Income Tax Appellate Tribunal - Ahmedabad
Alpesh Virchand Modi, Ahmedabad vs Income Tax Officer,Ward-8*4),, ... on 12 May, 2017
*,* अहमदाबाद ।
आयकर अपील
य अ धकरण, अहमदाबाद यायपीठ
IN THE INCOME TAX APPELLATE TRIBUNAL
" A " BENCH, AHMEDABAD
सव ी एन.के. ब लैया, लेखा सद य एवं महावीर साद, या यक सद य के सम ।
BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER And
SHRI MAHAVIR PRASAD, JUDICIAL MEMBER
आयकर अपील सं./I.T.A.
No.2717/Ahd/2011
( नधा रण वष / Assessment Year : 2008-09)
Shri Alpesh Virchand Modi बनाम/ ITO, Ward 8(4),
Manilal & Brothers, Vs. Ahmedabad.
Madhupura, Ahmedabad.
थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AAYPM 2313 G
(अपीलाथ' /Appellant) .. ( (यथ' / Respondent)
अपीलाथ' ओर से / Appellant by : Shri S.N. Divatia, AR
(यथ' क* ओर से/Respondent by : Ms. Richha Rastogi, Sr. DR
ु वाई क* तार.ख /
सन Date of Hearing 06/03/2017
घोषणा क* तार.ख /Date of Pronounce ment 12/05/2017
आदे श / O R D E R
PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER :
This is an appeal by the assessee directed against the order of the Commissioner of Income Tax(Appeals)-XIV, Ahmedabad, dated 16/09/2011 for the Assessment Year (AY) 2008-09.
2. Assessee has been taken following Grounds of appeals:
(i). The order passed u/s.250 on 16.09.2011 for A.Y.2008-09 by CIT(A)-XIV, Ahmedabad upholding the Short Term Capital Gain on sale of shares as business income and disallowance of ITA No. 2717/Ahd/2011 Alpesh Virchand Modi vs.ITO Asst.Year - 2008-09 -2- interest of Rs.31,068/- made by AO is wholly illegal, unlawful and against the principles of natural justice.
(ii). The ld. CIT(A) has grievously erred in law and or on facts in not considering fully and properly the submissions made and evidence produced by the appellant with regard to the impugned additions.
(iii). The Ld.CIT(A) has grievously erred in law and on facts in confirming that the appellant had indulged into trading in shares so that profit arising out of sale of shares was business income instead of STCG claimed by the appellant.
(iv). That in the facts and circumstances of the case as well as in law, the Ld.CIT(A) ought not to have upheld that the appellant was a trader and not an investor in shares so that STCG on sale of shares was business income.
(v). The Ld.CIT(A) has erred in upholding the disallowance of interest expenses of Rs.31,068/- made by AO.
(vi). That in the facts and circumstances of the case as well as in law, the Ld. CIT(A) ought not to have upheld the disallowance of interest of Rs.31,068/- made by AO.
2. The relevant facts as culled out from the materials on record are as under:-
During the course of assessment proceedings it was noticed that the assessee had shown profit of Rs.1,73,681/- out of share trading activity, the said profits however was reduced from the income under the head "Business & Profession", treating the same as investment and was offered to tax under the head "Short Term Capital Gain". On perusal of the details it was submitted by the assessee, it was seen that assessee ITA No. 2717/Ahd/2011 Alpesh Virchand Modi vs.ITO Asst.Year - 2008-09 -3- purchased and sold shares of 35 different companies during the year & assessee transacted in such equities as number of times during the entire year. Assessee's transactions in such purchases & sale were almost throughout the year. The details of the share trading undertaken by the assessee is tabulated below for ready reference:
STCG during the A.Y. 2008-09 Sl. Name of Script No. of Amount Profit/L No. share of in oss Traded/ involved Purchas e in IPO
1. BGR Energy 27 6720 2384
2. RNRL 750 72385 86255
3. IDFC 500 30165 11310
4. Meghmani Organics 350 6650 2856
5. Central Bank of India 63 6426 1217
6. Circuit Systems 395 13825 4594
7. Crain Energy Pvt.Ltd. 525 84000 10489
8. Eidel Weiss Ltd. 8 6600 0
9. Futura Poly Ltd. 300 12228 0
10. G.V. Films Ltd. 1000 12320 0
11. ICICI Bank Ltd 108 96120 9561
12. Idea Cellular Ltd 1172 12900 9947
13. Kolte Patil Developers 44 6380 1365
14. Maytas Infra Ltd. 180 6600 4070
15. Mudra Port Ltd. 15 6600 8036
16. Nocil Ltd. 500 30999 0
17. NTPC Ltd. 250 68785 0
18. Omaxe Ltd. 26 8060 1727
19. Powergrid Cor. Ltd. 786 88032 16826
20. Precision Pipe Ltd. 45 6750 221 ITA No. 2717/Ahd/2011 Alpesh Virchand Modi vs.ITO Asst.Year - 2008-09 -4-
21. Reliance Ind. Ltd. 35 92536 2106 22. Reliance Petro Ltd. 100 26488 0 23. Reliance Power Ltd. 25 6880 0
24. Time Techoplast Ltd. 24 7560 3487
25. Unity Infra Projects Ltd. 43 29025 1330
26. Wipro Ltd. 50 27452 464
27. Empee Distillery Ltd. (-) 2965 Total 4221 604376 173486
3. After going through the case records and the nature of transactions as a whole the assessee was asked to show cause as to why his activity should not be treated as business activity instead in investment activity as shown by him. The assessee vide order sheet dated 20.09.2010 stated that he is director in a company and was drawing salary exceeding Rs. 5 lacs and so purchase and sales of shares was not his main activity & such purchase was made with the intention to have long tern appreciation and for earning dividend. The assessee stated that the investments were made from the assessee's own fund. Assessee on the basis of his above submission stated that the profit on sale of shares should be treated as capital gain and not business income.
4. Against the said addition assessee filed first appeal before the learned CIT(A), who dismissed the appeal of the assessee. Now appeal of the appellant is before us.
5. We have gone through the relevant record and impugned order, it is undoubtedly facts that appellant is an individual and have income from ITA No. 2717/Ahd/2011 Alpesh Virchand Modi vs.ITO Asst.Year - 2008-09 -5- salary, share income from partnership firm and income from other sources. He had filed his return of income for Assessment Year 2008-09 on 29/09/2008 declaring loss of Rs.9,06,792/-.
6. During the course of Assessment Proceedings, the AO noticed that the appellant had shown profit of Rs.1,73,681/- in respect of share transactions which was declared in the return as short term capital gains. However, the AO treated the same as business income on the ground that the appellant had carried out purchase and sale of shares in a systematic and organized manner by acquiring the shares in IPOs which were sold on the listing day at profit.
7. The AO also found that the appellant had claimed interest of Rs.1,80,585/- on the borrowings amounting to Rs.46.50 lakhs as against which the interest free advance to the relatives were Rs.7 lakhs. Hence, interest of Rs.31,068/- was disallowed in respect of the said advance of Rs.7 lacs on the ground of diversion of borrowed funds for non-business purposes.
8. On account of foregoing observation we hold that appellant is an investor, not a full time business man of share trading because he is a director in company and derives salary, getting income from partnership firm and income from other sources.
ITA No. 2717/Ahd/2011Alpesh Virchand Modi vs.ITO Asst.Year - 2008-09 -6-
9. In the light of the above submissions we allow the appeal of the assessee.
10. In the result, appeal filed by the assessee is allowed.
This Order pronounced in Open Court on 12/05/2017
Sd/- Sd/-
एन.के. ब लैया महावीर साद
(लेखा सद य) ( या यक सद य)
( N.K. BILLAIYA ) ( MAHAVIR PRASAD )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 12/05/2017
Priti Yadav, Sr. PS
आदे श क त"ल#प अ$े#षत/Copy of the Order forwarded to :
1. अपीलाथ' / The Appellant
2. (यथ' / The Respondent.
3. संबं6धत आयकर आयु8त / Concerned CIT
4. आयकर आयु8त(अपील) / The CIT(A)-XIV, Ahmedabad.
5. 9वभागीय त न6ध, आयकर अपील.य अ6धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड फाईल / Guard file.
आदे शानुसार/ BY ORDER, स(या9पत त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad True Copy