TMI Blog2015 (7) TMI 798X X X X Extracts X X X X X X X X Extracts X X X X ..... the FAA support the decision of the FAA.Therefore,we are of the opinion that her order does not suffer from any legal infirmity.Upholding her order, - Decided against revenue. Share transactions - CIT(A) giving direction that wherever assessee has held shares for more than one month that may be treated as short term capital gain and if the holding period is less than one month then it should be treated as business income - Held that:- As decided in assess's own case [2011 (11) TMI 452 - ITAT MUMBAI] if the Department has accepted that some of the shares were purchased and held by the assessee as investment allowing the claim of the assessee for long term capital gain arising from sale thereof, there is no justification for them to contend that the assessee had purchased and held other shares as stock in trade merely because they were sold within a period of one year especially when other facts relevant thereto are almost similar. Further, intention of the assessee at the time of purchase of shares is relevant. See Gopal Purohit (2010 (1) TMI 7 - BOMBAY HIGH COURT ). - Decided in favour of assessee. Deletion of proportionate expenses - assessee has claimed all expenses against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erties by any Controller. 2. On the facts and circumstances of the case and in law, the Ld CIT(A) erred in giving direction that wherever assessee has held shares for more than one month that may be treated as short term capital gain and if the holding period is less than one month then it should be treated as business income. The direction given is contrary to law, therefore, order of CIT(A) may be set aside and order of A.O. be restored. 3. On the facts and circumstances of the case and in law, the Ld CIT(A) erred in deleting proportionate expenses of ₹ 8,16,667/- out of total expenses of ₹ 11, 12,377/- as assessee has claimed all expenses against short term capital gain only and not a single rupee was attributed to Long Term Capital Gain which is claimed exempt U/s.1 0(38) of the Act. 4. On the facts and circumstances of the case and in law, the Ld CIT(A) erred in giving direction to re-examine and compute 14A disallowance without appreciating the facts that the disallowance was computed as per the provisions of section 14A r.w. Rule 8D and therefore, it is prayed that the order of CIT(A) may be set aside and order of A.O. be restored. 5. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... city of the building, that he had calculated the income from house property only on estimate basis, that no investigation was carried out to ascertain the actual fair rent of the property, that the AO had failed to state as to what was the basis/source of his estimation, that fair rent could be ascertained by investigating the rent by placing similarly placed properties.The FAA relied upon the cases of Sheila Kaushik (131 ITR 435) and Dewan Daulat Rai Kapoor (122 ITR 700) of the Hon ble Supreme court. She also referred to the cases of Ashwin Adekar (ITA/1867/Mum/2006) dt.11.7.08, Reliance commercial corpn.,(ITA 2035/Mum/98)dt.1.212.03,Park Paper Industries Ltd.(ITA 1239- 1242/Mum/08 dt. 28.08.08).Finally,she held that property for property not let out Municipal value should be adapted to determine ALV and directed the APO to re-calculate the income from house property by adopting the standard rent/municipal value as yard stick. 2.3.Before us,Departmental Representative(DR)supported the order of the AO.Authorised Representative(AR)relied upon the order of the FAA.We have heard the rival submissions and perused the material before us. We find that the AO had determined the ALV ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the shares had not been purchased for investment purposes though the same has been shown as investment in the balance sheet.Finally,the AO held that share transactions carried out by the assessee has to be treated as business. 3.1.During the Appellate proceedings,before the FAA the assessee contended that she had maintained regular books of account wherein two portfolios were maintained,that she was having investment portfolio,that the investment portfolio comprised the securities which were treated as capital assets, that she was also maintaining trading portfolio comprising of stock-in-trade that were treated as trading assets, that she herself had bifurcated the entries and had offered the resultant profits/loss on the sale of shares as business income/LTCG/STCG separately, that she was an investor in shares and securities since last several years, that the transactions of sale and purchase of shares had been charged with security transaction tax, that she had diversified investments, that diversification did not mean that the assessee had treated investment as stock in trade or had carried out business.Referring to circular No.4/2007 dt.15.6.07 the assessee further c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee accordingly. 3.2.Before us, the DR partly supported the order of the FAA and argued that direction given by her about the shares held for more than one month were contrary to the decision of Gopal Purohit.The AR relied upon the decision of the F Bench of the Mumbai Tribunal delivered in assessee s own case for AY 06-07 (ITA 5655/Mum/2009) dt.4.11.2022. We have heard the rival submissions and perused the material before us. We find that the tribunal has mentioned the facts of the case for the AY 06-07 as under: 2. The assessee in the present case is an individual who filed the return of income for the year under consideration on 16-10-2006 declaring total income of ₹ 2,91,69,761/-. The said income comprised of short term capital gains of ₹ 2,28,16,373/- and income from F O and speculative transaction of ₹ 64,29,182/-. The assessee had also declared long term capital gains ofRs.1,17,41,141/- arising from sale of shares which were claimed to be exempt u/s.10(38). The income earned by the assessee from the dealing in future and option transactions was declared by her as business income and the profit earned from delivery based transaction in shares wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO referring to the relevant facts of the assessee s case, the primary motive of the assessee to undertake the transactions in shares was to make profit. She contended that the learned CIT(Appeals), however, simply relied on the decision of the Tribunal in the case of Gopal Purohit (supra) and followed the rule of consistency to give relief to the assessee on this issue. She relied on the following decisions of the Tribunal stating that in the similar facts and circumstances as involved in the assessee s case, profit arising from purchase and sale of shares has been held to be business income of the assessee: i) Shailesh L. Shah vs. DCIT ITA No. 3991 3992/Mum/2008; dated 13th July, 2010. ii) ACIT vs. Mr. V. Nagesh ITA No. 5410/Mum/2008; dated 24th Sept.,2009. iii)Smt. Sadhana Nabera vs. ACIT; ITA No. 2586/Mum/2009,dated 26th March,2010. iv) Sarnath Infrastructure (P) Ltd. vs. ACIT 120 TTJ (Lucknow) 216. 7.The learned counsel for the assessee, on the other hand, submitted that the profit arising from sale of shares was declared by the assessee as short term capital gain and long term capital gain depending on the period of holding. He submitted that the short ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee for ₹ 5.99 crores had become ₹ 9.30 crores as on 31-03-2006. According to him, if the assessee was a trader in shares, he would have certainly sold all the shares to book the profit, but the fact that he still preferred to hold the shares clearly shows that he was investor in share and not a trader. As regards the decision of the Tribunal in the case of Gopal Purohit relied upon by the learned CIT(Appeals) to decide the issue in favour of the assessee, he submitted that the said decision has been upheld even by the Hon ble Bombay High Court and even the SLP filed by the Department in that case has been dismissed by the Hon ble Supreme Court. He cited various decisions of the Tribunal stating that a similar issue has been decided therein in favour of the assessee following the rule of consistency. The Tribunal decided the issue against the AO in para-08-09 which reads as under: 8.We have considered the rival submissions and also perused the relevant material on record. The issue involved in the present appeal is whether the shares sold by the assessee during the year under consideration giving rise to short term capital gains were purchased and held by her as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals) only to the extent it is in respect of short term capital gains. In so far as the claim of the assessee for long term capital gains is concerned which has been accepted by the learned CIT(Appeals),the Department has not challenged the decision of the learned CIT(Appeals) and this is a peculiar fact involved in the present case having material and direct bearing on the issue under consideration.This is because if the Department has accepted that some of the shares were purchased and held by the assessee as investment while accepting the decision of the learned CIT(Appeals) allowing the claim of the assessee for long term capital gain arising from sale thereof, there is no justification for them to contend that the assessee had purchased and held other shares as stock in trade merely because they were sold within a period of one year especially when other facts relevant theretoare almost similar. For instance, if one lot of 1000 shares of a particular company was purchased by the assessee in the earlier year and 500 shares of the said lot were sold by her in the year under consideration before a period of one year andthe balance 500 shares were sold again in the year under co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nate disallowance, that expenses disallowed on ad hoc basis had to be deleted. 4.2.Before us,the DR supported the order of the AO and the AR relied upon the order of the FAA.We find that the AO had made proportionate disallowance assuming that the expenses claimed to have been incurred against the SRCG were indirectly attributable to LTCG also. But he has not explained as to what was the basis for arriving at the above conclusions. The AO had without making any enquiry about the nature of expenses and the number of transactions of LTCG made an addition of ₹ 8,61,667/- . We find that the FAA had deleted the disallowance as she was of the opinion that adhoc disallowance should not be made.In our opinion, considering the facts and circumstances of the case the order of the FAA does not suffer from any legal infirmity.So,confirming her order we decide ground No.3 against the AO. 5.Last ground of appeal is about direction given by the FAA to re-compute disallowance u/s.14A of the Act.During the assessment proceedings,the AO found that the assessee had received exempt income that she had not disallowed any expenditure related to exempt income. He held that from the books of a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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