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2013 (6) TMI 794 - ITAT MUMBAI

2013 (6) TMI 794 - ITAT MUMBAI - TMI - I.T.A. No. 6274/Mum/2010, I.T.A. No. 6275/Mum/2010, & I.T.A. No. 2114/Mum/2011 - Dated:- 19-6-2013 - SHRI VIJAY PAL RAO, JM & SHRI. N.K.BILLAIYA, AM, Appellant by : Shri B.V. Jhayeri Respondent by : Shri Javed Akhtar O R D E R PER VIJAY PAL RAO, JM These three Appeals by the Assessee are directed against the respective orders of the CIT(A) for the assessment years 2005-06, 2006-07 & 2007-08 respectively. 2. Since the common issues involved in all th .....

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of ₹ 87,955/- as business loss instead of which he has treated the same as speculation loss and not allowed to be set off against other income and the Ld. CIT(A)-30 has erred in confirming the same. 3) The Ld. A.O. has erred in making the ad-hoc addition of ₹ 1,50,000/- alleging low house-hold withdrawals and the Ld. CIT(A)-30 has erred in confirming the same. 4. At the time of hearing the Ld. AR of the assessee stated that the assessee does not press ground No. 2&3 and the same .....

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leting the assessment, the Assessing Officer treated both short term capital gain and long term capital gain on sale of shares as business income and taxed accordingly. On Appeal the CIT(A) has confirmed the action of the Assessing Officer on the ground that for the assessment year 2004-05 the assessee himself has accepted the treatment of long term capital gains arising from sale of shares as business income and do not go in appeal against the order of the CIT(A) who had confirmed the order of .....

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r 1997-98 till the assessment year 2006-07 at page No. 75 of the paper book. He has pointed out that for the assessment year 2001-02 the assessee had invested in shares of ₹ 1,24,33,007/- The Assessee incurred short term capital loss on sale of shares to the tune of ₹ 29,19,488/- and the assessee has earned long term capital gain of ₹ 37,99,409/- in the said assessment year. The return of income for the assessment year 2001-02 was scrutinized and the long term capital gain and .....

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short term capital gain as business income and taxed accordingly. He has pointed out that for the assessment year 2004-05 short term capital gain was chargeable to tax at the rate of 30% and therefore there was no tax effect as far as the short term capital gain was treated by the Assessing Officer as business income. As far as the long term capital gain of ₹ 3,75,375/- the same was chargeable to tax at the rate of 20% for the said year and treating the same as business income by the Asses .....

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erted his investment in the shares into stock in trade and therefore the investment in share remained as investment as it was treated accordingly by valuing them at cost. During the year under consideration the Assessee has earned business income from the share trading of ₹ 2,61,70,171/- which was offered as business income in the return of income. Apart from business income the Assessee ahs also sold some of the shares which were acquired by the Assessee prior to 31st March.2004 and the s .....

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erm capital gain on sale of shares on which the Security Transaction Tax (STT) is paid will be liable to tax at 10%. The Finance Act 2004 also inserted subsection 38 to section 10 of the Income Tax Act, whereby it is provided that any income arising from transfer of long term capital gain being equity shares on which STT is paid is exempt w.e.f. 01.10.2004. The Ld. AR has contended that in view of the aforesaid amendment in the Income Tax Act the short term capital gain earned up to 30th Sept.20 .....

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res acquired prior to 31st march.2004 which were held as investment and valued at costs on 31st March.2004. The holding period in respect of shares on which the assessee has earned capital gain is very long as in respect of the long term capital gain the holding period is ranging from 432 days to 2000 days, whereas the holding period in respect of short term capital gain in most of the cases is ranging from 45 days to 357 days. The Ld. AR of the assessee has pointed out that the assessee has use .....

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ehemently argued that in view of the fact as explained, the intention of the assessee is clear that the shares were purchased as investment and not as stock in trade. The assessee has been consistently treating the shares as investment in the books of account and valued the same as on 31st March at cost. From the assessment year 2005-06 onwards the Assessee has stop purchasing the shares for investment and therefore the frequency of purchase is very less and the shares already held by the assess .....

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tfolios one for investment and another for trading. The shares which were acquired in the earlier years as investment were remained in the investment portfolio. Therefore there was no profit motive as far as the shares held by the Assessee as investment. In support of his contention he has relied upon the decision of the Tribunal in the case of Hitesh Satish Chandra Doshi Vs. JCIT reported in 46 SOT 336, Mumbai. The Ld. AR has also relied upon the following decisions. 1. ITA No. 3661/Mum/2010 AY .....

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siness income for the assessment year 2004-05 then the Assessing Officer is justified in treating the same as business income for the year under consideration. Apart from this the assessee himself has started trading in shares which shows the intention of the assessee to earned profit by purchase and sales of share. 8. We have considered the rival submissions and carefully perused the relevant material on record. There are various guidelines and principles to be taken into consideration for dete .....

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r purchase of the shares, frequency of the purchase and sale of shares the motive of the transaction on purchase and sale of shares whether for realization of profit or for retention and appreciation of its value, the valuation of the shares as taken in the balance sheet etc. Therefore no single factor or principal can be a decisive factor to determine the nature of transaction i.e. trading activity or investment. Each case has to be decided based on the peculiar facts of the said case, hence th .....

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capital gain was subjected to tax at the rate of 10%,. Therefore, not preferring the appeal against the order of the CIT(A) for the assessment year 2004-05 does not operate as estoppel because in the matter of taxation the rule of estoppel and resjudicata are not applicable. Further we find from the undisputed fact that the assessee has not converted the shares shown as investment as on 31st March.2004 in to stock in trade and the treatment of the shares continued as investment and valued at co .....

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essee has retain the shares as long as 6 years and was not influenced by the frequent up and downs of the market, then there is no iota of doubt about the intention of the Assessee to acquire those shares. The holding period of the shares giving rise to the short term capital gain in most of the cases is ranging from 45 days to 357 days which clearly shows that those shares were held by the assessee with the intention to retain for a longer period for appreciation of the value of the asset. The .....

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of CIT Vs. Gopal Purohit 188 Taxman 140. The assessee has also shown the short term capital loss of ₹ 3,67,738/- and the holding period of the shares on which the assessee incurred the loss is more than 250 days and even up to 360 days. It is pertinent to note that if the assessee s intention was to avoid the tax then the loss arising from the shares which were held for more than average period of 250 days might have been shown as business loss. Thus the assessee has made a clear demarcati .....

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d for the purpose of investment. 9. We further note that since assessment year 1997-98 the assessee has been shown the investment and up to the assessment year 2003-04 the Revenue accepted the investment in shares. Therefore as far as the assessee s treatment of investment in the books of account there is no change as it is clear that even in case of capital loss the assessee is showing the same under the head capital loss. There is no repetitive transaction and the shares acquired for investmen .....

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wing grounds:- 1 The Ld. A.O. has wrongly invoked the provisions of section 14A and made the addition of ₹ 3,90,295/- of the Income Tax Act, 1961 and the Ld. CIT(A)-30 has erred in confirming the same. 2 The Ld. A.O. has in disallowing the interest expenditure of ₹ 51,320/- and the Ld. CIT(A)-30 has erred in confirming the same. 3 The Ld. A.O. has also erred in treating the short term capital gain of ₹ 17,383/- and long term capital gain of ₹ 15,55,397/- in sale of shares .....

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ital gain and long term capital gain arising from sale of shares treated as business income. We have heard the Ld. AR as well as the Ld. DR and considered relevant material on record. The facts for this assessment year are identical to the facts of the assessment year 2005- 06, except the amount of capital gain. The short term capital gain for the year under consideration is ₹ 17,383/- whereas the long term capital gain is ₹ 15,55,397/- In view of our finding for the assessment year .....

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