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TMI Blog2017 (3) TMI 887X X X X Extracts X X X X X X X X Extracts X X X X ..... oon Kabra, Sr.DR For The Respondent : Shri A. C. Shah, AR ORDER PER Manish Borad, Accountant Member . This appeal of Revenue for Asst. Year 2008-09 is directed against the order of ld. Commissioner of Income Tax(A) XX, Ahmedabad, dated 17.10.2013 vide appeal no. Commissioner of Income Tax(A)-XX/17/12-13, arising out of order u/s 143(3) of the Income-tax Act, 1961 (in short the Act) framed on 14/12/2010 by ACIT, B.K. Circle, Palanpur. Following grounds have been raised by Revenue :- 1). The Ld. Commissioner of Income-Tax (Appeals)-XX, Ahmedabad has erred in law and on facts in deleting the addition of ₹ 36,00,950/- made on account of capital gain treated as business income even though all the indicators show that the transactions were in the nature of business / trade. 2). On the facts and in the circumstances of the case, the Ld. Commissioner of Income-Tax (Appeals)-XX, Ahmedabad ought to have upheld the order of the Assessing Officer. 3). It is therefore, prayed that the order of the Ld. Commissioner of Income-Tax (Appeals)-XX, Ahmedabad may be set-aside and that of the Assessing Officer be restored. 2. Briefly stated facts of the case as cull ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Representative supported the order of ld. Commissioner of Income Tax(A). 6. We have heard the rival contentions and perused the material placed before us. Revenue s sole grievance in this appeal is against ld. Commissioner of Income Tax(A) s order deleting the addition of ₹ 36,00,950/- by treating the gain on shares as long term capital gain and against ld. Assessing Officer s treatment of the same as business income. We observe that ld. Commissioner of Income Tax(A) in his appellate order has discussed the facts of the case in detail and has relied on various decisions and allowed assessee s appeal by observing as follows :- 5,2. I have considered the facts of the case and the submission made by the appellant. The appellant was engaged in the business of trading of diamonds besides having rental income and interest income. During the course of assessment proceedings, the A.O. noticed that assessee has transacted in sale and purchase of shares and appellant shown the short term capital gain of ₹ 39,95,535/- and long term capital gain of ₹ 36,00,950/- . However, The A.O. treated both the capital gains as business income considering the volume, fre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch shows that there was no day to day control and nexus with the profit loss of the business carried out on by the appellant if any in terms of Section 28. Further delivery in all the shares were taken through DEMAT account and the same has not been controverted by the authorities. Moreover, the equity shares were valued at the cost as per the Accounting Standard- 13 which amply establishes the investment in shares. If the same would have been shown as closing stock being business asset then as per the Accounting Standard-2 the valuation of the closing stock would have been at the cost or market price whichever is less and in that case there would have been heavy losses during the year under consideration in place of the positive short term and long term capital gain shown in the return of income. A comparative figures of the same are given as under:- Year ending Value at cost (Rs.) Taking by appellant as per AS- 13 Value at Cost or Market Price whichever is less as perAS-2(Rs.) 31.03.2005 51,82,321/- 39,64,049/- 31.03.2006 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h shows the intention to investment in shares and not the trade because in business regularly traders trades in similar types of few items only so that they can get familiar with that item and get profit in that item in every kind of market. In the case of Management Structure Systems (P) Ltd. vs. ITO it is held that the intention of the appellant cannot be read from his mind but it reflects in its conduct, the way he treats the transactions. It was also contended that some of the scripts were held for more than 5 years and no transactions without delivery has taken place. 5.7 The appellant has not borrowed any money for investment in shares not paid any interest and used his own surplus funds which has not been doubted by the A.O. This proposition has also been accepted by the Board in Circular No.4/2007 that the appellant is entitled to maintain two portfolios of the share i.e. one as investment and another as stock in trade. In the preceding years, the appellant was constantly declaring the capital gain either long term or short term as per the period of holding on the sale of shares. It is true that the rule of Res Judicata does not applicable in the income tax proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he similar nature in the year under consideration cannot be treated as trading without any basis when it was not a stock-intrade. The facts are identical to the facts of the case cited and for this proposition .. 7. We further observe that ld. Commissioner of Income Tax(A) has relied on various judgments of Hon. Jurisdictional High Court, Tribunal s decision wherein it is an established fact that if an assessee is engaged in the transaction of purchase and sale of equity shares showing the investments in equity shares as investment in the balance sheet at cost and not as a closing stock and is consistently showing the gain as short term capital gain (if held for less than 12 months) or long term capital gain (if held for 12 months or more) then the claim of assessee is held to be justified. We further observe that ld. Commissioner of Income Tax(A) has referred and relied on various decisions but we find it pertinent to observe a few of them which squarely cover the facts of the assessee which are reproduced below :- (1) Vinod S. Sanghvi, Mumbai vs. ACIT, Mumbai in ITA No.3415/Mum/2012 held as under :- 15. We noted that the main contention of the revenue in trea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere purchased by the assessee as investment and the gain arising on sale of those shares were allowable to be taxed as capital gain. It is not denied that in this case also, the assessee was holding the shares as investment. Holding of the shares as investment itself prove the intention of the assessee as regards to the nature of the transaction. Had the shares been the business assets, it would have shown by the assessee as a stock in trade. Apparent is real, if the revenue feels that the intention of the assessee was not to hold the shares as investment. The onus in our opinion is on the revenue to prove that apparent is not real. No evidence was being placed or brought to our knowledge by the Ld. D.R. which may prove that the intention of the assessee was not to hold the shares as investment. It is also a fact that the assessee derived the dividend income and has also made the investment in the shares not out of the borrowed funds, but out of its own surplus funds. The CIT(A) while allowing the appeal of the assessee has extensively dealt with the various factors as well as various case laws to arrive at a finding that the shares were held by the assessee as a capital investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n account of sale of shares as short term capital gain. 7. In view of the above facts and circumstances of the case and in view of the decision of the Tribunal in the case of Tikuchand D. Jogani (supra), we allow this ground in favour of the assessee as facts are similar. (2) ACIT -20(3) Vs. Assessee ITAT Mumbai Dtd.21.08.2013 in ITA No.2081/ Mum/2011 held as under:- 5. We have considered the issues as raised by the AO and detailed submissions as stated above. There is no dispute with reference to the fact that assessee's main business is manufacturing of PVC pouches and tubings. The assessee also for the first time entered into share trading in F A business and earned profit of ₹ 47,88,079/- which is shown as business income. As far as share transactions are concerned, assessee was involved in share transactions in earlier years and also in later years. Considering the transactions and submissions of the assessee, we are of the opinion that the same cannot be treated as business income as assessee had no borrowed funds, no set up to do share transactions as a trading activity and further long term gains assessed as business income was treat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad been offered as STCG. In the preceding AY, the AO accepted this. As per Gopal Purohit 228 ITR 582 (Bom) (SLP dismissed) it is open to an assessee to trade in the shares and also to invest in shares. When shares are held as investment, the income arising on sale of those shares is assessable as LTCG/STCG. Accordingly, the decision of the Tribunal in holding that the income arising on sale of shares held as investment were liable to be assessed as LTCG/STCG cannot be faulted. (4) Nagindas P. Sheth (HUF) Vs. ACIT (ITAT Mumbai) ITA No.961/Mum/2010 ITA No.l836/Mum/2010 dtd.5.4.2011 held as under- Despite Large number of transactions in shares, profit assessable as capital gains The assessee HUF offered income from sale of shares as short-term capital gains (STCG). The AO held the income to be business profits on the ground that (i) the assessee had 158 share transactions in the year which showed the intention to trade, (ii) The regularity and frequency of transactions showed no intention to hold shares to earn dividend and (iii) Instead of one or two demat accounts, the assessee had adopted a professional approach and transacted through several brokers,. On ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... risdictional Hon'ble High Court and Hon'ble IT AT, Ahmedabad, the volume and frequency cannot be the sole criteria to take the decision. However, in the instant case, no such high transactions have been made in a particular script. Further, the decision of the Hon'ble ITAT, Ahmedabad in the case of Shri Sugam Chand C. Shah Vs. ACIT, Circle (3) in which holding period was held to be decisive in treating the transactions as business or capital gain is not very relevant now in view of the Gujarat High Court decision mentioned earlier. Unless there is specific provision in the Act in Section 94(7) holding period cannot determine the nature of transactions as business or capital gain. 5.11. In view of the above discussion, on facts and legally also the appellant has correctly shown the capital gains for taxation and the income cannot be termed as business income. Therefore, the A.O's action for treating the same as business income is rejected and short term and long term capital gain offered by the appellant are accepted. Thus, ground of appeal is allowed. 9. In view of above discussion and lucid findings of ld. Commissioner of Income Tax(A) and also referrin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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