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Mrs. Minal Deepak Mehta Versus ACIT 16 (2) , Mumbai

2016 (11) TMI 1156 - ITAT MUMBAI

Income from share transactions - business income or capital gain - Held that:- We find, the assessee continuously engaged in the buying and selling of shares and reflected the same as investment activity and not as stock-in-trade. The claim of the assessee was accepted by the Revenue Authorities in the AYs 2006-07 and 2007-08. AO disturbed the claim of the assessee in the year under consideration and treated the same as a business activity and taxed the gains under the head „income from profit a .....

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ssee. - I.T.A. No.657/M/2012 - Dated:- 23-9-2016 - SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER For The Appellant : Shri C.N. Vaze, AR For The Respondent : Miss. Anupama Singh, DR ORDER PER D. KARUNAKARA RAO, AM: This appeal filed by the assessee on 1.2.2012 is against the order of the CIT (A)-27, Mumbai dated 17.10.2011 for the assessment year 2008-2009. In this appeal, assessee raised the following grounds which read as under:- 1. On the facts and in the circ .....

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facts of the case are that the assessee declared short term capital gains of ₹ 38,48,344/- in the return of income. On finding the assessee is engaged in the share transaction activity, AO proposed to treat the same as business activity and proceeded to tax the same as business income‟. Contents of para 9 of the assessment order are relevant in this regard. AO relied on various judgments in support of the said conclusions. Matter travelled to the first appellate authority. 3. During .....

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activity in the past and offered the income of short term capital gains. Assessing Authorities accepted the claim of the assessee for the AYs 2006-07 and 2007-08 under the proceedings u/s 143(3) of the Act. Further, referring to the CBDT Circular No.6 of 2016, dated 29.2.2016, Ld Counsel for the assessee submitted that the accounting method with regard to these transactions in the books of account of the assessee decide the correct head of income. He also submitted that this proposition was uph .....

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pport of the same, Ld Counsel for the assessee read out the contents of para 7 of the said order of the Tribunal (supra). He also relied on another decision of the Tribunal in the case of Smt. Urmila S. Mehta vs. ACIT in ITA No. 9144/M/2010 (AY 2006-2007), dated 27.2.2013 for the proposition that when the facts are identical the rule of consistency is required to be honoured. For this proposition, he relied on the contents of para 12 of the said Tribunal‟s order (supra) dated 27.2.2013, wh .....

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as a business activity and taxed the gains under the head income from profit and gains of business and profession‟. We have perused the orders of the Revenue Authorities cited before us with reference to the Circular No.6/2016 of the Board. We have also perused the order of the Tribunal in the case of M/s. R.R. Hosiery (supra) and find paras 6 and 7 of the said Tribunal‟s order are relevant in this regard. Considering the significance of the said paras for the sake of completeness o .....

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he years, the assessee has been showing the gain / loss from sale of shares being investments which was accepted by the Revenue as is clear from the order passes u/s 143(3) for the assessment years 2005-06 and 2007-08 by the department in the earlier years even in the scrutiny proceedings as is clear from the copy of the assessment orders for the AYs 2005-06 and 2007-08, which are placed at pages 10 to 15 of the assessee‟s paper book. The assessee has been consistently showing closing and .....

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ncurring short term capital loss on shares to the tune of ₹ 7,57,10,331/-. It is also clear from the copy of profit and loss account that shares at the beginning and at the closing of the year were never shown as stock in trade but it has been shown under the head investments‟ schedule-6 to the balance sheet. The relevant extract is given herein for the sake of better understanding. ....... ..... We also note that the assessee sold 25 scripts during the year out of which three were o .....

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o AY 2011-2012 which reveals that the Revenue has consistently accepted the stand of the assessee barring the year under consideration. The details in respect of previous years are reproduced below for the sake of better understanding of the issue involved: ...... ..... After looking to the overall scenario of the assessee, we are of the considered view that the department cannot dictate the manner and method of treating the activity of assessee in shares as trading activity in one year while ac .....

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section (14) of Section 2 of the Income-tax Act, 1961 ('Act') defines the term "capital asset" to include property of any kind held by an assessee, whether or not connected with his business or profession, but does not include any stock-in-trade or personal assets subject to certain exceptions. As regards shares and other securities, the same can be held either as capital assets or stock-in-trade/ trading assets or both. Determination of the character of a particular investment .....

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ated June 15, 2007, summarized the said principles for guidance of the field formations . 3. Disputes, however, continue to exist on the application of these principles to the facts of an individual case since the taxpayers find it difficult to prove the intention in acquiring such shares/securities. In this background, while recognizing that no universal principal in absolute terms can be laid down to decide the character of income from sale of shares and securities (ie. whether the same is in .....

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(a) Where the assessee itself, irrespective of the period of holding the listed shares and securities, opts to treat them as stock-in-trade, the income arising from transfer of such shares/securities would be treated as its business income, b) In respect of listed shares and securities held for a period of more than 12 months immediately preceding the date of its transfer, if the assessee desires to treat the income arising from the transfer thereof as Capital Gain, the same shall not be put to .....

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4. It is, however, clarified that the above shall not apply in respect of such tran sactions in shares/securities where the genuineness of the transaction itself is questionable, such as bogus claims of Long Term Capital Gain / Short Term Capital Loss or any other sham transactions. Er (Rohit Garg) Deputy Secretary Government of India 5. It is reiterated that the above principles have been formulated with t he sale objective of reducing litig ation and maintaining consistency in approach on the .....

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AO to treat the income from sale and purchase of shares as short term and long term capital gains. 7. From the above, it is evident that irrespective of the holding period, if the assessee treated the shares as stock-in-trade, the income arising on such shares would be treated as business income. In reverse, if the assessee treated the shares as an investment, the same should not be brought under the head income from the business‟. This principle mentioned in the CBDT Circular (supra) is .....

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