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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
अऩीरधथी ओय से / Assessee by Shri V Mohan प्रत्मथी की ओय से/Revenue by Shri A Ramchandran सुनवधई की तधयीख / Date of Hearing : 14.9.2015 घोषणध की तधयीख /Date of Pronouncement: 28 .10.2015 आदेश / O R D E R
Per B R Baskaran, AM:
The appeal filed by the assessee is directed against the order dated 18.7.2013 passed by the ld. CIT(A)-27, Mumbai for the assessment year 2010-11, wherein the ld.CIT(A) has confirmed the order of AO in assessing the Short Term Capital Gains (STCG) arising on sale of shares as business income.
The AO, during the course of assessment proceedings noticed that the assessee has declared STCG on sale of shares to the tune of Rs.48.05 lakhs. The AO noticed that the assessee had purchased shares worth
Rs.117,00,887/- and sold the shares of worth Rs.165,06,783/-. Further, there was repetition of transactions in the scrips named M/s Jindal Steels and M/s Yes Bank. The AO further noticed that the assessee had earned dividend income of Rs.1,48,622/- only. Accordingly, he came to the conclusion that the assessee has indulged in share transactions as a trader. Accordingly, he assessed the STCG of Rs.48.05 lakhs as business income of the assessee. The ld. CIT (A) confirmed the same and hence, the assessee has filed this appeal before us.
We heard the parties and perused the record. It is well settled that the true nature of the transactions has to be determined by considering various factors. In this regard, the Hon’ble Courts as well as the CBDT has prescribed various criteria on the basis of which the true nature of transactions could be ascertained. Hence, the nature of transactions would be dependent upon the facts prevailing in each case. Though the practice adopted in the past years may be a guiding factor in determining the true nature of transactions, yet it is not necessary that the nature of transactions shall always remain constant. One of the most important criteria is the intention of the assessee at the time of purchase of shares. If the assessee had purchased the shares as a dealer, then the profit should be assessed as business income of the assessee. On the contrary, if the intention was to hold the shares as investment, then the profit shall be assessed as Capital gains. The intention of the assessee should be ascertained by his conduct and other criteria prescribed by the Courts and CBDT.
The Ld A.R submitted that the assessee has also declared long term capital loss and the same has been accepted by the assessing officer. Further he submitted that the assessee has not borrowed any interest
bearing funds for the purpose of making investments. He also submitted that the average holding period of shares was about five months and the assessee has also earned dividend income of Rs.1,48,622/-. He further submitted that the short term capital gain declared by the assessee has been accepted by the assessing officer in the past in assessment years 2005-06, 2008-09 and 2009-10 under 143(3) assessments. In assessment year 2012-13 also, the assessing officer has accepted the Short term capital gain. Accordingly he submitted that the order of tax authorities should be reversed on the principle of consistency. He further submitted that the co-ordinate bench of the Tribunal has considered identical issue in the case of other family members, viz., Shri Sumegh Modi (ITA No.5599/Mum/2010 dated 12.10.2011) and Praful D Modi (ITA No.1334/Mum/2010 dated 15.7.2011) and it has been decided in favour of the assessee.
On the contrary, the Ld D.R placed strong reliance on the order of Ld CIT(A).
Having heard rival submissions, we are of the view that the assessing officer has not made a strong case to support his view. We notice that the assessee’s declaration of Short term capital gain arising on sale of shares has been accepted in the past as well as in the future assessment years by the assessing officer u/s 143(3) proceedings. Further, we notice that the assessee has not borrowed any interest bearing funds for the purpose of purchasing shares. The assessing officer has pointed repetitive transactions in two scrips. However we notice that the said repetition was only on few occasions and the same, in our view, would not warrant the AO to treat the assessee as a trader in shares. The assessee has declared long term capital loss on sale of shares and the same has been accepted
by the assessing officer. The average period of holding of about 5 months further support the case of the assessee that he was acting as investor only in the shares. Under these set of facts, we are of the view that there is no justification in treating the assessee as a trader in shares. Accordingly, we set aside the order of Ld CIT(A) and direct the assessing officer to assess the profit arising on sale of shares as capital gains.