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Ratanlal J. Oswal Versus Commissioner of Income Tax-8

2015 (8) TMI 233 - BOMBAY HIGH COURT

Income arising on purchase and sale of shares - business income OR income from investments under the head 'capital gains' - Held that:- On examination of the manner in which the Appellant carried out its activity of purchase and sale of shares facts are indicia of the Appellant doing business in shares as a dealer thereof and not as an investor. Normally, no investor would deal with six different share brokers, or for that matter borrow funds for the purposes of investment in shares. Further, th .....

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the activity of business being pursued by the Appellant.

We do not find any merit in the submission that the Tribunal in the impugned order while dealing with the issue of charging tax under the head 'business income' or as 'capital gain' was influenced by the fact that some transactions were found to be bogus. In fact, the impugned order after making the above observation with regard to the Appellant's conduct, observes that notwithstanding the same, the income on purchase and sale .....

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nto ORDER P.C. In these two Appeals under Section 260A of the Income Tax Act, 1961 (the Act), the challenge is to common order dated 28th March, 2014 passed by the Income Tax Appellate Tribunal (the Tribunal). The common impugned order disposes of two independent appeals by a father and son for the Assessment Year 2006-07. 2. The basic issue which arises for our consideration in both the appeals is whether the Tribunal was correct in treating the income arising on purchase and sale of shares as .....

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ing Officer found that an amount of ₹ 21.37 lakhs offered as short term capital gains earned through one M/s. Mahasagar Securities Limited were not genuine being mere hawala entries. Thus, the amounts of ₹ 21.87 lakhs was brought to tax as income from other sources. So far the balance amount of short term capital gains of ₹ 81.71 lakhs is concerned, the Assessing Officer looking at the volume, frequency, the tax audit report as well as the fact that loan was taken to purchase s .....

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n earlier Assessment Year i.e. Assessment Year 2005-06, the income offered as short term capital gain was accepted and not treated as business income. Therefore, it was submitted on the principle of consistency the same ought to be followed. The CIT(A) after considering the submissions of the Appellant by order dated 13th July, 2009, concluded that the Appellant is a dealer in the sale and purchase of the shares and the order of the Assessing Officer on the above aspect, calls for no interferenc .....

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s claimed by the Appellant. 7. Mr. Shreedharan, learned Sr. Counsel appearing for the Appellant contends that a substantial question of law arises inasmuch as on the issue of taxability of income as capital gains or business income, the impugned order has been influenced by the fact that the Appellants dealing of shares through one M/s. Mahasagar Securities Ltd., was bogus. Thus, the impugned order stands vitiated as it has been influenced by unrelated facts.Further, it is submitted that the CIT .....

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; In any event, it is submitted that on similar issue viz: income on purchase and sale of shares to be taxed under the head 'capital gain' or as business income, appeals have been admitted by this Court. In the above view, it is submitted that these appeals be admitted. Finally, reliance was also placed upon the decision of the Supreme Court in CIT v/s. H. Holck Larsen 160 ITR 67 to contend that the issue whether or not, the income arising on the sale and purchase of shares is income ari .....

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facts as under: "(a) The assessee has carried out transaction with as many as six brokers, which normally an investor never do. This proves beyond doubt that the assessee is running a full fledged business of share trading. Hence, the transaction carried out cannot be treated as capital gain. (b) In majority of the cases, shares are purchased in huge quantity and holding period of shares were not significant. There are hardly any case where shares have been purchased and held for more than .....

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hare Trading in the Tax Audit Report, filed with the return of income where nature of business is written as "Income from Share Trading & Salary Income". Further, the submission of Tax Audit Report proves beyond doubt that the transactions in question are on trading account, as apart from share transactions shown as Short Term Capital Gain, there are no other transactions which is on trading account. Thus, the assessee himself admitted the transaction in question is on trading acco .....

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ransactions in shares as shares trading transactions. Moreover, the impugned order of the Tribunal also records that the number of transactions carried out by two Appellants were 100 and 120 shares respectively in a very short period. Further, the turnover in case of the father was ₹ 4.89 Crores and in case of son was ₹ 4.12 Crores. All these were indicative of there being a regular systematic activity which is the activity of business being pursued by the Appellant. 11. We do not fi .....

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case of Gopal Purohit (supra) is completely distinguishable. In the present case, the assessee has not before the authorities led any evidence to show that the transaction in the earlier assessment and the present assessment years are identical, calling for the same treatment in view of the decision of this Court in Gopal Purohit (supra). This is particularly so when it is the Appellant's case that the view taken in the earlier Assessment Year be followed in this year on account of the princ .....

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, is not acceptable as they were admitted in the context of the facts and circumstance of those cases. Similarly, the contention that the CIT(A) has not rendered any finding about the nature of the Appellant's activity is not correct as in fact, after consideration of the submission of the Appellant, it has held that the Appellant is a dealer in purchase and sale of shares. Similarly, the decision of the Apex Court in Holck Larsen (supra) which had been relied upon, would have no application .....

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