Income Tax Appeal v. Deputy Commissioner Of Income Tax-9(1) Mumbai

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.1281 OF 2016 Envision Investment & Finance P. Ltd.Now know as :Envision Investment Consultants P. Ltd. : Appellant.versusDeputy Commissioner of Income Tax-9(1)Mumbai : Respondent. WITH INCOME TAX APPEAL NO.1303 OF 2016 Envision Investment & Finance P. Ltd.Now know as :Envision Investment Consultants P. Ltd. : Appellant.versusAddl. Commissioner of Income Tax-9(1)Mumbai: Respondent. ................... Dr.K Shivram, Senior Counsel i/by Mr. Sameer G Dalal for the Appellant.Mr. Ashok Kotangle a/w Mr. Prabhakar Ranshur for the Respondent ................... CORAM : AKIL KURESHI & M.S.SANKLECHA, JJ. DATE : FEBRUARY 27, 2019. P.C.: 1These Appeals arise in common background and are filed by thesame assessee. They are being heard together and would be disposed of thiscommon order. For convenience we may refer to the facts arising in IncomeTax Appeal No.1281 of 2016 which concerns Assessment Year 2007-2008. 2These Appeals are filed by the Appellant – Assessee against theJudgment dated 01/01/2016 of the Income Tax Appellate Tribunal (in short“the Tribunal”), raising the following question for our consideration:- “Whether on the facts and in the circumstances of thecase, and in law, the Tribunal was justified in directingthe Respondent to treat the gain of Rs.20.91 croresarising on sale of share as Business income as againstShort Term Capital Gain declared by the Appellant.” 3The issue arises out of the Judgment of the Tribunal concerningthe question of treatment to the gain earned by the Assessee out of the sale ofshares. In so far as the shares which the Assessee had held in excess of oneyear, the Commissioner of Income Tax (Appeals) (for short “CIT (Appeals) hadheld in favour of the Assessee and treated the gain as Long Term Capital Gain.However, with respect to those shares, which the Assessee had sold within aperiod of one year, the gain was treated as arising out of business. TheTribunal confirmed the view of the CIT (Appeals) and treated such gain asAssessee's business income. This has given rise to the filing of the presentAppeal by the Assessee. The Tribunal while confirming the view of the CIT(Appeals) in this respect made the following observations :- “2.4We have heard rival submission and we perusedthe record. We have heard the rival submissions andperused the material before us. In our opinion, nosingle factor can decide the issue as to whether a “2.4We have heard rival submission and we perusedthe record. We have heard the rival submissions andperused the material before us. In our opinion, nosingle factor can decide the issue as to whether a particular transaction can be assessed under the headbusiness or capital gain as far as share transactions areconcerned. Judgments after judgments have held tghatthe issue has to decided after considering various factorslike volume of transaction, holding period, magnitudeof purchase of sales, ratio between purchase and salesand the accounting factor is intention of the assesseeand the intention can be gathered from the differentvariables. In short, there is no readymade formula todecide the issue and each case has to be decided on itsown facts. Treatment given to share transactions by theAO in the earlier and subsequent years can be one ofthe deciding factors, but in itself it is not the conclusiveproof. Unless and until it is not proved that the facts ofa particular A.Y. were identical to facts of other years.Courts have held that a single transaction can be held asbusiness transaction and a series of transactions can beheld to a capital gain transaction. In short the facts of aparticular year have to be tested on the touchstone ofthe general principles laid down by various authoritiesand summarized in the Circular issued by the CBDT.We find that out of the total profit of 21.05 Crores theassessee had earned profit of Rs.20.09 Cores frompurchase and sale of one script. In case of GlenmarkPharma Ltd., Reliance and RCVL there are repetitivetransactions (Pg. 9-10 of the Paper book). The shares ofReliance were sold on 19.04.2006 for the first time. On16-01-2006 the assessee purchase3d 99,000 shares ofsame company and same were sold on 19.05.2006 and01.06.2006. Shares of Glenmark were traded more than once. The volume of the shares and repetitivenature of the sale and purchase of shares indicate theintention of the assessee. In our opinion, the assesseewas dealing in shares as a treader rather than ainvestor. Considering the upward swing in the sharemarket it purchased shares of a particular company inbulk and within a short span of time sold them andearned a huge profit. The FAA had found that theassessee had purchased shares worth Rs.70.39 corresand sold the shares worth Rs.91.44 Crores. Thesurrounding circumstances clearly prove that theassessee was not making investment in these shares.These were pure and simple business transactions. Wehave also considered the dividend earned by theassessee during the year under appeal. In our opinion,facts of the case of Niraj A Surti (supra) are notapplicable to the case under consideration. Thereforeconfirming the order of the FAA, we decide ground no.1against the assessee.” 4A perusal of the above quoted portion of the Tribunal's Judgmentwould clearly show that the Tribunal had taken into account all the relevantfactors for coming to a conclusion that sale of shares resulted into businessincome of the assessee. The Tribunal noted frequency of purchase and sale ofshares, quantum of sale and purchase of shares and the relevant gains besidesother factors in order to come to a conclusion that the assessee had intended toengage itself in the business of buying and selling the shares. We do not find any error in the view taken by the Tribunal, since the Tribunal had noted in itsJudgment all the factors in coming the conclusion, which are factual in nature,and with respect to which no perversity is demonstrated. 4A perusal of the above quoted portion of the Tribunal's Judgmentwould clearly show that the Tribunal had taken into account all the relevantfactors for coming to a conclusion that sale of shares resulted into businessincome of the assessee. The Tribunal noted frequency of purchase and sale ofshares, quantum of sale and purchase of shares and the relevant gains besidesother factors in order to come to a conclusion that the assessee had intended toengage itself in the business of buying and selling the shares. We do not find any error in the view taken by the Tribunal, since the Tribunal had noted in itsJudgment all the factors in coming the conclusion, which are factual in nature,and with respect to which no perversity is demonstrated. 5The learned counsel for the assessee however contended that inthe later year the assessee had suffered loss in the process of selling the shareswhich was declared as cpital loss. The Assessing Officer in the assessment afterscrutiny accepted this declaration of the assessee and therefore the departmentis acting inconsistently which is not permissible. The issue of the assesseesuffering loss in the subsequent year arose after the assessment in the presentyear was completed. Quite apart,if in the later year the assessee had declareda loss on capital side, we wonder whether going against such a self declarationof the assesee, the Assessing Officer had to foist upon the assessee theconclusion that the loss was a business loss. If at all, it was up to the assesseeto claim it as business loss if the assessee was satisfied with the gain beingtaxed as business income. Be that as it may, this would not be determinativefactor in so far as the present Appeals are concerned. 6In the result, the Appeals are dismissed. [ M.S.SANKLECHA,J.] [ AKIL KURESHI, J ]