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TMI Blog2014 (1) TMI 846X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Appellant : Shri Naresh Kumar For the Respondent : Shri Pavan Ved ORDER:- PER : Rajendra Singh This appeal by the assessee is directed against the order dated 10.5.2012 of CIT(A) for the assessment year 2008-09. The disputes raised by the assessee in this appeal relate to nature of income earned by the assessee from share transactions and assessment of house property income. 2. At the time of hearing of the appeal, the ld. AR for the assessee did not press ground no.2 relating to the assessment of income from the property at Bellisima. This ground is dismissed as not pressed. 3. The second dispute is regarding nature of income earned by the assessee from sale and purchase of shares. The facts in brief are that the Assessing Officer during the assessment proceedings noted that the assessee as a proprietor of M/s. V.M. Investments, was engaged in the business of share trading. The assessee was also director of M/s. Prime Broking Company Ltd. from which he had received salary. The assessee had also derived income from house property and interest income. The AO further noted that the assessee had entered into certain transactions in shares from which income h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in proprietary concern and also director of broking firm M/s. Prime Broking Co. India Ltd. The dividend income earned by the assessee was only Rs.4,62,029/- on sale of shares worth Rs.40.00 crores which was only meagre and therefore intention of the assessee was not to earn dividend income but to earn profit from sale and purchase of shares. He referred to the judgment of Authority for Advance Rulings (AAR) reported in (288 ITR 641) = (2007-TII-03-ARA-INTL) in which the authority after referring to several judgments of Hon'ble Supreme Court observed that the purchase and sale of shares with motive of earning profit would result in the transaction being in the nature of trade/adventure in the nature of trade but in cases where object of investment in shares was to derive income by way of dividend etc. then the profit would be capital gain and not revenue receipt. As regards the assessment in earlier years, the Assessing Officer observed that principle of resjudicata was not applicable in income tax proceedings. Considering the facts and circumstances mentioned earlier, the Assessing Officer held that the assessee was dealing in shares with motive to earn profit in short span as a t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Aban Lloyd . In this case there were 62 transactions with repetitive buying and selling. The scrips had been sold after holding it for one day and few days. The gain from repeated purchases and sales in these scrips was Rs.1.52 crores out of total declared short term capital gain of Rs.1.50 crores. The repeated transaction in the same scrips clearly showed the intention of the assessee to trade in shares to earn profit. The assessee was also actually involved in the share business as proprietor of M/s. M.K. Investments and also director of M/s. Prime Broking Company (India) Ltd. The assessee had acquired large number of shares which were sold in short period. The assessee had access to infrastructure available of the proprietary concern. 3.4 As regards claims accepted in earlier year, the CIT(A) observed that mistake committed in earlier year cannot allowed to be perpetuated as held by Hon ble Supreme Court in case of Distributor (Baroda) P. Ltd. v. Union of India (155 ITR 120). As regards long term capital gain, CIT(A) observed that the assessee was dealing in share market and merely because a few shares happened to be held for a longer period did not imply that the shares r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the following decisions: i) 50 SOT 167 (Mum) in the case of Dev Ashok Karvat vs. DCIT ii) 139 ITD 294 (Mum) Jignesh Indulal Patel v. ITO iii) 130 TTJ 86 (Mum) (UO) B. K. Kenia vs. Addl. CIT 4.1 The ld. AR further submitted that the gain had also arisen in respect of certain shares which had been purchased in earlier year and since these had been accepted as investment in earlier years, the capital gain, in such cases have to be accepted. It was also submitted that the issue could be debatable but in such cases where two views are possible, the one favourable to the assessee should be adopted. As regards long term capital gains, it was submitted the shares sold after one year have to be considered as held for long term investment and, therefore, long term capital gain have to be accepted. Reliance was placed on the decision of Delhi Bench of the Tribunal in the case of Arjun Kapur vs. DCIT (70 TTJ 161). 5. The ld. CIT- DR appearing for the revenue, on the other hand, strongly supported the orders of the authorities below. It was argued that each case has to be decided on the basis of own facts and no two cases were identical. It was submitted that the judgments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d no single factor is conclusive. The most important factor is the intention of the assessee at the time of purchase which has to be gathered from the actual conduct of the assessee while dealing with the shares subsequently and not only on the basis of entry in the books of account or the objects in the memorandum of association. This view is supported by the judgment of the Hon'ble Supreme Court in the case of CIT vs. Madangopal Radheylal (73 ITR 642). The actual conduct has to be evaluated by analyzing the holding period etc. An investor makes purchases with long term goal of earning income from the investment and he is not tempted to sell the shares on every rise and fall in the market which are the attributes of a trader. Since income from investment in shares which is in the form of dividend is received annually, normally an investor is expected to hold the shares for more than a year. However there may be situations when the investor may also sell the shares after short holding in order to reshuffle portfolio when prices are falling or to encash investment in case of some personal exigencies. Each case is required to be examined carefully to ascertain the true nature of tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ote that dividend income earned by the assessee is only meager amounting to Rs.4,62,029/- on sale of shares worth Rs.40.00 crores which gives return of around 0.1 % on investment compared to high profit earned from sale and purchase of shares which also shows that dividend was only incidental income as even in case of trading shares the assessee will be entitled for dividend in respect of shares which were held on record date. Clearly assessee in this case had purchased and sold shares with profit motive and not for investment as is clear from the subsequent conduct of the assessee in dealing with shares. The transactions resulting into short term capital gain have therefore to be taken as business activity and the short term capital as business income. 8. It has been argued on behalf of the assessee that similar transactions in the earlier years i.e. 2006-07 and 2007-08 as well as in subsequent year i.e. 2010-11 have been accepted by Assessing Officer as investment activity. Therefore, to maintain consistency and for uniformity of treatment, the transaction should be accepted as investment activity in this year also. However considering the facts of the case we are unable to acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to make investment for earning dividend and appreciation in the value of shares. The same view has been taken by the Hon'ble Supreme Court in the case of New Jehangir Vakil Mils Co. Ltd. vs. CIT (supra), on which reliance has been placed by the ld. DR. In that case the Hon'ble Supreme Court held that the fact that in the earlier year the assessee was treated as an investor would not estop the assessing authority from considering as to when the trading activity of the assessee in shares began for the purpose of computation of profit in the subsequent year. Thus in that case, profit in respect of share purchased in earlier year was also accepted as business profit. 10. The ld. AR for the assessee has relied on the decision of the Tribunal in the case of Gopal Purohit (29 SOT 171) to argue that income from all delivery based transactions has to be assessed as income as held by the Tribunal in the said case. We have carefully perused the order of the Tribunal in the case of Gopal Purohit (supra), but we find that there is no universal finding in that case that all delivery based transactions have to be treated as investment. It is pertinent to note that the Tribunal in case of Gopa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emonstrate that there were large number of transactions with frequency, volume, continuity and regularity. It was in these circumstances that the claim of investment by the assessee was accepted. In the present case there is sufficient material as mentioned earlier to show that the assessee had undertaken the transactions with profit motive with regular and repetitive transactions in the same scrip. In case of B.K. Kenia vs. ACIT (supra), the Tribunal held that merely on the basis of volume of transaction the share transaction activity could not be considered as business. In the present case the transactions have been treated as business not only on the basis of volume but considering the frequency of transactions holding period as well as repetitive transactions in the same scrip on regular basis. The decisions of the Tribunal cited by the ld. AR are therefore rejected as not applicable to the facts of the present case. 12. In view of the foregoing discussion and for the reasons given earlier we hold that short term capital gain declared by the assessee in respect of share transaction has to be assessed as business income. The assessee has however pointed out that the holding pe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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