TaxTMI 
TaxTMI 
2012 (1) TMI 264
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....sessee for assessment year 2006-07, are directed against the impugned order dated 19th August 2009, passed by the Commissioner (Appeals)-IV, Mumbai. Since the issues raised in all these appeals are mostly common, for the sake of convenience, these were heard together and are being disposed off by way of this consolidated order. 2. Brief facts of the case are that, the assessee, is an "Individual", and is working as director and full time employee of N.V.S. Brokerage Pvt. Ltd., and earns remuneration of ` 7.24 lakhs per annum. The assessee also derives income from dividend and interest income and also income from speculative transactions. Besides this, the assessee has also shown income from short term capital gain and long term capital gain. Earlier, the assessee was a full time employee of M./s. J.P. Morgan Stanly Ltd., i.e., prior to assessment year 2002-03. She was in employment for the last thirty years. Besides earning remuneration, she has been investing in shares and securities, bonds, mutual funds, etc., for more than thirty years, and this fact has been accepted by the Revenue. 3. For all the years under consideration, the Assessing Officer, after scrutiny of the materia....
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....s properly been treated by the A.O. as business income. 5.1 A salaried person and a businessman can also be an investor. The shares which have been held for more than one year may, therefore, be reasonably treated to be investment and accordingly the same should be treated as long term capital gain rather than business income." 8. Before us, the learned Counsel for the assessee filed a paper book duly paginated from 1 to 66. He, while reiterating the submissions made before the authorities below, submitted that the assessee is an investor and she had been showing dealings in shares as "Short Term Capital Gain" and "Long Term Capital Gain" in all the previous years and that the same has been accepted by the Department. He relied on the following decisions of the Tribunal:- ACIT v/s Naishadh V. Vachharajani, ITA no.6429/Mum./2009, order dated 25th February 2011; Hitesh Satishchandra Doshi Etemia v/s JCIT, ITA no.6497/Mum./2009 and others, order dated 15th June 2011; ACIT v/s Mr. Jagdish Master HUF, ITA no.3233/Mum./2009, order dated 18th May 2011; and Bharat Kunverji Kenia v/s ACIT, 130 TTJ (Mum.) (UO) 86. 9. The arguments of the learned Counsel for the assessee are....
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....ord. 13. Learned Departmental Representative submitted that the frequency of transactions, the turnover and the period of holding clearly point out to the fact that the assessee is carrying on trading in shares and not investment in shares. He relied on the order of the Assessing Officer and submitted that the same should be upheld. 14. Rival contentions heard. On a careful consideration of the facts and circumstances of the case and on a perusal of the papers on record, as well as the case laws cited before us, we find that the assessee has been assessed to tax for more than thirty years. She was employed with M/s. J.P. Morgan Stanly Ltd., in various capacities and from assessment year 2003- 04, she joined as a director with N.V.S. Brokerage Pvt. Ltd. A perusal of the period of holding of shares, sale of which was disclosed as long term capital gain by the assessee, discloses that the average period of holding has been as high as 7,074 in Gujarat Ambuja Cements, 2,728 days in the case of ITI Ltd., 2,933 days in the case of Reliance Industries Ltd., 4,207 days in the case of Ruchi Soya, 4,435 days in the case of Tata Chemicals Ltd., 2,171 days in the case of Silverline Industries....
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....y that income from sale of shares which are held by the assessee for more than one year, is to be assessed as income earned from long term capital gain. 16. Coming to the issue of short term capital gain, we find that the scripwise period of holding has not been examined by any of the authorities below. Conclusions have been drawn based on general proposition of law without examining the facts. Thus, on the issue of taxation of income earned on shares which was sold within a period of one year, we restore the issue to the file of the Assessing Officer for adjudication afresh in accordance with law. While doing so, we direct the Assessing Officer not to treat the shares held by the assessee for substantial period of time, before being sold, as trading in shares, for the reason that the assessee has been an investor and has maintained separate books of account for the last many years and the period of holding of certain shares indicate that they are investments.. The Assessing Officer has to be consistent in his approach. On an examination of the holding period of some of the shares which were sold within a period of one year, we find that the period of holding is as high as 326 day....
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....n view of the above discussion, though, we are, prima-facie, of the opinion that the assessee is an "Investor", we restore ground no.1, which is on the issue of treating short term capital gain earned by the assessee as business income, to the file of Assessing Officer for denovo adjudication in accordance with law. Thus, this ground is allowed for statistical purposes. 19. Ground no.1, in Revenue's appeal, which is on the issue of assessing long term capital gain as business income is hereby dismissed. 20. Coming to other ground no.2, raised by the assessee for assessment year 2004-05, it is on the issue of disallowance of ` 3,75,902, as bad debt incurred by the assessee, on account of bad delivery of shares. 21. The first appellate authority at Para-8.1 / Page-3, held as follows:- "8.1 The claim of bad debt amounting to ` 3,75,902, is on account of transaction with respect of bad delivery in case of 3,500 shares of Vakarangee Software Ltd. In the financial year 2000-01, so far as the case is concerned, it is a case in which share has been held for more than 1 year and hence may be treated to be investment of the appellant. The losses incurred on account of bad delivery is, t....
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....losses on derivative transactions as non-speculative loss by the first appellate authority. 35. After hearing rival contentions, we find that the issue is covered against the assessee and in favour of the Revenue by the decision of a Special Bench of the Tribunal in Shree Capital Services v/s ACIT, wherein it is held that clause (d) of section 43(5) of the Act cannot be held to be clarificatory and it applies only to assessment year 2006-07 and onwards. The Hon'ble Jurisdictional High Court in CIT v/s Bharat R. Ruia, in ITA no.1359 of 2010, judgment dated 18th April 2011, impliedly upheld the Special Bench decision. At Para-37, the argument that amendment by way of insertion of clause (d) to the proviso to section 43(5), is clarificatory and, hence, retrospective was rejected by the Hon'ble Court. In view of the above, we allow grounds no.2 to 5 of the Revenue. 36. In the result, Revenue's appeal is partly allowed. 37. We now take up Revenue's appeal in ITA no.5953/Mum./2009, for assessment year 2006-07. 38. The sole ground raised by the Revenue, reads as follows:- "On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that F&O /....