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Shri. Pankaj K. dharia Versus ITO 16 (1) (1) , Mumbai

2016 (9) TMI 902 - ITAT MUMBAI

Profit arising out of sale & purchase of shares - business income OR short term capital gain - Held that:- We find that the assessee has maintained the investment portfolio and all the sales and purchase of shares are routed through the same portfolio as noted above. The assessee has kept the entire investment of shares as an investment and not in the trading account. The assessee is not in the business of share trading rather he is partner in firm and doing share transactions as part time. We f .....

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g activity has been carried out by the assessee because the assessee has kept the entire investment in shares in investment portfolio and his intention is clear that he has to earn capital appreciation on the same. The assessee acted accordingly. The assessee has also kept these shares in DEMAT after taking delivery of the same. Even otherwise in earlier years and future years the assesses transaction of sale and purchase of shares was treated by Revenue as investment and profit or loss arising .....

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e documents and noticed that assessee has earned interest income on the FDR’s, which were made out of loan taken from Deepika Dharia. There is a direct nexus between the loan taken and amount invested in FDR’s and it has not gone into interest free advances. Once it is a case, the disallowance made by AO cannot be sustained. Accordingly, we are of the view that the assessee has explained the nexus of interest bearing loans invested in income earning instruments and not in the interest free advan .....

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by ITO, Ward 16(1)(1), Mumbai under section 143(3) of the Act, 1961 ( hereinafter the Act ) for the AY 2008-09, vide his order dt. 01/12/2010. 2. The first issue in this appeal of assessee is against the order of Ld. CIT(A) confirming the action of the AO in treating the profit arising out of sale & purchase of shares as business income as against declared by assessee as short term capital gain. 3. Briefly stated facts are that the assessee claimed the income arising out of sale and purchas .....

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noted the details of transaction in his assessment order. Finally in view of the above, the Assessing Officer treated the profit arising out of sale and purchase of shares as business income. Aggrieved, assessee preferred the appeal before Ld. CIT(A). 4. The Ld. CIT also confirmed the action of the Assessing Officer in disallowing the claim of the assessee that the profit arising out of purchase and sale of share as Short Term/ Long Term Capital Gain or loss. The fact is that the assessee had e .....

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h to 3 months on which assessee incurred loss of ₹ 9,557/-. In view of these facts the Ld. CIT(A) confirmed the action of the AO treating the profit arising out of transactions of sale purchase of shares as business income. Aggrieved, assessee is in appeal before the Tribunal. 5. We have heard the rival contention and gone through the facts and circumstances of the case. The assessee before us filed a Paper Book containing various details of transaction of sale and purchase of shares. The .....

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t there are 67 transactions wherein the holding period is less than 15 days, the holding period of 15 transaction is less than 30 days, the holding period of 11 transactions is less than 45 days, the holding period of 19 transaction is less than 60 days, the holding period of 18 days is less than 90 days, holding period for 26 transaction is less than 180 days. There are 7 transactions where the assessee on different dates entered into transactions of sale and purchase, where holding period is m .....

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; 2238908/- Investment held as on 31/03/2007 ₹ 2414864/- Investment held as on 31/03/2008 ₹ 2368360/- The Assessing Officer has also noted that the assessee is maintaining DEMAT Account and DEMAT charges as well as transfer charges related to shares held by the assessee during different period were not debited to the trading account of the assessee but debited from the profit of shares as an investor. In view of these facts Ld. Counsel for the assessee stated that the assessee has in .....

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the other hand Ld. DR supported the order of Lower authorities. 7. Going through the facts of the case and arguments of both the sides, we find that the assessee has maintained the investment portfolio and all the sales and purchase of shares are routed through the same portfolio as noted above. The assessee has kept the entire investment of shares as an investment and not in the trading account. The assessee is not in the business of share trading rather he is partner in firm and doing share tr .....

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ould not mean that the trading activity has been carried out by the assessee because the assessee has kept the entire investment in shares in investment portfolio and his intention is clear that he has to earn capital appreciation on the same. The assessee acted accordingly. The assessee has also kept these shares in DEMAT after taking delivery of the same. Even otherwise in earlier years and future years the assesses transaction of sale and purchase of shares was treated by Revenue as investmen .....

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ions involved dealing in shares for the purposes of business (described in paragraph 8.3 of the judgment of the Tribunal as transactions purely of jobbing without delivery). The Tribunal has correctly applied the principle of law in accepting the position that it is open to an assessee to maintain two separate portfolios, one relating to investment in shares and another relation to business activities involving dealing in shares. The Tribunal held that the delivery based transactions in the pres .....

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t case and precedent cited by Ld. Counsel in the case of Gopal Purohit(supra), we allow the claim of the assessee holding that the income / profit arising out of sale purchase of shares is capital gains and not business income. This ground of assessee s appeal is allowed. 8. The next issue in the appeal of the assessee is against the order of Ld. CIT(A) confirming the action of the AO in disallowing interest expenditure of ₹ 2,93,652/-. 9. We have heard the rival contention and going throu .....

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; 2,94,707/-. According to AO, the assessee has given interest free loan to his son Shaishav Dharia after taking interest bearing loan from his wife Deepika Dharia. Accordingly he disallowed the interest expenditure of ₹ 2,93,652/- related to his wife and also interest paid to Shri. Farooq Hawa amounting to ₹ 1005/-. Aggrieved, assessee preferred the appeal before the Ld. CIT(A), who also confirmed the action of the AO in respect to disallowance of interest expenditure relating to pa .....

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