Company engage in purchasing and selling of securities can be treated as business activity

IN THE INCOME TAX APPELLATE TRIBUNAL

DELHI BENCH: B: NEW DELHI

BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT

AND

SHRI I.P. BANSAL, JUDICIAL MEMBER

ITA No.659/Del/2012

Assessment Year: 2008-09

DCIT, Circle 10(1),

New Delhi.

(Appellant)

Vs.

Dynamic Consultant Pvt. Ltd.,

(now known as P.R. Kumar Capital Advisors Pvt. Ltd.),

U-2, Green Park Main, New Delhi.

PAN: AAACD0042L

 (Respondent)

Assessee by: Shri K. Sampath, Advocate

Revenue by: Shri Surender Pal, Sr. DR

ORDER

PER I.P. BANSAL, JUDICIAL MEMBER

This is an appeal filed by the revenue. It is directed against the order passed by the CIT (A) dated 28th November, 2011 for Assessment Year 2008-09. The grounds of appeal read as under:-

1. Whether the ld. CIT (A) under the facts and circumstances of the case and in law is justified in treating profit on sale of shares as LTCG & STCG instead of business income treated by Assessing Officer?

2. The appellant craves leave to add, alter or amend any ground of appeal raised above at the time of the hearing.”

2. The assessee is a company engaged in management consultancy, implementation of internal controls, system audits, arranging finance from financial institutions and financing and advisory services in the capital markets. It is also doing NBFC business and is a Non-banking Finance Company registered with the Reserve Bank of India and is engaged in financing business sine 1986. During the impugned assessment year it disclosed long-term capital gain of ` 43,16,233/- along with short-term capital gain of ` 13,21,932/- (STT paid) and STGS of ` 19,865/-. The Assessing Officer after examining the details of the transactions observed that the activity of selling and purchasing of shares and securities etc. was in the nature of business activity and it was not an activity of an investor. He noted that the assessee had purchased 65062 number of shares for ` 1,19,51,834/- and sold shares worth ` 1,32,92,947/-. Some 10000 shares of Escorts India Ltd. were held only for five days. 10000 shares of Nav Bharat Ventures were sold within 12 to 60 days and, thus, referring to the CBDT Circular No.4/2007 dated 15.06.2007 he held that the income therefrom is assessable as business income and, accordingly, the income therefrom has been treated to be income from business. Learned CIT (A) has accepted the claim of the assessee on the basis of the decision of ITAT in the case of the assessee itself dated 3^rd September, 2011 for Assessment Year 2006-07 in which it has been held that the assessee has rightly shown the long-term capital gain and short-term capital gain on sale of shares held as investments and, following the said order, learned CIT (A) has decided the issue in favour of the assessee. The relevant portion of the order of ITAT has been reproduced by learned CIT (A) in his order.

3. The learned DR, relying upon the observations of the Assessing Officer in the assessment order, pleaded that the Assessing Officer has rightly treated the income of the assessee as income from business and learned CIT (A) has wrongly allowed relief to the assessee.

4. However, On the other hand, the learned AR of the assessee has produced before us copy of the aforementioned order of the Tribunal in the case of the assessee itself and submitted that learned CIT (A) has rightly granted the relief to the assessee and his order should be upheld.

5. We have heard both the parties and their contentions have carefully been considered. The Tribunal, under similar circumstances in respect of Assessment Year 2006-07 has granted relief to the assessee vide its order dated 30th September, 2011. A copy of the said order has been placed on our record. The relevant portion of the order of ITAT has already been reproduced in the order of CIT (A). After hearing both the parties and after considering their submissions, we find no reason to deviate from the findings recorded by the Tribunal in respect of Assessment Year 2006-07 which will be equally applicable to the facts of the present case. Therefore, we decline to interfere and the appeal filed by the revenue is dismissed.

6. In the result, the appeal is dismissed.

The order pronounced in the open court on 13.04.2012.

                                                          Sd/-                                Sd/-

                                              [G.D. AGRAWAL]         [I.P. BANSAL]

                                               VICE PRESIDENT    JUDICIAL MEMBER

Dated, 13.04.2012.

dk

Copy forwarded to: -

1. Appellant

2. Respondent

3. CIT

4. CIT(A)

5. DR, ITAT

Deputy Registrar,

ITAT, Delhi Benches