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TMI Blog2013 (9) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... h regard to the transaction. The transaction in whole has to be taken into consideration and the magnitude of the transaction does not alter the nature of transaction. Though the principle of res judicata does not apply to the Income-tax proceedings as each year is an independent year of the assessment but in order to maintain consistency, it is a judicially accepted principle that same view should be adopted for the subsequent years, unless there is a material change in the facts – Decided against the Revenue. - ITA No.7789/Mum/2010 - - - Dated:- 19-6-2013 - P M Jagtap and Vivek Varma, JJ. For the Appellant : Shri Manoj Kumar For the Respondent : Shri Beharilal ORDER:- PER : Vivek Varma The appeal arises from the order of the CIT(A) 35, Mumbai, dated 16.08.2010 wherein, the department has raised the following ground: On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to accept the claim of Short Term Capital Gain of Rs. 22,66,873/- on profit arriving from purchase sale of shares instead of business income treated by the AO without appreciating the fact that the assessee is dealing in large volume of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n under the head business on the following grounds: Mere entries in the books of account showing shares as Investment is not determinative factor to decide the real nature of transaction. For this proposition the AO relied on various judgments including the decisions of the Supreme Court in a) Tuticorin Alkali Chemicals case 227 ITR 172 b) Chowringhee Sales Bureau s case 87 ITR 584 c) Punjab Distilling Industries Ltd s case 35 ITR 523 d) G. Venkataswami Naidu Co s case 35 ITR 594 e) Bazapur Sugar Factor s case 172 ITR 330 (i) Assessee is undoubtedly dealing in large number of shares. In fact dealing in shares is the sole business of the assessee. Most of the shares are bought and sold within short period. While some are not sold due to market conditions and their holding with the assessee remains beyond few days, it will not change the nature of transactions. The assessee is very well engaged in the business of share trading and runs a full fledged office for this purpose. (ii) The AO relied on the Circular No. 4/2007 dated 15.06.2007 issued by the Central Board of Direct Taxes (iii) For treating the profit on sale of investment in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est would have been paid. The few loans appearing in the balance sheet were taken from friends and relatives, on which, no interest was paid. It was submitted that the assessee did some speculative transactions in shares, which were very nominal, but that by itself, would not debar the assessee from claiming the profit on sale of shares under the head capital gains. He admitted that the assessee showed speculative profit of Rs. 66,170/- in the preceding year, i.e. assessment year 2006-07. He further contended that the AO was wrong to hold that the assessee held most of the shares only for very few days. On the other hand, the assessee earned major portion of short term capital gain (Rs. 12,27,142/- out of Rs. 22,46,050/-) from the shares held for fairly short/long period as shown below: Purchases Sales Security Name Date Qty Amt. Date Qty Amt. Holding Period Gains Loss Arrow Webtex 6.2.06 2500 5,33,705 19.12.06 900 6,58,329 - 316 3.5.06 400 3,21,089 - 500 3,04,361 - 225 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that the assessee paid STT at a higher rate applicable to the investor which shows that the assessee was only an investor. He relied on the decision of Hon ble Mumbai Tribunal in the case of Gopal Purohit vs. JCIT (29 SOT 117) in which it was held as under: When we compare the facts of the case, we find that the facts of both are almost identical. In the present case, the assessee is also maintaining separate records for both types of transactions. Further, in the present case, it is important to notice that the assessee has entered into two different types of transactions, where both activities are entirely different in nature i.e. one activity is of investment in nature on the basis of delivery and second activity is purely of jobbing (without delivery) which puts assessee s case on a more strong footing. Hence, in our view, the ratio of this decision is squarely applies to the fats of the present case. Accordingly, we hold that the delivery based transaction should be treated as of the nature of investment transactions and profit there from should be treated as short term capital gain or long term capital depending upon the period of holding. To conclude, we hold t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -49554 -2.19% 211-240 2 1 4 771428 34.03% 181-210 0 0 0 0 0.00% 151-180 0 0 0 0 0.00% 121-150 11 7 10 103884 4.58% 91-120 10 7 12 319495 14.09% 61-90 10 9 8 -113895 -5.02% 31-60 14 19 17 470587 20.76% 0-30 18 24 26 217114 9.58% Total 2266872 100.00% From the above, it could be seen that major portion of short term capital gains was earned by holding the shares for more than seven months and in fact the short term capital gains earned on sale of shares by holding them for less than five months is not substantial. Further as seen from the capital account and balance sheet, the appellant has not claimed any interest paid on borrowings as the same were from relatives and friends. Considering the above facts, it cannot be said that the appellant was regularly trading in shares. Further, the Hon ble Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res judicata does not apply to income-tax proceedings. Though, each assessment year being a unit, what was decided in one year might not apply in the following year, where a fundamental aspect permeating through different assessment years has been found as a fact. One way or the other and parties have allowed that position to be sustained by no challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year." The same view has been taken by the Hon ble Delhi Court in CIT vs. Neo Poly Pack (P) Ltd. [2000] 245 ITR 492. Further the Hon ble Mumbai Tribunal in the case of Gopal Purohit (29 SOT 117) held that the delivery based transactions are to be assessed under capital gains and this decision has been confirmed by the Hon ble Mumbai High Court by judgment dated 06.01.2010. In the light of the above jurisdictional decisions and for the other factual findings given above, I direct the AO to accept the claim of the appellant by accepting short term capital gain admitted by the appellant . The CIT(A), thus, allowed the claim of the assessee and reversed the decision of the AO. 8. Against this decision, the department ..... X X X X Extracts X X X X X X X X Extracts X X X X
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