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2016 (7) TMI 6 - ITAT MUMBAI

2016 (7) TMI 6 - ITAT MUMBAI - TMI - Assessability of gain on purchase and sale of shares - business income or capital gain - Held that:- In the present case, it is an established position that assessee company is an investment company primarily involved in undertaking transactions in the shares of Piramal Group of companies. This feature contrasts it from an investment company, who otherwise freely operates in the market place looking for opportunities to trade in all or any available scrips in .....

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ls) in assessment year 2001-02 to the factum of assessee not disputing the stand of Assessing Officer in assessment year 1999- 2000 is not determinative of the issue because ostensibly, the amount involved was very small and for that reason assessee did not prefer an appeal before the Tribunal, an assertion of the Ld. Representative for the assessee, which is not controverted by the Ld. Departmental Representative for the Revenue before us.Considering the entirety of facts and circumstances of t .....

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estment is liable to be added to the cost of acquisition of the shares for computing capital gains. In this view of the matter, the disallowance made by the CIT(Appeals) becomes untenable. - Decided in favour of assessee - ITA No. 5352/MUM/2004, ITA NO.4110/MUM/2005 - Dated:- 29-4-2016 - SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI JOGINDER SINGH, JUDICIAL MEMBER For The Appellant : Shri J.D.Mistri For The Respondent : Shri Yogesh Kamat ORDER PER G.S. PANNU,AM: The captioned appeals have been pref .....

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ng Officer under section. 143(3) of the Act, 1961 ( in short the Act ) dated 26/03/2003. 3. In this appeal, although assessee has raised multiple Grounds of appeal, but the pertinent dispute arises from the action of the incometax authorities in assessing the long term capital gain and short term capital gain earned on the sale of shares as business income . Briefly put, the relevant facts are that the appellant is a company incorporated under the provisions of the Companies Act, 1956. It is an .....

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. Additionally, it also earned short term capital gain on sale of shares of Piramal Healthcare Ltd. amounting to ₹ 12,748/-. The assessee reflected the aforesaid gain as its income assessable under the head Capital Gains in the return of income. The Assessing Officer treated the said transactions as trading transactions and accordingly, assessed the resultant income as business income instead of capital gains . The discussion made in the assessment order reflects that the primary argument .....

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financial years 1996-97 to 1999-2000 he reinforced the argument of the Assessing Officer that purchase and sale of shares have been regularly undertaken by the assessee. Thus, the stand of the Assessing Officer to tax the gain on sale of shares as business income was affirmed. 4.1 At this point, it would also be relevant to note that the CIT(Appeals) not only affirmed the stand of the Assessing Officer, but also enhanced the total income on account of interest costs. The Assessing Officer has al .....

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if interest is paid on amount borrowed for investment in shares held as investments it must be added to the cost of acquisition for computing capital gains and that, if the income arising from sale of shares is held as business income , then the interest expenditure of ₹ 95,79,195/- was allowable as a deduction, and, thus no disallowance was merited. In so far as the break-up of interest cost was concerned, assessee submitted that interest of ₹ 32,21,278/- related to the instant asse .....

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ng the assessability of gain on purchase and sale of shares as business income and the disallowance of interest expenditure of ₹ 95,79,195/-. 5. Before us, the Ld. Representative for the assessee has vehemently pointed out that the shares sold by the assessee were reflected as investment in the Balance sheet all along and that they were being valued at cost in the books of account. Countering the charge made by the Assessing Officer that assessee has undertaken multiple transactions, it wa .....

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up companies and it cannot be regarded as a trading activity per-se. The Ld. Representative for the assessee also referred to the details of sale and purchase of shares to show that the transactions were not spread out throughout the year but were being carried out at in-frequent intervals. Ld. Representative for the assessee also explained that the sale of shares was undertaken as a normal investor would do, because there was a reasonably high appreciation in their values. In sum and substance, .....

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sessee pointed out that the aforesaid is no ground to hold the issue against the assessee, because in assessment year 1999-2000, assessee did not prefer further appeal before the Tribunal primarily for the reason that the amount involved was very small i.e. ₹ 47,000/- only. 6. On the other hand, Ld. Departmental Representative for the Revenue has defended the action of the income-tax authorities by pointing out that the sale of shares have been undertaken by the assessee on multiple occasi .....

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facts and circumstances. In the present case, it is an established position that assessee company is an investment company primarily involved in undertaking transactions in the shares of Piramal Group of companies. This feature contrasts it from an investment company, who otherwise freely operates in the market place looking for opportunities to trade in all or any available scrips in the market. Therefore, in such a situation, in our view, the onus is on the Revenue to establish that assessee h .....

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Piramal Healthcare Ltd., in which it has earned short term capital gain. The detail also reveals that assessee purchased the shares in the three companies in small lots on varying dates. So however, the sales have been made together on proximate dates. Though the gain/loss on each lot has been separately shown, but it is not a case where each purchase lot has been sold separately on different dates. Therefore, the manner of making sales of shares does not reflect any trading, though there is an .....

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undertaken regularly so as to be treated as a business activity. Reference made by the CIT(Appeals) in assessment year 2001-02 to the factum of assessee not disputing the stand of Assessing Officer in assessment year 1999- 2000 is not determinative of the issue because ostensibly, the amount involved was very small and for that reason assessee did not prefer an appeal before the Tribunal, an assertion of the Ld. Representative for the assessee, which is not controverted by the Ld. Departmental .....

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