SATISHCHANDRA S. DOSHI, MUMBAI v. JCIT 21(3), MUMBAI

ITA 6496/MUM/2009 | 2004-2005
Pronouncement Date: 30-03-2012 | Result: Partly Allowed

Appeal Details

RSA Number 649619914 RSA 2009
Assessee PAN AACPD7600F
Bench Mumbai
Appeal Number ITA 6496/MUM/2009
Duration Of Justice 2 year(s) 3 month(s) 12 day(s)
Appellant SATISHCHANDRA S. DOSHI, MUMBAI
Respondent JCIT 21(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2012
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted H
Tribunal Order Date 30-03-2012
Date Of Final Hearing 21-03-2012
Next Hearing Date 21-03-2012
Assessment Year 2004-2005
Appeal Filed On 18-12-2009
Judgment Text
SHRI SATISHCHANDRA S DOSHI ITA NO.6496/MUM/2009(ASST YEAR 2004-05) ITA NO. 6604/MUM/2009(ASST YEAR 2006-07) ITA NO.151/MUM/2010(ASST YEAR 2004-05) ITA NO. 811/MUM/2009(ASST YEAR 2006-07) IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI H BENCH MUMBAI BENCHES MUMBAI BEFORE SHRI VIJAY PAL RAO JM & SHRI RAJENDRA AM ITA NO.6496/MUM/2009(ASST YEAR 2004-05) ITA NO. 6604/MUM/2009(ASST YEAR 2006-07) SHRI SATISHCHANDRA S DOSHI ETERNIA A/1602 HIRANANDANI GARDEN MAIN STREET POWAI MUMBAI 76 VS THE JT COMMR OF INCOME TAX 21(3) MUMBAI (APPELLANT ) (RESPONDENT) ITA NO.151/MUM/2010(ASST YEAR 2004-05) ITA NO. 811/MUM/2009(ASST YEAR 2006-07) THE JT COMMR OF INCOME TAX 21(3) MUMBAI VS SHRI SATISHCHANDRA S DOSHI ETERNIA A/1602 HIRANANDANI GARDEN MAIN STREET POWAI MUMBAI 76 (APPELLANT ) (RESPONDENT) PAN NO. AACPD7600F ASSESSEE BY SH DEEPAK SHAH/TEJ SHAH REVENUE BY SMT KUSUM INGALE DT.OF HEARING 21 ST MAY 2012 DT OF PRONOUNCEMENT 30 TH MARCH 2012 ORDER PER BENCH THESE TWO SETS OF CROSS APPEALS ARE DIRECTED AGAIN ST SEPARATE ORDERS DATED 21.10.2009 AND 24.11.2009 OF THE CIT(A) FOR THE AYS 2004-05 AND 2006-07 RESPECTIVELY. SHRI SATISHCHANDRA S DOSHI ITA NO.6496/MUM/2009(ASST YEAR 2004-05) ITA NO. 6604/MUM/2009(ASST YEAR 2006-07) ITA NO.151/MUM/2010(ASST YEAR 2004-05) ITA NO. 811/MUM/2009(ASST YEAR 2006-07) 2 2 THE ASSESSEE IS AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF SHARE TRADING AND INVESTMENT. THE ASSESSEE DECLARED HIS INCOME IN THE RETURN OF INCOME FILED FOR THESE ASSESSMENT YEARS UNDER CONSIDERATION AS UNDER : FOR AY 2003-04: I) SHORT TERM CAPITAL GAIN RS. 1 23 79 416/- II) LONG TERM CAPITAL GAIN (LOSS) RS. 2 52 133/- III) OTHER SOURCES RS. 2 376/- FOR AY 2006-07: I) BUSINESS INCOME RS.9 34 91 493/- II) SHORT TERM CAPITAL GAIN RS. 74 56 654/- III) LONG TERM CAPITAL GAIN RS.1 82 28 482/- IV) OTHER SOURCES RS. 8 011/- 2.1 THE ASSESSING OFFICER DID NOT ACCEPT THE SHORT THE CAPITAL GAINS AS WELL AS LONG CAPITAL GAINS CLAIMED BY THE ASSESSEE ON PURCHASE A ND SALE OF SHARES. ACCORDINGLY THE ASSESSING OFFICER HELD THAT THE ASSESSEE IS ENG AGED IN THE ACTIVITY OF EARNING PROFIT FROM DEALING IN SHARES AND TREATED THE SHORT TERM AND LONG TERM CAPITAL GAINS DECLARED BY THE ASSESSEE AS BUSINESS INCOME. 2.2 ON APPEAL THE CIT(A) HELD THAT THE ASSESSEE CA N BE A INVESTOR AS WELL AS TRADER AND CAN HAVE BOTH PORTFOLIOS. HOWEVER H E HAS BIFURCATED THE SURPLUS ON SALE AND PURCHASE OF SHARE HELD FOR LESS THAN 30 DA YS BY TREATING AS BUSINESS INCOME AND FOR THOSE SHARES HOLDING MORE THAN 30 DAYS AS S HORT TERM CAPITAL GAIN. THE LONG TERM CAPITAL GAIN WAS ACCEPTED BY THE CIT(A). THUS THE ASSESSEE AS WELL AS THE REVENUE ARE IN APPEAL BEFORE US AGAINST THE IMPUGNE D ORDERS OF THE CIT(A). THERE IS NO DISPUTE BEFORE US REGARDING LONG TERM CAPITAL GA INS ACCEPTED BY THE CIT(A) BECAUSE THE REVENUE HAS NOT CHALLENGED THE APPEAL O N LONG TERM CAPITAL GAINS. 3 THE ASSESSEE HAS RAISED THE FIRST COMMON ISSUE IN THESE APPEALS IS AS UNDER: SHRI SATISHCHANDRA S DOSHI ITA NO.6496/MUM/2009(ASST YEAR 2004-05) ITA NO. 6604/MUM/2009(ASST YEAR 2006-07) ITA NO.151/MUM/2010(ASST YEAR 2004-05) ITA NO. 811/MUM/2009(ASST YEAR 2006-07) 3 WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) IS JUSTIFIED IN TREATING THE SURPLUS/LOSS OF SHARES HE LD FOR LESS THAN 30 DAYS IN RESPECT OF PURCHASE AND SALE OF SHARES AS BUSINESS INCOME. 3.1 WHEREAS THE REVENUE HAS RAISED THE ONLY COMMON ISSUE IN THESE APPEAL IS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) HAS ERRED IN TREATING THE BUSINESS INCOME ON ACCOUNT OF TRADING IN SHARES AS SHORT TERM CAPITAL GAIN BY APPLYING THE SHARE HOLDIN G PERIOD FOR SHORT TERM CAPITAL GAIN AS MORE THAN 30 DAYS BUT LESS THAN 1 YE AR. 4 IT IS CLEAR THAT THE FIRST ISSUE RAISED IN ASSESS EES APPEAL AS WELL AS IN REVENUES APPEAL IS CONNECTED AND RELATED TO THE ASSESSMENT OF INCOME ON SALE AND PURCHASE OF SHARES CLAIMED BY THE ASSESSEE AS SHOR T TERM CAPITAL GAINS. 5 WE HAVE HEARD THE LD AR OF THE ASSESSEE AS WELL A S THE LD DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED AND DECIDED BY THE TRIBUNAL IN THE CASE OF THE ASSESSEES SON SHRI HITESH SATISHCHANDRA DOSHI IN ITA NO. 6497/MUM/2009 VIDE ORDER DATED 15.6.2011. THE LD AR HAS FURTHER SUBMITTED T HAT THE ASSESSING OFFICER AS WELL AS THE CIT(A) HAS PASSED THE IDENTICAL ORDERS IN THE C ASE OF THE ASSESSEE AS WELL AS IN THE CASE OF THE SON OF THE ASSESSEE. THEREFORE WHE N THE FACTS OF BOTH CASES ARE IDENTICAL THE ISSUE IS COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES SON CASE (SUPRA). 5.1 ON THE OTHER HAND THE LD DR HAS SUBMITTED THAT THE ASSESSEE HAS CLAIMED THE EXPENDITURE IN THE NATURE OF BANK CHANGES INTE REST DE-MAT CHARGES DEPRECIATION COMPUTER PROFESSIONAL FEE AND OTHER MISCELLANEOUS EXPENSES INCLUDING TELEPHONE EXPENDITURE AGAINST SHORT TERM CAPITAL GAINS WHICH SHOWS THAT THE ASSESSEE WAS IN THE ACTIVITY OF TRADING AND CLA IMING THE EXPENSES AGAINST THE SAID INCOME DERIVED FROM THE TRADING ACTIVITY. SHE HAS FURTHER SUBMITTED THAT IN FORM SHRI SATISHCHANDRA S DOSHI ITA NO.6496/MUM/2009(ASST YEAR 2004-05) ITA NO. 6604/MUM/2009(ASST YEAR 2006-07) ITA NO.151/MUM/2010(ASST YEAR 2004-05) ITA NO. 811/MUM/2009(ASST YEAR 2006-07) 4 3CD THE ASSESSEE HAS SHOWN ITS BUSINESS IN PARA 8( A) AS DERIVATIVE OPERATIONS AND SHARE TRADING. THEREFORE THE ACTIVITY OF THE ASSES SEE IS NOTHING BUT SHARE TRADING AND THE AO IS JUSTIFIED IN TREATING THE INCOME AS BUSIN ESS INCOME. WHILE RELYING THE ORDER OF THE AO THE LD DR RELIED UPON THE FOLLOWING DECI SIONS: I)PVS RAJU VS AACIT 18 TAXMAN.COM 3(ANDHRA PRADES H) II)MAFATLAL FABRICS P LTD VS DCIT 49 SOPT 303(MUM ) III)IMMORTAL FINANCIAL SERVICES P LTD VS DCIT 44 SOT 88(MUM) 6 AFTER CONSIDERING THE RIVAL CONTENTIONS AS WELL A S CAREFUL PERUSAL OF THE RELEVANT MATERIAL ON RECORD WE NOTE THAT IN THE SI MILAR FACTS AND CIRCUMSTANCES AN IDENTICAL ISSUE CAME BEFORE THE TRIBUNAL IN THE C ASE OF THE ASSESEES SON SHRI HITECH SATISHCHANDRA DOSHI WHICH HAS BEEN CONSIDERED AND ADJUDICATED BY THE TRIBUNAL IN ITA NO. VIDE ORDER DATED 15.6.2011 IN PARAS 9 TO 16 AS UNDER: 9 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERU SED THE RELEVANT RECORDS. THE ASSESSING OFFICER TOOK THE RATIO OF PURCH ASE AND SALE TO THE OPENING AND CLOSING BALANCE TO SUPPORT HIS VIEW OF TREATMENT OF THE TRANSACTION INCLUDING THE TRANSACTION RESULTING LONG TERM CAPITAL GAINS AS TRADING ACTIVITY AND CONSEQUENTLY ASSESSED INCOME H AS BUSINESS INCOME. THE CIT(A) THOUGH ADMITTED LONG TERM CAPITAL GAINS AND THE TRANSACTION OF PURCHASE AND SALE RESULTING LONG TERM CAPITAL GAINS AS INVESTMENT; HOWEVER HE HAS BIFURCATED THE TRANSACTIONS OF SALE AND PURCHA SE RESULTING SHORT TERM CAPITAL GAINS ON THE BASIS OF HOLDING PERIOD ON THE CRITERIA OF MORE THAN 30 DAYS AND LESS THAN 30 DAYS. IT IS PERTINENT TO NOTE THAT THERE IS A CRITERIA PROVIDED U/S 2(42A) WHICH DEFINES THE SHORTER CAPI TAL ASSET AS CAPITAL ASSET HELD BY AN ASSESSEE FOR NOT MORE THAN 12 MONTHS IN THE CASE OF SHARES AND OTHER SECURITIES. SECTION 2(42B) FURTHER DEFINES THE SHORT TERM CAPITAL GAIN MEANS CAPITAL GAIN ARISING FROM THE TRANSFER OF SHORT TERM CAPITAL ASSET. THUS STATUTE PRESCRIBED CRITERIA FOR TREATING THE CAPITAL ASSET EITHER AS LONG TERM CAPITAL ASSET OR SHORT TERM CAPITAL ASSET ON THE BAS IS OF THE HOLDING PERIOD BUT NO SUCH CRITERIA OF TREATING THE SHORT TERM CAPITAL AS SET AND TREATING THE ASSET HAS BEEN PRESCRIBED UNDER THE STATUTE. EVEN THERE IS NO INDICATION OF HOLDING PERIOD OF 30 DAYS FIND PLACE EITHER IN THE STATUTE OR IN THE CIRCULAR/INSTRUCTIONS AS WELL AS JUDICIAL PRONOUNCEMENTS ON THE ISSUE. EV EN OTHERWISE HOLDING PERIOD IS ONE OF THE VARIOUS CRITERIA AND PRINCIPLES TO DETERMINE THE NATURE OF THE TRANSACTION I.E. TRADING OR INVESTMENT NO SINGLE FORMULA OR PRINCIPLE CAN BE THE DETERMINATIVE FACTOR FOR DECIDING THE NATURE O F THE TRANSACTION I.E. AS TRADING TRANSACTION OR INVESTMENT. A BUNDLE OF CRITERIA/ FACTORS/PRINCIPLES ARE TO BE TAKEN INTO ACCOUNT IN ORDER TO DETERMINE TH E NATURE OF TRANSACTION. 10 THE HONBLE SUPREME COURT IN THE CASE OF CIT VS A SSOCIATED INDUSTRIAL DEVELOPMENT CO P LTD REPORTED IN 82 ITR 586 AS WELL AS IN THE CASE OF CIT VS H SHRI SATISHCHANDRA S DOSHI ITA NO.6496/MUM/2009(ASST YEAR 2004-05) ITA NO. 6604/MUM/2009(ASST YEAR 2006-07) ITA NO.151/MUM/2010(ASST YEAR 2004-05) ITA NO. 811/MUM/2009(ASST YEAR 2006-07) 5 HOLSCK LARZEN REPORTD IN 160 ITR 67 HAS LAID DOWN VA RIOUS PRINCIPLES WHICH HAS BEEN CONSIDERED BY THE CBDT FOR ISSUING THE CIRCULAR N O.4/2007 DATED 15.6.2007. IN SHORT THE PRINCIPLES LAID DOWN IN T HOSE CASES FOR DECIDING THE QUESTION OF NATURE OF THE TRANSACTION AS TRADING OR I NVESTMENT MAINLY/BROADLY ARE;- WHAT IS THE INTENTION OF TH E ASSESSEE AT THE TIME OF PURCHASE OF SHARES; WHETHER THE ASSESSEE HAS BORROWED MONEY TO PURCHASE AND PAID INTEREST THEREON; WHAT IS THE FREQUENCY OF S UCH PURCHASE AND DISPOSAL IN THAT PARTICULAR ITEM; WHETHER THE PURCHA SE AND SALE IS FOR REALIZING PROFIT OR PURCHASES ARE MADE FOR RETENTION AND APPRECI ATION IN ITS VALUE; HOW THE VALUE OF ITEMS HAS BEEN TAKEN IN THE BALANCE SH EET. THUS NO SINGLE FACTOR CAN BE SAID TO BE DECISIVE FACTOR AND NO SINGLE PRINC IPLE CAN BE LAID DOWN TO DETERMINE THE NATURE OF THE TRANSACTION I.E. TRADING ACTIVITY OR INVESTMENT. EACH CASE HAS TO BE DECIDED BASED ON THE PARTICULAR FACTS OF THE SAID CASE. THEREFORE THERE CANNOT BE ANY PRECEDENT IN THE MATTE R OF ADJUDICATION OF THE ISSUE OF NATURE OF TRANSACTION WITH REGARD TO PURCH ASE AND SALE OF SHARES AND SECURITIES. THE ISSUE CAN BE DETERMINED ONLY BY TAKING INTO ACCOUNT ALL THE RELEVANT FACTS AND PRINCIPLES AS LAID DOWN BY T HE HONBLE SUPREME COURT AND OTHER HIGH COURTS. THUS PRINCIPLES ARE TAKEN AS G UIDELINES TO BE APPLIED IN THE FACTS OF EACH CASE AND CANNOT BE TAKEN AS ST RICT JACKET/FORMULA. THEREFORE THE BIFURCATION OF THE SHORT TERM CAPITAL G AIN AND TREATING THE TRANSACTION AS INVESTMENT IN THE CASES WHERE THE HO LDING PERIOD OF MORE THAN 30 DAYS AND AS BUSINESS TRANSACTION IN THE CASE WHERE THE HOLDING PERIOD IS LESS THAN 30DAY IN OUR CONSIDERED OPINION IS NOT JUSTIFIED ON THE PART OF THE CIT(A). SINCE THERE CANNOT BE A SINGLE CRITERIA FOR JUDGING THE TRANSACTION AS CAPITAL ASSET OR TRADING ASSET; THE CIT(A) ADOPTED O NLY HOLDING PERIOD AS A SOLE CRITERIA FOR BIFURCATING THE TRANSACTIONS REL ATING TO THE SHORT TERM CAPITAL GAIN WHICH IS NEITHER PROPER AND NOR JUSTIFIED. 10.1 MOREOVER WHEN THE ASSESSEE HAS TREATED THE INV ESTMENT TRANSACTION IN THE BOOKS OF ACCOUNT WHICH INCLUDES THE LONG TERM CAPITAL GAINS AS WELL AS SHORT TERM CAPITAL GAINS THEN AFTER ACCEPTING THE LO NG TERM CAPITAL GAINS THE TRANSACTION REPRESENTING SHORT TERM CAPITAL GAINS AS CLAIMED BY THE ASSESSEE CAN BE NEITHER TREATED AS AN INVESTMENT OR TRADING IN NATURE. THERE CANNOT BE A SUB-DIVISION OF TRANSACTION RELATING TO SHORT T ERM CAPITAL GAIN. HENCE IN OUR CONSIDERED OPINION IN THE CASE IN HAND THE CIT (A) HAS COMMITTED AN ERROR IN BIFURCATING THE TRANSACTIONS OF PURCHASE AND SALE OF SHARES ON THE BASIS OF HOLDING PERIOD OF 30 DAYS AND THE INCOME ARI SING FROM THE SAME CLAIMED BY THE ASSESSEE AS SHORT TERM CAPITAL GAIN H AS BEEN SUB-DIVIDED AS SHORT TERM CAPITAL GAINS AND BUSINESS INCOME. 11 NOW WE WILL ANALYSIS THE FACT OF THE PRESENT CAS E IN THE LIGHT OF THE PRINCIPLES LAID DOWN BY THE JUDICIAL PRONOUNCEMENTS FOR DETERMINING THE NATURE OF THE TRANSACTION OF SALE AND PURCHASE OF SH ARES. INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE O F SHARES: 12 UNDISPUTEDLY THE ASSESSEE HAS TREATED THE TRANSAC TION AS INVESTMENT BY RECORDING IN THE BOOKS OF ACCOUNT BEING INVESTMENT AND NOT AS STOCK-IN- TRADE. THE ASSESSEE HAS SHOWN INVESTMENT IN SHARES IN THE BEGINNING AND CLOSING OF THE YEAR ONLY AN INVESTMENT AND NOT AS ST OCK-IN-TRADE. FURTHER THE SHRI SATISHCHANDRA S DOSHI ITA NO.6496/MUM/2009(ASST YEAR 2004-05) ITA NO. 6604/MUM/2009(ASST YEAR 2006-07) ITA NO.151/MUM/2010(ASST YEAR 2004-05) ITA NO. 811/MUM/2009(ASST YEAR 2006-07) 6 ASSESSEE HAS BEEN MAINTAINING SEPARATE PORTFOLIOS FO R INVESTMENT AND TRADING TRANSACTIONS. IT IS NOW SETTLED PROPOSITION OF LAW T HAT AN ASSESSEE CAN HAVE TWO SEPARATE PORTFOLIOS ONE FOR INVESTMENT AND OTHER F OR TRADING TRANSACTIONS AND THE INCOME FROM THESE TWO PORTFOLIOS IS ASSESSAB LE UNDER THE DIFFERENT HEADS I.E. CAPITAL GAIN AND BUSINESS. THE CLA IM OF THE ASSESSEE IS FURTHER STRENGTHEN BY THE FACT THAT EVEN PRIOR TO THE DIFFER ENTIAL TAX EFFECT W.E.F 1.10.2004 THE ASSESSEE HAS BEEN TREATING THE INVE STMENT SEPARATELY AND ADMITTING CAPITAL GAIN AS WELL AS CAPITAL LOSS. TH IS CONSISTENT TREATMENT OF THE ASSESSEE HAS NOT BEEN DISPUTED RATHER HAS BEEN ACCEPT ED BY THE REVENUE PRIOR TO THE ASSESSMENT YEAR UNDER CONSIDERATION. THUS FROM THE FACTS AND MATERIALS ON RECORDS IT IS CLEARLY ESTABLISHED THAT THE INTENTION OF THE ASSESSEE AT THE TIME OF ACQUIRING THE SHARES WHICH ARE CLAIMED AS INVESTMENT WAS FOR INVESTMENT AND NOT FOR TRADING SO FAR AS REPRESENTIN G THE LONG TERM CAPITAL GAINS AND SHORT TERM CAPITALS GAINS. OWN FUNDS OR BORROWED FUNDS USED FOR PURCHASE OF SH ARES AND PAYMENT OF INTEREST: 13 AS PER THE BALANCE SHEET OF THE ASSESSEE AT PAGE 22 OF THE PAPER BOOK FOR THE ASSESSMENT YEAR 2003-04 THE ASSESSEE IS HAVING ITS OWN FUNDS OF RS. 3.71 CRORES AND INVESTMENT OF RS. 3.91 CRORES WHI CH CLEARLY SHOWS THAT THE ASSESSEE WAS HAVING ITS OWN FUNDS TO THE EXTENT OF 95% OF THE INVESTMENT. THEREFORE WE DO NOT FIND ANY SUBSTANCE IN THE CONTEN TION OF THE LD DR THAT THE ASSESSEE HAS USED BORROWED FUNDS FOR THE PURPOSE OF INVESTMENT. THE POSITION IS ALMOST THE SAME IN THE SUBSEQUENT YEARS . MOREOVER THE CIT(A) IN PARA 4.3.1 (A) HAS RECORDED THE FINDING THAT THE SOUR CE OF ACQUISITION ARE OUT OF OWN FUNDS AND FAMILY FUNDS. FREQUENCY OF PURCHASE AND SALE OF SHARES: 13.1 AS REGARDS THE FREQUENCY OF PURCHASE AND SALE OF SHARES THE ASSESSEE HAS TRANSACTED ALL TRANSACTIONS OF SALES AND PURCHASE S; THROUGH D-MAT ACCOUNT IN THE ELECTRONIC SYSTEM OF STOCK EXCHANGE. A SINGLE ORDER PLACED BY THE PURCHASER MAY BE COMPLETED BY WAY OF VARIOUS SMA LL QUANTITIES OF SHARES AVAILABLE FOR SALE TO MEET OUT THE DEMAND OF THE PUR CHASER. THEREFORE A SINGLE ORDER IS NOT NECESSARY BE COMPLETED BY A SING LE TRANSACTION OF THE ENTIRE QUANTITY OF SHARES. 13.2 SIMILARLY IN THE CASE OF SALE THE SAME MAY BE DIVIDED AS PER THE REQUIREMENT OF THE PURCHASER AND IN THIS WAY; SINGLE T RANSACTION IS REFLECTED AS NUMBER OF TRANSACTIONS. FOR INSTANCE THE SHARES OF JINDAL SCRIP PURCHASED BY THE ASSESSEE ON 3.6.2002 THE ORDER WAS FOR 10000 SHA RES WHICH WAS COMPLETED BY 4 DIFFERENT LOTS OF SHARES OF 4000 2500 2500 AND 1000. THEREFORE THE SAID ORDER OF PURCHASE OF JINDHAL SCRIPS ON 3.6.2002 HAS BEEN REPORTED AS FOUR TRANSACTIONS OF PURCHASES WHICH IS OT HERWISE ONE TRANSACTION. THUS IT APPEARS THAT THE NUMBERS OF T RANSACTIONS ARE TAKEN AS PER THE DIFFERENT LOTS AVAILABLE FOR EXECUTION OF THE O NE ORDER AND ACCORDINGLY IT GIVES UNREALISTIC FIGURE OF THE NUMBER OF TRANSACTION S. MOTIVE OF PURCHASE AND SALE OF SHARE: SHRI SATISHCHANDRA S DOSHI ITA NO.6496/MUM/2009(ASST YEAR 2004-05) ITA NO. 6604/MUM/2009(ASST YEAR 2006-07) ITA NO.151/MUM/2010(ASST YEAR 2004-05) ITA NO. 811/MUM/2009(ASST YEAR 2006-07) 7 13.3 FROM THE DETAILS OF THE SHORT TERM CAPITAL GAI NS WE FIND THAT THE TOTAL SHORT TERM CAPITAL GAINS ARISING FROM THE SHARES SOLD WITHIN 30 DAYS OF PURCHASE IS RS.15 19 938/- AND A TOTAL AMOUNT OF SHORT TERM C APITAL GAINS FROM THE SHARES SOLD AFTER 30 DAYS BUT BEFORE ONE YEAR IS RS. 37 76 14 3/- WHICH SHOWS THAT THE ASSESSEES INTENTION WAS TO HOLD THE SHARES FOR A LO NGER PERIOD AND TO EARN INCOME OF APPRECIATION OF THE VALUE OF THE SHARES AND NOT EARN THE PROFIT IN THE SHORT PERIOD CHANGE IN THE PRICE OF THE SHARES. A PART FROM THE ABOVE THE ASSESSEE HAS BEEN REGULARLY EARNING DIVIDEND INCOME. PROFIT MOTIVE IS INHERENTLY EMBEDDED IN THE TRANSACTION OF PURCHASE AN D SALE. THE IMPORTANT ASPECT IS THE INTENTION TO EARN PROFIT FROM APPRECIATI ON OF VALUE OF CAPITA ASSET OR BY WAY OF TRANSFER OF TRADING ASSET. VALUATION OF ITEMS IN BALANCE SHEET: 14 UNDISPUTEDLY THE ASSESSEE VALUED THE SHARES UNDE R INVESTMENT PORTFOLIO AT COST AND NEVER VALUED THE BALANCE AT T HE BEGINNING AS WELL AS AT THE END OF THE YEAR OF MARKET PRICE OR REALIZATION VA LUE. 15 IN THE CASE OF ASSOCIATED INDUSTRIAL DEVELOPMENT CO P LTD REPORTED IN 82 ITR 586 THE HONBLE SUPREME COURT HAS OBSERVED AS UNDER: 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 SHARE AND IT SHOULD IN NORMAL CIRCUMSTANCES BE IN A POSITION TO PRODUCE EV IDENCE FROM ITS RECORDS AS TO WHETHER IT HAS MAINTAINED ANY DISTINCTIO N BETWEEN THOSE SHARES WHICH ARE ITS STOCK-IN-TRADE AND THOSE WHICH ARE HELD BY WAY OF INVESTMENT. 15.1 IN THE CASE IN HAND THE ASSESSEE HAS TREATED T HE SHARES AS INVESTMENT IN THE BOOKS OF ACCOUNT AND VALUES THE SAME AT COST IN THE BALANCE SHEET AND NOT AT THE MARKET VALUE OR REALIZABLE VALUE. THERE FORE WHEN THE ASSESSEE IS MAINTAINING THE DISTINCTION BETWEEN T HE SHARES WHICH ARE HELD AS INVESTMENT FROM THE SHARES WHICH ARE HELD AS STOCK- IN-TRADE THEN KEEPING IN VIEW OF THE OTHER FACTS AND APPLYING THE PRINCIPLES AS DISCUSSED ABOVE WE HAVE NO HESITATION TO SAY THAT THE ASSESSEE HAS BE EN MAINTAINING TWO SEPARATE DISTINCT PORTFOLIOS RIGHT FROM THE BEGINNING AND THE REVENUE HAS FAILED TO BROUGHT OUT ANY MATERIAL TO SHOW THAT ANY C HANGE IN THE PRACTICE OF ACCOUNTING METHOD OF THE ASSESSEE AS WELL AS IN THE ACTIVITY OF THE ASSESSEE IN PURCHASE AND SHARES OF SHARERS UNDER TWO SEPARATE AND DISTINCT PORTFOLIO. IT IS AN ACCEPTED FACT AND PRACTICE THAT IN ORDER TO REDUCE THE RISK OF LOSS OF CAPITAL OR INCOME THE INVESTOR MAY TRY TO DIVERSIFY THE INVESTMENT; THEREFORE THERE MAY BE A CASE OF RESHUFFLING PORTFOLIOS BY SEL LING OF SOME SCRIPS AND BUYING OF SOME OTHER SCRIPS TO MITIGATE THE SCOPE OF LOSS OF CAPITAL OR INCOME. THEREFORE THE RESHUFFLING IN A SHORT PERIOD IS NOT NEC ESSARY BE TAKEN AS AN ACTIVITY OF TRADING WHEN THE INTENTION WAS TO REDUCE THE RISK OF LOSS OF CAPITAL. SHRI SATISHCHANDRA S DOSHI ITA NO.6496/MUM/2009(ASST YEAR 2004-05) ITA NO. 6604/MUM/2009(ASST YEAR 2006-07) ITA NO.151/MUM/2010(ASST YEAR 2004-05) ITA NO. 811/MUM/2009(ASST YEAR 2006-07) 8 15.2 THERE ARE VARIOUS DECISIONS OF THE TRIBUNAL ON TH IS POINT AND EACH HAS BEEN DECIDED ON THE FACTS OF EACH CASE. SOME OF THE DECISIONS ARE IN FAVOUR OF THE ASSESSEE WHERE SOME OTHER CASES ARE IN FAVOUR OF THE REVENUE. IN THE LATEST DECISION OF THE TRIBUNAL IN THE CASE OF SHRI MAHENDRA C SHAH VS ACIT IN ITA NO.6289/MUM/208 DATED 18 MAY 2011 HAS HELD IN P ARAS 14 TO 21 AS UNDER: 14 WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIO NS. THE QUESTION WHETHER THE SURPLUS ON THE SALE OF SHARES IS TO BE A SSESSED AS CAPITAL GAINS (SHORT TERM OR LONG TERM) AS CLAIMED BY THE AS SESSEE OR AS BUSINESS INCOME AS CLAIMED BY THE ASSESSING OFFICER IS A QUESTION OF FACT TO BE DECIDED ACCORDING TO THE CUMULATIVE EFFE CT OF SEVERAL FACTS AND CIRCUMSTANCES OF THE CASE. THE INTENTION OF THE ASSESSEE THE NATURE OF THE COMMODITY SOLD WHETHER THE ASSESSEE H AS USED HIS OWN FUNDS OR BORROWED FUNDS THE TREATMENT GIVEN TO THE A SSET IN THE BOOKS OF ACCOUNT THE CONSISTENT STAND TAKEN BY THE REVEN UE AUTHORITIES IN RESPECT OF THE SALE PROCEEDS OF THE ASSET IN THE EARLI ER YEARS THE FREQUENCY AND VOLUME OF THE TRANSACTIONS THE PERIO D OF HOLDING THE SHARES WHETHER THE ASSESSEE TOOK OR GAVE DELIVERY OF THE SHARES ARE ALL QUESTIONS WHICH HAVE TO BE CONSIDERED BEFORE A DECI SION IS TAKEN AS TO WHETHER THE ASSESSEE HELD THE SHARES AS CAPITAL ASSE TS (INVESTMENT) OR AS STOCK-IN-TRADE. IT IS ALSO RECOGNIZED BY THE REVE NUE THAT THE SAME ASSESSEE CAN HOLD THE SHARES IN TWO DIFFERENT PORTFO LIOS ONE PORTFOLIO FOR STOCK-IN-TRADE AND ANOTHER PORTFOLIO AS INVESTMENT . THIS POSITION HAS BEEN RECOGNIZED BY THE CBDT IN ITS CIRCULAR NO: 665 DATED 05.10.1992. 15 IN THE PRESENT CASE THE COMMODITY IN QUESTION IS SHARES WHICH ARE GENERALLY TRADED. BUT THAT IS NOT CONCLUSIVE B ECAUSE IT IS COMMON KNOWLEDGE THAT SHARES ARE ALSO HELD AS INVESTMENT PA RTICULARLY SHARES OF BLUE CHIP COMPANIES WHICH MAY YIELD CONSISTENT D IVIDEND AND MAY ALSO APPRECIATE IN VALUE OVER A PERIOD OF YEARS THE APPRECIATION BEING SIMILAR TO THE APPRECIATION IN THE VALUE OF OT HER INVESTMENTS SUCH AS FIXED DEPOSITS WITH BANKS REAL ESTATE GOLD AND OTHER PRECIOUS METALS ETC. IT IS A FACT THAT IN THE PRESENT CASE THE ASSESSEE HAS SHOWN THE SHARES AS INVESTMENT IN HIS BALANCE SHEETS. TH E RELEVANT DETAILS ARE GIVEN IN PARA 2.2(C) OF THE ORDER OF THE CIT(A) FOR TH E ASSESSMENT YEAR 2006-07. THE SAME IS SET OUT BELOW: - F.Y. ENDING ON NO.OFCOMPANIES NO. OF SHARES VALUE 31.03.2003 147 143323 98 22 424/- 31.03.2004 159 302243 1 69 96 403/- 31.03.2005 149 490237 3 24 59 391/- 31.03.2006 131 541377 3 32 72 973/- ONE ASPECT WHICH IS THROWN UP BY THE ABOVE TABLE IS THAT THOUGH THE INVESTMENT VALUE INCREASED SUBSTANTIALLY FROM YEAR T O YEAR THE NUMBER OF COMPANIES WHOSE SHARES WERE HELD BY THE ASSESSEE REMAINED MORE SHRI SATISHCHANDRA S DOSHI ITA NO.6496/MUM/2009(ASST YEAR 2004-05) ITA NO. 6604/MUM/2009(ASST YEAR 2006-07) ITA NO.151/MUM/2010(ASST YEAR 2004-05) ITA NO. 811/MUM/2009(ASST YEAR 2006-07) 9 OR LESS CONSTANT AND IN FACT AS ON 31.03.2006 IT AC TUALLY FELL TO 131 FROM THE EARLIER HIGH OF 159. IT APPEARS TO US THAT BASI CALLY THE NUMBER OF SHARES OF A PARTICULAR COMPANY PURCHASED BY THE ASSESS EE HAD INCREASED WHICH SUBSTANTIALLY CONTRIBUTED TO THE INC REASE IN THE VALUE OF THE INVESTMENT. THE ABOVE ANALYSIS PRIMA FACIE S HOWS THAT THE ASSESSEE IS BASICALLY AN INVESTOR MORE THAN A SHARE D EALER. THE STAND OF THE ASSESSEE HAS BEEN ACCEPTED BY THE REVENUE AUT HORITIES IN THE ASSESSMENT YEARS 2001-02 AND 2004-05 IN ASSESSMENT ORDERS PASSED UNDER SECTION 143(3) OF THE ACT. THE ASSESSMENT ORDE R FOR THE ASSESSMENT YEAR 2001-02 IS AT PAGE 34 35 OF THE P APER BOOK. IT IS SEEN THEREFROM THAT THE ASSESSING OFFICER HAS ACCEPTED T HE SHORT TERM CAPITAL LOSS AND THE LONG TERM CAPITAL GAINS SHOWN BY THE ASSESSEE ON SALE OF SHARES. THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2004-05 IS AT PAGES 61 & 62 OF THE PAPER BOOK. IN THIS YEAR AL SO THE SHORT TERM CAPITAL GAINS OF RS.13 94 013/- HAS BEEN ACCEPTED B Y THE ASSESSING OFFICER. THERE IS ALSO NO DISPUTE THAT THE ASSESSEE HAS BEEN DECLARING THE COST OF THE SHARES AS INVESTMENT IN HIS BALANCE SHEETS IN ALL THE YEARS. 16. FOR THE ASSESSMENT YEAR 2005-06 THE ASSESSEE HA S FURNISHED THE DETAILS OF THE SALE OF SHARES FOR TWO PERIODS I.E. F ROM 01.04.2004 TO 30.09.2004 AND FROM 01.10.2004 TO 31.03.2005. IT IS SEEN THAT IN RESPECT OF THE FIRST PERIOD THE SHARES SOLD ARE THOSE OF BHARAT EARTH MOVERS LTD. BALAJI TELEFILM LTD. CENTURY TEXTILES INDIA LTD. CIPLA LTD. GAIL INDIA LTD. PENNAR ALUMINIUM CO.LTD. RELIANCE CAPITAL LTD. TAT A STEEL LTD. AND VISUAL SOFTWARE LTD. THE HOLDING PERIOD IN RESPECT OF THESE SHARES RANGES FROM 533 DAYS TO 3981 DAYS. THE DETAILS OF SA LE OF SHARES IN RESPECT OF THE SECOND PERIOD SHOW SHARES OF AVERY INDI A LTD. BALLARPUR INDUSTRIES LTD. COLGATE PALMOLIVE (INDIA) LTD. HD FC BANK LTD. ICICI BANK LTD. LARSEN & TOUBRO LTD. CEAT LTD. TATA STE EL VOLTAS LTD. THE HOLDING PERIOD RANGES FROM 387 DAYS TO 9016 DAYS. IT IS SEEN THUS THAT THE ASSESSEE HAS HELD THE SHARES FOR QUITE A LONG PE RIOD. FOR EXAMPLE THE SHARES OF GREAVES COTTON LTD. WERE HELD FOR ALMOST 27 YEARS (9016 DAYS). THE SHARES OF AVERY INDIA LTD. WERE HELD FOR 7493 DAYS. THE SHARES OF PCS INDUSTRIES LTD. WERE HELD FOR 5674 DAYS. MANY OF THE SHARES WERE HELD FOR 3000 TO 4000 DAYS (9 YEARS TO 12 YEARS). SIMILAR DETAILS HAVE BEEN FILED FOR THE ASSESSMENT YEAR 200 6-07 ALSO. FOR THIS YEAR IN RESPECT OF SUBSTANTIAL NUMBER OF SALE OF SHARE S THE HOLDING PERIOD WAS MORE THAN ONE MONTH AND IN RESPECT OF SHA RES WHICH WERE HELD FOR LESS THAN A PERIOD OF TWELVE MONTHS THE S URPLUS WAS SHOWN AS SHORT TERM CAPITAL GAINS. IN RESPECT OF THE SURPLUS SHOWN AS LONG TERM CAPITAL GAINS THE PERIOD OF HOLDING IN ALL THE SHA RE TRANSACTIONS WAS SEVERAL YEARS. IT IS SIGNIFICANT THAT THE REVENUE HAS NOT FILED ANY APPEAL AGAINST THE FINDING OF THE CIT(A) THAT THE LONG TER M CAPITAL GAINS DECLARED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2006 -07 SHOULD BE ASSESSED AS SUCH AND NOT UNDER THE HEAD BUSINESS. 17. IT IS FURTHER SEEN THAT EVEN IN RESPECT OF THE AS SESSMENT YEAR 2007-08 IN WHICH YEAR AN ASSESSMENT WAS COMPLETED U NDER SECTION SHRI SATISHCHANDRA S DOSHI ITA NO.6496/MUM/2009(ASST YEAR 2004-05) ITA NO. 6604/MUM/2009(ASST YEAR 2006-07) ITA NO.151/MUM/2010(ASST YEAR 2004-05) ITA NO. 811/MUM/2009(ASST YEAR 2006-07) 10 143(3) OF THE ACT BY ORDER DATED 13.11.2009 THE ASS ESSING OFFICER HAS ACCEPTED THE SHORT TERM CAPITAL LOSS OF RS.69 43 82 1/- ON SALE OF THE SHARES AND THE SAME HAS NOT BEEN CONSIDERED AS BUSINE SS. 18. IT WOULD THUS APPEAR THAT PRIMA-FACIE THERE IS EN OUGH EVIDENCE TO SHOW THAT THE ASSESSEE IS AN INVESTOR IN SHARES AN D THEREFORE THE SURPLUS ARISING ON THE SALE OF SHARES SHOULD BE ASSESS ED AS SHORT TERM OR LONG TERM CAPITAL GAINS DEPENDING ON THE PERIOD OF HOLDING AND NOT AS BUSINESS INCOME. 19. BUT THEN THE CONTENTION OF THE DEPARTMENT IS TH AT THE ASSESSEE IS ALSO CARRYING ON F & O TRANSACTIONS AS SPECULATION B USINESS IN SHARES AND THAT THE INVESTMENT IN F & O TRANSACTION AS PER THE BALANCE SHEET AS ON 31.03.2005 IS RS.1 03 01 657/- AS AGAINST TH E INVESTMENT IN THE SHARES OF RS.3 24 59 391/-. THE POINT MADE IS THAT A LMOST 1/4 TH OF THE TOTAL INVESTMENT OF THE ASSESSEE IS IN SPECULATION AND F & O BUSINESS AND WITH THIS KIND OF BACKGROUND IT WOULD BE DIFFIC ULT TO BELIEVE THAT THE ASSESSEE CAN ALSO BE TREATED AS INVESTOR IN SHA RES. WE FIND IT DIFFICULT TO ACCEPT THE CONTENTION BECAUSE THE CIRCU LAR ISSUED BY THE CBDT REFERRED TO SUPRA HAS ITSELF RECOGNIZED THAT A PERSON CAN HAVE TWO PORTFOLIOS ONE FOR INVESTMENT AND THE OTHER AS STOCK-IN-TRADE. THE HONBLE BOMBAY HIGH COURT HAS ALSO ACCEPTED THIS PO SITION IN ITS JUDGEMENT IN THE CASE OF CIT VS. GOPAL PUROHIT (34 DTR 52) DELIVERED ON 6 TH JANUARY 2010. IT IS THEN POINTED OUT THAT THE ASS ESSEE HAS BORROWED FROM INDIA BULLS FOR THE PURPOSE OF BUYING SH ARES AND THIS IS A STRONG INDICATION THAT THE ASSESSEE INTENDED TO DO B USINESS IN SHARES AND NOT MERELY INVEST IN THEM. THE LEARNED COUNSEL F OR THE ASSESSEE HAS DRAWN OUR ATTENTION TO AN ORDER OF THE PUNE BENC H OF THE TRIBUNAL IN THE CASE OF S.BALAN @ SHANMUGAM BALKRISHNAN CHETT IAR VS. DCIT. (2009) 120 ITD 469 TO SUBMIT THAT THERE IS NO THU MB RULE THAT A PERSON CANNOT BORROW MONEY FOR THE PURPOSE OF MAKING INVESTME NT. WE HAVE EXAMINED THE POSITION WITH REFERENCE TO THE ORDER OF THE PUNE BENCH TO WHICH ONE OF US (THE ACCOUNTANT MEMBER) WAS PARTY . IN THIS CASE THE ASSESSEE HAD BORROWED MONIES FOR ACQUIRING SHARES . THE SURPLUS ON THE SALE OF SHARES WAS DECLARED UNDER THE HEAD CAPIT AL GAINS AND FOR THE PURPOSE OF COMPUTING THE GAINS THE INTEREST COST WAS ALSO CAPITALIZED AND REDUCED FROM THE SALE PRICE. THE INT EREST HAS NEVER BEEN CLAIMED AS REVENUE DEDUCTION. ON THESE FACTS I T WAS HELD THAT THERE WAS NO RULE THAT INTEREST COST CANNOT BE CAPITA LIZED AND ESPECIALLY ON THE FACTS OF THE CASE OF THE ASSESSEE BEFORE THE PUNE BENCH IT WAS HELD THAT THE RIGHT COURSE WOULD BE TO CAPITALIZE THE INTEREST COST AND DEDUCT THE WHOLE COST FROM THE SAL E PRICE WHILE COMPUTING THE CAPITAL GAINS. IT WAS OBSERVED THAT T HE INTEREST COST CANNOT BE SEGREGATED FROM THE COST OF ACQUISITION A ND FOR THIS PURPOSE RELIANCE WAS PLACED ON THE JUDGEMENT OF THE DELHI HI GH COURT IN CIT VS. MITHLESH KUMARI (1973) 92 ITR 9 WHERE IT WAS HE LD THAT INTEREST PAID BY THE ASSESSEE ON MONIES BORROWED FOR THE PURCHASE OF AN OPEN PLOT OF LAND WOULD FORM PART OF THE ACTUAL COST OF THE ASS ESSEE FOR THE PURPOSE OF DETERMINING THE CAPITAL GAINS DERIVED FRO M THE SALE OF THE SHRI SATISHCHANDRA S DOSHI ITA NO.6496/MUM/2009(ASST YEAR 2004-05) ITA NO. 6604/MUM/2009(ASST YEAR 2006-07) ITA NO.151/MUM/2010(ASST YEAR 2004-05) ITA NO. 811/MUM/2009(ASST YEAR 2006-07) 11 PLOT. THIS DECISION CERTAINLY LENDS SUPPORT TO THE CONTENTION OF THE ASSESSEE BEFORE US. EVEN IN THE PRESENT CASE THE DE PARTMENT HAS NO OBJECTION TO THE CAPITALIZATION OF THE INTEREST. TH E ALTERNATIVE SUBMISSION OF THE ASSESSEE HOWEVER WAS THAT IN ANY C ASE THE BALANCE IN HIS CAPITAL ACCOUNT AS ON 31.03.2005 WAS RS.4 19 60 788/- WHICH IS MORE THAN THE INVESTMENT IN THE SHARES AS ON THAT DAT E WHICH STOOD AT RS.3 24 59 391/- AND THEREFORE IT CAN BE PRESUMED TH E BORROWED MONIES WERE UTILIZED ONLY FOR THE PURPOSE OF CARRYING O N THE F & O BUSINESS. IN FACT THIS CONTENTION HAS BEEN ACCEPTE D BY THE CIT(A) IN HIS ORDER FOR THE ASSESSMENT YEAR 2006-07. REFERENCE MA Y BE MADE IN THIS CONNECTION TO PARA 2.3(I) OF THE ORDER OF THE CI T(A) FOR THE ASSESSMENT YEAR 2006-07. IN THAT YEAR THE ASSESSEE HA D PAID INTEREST OF RS.15.73 LAKHS AND THAT WAS PUT AS ONE OF THE POIN TS AGAINST THE ASSESSEES CONTENTION THAT HE WAS AN INVESTOR IN TH E SHARES. THE CIT(A) HELD THAT THE ASSESSEE S OWN CAPITAL WAS RS.5.15 C RORES IN THAT YEAR OUT OF WHICH THE INVESTMENT OF RS.3.32 CRORES IN SHARES CO ULD HAVE COME AND THUS IT CANNOT BE SAID THAT THE ASSESSEE WAS DE PENDING TOTALLY ON BORROWED FUNDS. IN THE LIGHT OF THIS FINDING ALSO I T CANNOT BE SAID THAT THE FACT THAT THE ASSESSEE PAID INTEREST ON BORROWI NGS SHOULD BE HELD AGAINST HIM PARTICULARLY WHEN THERE ARE OTHER PREDO MINATING FEATURES IN THE CASE WHICH GIVE CLEAR IMPRESSION THAT THE ASSE SSEE INTENDED ONLY TO INVEST IN SHARES AND NOT HOLD THEM AS STOCK-IN-T RADE. 20. IT THUS APPEARS TO US THAT THE CIT(A) TOOK AN I NCORRECT VIEW OF THE MATTER IN THE ASSESSMENT YEAR 2005-06 AND THAT THE CIT(A) WHO DEALT WITH THE APPEAL FOR THE ASSESSMENT YEAR 2006-07 HAS TAKEN THE CORRECT VIEW OF THE MATTER AND APPLIED THE APPROPRIA TE PRINCIPLES CORRECTLY IN HOLDING THAT THE ASSESSEE WAS AN INVES TOR IN SHARES. 21. FOR THE ABOVE REASONS WE ALLOW THE FIRST GROUND TAKEN BY THE ASSESSEE IN HIS APPEAL. THE GROUNDS TAKEN BY THE DEP ARTMENT IN ITS APPEAL FOR THE ASSESSMENT YEAR 2006-07 ARE REJECTED. 15.3 IN THE ABOVE SAID CASE THE TRIBUNAL OBSERVED THAT THE INVESTMENT VALUE INCREASED SUBSTANTIALLY FROM YEAR TO YEAR. THE NU MBER OF COMPANIES WHOSE SHARES WERE HELD BY THE ASSESSEE REMAINED MORE OR LESS CONSTANT WHICH PRIMA FACIE SHOW THAT THE ASSESSEE IS BASICALL Y AN INVESTOR MORE THAN A SHARE DEALER. IN THE CASE IN HAND ALSO THE INVESTMEN T VALUE HAS INCREASED SUBSTANTIALLY FROM YEAR TO YEAR BUT THE NUMBER OF C OMPANIES REMAIN ALMOST THE SAME. AS WE HAVE ALREADY DISCUSSED IN THE FOREG OING PARA THAT IN THE TOP TEN SCRIPS THE INVESTMENT OF THE ASSESSEE HAS BEEN INCREASING FROM YEAR TO YEAR AND GOES UPTO 87% TO THE TOTAL INVESTMENT FROM 45% IN THE ASSESSMENT YEAR 2000-01. THE VALUE OF THE INVEST MENT ALSO INCREASED FROM RS. 81 59 140/- IN THE YEAR 2000-01 TO RS. 1 66 32 000/- IN THE ASSESSMENT YEAR 2006-07. THEREFORE HAVING REGARD TO THE FACTS AND C IRCUMSTANCES OF THE CASE AND APPLYING THE VARIOUS PRINCIPLES AND GUIDELINES LA ID DOWN BY THE HONBLE SUPREME COURT THE SURPLUS OF SALE AND PURCHASE OF TH E SHARES HELD BY THE ASSESSEE AS INVESTMENT IN THE BOOKS OF ACCOUNT CANN OT BE TREATED AS SHRI SATISHCHANDRA S DOSHI ITA NO.6496/MUM/2009(ASST YEAR 2004-05) ITA NO. 6604/MUM/2009(ASST YEAR 2006-07) ITA NO.151/MUM/2010(ASST YEAR 2004-05) ITA NO. 811/MUM/2009(ASST YEAR 2006-07) 12 BUSINESS INCOME. EVEN OTHERWISE WHEN IN THE IM MEDIATE PRECEDING YEAR RIGHT FROM ASSESSMENT YEAR 1999-00 TO ASSESSMENT YEAR 2 002-03 AND SUBSEQUENT YEAR 2007-08 THE CLAIM OF THE ASSESSEE REGARDING CAPITAL GAIN AND INVESTMENT SHOWN UNDER THE HEAD INVESTMENT IN THE BALANCE SHEET HAS BEEN ACCEPTED BY THE REVENUE AND WHEN THERE IS NO SUBSTANTIAL CHANGE IN THE ASSESSMENT YEAR UNDER CONSIDERATION WITH RESPECT TO THE TREATMENT OF THE SHARES BY THE ASSESSEE AND THE PATT ERN OF THE PURCHASE AND SALE AS WELL AS AVAILABILITY OF ASSESSES OWN FUNDS THEN THERE SHOULD BE UNITY IN THE TREATMENT AND CONSISTENCY IN THE SAME FACT AND C IRCUMSTANCES AND THE ASSESSING OFFICER CANNOT TREAT THE SAME INCOME UNDE R DIFFERENT CHARACTER AND HAD ONLY BECAUSE OF CHANGE IN THE PROVISION O F INCOME TAX ACT AND ALLOWED DIFFERENTIAL TAX ON THE CAPITAL GAIN IN COMP ARISON TO BUSINESS INCOME. THE DEPARTMENT CANNOT BE ALLOWED TO CHANGE TREATMEN T TO BE GIVEN TO THE SURPLUS OR LOSS OF SALES OF THE SHARES FROM SHORT TERM C APITAL GAIN TO PROFIT OR GAIN OF BUSINESS OR PROFESSION WHEN THERE IS CONSISTE NCY IN FACT AND CIRCUMSTANCES RELATING TO THE TRANSACTION. THE PRINCIP LE OF RES JUDICATA IS NOT ATTRACTED SINCE EACH ASSESSMENT YEAR IS SEPARATE UNI T IN ITSELF; HOWEVER WHEN THE FACTS AND CIRCUMSTANCES ARE IDENTICAL THEN UNIFORMITY IN TREATMENT AND CONSISTENCY HAS TO BE MAINTAINED. 15.4 SIMILAR VIEW WAS TAKEN BY THE TRIBUNAL IN THE C ASE OF GOPAL PUROHIT REPORTED IN 29 SOT 117 WHICH IS IN CONFORMITY WITH TH E DECISION OF THE HONBLE BOMBAY HIGH COURT REPORTED IN 228 /CTR 582 WHEREIN THE HONBLE HIGH COURT HAS OBSERVED IN PARAS 2 & 3 AS UNDER: 2. THE TRIBUNAL HAS ENTERED A PURE FINDING OF FACT TH AT THE ASSESSEE WAS ENGAGED IN TWO DIFFERENT TYPES OF TRANSACTIONS. THE FIRST SET OF TRANSACTIONS INVOLVED INVESTMENT IN SHARES. THE SECO ND SET OF TRANSACTIONS INVOLVED DEALING IN SHARES FOR THE PURPO SES OF BUSINESS (DESCRIBED IN PARA 8.3 OF THE JUDGMENT OF THE TRIBUNAL AS TRANSACTIONS PURELY OF JOBBING WITHOUT DELIVERY). THE TRIBUNAL HAS CORRECTLY APPLIED THE PRINCIPLE OF LAW IN ACCEPTING THE POSITION THAT IT IS OPEN TO AN ASSESSEE TO MAINTAIN TWO SEPARATE PORTFOLIOS ONE RE LATING TO INVESTMENT IN SHARES AND ANOTHER RELATING TO BUSINES S ACTIVITIES INVOLVING DEALING IN SHARES. THE TRIBUNAL HELD THAT THE DELIVE RY BASED TRANSACTIONS IN THE PRESENT CASE SHOULD BE TREATED AS THOSE IN T HE NATURE OF INVESTMENT TRANSACTIONS AND THE PROFIT RECEIVED THEREF ROM SHOULD BE TREATED EITHER AS SHORT-TERM OR AS THE CASE MAY BE LONG-TERM CAPITAL GAIN DEPENDING UPON THE PERIOD OF THE HOLDING. A FI NDING OF FACT HAS BEEN ARRIVED AT BY THE TRIBUNAL AS REGARDS THE EXISTENC E OF TWO DISTINCT TYPES OF TRANSACTIONS NAMELY THOSE BY WAY OF INVEST MENT ON ONE HAND AND THOSE FOR THE PURPOSES OF BUSINESS ON THE OTHER H AND. QUESTION (A) ABOVE DOES NOT RAISE ANY SUBSTANTIAL QUESTION OF LA W. 3. INSOFAR AS QUESTION (B) IS CONCERNED THE TRIBUNAL HAS OBSERVED IN PARA 8.1 OF ITS JUDGMENT THAT THE ASSESSEE HAS FOLLO WED A CONSISTENT PRACTICE IN REGARD TO THE NATURE OF THE ACTIVITIES TH E MANNER OF SHRI SATISHCHANDRA S DOSHI ITA NO.6496/MUM/2009(ASST YEAR 2004-05) ITA NO. 6604/MUM/2009(ASST YEAR 2006-07) ITA NO.151/MUM/2010(ASST YEAR 2004-05) ITA NO. 811/MUM/2009(ASST YEAR 2006-07) 13 KEEPING RECORDS AND THE PRESENTATION OF SHARES AS INVE STMENT AT THE END OF THE YEAR IN ALL THE YEARS. THE REVENUE SUBM ITTED THAT A DIFFERENT VIEW SHOULD BE TAKEN FOR THE YEAR UNDER CONSIDERATION SINCE THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE TO ASSESS MENT PROCEEDINGS. THE TRIBUNAL CORRECTLY ACCEPTED THE POSITION THAT TH E PRINCIPLE OF RES JUDICATA IS NOT ATTRACTED SINCE EACH ASSESSMENT YEA R IS SEPARATE IN ITSELF. THE TRIBUNAL HELD THAT THERE OUGHT TO BE UNI FORMITY IN TREATMENT AND CONSISTENCY WHEN THE FACTS AND CIRCUMSTANCES ARE IDENTICAL PARTICULARLY IN THE CASE OF THE ASSESSEE. THIS APPRO ACH OF THE TRIBUNAL CANNOT BE FAULTED. THE REVENUE DID NOT FURNISH ANY J USTIFICATION FOR ADOPTING A DIVERGENT APPROACH FOR THE ASSESSMENT YEAR IN QUESTION. QUESTION (B) THEREFORE DOES NOT ALSO RAISE ANY SUBS TANTIAL QUESTION. 16 IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CA SE AND DECISIONS OF THE TRIBUNAL AS WELL AS THE JURISDICTIONAL HIGH COURT WE HOLD THAT THE INCOME ARISING FROM PURCHASE AND SALE OF SHARE HELD BY THE ASSESSEE AS INVESTMENT CANNOT BE TREATED AS BUSINESS INCOME. 7 AS FAR AS THE DECISION RELIED UPON BY THE LD DR I S CONCERNED THE TRIBUNAL IN THE IMPUGNED ORDER HAS TAKEN A VIEW THAT EACH CASE HAS TO BE DECIDED BASED ON THE PARTICULAR FACTS OF THE SAID CASE. THEREFORE THERE CANNOT BE ANY PRECEDENT ON THE POINT OF NATURE OF TRANSACTION WITH REGARD TO P URCHASE AND SALE OF SHARES AND SECURITIES. WE FURTHER NOTE THAT WHILE DECIDING TH E CASE OF THE ASSESSEES SON THE TRIBUNAL HAS ALREADY TAKEN INTO CONSIDERATION THE V ARIOUS DECISIONS RELIED UPON BY THE LD DR AS WELL AS THE LD AR BUT EXCEPT ONE ASPEC T THAT THE ASSESSEE CAN HAVE TWO PORTFOLIOS SIMULTANEOUSLY BEING AN INVESTOR AND A TRADER IN SHARES AS HELD IN THE CASE OF GOPAL PUROHIT BY THE HONBLE JURISDICTIONA L HIGH COURT. 7.1 AS FAR AS THE EXPENDITURE WHICH CANNOT BE CLAIM ED AGAINST THE CAPITAL GAINS AS CONTENDED BY THE LD DR IS CONCERNED IT IS TO BE NOTED THAT MERELY BECAUSE THE EXPENDITURE WHICH IS NOT ALLOWABLE AGAINST THE CAPI TAL GAIN WILL NOT CHANGE THE NATURE OF TRANSACTION AND INCOME. FURTHER WHEN THE ASSESSEE IS ADMITTEDLY IN THE SHRI SATISHCHANDRA S DOSHI ITA NO.6496/MUM/2009(ASST YEAR 2004-05) ITA NO. 6604/MUM/2009(ASST YEAR 2006-07) ITA NO.151/MUM/2010(ASST YEAR 2004-05) ITA NO. 811/MUM/2009(ASST YEAR 2006-07) 14 BUSINESS OF SHARE TRADING THEN THE SAID EXPENDITUR E MAY BE RELATED TO THE TRADING ACTIVITY AND NOT TO THE INVESTMENT. 7.2 THEREFORE IN VIEW OF THE DETAILED ORDER OF THE TRIBUNAL IN THE CASE OF THE SON OF THE ASSESSEE (SUPRA) WE DECIDE THIS ISSUE IN FA VOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 8 THE SECOND ISSUE RAISED BY THE ASSESSEE IN THESE APPEALS REGARDING CLAIM OF DEDUCTION U/S 54F. 8.1 WE HAVE HEARD THE LD AR OF THE ASSESSEE AS WELL AS THE LD DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. SINCE THE ASSESSIN G OFFICER HAS TREATED THE ENTIRE INCOME AS BUSINESS INCOME; THEREFORE THE ASSESSEE S CLAIM U/S 54F IS DISALLOWED AT THE THRESHOLD WITHOUT EXAMINING THE SAME ON MERIT. IN VIEW OF OUR FINDING ON THE ISSUE OF CAPITAL GAIN WE REMIT THIS ISSUE TO THE R ECORD OF THE ASSESSING OFFICER FOR DECIDING THE CLAIM OF SEC. 54F AS PER LAW. 9 NEXT ISSUE RAISED BY THE ASSESSEE IS CARRY FORWAR D OF SHORT TERM CAPITAL LOSS TO BE SET OFF AGAINST THE CURRENT SHORT TERM CAPITAL G AINS. 9.1 WE HAVE HEARD THE LD AR OF THE ASSESSEE AS WELL AS THE LD DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THIS ISSUE IS CONSEQUENTIAL TO THE ISSUE OF CAPITAL GAINS. SINCE WE HAVE ALLOWED THE ASSESSE ES CLAIM OF SHORT TERM CAPITAL GAINS; THEREFORE THE CLAIM OF SETTING OFF OF SHORT TERM CAPITAL LOSS AGAINST SHORT TERM CAPITAL GAINS IS CONSEQUENTIAL AND ACCORDINGLY WE DIRECT THE ASSESSING OFFICER TO CONSIDER AND DECIDE THE SAME AS PER LAW. SHRI SATISHCHANDRA S DOSHI ITA NO.6496/MUM/2009(ASST YEAR 2004-05) ITA NO. 6604/MUM/2009(ASST YEAR 2006-07) ITA NO.151/MUM/2010(ASST YEAR 2004-05) ITA NO. 811/MUM/2009(ASST YEAR 2006-07) 15 10 IN THE RESULT THE APPEALS OF THE ASSESSEE ARE P ARTLY ALLOWED WHEREAS THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON THIS 30 TH DAY OF MAR 2012 SD/ SD/ ( RAJENDRA ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 30 TH MAR 2012 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR ITAT MUMBAI