Income Tax Appellate Tribunal - Mumbai
Kinjal Rajnikant Maniar, Mumbai vs Department Of Income Tax on 25 April, 2013
आयकर अपीलीय अिधकरण "ए ए" Ûयायपीठ मुंबई मɅ।
IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, MUMBAI ौी डȣ. मुमोहन, उपाÚय¢ एवं ौी संजय अरोड़ा, लेखा सदःय केसम¢ ।
BEFORE SHRI D. MANMOHAN, V. P. AND SHRI SANJAY ARORA, A. M. आयकरअपीलसं.I.T.A. No.8063/Mum/2011 िनधा[रणवष[ / Assessment Year: 2008-09) (िनधा[ Income Tax Officer,-4(2)(2) Kinjal Rajnikant Maniar, Room No. 644, 6th Floor A-1, 4th Floor, Aayakar Bhawan, बनाम / Bhakti Apartments, M.K. Road, Vs. M.G. Cross Road No.2, Mumbai-400 020. Kandivali (W), Mumbai- 400 067.
ःथायीले खासं / .जीआइआरसं / .PAN/GIR No. : AAMPM 4925 C
(अपीलाथȸ/Appellant) : (ू×यथȸ / Respondent)
अपीलाथȸ ओर से /Appellant by : Miss Neeraja Pradhan
ू×यथȸकȧ ओर से/Respondentby : Shri Kinjal R. Maniar
सुनवाई कȧ तारȣख /Date of Hearing : 25.04.2013
घोषणा कȧ तारȣख/ Date of : 14.06.2013
Pronounce ment
आदे श / O R D E R
Per Sanjay Arora, A. M.:
This is an Appeal by the Revenue directed against the Order by the Commissioner of Income Tax (Appeals)-8, Mumbai ('CIT(A)' for short) dated 27.09.2011, partly allowing the assessee's appeal contesting its assessment u/s.143(3) of the Income Tax Act, 1961 ('the Act' hereinafter) for the assessment year (A.Y.) 2008-2009 vide order dated 23.12.2010.
2ITA No. 8063 /Mum/2011 (A.Y. 2008-09) I.T.O. vs. Shri Kinjal Ranjikant Maniar
2. The only issue arising in the instant appeal is the head of income under which the income on the sale of shares arising to the assessee and returned by it as 'long term capital gains' (LTCG), at Rs. 18,10,237, is to be assessed; the Revenue claiming it as being assessable as business income u/s. 28 of the Act.
3. We have heard the parties, and perused the material on record. 3.1 The Assessing Officer (AO) has made an elaborate case in favour of the Revenue's stand. Firstly, the income from the said transactions for the preceding years, being assessment years 2005-06 and 2006-07, had been assessed as business income. The assessee had undertaken, almost throughout the year extensive transactions in shares. Though the number of transactions may not have been very high, but the assessee had purchased shares in bulk, indicating the same to be his main vocation, consuming the bulk of his resources, including time. The assesse had in fact no other business; the other income returned by him being primarily interest and dividend. The stock flow statement for the year shows in fact scrips in as many as 85 companies. It is, as clarified by the honb'le apex court in case of CIT vs. Associated Industrial Development Co. Pvt. Ltd. [1971] 82 ITR 586 (SC), for the assessee to show what part of the holding in shares is by way of 'investment', and which part by way of 'stock-in-trade'. The assessee should in normal circumstances be in a position to show so from his records. However, the assessee had not produced any material in the matter. No balance-sheet stood produced; the assesse has neither maintained any books of account nor any balance-sheet, and the only material adduced in support of his claim is the bank statement. The question as to whether a particular scrip is being held as an investment or not is a mixed question of law and of fact. This would, even as clarified by the apex court in the case of CIT vs. H. Holck Larsen [1986] 160 ITR 67 (SC), imply that factual evidences in this respect are to be led by the assessee, who has in fact engaged in both delivery as well as non-delivery based transactions. The AO, therefore, was of the clear view that the income claimed exempt by way of LTCG was assessable as business income. Reliance was placed by him on a number of decisions by the apex court, as under, as also by the tribunal, wherein in 3 ITA No. 8063 /Mum/2011 (A.Y. 2008-09) I.T.O. vs. Shri Kinjal Ranjikant Maniar the facts of the case, it had been held that the said transactions were part of the assessee business/trading stock, as well as the CBDT Circular No. 4/ 2007 dated 15.06.2007 laying down the guidelines for the purposes of determining the same:
1. CIT vs. Associated Industrial Development Co. (P.) Limited [1971] 82 ITR 586 (SC)
2. CIT vs. H. Holck Larsen [1986] 160 ITR 67 (SC)
3. Raja Bhadur Visheshwar Singh vs. CIT [1961] 41 ITR 685 (SC)
4. Dalhousie Investment Trust Co. Ltd. vs. CIT [1968] 68 ITR 486 (SC)
5. G. Venkataswami Naidu & Co. vs. CIT [1959] 35 ITR 594 (SC)
6. CIT vs. Sutlej Cotton Mills Supply Agency Limited [1975] 100 ITR 706 (SC) In appeal, it was clarified that the assessee has been consistently valuing the shares at cost, thereby treating them as an investment, booking income only on their sale, so that the said treatment clearly reflected their said treatment as by way of investment. All the shares on which income had been returned under the head 'capital gains' stood transferred in the assessee's name in the D-mat account on which the securities transactions tax (STT) had also been paid. The matter had been examined by the first appellate authority in the assessee's case for assessment years 2005-06 and 2006-07, holding, after analyzing the transactions, that there was no justification for treating the said income as business income, i.e., as against the long term capital gain returned by the assessee. As such, consistence would also suggest adoption of the same view. He, therefore, directed for the treatment of the said income as LTCG, so that the Revenue is in appeal.
3.2 As apparent, the AO's case has two limbs, i.e., the assessment of the gains on the transactions in shares as business income for the preceding years, as well as analyzing the transactions for the current year. The ld. CIT(A) was moved by the fact that in the assessment for the preceding years, i.e., AY 2005-06 and 2006-07, the first appellate authority had held the transactions in shares to be in capital assets. The ld. CIT(A) was however also required to look objectively into the transactions for the current year, as the transactions for one year cannot be presumed to be the same as that for another, and the investment behavior for one year may well vary, wholly or partially, from that in another, 4 ITA No. 8063 /Mum/2011 (A.Y. 2008-09) I.T.O. vs. Shri Kinjal Ranjikant Maniar so that there cannot be any presumption as to a uniformity in its respect from year to year. In fact, for those years the specific finding was that the assessee had sold shares held by him for as long as five years and about. To this extent, therefore, we find the order of the ld. CIT(A) as deficient.
3.3 The assessee has during the hearing before us, produced the statement of long terms capital gains. On its basis we find that the earliest of the shares sold during the year stands acquired in the month of June, 2005, and sold in June, 2007, representing a holding period of two years (24 months), which we observe to be the maximum holding period. The shares sold are spread over seven companies, and even though not a large number in itself, the bulk of the investment is only in three scrips, i.e., Arrow Web, at Rs. 11.17 lakhs, Hind Organics (Rs. 5.13 lakhs) and Hughes Tele, at Rs. 3.28 lakhs. Further, the investment therein co-exists, and it is not the case that the investment in one stands made by realizing that in the other, or stands financed through another. In other words, the investment profile exhibits a definite disposition toward investment, with the time lag between acquisition and its liquidation ranging between 12 to 18 months. Further, that an investment to the tune of Rs.20 lacks has fetched the assessee a profit of Rs.18.35 lakhs would rather show the assessee's acumen in picking up the right scrips. However, the balance share transactions yield nominal profit or loss. In fact, the assessee has the same time also returned short term capital loss of Rs. 1.24 lacs, since accepted by the Revenue. The same though would not by itself make it a business activity. Rather, here again we find that the loss arises on account of loss sustained at Rs. 3.01 lakhs in one scrip (MRPL), in which investment to the tune of Rs. 6.74 lakhs had been made by the assessee, so that the assessee had derived profit on most of the other transactions, which are spread over as many as 12 scrips. Though, again, not a large number, the same indicates continuous systematic activity in terms of purchase of shares as well as their disposal, as soon as a profit opportunity arises. This is clearly evident from the holding period, being at less than 30 days in many cases, and as low as one day in one case and, in fact, negative in another, in the sense that the shares were sold on 27. 04. 2007 prior to 5 ITA No. 8063 /Mum/2011 (A.Y. 2008-09) I.T.O. vs. Shri Kinjal Ranjikant Maniar their purchase on 3.5.2007 [in the case of Midas Farms (400 shares)]. Clearly, the assessee has also engaged in the share trading activity, i.e., as a vocation.
4. In view of the foregoing, therefore, though we are not inclined to disturb the finding of the ld. CIT(A) as far as the head of income under which the impugned gain is to be assessed, i.e., as LTCG, we would also like to put it on record that the assessee is also transacting in shares by way of trade or as a venture/s in the nature of trade. It would therefore do well to maintain separate D-mat account for shares being held by it by way of investment as against those by way of stock-in-trade, demarcating or classifying them as such at the very outset, i.e., upon purchase. This is as it is the intent with which the scrip is acquired that is paramount in deciding the question of its being held as an investment or as stock-in-trade; the assessee having been found by us as being engaged in either activity. Further, even if subsequently shares in one category are sought to be transferred to the other, as there is no embargo for treatment of trade stock as capital asset, or vice versa, the same could be by way of transfer from one D-mat account to another, with concomitant tax implications though. This would not only enable the Revenue to assess him in accordance with law, but also strengthen the assessee's case, besides being in accordance with the law as explained by the hon'ble apex court and other decisions cited by Assessing Officer having a bearing in the matter, so that the issue really boils down to applying the same in the facts of the circumstances of the case, which, therefore, are required to be properly appreciated, i.e., in totality, considering the entirety of the facts of the case. We decide accordingly.
5. In the result, the Revenue's appeal is dismissed.
पǐरणामतः राजःव कȧ अपील खाǐरज कȧ जाती है ।
Order pronounced in the open court on 14th June, 2013 आदे श कȧ घोषणा खुलेÛयायालय मɅ Ǒदनांकः 14 जून, 2013 को कȧ गई।
Sd/- Sd/-
(D.MANMOHAN) (SANJAY ARORA)
उपाÚय¢/ VICE PRESIDENT लेखासदःय / ACCOUNTANT MEMBER
मुंबई Mumbai; ǑदनांकDated : 14.06.2013
6
ITA No. 8063 /Mum/2011 (A.Y. 2008-09)
I.T.O. vs. Shri Kinjal Ranjikant Maniar
व.िन.स/.Pramod Kumar, PS
आदे श कȧ ूितिलǒप अमेǒषत /Copy of the Order forwarded to :
1. अपीलाथȸ/ The Appellant
2. ू×यथȸ/ The Respondent
3. आयकरआयुƠ)अपील (/ The CIT(A)
4. आयकरआयुƠ/ CIT- concerned
5. ǒवभागीयूितिनिध ,आयकरअपीलीयअिधकरण ,मुंबई/ DR, ITAT, Mumbai
6. गाड[ फाईल / Guard File आदे शानुसार/ ार BY ORDER, उप/सहायक उप सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण ,मुंबई / ITAT, Mumbai