Income Tax Appellate Tribunal - Jodhpur
Asstt. Cit vs Krishna Kumar Bangur on 4 February, 2004
Equivalent citations: [2005]1SOT189(JODH)
ORDER
N.K. Saini, AM This is an appeal by the department against the order of the CIT (A) dated 9-3-1999. The only ground raised in this appeal reads as under:
"On the facts and in the circumstances of the case, the learned CIT (A) has erred in law in directing the assessing officer to tax the profit on sale of shares as capital gain as against business income taxed by the assessing officer, despite material and reasons on record to the contrary."
2. The assessee declared long-term capital gain from the shares at Rs. 2,00,484. The assessing officer considered the profit from the shares as income from business and worked out the amount of profit at Rs. 4,39,293. According to the assessing officer the assessee earned the aforesaid profit as per following details :
SL No. Name of com.
Qty.
Cost Selling Price Cy. Price Profit/loss EQUITY SHARES
1.
Didwana Indl. Corp. Ltd.
100010510 13000 1000 2490
2. General Invest Co. Ltd.
400 042800 400 42800
3.
-do-
40 4053 4280 40 2274.
-do-
30 3343 3210 30-133
5. Oriental Co. Ltd.
300 033300 300 33300
6.
-do-
13013285 14430 130 1145
7.
-do-
25 2889 2775 25-114
8. Swadeshi Comml. Co. Ltd.
20013794 16600 200 2805
9. Ranbaxy Laboratory 300 46761 187500 300 140739
10. Maharaja Shree Urnaid Mills 3000 10 195000 3000 194990 PREFERENCESHARES
11. Codrey Philips India Ltd.
40018246 40000 400 21754
12. Ketwell Bullen & Co. Ltd.
50 2534 1825 50-709 5875 115426 554720 5875 439293
3. Before the learned CIT (A) the assessee submitted that the assessing officer was not justified in making the addition on the ground that the assessee was dealing in shares. It was explained that the assessee had been selling the shares in the past also as in the year under consideration and it was showing the capital gain on such sale of shares in the past assessment years and the same has been accepted by the assessing officer all through. It was further stated that whereas the assessing officer has accepted the long term capital gain in the hands of the minor at Rs. 1,72,646 under similar circumstances but had not accepted the long-term capital gain as declared by assessee on sale of shares in his case. It was stated that the shares which were sold by the assessee were purchased long long ago i.e. 20-30 years back and such shares were purchased only with a view to earn dividend income and those shares were only investment and were not even disposed off when there was unexpected rise in the value of shares. It was stated that the assessee had sold only 5875 shares which was of near about 10 per cent of the total holding and thus assessee had not dealt in shares. It was also submitted that the assessee had not invested in shares by making borrowing and had shown the investment in shares under the head "investment" in the balance sheet. It was further stated that the main source of the assessee was salary income from various concerns and considerable income from other sources. Therefore, assessing officer was not justified in holding that the assessee had done business in purchase and sale of shares. As such the assessee was liable to be taxed only on account of capital gain and not on account of business income.
The reliance was placed on the judgment of Hon'ble Supreme Court in the case of Karam Chand Thapar & Bros. (P) Ltd. v. CIT (1971) 82 ITR 899 (SC) and the judgment of Honble Calcutta High Court in the case of CIT v. Karam Chand Thapar & Sons Ltd. ( 1978) 115 ITR 250 (Cal.).
4. The Learned CIT (A) after considering the submissions of the assessee observed that the assessing officer was not justified in holding that the assessee had been dealing in shares and debentures because the assessing officer had not established the intention of assessee was to sell the shares on profit. He further observed that the assessee had sold shares after keeping them for 20 to 30 years and the shares sold during the year were near about 10 per cent of the total holdings. He further observed that the assessee had not done frequent transaction in purchase and sale of shares and was showing capital gain in the past also which had been accepted by the assessing officer. According to him the facts of the assessee case for the year under consideration were not in any way different from the facts in earlier years. The learned CIT (A) further stated that the case on which the assessing officer had placed reliance, as a matter of fact supported the view of the assessee rather than of the assessing officer. He, therefore, following the judgment of the Hon'ble Supreme Court in case of Karam Chand Thapar & Bros. (P) Ltd. (supra) and the judgment of Hon'ble Calcutta High Court in case of Karam Chand Thapar & Sons Ltd. (supra) and also decision of ITAT Mumbai Bench in the case of Smt. Nina Birla v. Asstt. CIT (1997) 62 ITD 39 held that the assessing officer was not justified in treating the business income on account of. sale of shares. He accordingly directed the assessing officer to tax only capital gain as shown by the assessee on sale of shares.
5. Being aggrieved, the department is in appeal. The learned Departmental Representative reiterated the observations made by the assessing officer and vehemently argued that the assessee was engaged in the business of the sale and purchase of the shares and there were many transactions which were done by the assessee for the year under consideration. Therefore, the assessing officer was justified in treating the income from the sale of the shares as business income instead of capital gain shown by the assessee. He prayed to set aside the order of the CIT (A) and to restore the order of the assessing officer. In his rival submissions the learned counsel for the assessee reiterated the submissions made before the CIT (A) and further submitted that the main source of the income of the assessee was from salary, Directorship fees, dividend and interest and not trading in shares. It was further stated that the assessee had been maintaining regular books of account not only for the year under consideration but also for the earlier years and the assessing officer had not made/whispered any adverse comment nor rejected the same. It was argued that not only in the year under consideration but all along in the past the assessee had been showing such shares as his investment and not as stock in trade and the balance sheet filed by the assessee had been accepted by the department in the past wherein such shares were shown as investment. He further stated that the assessing officer had failed to establish that intention of the assessee was to carry on the business or to acquire the asset with a view to sell the same. Therefore, the learned CIT (A) was fully justified in directing the assessing officer to consider the profit from the sale of shares as long-term capital gain and not income from business. The reliance was placed on the judgment of Honble Bombay High Court in the case of CIT v. V.A. Trivedi (1988) 172 ITR 95 (Bom) and Ashok Kumar Jalan v. CIT (1991) 187 ITR 316 (Bom.). It was further stated that the assessee had not taken any loan for making the investment in shares and the holdings of the shares was for a long period virtually 20-30 years before sale which proved the intention of the assessee of being an investor and not a dealer. He further stated that the assessing officer only mentioned the rate of the shares and the sale value in the assessment order but not the date of purchase. He referred to the page No. 17 of the paper book which reads as under:
Name of the Company Dt. of acquisition Cost per unit Qty.
Cost (Rs.) Sold during the year Qty Rate Amount Profit/loss In books Long term Capital Gains/ Loss Equity Shares Didwana Industrial Corpn. Ltd.
28/10/72 10.51 1000 10510.00 1000 13.00 13000 2490.00 General Investment Co. Ltd.
13/6/66 0.00 400 0.00 400 107.00 42800 42800.00
-do-
8/11/72 101.33 40 4053.00 40 107.00 4280 227.00
-do-
19/10/77 11.45 30 3343.50 30 107.00 3210 (133.50) Oriental Co. Ltd.
29/3/75 0.00 300 0.00 300 111.00 33300 33300.00
-do-
12/12/72 102.19 130 13285.00 130 111.00 14430 1145.00
-do-
18/2/77 115.58 25 2889.50 25 111.00 2775 (114.50) Swadeshi Commercial Co. Ltd.
27/8/73 68.97 200 13794.50 200 83.00 16600 2805.50 Ranbaxy Laboratory 4/11/91 155.87 300 46761.00 300 625.00 187500 140739.00 Maharaja Shree Umaid Mills 14/7/74 0.00 3000 10.00 3000 85.00 195000 194990.00 TOTAL EQUITY 5425 95646.50 5425 512895 418248.50 PREFERENCE SHARES Codrey Philips India Ltd.
23/2/74 45.62 400 18246.00 400 100.00 40000 2175400 Ketwell Bullen & Co. Ltd.
16/5/67 50.88 50 2534.00 50 36.50 1825 (709.00) TOTAL REFERENCE 450 20780.00 450 41825 21045.00 Sub-Total 5875 115426.50 5875 554720 439293.50 On the basis of above detail it was stated that the shares were purchased long ago so the profit from those shares was rightly claimed as long-term capital gain.
6. We have considered the rival submissions and the material available on record. In the instant case it is not in dispute that the main source of the income of the assessee was salary income and income from other sources such as dividend income, Directorship fee, interest etc. From the details furnished by the learned counsel for the assessee, it would be clear that the shares were purchased long ago and the assessing officer had not brought any material on record to suggest that it was the intention of the assessee to earn profit from the shares. It is also not the case of the assessing officer that the assessee had taken any loan for making the investment in shares as such the investment in shares by the assessee was not for the business purpose particularly when the assessee was showing the investment in shares under the head "investment" in the balance sheet which had been filed with the department alongwith the returns of income for the year under consideration as well as for the earlier years. In the instant case the learned Departmental Representative could not controvert this explanation of the learned counsel for the assessee that in the earlier years such profit from the sale of shares had been taxed under the head capital gain and there was no change in the facts for the year under consideration vis-a-vis the facts for the earlier years. In that view of matter also the CIT (A) was justified in directing the assessing officer to treat the income earned by the assessee from the sale of shares as capital gain instead of business income. Considering the totality of the fact as discussed hereinabove, we do not see any infirmity in the order of CIT (A) and accordingly we uphold the view taken by learned CIT (A).
7. In the result, the appeal is dismissed.