2014 (6) TMI 71 - AT - Income Tax

Treatment of income of sale of shares Allowability of exemption u/s 10(38) of the Act Held that - The number of shares, the date of purchase and dates of sale at the prices of specific number of shares as set out in the order has not been shown to be incorrect by the Revenue - none of the facts are disputed neither the dates are disputed nor the nos. of shares nor the price of sale or purchase - revenue has also not attempted to upset the finding of the CIT(A) inasmuch as that the assessee was maintaining two separate portfolios one for Investment and one for business - CIT(A) records that he has personally verified the position for the last 7 years from the P&L A/c of the assessee as well as the inventory of closing stock and then has come to a finding that neither during the year nor in the earlier years the assessee has ever traded in those shares which are kept as an investment - Nothing has been placed by the Revenue in order to take a contrary view. The factum of maintaining two separate portfolio was found to be correct even on a perusal of the position emanating from the 143(3) order of the AO in 2002-03 AY - No evidence to the contrary upsetting these findings as incorrect finding has been placed - the holding period has also not been argued to be incorrect which is more than one and a half year or more. - Decided against Revenue. Deletion of expenses Held that - The only relief available to the assessee can be the deletion of the expenditure estimated for the month of June 2006 when Mr. Aman Gupta returned to India - Nothing has been placed on record before us except oral arguments to demonstrate that Mr. Aman Gupta was also financed by his father - No arguments have been advanced requesting for the admission of evidence of withdrawals available to the assessee s husband - In the absence of any relevant evidence the assessee being the best judge to know its affairs, there was no reason to deviate from the order thus, the addition @ Rs. 1 lac per month for the month of April and May is upheld and the addition to the extent of Rs. 2 lac is sustained Decided partly in favour of Assessee. Disallowance of foreign visit expenses Held that - The claim of the assessee that the amount was sufficient to cover the two foreign travels has not been accepted by the department the argument has been advanced but nothing has been placed on record to show the actual withdrawals available to her husband for the specific period - the foreign travel for tourism purposes has been done by the assessee to Dubai and Singapore for specific days - The information available in regard to the travel whether it was executive class or ordinary class and the nature of stay whether it was a Five Star Hotel or an ordinary bed and breakfast arrangement is an information which necessarily is known only to the assessee who has chosen to evade the same as the stand taken is that no records have been maintained - Nothing has been placed to show that the addition is excessive there was no alternative but to confirm the addition as necessary evidence in the knowledge of the assessee have not been made available to take a contrary view Decided against Assessee.

Issues Involved:
1. Treatment of income from the sale of shares as long-term capital gain versus business income.
2. Addition on account of boarding, lodging, and clothing expenses of the assessee's son.
3. Addition on account of foreign visit expenses.

Detailed Analysis:

Issue 1: Treatment of Income from Sale of Shares
The primary contention was whether the income from the sale of shares should be treated as long-term capital gain, which is exempt under Section 10(38) of the Income Tax Act, or as business income. The Assessing Officer (AO) argued that the quantum, magnitude, and nature of the transactions indicated they were part of the assessee's regular business activities. The AO noted that the shares were not typically traded on the stock exchange and questioned the genuineness of the transactions, suggesting they were part of the assessee's business operations. However, the assessee maintained separate accounts for investments and trading portfolios, which was supported by balance sheets and other documents.

The CIT(A) upheld the assessee's claim, noting that the assessee consistently maintained two separate portfolios and that the transactions in question were held as investments. The CIT(A) also pointed out that the AO's own actions contradicted his stance, as he did not treat all investments as part of the trading stock. The Tribunal found no reason to interfere with the CIT(A)'s findings, emphasizing that the Revenue failed to provide contrary evidence to disprove the assessee's claim of maintaining separate portfolios.

Issue 2: Addition on Account of Boarding, Lodging, and Clothing Expenses of the Assessee's Son
The AO estimated the expenses for the assessee's son's education and living expenses in the UK at Rs. 1 lakh per month, totaling Rs. 3 lakhs for the period under consideration. The assessee argued that no tuition fees were paid during the year as the son returned to India in June 2006, and the expenses were covered by family withdrawals. The CIT(A) upheld the AO's estimation, noting that the assessee failed to provide evidence of the son's independent income or support from the father.

The Tribunal partially allowed the assessee's appeal, reducing the addition to Rs. 2 lakhs, considering the son returned to India in June 2006 and thus expenses for that month were not warranted.

Issue 3: Addition on Account of Foreign Visit Expenses
The AO estimated the expenses for the assessee's foreign visits to Dubai and Singapore at Rs. 3.5 lakhs, arguing that the household withdrawals were insufficient to cover these expenses. The assessee contended that the trips were short and the expenses were covered by the withdrawals. The CIT(A) upheld the AO's estimation, citing the family's lavish lifestyle and lack of records for the foreign visits.

The Tribunal upheld the CIT(A)'s decision, noting that the assessee failed to provide any evidence to contradict the AO's estimation or to show that the expenses were covered by the household withdrawals.

Conclusion:
The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's appeal, reducing the addition for the son's expenses but upholding the treatment of share income as long-term capital gain and the addition for foreign visit expenses.

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