Case Law Details
The appeal of the revenue and the cross objection of the assessee is directed against the order dated 19-01-2015 passed by Ld CIT(A)-45, Mumbai and it relates to the assessment year 2010- 11. The revenue is aggrieved by the decision of Ld CIT(A) in holding that the gains arising on sale of shares is assessable as Capital gains only. The assessee has filed cross objection taking an alternative plea that if the decision of the AO is upheld, then the brought forward losses arising on sale of shares should also be treated as business loss and set off be given.
2. We heard the parties and perused the record. The assessee is an individual and registered as sub-broker with SEBI. During the year under consideration, the assessee made gains on sale of shares and accordingly declared short term capital gains of Rs. 84,57,551/- and long term capital gain of Rs. 48,41,899/-. The AO did not accept the same as Capital gains and accordingly assessed both the incomes as business income of the assessee. The Ld CIT(A), however, reversed the decision of the AO and hence the revenue has filed this appeal.
3. The Ld D.R submitted that the assessee has been indulging in the activities of purchase and sale of shares as a trader. He submitted that the assessee’s return of income has been accepted in the earlier years u/s 143(1) of the Act and hence the principles of consistency would not apply, as the AO has not applied his mind in the earlier years. He further submitted that more than 50% of the shares shown in Short term capital gains have been held for less than 30 days. The dividend declared by the assessee was also very minimal. The assessee has also borrowed funds for making investments. He submitted that the Honourable Kerala High Court has confirmed the assessment of Capital gains as business income under identical set of facts in the case of Equity Intelligence India (P) Ltd (2015)(376 ITR 321). Accordingly the Ld D.R submitted that the Ld CIT(A) was not justified in reversing the order of the AO.
4. The Ld A.R, on the contrary, submitted that the assessee has acted as an Investor only in these share transactions. He submitted that the assessee has declared capital gains in an identical manner in the earlier years and the same has been accepted in the past. He submitted that the CBDT has issued Circular No. 6/2016 dated 29-02-2016, wherein it is stated that the Long term capital gains declared by the assessee shall not be put to dispute by the AO. It was further stated that the stand so taken by the assessee should not be allowed to be changed. He submitted that the assessee has declared long term capital gains on sale of shares in the past also and during the year under consideration also. Accordingly he submitted that the Ld CIT(A) was justified in reversing the decision of the AO in respect of Long term capital gains.
5. In respect of Short term capital gains, the Ld A.R submitted that though the assessee had held more than 50% of shares for less than 30 days, the assessee has incurred loss of Rs. 2.55 lakhs from those shares. He submitted that, out of short term capital gain of Rs. 84.57 lakhs, the assessee has made a gain of Rs. 74.77 lakhs in respect of shares held for more than 90 days. Accordingly he submitted that majority of shares have been held for more than 90 days and the assessee has sold only those shares, where the risk of loss was more. He submitted that the assessee had borrowed funds on a small scale only. He submitted that the Honourable Bombay High Court has held in the case of Gopal Purohit (ITA No.1121 of 2009 dated 06-01-2010) that a person can be both trader and investor. He submitted that the assessee has treated the shares as investment only in its books of account and there is no repetition of transactions also.
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