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TMI Blog2016 (5) TMI 470X X X X Extracts X X X X X X X X Extracts X X X X ..... ther he has made a proper calculation with respect to provisions of section 14A r.w.rule 8D. We, therefore, are of the view that ld. CIT(A) has rightly deleted the disallowance of ₹ 11,598/- u/s 14A r. w. rule 8D as Assessing Officer has made ad hoc disallowance of equal amount of the exempt income at ₹ 11,598/- - Decided against revenue - ITA No. 168/Ahd/2012 - - - Dated:- 4-4-2016 - Shri Rajpal Yadav, JM, Shri Manish Borad, AM. For The Appellant : Shri V. K. Singh, Sr.DR For The Respondent : Shri S. N. Soparkar, AR ORDER PER Manish Borad, Accountant Member. This appeal of the Revenue is directed against the order of CIT(A)-XI, Ahmedabad, dated 3.11.2011 in appeal No.CIT(A)- XI/268/Addl.CIT R-6/10-11. Assessment order u/s 143(3) of the Income-Tax Act, 1961 (in short the Act) for Asst. Year 2008-09 was framed by Addl. CIT, Range-6, on 23.11.2010. Revenue has raised following grounds :- 1. The Ld. Commissioner of Income tax (A) has erred in law and on facts in directing the Assessing Officer to treat the income of ₹ 2,04,87,755/- from the sale of shares as Short Term Capital Gain, instead of business income, as assessed by the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... short term capital gain from sale of shares was taxed as business income. 3. Aggrieved, assessee went in appeal before ld. CIT(A). 4. As regards ground no.1 raised by assessee towards treating the income of short term capital gain of ₹ 2,04,87,755/- as business income, ld. CIT(A) deleted the addition by accepting the contention of assessee by treating the profits from sale of shares at ₹ 2,04,87,755/- as short term capital gain instead of business income as assessed by Assessing Officer by observing as under :- 2.3 I have carefully considered the rival submissions. I have also -gone through the assessment order and submissions of the Id. A.R. After taking in view of material available on records and the legal position on this issue, I am inclined to agree with the submissions of the Id. A.R. for the following reasons: (i) It is seen that appellant has .claimed short term capital gain in respect of 54 transactions only. These transactions being small in number, it cannot be said that appellant was engaged in the business of trading of shares. (ii) As per the CBDT circular No.4/2007 dt. 15-6-2007, most important criteria to be applied for treating the share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. This ground of appeal is allowed. 5. Aggrieved, Revenue is now in appeal before the Tribunal. 6. Ld. DR supported the order of Assessing Officer and did not place anything new before us. 7. On the other hand, ld. AR submitted that assessee is a CFA from ICFAI Hyderabad and joined Motilal Oswal Securities Ltd. as a salaried employee and left the company in 2006 and during this period he was also engaged in investment in shares and securities and the same have been declared as capital gain in the return of income filed by him. 8. Ld. AR also submitted referring to balance sheet appearing at page -21 of the paper book, exhibiting investment in equity shares at ₹ 23,28,219/-, investment in unquoted shares at ₹ 23,06,525/-, investment in mutual funds at ₹ 6,38,951/- and investment in govt. securities at ₹ 1,20,000/- and exhibited that short term capital gain shown during the year under appeal are in relation to sale of investments held by assessee as on 31st March, 2007. The ld. AR further submitted that during his employment period, Lok Housing Construction Ltd. a public limited company floated issue of fully convertible warrants having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned a capital gain of ₹ 2,03,86,894/-. In order to further examine the transactions of sale of shares of Lok Housing and Construction Ltd. we find that assessee applied for acquiring fully convertible warrants of this company on 26th February, 2006 and paid 10% i.e. ₹ 4.60 per warrant for 95,000 warrants at the time of application. Thereafter on 10.5.2006 warrants were allotted to the assessee for an amount of ₹ 4,37,000/- which is duly appearing in the balance sheet of assessee as on 31st March, 2007 under the investment in shares head. Thereafter in the beginning of F.Y. 2007-08 assessee in order to get warrants converted into equity shares paid the balance amount i.e. 90% which works out at ₹ 39.33 lacs and acquired the equity shares of the company and got it in demat form. All these shares were sold in between 1.8.2007 and 5.2.2008. The assessee paid interest on borrowed funds for paying ₹ 39.33 lacs towards balance amount of allotment money for converting warrants into shares and paid interest of ₹ 8,48,296/- to his father in law and uncle in law from whom fund was borrowed and also did not claim this interest expenditure against business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered the submissions of the representative and the stand taken by the A.O. As seen from the assessment order dated 31.10.2007 for A,Y. 2005-2006, the A.O. has accepted the claim of long term capital gain and short term capital loss in respect of shares which were taken delivery and sold through the demat account of the appellant. It is also seen that the appellant has shown speculation loss of ₹ 5,29,282/- for A.Y. 2005-2006. Thus the A.O. did not assess the long term capital gain and short term capital gain under the head business for A.Y. 2005-2006. Merely because the appellant was having speculative business in shares, that does not mean that even the delivery based transactions of shares should be assessed under the head business. The Hon'ble Hyderabad Tribunal in the case of Shah-La Investments and Financial Consultants Pvt. Ltd. vs. Dy. CIT (2 SOT 371) held that there is no bar for the same assessee to do business in shares and hold some shares as investment. Further as contended by the representative, the appellant has no borrowed funds either as on 31.03.2005 or as on 31.03.2006 as per the balance sheet whereas the A.O. held in the Assessment order as [para 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T (29 SOT 117) held as under in para 8.1 In our view, the legislative change of this nature, whereby no change has been made in respect of nature and modus operandi of such share transactions, resulting into any advantage cannot be taken away by the Revenue Authorities in this manner and in these circumstances, we are of the view that, principle of consistency, though it is an exception to the principle res judicata must be applied here. It is further so because the payment of securities transaction tax is mandatory i.e. whether an assessee earns the profit or not or suffers a loss and by imposition of such tax, the Legislature has not given any benefit to individual(s) entering into these transactions. Thus, in our view, in the facts and circumstances of the case, on the basis of principle of consistency alone, the action of the Revenue Authorities is liable to be quashed. . 5.3 Further, the Hon'ble Mumbai ITAT in the case of Janak S. Kangwala vs. ACIT (11 SOT 627) held as under on the principle of consistency and the issue of magnitude of transactions: The mere volume of transaction transacted by he assessee would not alter the nature of transaction. It is an estab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordingly, the A.O. is directed to accept the claim nof short term capital gain and long term capital gain. The A.O. shall withdraw rebate allowed u/s.88E of the I.T. Act by order u/s. 154 dated 03.02.2009 so far as it relates to capital gain. 7. In the result, the appeal of the Revenue is dismissed. 13. Respectfully following and relying on the decision of co-ordinate bench in the light of facts discussed in the case of assessee we are of the view that it cannot be said that assessee was only a trader in shares because assessee has clearly demarcated the transactions in his books of account, which proves that he was an investor in shares and securities upto end of F.Y. 2006-07 and commenced the business of shares and securities during Asst. Year 2008-09 i.e. F.Y. 2007-08. However, shares and securities held upto 31.3.2007 were sold during financial year 2007-08 and income earned from sale of such investments were shown as short term and long term capital gain. We, therefore, hold that the short term capital gain of ₹ 2,04,87,755/- should be accepted and there is no reason to interfere with the order of ld. CIT(A) and we uphold the same. This ground of Revenue is dism ..... X X X X Extracts X X X X X X X X Extracts X X X X
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