Pr. Commissioner Of Income Tax- 17,Mumbai v. Hardik Bharat Patel

R.M. AMBERKAR (Private Secretary) IN THE HIGH COURT OF JUDICATURE AT BOMBAYO.O.C.J. INCOME TAX APPEAL (IT) NO. 390 OF 2016 Pr. Commissioner of Income Tax- 17,Mumbai..Appellant Versus Hardik Bharat Patel ..Respondent ................... Mr. Sham Walve for the Appellant Mr. Sham Walve for the Appellant Mr. Sanjiv M. Shah for the RespondentMr. Sanjiv M. Shah for the Respondent ................... CORAM : AKIL KURESHI & M.S. SANKLECHA, JJ. DATE : NOVEMBER 19, 2018. P.C.: 1.This appeal under Section 260 A of the Income Tax Act,1961 (Act), challenges the order dated 3.3.2015 passed bythe Income Tax Appellate Tribunal, Mumbai Benches H”,Mumbai (“the Tribunal” for short). This appeal relates tothe Assessment Year 2008-09. 2. The Revenue has urged following reframed questions of law for our consideration: “ (a) Whether on the facts and in the circumstances of the case andlaw, the Tribunal was justified in directing the AO to treat the profitlaw, the Tribunal was justified in directing the AO to treat the profit arising on the frequent and voluminous transactions initiated withborrowed funds in shares as 'Long Term Capital Gain' instead of'Business Income? (b) Whether on the facts and circumstances of the case and inlaw, was the Tribunal justified in directing the AO to treat the notionalloss incurred on Futures & Option transaction as normal businessloss?” -3.Regarding Question No. (a): (a). The impugned order of the Tribunal dismissed theRevenue's appeal by following its order dated 1[st] May, 2013in the case of same assessee for assessment years 2007-08and 2008-09 treating its income on sale of shares asclassifiable under the head 'capital gain'. According to thelearned counsel for Revenue, the appeal of the Revenue fromthe earlier order dated 1[st] May 2013 of the Tribunal for theassessment years 2007-08 and 2008-09 has been admittedon 7[th] March, 2016 by this Court being Income Tax AppealNos. 2313 and 2290 of 2013 (CIT V/s. Hardik Patel).Therefore, this appeal also requires consideration. It is thefurther case of the Revenue that the amount invested inshares were out of borrowed funds and therefore, the samehas to be treated as business income and not as investmentis to be classified as long term capital gains. (b) However, we find that the earlier order dated 1[st] May2013 of the Tribunal dealt with the issue of short term capitalgain while in this case, the issue involved is with regard tolong term capital gain. (c) Besides our attention is drawn to Circular No. 6 of 2016dated 29.2.2016 issued by the Central Board of Direct Taxes(CBDT). This circular issued with regard to the issue oftaxability of surplus on sale of shares and securities, -whether as capital gain or business income in case of longterm holdings of shares and securities i.e in excess of 12months. It has clarified therein that with a view to reducelitigation and uncertainty in the matter of taxibility, as longterm capital gains or business income - the assess has anoption to treat the income from sale of listed shares andsecurities as income arising under the head 'Long TermCapital Gains', them the same shall be accepted by theassessing ofÏcer. However, the stand once taken by theassessee would not be subject to change and consistentlythe income on the sale of securities which are held asinvestment would continue to be taxed as long capital gains or business income as opted by the Assessee. The circularmakes no distinction whether the investments made inshares were out of borrowed funds or out of its own funds.Thus, the distinction which has been sought to be made bythe Revenue cannot override the above CBDT Circular, whichis binding upon it. or business income as opted by the Assessee. The circularmakes no distinction whether the investments made inshares were out of borrowed funds or out of its own funds.Thus, the distinction which has been sought to be made bythe Revenue cannot override the above CBDT Circular, whichis binding upon it. (d) In the above view, as the issue stands concluded infavour of the Respondent by the above CBDT Circular, theabove question as proposed does not give rise to anysubstantial question of law. Hence, not entertained. 4.Regarding Question (b):- (a) Mr. Walve, the learned counsel for the Revenue, veryfairly states that this issue stands concluded against theRevenue by the decision of this Court in the case ofCommissioner of Income Tax Vs. Bharat R. Ruia (HUF)reported in [2011] 337 ITR 452 (Bom). (b)In the above view, the Question 2 as proposed does notgive any rise to any substantial question of law. Hence, not entertained. 5.Accordingly, Appeal is dismissed. [ M.S. SANKLECHA, J. ] [ AKIL KURESHI, J ]