TMI Blog2016 (1) TMI 217X X X X Extracts X X X X X X X X Extracts X X X X ..... IT vs. Sri Surve Shriram Krishnaji (2012 (5) TMI 620 - ITAT PUNE) on which the ld. Counsel has placed reliance has no relevance in the facts of the present case. A perusal of first proviso to section 194A of the Act makes it clear that section 194A shall also apply to individuals, where total sales, gross receipts or turnover from business or profession exceed the monetary limit specified u/s 44AB of the Act. The proviso has been inserted by the Finance Act, 2002 w.e.f. 1-6-2002. We find no merit in the submissions of the ld. Counsel for the assessee on the second issue - Decided against assessee. - ITA No. 955/PN/2011 - - - Dated:- 16-10-2015 - SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM For The Assessee : Shri M.K. Kulkarni For The Revenue : Shri B.C. Malakar ORDER PER VIKAS AWASTHY, JM : The appeal has been filed by the assessee against the order of Commissioner of Income Tax (Appeals)-III, Pune dated 29-10-2010 for the assessment year 2005-06. 2. In appeal, the assessee has raised 8 grounds assailing the findings of Commissioner of Income Tax (Appeals). However at the time of making submissions, the ld. Counsel for the assessee restricted his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Counsel for the assessee submitted that the authorities below have erred in holding that the income from sale of shares is to be assessed under the head, Income from Business Profession . The ld. Counsel in support of his submissions placed reliance on the following decisions: i. ITO Vs. Rohit Anand, 34 SOT 42 (Delhi-Trib.); and ii. CIT Vs. N.S.S. Investments (P.) Ltd., 158 Taxman 13 (Mad H.C.) In respect of disallowance u/s. 40(a)(ia) of the Act the ld. Counsel submitted that the amendment to section 194C was made w.e.f. 01-06-2007 to include the individuals. Therefore, the provisions of section 40(a)(ia) will not be applicable to the assessee in the assessment year 2005-06 i.e. the assessment year under appeal. In support of his submissions, the ld. Counsel placed reliance on the decision of the Tribunal in the case of Dy. CIT vs. Sri Surve Shriram Krishnaji in ITA No. 1207/PN/2010 for the assessment year 2005-06 decided on 17-05-2012. 5. On the other hand Shri B.C. Malakar representing the Department vehemently supported the findings of the Commissioner of Income Tax (Appeals). The ld. DR submitted that a perusal of transaction carried out by the assessee in sale an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stment, the gain arising there from is required to be treated as capital gains. On the other hand, if the shares are purchased with the intention to earn profit thereon by trading and are held as stock in trade in the books of account, the profit arising on sale of such shares is liable to be treated as business income. 8. In the present case, the assessee is a commission agent and is a wholesale trader of Bhusar and Rajma. During the impugned assessment year, the assessee had purchased shares worth ₹ 34,20,978/- and sold shares to the tune of ₹ 19,86,943/-. The assessee earned profit of ₹ 7,19,166/-. The assessee has treated the income from sale of shares as capital gain whereas the Revenue has assessed the same under the head Income from Business or Profession . The main reason for treating the income from sale of shares as income from business by the Department is the large volume and value of share transactions. Another contention of the Revenue for treating the income from sale of shares as business income is that the assessee has diverted business funds for purchase of shares and for business purposes the assessee has taken loan. On the other hand the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estment or form part of the stock in trade is a matter which is within the knowledge of the assessee who holds his shares and he should, in normal circumstances, be in a position to produce evidence from his records as to whether he is maintaining any stock-in-trade or holding the shares by way of investment. In the present case, it is not disputed that the assessee had maintained this distinction in its records. It is true that volume of transaction. is an important indicator of the intention of the assessee whether to deal in shares as trading asset or to hold the shares as investor but certainly not the sale criterion. In our considered opinion, the Assessing Officer's conclusion that since sale and purchase had been determined by the volatility in the market the same is against the basic feature of investor is not based on the sound rational reasoning. A prudent investor always keeps a watch on the market. trends and, therefore) is not barred under law from liquidating his investments in shares always a vexed question to find out as to whether the assessee was holding the shares as stock in trade or under an investment portfolio particularly because one has to infer the int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the knowledge of the assessee who holds the shares and it should, in normal circumstances, be in a position to produce evidence from its records as to whether it has maintained any distinction between those shares which are its stock-intrade and those which are held by way of investment. 12. We would also like to observe here that the assessee is engaged in trading of Bhusar and Rajma from which he is having turnover of more than ₹ 1.68 Crores during the period relevant to assessment year under appeal. The turnover from sale of shares is ₹ 19.86 Lacs, which is less than 12% of the total business turnover of the assessee. Thus, it is apparent that the main business of the assesse is trading in Bhusar and Rajma and not trading in shares. In view of the facts of the case and the judicial decisions discussed above we hold that in the present case the income from sale of shares is capital receipt. Accordingly, this ground of appeal of the assessee is allowed. 13. The second issue raised by the assessee in appeal is with regard to disallowance u/s. 40(a)(ia). The ld. Counsel for the assessee submitted that no disallowance could be made under section 40(a)(ia) in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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