 & 2007-2008 Page 3 of 6

We have considered the rival submissions and also perused the relevant material available on record. Although the ld. Counsel for the assessee has contended that the ratio of various decisions of the Tribunal and High Courts is applicable to the facts of the present case and the issue involved is required to be decided in favour of the assessee by following the said ratio, we are of the view that the issue as to whether the profit arising from transactions in shares is chargeable to tax as business income or capital gain, is purely a factual issue, which has to be considered and decided after taking into consideration the totality of the facts and circumstances involved in each case. In the case of the assessee before us, this issue has already been decided by the Tribunal against the assessee for A.Y. 2005-06 involving identical facts and circumstances and even the ld. Counsel for the assessee has not been able to point out any distinction in the material facts of the case relevant to the issue under consideration as involved in the year under consideration, vis-a-vis, the immediately preceding year, i.e. A.Y. 2005-06, wherein a similar issue has been decided by the Tribunal for the following reasons given in its order dated 30.09.2008:- “7. We have carefully considered the orders of the authorities below and the submissions of the Id. representatives of both the parties and have also considered the cases eited at the time of hearing of the appeal. It is a fact that the intention of the person as to whether a particular transaction is in the nature of investment or in the nature of trade is to be ascertained, is a mixed question of law and facts. If a person invests money in acquiring the shares or any other asset intending to hold it, 'enjoys its income for sometime, and then sells it at a profit, it would be a clear case of capital accretion and not profit derived from an adventure in. the nature of trade. However, in deciding the character of such transaction, as held by the Hon'ble Apex Court in the case of G. Venkataswami Naidu & Co. (supra), several factors are relevant, such as, e.g., whether the purchaser was a trader and the purchase of the commodity and its resale were allied to his usual trade or business or incidental to it, the nature and quantity of the commodity purchased and resold; any act subsequent to the purchase to improve the quality of the commodity purchased and thereby make it more readily re-saleable; any act prior to the purchase showing a design or purpose; the similarity of the transaction to operations usually. associated with trade or business; the repetition of the transaction; the element of pride of possession. If we apply the above principles to the facts of & 1015/KOL./2011 Assessment years: 2006-2007 & 2007-2008 Page 4 of 6

The Tribunal thus has decided a similar issue in assessee’s own case for A.Y. 2005-06 holding that the profit arising from the transaction of purchase and sale of shares is chargeable to tax in the hands of the assessee as business income and not capital gain. As the issue involved in the year under consideration as well as all the material facts relevant thereto are admittedly similar to that of A.Y. 2005-06, we respectfully follow the decision of the Tribunal for the A.Y. 2005-06 and uphold the impugned order of the ld. CIT(Appeals) holding that the profit arising from the transactions in purchase and sale of shares is chargeable to tax in the hands of the assessee as business income and not capital gain. & 1015/KOL./2011 Assessment years: 2006-2007 & 2007-2008 Page 5 of 6 Ground No. 1 of the assessee’s appeal for A.Y. 2006-07 is accordingly dismissed.

As regards the issue involved in Ground No. 2 relating to the disallowance under section 14A of the Act, it is observed that a similar issue involved in identical facts and circumstances has already been decided by the Coordinate Benches of this Tribunal by taking a view that the disallowance on account of expenses incurred by the assessee in relation to the earning of exempt dividend income under section 14A can be made before the applicability of Rule 8D from A.Y. 2008-09 on estimated basis @ 1% of the exempt dividend income. Respectfully following this consistent view taken by the Tribunal, we direct the Assessing Officer to restrict the disallowance under section 14A at 1% of the exempt dividend income. Ground No. 2 of the assessee’s appeal for A.Y. 2006-07 is thus partly allowed.

As regards the appeal of the assessee for A.Y. 2007-08 being it is observed that the solitary issue involved therein relating to the determination of head of income under which the profit arising from the transaction of purchase and sale of shares is chargeable to tax in the hands of the assessee is similar to the one involved in Ground No. 1 of the assessee’s appeal for A.Y. 2006-07, which has already been decided by us in the foregoing portion of this order falling in A.Y. 2005-06. We, therefore, uphold the impugned order of ld. CIT(Appeals) on this issue and dismiss the appeal of the assessee for A.Y. 2007-08.

In the result, the appeal of the assessee for assessment year 2006-07 is partly allowed, while the appeal of the assessee for A.Y. 2007-08 is dismissed. Order pronounced in the open Court on November 6th, 2015. Sd/- Sd/-