DCIT CIR 2, KALYAN v. GUL K. ACHHRA, ULHASNAGAR

ITA 4208/MUM/2009 | 2005-2006
Pronouncement Date: 06-04-2010 | Result: Dismissed

Appeal Details

RSA Number 420819914 RSA 2009
Assessee PAN AAQPA7561C
Bench Mumbai
Appeal Number ITA 4208/MUM/2009
Duration Of Justice 8 month(s) 29 day(s)
Appellant DCIT CIR 2, KALYAN
Respondent GUL K. ACHHRA, ULHASNAGAR
Appeal Type Income Tax Appeal
Pronouncement Date 06-04-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 06-04-2010
Date Of Final Hearing 01-04-2010
Next Hearing Date 01-04-2010
Assessment Year 2005-2006
Appeal Filed On 08-07-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH MUMBAI. BEFORE S/SHRI S.V.MEHROTRA AM & V.DURGA RAO JM I.T.A. NO. 4208/MUM/2009 ASSESSMENT YEAR: 2005-06 THE DCIT CIRCLE 2 V. GUL K.ACHHRA RANI MANSION 2 ND FLOOR MURBAD ROAD ACHHRA BUILDG SECTION-17 KALYAN. ULHASNAGAR. PA NO.AAQPA 7561 C (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI DAYA SHANKAR RESPONDENT BY : NONE O R D E R PER S.V.MEHROTRA AM THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 17.4.2009 OF LD CIT (A)-II THANE FOR THE ASSESSMENT YEAR 2005 -06. GROUND RAISED BY THE REVENUE READS AS UNDER:- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN THE LAW THE CIT (A)II THANE ERRED IN TREATING THE AMOUNT R ECEIVED ON SALE OF SHARES AS COMPENSATION FOR RELINQUISHMENT OF RIGHTS IN BUSINESS AND CONSEQUENTIALLY TREATING THIS AMOUNT AS BUSINESS IN COME U/S.28(II)AS AGAINST CAPITAL GAIN DECLARED BY THE ASSESSEE AND A CCEPTED IN THE ORIGINAL ASSESSMENT PROCEEDINGS. 2. THE NOTICE OF HEARING BY REGD. POST WITH AD SENT TO THE RESPONDENT ASSESSEE HAS BEEN RETURNED BACK UNSERVED WITH THE POSTAL REMARKS LEFT. THEREFORE WE PROCEED TO 2 DECIDE THE APPEAL OF THE REVENUE EXPARTE QUA ASSESS EE AFTER HEARING LD D.R. AND ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. 3. FACTS IN BRIEF ARE THAT THE ASSESSEE CARRIED ON THE BUSINESS OF DISTRIBUTORS & EXHIBITORS OF FILMS. THE ORIGINAL RETURN OF INCOME WAS FILED DECLARING TOTAL INCOME AT RS.7 62 86 220/- ON 31.10.2006. THE ASSESSMENT WAS COMPLETED AT A TOTAL INCOME OF RS.7 62 86 220/- U/S.143(3) OF THE I.T.ACT. SUBSEQ UENTLY THE ASSESSEE FILED REVISED RETURN ON 23.11.2007 DECLARING TOTAL INCOME AT RS.7 72 86 220/-. AS THE REVISED RETURN WAS FILED BEYOND THE TIME LIMIT PRESCRIBED U/S. 139(4) A NOT ICE U/S.148 WAS ISSUED TO ASSESSEE ON 2.1.2008. IN RESPONSE TO WHICH THE ASSESSEE VIDE H IS LETTER DATED 6.1.2008 REQUESTED TO TREAT THE RETURN FILED BY HIM ON 23.11.2007 AS A RE TURN HAVING BEEN FILED IN RESPONSE TO NOTICE U/S.148. THE AO NOTICED THAT THE ASSESSEE A ND HIS WIFE WERE HOLDING 100% SHARE CAPITAL [4500 EQUITY SHARES IN THE COMPANY(79.78% O F SHRI GUL AND 20.22% OF WIFE SMT. KANTA)]. THE SAID SHARES WERE NOT LISTED IN ANY ST OCK EXCHANGES IN INDIA. THE ASSESSEE WAS A DIRECTOR AND MANAGING THE WHOLE AFFAIRS OF TH E COMPANY. HE NOTICED THAT AS PER AGREEMENT DATED 17.8.2004 FOR SALE OF SHARES EXECUT ED BETWEEN ASSESSEE AND HIS WIFE (VENDORS) AND SUBHASH S RUNWAL AND 2 OTHERS DIRECT ORS OF M/S. RUNWAL AND 2 OTHERS DIRECTORS OF M/S. RUNWAL DEVELOPERS PVT LTD. RUNWA L CHAMBERS (PURCHASERS) THE ASSESSEE (VENDORS) SOLD 4500 EQUITY SHARES FOR THE VALUE OF RS.22 222/- PER SHARE FOR TOTAL VALUE OF RS.10 CRORES. HE NOTED THAT THE SALE VALU E PER EQUITY SHARE HAD BEEN FIXED AFTER CONSIDERING THE VALUE OF THE PLOT OF LAND AND OTHER ASSETS OF THE COMPANY SUBJECT TO CERTAIN TERMS AND CONDITIONS MENTIONED IN THE AGREE MENT VIZ; ON THE COMPLETION OF THE SALE TRANSACTION VENDORS SHALL HAND OVER ALL SHARES TO THE PURCHASER INCLUDING ALL RECORDS FILE S DOCUMENTS PAPERS STATUTORY DOCUMENTS CONTRACTS AND OTHER RECORDS CO NCERNING THE COMPANY AND SRINAGAR AND ALSO ALL THE TITLE DEEDS WITH RESP ECT TO THE PROPERTY ADMEASURING 2981.64 SQ. MTR. TOGETHER WITH CINEMA T HEATER STANDING THEREON DESCRIBED IN THE ANNEXURE II ATTACHED WITH THE AGREEMENT (CLAUSE 7). NO MATERIAL HAS TO BE TAKEN FROM THE DATE OF LAST B ALANCE SHEET AS ON 31.03.2004(CLAUSE 12) THE VENDORS HERE BY UNDER TAKE TO PROCURE RESIGNATI ON OF THE EXISTING DIRECTORS ON OR BEFORE COMPLETION OF SALE AND INDUC T THE NOMINEES OF THE PURCHASER ON BOARD OF DIRECTORS OF THE COMPANY AND SRINAGAR(CLAUSE). 3 IN VIEW OF THIS THE AO WAS OF THE OPINION THAT THE INCOME DECLARED UNDER THE HEAD CAPITAL GAIN WAS TO BE TAXED AS BUSINESS INCOME U /S.28(II)(A) OF THE ACT. HE THEREFORE ISSUED NOTICED ON 21.10.2008 INTER ALIA STATING AS UNDER:- ..WITHOUT PREJUDICE TO ABOVE IT IS ALSO SEEN THAT IN THE SAID COMPANY YOU WERE NOT ONLY A SHARE HOLDER BUT ALSO DIRECTOR MANA GING THE WHOLE AFFAIRS 0 THE COMPANY. BY VIRTUE THE SALE OF SHARES OWNED Y OU AND YOUR WIFE HAVE DIVESTED YOURSELF OF YOUR RIGHT TO MANAGE THE AFFAI RS OF THE COMPANY AND YOU BEING A MAJOR HOLDER THE SALE PROCEEDS OF THE S HARES ARE COVERED BY PROVISIONS OF SECTION28(II)(A) AND REQUIRED TO BE T REATED AS BUSINESS INCOME. YOU ARE THEREFORE REQUIRED TO SHOW CAUSE WH Y THE ABOVE RECEIPTS SHOULD NOT BE TREATED AS BUSINESS A PROVIDED U/S. 2 8 (II)(A) INSTEAD CAPITAL GAINS SHOWN BY YOU. THE ASSESSEE POINTED OUT THAT THIS ISSUE HAS BEEN C ONSIDERED BY THE ADDITIONAL COMMISSIONER OF INCOME TAX IN THE ORIGINAL ASSESSME NT PROCEEDINGS U/S.143(3) AND THE COMPUTATION WAS MADE UNDER THE HEAD CAPITAL GAIN. WITHOUT PREJUDICE TO THIS PLEA THE ASSESSEE FURTHER POINTED OUT THAT IT IS A MATTER OF RECORD THAT HE ALONGWITH HIS WIFE ACQUIRED SHARES OF ODEAON EXHIBITORS PVT LTD. FROM TIME TO TIME AS PER DETAILS KEPT ON ORIGINAL ASSESSMENT PROCEEDINGS. THESE SHARES WERE HELD FORALMOST 12 TO 13 YEARS AND SOLD IN F.Y. 2004-05. THE TRANSACTION OF SALE OF A SSET HELD AS CAPITAL ASSET WAS CLEARLY A TRANSFER OF CAPITAL ASSET COVERED BY SECTION 45 A ND WAS ACCORDINGLY DECLARED AS LONG TERM CAPITAL GAIN. IT WAS POINTED OUT THAT THE PRO VISIONS OF SECTION 28(II)(A) ARE NOT ATTRACTED SINCE THE AMOUNT RECEIVED WAS NOT FOR DIV ESTING RIGHT TO MANAGE AFFAIRS OF COMPANY BUT SHARES OF COMPANY HELD AS CAPITAL ASS ETS WERE SOLD. IT WAS POINTED OUT THAT IT WAS A CASE OF SALE OF SHARE SIMPLICITER AND IN CONSEQUENCE TO WHICH THE SHARES WERE TRANSFERRED IN FAVOUR OF A THIRD PARTY. THE A SSESSING OFFICER DID NOT ACCEPT THE ASSESSEES CONTENTION AND OBSERVED THAT THE ASSESSE E WAS MANAGING THE WHOLE AFFAIRS OF THE COMPANY AND BY TRANSFERRING THE SHARES TOGETHER WITH THE TITLE DEEDS OF THE PROPERTY IN THE FORM OF LAND CINEMA THEATRE THE ASSESSEE HAD DIVESTED HIMSELF OF MANAGING THE AFFAIRS OF THE COMPANY AND THUS THE MANAGEMENT OF THE ASSESSEE HAD COME TO AN END BY VIRTUE OF TRANSFER OF THESE SHARES. HE OBSERVED TH AT HE WAS SIGNING ALL THE DOCUMENTS IN HIS CAPACITY AS MANAGING DIRECTOR. FURTHER IT IS A CASE OF PRIVATE LIMITED COMPANY AND THE ENTIRE SHAREHOLDING WAS WITHIN THE FAMILY CONSI STING OF THE ASSESSEE AND HIS WIFE AND THEREFORE ALL SHARES VESTED WITH THE ASSESSEE. HE CONCLUDED THAT IT WAS NOTHING BUT THE 4 COMPENSATION RECEIVED FOR TERMINATING THE MANAGEMEN T RIGHTS OF THE ASSESSEE IN THE SAID COMPANY AND THEREFORE THE PROVISIONS OF SECTION 2 8(II)(A) WERE ATTRACTED. HE FURTHER DEMONSTRATED THAT THE BOOK VALUE OF THE SHARES WAS (-)RS.34 823 WHEREAS THE SHARES WERE SOLD AT RS.22 222/- PER SHARES. THUS HE CONCLUDED THAT THE CONSIDERATION RECEIVED BY THE ASSESSEE WAS NOT MERELY THE SALE VALUE FOR TRANSFER OF SHARES BUT FOR RELINQUISHING HIS RIGHTS IN THE BUSINESS WHICH HAD BEEN COMPENSATED. HE RELIED ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. D.R. SONDHI 248 ITR 695 (DELHI). 4. BEFORE LD CIT (A) IT WAS POINTED OUT THAT THE FACTS IN THE CASE OF D.R.SONDHI (SUPRA) WERE VASTLY DIFFERENT. IT WAS POINTED OUT THAT IN THE SAID CASE; THERE WERE TWO GROUPS OF SHAREHOLDERS. AS A RESULT OF DISPUTE ON E GROUP SONDHI HAD SURRENDERED THEIR SHARES. ON SUCH SURRENDER AND PREMATURE RETIREMENT THE COMPANY PAID COMPENSATION OF RS.95 000/- TO MR SONDHI. THE AO TREATED THIS COMP ENSATION AS PROFIT IN LIEU OF SALARY AND TAXED IT U/S.17(3)(I). HOWEVER THE HONBLE HI GH COURT UPHELD THE ITAT VIEW THAT IT WAS ASSESSABLE U/S.28(II)(A). HOWEVER IN THE PRES ENT CASE THE ASSESSEE ALONGWITH HIS WIFE MRS KANTA G ACHARYA HELD THE ENTIRE SHAREHOLDI NG OF A PRIVATE LIMITED COMPANY VIZ; ODEON EXHIBITORS P.LTD. THE COMPANY OWNED IMM OVABLE PROPERTY AT GHATKAPOR BEING LAND SITUATED AT PLOT NO.194 CITY SURVEY NO. 5752 ADMEASURING 2981 SQ. MTRS WITH A CINEMA THEATRE STANDING THEREON. THE COMPANY HAD GIVEN SOME PORTION OF THE PROPERTY ON RENTAL BASIS TO OTHER PERSONS. AS PER AN AGREEM ENT FOR SALE OF SHARES EXECUTED ON 17.8.2004 THE ASSESSEE AND HIS WIFE AGREED TO SELL THEIR ENTIRE SHAREHOLDINGS IN M/S. ODEON EXHIBITORS (P)LTD. TO THE DIRECTORS OF M/S. RUNWAL DEVELOPERS P. LTD. AT THE RATE OF RS.22 222/- PER SHARES AND THUS THE ENTIRE SHAR EHOLDING WAS AGREED TO BE SOLD FOR A SUM OF RS.10 CRORES. THE ASSESSEE AND HIS WIFE WER E OBLIGED TO CLEAR CERTAIN ENCUMBRANCES AND SETTLE DISPUTES WITH TENANTS ETC. WITH REFERENCE TO THESE FACTS IT WAS POINTED OUT THAT THE ASSESSEE HAD NO INDEPENDENT OR SEPARATE RIGHTS OF MANAGING THE AFFAIRS OF THE COMPANY OTHER THAN THE RIGHT ACQUIRE D BY HIM NOT ON HIS OWN BUT BY VIRTUE OF THE ASSESSEES OWNERSHIP OF MAJORITY SHAREHOLDIN G IN THE COMPANY. IT WAS POINTED OUT THAT THE ONLY ASSET THAT THE ASSESSEE HAD WERE THE SHARES IN QUESTION AND APART FROM THAT THE ASSESSEE DID NOT HAVE ANY OTHER ASSET BY WAY OF ANY SEPARATE RIGHT TITLE OR INTEREST TO MANAGE THE AFFAIRS OF THE COMPANY. THE ASSESSEE R ELIED ON THE DECISION OF THE HONBLE 5 CALCUTTA HIGH COURT IN THE CASE OF RAM SARAN DAS & BROS V CIT 78 TAXMAN 569(CAL). IN THIS CASE THE ASSESSEE WAS OWNER OF CERTAIN COL LIERIES THAT WERE COMPULSORILY ACQUIRED BY THE GOVERNMENT. THE ASSESSE WORKED OUT A LOSS OF RS.4 57 844/- IN THE PROFIT AND FLOSS ACCOUNT AS SUSTAINED BY IT ON ACCOUNT OF DIFFEREN CE BETWEEN THE COMPENSATION RECEIVED AND THE VALUE OF THE ASSETS IN THE BALANCE SHEET. THE AO HELD THAT IT WAS A CAPITAL LOSS AND THEREFORE DISALLOWABLE IN COMPUTING THE BUSIN ESS INCOME OF THE ASSESSEE. LD CIT (A) DIRECTED THE AO TO TREAT THE LOSS AS ARISING FR OM BUSINESS IN VIEW OF SECTION 28(II)(A) ON THE GROUND THAT COMPENSATION WAS RECEIVED BY TH E ASSESSEE AS HE WAS MANAGING THE AFFAIRS OF THE COLLIERIES WHICH RIGHT CEASED ON NA TIONALIZATION OF THE COLLIERIES BY THE GOVERNMENT. THE TRIBUNAL HOWEVER REVERSED THE DEC ISION OF LD CIT (A) AND UPHELD THE STAND OF THE AO TREATING THE SAME AS CAPITAL LOSS O BSERVING THAT IT WAS NOT MERELY THE MANAGEMENT THAT HAD BEEN TAKEN OVER BY THE COMPANY BUT ALL THE ASSETS AND BUSINESS ITSELF HAD BEEN TAKEN OVER BY THE COMPANY AND THER EFORE THE PROVISIONS OF SECTION 28(II) DID NOT APPLY. THE TRIBUNAL HELD THAT THERE WAS NO THING ANYWHERE TO SUPPORT THE VIEW THAT EVEN WHERE ASSETS WERE TAKEN OVER BY THE COMPA NY SECTION28(II)(D) WOULD APPLY. THE HONBLE HIGH COURT AFFIRMED THE ORDER OF THE TR IBUNAL. THEREAFTER THE ASSESSEE ALSO RELIED ON THE DECISION IN THE CASE OF VENKATESH V C IT 243 ITR 357 (MAD). IN THIS CASE THE ASSESSEE SOLD THE SHARES IN TWO COMPANIES TO ON E MR G.N.JATTIYA. THE CASE OF THE ASSESSEE WAS THAT THOSE SHARES WERE SOLD AT A PRICE AT HIGHER THAN THE PREVAILING MARKET VALUE OF THOSE SHARES. THE CONTENTION OF THE ASSES SEE WAS THAT THE SALE PRICE DID NOT WHOLLY PERTAIN TO THE VALUE OF THE SHARES HELD BY T HEM AND PART OF THE AMOUNT RECEIVED BY THEM WAS THE CONSIDERATION FOR THE TRANSFER OF THE CONTROLLING INTEREST OF THOSE COMPANIES TO THE VENDORS AS IT HAD BEEN AGREED THAT THE EXIST ING DIRECTORS WOULD RESIGN AFTER INDUCING THE NOMINEES OF THE VENDEES. THE AO DID NOT ACCEPT THE ASSESSEES CONTENTION AND COMPUTED THE DIFFERENCE BETWEEN THE CONSIDERATION I N THE SHARES RECEIVED BY THE ASSESSEE AND THE COST OF ACQUISITION OF SHARES AS LONG TERM CAPITAL GAIN. THE HONBLE MADRAS HIGH COURT HELD AS UNDER:- IT IS BY REASON OF CONTROL OVER THE SHARES THAT TH E PERSON CONTROLLING THOSE SHARES IS ENABLED TO EXERCISE CONTROL OVER TH E MANAGEMENT. IT IS WHEN HE IS IN A POSITION TO CONTROL THE MANAGEMENT THAT THE INTEREST HELD BY HIM IN THE COMPANY IS GENERALLY REFERRED TO AS C ONTROLLING INTEREST. WITHOUT CONTROL OVER THE SHARES THERE CAN BE NO QUE STION OF ANY CONTROLLING INTEREST. IT IS ONLY BY VIRTUE OF THE OWNERSHIP OF THE SHARES THAT 6 THE COMPOSITION OF THE BOARD OF DIRECTORS OF THE CO MPANY CAN BE CONTROLLED BY EXERCISE OF THE VOTING RIGHTS ATTACHED TO THOSE SHARES FOR THE PURPOSE OF ELECTING OR REMOVING A DIRECTOR. IT IS BY REASON O F THE CONTROL FROM WITHIN THE BOARD OF DIRECTORS THAT IT IS POSSIBLE TO CO OP T THE DIRECTORS OF THE CHOICE OF THE PERSON HOLDING THE CONTROLLING INTERE ST. THE PRICE PAID FOR THE SHARES BY THE VENDEE IS THEREFORE THE PRICE PAI D FOR ACQUIRING THE SHARES AND THE ENTIRE CONSIDERATION IS REQUIRED TO BE CONSIDERED FOR THE PURPOSE OF COMPUTING THE CAPITAL GAINS IN THE HANDS OF THE ASSESSES. 5. LD CIT (A) RELYING ON THE DECISION OF THE HONBL E MADRAS HIGH COURT IN THE CASE OF VENKATESH V CIT (SUPRA)HELD AS UNDER: FROM THE ABOVE JUDGMENT OF HONBLE MADRAS HIGH COU RT IN THE CASE OF VENKATESH V CIT IT FOLLOWS THAT CONTROLLING INTERE ST CANNOT BE PERCEIVED AS A SEPARATE ASSET APART FROM THE SHARES THAT CONFER CO NTROLLING INTEREST. WORSE STILL IN THE CASE OF THE APPELLANT THE AO HAS MISTREATED CO NTROLLING INTEREST AS A RIGHT OF MANAGEMENT. AT ANY RATE THESE CANNOT BE TREATED AN ASSET AND ARE MERELY OFF- SHOOT OF SHAREHOLDING. AS REGARDS THE CONTENTION O F THE AO RELATING TO NEGATIVE NET WORTH OF THE COMPANY IT IS TO BE NOTED THAT TH IS NEGATIVE VALUE HAS BEEN ARRIVED AT WHILE TAKING THE VALUE OF IMMOVABLE PROP ERTY AT BOOK VALUE. IN THE INSTANT CASE THE COMPANY HAD ACQUIRED THE IMMOVABL E PROPERTY UNDER AN INDENTURE OF LEASE DATED 12 TH MAY 1983. ON THE STRENGTH OF THAT LEASE THE APPELLANT REPRESENTED TO RUNWALA THAT BY VIRTUE OF THE SHAREHOLDING HE HAD A CLEAR AND MARKETABLE TITLE OVER LAND ADMEASURING 2981 SQ. MT IN GHATKOPAR. THE DIFFERENCE BETWEEN BOOK VALUE OF THE SHARES AND MAR KET VALUE HAS ARISEN ON ACCOUNT OF STEEP RISE IN THE MARKET VALUE OF THAT L AND. AT ANY RATE THE PRICE THAT RUNWALA HAVE PAID TO THE APPELLANT IS NOT IN DISPUT E. THAT PRICE HAS BEEN PAID FOR TRANSFER OF THE SHAREHOLDINGS OF THE APPELLANT AND NOTHING ELSE. NO OTHER ASSET OR BENEFIT HAS BEEN PASSED ON BY THE APPELLANT TO RUNW ALA. IT IS THEREFORE SUBMITTED THAT THE ATTEMPT OF THE AO TO HOLD THAT CONSIDERATI ON RECEIVED BY THE APPELLANT ON TRANSFER OF A CAPITAL ASSET WHICH WOULD CONSTITUTE A CAPITAL RECEIPT IN THE HANDS OF APPELLANT INTO BUSINESS RECEIPTS IS NOT JUSTIFIED A ND THEREFORE SHOULD FALL. CIRCULAR NO.4/2007 DATED 15.6.2007 AT THIS JUNCTURE REFERENCE MAY ALSO BE MADE TO BOAR D CIRCULAR NO.4/200. THIS CIRCULAR DETAILS WITH GUIDELINES PRESCRIBED FOR TRE ATMENT OF PROFIT ARISING ON SALE/TRANSFER OF SHARES I.E. WHETHER TO TREAT IT AS BUSINESS INCOME OR CAPITAL GAIN. THIS CIRCULAR REITERATES THE WELL ESTABLISHED PRINC IPLES LAID DOWN FOR THE PURPOSE OF DISTINGUISHING BUSINESS INCOME FROM CAPITAL GAIN. THESE ARE ANALYSED BELOW FOR YOUR KIND PERUSAL. I) WHETHER THE PURCHASE WAS A TRADER AND THE PURCHASE OF THE COMMODITY AND ITS RESALE WERE ALLIED TO HIS USUAL TRADE OR BUSINESS OR WERE INCIDENTAL TO IT. NO. THE ASSESSEE IS IN BUSINESS OF EXHIBITION OF FILMS AND NOT A TRADER IN SHARES. 7 II) THE NATURE AND QUANTITY OF THE COMMODITY PURCHASED AND RESOLD- IF THE COMMODITY PURCHASED IS IN VERY LARGE QUANTITY IT COULD TENT TO ELIMINATE THE POSSIBILITY OF INVESTMENT FOR PERSONAL USE POSSESSION OR ENJOYMENT NO. APPELLANT HOLD SHARES OF HIS OWN FAMILY GROUP CONCERNS ONLY III) THE REPETITION OF THE TRANSACTION NO. SALE OF SHARES BEFORE OR AFTER 2004- 05 IV) NO INTENTION TO HOLD THE PROPERTY AND PURCHASED FOR SOLE INTENTION FOR RESALE AT PROFIT. NO. THE APPELLANT HAS HELD THE SHARES OF THIS COMPANY FOR A VERY LONG PERIOD (ABOUT 10 YEARS) AND THERE WAS NO SUCH INTENTION TO RESALE THE SHARES AT PROFIT. V) HELD AS STOCK IN TRADE OR CAPITAL ASSET CAPITAL ASSET ALL THE ABOVE FACTORS CLEARLY INDICATE THAT APPELLA NT NEVER HELD THESE SHARES AS STOCK IN TRADE BUT INVESTMENT AND AS SUCH THE SURPL US ARISING ON TRANSFER OF SHARES HAS TO BE TAXED UNDER THE HEAD CAPITAL GAIN ONLY. AS REGARDS THE RELIANCE PLACED BY THE LD A.O. ON TH E JUDGEMENT IN THE CASE OF D.R.SONDHI THE AO HAS RIGHTLY MENTIONED THAT THE F ACTS OF THAT CASE ARE VASTLY DIFFERENT. THAT BEING SO HE SHOULD NOT HAVE REFERR ED TO THAT JUDGMENT AT ALL AND HENCE THE ASSESSMENT MADE BY THE AO WHILE TREATING THE LONG TERM CAPITAL GAIN ON SALE OF SHARES AS BUSINESS INCOME U/S.28(II)(A) DES ERVES TO BE REVERSED AND THE INCOME ARISING ON SALE OF SHARES MAY PLEASED BE DIR ECTED TO EB ASSESSED AS LONG TERM CAPITAL GAIN ONLY. 6. LD D.R. RELIED ON THE ORDER OF THE AO. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF LD D.R. I T IS NOT DISPUTED THAT THE SALE CONSIDERATION HAS BEEN RECEIVED FOR THE TRANSFER OF ENTIRE SHAREHOLDING IN THE COMPANY. THE CONTROLLING INTEREST ENJOYED BY THE ASSESSEE IN THE COMPANY WAS ONLY BY VIRTUE OF HIS SHAREHOLDING IN THE COMPANY AND NOT OTHERWISE. SEC TION 14 OF THE I.T.ACT DEALS WITH HEADS OF INCOME AND IF A PARTICULAR INCOME FALLS UN DER SPECIFIC HEAD OF INCOME THEN SAME CANNOT BE BROUGHT TO TAX UNDER ANY OTHER HEAD OF IN COME. THE SHARES IN THE COMPANY WERE HELD AS INVESTMENTS AND THEREFORE WERE CAPI TAL ASSETS. ACCORDINGLY WHEN THE SHARES PER SE WERE TRANSFERRED THEN THE SAME COME WITHIN THE PUR VIEW OF CAPITAL GAIN TAX AND MERELY BECAUSE CERTAIN INCIDENTAL RIGHTS ATTACH ED TO THE SHARES STANDS TRANSFERRED IT WOULD NOT COME WITHIN THE PURVIEW OF SECTION 28. MO REVER LD CIT (A) HAS POINTED OUT THAT VALUE OF PER EQUITY SHARE WAS MAINLY GOVERNED BY THE STEEP RISE IN MARKET VALUE OF PROPERTIES HELD BY COMPANY AND NOT BY CONTROLLING I NTEREST IN THE COMPANY. FURTHER WE FIND THAT THIS ISSUE IS SQUARELY COVERED BY THE DEC ISION IN THE CASE OF VENKATESH V 8 CIT(SUPRA) RELIED UPON BY LD CIT (A) WHICH ARE NOT ED ABOVE. WE THEREFORE DO NOT FIND ANY INFIRMITY TO INTERFERE WITH THE ORDER OF LD CIT (A) WHICH WE UPHOLD. 8. IN THE RESULT APPEAL FILED BY THE REVENUE STAND S DISMISSED. PRONOUNCED ON 6YH APRIL 2010 SD/- (V. DURGA RAO) (JUDICIAL MEMBER) SD/- (S.V. MEHROTRA) (ACCOUNTANTMEMBER) MUMBAI DATED 6 TH APRIL 2010 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- MUMBAI 4. COMMISSIONER OF INCOME TAX CITY- MUMBAI 5. DEPARTMENTAL REPRESENTATIVE BENCH G MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR ITAT MUMBAI 9 DATE INITIALS 1. DRAFT DICTATED ON 1.4.2010 PS 2. DRAFT PLACED BEFORE AUTHOR 1.4.2010 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM/JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/J M 5. APPROVED DRAFT COMES TO THE SR. PS PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER 10