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Shewaram Kalumal Suhandani 19, Thaltej, Ahmadabad-380059. V/s. Dy. Commissioner of Income Tax, Circle-13, Ahmedabad
December, 26th 2013
               ,  Û `'

            Before Shri Mukul Kr. Shrawat, Judicial Member and
                   ^          ^, Û 
                   Shri T.R. Meena, Accountant Member
                   ^ ..,                      ¢ 

                            ITA No. 534/Ahd/2010
                          Assessm ent Year : 2006-07

 Shewaram Kalumal Suhandani      V/s . Dy. Commissioner of Income
 19, Golden House,                     Tax,
 S.G.Highway, Near Gurudwara,          Circle-13, Ahm edabad
 Thaltej, Ahmadabad-380059.
                       P AN No. ADGPS0290K
           (Appellant)           ..            (Respondent)

                                            Shri T. H. Vasa, A.R.
     By Appellant
     ×   /By Respondent                     Shri K. C. Mathews, Sr. D.R.
       /Date of Hearing
       /Date of Pronouncement                17.12.2013


PER : Shri T.R.Meena, Accountant Member

      This is an appeal at the behest of assessee which has emanated from

the order of CIT(A)-XXI, Ahmedabad, dated 07.12.2009 for assessment year

2006-07. The effective grounds of appeal are as under:

      "1.   That the learned Commissioner of Income-tax (Appeals) has
            erred in confirming in treating the net short term capital gain of
            Rs. 9,29,511/- as business income of the appellant.
I T A No . 5 34 / Ah d /2 0 10 , A . Y. 06- 0 7                            Page 2

         2.       That the learned Commissioner of Income-tax (Appeals) has
                  erred in coming to conclusion that the appellant has carried
                  out business of trading in shares and in securities and treating
                  short term capital gain as business income of the appellant.
         3.       That the learned Commissioner of Income-tax (Appeals) did
                  not appreciate the contention that the appellant was investing
                  in shares and securities and therefore the short term capital
                  gain should not be taxed as business income. That the
                  learned A.O. is not uniform and consistent in his approach
                  while considering investments sold by the appellant as
                  business income.
         4.       That the learned Commissioner of Income-tax (Appeals) has
                  erred in not considering that the shares and securities were
                  held as investments and not as trading stock by the appellant."

2.       All the grounds of the assessee are revolving around the Ld. A.O.

treated short term capital gain as business income. The assessee has

declared the income from pension, capital gain from sale of shares and

securities and income from other sources. During the year under

consideration, the assessee had disclosed short term capital gain of Rs.

9,29,511/- on sale of shares of Indian Companies. The assessee had paid tax

@ 10% from the short term capital gain. After examining the details and

nature of the transaction, the Ld. A.O. gave the reasonable opportunity of

being heard for this transaction should not be treated as "business income".

The assessee filed reply on 30.12.2008 which has been reproduced by the Ld.

A.O. at Page No. 2 & 3 of the assessment order. After considering the details

and reply of the assessee, the Ld. A.O. relied upon the Hon'ble Supreme
I T A No . 5 34 / Ah d /2 0 10 , A . Y. 06- 0 7                         Page 3

Court's decision in case of the CIT vs. H. Holck Larson 160 ITR 67 (SC) and

discussed the parameter of share trading is whether short term capital gain or

business income. He finally analyze this case on the following basis :

         (i) The subject matter of realization.

         (ii) The length of the period of ownership.

         (iii) The frequency or number of transactions by the same person.

         (iv) Supplementary work on or in connection with the property realized .

         (v) The circumstances that were responsible for the realization.

         (vi) Motive.

         After applying these tests on the assessee, he held that the assessee's

share trading was business income and not a short term capital gain as

claimed by the assessee.

3.       Being aggrieved by the order passed by the Ld. A.O., the assessee

carried the matter before the Ld. CIT(A) who had considered the Ld. A.O's

order as well as submissions made by the assessee and without recording

any reasons he had accepted order of the Ld. A.O., he dismissed the

assessee's appeal.

4.       Now, the assessee is before us. The Ld. A.R filed written reply as


         "1.      Shri S. K. Suhandani, aged 76 years, is a retired employee

                  receiving pension from State Government. He has never carried

                  on himself or in partnership any business. No books of accounts
I T A No . 5 34 / Ah d /2 0 10 , A . Y. 06- 0 7                            Page 4

                  are maintained by him. He maintains Bank accounts and Demat


         2.       His investments are at all times valued at cost. He has never

                  valued them at Cost or Market value which ever is lower as per

                  the guidelines of ICAI.

         3.       Appellant is accepted as investor in all the previous years. He has

                  been making investments since 1985.

         4.       The appellant has never-ever made any borrowings or taken

                  loans to make investments. All his investments are out of his

                  capital, savings and income.

         5.       Appellant earned substantial dividend income in the year under

                  consideration and all earlier years.

                  Assessment Year                             Dividend Income Rs.

                  2003-04                                     1,26,150

                  2004-05                                     2,27,803

                  2005-06                                     2,13,804

                  2006-07                                     1,91,814

         6.       Appellant has earned Rs. 13,71,532/- long term capital gain and

                  Rs. 9,29,493/- as short term capital gain which indicates that his

                  long term holding giving long term capital gain is more than his

                  short term capital gain.
I T A No . 5 34 / Ah d /2 0 10 , A . Y. 06- 0 7                         Page 5

         7.       Appellant is neither a broker or a sub-broker registered under


         8.       Appellant has never deal in futures, derivatives, options or has

                  made hedging transactions.

         9.       Appellant has taken delivery and has given delivery for all

                  transactions of purchase and sale made by him except cases

                  where there were corrections of wrong purchases and wrong

                  punching of sales made by broker's staff.

         10.      Assessee has never claimed set-off of losses against income

                  under other heads of income.

         11.      investments made in different assets-Fixed deposits with Banks,

                  Fixed deposits with Companies, Mutual funds, Corporate and

                  Govt. Bonds, Post office investments.

                  All the above aspects are dealt with decisions from different

                  courts in the decision of Hon'ble Andhra Pradesh High Court in

                  the case of Sprectra Shares and Scripts (P) Ltd. vs.

                  Commissioner of Income tax reported at (2013) 91 DTR (AP)

                  289- issue No, 164 of 5th September-2013.

         Sale includes shares purchased, share applied and allotted sold, Bonus

         shares, Right shares allotted and sold. In short term capital gains bonus

         shares, rights/ shares allotted on IPO applicants are as per statement

I T A No . 5 34 / Ah d /2 0 10 , A . Y. 06- 0 7                                  Page 6

He also filed the details of the short term capital gain claimed by the assessee

and also a copy of return, copy of challan showing security transaction paid by

the assessee, a copy of computation of income and details of chart of sale-

purchase of shares and also drawn our attention that the assessee had

allotted Bonus shares which was also sold during the year and there is no

purchase price in case of Bonus shares and whole value of shares had been

shown as "short term capital gain", which proves that the assessee's intention

was to invest in the shares and security for investment purpose and not for

trading purpose. In past also, the Revenue has accepted the assessee's short

term capital gain as it is. Thus, he prayed to allow the short term capital gain

as claimed by the assessee.                   At the outset, the Ld. DR submitted the order

of the Ld. CIT(A).

5.       We have gone through the Paper book submitted by the assessee and

order of the lower authorities. It is found from the details furnished by the

assessee that the Ld. A.O. even on bonus shares has also calculated as

"business income" which proves that the assessee held shares for the

investment purpose. But on the basis of magnitude of transaction, frequency,

length of holding, the sources of income, motive, we hold that share

purchased and sold during the year, is business except the tax shown on

bonus shares with original shares, if any.
I T A No . 5 34 / Ah d /2 0 10 , A . Y. 06- 0 7                           Page 7

Thus, we set aside the order of the Ld. A.O. as per the above direction to re-

compute the income accordingly.

6.       In the result, the assessee's appeal is allowed for statistical purposes.

 This Order pronounced in open Court on 17.12.2013

         Sd/-                                                     Sd/-
 (Mukul Kr. Shrawat)                                          (T.R. Meena)
  Judicial Member                                         Accountant Member
                                              True Copy
     / Copy of Order Forwarded to:-
1.  / Appellant
2. × / Respondent
3.    / Concerned CIT
4.  -  / CIT (A)
5.  ,   ,  / DR, ITAT, Ahmedabad
6. [  / Guard file.
                                                                    By order/  ,

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