Case Law Details
Shankar Realty (P) Ltd. Vs. ACIT (ITAT Mumbai)
We have observed that the assessee is declaring income from house property as well income from capital gain in the return of income filed with the Revenue. The dispute is within narrow compass wherein the assessee is contending that the income from sale and purchase of shares be treated as capital gains while revenue is contending the same to be business income.
The assessee duly explained before us that no interest bearing borrowed funds were utilized for buying the shares. The assessee has duly explained that the interest of Rs. 20.02 lacs was paid towards borrowed funds which were invested in immovable properties and the said interest expenses were allowed by the revenue by way of deduction under the head “income from house property”.
We have gone through the details of transactions carried on by the assessee relating to the sale and purchase of shares which are placed in paper book page no. 37 to 56. We have carefully gone through these transactions which are large number of transactions entered into by the assessee in shares which were entered into frequently, regularly and in many cases the transactions are squared within a short span of buying of the shares.
No doubt every investment which is made by the tax payer, there is always an intention to make profits but the same cannot be classified as business income merely because it was carried on with profit motive and its classification is to be tested based on motives, frequency, regularity transactions entered into by the tax-payer to come to the conclusion whether the activity is a business activity or an investment to earn capital gains. It is also noted that in majority of the cases the assessee has sold the shares within 90 days of purchase. This is a mixed question of fact and law and is to be decided on the factual matrix of each case. It is also undisputed that the transactions for purchase and sale of shares entered into by the assessee are all delivery based transactions for sale and purchase of shares. After carefully considering the voluminous transactions entered into by the assessee during the year running into several pages of paper book from page no. 37 to 56 and the overall conduct of the assessee, we are of the considered view that gains arising from purchase and sale of shares which are squared within 30 days of purchase by the assessee, the same may be treated as a business income and correspondingly STT paid be allowed as deduction in accordance with law, while the transactions for purchase and sale of shares which are squared after 30 days of its purchase, the same may be treated as income from capital gains. In view of decision of Hon’ble Bombay High Court in the case of CIT v. Pruthvi Brokers & Shareholders (supra), the claim of the assessee raised for the first time before tribunal for grant of deduction towards STT paid is admitted and allowed as business deduction after verification on merits in accordance with law and corresponding STT paid on such shares income of which is held to be business income be allowed by the assessing officer after verification. For the limited purposes we are restoring this matter to the file of the assessing officer to make computation of business income as well capital gains on shares after verification of period of holding of such shares in accordance with our above directions.
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