IN INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES , MUMBAI Before Shri Mahavir Singh, JM and Shri Ramit Kochar, AM ITA No.5219/Mum/2014 : Asst.Year 2010-2011 Asstt.Commissioner of Income- Shri Ajay V.Agarwal tax 110 Key Tuo Industrial Estate Circle 24(1) Kondivita Lane, Near MIDC Vs. Mumbai. Andheri (East), Mumbai 400 059. PAN : AAAPA7841D. (Appellant) ( Respondent) Appellant by : Shri A.Ramachandran Respondent by : Shri Ayan Saldanha Date of Hearing : 05.10.2016 Date of Pronouncement : 05.10.2016 O R D E R Per Mahavir Singh, JM : This appeal by Revenue arising out of order of Commissioner of Income- tax (Appeals)-34, Mumbai in appeal No.CIT(A)-34/IT-35/13-14 dated 30.05.2014. assessment was framed by ACIT, Circle 24(1), Mumbai for assessment year 2010-2011 vide his order dated 20.03.2013 u/s 143(3) of Income-tax Act, 1961 (hereinafter Act ). 2. only issue in this appeal of Revenue is against order of CIT(A) in deleting addition, made by A.O. by treating short term capital gain declared by assessee as business income, ignoring that transaction of purchase and sale of shares were made on regular basis with ultimate motive of quick profit. 3. Briefly stated facts are that assessee during year under consideration has declared short term capital gain on sale of shares amounting to Rs.1,69,04,808. assessee has declared purchase cost of shares at Rs.9,65,13,991 as against sale cost of Rs.11,34,18,796. A.O. noted that assessee traded 2 ITA No.5219/Mum/2014. Shri Ajay V.Agarwal. total number of scrip s at 2,99,952, in which more than 30 companies were involved. A.O. narrated share holding period and short term capital gain earned by assessee as under:- Share holding period STCG 0-30 (70,956) 31-60 28,98,187 61-90 18,27,870 91-180 42,34,124 181-364 80,15,583 ---------------- 1,69,04,808 ========== 3.1 According to A.O. volume of transaction is very high and holding period is very less in most of transactions ranging between 0 and 180 days. A.O. also noted that major income derived by assessee is from dealing in shares as assessee has earned long term capital gain of Rs.19,08,553 and short term capital gain of Rs.1,69,04,808. According to A.O. assessee is engaged in organized activity of share trading and intention of assessee is to earn quick profit, hence he came to conclusion that this is business / trading activity. Accordingly, he treated income from sale of shares as business income. Aggrieved, assessee preferred appeal before CIT(A). CIT(A) after considering facts in entirety, allowed claim of assessee. Aggrieved, Revenue came in second appeal before Tribunal. 4. We have heard rival contentions and gone through facts and circumstances of case. We find that assessee is whole time Director in M/s.Donear Industries Limited, listed company, engaged in business of manufacture of fabric for suitings and shirtings. assessee is regular investor and invested in shares to hold them as investment and to earn dividend / capital appreciation. Admitted fact is that assessee earned long term capital gain of Rs.19,08,553 during relevant year and also earned short term capital gain of Rs.1,69,04,808. We find that Assessing Officer was of view that assessee is engaged in share trading in large volume and frequency of share transaction is also there, and 3 ITA No.5219/Mum/2014. Shri Ajay V.Agarwal. hence, he treated transactions as business transactions, which are less than 180 days amounted to Rs.89.60 lakh. We find from facts of case that assessee is Director in M/s.Donear Industries Limited and getting remuneration of Rs.9,00,000. He is not engaged in any share broking business and there is no F&O transaction undertaken by him. From facts of case, we also find that assessee at time of purchase was to earn dividend and his intention was very clear. assessee has earned considerable dividend as well as capital appreciation in form of long term capital gain or short term capital gain in past years as under:- Assessment Dividend LTCG STCG Any interest Year paid / payable 2004-05 21,51,974 7,70,298 5,35,666 No 2005-06 22,27,530 12,89,219 5,56,480 No 2006-07 35,15,103 1,32,11,270 28,002 No 2007-08 97,38,734 18,31,70,528 943 No 2008-09 59,13,008 4,47,13,529 28,93,497 No 2009-10 26,67,930 (8,93,981) (1,88,13,233) No 2010-11 25,89,150 26,27,272 1,69,04,808 No 4.1 From above chart, we find that assessee has earned mainly long term capital gain, which is far in excess of short term capital gain cumulatively. From pattern of holding period, it is clear that intention of assessee at time of purchase of share was to hold shares for capital appreciation. One more fact pointed out by learned Counsel for assessee out of short term capital gain of Rs.89 lakh, which is less than 180 days of holding period, treated by A.O. as business income, amount of Rs.32.94 lakh pertains to those scrip s held by him prior to 31.3.2009 and short term capital gain of Rs.15.26 lakh has been earned on sale of scrips which earned long term capital gain. One more fact we noticed is that major short term capital gain was earned on sale of shares of Century Textile & Industries Limited, where average period of holding is more than 3 months and Godrej Industries Limited, where average holding period is more than 2 months amounting to approximately Rs.42 lakhs. It was informed by learned Counsel for assessee that in previous years and in future years, assessee has been consistently declaring profit from sale of shares as capital gains, which was un- challenged by Revenue. He referred to assessment year 2004-2005, wherein 4 ITA No.5219/Mum/2014. Shri Ajay V.Agarwal. Revenue accepted in scrutiny assessment, i.e., u/s 143(3) of Act, that assessee has earned short term capital gain and which was assessed as it is. For assessment year 2012-2013, Revenue accepted short term capital gain declared on sale of shares in scrutiny assessment u/s 143(3) of Act. It is fact that assessee is consistently disclosing these shares as investments in his books of account and assessee has been purchasing shares out of own funds and no loan is taken for purpose of making this investment in shares. learned Counsel for assessee relying on decision of Hon ble Bombay High Court in case of CIT v. Gopal Purohit [(2011) 336 ITR 287 (Bom.)], wherein it is held as under:- Held, dismissing appeal, (i) that it was open to assessee to maintain two separate portfolios, one relating to investment and another relating to business of dealing in shares, that finding of fact had been arrived at by Tribunal as regards two distinct types of transactions, namely, those by way of investment and those for purposes of business, and this warranted no interference. (ii) That there should be uniformity in treatment and consistency when facts and circumstances for different years were identical particularly in case of same assessee. (iii) That entries in books of account alone are not conclusive in determining nature of income. 4.2 In view of above facts and circumstances of case, we are of view that assessee has rightly declared profit arising out of sale and purchase of shares as short term capital gain and A.O. has wrongly treated same as business income. We find no infirmity in order of CIT(A) and hence same is confirmed. 5. In result, appeal of Revenue is dismissed. Order pronounced on this 05th day of October, 2016. Sd/- Sd/- (Ramit Kochar) (Mahavir Singh) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated : 05th October, 2016. Devdas* 5 ITA No.5219/Mum/2014. Shri Ajay V.Agarwal. Copy of Order forwarded to : 1. Appellant 2. Respondent. 3. CIT, Mumbai. 4. CIT(A) - 34, Mumbai 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, Mumbai Asstt.Commissioner of Income-tax Circle 24(1), Mumbai v. Ajay V.Agarwal