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2016 (7) TMI 690 - ITAT MUMBAI

2016 (7) TMI 690 - ITAT MUMBAI - [2016] 49 ITR (Trib) 132 - Profit on sale and purchase of shares - Treatment of income under the head short-term capital gain OR business income - Held that:- The details of the transactions of sale and purchase of shares and the resultant gains arising therefrom are placed in the paper book which we have given an anxious thought. Keeping in view the factual matrix and the peculiar facts and circumstances of the case, we are of the considered view, it will be jus .....

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t gain arising therefrom should be charged to tax as short-term capital gains as there is reflected an indica of investment where the period of holding is more than 30 days and not more than twelve months. The Assessing Officer is directed to compute the respective business income and short-term capital gain on sale of shares accordingly as indicated by us as above. - I.T.A. No. 1271/Mum/2012 - Dated:- 27-5-2016 - Saktijit Dey (Judicial Member) And Ramit Kochar (Accountant Member) For the Appell .....

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ment order dated December 27, 2010, passed by the learned Assessing Officer (hereinafter called "the AO") under section 143(3) of the Income-tax Act, 1961 (hereinafter called "the Act"). 2. The ground of appeal raised by the assessee in the memo of appeal filed with the Income-tax Appellate Tribunal, Mumbai (hereinafter called "the Tribunal") reads as under : "1. Treatment of income under the head short-term capital gain as business income : On the facts and in .....

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having business income, being proprietor of (i) M/s. Movements, (ii) M/s. International Ship Agency, and (iii) M/s. S. B. Shroff engaged in the business of transporters, hire charges and cargo handling agents. The assessee also received salary from Silver Shield Energy Pvt. Ltd. The assessee is also having receipt of share of profit from partnership firms (i) M/s. Cargo Handlers and Stevedors, (ii) M/s. Shroff and Co. (cargo handling agent), and (iii) M/s. Shroff and Co. (CHA). 4. During the cou .....

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n reply submitted that the assessee is a businessman having interest in various firms engaged in the business of clearing and forwarding and parked his surplus funds with broker who purchase and sell shares on behalf of the assessee resulting in long-term capital gains and short-term capital gains on sale of shares. The assessee submitted that he has earned income from his proprietary business and also earned salary from the partnership firm, M/s. Shroff and Co., and also earned bank inter est. .....

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ssee submitted that he has not indulged in repeated sale and purchase of shares. The assessee submitted that he has only purchased and sold listed securities and mutual funds and no investment is made in sister or related concerns or inde pendent companies. The assessee submitted that he had given funds to broker who invest on the assessee's behalf and there are no repeated trans actions. The assessee relied upon the decision of the honourable Bombay High Court in the case of CIT v. Gopal Pu .....

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prime intention of the assessee was to trade in shares and not to hold them as investment. Therefore, the assessee's motive was to earn maximum profit and the profits were again ploughed back to earn more profits. Thus, the entire activity of the assessee has to be treated as business in trading in shares and it cannot be treated as investment. The assessee entered into substantial number of shares and during the period the assessee dealt in number of transactions of 65 scrips and the holdin .....

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the Assessing Officer, vide assessment orders dated December 27, 2010, passed under section 143(3) of the Act. 5. Aggrieved by the assessment orders dated December 27, 2010, passed by the Assessing Officer under section 143(3) of the Act, the assessee filed the first appeal before the learned Commissioner of Income-tax (Appeals). 6. Before the learned Commissioner of Income-tax (Appeals), the assessee submitted that merely because there were transactions in 65 different scrips will not have imp .....

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aid and received from the broker for the sale and purchase of shares and the trading is not carried by the assessee himself but was done through professional. The investments were made with the objective to earn good returns in the form of dividend or capital gain. No single principle would be decisive and the total effect of all the principles should be considered to determine whether the shares are held by the assessee as investment or stock-in-trade. The assessee submitted that in the precedi .....

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he same and the short-term capital gain of ₹ 32,70,593 on sale of shares declared by the assessee in the return of income filed with the Revenue should be accepted and brought to tax as short-term capital gains. 7. The learned Commissioner of Income-tax (Appeals) after considering the submissions of the assessee and the assessment order observed that the issue in hand depends upon the factual matrix of the case and each case has different facts which will determine whether the gains arisin .....

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ssessing Officer pointed out the magnitude of the transaction and the period of holding, while apart therefrom the transactions in sale purchase of shares are repetitive and the learned Commissioner of Income-tax (Appeals) produced the following chart showing the repetitive transactions whereby the assessee is re-entering the market by purchasing the scrips after having sold the earlier holding in the same share : Name of the scrip Date/s of sale Date/s of purchase after selling earlier holding .....

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007 28-8-2007, 28-8-2007, 31-8-2007, 13-12-2007, 14-12-2007, 17-12-2007, 28-12-2007, 19-2-2008 Radha Madhav Corporation 12-6-2007, 10-9-2007 30-10-2007, 20-11-2007, 26-11-2007 Spanco Telesystems and Solutions Ltd. 5-3-2007, 3-5-2007 10-4-2007, 20-4-2007, 2-5-2007, 25-5-2007 Deccan Chronical Holdings Ltd. 12-9-2007, 17-9-2007 29-10-2007 KLG Systels Ltd. 1-10-2007, 3-10-2007, 8-10-2007, 20-11-2007 9-10-2007, 26-10-2007, 30-10-2007, 31-10-2007, 26-11-2007, 5-12-2007, 12-12-2007, 17-12-2007, 10-3-20 .....

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s as what is required these days is a computer and internet connectivity, an elaborate office set up is not required to trade in shares. The learned Commissioner of Income-tax (Appeals) held that principles of res judicata is not applicable to the Income-tax proceedings and the nature of transactions is to be adjudged on the basis of the facts and circumstances of each year. The intention of the assessee is to be seen from the surrounding facts and circumstances. The magnitude of the transaction .....

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6, 2011. 8. Aggrieved by the appellate orders dated December 16, 2011, of the learned Commissioner of Income-tax (Appeals), the assessee is in second appeal before the Tribunal. 9. The learned counsel for the assessee submitted that the short-term capital gain earned by the assessee on investments made in shares has been classified as business income by the Revenue authorities. The assessee is consistently following the same principle whereby delivery based buying and selling in the shares is cl .....

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vide order dated December 30, 2008, and December 16, 2009, respectively are placed in the paper book pages 27-29 and 38-39 respectively. The learned counsel for the assessee submitted that the principle of consistency has to be followed. The learned counsel for the assessee drew our attention to the paper book pages 65-66 whereby the details of holding of shares are there as at March 31, 2007, whereby the investments in shares have substantially increased as at March 31, 2008, indicating the in .....

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s relied upon various case law which are also placed separately in the form of paper book of case law, in particular the decision of the Income-tax Appellate Tribunal in the case of Asst. CIT v. Naishadh V. Vachharajani (ITA No. 6429/Mum/2009, dated February 25, 2011) which is affirmed by the honourable Bombay High Court in ITA (L) No. 1042 of 2011 dated September 22, 2011, and also the decision of the honourable Bombay High Court in the case of CIT v. Gopal Purohit [2011] 336 ITR 287 (Bom) ; [2 .....

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ught to tax as short- term capital gain and not income from business as has been done by the Assessing Officer and confirmed by the learned Commissioner of Income- tax (Appeals). In the earlier years also it was disclosed as short-term capital gains which was accepted by the Revenue. There are no intraday transactions and there are no F & O transactions. The learned counsel further relied upon the decision of the Income-tax Appellate Tribunal in the case of Nehal V. Shah v. Asst. CIT (ITA No .....

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the assessee submitted that there was dividend income earned of ₹ 2.57 lakhs on shares investment which reflect that shares are held as investment and objective is to earn return on investment and not merely profit on sale and purchase of shares. The learned counsel for the assessee submitted that, without prejudice, the shares in which holding of shares is more than 30 days be taken as short- term capital gain up to the period of one year, while the period of holding up to 30 days should .....

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ed Commissioner of Income-tax (Appeals) reflecting the shares whereby the assessee re-entered the same shares and purchased it after selling the same. The learned Departmental representative further relied upon the orders of the authorities below. He held that the principles of res judicata are not applicable to the Income-tax proceeding. The assessee's intention clearly indicates to earn profit by buying and selling of shares. The assessee is not having any infrastructure which is not mater .....

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able on record including the case law relied upon by the assessee. We have observed that the assessee is engaged in the business and is proprietor of M/s. Movements, M/s. International Ship Agency and M/s. S. B. Shroff engaged in the business of transporters, hire charges and cargo handling agents. The assessee also received salary from Silver Shield Energy Pvt. Ltd. The assessee is also having share of profit from partnership firms, M/s. Cargo Handlers and Stevedors, M/s. Shroff and Co. (Cargo .....

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the preceding assessment years even under the scrutiny assessments under section 143(3) of the Act but in the instant assessment year, the short-term capital gain arising from sale and purchase of shares has been treated as business income by the Revenue and brought to tax under the head "Income from business". The principle of res judicata is not applicable in Income-tax proceedings. The assessee is declaring the investment in shares at cost which is also accepted by the Revenue in t .....

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