The ACIT, Circle-1,, Bhavnagar v. Smt. Devyaniben Hasmukhrai Patel, Bhavnagar

ITA 2913/AHD/2009 | 2006-2007
Pronouncement Date: 22-07-2011 | Result: Allowed

Appeal Details

RSA Number 291320514 RSA 2009
Bench Ahmedabad
Appeal Number ITA 2913/AHD/2009
Duration Of Justice 1 year(s) 8 month(s) 30 day(s)
Appellant The ACIT, Circle-1,, Bhavnagar
Respondent Smt. Devyaniben Hasmukhrai Patel, Bhavnagar
Appeal Type Income Tax Appeal
Pronouncement Date 22-07-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted C
Tribunal Order Date 22-07-2011
Date Of Final Hearing 15-07-2011
Next Hearing Date 15-07-2011
Assessment Year 2006-2007
Appeal Filed On 23-10-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI D.K.TYAGI HONBLE JUDICIAL MEMBER AND SHRI A. MOHAN. ALANKAMONY HONBLE ACCOUNTANT MEMBE R ITA NO.2913/AHD/2009 ASSESSMENT YEAR:2006-07 DATE OF HEARING:15.7.11 DRAFTED:18.7.11 ASSISTANT COMMISSIONER OF INCOME-TAX CIRCLE-1 JASHONATH CHOWK BHAVNAGAR -364 001 V/S . SMT. DEVIYANAI HASMUKHRAI PATEL PLOT NO. 2214//C-1 MANAN HILL DRIVE BHAVNAGAR PAN NO.AAOPP4644H (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI JASBIR S CHOUHAN SR-DR RESPONDENT BY:- SHRI S.N. SOPARKAR SR-AR O R D E R PER D.K.TYAGI JUDICIAL MEMBER:- THIS IS REVENUES APPEAL AGAINST THE ORDER OF COMM ISSIONER OF INCOME- TAX(APPEALS)-XX AHMEDABAD DATED 07-07-2009 FOR THE ASSESSMENT ORDER 2006-07. THE APPEAL HAS BEEN FILED BY THE REVENUE AGAINST TH E ORDER OF LD. CIT(APPEALS) WHEREIN HE HAS HELD THAT PROFIT ARISING ON SALE OF SHARES AND MUTUAL FUND IS SHORT- TERM CAPITAL GAINS AND NOT BUSINESS INCOME WHEREAS THE ASSESSING OFFICER HAS TREATED SUCH PROFIT ON SALE OF SHARES AND SECURITIE S WITHIN 30 DAYS OF THEIR PURCHASE AS BUSINESS INCOME. THE REVENUE HAS TAKEN FOLLOWING GROUNDS:- 1. THE LD. CIT(A) XX AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE INCOME DECLARED BY THE ASSESSEE ON ACCOUNT OF SHORT TERM CAPITAL GAINS FROM SHARES AND MUTUAL FUND IS TO BE TREATED AS SHORT TERM CAPITAL GAINS AS AGAINST THE BUSINESS INCOME TREATED BY THE ASSES SING OFFICER WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIALS BROUGHT ON RECORD BY THE ASSESSING OFFICER. 1.2 IN DOING SO THE LD. CIT(A) HAS ERRED IN LAW AN D ON FACTS IN NOT APPRECIATING THE RATIO OF THE RULING GIVEN BY THE A R AND THE ORDER JUDICIAL DECISIONS RELIED UPON BY THE AO IN THE ASSESSMENT O RDER. ITA NO.2913/AHD/2009 A.Y. 2006-0 7 ACIT CIR-1 BNG V. SMT. DEVIYANI H PATEL PAGE 2 1.3 IN DOING SO THE LD. CIT(A) HAS ERRED IN LAW AN D ON FACTS IN OBSERVING THAT THE PURCHASE AND SALE OF SECURITIES BY THE ASSESSEE WAS ONLY ON INDEPENDENT OCCASIONAL ACTIVITY WITHOUT APPRECIATING THAT TAKI NG INTO CONSIDERATION THE REGULARLY AND THE FREQUENCY OF THE TRANSACTIONS AS WELL AS THE TRADING PATTERN IT WAS CLEAR THAT THE ASSESSEE WAS DEALING SHARES N OT AS AN INVESTOR BUT AS A TRADER. 1.4 IN DOING SO THE LD. CIT(A)-XX AHMEDABAD HAS E RRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT CONSIDERING THE SMALL PER IOD FOR WHICH THE SAID SHARES WERE HELD BY THE ASSESSEE. IT WAS CLEAR THAT THE UN DERLYING INTENTION OF THE ASSESSEE WAS NOT TO PURCHASE THE SAID SHARES AS ON THE INVESTMENT FOR THE PURPOSE OF DERIVING ANY DIVIDEND INCOME FROM THE SA ME BUT THE SAME WERE ACQUIRED AS STOCK IN TRADE WITH THE INTENTION OF CA RRYING OUT REGULAR BUSINESS IN SALE AND PURCHASE OF SHARES. 2. AT THE TIME OF HEARING BOTH THE PARTIES AGREED T HAT THE ISSUE IS COVERED BY THE ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.380 383-385/AHD/2009 DATED 31-03-2011 FOR THE ASSESSMENT ORDER 2005-06 WHEREAS FOLLOWING WAS HELD:- 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. WE NOTICE THAT ASSESSEE HAS CARRIED OUT MORE THAN2 00 TRANSACTIONS IN THE YEAR OUT OF WHICH ABOUT 25 TRANSACTIONS ON SALE AN D PURCHASE WERE SUCH THAT WHICH WERE DONE WITHIN 30 DAYS ON WHICH ASSESSING O FFICER HAD TREATED THE PROFIT AS THAT FROM BUSINESS. THE DETAILS FILED BY ASSESSEE AS PER PAGES NO.9- 12 OF HIS PAPER BOOK CLEARLY SHOW THAT THERE IS LAR GE FREQUENCY OF TRANSACTIONS NUMBER OF SHARES ARE PURCHASED ARE ALSO SUBSTANTIAL FOR EXAMPLE 15 OF SHARES OF BANK OF RAJASTHAN WERE PURCHASED ON 06-0 1-2005 BUT SOLD ON 07- 01-2005 12 SHARES OF BHARAT EARTH MOVERS PURCHASED ON 08-09-2007 21-09- 2005 11 292 SHARES OF BHARAT SHARES LTD. PURCHASED ON 23-12-2007 WERE SOLD BY 03-01-2005 AND SO ON. THUS THE FREQUENCY A ND VOLUME OF TRANSACTION IS SUBSTANTIAL. IT IS NOT MATERIAL WHETHER THE ASSE SSEE IS A BROKER OR NOT WHAT IS RELEVANT IS INTENTION. IN OUR VIEW ASSESSEE IS CLEA RLY DEALING IN SHARE LIKE A TRADER. THEREFORE PROFIT THEREON SHOULD BE CONSIDE RED UNDER THE HEAD BUSINESS. ASSESSING OFFICER HAS BEEN RIGHT IN TRE ATING SUCH PROFITS ON HOLDING OF SHARES FOR 30 DAYS AS BUSINESS INCOME. SIMILAR I SSUE HAS BEEN CONSIDERED IN A DETAILS IN THE CASE OF SHRI SUGAAMCHAND C SHAH (SUPRA) PRONOUNCED ON 29-01-2010. THE DECISION OF THE TRIBUNAL IN THE CAS E OF SARNATH INFRASTRUCTURE (P) LTD. V. ACIT (2009) 120 TTJ 216 (LUCKNOW) AND I TAT MUMBAI BENCH IN THE CASE OF GOPAL PUROHIT V. JCIT (2009) 20 SOT 117 (BOM) HAVE BEEN CONSIDERED IN DETAILS IN THAT ORDER. FOR THE SAKE O F CONVENIENCE WE REPRODUCE PARA-9 TO 19 FROM THE ORDER IN SUGAMCHANDS CASE AS UNDER:- 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. IN OUR CONSIDERED VIEW THE TRIBUNAL IN THE CASES OF GOPAL PUROHI VS. JT. CIT(SUPRA) AND OF SARNATH INFRASTRUCTURE (P) LTD. V S. ASSTT.CIT(SUPRA) LAID DOWN CRITERIA FOR HOLDING AS TO WHEN TRANSACTI ON IN SHARES BE TREATED AS TRADING AND WHEN THEY SHOULD BE TREATED AS INVESTMENT. ITA NO.2913/AHD/2009 A.Y. 2006-0 7 ACIT CIR-1 BNG V. SMT. DEVIYANI H PATEL PAGE 3 10. FOR THE SAKE OF CONVENIENCE WE REPRODUCE HEREU NDER THE RELEVANT PORTION OF THE ORDER OF ITAT BOMBAY BENCH IN THE CA SE OF GOPAL PUROHIT VS. JT.CIT [2009] 29 SOT 117 (MUM.). IF THESE FACTS ARE TAKEN INTO CONSIDERATION THEN FOLLOWING CONCLUSIONS EMERGE : (I) THE FACTS OF THE YEAR UNDER CONSIDERATION WITH REGARD TO NATURE OF INCOME(S) EARNED BY THE ASSESSEE AND THE TRANSACTIONS ARE SAME IN ALL THESE YEARS EXCEPT TRA NSACTIONS IN F&O SEGMENT IN SOME OF THE YEARS WHEREIN THIS KIND OF ACTIVITY WAS STARTED BY THE STOCK EXCHANGE. (II) INTEREST ON BORROWED CAPITAL HAS BEEN ALLOWED AS BUSINESS EXPENDITURE AGAINST THE PROFIT ON JOBBING ACTIVITIE S SHOWN BY THE ASSESSEE AS BUSINESS PROFIT. (III) THE ASSESSEE HAS SHOWN SHARES PURCHASED ON DE LIVERY BASIS AS INVESTMENT AT THE END OF THE YEAR AND NO S TOCK-IN-TRADE EXIST ON THAT DATE AND THE ASSESSEE HAS EARNED BOTH LONG-TERM AND SHORT-TERM CAPITAL GAINS WHICH MEANS THE ASSESS EE HAS ALSO HELD SHARES FOR A PERIOD OF MORE THAN 12 MONTH S. 8.1 THUS THE NATURE OF ACTIVITIES MODUS OPERANDI OF T HE ASSESSEE MANNER OF KEEPING RECORDS AND PRESENTATION OF SHARES AS INVES TMENT AT THE YEAR END IS SAME IN ALL THE YEARS HENCE; APPARENTLY THERE APP EARS NO REASON AS TO WHY THE CLAIMS MADE BY THE ASSESSEE SHOULD NOT BE ACCEP TED. HOWEVER THE REVENUE AUTHORITIES HAVE TAKEN A DIFFERENT VIEW IN THE YEAR UNDER CONSIDERATION BY HOLDING THAT PRINCIPLE OF RES JUDI CATA IS NOT APPLICABLE TO THE ASSESSMENT PROCEEDINGS. THERE CANNOT BE IN OUR VIE W ANY DISPUTE ON THIS ASPECT BUT THERE IS ALSO ANOTHER JUDICIAL THOUGHT THAT THERE SHOULD BE UNIFORMITY IN TREATMENT AND CONSISTENCY UNDER THE S AME FACTS AND CIRCUMSTANCES AND WE HAVE ALREADY FOUND THAT FACTS AND CIRCUMSTANCES ARE IDENTICAL EVEN THOUGH A DIFFERENT STAND HAS BEEN T AKEN BY THE REVENUE AUTHORITIES. THIS ACTION OF THE REVENUE AUTHORITIES HAS LED US TO ASK OURSELVES THAT IN THIS YEAR WHY IT HAS BEEN DONE SO. IN THE P ROCESS TO FIND THE ANSWER WE NOTED THAT THERE WAS A CHANGE IN THE SCHEME OF T AXATION RELATING TO SHORT- TERM CAPITAL GAINS AND LONG-TERM CAPITAL GAINS. THR OUGH THE FINANCE ACT 2004 THE LEGISLATURE IMPOSED SECURITIES TRANSACTIO N TAX ON THE SALE AND PURCHASE OF SHARES AND OTHER DERIVATIVE TRANSACTION S AND SIMULTANEOUSLY THE LEGISLATURE EXEMPTED LONG-TERM CAPITAL GAIN UNDER S ECTION 10(38) OF THE ACT FROM THE LEVY OF TAX AND ON SHORT-TERM CAPITAL GAIN A CONCESSIONAL RATE OF TAX I.E. 10 PER CENT HAS BEEN LEVIED SUBJECT TO THE CO NDITION THAT TRANSACTIONS RESULTING INTO THIS TYPE OF GAIN MUST HAVE SUFFERED SECURITIES TRANSACTION TAX. THIS IS THE FIRST YEAR OF SUCH CHANGE AND HAVING R EGARD TO THE QUANTUM OF GAINS THIS SCHEME OF TAXATION ONLY IN OUR VIEW H AS PROMPTED THE REVENUE AUTHORITIES TO TAKE A DIFFERENT VIEW ON THE SAME TY PES OF TRANSACTIONS ENTERED INTO BY THE ASSESSEE IN EARLIER YEARS. AT THIS STAG E WE CONSIDER IT FIT TO STATE THAT THERE IS NO DISPUTE BEFORE US THAT ASSESSEE HA S CLAIMED EXEMPTION UNDER SECTION 10(38) AND/OR HAS PAID TAX UNDER SECTION 11 1A AT CONCESSIONAL RATE ON THE TRANSACTIONS WHERE SECURITIES TRANSACTION TAX HAS NOT BEEN. IT IS ALSO ITA NO.2913/AHD/2009 A.Y. 2006-0 7 ACIT CIR-1 BNG V. SMT. DEVIYANI H PATEL PAGE 4 NOTED THAT THE ASSESSEE HAS PAID TAX ON SHORT-TERM CAPITAL GAINS AT NORMAL RATES ON SHARE TRANSACTIONS EXECUTED IN THE PERIOD PRIOR TO IMPOSITION OF SECURITIES TRANSACTIONS TAX. IN OUR VIEW THE LEGIS LATIVE CHANGE OF THIS NATURE WHEREBY NO CHANGE HAS BEEN MADE IN RESPECT OF NATUR E AND MODUS OPERANDI OF SUCH SHARE TRANSACTIONS RESULTING INTO ANY ADVA NTAGE CANNOT BE TAKEN AWAY BY THE REVENUE AUTHORITIES IN THIS MANNER AND IN THESE CIRCUMSTANCES WE ARE OF THE VIEW THAT PRINCIPLE OF CONSISTENCY THOUGH IT IS AN EXCEPTION TO THE PRINCIPLE OF RES JUDICATA MUST BE APPLIED HERE. IT IS FURTHER SO BECAUSE THE PAYMENT OF SECURITIES TRANSACTION TAX IS MANDATORY I.E. WHETHER AN ASSESSEE EARNS THE PROFIT OR NOT OR SUFFERS A LOSS AND BY IM POSITION OF SUCH TAX THE LEGISLATURE HAS NOT GIVEN ANY BENEFIT TO A CLASS OF TRANSACTIONS AS A WHOLE THOUGH IT MAY RESULT INTO AN APPARENT BENEFIT TO IN DIVIDUAL(S) ENTERING INTO THOSE TRANSACTIONS. THUS IN OUR VIEW IN THE FACTS AND CIRCUMSTANCES OF THE CASE ON THE BASIS OF PRINCIPLE OF CONSISTENCY ALON E THE ACTION OF THE REVENUE AUTHORITIES IS LIABLE TO BE QUASHED. WE ORDER ACCOR DINGLY AND DIRECT THE ASSESSING OFFICER TO ACCEPT THE CLAIMS OF ASSESSEE IN REGARD TO SHORT-TERM CAPITAL GAIN AND LONG-TERM CAPITAL GAIN. 10.1. IN THE CASE OF SARNATH INFRASTRUCTURE (P) LTD . VS. ASSTT.CIT(SUPRA) THE TRIBUNAL CONSIDERED THE CIRCULAR NO.4 OF CBDT(2007) DATED 15/06/2007 VARIOUS OTHER DECISIONS SUCH AS CIT VS. ASSOCIATE D INDUSTRIAL CO.LTD. (1971) 82 ITR 586 (SC) CIT VS. H. HOLCK LARSEN (H) (1986) 160 ITR 67 (SC) FIDELITY NORTHSTAR FUND IN RE(2007) 207 CTR (AAR) 297; (2007 ) 288 ITR 641 (AAR) FIDELITY ADVISOR SER SERIES VIII IN RE (2004) 271 I TR 1 (AAR) JP HARRISON (WATFORD) LTD. VS. GRIFFITH (H.M. INSPECTOR OF TAXE S) (1962) 40 TAX CASES 281 (HL) RAJA VISHEWARA SINGH (DECEASED) VS. CIT (1961 ) 41 ITR 685 (SC) CENTRAL INDIA AGENCIES PVT. LTD. V S. CIT (1970) 77 ITR 959 (ALL.) MRS. SAROJANI RAJAH VS. CIT (1969) 79 ITR 504 (MAD.) DA LHOUSIE INVESTMENT CO. LTD. VS. CIT (1968) 68 ITR 486(SC) CIT VS. ASSOCIA TED INDUSTRIAL DEVELOPMENT CO. LTD. (1971) 82 ITR 586 (SC) CIT VS . SUTLEJ COTTON MILLS SUPPLY AGENCY LTD. (1975) 100 ITR 706 (SC) AND CULL ED OUT FOLLOWING PRINCIPLES WHICH ARE DESCRIBED IN PARA NO.13 OF THA T ORDER:- 13. AFTER CONSIDERING ABOVE RULINGS WE CULL OUT FOLLOWI NG PRINCIPLES WHICH CAN BE APPLIED ON THE FACTS OF A CASE TO FIND OUT WHETHER TRANSACTION(S) IN QUESTION ARE IN THE NATURE OF TRA DE OR ARE MERELY FOR INVESTMENT PURPOSES : (1) WHAT IS THE INTENTION OF THE ASSESSEE AT THE TI ME OF PURCHASE OF THE SHARES (OR ANY OTHER ITEM). THIS CAN BE FOUND OUT F ROM THE TREATMENT IT GIVES TO SUCH PURCHASE IN ITS BOOKS OF ACCOUNT. WHE THER IT IS TREATED AS STOCK-IN-TRADE OR INVESTMENT. WHETHER SHOWN IN OPEN ING/CLOSING STOCK OR SHOWN SEPARATELY AS INVESTMENT OR NON-TRADING AS SET. (2) WHETHER ASSESSEE HAS BORROWED MONEY TO PURCHASE AND PAID INTEREST THEREON ? NORMALLY MONEY IS BORROWED TO P URCHASE GOODS FOR THE PURPOSES OF TRADE AND NOT FOR INVESTING IN AN A SSET FOR RETAINING. (3) WHAT IS THE FREQUENCY OF SUCH PURCHASES AND DIS POSAL IN THAT PARTICULAR ITEM? PURCHASE AND SALE ARE FREQUENT O R THERE ARE ITA NO.2913/AHD/2009 A.Y. 2006-0 7 ACIT CIR-1 BNG V. SMT. DEVIYANI H PATEL PAGE 5 SUBSTANTIAL TRANSACTIONS IN THAT ITEM IT WOULD IND ICATE TRADE. HABITUAL DEALING IN THAT PARTICULAR ITEM IS INDICATIVE OF IN TENTION OF TRADE. SIMILARLY RATIO BETWEEN THE PURCHASES AND SALES AN D THE HOLDINGS MAY SHOW WHETHER THE ASSESSEE IS TRADING OR INVESTING ( HIGH TRANSACTIONS AND LOW HOLDINGS INDICATE TRADE WHEREAS LOW TRANSAC TIONS AND HIGH HOLDINGS INDICATE INVESTMENT). (4) WHETHER PURCHASE AND SALE IS FOR REALIZING PROF IT OR PURCHASES ARE MADE FOR RETENTION AND APPRECIATION IN ITS VALUE ? FORMER WILL INDICATE INTENTION OF TRADE AND LATTER AN INVESTMENT. IN TH E CASE OF SHARES WHETHER INTENTION WAS TO ENJOY DIVIDEND AND NOT MER ELY EARN PROFIT ON SALE AND PURCHASE OF SHARES. A COMMERCIAL MOTIVE IS AN ESSENTIAL INGREDIENT OF TRADE. (5) HOW THE VALUE OF THE ITEMS HAS BEEN TAKEN IN TH E BALANCE SHEET ? IF THE ITEMS IN QUESTION ARE VALUED AT COST IT WOULD INDICATE THAT THEY ARE INVESTMENTS OR WHERE THEY ARE VALUED AT COST OR MAR KET VALUE OR NET REALIZABLE VALUE (WHICHEVER IS LESS) IT WILL INDIC ATE THAT ITEMS IN QUESTION ARE TREATED AS STOCK-IN-TRADE. (6) HOW THE COMPANY (ASSESSEE) IS AUTHORIZED IN MEM ORANDUM OF ASSOCIATION/ARTICLES OF ASSOCIATION? WHETHER FOR TR ADE OR FOR INVESTMENT? IF AUTHORIZED ONLY FOR TRADE THEN WHET HER THERE ARE SEPARATE RESOLUTIONS OF THE BOARD OF DIRECTORS TO C ARRY OUT INVESTMENTS IN THAT COMMODITY? AND VICE VERSA. (7) IT IS FOR THE ASSESSEE TO ADDUCE EVIDENCE TO SH OW THAT HIS HOLDING IS FOR INVESTMENT OR FOR TRADING AND WHAT DISTINCTION HE HAS KEPT IN THE RECORDS OR OTHERWISE BETWEEN TWO TYPES OF HOLDINGS . IF THE ASSESSEE IS ABLE TO DISCHARGE THE PRIMARY ONUS AND COULD PRIMA FACIE SHOW THAT PARTICULAR ITEM IS HELD AS INVESTMENT (OR SAY STOC K-IN-TRADE) THEN ONUS WOULD SHIFT TO REVENUE TO PROVE THAT APPARENT IS NO T REAL. (8) THE MERE FACT OF CREDIT OF SALE PROCEEDS OF SHA RES (OR FOR THAT MATTER ANY OTHER ITEM IN QUESTION) IN A PARTICULAR ACCOUNT OR NOT SO MUCH FREQUENCY OF SALE AND PURCHASE WILL ALONE WILL NOT BE SUFFICIENT TO SAY THAT ASSESSEE WAS HOLDING THE SHARES (OR THE ITEMS IN QUESTION) FOR INVESTMENT. (9) ONE HAS TO FIND OUT WHAT ARE THE LEGAL REQUISIT ES FOR DEALING AS A TRADER IN THE ITEMS IN QUESTION AND WHETHER THE ASS ESSEE IS COMPLYING WITH THEM. WHETHER IT IS THE ARGUMENT OF THE ASSESS EE THAT IT IS VIOLATING THOSE LEGAL REQUIREMENTS IF IT IS CLAIMED THAT IT IS DEALING AS A TRADER IN THAT ITEM? WHETHER IT HAD SUCH AN INTENTION (TO CAR RY ON ILLEGAL BUSINESS IN THAT ITEM) SINCE BEGINNING OR WHEN PURCHASES WER E MADE ? (10) IT IS PERMISSIBLE AS PER CBDTS CIRCULAR NO. 4 OF 2007 OF 15TH JUNE 2007 THAT AN ASSESSEE CAN HAVE BOTH PORTFOLIOS ONE FOR TRADING AND OTHER FOR INVESTMENT PROVIDED IT IS MAINTAINING SEP ARATE ACCOUNT FOR ITA NO.2913/AHD/2009 A.Y. 2006-0 7 ACIT CIR-1 BNG V. SMT. DEVIYANI H PATEL PAGE 6 EACH TYPE THERE ARE DISTINCTIVE FEATURES FOR BOTH AND THERE IS NO INTERMINGLING OF HOLDINGS IN THE TWO PORTFOLIOS. (11) NOT ONE OR TWO FACTORS OUT OF ABOVE ALONE WILL BE SUFFICIENT TO COME TO A DEFINITE CONCLUSION BUT THE CUMULATIVE EF FECT OF SEVERAL FACTORS HAS TO BE SEEN. 11. WHEN WE EXAMINE THE FACTS OF THE CASE WE FIND ASSESSEE HAS MAINTAINED THE BOOKS OF ACCOUNT IN RESPECT OF DEALING IN SHARE S AND ASSESSEE HAS SHOWN THE TRANSACTIONS IN SHARES AS INVESTMENT AND NOT AS STOCK-IN-TRADE. IT HAS BEEN SHOWN CONSISTENTLY FOR SEVERAL YEARS IN THE PA ST AND DEPARTMENT HAS NOT CHALLENGED THE BOOK KEEPING OR ACCOUNTING OF SHARES AS INVESTMENT. NO CONTRARY MATERIAL OR FACTS HAVE BEEN POINTED OUT BY THE REVENUE TO SHOW THAT FACTS IN THE CURRENT YEAR ARE DIFFERENT THAN THE FA CTS IN EARLIER YEARS. IT IS ALSO NOT POINTED OUT BY THE REVENUE THAT FREQUENCY AND N UMBER OF TRANSACTIONS ARE ABNORMALLY HIGH IN THE CURRENT YEAR AS COMPARED TO WHAT WAS DONE IN EARLIER YEARS. 12. THERE IS ALSO NO MATERIAL TO COME TO THE CONCLU SION THAT THE VALUATION OF INVESTMENT HAS BEEN DONE ON COST OR NET RELIABLE VA LUE WHICHEVER IS LOW. THE ASSERTION OF THE ASSESSEE IS THAT ENTIRE PORT-FOLIO HAS BEEN VALUED AT COST AS AT THE END OF ACCOUNTING YEAR WHICH REMAINED UNCHALLEN GED. 13. THE SHARES WHICH ARE SOLD OUT OF SUCH INVESTMEN T THIS YEAR WERE MOSTLY PURCHASED A YEAR OR EARLIER SHOWING THAT THE ASSESS EE HAD INTENTION WHILE PURCHASING THEM TO HOLD THEM AND THEY WERE REFLECTE D IN THAT BALANCE-SHEET AS INVESTMENT. THE ASSESSEE HAS ENJOYED DIVIDEND IN COME AND DECLARED THE SAME IN THE RETURN OF INCOME TRADING THE TRANSACTIO NS AS INVESTMENT EVEN IF FREQUENCY OF SELLING OF SHARES MAY BE MORE BUT IN R ESPECT OF SHARES HELD FOR A CONSIDERABLE LONGER PERIOD (FOR MORE THAN 366 DAYS) AS PER FINDING GIVEN BY THE LEARNED CIT(APPEALS). THIS FINDING REMAINED UNC ONTROVERTED. THE ASSESSEE HAS EARNED GAIN OF RS.37 52 281/- ON SALE OF THOSE SHARES WHICH WERE HELD FOR MORE THAN 366 DAYS AND UPTO 6832 DAYS . IN ANY CASE WHEN THOSE SHARES WERE PURCHASED IT COULD NOT BE SAID TH AT INTENTION OF THE ASSESSEE WAS TO DEAL IN THEM AND NOT TO HOLD THEM A S INVESTMENT. EVEN IN THE CASE OF INVESTMENT IT IS FOR THE ASSESSEE TO DECIDE WHEN TO DISPOSE THEM OFF SO THAT TO GIVE MAXIMUM RETURN OUT OF THEM. THERE I S NO THEORY THAT ASSET HELD ON LONG-TERM BASIS SHOULD BE SOLD ONLY AT THE TIME OF NEED OR IN EMERGENCY. HE CAN VERY WELL SALE THE INVESTMENTS TO REAP THE B ENEFIT WHEN PRICES OF SHARES ARE HIGH SO AS TO EARN BETTER GAINS AND MAKE INVESTMENT ELSEWHERE. IN OUR CONSIDERED VIEW IT IS THE DECISION OF THE ASSE SSEE TO DISPOSE OF AN INVESTMENT IF ACCORDING TO HIM MARKET VALUE THERE OF HAVE REACHED A PLATEAU SO AS TO MAKE INVESTMENT IN OTHER ASSETS WHICH HAVE POTENTIAL OF APPRECIATION IN MARKET VALUE. THIS DECISION TO SALE HIS INVESTME NT AT HIGH MARKET PRICE CANNOT CONVERT AN OTHERWISE INVESTMENT INTO TRADING . IF IN THE PAST THE DEPARTMENT HAS ACCEPTED THE SALE OF SHARES OF HOLDI NGS OF MORE THAN A YEAR AS INVESTMENT AND PROFITS THEREON HAS BEEN ASSESSED UNDER THE HEAD CAPITAL GAIN THEN THERE IS NO REASON TO HOLD DIFFERENTLY THIS YEAR. WE ACCORDINGLY CONFIRM THE ORDER OF THE LEARNED CIT(APPEALS) IN RE SPECT OF HOLDING THAT PROFIT OF RS.37 52 281/- SHOULD BE ASSESSED AS 'LONG-TERM CAPITAL GAIN'. ITA NO.2913/AHD/2009 A.Y. 2006-0 7 ACIT CIR-1 BNG V. SMT. DEVIYANI H PATEL PAGE 7 15. IN RESPECT OF PROFIT OF RS.55 40 679/- BEING 'S HORT-TERM CAPITAL GAIN' AS CLAIMED BY THE ASSESSEE AND HELD AS PROFITS ASSESSE D UNDER THAT BUSINESS BY TWO AUTHORITIES WE FIND THAT IN MANY CASES THERE I S DELIVERY OF SHARES AND SHARE WERE REGISTERED IN THE NAME OF THE ASSESSEE. THE HOLDING PERIOD OF THE SHARES IS FROM 0 DAYS TO 366 DAYS. IN SOME CASE S THE FREQUENCY OF TRANSACTIONS ARE APPARENTLY SUBSTANTIAL AS ON ONE D AY THE ASSESSEE HAS PURCHASED SEVERAL SCRIPTS AND SOLD SEVERAL OF THEM ON THE SAME DAY. 16. THE QUESTION IS WHETHER THEREFORE MERELY FROM FREQUENCY OF THE TRANSACTIONS CARRIED ON BY THE ASSESSEE HE IS TREA TED AS DEALER IN SHARES OR STILL HE IS HELD AS INVESTOR. AS FOUND IN THE CASE OF SARNATH INFRASTRUCTURE (P) LTD. VS. ASSTT.CIT(SUPRA) ALSO ASSESSEE ADDUCED EV IDENCE TO SHOW THAT HIS HOLDINGS ARE FOR INVESTMENT AS RECORDED IN THE BOOK S OF ACCOUNT. THE HOLDINGS ARE VALUED AT COST AND SUCH ACCOUNTING HAS BEEN AC CEPTED BY THE REVENUE IN EARLIER YEARS. THERE IS NO MATERIAL TO SHOW THAT ASSESSEE HAS DECLARED HIMSELF AS A TRADER IN SHARES AND LEGAL REQUIREMENT S THEREFORE HAVE BEEN COMPLIED WITH. IT IS ALSO A FACT THAT HE HAS NOT BO RROWED ANY MONEY FOR INVESTING IN SHARES. MERELY BECAUSE ASSESSEE HAD S OME BORROWED FUNDS IT WOULD NOT BY ITSELF SHOW THAT THEY WERE DEPLOYED IN INVESTMENT. NOTWITHSTANDING EVEN BORROWING ARE REQUIRED TO SET TLE PAYMENTS OBLIGATIONS IN RESPECT OF INVESTMENTS LIKE ONE TAKES LOAN FOR PURCHASING A HOUSE. IN ANY CASE HIGH FREQUENCY TRANSACTIONS AND LOW PERIOD HO LDINGS INDICATE TRADE WHEREAS LOW FREQUENCY TRANSACTIONS AND HIGH PERIOD HOLDINGS INDICATE INVESTMENT. 17. IN THIS CASE THE ASSESSEE HAS DISCHARGED THE O NUS OF SHOWING THAT IT IS MAKING INVESTMENT BUT REVENUE IS ABLE TO SHOW THAT THERE ARE HIGH FREQUENCIES AND LOW HOLDINGS IN MANY TRANSACTIONS O F SHARES INDICATING THAT ASSESSEE HAS SOME INTENTION OF PURCHASING AND SELLI NG SHARES AS A TRADER. THE CASE OF THE ASSESSEE IS SUPPORTED BY THE FACT T HAT IT HAS ENTERED THE PURCHASES IN THE BOOKS AS INVESTMENT SHARES ARE VA LUED AT COST AND REVENUE IS HOLDING SUCH ACCOUNTING TREATMENT AS INV ESTMENT IN THE PAST. THUS THERE CANNOT BE A FIXED CRITERIA TO DECIDE AS IN THE PRESENT CASE WHETHER ASSESSEE HAS TRADED IN SHARES EVEN THOUGH ASSESSEE HELD THEM AS INVESTMENT. 18. THOUGH IT HAS BEEN HELD IN THE CASE OF SARNATH INFRASTRUCTURE (P) LTD.(SUPRA) THAT DELIVERY OF SHARES IS AN IMPORTANT CRITERIA FOR HOLDING THAT ASSESSEE IS INVESTING IN THEM BUT AFTER DEMATIZATIO N WHERE SHARES ARE DELIVERED IN THE DEMAT ACCOUNT THE NEXT DAY IT CAN NOT BE HELD THAT IN ALL SUCH CASES IT WOULD BE INVESTMENT AND NOT TRADING. IF THAT IS SO HELD THEN ALL THOSE TRADERS IN SHARES IN WHOSE DEMAT ACCOUNTS SHA RES ARE DELIVERED CAN BE SAID TO HAVE EARNED CAPITAL GAINS AND NOT PROFIT S. THEREFORE ONLY ONE CRITERIA I.E. DELIVERY OF SHARES ALONE WILL NOT BE SUFFICIENT TO DECIDE THE ISSUE. EVEN OTHERWISE IN SARNATH INFRASTRUCTURE (P) LTD.(S UPRA) ITSELF IT HAS BEEN HELD THAT CUMULATIVE EFFECT OF SEVERAL FACTORS WILL DECI DE THE ISSUE. 19. CONSIDERING THE TOTALITY AND PECULIARITY OF THE FACTS OF THIS CASE WE FIND THAT ASSESSEE IS NEITHER FULLY ACTING AS A TRADER N OR AS FULLY INVESTOR. ITA NO.2913/AHD/2009 A.Y. 2006-0 7 ACIT CIR-1 BNG V. SMT. DEVIYANI H PATEL PAGE 8 DEMARCATION IS QUITE HAZY; THOUGH IN THE BOOKS HE I S SHOWING ALL THE PURCHASES AS INVESTMENT BUT FREQUENCY OF TRANSACTIO N IN SEVERAL CASES IS SO LARGE AND HOLDING PERIOD IN MANY CASES IS SO SMALL FROM 0 TO A WEEK OR SO THAT ASSESSEE IS DE FACTO SELLING AND PURCHASING SH ARES AS TRADER. HE IS ALSO HOLDING SHARES FOR LONG PERIOD INDICATING THAT TH EY ARE HELD AS INVESTMENT. THEREFORE A CRITERIA HAS TO BE FIXED FOR DETERMINI NG AS TO WHEN HE IS ACTING AS TRADER AND WHEN AS INVESTOR. ACCORDINGLY WE DECIDE FOLLOWING CRITERIA TO HOLD WHEN GAINS ARE TO BE TAXED AS PROFIT TO BE EARNED U NDER THE BUSINESS OR TO BE TAXED AS SHORT TERM CAPITAL GAIN WE HOLD THAT IF S HARES ARE NOT HELD EVEN SAY FOR A MONTH THEN THE INTENTION IS CLEARLY TO REAP PROFIT BY ACTING AS A TRADER AND HE DID NOT INTEND TO HOLD THEM IN INVESTMENT PO RT-FOLIO. WE BELIEVE THAT IF A PERSON INTENDS TO HOLD HIS PURCHASES OF SHARES AS I NVESTMENT HE WOULD WATCH THE FLUCTUATION OF RATES IN THE MARKET FOR WHICH A MINIMUM TIME IS NECESSARY WHICH WE ESTIMATE AT ONE MONTH. WHERE SHARES ARE HE LD FOR MORE THAN A MONTH THEY SHOULD BE TREATED AS INVESTMENT AND ON THEIR SALE SHORT TERM CAPITAL GAIN SHOULD BE CHARGED. WHEN SHARES ARE HEL D FOR LESS THAN A MONTH GAIN ON THEM SHOULD BE TREATED AS PROFIT FROM BUSIN ESS. SINCE ALL THE AUTHORITIES REFERRED BY LD. CIT(A) AN D BY THE PARTIES BEFORE US ARE CONSIDERED BY THE TRIBUNAL IN THESE ORDERS REFERR ED ABOVE WE ARE OF THE ASSESSEE IS PARTLY DEALING IN INVESTMENTS AS TRADER. THEREF ORE IN OUR VIEW CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES AND FREQUEN CY AND VOLUME AND HOLDING PERIOD OF THE SHARES ASSESSING OFFICER WAS JUSTIFIED IN T REATING THE PROFIT ON SALE OF SHARE HELD FOR LESS THAN 30 DAYS AS BUSINESS INCOME. RESPECTFULLY FOLLOWING THE SAME THE REVENUES APPEA L IS ALLOWED. 3. IN THE RESULT REVENUES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 22/07/2011 SD/- SD/- (A.MOHAN.ALANKAMONY) (D.K. TYAGI) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD DATED : 22/07/2011 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- XX AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD