TMI Blog2019 (1) TMI 1636X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Though it is pleaded that the assessee is a very busy Doctor engaged in the professional work but what transpires from the records is that the assessee is devoting his time and knowledge for regular purchase and sale of equity shares round the year. Even otherwise there is no Estoppel by law on the assessee to carry more than one business or profession. There are innumerable instances where a particular individual carries on multiple businesses from multiple locations then why cannot the assessee. The situation in the case of assessee seems to be different because assessee is keeping continuous watch on the share market. He selects various scripts for regular purchase and sale and he is also engaged in the future and option market. Hundreds of transactions have been entered with the same brokers for purchase/sale. No separate demat account have been kept by the assessee relating to the alleged investment in equity shares and profit and sale from share trading and future and option. In these given facts it is hard to believe that such gain from such magnitude of transactions can be taxed under the head of short term capital gain. AO was fair enough to give the benefit of ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsactions which reflects modus operandi of assessee of share business as an adventure in the nature of trade. 2. The Ld CIT (A) has erred in not appreciation the fact that assessee has purchased shares of a very large amount of ₹ 12,02,54,365/- and sold the shares for ₹ 14,20,85,990/- . These figures themselves speak which is the prime activity and that is the dominant intention of the assessee. The magnitude of share transaction is on so higher side that it cannot be said that main activity of the assessee was of doctor's profession. 3. Appreciating the assessee's version that he is a leading eye surgeon having no time for carrying out share business and share business is not of his line, it may be mentioned that it is not necessary that a person should engage physically for carrying out such business that to when the assessee is having time for doing speculative business . 3. The grounds raised by the assessee are as under;- C.O. No.65/Ind/2012 (Assessment Year 2008-09) 01. On the facts and circumstances of the case and in law the Learned CIT- (A) appreciating the submissions made before him was fully justified in treating the addition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,14,17,278/-. Case was selected for scrutiny and necessary notice u/s 143(2) of the Act was duly served upon the assessee. During the course of assessment proceedings Ld. Assessing Officer in short Ld.AO ) observe that the assessee apart from earning professional income by running M/s. Chaudhary Eye Retina Research Centre has also earned substantial income from purchase and sale of equity shares which included Long term Capital Gain at ₹ 35,22,054/- and Short Term Capital Gain at ₹ 1,18,57,282/-. Ld. Assessing Officer was satisfied with the claim of long term capital gain of ₹ 35,22,054/-. The Ld. Assessing Officer examined in detail about the profit from purchase and sale of equity shares at ₹ 1,18,57,282/- by calling necessary details of the equity shares purchased and sold and financial ledger for the transactions carried out during the year. After going through submissions made by the assessee as well as facts available on record Ld. AO came to a conclusion that the alleged profit of ₹ 1,18,57,282/- is a profit from running of share business which is in an adventure in the nature of business and the assessee has wrongly claimed the benefit of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal against the finding of Ld. CIT(A) whereas the assessee has raised cross objection raising two issues; firstly supporting the finding of Ld. CIT(A) relating to claim of short term capital gain from purchase sale of equity shares and also raised ground against the disallowance confirmed by the Ld. CIT(A) u/s 14A of the Act at ₹ 2,15,542/-. 7. We will fist take the Revenue s appeal wherein sole issue raised is against the finding of Ld. CIT(A) treating the income of ₹ 1,18,57,282/- as profit from purchase sale of shares as short term capital gain instead of business income without considering the magnitude, intention, frequency on transactions which reflects modus operandi of the assessee of share business as adventure in the nature of trade. 8. Ld. Departmental Representative (DR) vehemently argued supporting following findings of Ld. Assessing Officer: The submission of the assessee has been duly considered in reference to the - circular of the CBDT no. 4/2007, but not accepted because of the following reasons:- (i) The assessee is deriving income from the F 0 as well as speculation share trading which are purely business income. The person w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... single fact has any decisive significance and the question must be answered depending on the collective effect of all relevant material brought on record. (ii) These principles have to be applied to the following facts: (a) The assessee entered into transaction of purchases and sale of shares of about 32 companies totalling ₹ 1,87,83,440 which were sold for ₹ 2,69, 71,368. Though most transactions were effected by actual delivery, the holding period was less than 6 months. Most of the gain was earned in shares held for a period for short periods; (b) In the earlier years the assessee has nil or small long term capital gain which indicates that holding investments for a longer period is not the main intention except few scrips which are carried over without any transactions year after year. Accordingly to the extent of investment activity in shares one can see that the assessee has invested in some 5 to 6 companies scrips which have been carried over from year to year in which there are no frequent or large number of transactions and these investments in shares can be considered as assessee's proper investments ; (c) Purchase and sale of shares in short ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not make any difference to the nature of transaction where delivery is effected considering the other facts prevailing the case of the assessec viz., (a) The volume and frequency of the' transactions which were about 800 in number where the holding period was between minimum of 1 day to maximum o( 6 months. (b) Shares of more than 200 companies had been bought and sold by the assessee during the previous year. (c) The volume of purchase and sale (delivery based) of the assessee during the previous year was ₹ 1,01,51,786/ and ₹ 1,10,45,798/- respectively. The value of investment as on 31.3.2004 was only ₹ 11,14,054/-. (d) The purchase and sale of shares was the only activity of the-assessee. (e) The period of holding being very short it is reasonable to presume that the purchase was made with an intention to resell. (f) The scale of activity is substantial. (g) The transactions were continuous and regular besides being systematic. (h) Borrowed funds had been used for purchase of shares Learned counsel for the assessee's contention that borrowed funds were used to buy immovable property remains unsubstantiated and the findings of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olios, one for investment and other for share trading. Since period of holding of investment in shares is less than one year, capital gain is to be treated as short term. As already stated in our earlier submission the consistency is observed by the Department in the case of assessee right from A.Y. 2001-02 has to be followed. In all these previous years losses/income from purchase and sale of shares has been treated by the Department as capital loss/gain. He. has. handsome money. He tries his luck by making investment in shares in good quantity. He has adopted the mode of investment in shares because money invested therein is readily realizable, without any efforts. The assessee's shares activity treated as investment in earlier years cannot be treated as business in subsequent year if facts are the same. Reliance is placed on the decision of High Court of Bombay in the case of Commissioner of Income Tax Vs. Gopal Purohit Income Tax Appeal No. 1121 0/2009 dated 06.01.2010. It is therefore submitted that the order of the CIT(A) be upheld and appeal of the Department be dismissed and cross objection of the assessee be allowed. He further submitted that On per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,42,162 37,324 3,92,724 15,97,049 1,02,38,693 2005-06 1,23,550 46,377 2,38,676 97,48,386 32,29,256 2006-07 3,29,368 52,420 99,339 13,67,339 32,79,855 2007-08 4,37,354 77281 17,90,494 35,22,054 1,18,57,282 2008-09 6,33,223 71,274 5612 179 (-)25,31,605 8,89,162 2009-10 14,05,361 84,805 65,84,736 (-)21,92,310 33,03,469 2010-11 6,61,670 95,270 59,08,981 85,35,041 2,83,525 2011-12 4,59,287 1,11,162 28,68,793 (-)5,03,234 7,98,900 Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... previous years losses/income from purchase and sale of shares has been treated by the Department as capital loss/gain. The said issue has already been decided by the learned CIT(A) in the assessee's appeal no. IT-283/2009-10/40 dated 30.05.2011 in favour of the assessee. The department has been filed the appeal against the CIT(A) order for the A.Y. 2004-05 before ITAT Indore Bench, Indore which is pending for order. Moreover following points needs attention:- 1. The assessee is renowned Eye surgeon and all the time he is busy in his profession. He does not have any business at all. He has earned money in profession which he invest by way of fixed deposits in the banks and also purchased and sale of shares of various Indian Companies. ii. He does not have any shop/office for trading in shares. He does not deal in the purchase and sale of shares regularly. It would make no difference even if the transaction is a single, multiple or isolated. iii. He has not absorbed himself in the business of shares. He purchase and sale shares it and when advised by the experts and/or brokers, so that he may invest his own money profitably. For this purpose he does not borrow money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The learned CIT(A) is justified holding that the income derived by the assessee from the share transactions is a short term capital gain. The ratios of this case are similarly with the appellant's case held by jurisdictional Hon'ble High Court in the case of CIT Vs. Shree Om Prakash Sur; (2012) 191TJ 326 (M.P.). Held - that assessee invested to earn dividend - No funds were borrowed for making investment - Income is treated as short term capital gain '. The ITAT Indore Bench, Indore applying the judgment of CIT Vs .Om Prakash Suri; (2012) 19 ITJ 326 (M.P) is In favour of assessee in the following cases:- (1) Commissioner of Income Tax Vs. Sanjay Soni (20.12) 20. IT J 454. (ii Shri Manish Karwa Vs. ACIT - 5(1), Indore I.T.A. No. 3o.711nd12,Qo.9 order dated 20.12.2013 (iii) Shri SushilKarwa Vs. ACIT - 5(1}, Indore. I.T.A. No. 3o.811nd/2Qo.9 order dated 20.12.20.3 (iv) Smt. Sudha Karwa Vs. ACIT - 5(1), Indore I.T.A. No. 3o.9/1nd/2o.o.9 order dated 20.12.2013 (v) Shri Vishnu Karwa Vs. ACIT - 5(1), Indore I.T.A. No. 31o./lnd/200.9 order dated 20.12.2013 (vi) Shri Subhashchand Karwa (HUF) Vs. ACIT - 5(1), Indore I.T.A. No. 3M11/1nd/2o.o.9 orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m capital gain. 12. It is an established fact that the issue relating to taxability of gain/loss from purchase/sale of equity shares is purely a matter of fact and the treatment of such gain/loss can be decided only on the basis of the facts of the particular assessee. Though the Ld. Counsel for the assessee has relied on many judgments but in our humble view the decision cannot be applied squrely on the facts of the assessee. Though the facts before the Hon'ble High Court of Bombay in the case of ITO vs. Gopal Purohit are similar to a considerable extent but the view cannot be applied on the facts of the assessee because it does not fulfill the rule of consistency. In the case of assessee in the preceding year there was meager income from purchase and sale of equity shares which considerably increased from year to year with the fact that the assessee also start share trading business as well as trading of future options (F O). For this very reason the rule of consistency cannot be applied. Even otherwise the case of assessee was never subject to scrutiny for examining this issue of purchase and sale of shares and it was only for A.Y. 2004-05 that the case was reopened and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Escorts Ltd. 253934 equity shares were purchased and sold during the year on 52 occasions. In case of Fortis Health Care Ltd. 1,88,690 equity shares were purchased and sold scattered over on 31 transactions. 13. The above given facts have nowhere during the course of proceeding before the lower authorities as well as before us have been disputed by ld. counsel for the assessee. The picture which can be framed in the light of the above facts shows that though the assessee has not borrowed the money for investing into the business but apart from that all other basic feature of carrying on regular business have been performed by the assessee. It has nowhere been pleaded that the assessee has kept designated employee/portfolio manager to take care of investments. Therefore, all these huge number of transactions of regular purchase/sale of equity shares of various listed companies share trading transactions have been carried out by the assessee himself. The assessee has also earned income from future and option transactions of equity shares which itself infer that the assessee is into business of share trading. 14. Such issues of taxability of gain from equity shares whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally engaged in other business or profession make such investments to fetch some income without investing much time on trading such investments on regular basis. For this reason the investors invests the money in fixed deposits Public Provident funds as well as equity shares and other investments options. 18. But the situation in the case of assessee seems to be different because assessee is keeping continuous watch on the share market. He selects various scripts for regular purchase and sale and he is also engaged in the future and option market. Hundreds of transactions have been entered with the same brokers for purchase/sale. No separate demat account have been kept by the assessee relating to the alleged investment in equity shares and profit and sale from share trading and future and option. In these given facts it is hard to believe that such gain from such magnitude of transactions can be taxed under the head of short term capital gain. 19. Ld. AO was fair enough to give the benefit of exemption for the long term capital gain but as regards the alleged income of ₹ 1,18,57,282/-, we find merit in the finding of Ld. AO and are inclined to hold that the alleged inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed the following expenses for investments in shares: Bank/De-met charges 37,451 Cess on ST 4,224 Brokerage 2,66,205 Service Tax on brokerage 1,71,442 Transaction charges 46,159 Stamp charges 815 Turnover charges 970 Total 5,27,267 ii. The said expenses ₹ 5,27,267/- claimed against short-term capital gain on sale of shares. During the year under appeal short term sale proceeds of shares ₹ 12,41,10,593/- and long term sale proceeds of shares Rs, 1,79,75,397/-. Thus the total sale proceeds of ₹ 14,20,85,990/-. The short term sale proceeds 87.35% and long term sale proceeds 12.65 /0. The short term expenses Rs, 4,60,567 (527267 X 87.351100) and long term expenses ₹ 66,700 (527267 X 12.65/100) out of the said expenses ₹ 5,27,267. The expenses incurred ₹ 66,700 for long term capital gain which is already disallowed in the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le under the law. Held - That the amount of gain arising from sale/purchase of shares was assessed as income from capital gains. The copy of the same is on page 52to M of paper book. Disallowance u/s. 14A of the Act is not warranted. It is therefore submitted that in the appellant case the order of the CIT(A) regarding short term capital gain be upheld and disallowance of Rs, 2,15,542/- out of dividend income of Rs, 4,37,354/- for which assessee has not incurred any expenditure direct or indirect in relation to dividend income the same may kindly be allow. Appeal of the Department be dismissed and cross objection of the assessee be allowed. 25. Per contra Ld. DR supported the order of the both lower authorities. 26. We have heard the rival contentions, perused the record placed before us. The issue raised by the assessee in this cross objection relates to disallowance u/s 14A of the Act at ₹ 2,15,542/-. As discernable from the records, the assessee has earned long term capital gain, dividend income and also business income from trading in shares and futures and option. The assessee has also shown short term capital gain from purchase and sale of listed equity s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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