Income Tax Appellate Tribunal - Delhi
Jt. Cit vs Dinesh Kumar Gupta on 12 August, 2004
Equivalent citations: [2005]2SOT126(DELHI)
ORDER
S.C. Tiwari, A.M. As common facts are involved in these 3 appeals the same were argued together by the learned Departmental Representative and the learned authorised representative of the assessee. These appeals are being decided by this consolidated order, for convenience.
2. Appeal in ITA No. 502 is appeal filed by the revenue on 4-2-2000 against the order of learned CIT(A)XXlX, New Delhi dated 5-11-1999. In this appeal the dispute is as to whether the income arising to the assessee on sale of shares should be assessed under the head 'capital gains' as held by the learned CIT(A) or the same should be assessed as business income as contended by the revenue.
3. Facts of the case leading to this dispute briefly are that the assessee carried on business in the name of M/s. Sharad Sales and M/s. Keshav Agencies. Under the name of M/s. Sharad Sales the assessee carried on the business of dealing in motor parts. In the name of M/s. Keshav Agencies the assessee dealt in shares to only of 2 companies viz., M/s. Goetz and M/s. Goetz Financial Services Ltd. Income from both these proprietary concerns was disclosed as business income. Besides the assessee also carried on buying and selling of shares of other companies and certain investment in securities. Income arising to the assessee on buying and selling of shares in the individual name was declared by the assessee as capital gains. According to the revenue the assessee's transactions in shares in the individual name should also be treated as business of dealing in shares carried on by the assessee.
4. During the course of hearing before the learned CIT(A) the assessee contended that his main business was dealing in automobile parts for which purpose the assessee had obtained agency of M/s. Goetz. The assessee was required to hold shares of M/s. Goetz and M/s. Goetz Financial Services Ltd. as it was holding agency of these two companies. Hence the assessee treated the shares of these two companies as business assets and declared income as business income. As to other transaction of the assessee of buying and selling shares was not with a view to carry on any trade, the assessee acquired shares by way of investments. The assessing officer held that since these shares had been purchased with a profit motive, the transactions of the assessee were in the nature of trade adventure. The assessee argued before the 1d. CIT(A) that it is the intention of the assessee at the time of purchase of shares which was required to be seen and only because profit was made on sale did not mean that the assessee carried on any business. The learned CIT(A) saw force in the contention of the assessee. He referred to the judgments in CIT v. Sutlej Cotton Mills Supply Agency Ltd. (1975) 100 ITR 706 (SC), G. Venkataswami Naidu & Co. v. CIT (1959) 35 ITR 594 (SC), Raja Bahadur Visheshwara Singh v. CIT (1961) 41 ITR 685 (SC) and Rajputana Textile Agencies Ltd. v. CIT (1961) 42 ITR 743 (SC). He held that the assessee's transactions in shares of other companies were in the nature of investments and, therefore, the income arising on sale of such shares had rightly been offered by the assessee as capital gains. Aggrieved by this order the revenue is in appeal before us.
5. During the course of hearing before us the learned Departmental Representative argued that the fact of assessee being assessed under the head 'capital gains' in the earlier assessment years should not prejudice the correct inference to be drawn this year. The learned Departmental Representative referred to the paper book filed by the assessee and pointed out that for assessment year 1993-94 no capital gains were assessed and for assessment year 1994-95 only a sum of Rs. 1, 16,082 had been assessed under the head 'capital gains'. The assessee was, therefore, notjustified in saying that he was regularly being assessed under the head ,capital gains'in relation to transactions in shares. The learned Departmental Representative referred to the judgments in Raja J. Rameshwar Rao v. CIT (1961) 42 ITR 179 (SC) and CIT v. Krishna Rao (1979) 120 ITR 101 (AP) and argued that frequent purchases and sale for commercial motive, instinct and profit purposes should be regarded as trading activity. The facts of the case showed that the assessee was accustomed to frequently buy and sell shares which showed that he was carried out a business in shares.
6. The learned authorised representative of the assessee argued that for assessment year 1993-94 there was long term capital loss. Hence the same was not claimed in that year. However, the set off of the same was claimed in assessment year 1994-95. The learned authorised representative argued that the assessee entered into transactions in shares of companies other than Goetz during the previous year relevant to assessment years 1993-94, 1994-95 and 1995-96 but there was not a single transaction of short term capital gains. This showed that the assessee purchased shares and held them with him for sufficiently long period, unlike a trader who would sell the goods at profit at the earliest available opportunity. The learned authorised representative further argued that the assessee invested his own funds. The borrowed capital was utilized by the assessee for purchase of shares of Goetz (India) Ltd. only. Other shares were all purchased by the assessee on investment of his own funds.
7. We have carefully considered the rival submissions. It is not correct to say that profit motive alone would distinguish a transaction from investment to trading. Even in the case of investment there may be motive that the assessee should be able to sell the investment at a premium. When household savings are invested in gold etc. the profit motive is there but that does not make a householder a businessman trading in gold. In the case of CIT v. A. Dharma Reddy (1969) 73 ITR 751 (SC) the term business has been defined to be continuous exercise of an activity. In the present case the assessee lield the shares for certain length of time before selling the same and the funds invested were entirely assessee's own funds. On these facts it is not possible to hold that the assessee carried on trading in shares as a continuous regular activity. We, therefore, do not see any reason to interfere in the order of the learned CIT(A) in this respect. The same is upheld.
8. Assessee's appeal in ITA No. 1488 (Del.) 03 has been filed on 2-4-2003 against the order of learned CIT(A) XXII, New Delhi dated 5-2-2003 in the case of the assessee in relation to assessment order under section 143(3) for assessment year 1995-96.
9. First ground in this appeal is general and is covered by subsequent grounds of appeal.
10. Ground of appeal No. 2 is directed against disallowance of interest paid by the assessee to Standard Chartered bank amounting to Rs. 25,690. assessing officer has made disallowance on the ground that the assessee could not produce any supporting documents to show that the funds had been borrowed and interest had been paid. In other words the assessee did not furnish any documents from Standard Chartered bank certifying the advances to the assessee and charging of interest. On assessee's appeal the learned CIT(A) has upheld the order of assessing officer for the same reason. During the course of hearing before us the learned authorised representative of the assessee argued that the borrowed funds had been credited to the assessee's books of account and utilized for the purpose of business of the assessee. On these facts we direct the assessing officer to allow the assessee one more opportunity to produce the relevant documents to establish the fact of borrowing and payment of interest to the bank. Thereupon the assessing officer may allow the assessee the necessary deduction in relation to interest paid.
11. Third ground is directed against the addition of Rs. 48,536. It is seen that in the order of learned CIT(A) XXlX, New Delhi dated 5-11-1999 there are no directions contained in relation to addition of Rs. 48,536. We, therefore, do not find any infirmity in the order of assessing officer dated 28-3-2002 which has been made only to give effect to the order of learned CIT(A) dated 5-11-1999. Hence this ground of appeal is rejected.
12. Ground of appeal No. 4 is directed against the learned CIT(A) not allowing deduction of Rs. 1,500 under section 10(32). We find that this issue also did not form part of the earlier order of the learned CIT(A) made on 5- 11- 1999. Hence this ground of appeal is also rejected.
13. Ground of appeal No. 5 relating to interest under section 244A was not pressed during the course of hearing before us. Hence the same is rejected.
14. Ground of appeal No. 6 is directed against disallowance of brokerage/ interest paid amounting to Rs. 56,323. In the order dated 5-11-1999 the learned CIT(A) held that the assessing officer was justified in disallowing assessee's claim of deduction on account of brokerage amounting to Rs. 56,323. The assessee has not challenged that order. Hence the assessee cannot now challenge the same against the order of assessing officer which has been made only to give effect to the aforesaid order of learned CIT(A) dated 5-11-1999. Hence this ground of appeal is rejected. The same pertains to assessee's ground of appeal No. 7 that the amount of capital gain is required to be reduced to Rs. 31,350. Accordingly ground of appeal No. 7 is also rejected.
15. Now we shall take up assessee's appeal in ITA No. 4262 (Delhi) 2000 which has been filed by the assessee on 24-10-2000 against the order of learned CIT(A) XXlX, New Delhi dated 21-8-2000 in the case of the assessee in relation to assessment order under section 143(3) for assessment year 1996-97.
16. In this appeal the assessee has taken as many as six grounds of appeal. However, during the course of hearing before us the learned authorised representative of the assessee pressed only ground of appeal No. 3 i.e. disallowance of Rs. 40,500 being brokerage paid on financiers. The learned CIT(A) has rejected the assessee's ground of appeal relying upon his order for assessment year 1995-96. The case of the assessee before us is that amount paid was in fact interest on loans though mentioned as brokerage. In our view, the correctness of the contention of the assessee is required to be verified. We, therefore, direct the assessing officer to allow the assessee one more opportunity to establish facts in this respect and thereafter he may decide this issue afresh in accordance with law.
17. In the result, while the appeal filed by the revenue in ITA 502(Delhi) 2000 is dismissed, the appeals filed by the assessee in the other two appeals shall, for statistical purposes, be treated as partly allowed.