The Commissioner Of Income Tax-25 v. Dhanki

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.2042 OF 2011 The Commissioner of Income Tax-25..Appellant.V/s.Shri Rajesh V. Dhanki..Respondent. Mr. Tejveer Singh, for the Appellant.Mr. Subhash S. Shetty, for the Respondent. P.C:- CORAM: J.P.DEVADHAR & M.S.SANKLECHA,JJ.DATE : 27[th] FEBRUARY, 2013. In this Appeal by the Revenue for the Assessment Year 2006- 07, although several questions have been raised for our consideration, the Counsel for he Revenue presses only Question (a) which reads as under:- Whether on the facts and in the circumstances of the case and in law, the Tribunal is right in holding to treat the income from sale of shares as an income from long term capital gain as against the business income treated by the Assessing Officer without appreciating the fact that the assessee is having sole activity of buying and selling of shares where the transactions were entered into continuously and regularly and has substantial volume. Huge number of share and repeated transaction in single scrip, which clearly denote that the sole motive of the assessee is to carry on business in shares rather investment in shares to earn dividend? 2The basic dispute is whether the income earned on sale of shares is to be classified under the head 'business income' or under the head 'capital gain'. 3The Respondent-Assessee in its return of income shown capital gains (short term and long term) on account of purchase and sale of shares. The Assessing Officer came to the conclusion that income shown under the head 'capital gains' i. e. short term and long term are to be taxed under the head 'business income' taking into account the number of days for which shares were held was few and in some cases the scrips were sold on the same day. 4In appeal, the CIT(A) allowed the claim of the Respondent-Assessee and held that income on account of sale of shares and securities are to be taxed as 'capital gains' . 5On an appeal by the Revenue, the Tribunal by the impugned order held that so far as the income/loss earned as sale of shares declared under the head 'capital gains', be classified under the head 'Business Income'. This was on the basis of a finding of fact that the Respondent-Assessee was entering into purchase and sale of of the same scrips depending upon the price movements. However, so far as long term capital gain is concerned, the Tribunal held that the Respondent-Assessee S.R.JOSHI2 of 3 had retained shares over a long period of time ranging for 365 days to 568 days. Further, once these shares were sold, the Tribunal held that the Respondent-Assessee did not purchase the same scrips. This according to the Tribunal indicated that they were not held as stock-in-trade. The Tribunal placed reliance upon Circular No.4 of 2007 dated 15[th] June, 2007 issued by the CBDT wherein it is clarified that a person can have two Portfolios i. e. investment portfolio and trading portfolio both consisting of stocks and shares. On the aforesaid facts, the Tribunal concluded that income declared as 'Long Term Capital Gain' is not to be classified under the head 'Business Income'. 6The Respondent-Assessee has accepted the impugned order. The Revenue is in appeal to the extent the Tribunal held that income/loss as declared under the head 'Long Term Capital Gain' is not to classified under the head 'Business Income'. We find that the decision of the Tribunal is based on a finding of fact. In these circumstances, we see no reason to entertain the proposed question of law. 7Accordingly, appeal is dismissed with no order as to costs. (M.S.SANKLECHA,J.) (J.P.DEVADHAR,J.)