IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "D" BENCH AHMEDABAD
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Before Shri Mukul Kr. Shrawat, Judicial Member and
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Shri T.R. Meena, Accountant Member
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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
17.10.2013
/Date of Pronouncement 17.12.2013
ORDER
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
under:
"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
Accounts.
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
SEBI.
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
attached."
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
S.K.Sinha
/ 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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