Income Tax Appellate Tribunal - Mumbai
Nemichand P Jain Huf, Mumbai vs Department Of Income Tax on 13 November, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI "B" BENCH, MUMBAI
BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL
MEMBER,
AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER.
ITA. No. 7159/Mum/2013
(Assessment Year: 2010-11)
ACIT- 16(2), 2nd Floor,
Matru Mandir, Tardeo Road, Appellant
Mumbai-400 007
Vs.
Shri Nemichand P Jain HUF B-2,
6th Floor, Matru Ashish Building, Respondent
39, Nepeansea Road,
Mumbai-400 036.
PAN: AAACHN 1035N
अपीलाथ क
ओर से /By Appellant : Shri Airiju Jaikaran, D.R.
यथ क
ओर से/By Respondent : Shri Naresh Kumar
सन
ु वाई क
तार ख/Date of Hearing : 09.11.2015
घोषणा क
तार ख/Date of
Pronouncement : 13.11.2015
आदे श / O R D E R
PER SHAILENDRA KUMAR YADAV, J.M:
This appeal has been filed by Revenue against the order of Commissioner of Income-Tax (Appeals)-27, Mumbai, dated 24.09.2013 for A.Y. 2010-11 on following grounds:
"1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in treating the transaction of purchase and sale of shares as Short Term Capital Gain and Long Term Capital Gain instead of Business Income.
2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in treating the transaction of purchase and sale of shares as Short Term Capital Gain instead of Business Income ignoring the landmark judgment of Hon. ITAT IN THE INCOME TAX APPELLATE TRIBUNAL "F" BENCH, MUMBAI in the case of Veena S. Kalra, Mumbai v/s Department of the Income-Tax, ACIT 16(1), Mumbai delivered on 10th July, 2013 bearing I.T.A. No. 2403/M/2012 (Assessment Year:2008-09)."
2. Appellant is an individual. The return of income for the year under appeal was filed on 13.10.2010 declaring total income of Rs.25,76,970/-.Assessment u/s 143(3) was completed by the Ld. Assessing Officer determining the total income at Rs.52,38,980/-. Assessing Officer observed that assessee has received short term capital gain of Rs.38,67,267/- and long term capital gain of Rs.10,59,831/-. Assessing Officer ask the assessee to explain as to why such capital gain should not be tax as business income. Assessing Officer after considering the submissions on behalf of assessee treated the short term capital gain of Rs. 38,67,267/- and long term capital gain of Rs. 10,59,831/- as business income of assessee and added the same to the total income of assessee.
2.1 Matter was carried before first appellate authority where various contentions raised on behalf of assessee to justify its claim of short term capital gain and long term capital gain in respect of income from shares. Having considered the same CIT(A) granted relief to the assessee as claimed. Same has been opposed on behalf of revenue inter alia submitted that CIT(A) erred in treating the transaction of purchase and sale of shares as short term capital gain and long term capital gain instead of business income. So, the order of CIT(A) be set aside and that of the Assessing Officer be restored. The Departmental Representative also relied on decision of ITAT in case ITAT IN THE INCOME TAX APPELLATE TRIBUNAL "F" BENCH, MUMBAI in the case of Veena S. Kalra, Mumbai v/s Department of the Income-Tax, ACIT 16(1), Mumbai delivered on 10th July, 2013 bearing I.T.A. No. 2403/M/2012 and required to set aside the order of CIT(A) and restored the order of Assessing Officer. On the other hand, the Ld. Authorized Representative supported the order of CIT(A).
3. After going through rival submissions and material on record, we find that Assessing Officer has treated the short term and long term capital gain from shares as business income. Assessee is HUF and its Karta's main activity is of Property development and that he is neither a share broker nor share dealer. Assessee earned considerable amount of short term capital gains from the shares held by him for a period more than one month and there was no churning of shares as stated by assessee. Assessing Officer has picked up only a few transactions wherein the holding period was a few days, ignoring the majority of transactions. As regards long term capital gain offered to tax it was found that share in this category were held by assessee starting from 414 days to 803 days which is fairly long period and there was no reason to consider such transaction long term capital gain as assessee's business activities. The liquidating of investment with a view to minimize the losses when the share market is showing volatility could not be considered as business without attributing churning in same shares. The Assessing Officer observed few transactions wherein the assessee has incurred losses and attributed this fact to the assessee intention to carry on business without waiting for the return in the long term. Assessing Officer failed to appreciate that value of closing investment at cost is more than the market value. It is not the case assessee has been trying to liquidate all the investments.
4. Over all intention of assessee has to be liquidate while deciding the issue of long term or short term versus business activity. Assessee was not in a hurry to make profits over night and he was able to absorb the losses incurred by him and still hold the portfolio as investment. The assessee has invested his own capital in investment of shares and no borrowed funds are involved. The assessee was in receipt of salary as a working partner of the firms so he was not full time involved in share dealing. The act of maintaining the regular books along with demat account and contract notes and thus organizing proper records cannot be construed as systematic and regular of trading activity since maintaining the books and organizing the records is necessary for evaluating its investment activities in share. Assessee has been following a consistent method of showing investments in his balance sheet. Assessee has shown the speculation profit and profit and loss account investment activity separately and there is no mix up of his business with that of the investment activity.
5. Thus, the portfolio held by the appellant when considered in the light of number of scrips held/purchased/sold and corresponding number of transactions, number of days transacted in market, lack of frequency of transactions, consistent valuation of shares at cost value, separation of speculation/F&O business from investment activity, investment being made from own funds shows that assessee is engaged as investor in shares and not as trader. In view of this CIT(A) appeal was justified in observing that income return by assessee short term and long term capital gains has to be assessed under the respective heads as claimed by assessee and not business income. Further, the assessee has consistently shown short term capital gain/short term capital loss as well as long term capital gain/long term capital loss in all these years. In fact, the gross long term capital gain earned by assessee is over Rs.16.72 lakh which indicates that assessee has been a long term investor in shares. In view of above CIT(A) was justified in directing to assessee long term capital gain under respective heads.
6. This reasoned factual finding of CIT(A) need not interference from our side. We uphold the same. It is pertinent to mention, of the case relied by both authorities have taken into consideration though the same has not been specifically mentioned.
7. As a result, appeal filed by revenue is dismissed.
Pronounced in the open Court on this the 13th day of November, 2015.
Sd/- Sd/- (R.C. SHARMA) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai: Dated 13/11/2015 Ashwini Gajakosh आदे श क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent 3. आयकर आयु त(अपील) / The CIT(A) 4. आयकर आयु त / CIT - concerned
5. !वभागीय $त$न%ध, आयकर अपील य अ%धकरण, मुंबई / DR, ITAT, Mumbai
6. गाड+ फाईल / Guard File आदे शानस ु ार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई / ITAT, Mumbai