Gains from sale of shares whether capital gains or business profits: Short period of holding shows that intention of assessee is to earn profit at earliest possible occasion. Assessee is moving as per stock market trend and selling shares at first available opportunity. This type of activity of sale and purchase is rightly termed, not as investment, but as trading
1 By this appeal, assessee questions concurrent findings of fact rendered by Commissioner (Appeals) and Tribunal.
2 Income Tax Appellate Tribunal, Mumbai Bench, had before it appeal of assessee for year 2007-08.
3 She claimed that she is housewife. She claimed short term capital gains on sale and purchase of shares as well as speculation income from trading of shares.
4 Assessing Officer, however, found that assessee integrated both and this is systematic activity or trading of shares with business motive. Thus, this is trading activity and, therefore, he treated short term capital gain offered by assessee as business income.
5 Then Commissioner was approached by aggrieved assessee who upheld finding of Assessing Officer and dismissed appeal.
6 Thereafter, Tribunal was approached and argument of assessee’s representative as noted in paragraph 3 of impugned order of Tribunal is that this assessee has been showing profit on sale and purchase of shares as short time capital gain which was accepted by Assessing Officer and, therefore, for year under consideration, he should not take different stand. Thus, for Assessment Year 2007-08, finding for Assessment Year 2006-07 ought to follow. Just because assessee is having speculative transaction in trading of shares, investment cannot be treated as trading activity. Hence, short term capital gain offered by assessee cannot be treated as business income.
7 Reliance was placed on this Court’s judgment in case of Commissioner of Income Tax-25 vs. Gopal Purohit 336 ITR 287 and today Mr. Gandhi, learned advocate appearing on behalf of assessee would submit that substantial question of law is that appellate authorities failed to apply their mind to entire conspectus of facts. They did not examine transactions wherein assessee had holding period of more than one month. There were at least ten transactions of this nature and, therefore, treatment that is required to be given to such transactions results in Tribunal failing to apply its mind as last fact-finding authority.
In other words, insofar as such transactions are concerned, there is enough amount which Tribunal should have considered as basis for sending case back. If Tribunal has not done that, we should send this case back to Tribunal is, therefore, request.
8 Mr. Malhotra appearing on behalf of Revenue, on other hand, would submit that these are concurrent findings of fact and in that regard our attention is invited to Commissioner’s order where he notes salient features. He has noted that income from other sources is shown out of which dividend income is negligible. actual dividend received from shares works out to Rs.189/-. There was trading / speculative income / loss for earlier Assessment Years arising from trading in shares. Even for Assessment Years 2004-05, 2003-04, in statement of income it is treated as profit on sale of shares. Hence, past history is extremely relevant. real investor is not influenced by short term fluctuations, particularly negative ones and it is only trader who is guided by these considerations.
9 assessee included certain loss transactions and it is, therefore, clear that these are squared up with other sale transactions either on same day or next day or within five days. Hence Mr. Malhotra would submit that if one of tests and to be applied from decisions of this Court and Hon’ble Supreme Court are applied, these findings of facts are rightly returned. They raise no substantial question of law and they are neither perverse or vitiated by any errors of law apparent on face of record.
10 With assistance of both Mr. Gandhi and Mr. Malhotra we have perused appeal Memo and all its annexures. order under appeal was delivered by Tribunal on 27th April, 2015. It had before it appellate order of Commissioner (Appeals) dated 6th October, 2010.
11 It noted all facts as also submissions of assessee and then applied relevant tests.
12 Mr. Gandhi would submit that this is case akin to at least two matters which were decided by this Court, namely, Income Tax Appeal No.325 of 2015 together with Income Tax Appeal No.326 of 2015, Jaya Chheda, legal heir of late Hitesh S. Bhagat vs. Assistant Commissioner of Income Tax, decided on 8th November, 2017. Hence, when seventy three transactions were examined and in ten, holding period was more than one month, at least in relation to those cases Tribunal should have found out effect of same on taxable income. If it was not possible for Tribunal to have examined this issue by referring to these transactions, Commissioner or Assessing Officer could have been called upon to do so. Having failed to do this results in substantial question of law.
13 We do not find any substance in these contentions for in Jaya Chheda’s case, there were indeed peculiar facts. There, for Assessment Year 2007-08 (one of Assessment Years under consideration) assessee claimed short term capital gains of Rs.3,44,93,842/-. Assessing Officer called upon assessee to furnish details in relation to this claim with supporting documents. They were furnished. In order of Assessing Officer, details of transaction in shares throughout year are set out and he came to conclusion that assessee had made delivery based transactions in over forty one scrips, not once but generally number of times. entire amount claimed as short term capital gain should be treated as business income.
14 assessee preferred appeal before Commissioner and succeeded. Commissioner directed Assessing Officer to assess entire income as short term capital gain.
15 Then this Court noted facts for further Assessment Year 2008-09. position was more or less identical. two appeals preferred by Revenue before Appellate Tribunal resulted in this Court making detailed reference to legal principles and submissions canvassed. It reproduced verbatim findings in Tribunal’s order. It then concluded that at least for Assessment Year 2007-08, Tribunal should have noted that Commissioner was impressed with fact that business activities in shares have been carried out only on 93 days out of entire year and average period of holding is 69 days. That is how Commissioner directed entire amount claimed to be treated as short term capital gain. This was strait jacket formula which was adopted by Commissioner (Appeals) and unmindful of transactions.
16 Appellate Tribunal in detailed order referred only to 44 transactions out of 86 and in respect of 44 transactions no details were examined. Hence, both transactions could not have been treated on par when factual aspects with regard to both were peculiar. This necessitated intervention if this Court and finding of this Court is that as last appellate body, Tribunal should have considered these mixed questions. It was empowered by law to consider these mixed questions of law and fact. It should have also referred to all details in relation to these 44 transactions and could not have made general and sweeping observation by relying on only 42 transactions. That is how it erred in reversing order of Commissioner.
17 Eventually this Court did not accept assessee’s plea, but remanded case back. Such judgment, therefore, turns essentially upon its peculiar facts and we do not see how it can assist Mr. Gandhi in this case.
18 In Income Tax Appeal No. 1974 of 2011 decided on 20th June, 2012, Revenue brought appeal. Revenue brought appeal aggrieved by order of Tribunal. This Court noted that Tribunal has examined all transactions and did not fail to perform its duty unlike observation and conclusion in Jaya Chheda (supra). Hence there is no perversion found in order of Tribunal in case of Suresh R. Shah (supra). Revenue’s appeal was dismissed.
19 Revenue Circular has been issued on point that there should not be application of any general formula or there should not be sweeping conclusion, but case to case test or approach should be adopted.
20 In instant case, Tribunal was not unmindful of all these legal principles, tests evolved and even caution administered by Circular. Circular, in fact, is later than Tribunal’s order impugned in instant appeal.
21 However, details of sales and purchase in shares during year resulted in conclusion of Tribunal that total 73 transactions were disclosed. Only one transaction is shown in long term capital gain category. other transactions are sales and purchase of shares during year itself. Out of transactions showing short term capital gain, only in case of ten transactions, holding period is more than one month.
In majority of transactions period of holding is even less than one week. That is ranging from one day to seven days.
Hence argument was rejected that merely because ten transactions disclose holding period of more than one month that is not reflective of transactions undertaken during year under assessment.
In fact, trend is that majority transactions have feature in holding of shares from one day to seven days. assessee sold shares within period of one week from date of purchase in more than eighty per cent of cases. It is this trend which resulted in concurrent finding against assessee. Intention of assessee in indulging in these transactions is to earn profit at earliest possible occasion and when there is rise in price. assessee is moving as per stock market trend.
At first available opportunity, assessee is selling shares. This type of activity of sale and purchase is rightly termed, not as investment, but actuated by motive of sale and purchase so as to earn profit at earliest occasion.
In year 2006-07, which is immediately preceding assessment year, assessee herself offered profit from sale and purchase of shares as business income. Hence, shifting stands as also peculiar nature of transactions resulted in Tribunal upholding concurrent findings against assessee.
22 We do not find any perversity in approach of Tribunal. questions proposed are not substantial questions of law as there is no error of law committed by Tribunal while deciding assessee’s appeal. present appeal is devoid of merit and is dismissed. No order as to costs.