Shri Kuldeep Singh Nanda, 16, Vasant Peddar Road, Mumbai-400 026 Vs. The ACIT 11(1), Aayakar Bhavan, Mumbai-400 020
August, 29th 2014
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IN THE INCOME TAX APPELLATE TRIBUNAL " G" BENCH, MUMBAI
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BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND
Dr. S.T.M. PAVALAN, JUICIAL MEMBER
( [ [ / Assessment Years : 2008-09 & 2009-10
Shri Kuldeep Singh Nanda, / The ACIT 11(1),
16, Vasant Peddar Road, Aayakar Bhavan,
Mumbai-400 026 Mumbai-400 020
. / . / PAN/GIR No. : AABPN 3364K
( /Appellant) .. (× / Respondent)
/ Appellant by: Shri Hiro Rai
× /Respondent by: Shri S.P. Walimbe
/ Date of Hearing :27.08.2014
/Date of Pronouncement :28.08.2014
/ O R D E R
PER N.K. BILLAIYA, AM:
These two appeals by the assessee are preferred against two
separate orders of the Ld. CIT(A)-3, Mumbai dt. 28.4.2011 pertaining to
A.Yrs. 2008-09 and 2009-10 respectively. As both these appeals have
common issues, they were heard together and dispose of by this common
order for the sake of convenience and brevity.
2 ITA No. 4303/M/2011
ITA No. 6617/M/12
2. The common grievance in both the years is that the Ld. CIT(A)
erred in upholding the action of the AO of assessing the Long Term and
Short Term capital gains as income from business and profession. The
other grievance relates to disallowance u/s. 14A r.w. R. 8D.
3. At the outset, the Ld. Counsel for the assessee stated that he is not
pressing the second grievance relating to the disallowance u/s. 14A for
both the years. Accordingly, this ground for both the years under
consideration is dismissed as not pressed.
3. Coming to the common grievance, we find that the assessee has
shown Capital gains Short Term as well as Long term in both the years.
The AO was of the opinion that assessee is actually trading in shares and
therefore income arising out of the share transaction have to be treated
under the head "profits and gains of business or profession.
4. The assessee carried the matter before the Ld. CIT(A) but without
5. Before us, the Ld. Counsel for the assessee drew our attention to
the statements of Short term capital gains and Long term capital gains as
well as to the balance sheet of the assessee. It is the say of the Ld.
Counsel that the assessee has been showing purchase of shares under the
head `investments' since past many years and the same has been accepted
as such in A.Y. 2006-07 vide order dt. 23.9.2008 which was made u/s.
143(3) of the Act and also in A.Y. 2001-02 vide order dt. 25.3. 2004.
The Ld. Counsel further stated that considering the nature of transaction,
the capital gains arising out of the share transaction ought to be taxed as
capital gains Long term or Short term.
3 ITA No. 4303/M/2011
ITA No. 6617/M/12
6. Per contra, the Ld. Departmental Representative strongly supported
the findings of the Revenue authorities.
7. We have carefully perused the orders of the lower authorities and
the relevant material evidence brought on record before us. The issue
whether the income from sale and purchase of shares in a particular case
should be treated as capital gain or as business income has been a
debatable issue and there are conflicting decisions of the Tribunal on this
issue. Each case is, therefore, to be based on its own factual situation.
The Hon'ble Supreme Court in the case of CIT Associated Industrial
Development Co Pvt. Ltd. 82 ITR 586, which decision has also been
considered by the CBDT in its Circular No. 4/2007 dt. 15.6.2007, has
observed that :
"Whether a particular holding of shares is by way of investment or
forms part of the stock-in-trade is a matter which is within the
knowledge of the assessee who holds the shares and it should, in
normal circumstances, be in a position to produce evidence from
its records as to whether it has maintained any distinction between
those shares which are its stock-in-trade and those which are held
by way of investment"
The CBDT has also mentioned in its circular that it is possible for
a tax payer to have two portfolios i.e. an investment portfolio and trading
portfolio. This view has also been fortified by the decision of the
Hon'ble Jurisdictional High Court in the case of CIT Vs Gopal Purohit
336 ITR 287(2010) 188 Taxman 140 (Bom).
8. The allegation of the AO is that the assessee has indulged in high
frequency transactions. This in itself could not mean that trading
activities have been carried out. A prudent investor always keep a watch
on the volatility of the market and made sound investment decision in
accordance with such market fluctuation and has the liberty to liquidate
4 ITA No. 4303/M/2011
ITA No. 6617/M/12
the investments in shares as and when necessary. The law itself has
recognized this fact by treating the same as Short Term Capital gain for
shares held less than 12 months and Long Term Capital gains when the
shares are held for more than 12 months. Had this been not the case, all
the gains on shares would be considered as business income only. Thus,
the assessee's claim cannot be negated on the basis of frequency of
transaction. The AO cannot replace his opinion for that of the assessee in
holding that the shares are held as stock-in-trade and profit from which is
to be assessed as business income. In all cases, the intention is
manifested by the assessee himself by his conduct and other relevant
9. A perusal of the balance sheet of the assessee shows that the
assessee had shares in companies as on 31.3.2007 at Rs. 89,61,206/-, the
same is shown as on 31.3.2008 at Rs. 3,70,00,413/- which shows that
there is a substantial increase in the shares. However, at the same time,
we find that loans and amounts payable as on 31.3.2007 was at Rs.
45,49,495/- which came down to Rs. 4,051/- on 31.3.2008. Further, bank
loans which were at Rs. 1,64,36,295/- as on 31.3.2007 has come down to
Rs. 49,64,638/- on 31.3.2008. This shows that there was no fresh
borrowing in F.Y. 2007-08. Similarly, bank loans as on 31.3.2005 were
at Rs. 4.15 crores which has come down to Rs. 3.06 crores as on
31.3.2006. We further find that some of the shares were purchased in the
year 2000 which were sold in the year 2007. There is not much churning
in the shares. Considering the entire facts in totality, we find that the
assessee has shown shares as investment right from the date of purchase
and the same has been shown as such in the balance sheet. In our
5 ITA No. 4303/M/2011
ITA No. 6617/M/12
considered opinion, the shares have to be treated as an investment and
therefore any profit earned on the sale thereof is to be treated as capital
gain. We, accordingly set aside the order of the Ld. CIT(A). The AO is
directed to treat the profits on sale of shares as capital gain, Short Term
Capital gain or Long Term Capital gain as the case may be.
10. In the result, the appeals filed by the assessee for both the years are
Order pronounced in the open court on 28th August, 2014
(S.T.M. PAVALAN ) (N.K. BILLAIYA)
Û / JUDICIAL MEMBER / ACCOUNTANT MEMBER
Mumbai; Dated : 28th August, 20140.
/Copy of the Order forwarded to :
1. / The Appellant
2. × / The Respondent.
3. () / The CIT(A)-
4. / CIT
5. , ,
/ DR, ITAT, Mumbai
6. [ / Guard file.
/ BY ORDER,
× //True Copy//
, / ITAT, Mumbai