ACIT Vs Sunil Bakht (ITAT Delhi)
The holding period of the assessee is minimum of 72 days and maximum of 186 days in the four schemes. The assessee contended before the ld CIT(A) that these are the only four transactions during the year. Magnitude of the investment coupled with the volume is also not much. The ld CIT(A) relying on the decision of the BS Raju Vs. Addll. CIT held that same is capital gain. He further held that in case of mutual fund the assessee does not have any control on the manner in which further investment have been made. Further, in case of the assessee, in earlier years the revenue has accepted the claim of the assessee as capital gain or loss. There is no change shown to us in the facts of the case this year. In this year only there is a change in the stand of the revenue. The ld CIT(A) has also followed the principle of consistency. On reading of the order of the ld CIT(A) we do not find any infirmity in holding profit of sale of mutual fund earned by the assessee as chargeable to tax under the head capital gain and not as business income.
FULL TEXT OF THE ITAT JUDGMENT
1. This appeal is filed by the ld ACIT, Circle-33(1), New Delhi against the order of the ld CIT(A), XI, New Delhi dated 28.04.2016 for Assessment Year 2011-12. The only ground of the appeal of the revenue is that the assessee has earned profit on sale of mutual funds of Rs. 26953746/- as capital gain shown by the assessee. The ld AO treated the same as business income but the ld CIT(A) held it to be capital gain.
2. Brief facts of the case shows that the assessee is an individual who filed his return of income on 26.09.2011 declaring income of Rs. 9591980/-. He is engaged in the business of trading in securities, derivatives and professional income. He also derived salary. The assessee has also shown capital gain.
3. During the year the assessee has shown capital gain of Rs. 26953746/-arising out of the sale of mutual funds in one AMC in four different schemes. The holding period of the mutual funds were from 72 days to 186 days. The ld AO noted the Circular No. 74/2007 dated 15.06.2007 and held that the assessee is engaged in the business of trading and investment in shares and mutual funds. He bought units of mutual funds during the year and same were also sold in the same year. The ld AO held it to be business income instead of capital gain offered by the assessee and passed an order u/s 143(3) of the Act on 07.03.2014.
4. The assessee aggrieved with the order preferred an appeal before the ld CIT(A), who held that gain earned by the assessee is capital gain and not business income vide para No. 3.7 to 3.11 of his order as under:-
3.7 I have considered the submissions of the appellant and the facts of the case along with the documents on record. The appellant had filed certain evidence more particularly annexure-8 showing the details of long term capital gains and short term capital gains, the amount invested and the period of holding in a tabular form during the appellate proceedings. Even though, it is part of books of accounts of the appellant but since the same was not submitted during the assessment proceedings the same was forwarded to the AO vide this office letter dt. 15.10.2015 as referred above for acceptance of said evidence under Rule-46A. The AO in both the remand report has not objected to the filing of above statement and since it is part of books of accounts the same is admitted as the same are in support of the grounds of appeal and the explanation of the AR that it was required to be filed after the receipt of the assessment order is acceptable.
3.8 The Assessing Officer in coming to the conclusion that the capital gains amounting to Rs. 2,69,53,746/- was business income observed in para 4.3.5 (ii) that the period of holding the investment varied from as short as few days to few months and in most of the cases, the period of holding was less than one month. However, on perusal of the holding period as submitted in Annexure-8 of the written submission filed in the appellate proceedings, it is seen that out of total capital gains investments in Kotak India Real Estate Fund-1, DWS fix term fund series 43 regular growth and Birla Sun Life dynamic bond fund-Regular Income-Monthly Dividend are long term investments and held between FY 2006-07 to 2009-10 and constitutes over 76% of the capital gains at book value by the appellant. As regards, the investments in short term capital gains, it is seen in Annexure-8 that the period of holding of these funds vary between 72 days to 1007 days. The Annexure-8 and the written submission was forwarded to the Assessing Officer and was requested to give a categorical finding regarding the correctness of the finding given in the para 4.3.5 (ii) in the assessment order as discussed above. The Assessing Officer in her remand report did not contradict the submission of the appellant with respect to the period of holding as claimed by him. However, the Assessing Officer in para 5 of the remand report reiterated that period of holding was short in most of the cases and assessee had dealt a larger number of shares/securities in this year and most of the cases shares/securities were bought and sold during the year. To substantiate the Assessing Officer pointed out the following 4 securities which were bought and sold during the year. The details of such securities including the purchase price/sales price and the gains and the period of holdings of these assets are as under:
