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TMI Blog2016 (12) TMI 1549X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case, and especially in view of the circulars of the Board, we do not find legality in the actions of the lower authorities in assessing the impugned income under the head ‘business’. Thus, the impugned income arising from sale of shares is directed to be assessed under the head ‘capital gains’, i.e. short term capital gain or long term capital gain, as the case may be. The AO is also directed to provide all consequential benefits as have been mentioned in grounds of appeal, after verifying requisite facts, viz. granting of exemption u/s 10(38) wherever applicable, charging of tax on special rate prescribed u/s 111A/112 and setting off of brought forward short term capital losses of AY 2009-10, in accordance with law and facts of this case. - Decided in favour of assessee. - I.T.A. No.4606/Mum/2013 - - - Dated:- 15-12-2016 - SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACCOUNTANT MEMBER For The Appellant : Shri Deepak Padauch For The Respondent : Shri B.S. Bist ORDER Per ASHWANI TANEJA, AM: This appeal has been filed by the assessee against the order of Ld. Commissioner of Income-tax (Appeals)-35, Mumbai [in short, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income and also erred consequently in taxing the same at normal rate of income-tax, instead of special rates prescribed u/s 111A / 112 of the Act and also denied benefit of exemption u/s 10(38) as was applicable on the long term capital gain and also erred in not granting benefit of set off of all brought forward short term capital losses of assessment year 2009-10. 3. The brief background as culled out from the orders of the lower authorities is that the assessee is an HUF, filed return of income showing income including Income from short term and long term capital gain on sale of shares, speculation profit on sale of shares, Income from house property and interest from bank. During the course of assessment proceedings, the AO asked the assessee to submit details with respect to share trading activities. Assessee filed the details, on the basis of which the AO concluded that share trading activities carried out by the assessee were done frequently and shares were held for a very short period. Thus, looking into the regularity and frequency of the transactions, the AO issued show-cause notice to the assessee requiring the assessee to explain why the gain arising from share tradi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture of the transactions. The transaction in whole has to be taken into consideration and the magnitude of the transaction does not alter the nature of transaction. 6. The assessee further submits that it, holds the shares as an investment as well as stock in trade . It is the intention of assessee which has to be seen to determine the nature of transaction. There is no basis for treating the investment activity of the assessee as trading in shares, when its intention was to hold shares in the companies as an investment and not as stockin- trade. Magnitude of transaction is not the sole factor to determine the nature of transaction. We also draw attention to CBDT circular no.4/2007 dated 15.6.2007 wherein it is stated that ..... The Assessing Officer are further advised that no single principle would be decisive and the total effect of al the principles should be considered to determine whether, in a given case, the share are held by the assessee as investment or stock in trade 7. Further the assessee has been consistently investment in shares for the past several years and the assessee has been offering for income tax any' gains made by it on sale of sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istently in all the years right from AY 1999- 2000 upto 2009-10. In AY 2006-07, the assessment order was passed u/s 143(3) dt 07-08-2008 wherein the returned income was assessed, under the head capital gains only. Even in subsequent assessment years from A.Ys. 2011-12 TO 2015-16, the income was retuned under the head capital gains and assessed as such by the AO. There was no basis for the AO in this year to take a divergent view. The shares have always been shown as part of investment and accepted as such. Ld. Counsel relied upon the following judgements in support of his claim: 1) Gopal Purohit v. JCIT [2009] 29 SOT 117 (MUM) 2) CIT v.Gopal Purohit [2011] 336 ITR 287 (Bom) 3) ACIT v. Chetan K. Mehta - (ITA No.6529/Murn/2011) 4) ACIT v. Shri Ronnie Hosi Mehta (ITA No. 640/M/2012) 5) M/s. Mindset Technologies Pvt.Ltd. (ITA No.7071/M/2013) 6) Shri Dhairesh K. Sangvi v. DCIT (ITA No. 2933/M/2013) 7) DCIT v. M/s. E-Cap Partners (ITA No.4785/M/2009) 8) Shri Rajesh S. Sanghvi v. ACIT (ITA No, 1609/M/2011) 9) CIT V. Amit Jain ITA No.517/2012 (Delhi High Court) 7. Per contra, the Ld. DR relied upon the orders of the lower authorities and reiterated the obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s own funds in making investment in the shares. The shares have always been shown as part of investment in its balance-sheet consistently. It has also been noted that CBDT by way of its circular No.4/7 dated 15-06-2007 clarified that an assessee can have two portfolios, i.e. one for investment purposes and the other for business purposes. The amount held in the investment portfolio should be treated as income under the head Capital gains . Relevant part of the circular is reproduced below: 10. CBDT also wishes to emphasise that it is possible for a tax payer to have two portfolios, i.e., an investment portfolio comprising of securities which are to be treated as capital assets and a trading portfolio comprising of stock-in-trade which are to be treated as trading as-sets. Where an assessee has two portfolios, the assessee may have income under both heads i.e. capital gains as well as business income. 11. Assessing officers are advised that the above principles should guide them in determining whether, in a given case, the shares are held by the assessee as investment (and therefore giving rise to capital gains) or as stock-in-trade (and therefore giving rise to business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business; (ii) The assessee has choice of deciding whether the shares are purchased in investment portfolio or business portfolio. Once a particular decision is taken by the assessee, then he is obliged to follow the same in all subsequent years; it would in turn mean that AO shall also be bound to follow consistent approach; (iii) CBDT also wants to reduce litigation and maintain consistency by the Revenue as well as by the assessee in approach followed on the issue of treatment of income derived from sale of shares. 12. Thus, turning back to the facts of our case, it is an undisputed fact that in AY 1999-2000 the assessee included its shares as part of investment and since then the assessee has been consistent in approach by showing the same under the head investment and claiming the income from sale of shares as assessable under the head Income from capital gains . But the AO breached the consistency approach in the year before us despite the fact that in all earlier and subsequent years the stand of the assessee has been accepted. This approach is not permissible under the law. On the other hand, the assessee has offered the impugned income as assessable under the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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