Itxa/155/2017 Of Dilipkumar Vishindas Lakhi v. The Joint Commissioner Of Income Tax, Range 16 (3)

Priya Soparkar 1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.155 OF 2017 Dilipkumar Vishindas Lakhi … Appellant V/s. The Joint Commissioner of Income Tax… Respondent --- Mr.Subhash Shetty i/by Mr.Atul Jasani for the Appellant.Mr.Ashok Kotangle with Mr.Prabhakar Ranshur for theRespondent. --- CORAM : AKIL KURESHI AND SARANG V.KOTWAL, JJ. DATE : MARCH 12, 2019. P.C.:- 1. Assessee has filed this appeal against the judgment of theIncome Tax Appellate Tribunal raising following questions forour consideration:- “(1) Whether in the facts and circumstances of thecase and in law, the Tribunal was right in holdingthat the gains arising from transfer of shares heldfor a period of less than 30 days is to be treated asbusiness income and not as capital gains?(2)Whether in the facts and circumstances of thecase and in law, the Tribunal was right in upholdingthe disallowance on a reasonable basis made under Section 14A of the Act for the assessment year2007-08 when no method has been prescribedunder subsection(2) for the relevant assessmentyear ?” 2. At the outset, counsel for the assessee stated that questionNo.2 involves a very small amount and he therefore only onthis count does not press this question. 3.The surviving question pertains to the decision of theTribunal treating the assessee’s receipt from sale of shares heldby him for less than 30 days, as his business income. 4.The materials on record would suggest that assessee ismainly engaged in the business of trading of diamonds. Theassessee also engaged himself in buying and selling shares. TheAssessing Officer and CIT (Appeals) on the basis of the frequencyof sale and purchase of shares and duration of holding suchshares as also the volume came to the conclusion that the sharesheld by the assessee for less than 12 months would give rise tobusiness income upon sale. The Tribunal give partial relief to theassessee and held that all the shares which were held by the 334 itxa 155-17-o assessee for more than 30 days would qualify as capital gainand not as business income. 5.Counsel for the assessee submitted that the AssessingOfficer has introducing an artificial cut off line for holding thatshares held for less than 30 days will give rise to business income,a demarcation not provided in the Income Tax Act. 6.On the other hand, learned counsel Mr.Ashok Kotangle forthe revenue drew our attention to the relevant facts and arguedthat the Tribunal has considered the relevant parameters andcame to the conclusion which calls for no interference. 7. At the outset, we may record that learned counsel for theassessee is correct in contending that the mere demarcation ofholding shares for less than 30 days or more cannot beconclusive or even in a given case the determinative factor.However, in the present case, we must appreciate the essence ofthe order of the Tribunal in overall facts and circumstances of thecase. After noticing the assessee’s activity of buying and selling shares and income generated from such activity, the Tribunalwhile granting partial relief for the Assessee had recorded thatthe same was done in peculiar facts of the case. The ultimatedirections of the Tribunal therefore must be viewed in suchbackdrop. 7. At the outset, we may record that learned counsel for theassessee is correct in contending that the mere demarcation ofholding shares for less than 30 days or more cannot beconclusive or even in a given case the determinative factor.However, in the present case, we must appreciate the essence ofthe order of the Tribunal in overall facts and circumstances of thecase. After noticing the assessee’s activity of buying and selling shares and income generated from such activity, the Tribunalwhile granting partial relief for the Assessee had recorded thatthe same was done in peculiar facts of the case. The ultimatedirections of the Tribunal therefore must be viewed in suchbackdrop. 8.The facts on record would suggest that during the periodrelevant to assessment year 2007-08, which is underconsideration, the assessee had executed as many as 106transactions of buying and selling shares within less than 30days. The total value of sale transactions was Rs.7.11 crores. Theassessee had also engaged in buying and selling shares of sizablevolume and value after holding them for a period rangingbetween two months to upto 200 days. It was also noticed thatthe assessee was indulging intra-day transactions without takingdelivery of the shares which gave rise to the assessee’s speculativeincome. 9.When seen in totality of the facts and circumstances of thecase, one cannot find fault to the Tribunal’s conclusion that the Priya Soparkar assessee was not purely an investor in shares. The Tribunalintroducing the demarcation line of holding of shares of less than30 days and more than 30 days for giving different treatment for receipts arising out in sale of such shares would not vitiate thevery foundation of the Tribunal’s finding. No question of lawarises. Income Tax Appeal is dismissed. (SARANG V.KOTWAL,J.) (AKIL KURESHI,J.)….