TaxTMI 
TaxTMI 
2019 (6) TMI 432
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....nd circumstances of the case and in law, the CIT(A) erred in confirming the actions of Dy. Commissioner of Income Tax, Range 24(1), Mumbai ("the Ld. AO") in treating the short-term capital gains amounting to Rs. 51,70,511 as business income on the alleged ground that the Appellant is engaged in the business of trading in shares by holding that the transactions carried out by the Appellant are voluminous and the period of holding is meagre. 2. He failed to appreciate and ought to have held that: a. The Appellant had maintained two separate portfolios for shares, one as investment and the other for the purpose of trading; b. In the earlier as well as future assessment years, the Ld. AO had consistently accepted the short-term capital gains arising on the sale of shares held as investment as shown by the Appellant. 3. The Appellant, therefore, prays that the Ld. AO be directed to treat the amount of Rs. 51,70,511 as short-term capital gains and not as a business income. GROUND II: DISALLOWANCE OF INTEREST EXPENSE U/S. 14A OF THE ACT R.W. RULE 8D OF THE INCOME-TAX RULES, 1962 ("THE RULES") AMOUNTING TO RS. 5,42,245: 1. On the facts ....
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....ss Income which was to be taxed at regular rates of tax. 3.3 The second addition stem from the fact that the assessee earned exempt income aggregating to Rs. 112.72 Lacs during impugned AY, which called for disallowance u/s 14A. The Ld. AO, applying Rule 8D, computed aggregate disallowance of Rs. 5.42 Lacs on account of indirect expenditure u/r 8D(2)(iii), being 0.5% of average investments. 4. Aggrieved, the assessee agitated the same without any success before Ld. first appellate authority vide impugned order dated 30/11/2016. The assessee agitated the stand of Ld. AO qua treatment of gains on shares by reiterating that similar claim has been accepted by the revenue in assessments framed u/s 143(3) for AYs 2007-08, 2008-09 & 2009-10. Even in AY 2013-14, income from shares was assessed as Capital Gains. Reliance was placed on certain judicial pronouncements and CBDT circulars issued on the subject from time to time to support the submissions. However, the same could not convince first appellate authority who observed that the assessee was involved in the activity of investments & finance as a business in his proprietary concern namely M/s Rupam Investment & Finance a....
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....which has been confirmed by Hon'ble Apex Court by way of dismissal of revenue's SLP on 15/11/2010. The perusal of assessee's personal Balance Sheet as placed on record would reveal that majority of the investments have been funded out of assessee's own capital. The assessee has earned dividend income of Rs. 34.45 Lacs during impugned AY. Another pertinent fact to be noted that the assessee has income from garment business to the tune of Rs. 47.30 Lacs which would prima-facie, establish that share trading was not the only activity carried out by the assessee during impugned AY. Apart from this, the assessee was also carrying on the business of finance & investment in another proprietorship concern during impugned AY. 6.3 It has been submitted by Ld. AR that the assessee is a conventional investor in shares & securities and the gains / loss on shares was always offered under the head Capital Gains only and the same has always been accepted by the revenue in all the earlier years. In particular, similar treatment given by the assessee to such income in AYs 2007-08, 2008-09, 2009-10 was accepted by the revenue in assessments framed u/s 143(3) and the gains / losses were assessed und....
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....niformly held that res judicata does not apply in matters pertaining to tax for different assessment years because res judicata applies to debar courts from entertaining issues on the same cause of action whereas the cause of action for each assessment year is distinct. The courts will generally adopt an earlier pronouncement of the law or a conclusion of fact unless there is a new ground urged or a material change in the factual position. The reason why courts have held parties to the opinion expressed in a decision in one assessment year to the same opinion in a subsequent year is not because of any principle of res judicata but because of the theory of precedent or the precedential value of the earlier pronouncement. Where facts and law in a subsequent assessment year are the same, no authority whether quasi judicial or judicial can generally be permitted to take a different view. This mandate is subject only to the usual gateways of distinguishing the earlier decision of where the earlier decision is per incuriam. However, these are fetters only on a coordinate Bench which, failing the possibility of availing of either of these gateways, may yet differ with the view ex....
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....l independent activity; (ii) Whether, the purchase is made solely with the intention of resale at a profit or for longterm appreciation and/or for earning dividends and interest. (iii) Whether scale of activity is substantial; (iv) Whether transaction were entered into continuously and regularly during the assessment year. (v) Whether purchases are made out of own funds or borrowings; (vi) The stated objects in the Memorandum and Articles of Association in the case of corporate assessee; (vii) Typical holding period for securities bought and sold; (viii) Ratio of sales to purchase and holding. (ix) The time devoted to the activity and the extent to which it is the means of livelihood. (x) The characterization of securities in the books of account and balance sheet as stock-intrade or investment. (xi) Whether the securities purchased or sold are listed or unlisted. (xii) Whether investment is in sister/related concerns or independent companies. (xiii) Whether transaction is by promoters of the company. (xiv) Total number of stock dealt in (xv) Whether money h....
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....tantial dividend income during the year. The average holding period is more than 100 days. Further, the long-term gains earned on similar activity has been accepted by the revenue as Capital Gains only. Moreover, latest CBDT Circular No.6/2016, which is clarificatory in nature, applies to listed securities and directs AO not to disturb the stand taken by assessee provided the same is applied consistently. Hence, we find that there could not be any straight jacket formula to distinguish the same and further there cannot be any single decisive factor to determine the same but an overall view has to be taken keeping in mind peculiar facts and circumstances of the case. Accordingly, after weighing all the factors as cited above, we find ourselves in agreement with the submissions of Ld. AR and therefore, inclined to hold that the impugned gains were rightly offered as Capital Gains. By reversing the stand of lower authorities, we allow this ground of appeal. Our view is fortified by the cited decision of Hon'ble Bombay High Court rendered in CIT V/s Gopal Purohit which has subsequently been followed in recent decision titled as Pr.CIT V/s Vikshit Engineering Ltd. [100 Taxmann.com 436 2....