TaxTMI 
TaxTMI 
2019 (1) TMI 1636
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....f transactions which reflects modus operandi of assessee of share business as an adventure in the nature of trade. 2. The Ld CIT (A) has erred in not appreciation the fact that assessee has purchased shares of a very large amount of Rs. 12,02,54,365/- and sold the shares for Rs. 14,20,85,990/- . These figures themselves speak which is the prime activity and that is the dominant intention of the assessee. The magnitude of share transaction is on so higher side that it cannot be said that main activity of the assessee was of doctor's profession. 3. Appreciating the assessee's version that he is a leading eye surgeon having no time for carrying out share business and share business is not of his line, it may be mentioned that it is not necessary that a person should engage physically for carrying out such business that to when the assessee is having time for doing speculative business". 3. The grounds raised by the assessee are as under;- C.O. No.65/Ind/2012 (Assessment Year 2008-09) 01. On the facts and circumstances of the case and in law the Learned CIT- (A) appreciating the submissions made before him was fully justified in treating the addition of Rs. 1,18,57,282....
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....sary notice u/s 143(2) of the Act was duly served upon the assessee. During the course of assessment proceedings Ld. Assessing Officer in short 'Ld.AO') observe that the assessee apart from earning professional income by running M/s. Chaudhary Eye & Retina Research Centre has also earned substantial income from purchase and sale of equity shares which included Long term Capital Gain at Rs. 35,22,054/- and Short Term Capital Gain at Rs. 1,18,57,282/-. Ld. Assessing Officer was satisfied with the claim of long term capital gain of Rs. 35,22,054/-. The Ld. Assessing Officer examined in detail about the profit from purchase and sale of equity shares at Rs. 1,18,57,282/- by calling necessary details of the equity shares purchased and sold and financial ledger for the transactions carried out during the year. After going through submissions made by the assessee as well as facts available on record Ld. AO came to a conclusion that the alleged profit of Rs. 1,18,57,282/- is a profit from running of share business which is in an adventure in the nature of business and the assessee has wrongly claimed the benefit of lower tax rate by showing it has short term capital gain. Ld. Assessing Offi....
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....upporting following findings of Ld. Assessing Officer: "The submission of the assessee has been duly considered in reference to the - circular of the CBDT no. 4/2007, but not accepted because of the following reasons:- (i) The assessee is deriving income from the F & 0 as well as speculation share trading which are purely business income. The person who is in the Trading never can be an investor because by the pattern itself it is difficult to distinguish the Short Term Capital Gain and business trading in shares. (ii) The frequency of the transactions are also against the assessee. The sale value of the shares are in crores, the number of scrips are huge and by no stretch of imagination it can be said as "Investment". Therefore in totality of the facts and the circumstances the STCG shown of Rs. 1,18,57,2821- is treated as Business income from share trading. I am also satisfied that the assessee has submitted inaccurate particulars which attract penalty u/s271 (1)( c). Accordingly penalty u/s 271 (1 )(c ) is initiated. The above issue is also dealt by the Hon'ble ITAT, Mumbai in two recent cases and held as under :- (A) Sadhana Nabera vs. ACIT (ITAT Mumbai) dated 2....
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....ty in shares one can see that the assessee has invested in some 5 to 6 companies scrips which have been carried over from year to year in which there are no frequent or large number of transactions and these investments in shares can be considered as assessee's proper "investments"; (c) Purchase and sale of shares in short period indicates that the assessee purchased the shares with a motive to earn profit in short period; (d) The assessee borrowed funds to purchase shares; (e) The dividend received was meager; (iii) These facts indicate that the intention of the assessee was to gain profits by dealing in short term period only. Consequently, the income from sale of shares was assessable as "income from business" and not "short-term capital gains"; (8) Jayshree Pradip Shah vs ACIT C-25(2) I. T.A No. 360BIMuml07 (Assessment Year: 2004-05) dated 24th Feb. 2010 Keeping in mind, the above broad principles, we shall now examine the case of the assessee. The assessee during the previous year had entered into transactions of purchase of shares of about 200 companies totaling to Rs. 1,01,51,786/- and all those shares were sold for a value of Rs. 1, 10,45,798/-. The above tran....
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....tial. (g) The transactions were continuous and regular besides being systematic. (h) Borrowed funds had been used for purchase of shares Learned counsel for the assessee's contention that borrowed funds were used to buy immovable property remains unsubstantiated and the findings of the Assessing Officer to the contrary should therefore prevail. (i) Substantial time devoted by the assessee to the activity of purchase and sale. In fact, the only source of income in the profit and loss account is from purchase and sale of shares. (j) All the shares sold and purchased arc of listed companies. (k) Composition of the dividend income is meager, which goes to show that the assessee never locked for returns from investments. In the light of the above circumstances prevailing in the case of the assessee we are of the view that the conclusion of the revenue authorities that the income from sale of shares declared by the assessee as STCG is income from business is correct and calls for no interference. 9. Per contra Ld. Counsel for the assessee has made following written submissions: "02. Regarding short term/long term capital gain. Assessee made investment in shares and t....
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....Income Tax Vs. Gopal Purohit Income Tax Appeal No. 1121 0/2009 dated 06.01.2010. It is therefore submitted that the order of the CIT(A) be upheld and appeal of the Department be dismissed and cross objection of the assessee be allowed. He further submitted that On perusal of balance sheet filed by respondent from A. Y. 2002-03 to A.Y. 2011-12, you will appreciate the facts that the assessee is always making investments as under: i) Shares. and debentures. ii) Public Provident Fund. iii) Fixed Deposits. Financial Year Shares./ Debenture PPF Fixed Deposit 2001-02 75,94,928 2,21,860 16,68,920 2002-03 81 22637 322757 18,09,668 2003-04 74,75,564 4,19,888 -- 2004-05 1,91,63,008 5,27,212 1,63,92,724 2005-06 3,42,86,111 6,43,589 41,25,229 2006-07 4,66,25,677 7,66,009 -- 2007-08 4,02,19,282 8,97,290 2,58,81,088 2008-09 3,18,64,816 10,37,064 7,05,07,582 2009-10 3,27,45,371 11,90,869 7,54,71,050 2010-11 9,98,77,183 13,55,639 3,06,37,308 2011-12 9,91,15,979 15,65,801 3,03,19,554 Statement of Dividend, PPF interest, FUR Interest and Long Term & Short Term Gain & Long Term Short Term Gain F.Y Dividend Income PPF Interest F....
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....Y. 2001-02 to 2007-08 except in the A. Y. 2004-05 reopened the case u/s, 147 of IT Act. In all these previous years losses/income from purchase and sale of shares has been treated by the Department as capital loss/gain. The said issue has already been decided by the learned CIT(A) in the assessee's appeal no. IT-283/2009-10/40 dated 30.05.2011 in favour of the assessee. The department has been filed the appeal against the CIT(A) order for the A.Y. 2004-05 before ITAT Indore Bench, Indore which is pending for order. Moreover following points needs attention:- 1. The assessee is renowned Eye surgeon and all the time he is busy in his profession. He does not have any business at all. He has earned money in profession which he invest by way of fixed deposits in the banks and also purchased and sale of shares of various Indian Companies. ii. He does not have any shop/office for trading in shares. He does not deal in the purchase and sale of shares regularly. It would make no difference even if the transaction is a single, multiple or isolated. iii. He has not absorbed himself in the business of shares. He purchase and sale shares it and when advised by the experts and/or bro....
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....account for the year ending 31 st March, 2008 is on page 49. to 51 of paper book. The learned CIT(A) is justified holding that the income derived by the assessee from the share transactions is a short term capital gain. The ratios of this case are similarly with the appellant's case held by jurisdictional Hon'ble High Court in the case of CIT Vs. Shree Om Prakash Sur; (2012) 191TJ 326 (M.P.). Held - "that assessee invested to earn dividend - No funds were borrowed for making investment - Income is treated as short term capital gain"'. The ITAT Indore Bench, Indore applying the judgment of CIT Vs .Om Prakash Suri; (2012) 19 ITJ 326 (M.P) is In favour of assessee in the following cases:- (1) Commissioner of Income Tax Vs. Sanjay Soni (20.12) 20. IT J 454. (ii Shri Manish Karwa Vs. ACIT - 5(1), Indore I.T.A. No. 3o.711nd12,Qo.9 order dated 20.12.2013 (iii) Shri SushilKarwa Vs. ACIT - 5(1}, Indore. I.T.A. No. 3o.811nd/2Qo.9 order dated 20.12.20.3 (iv) Smt. Sudha Karwa Vs. ACIT - 5(1), Indore I.T.A. No. 3o.9/1nd/2o.o.9 order dated 20.12.2013 (v) Shri Vishnu Karwa Vs. ACIT - 5(1), Indore I.T.A. No. 31o./lnd/200.9 order dated 20.12.2013 (vi) Shri Subhashcha....
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....1,18,57,282/- has been rightly shown as short term capital gain. 12. It is an established fact that the issue relating to taxability of gain/loss from purchase/sale of equity shares is purely a matter of fact and the treatment of such gain/loss can be decided only on the basis of the facts of the particular assessee. Though the Ld. Counsel for the assessee has relied on many judgments but in our humble view the decision cannot be applied squrely on the facts of the assessee. Though the facts before the Hon'ble High Court of Bombay in the case of ITO vs. Gopal Purohit are similar to a considerable extent but the view cannot be applied on the facts of the assessee because it does not fulfill the rule of consistency. In the case of assessee in the preceding year there was meager income from purchase and sale of equity shares which considerably increased from year to year with the fact that the assessee also start share trading business as well as trading of future & options (F&O). For this very reason the rule of consistency cannot be applied. Even otherwise the case of assessee was never subject to scrutiny for examining this issue of purchase and sale of shares and it was only ....
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....ty. In the case of Escorts Ltd. 253934 equity shares were purchased and sold during the year on 52 occasions. In case of Fortis Health Care Ltd. 1,88,690 equity shares were purchased and sold scattered over on 31 transactions. 13. The above given facts have nowhere during the course of proceeding before the lower authorities as well as before us have been disputed by ld. counsel for the assessee. The picture which can be framed in the light of the above facts shows that though the assessee has not borrowed the money for investing into the business but apart from that all other basic feature of carrying on regular business have been performed by the assessee. It has nowhere been pleaded that the assessee has kept designated employee/portfolio manager to take care of investments. Therefore, all these huge number of transactions of regular purchase/sale of equity shares of various listed companies share trading transactions have been carried out by the assessee himself. The assessee has also earned income from future and option transactions of equity shares which itself infer that the assessee is into business of share trading. 14. Such issues of taxability of gain from equity share....
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....normally engaged in other business or profession make such investments to fetch some income without investing much time on trading such investments on regular basis. For this reason the investors invests the money in fixed deposits Public Provident funds as well as equity shares and other investments options. 18. But the situation in the case of assessee seems to be different because assessee is keeping continuous watch on the share market. He selects various scripts for regular purchase and sale and he is also engaged in the future and option market. Hundreds of transactions have been entered with the same brokers for purchase/sale. No separate demat account have been kept by the assessee relating to the alleged investment in equity shares and profit and sale from share trading and future and option. In these given facts it is hard to believe that such gain from such magnitude of transactions can be taxed under the head of short term capital gain. 19. Ld. AO was fair enough to give the benefit of exemption for the long term capital gain but as regards the alleged income of Rs. 1,18,57,282/-, we find merit in the finding of Ld. AO and are inclined to hold that the alleged income ....
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....: Bank/De-met charges 37,451 Cess on ST 4,224 Brokerage 2,66,205 Service Tax on brokerage 1,71,442 Transaction charges 46,159 Stamp charges 815 Turnover charges 970 Total 5,27,267 ii. The said expenses Rs. 5,27,267/- claimed against short-term capital gain on sale of shares. During the year under appeal short term sale proceeds of shares Rs. 12,41,10,593/- and long term sale proceeds of shares Rs, 1,79,75,397/-. Thus the total sale proceeds of Rs. 14,20,85,990/-. The short term sale proceeds 87.35% and long term sale proceeds 12.65°/0. The short term expenses Rs, 4,60,567 (527267 X 87.351100) and long term expenses Rs. 66,700 (527267 X 12.65/100) out of the said expenses Rs. 5,27,267. The expenses incurred Rs. 66,700 for long term capital gain which is already disallowed in the assessment order pertaining to LTCG claimed as exempted income. iii. Section 14A - Expenditure incurred in relation to income not includible in total income, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part. of the total income under this act. iv. The claim made by the appellant that no ....
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....out of dividend income of Rs, 4,37,354/- for which assessee has not incurred any expenditure direct or indirect in relation to dividend income the same may kindly be allow. Appeal of the Department be dismissed and cross objection of the assessee be allowed. 25. Per contra Ld. DR supported the order of the both lower authorities. 26. We have heard the rival contentions, perused the record placed before us. The issue raised by the assessee in this cross objection relates to disallowance u/s 14A of the Act at Rs. 2,15,542/-. As discernable from the records, the assessee has earned long term capital gain, dividend income and also business income from trading in shares and futures and option. The assessee has also shown short term capital gain from purchase and sale of listed equity share which have been held by us to be business income while deciding the issue raised by the revenue for the instant year under appeal. 27. As far as disallowance u/s 14A of the Act is concerned, we find that assessee has suo moto disallowed a sum of Rs. 66,700/- which is proportionately calculated to have been incurred for earning exempted income. In the finding given by the assessing officer in the as....