By Ajay R. Singh, Advocate
CIT, vs. Mohan Vallabhdas Bhatiya. [ Income tax Appeal no
1201 of 2014 dt : 24/01/2017 (Bombay High Court)].
[ACIT , vs. Mohan Vallabhdas Bhatiya., [dated 31/01/2014;
A Y: 2005-06. Mum.ITAT]
The assessee carries on business as a trader in shares. He
also has investments, consequently he holds two portfolios one an investment
portfolio showing the capital assets and the other is trading portfolio. The
assessee was consistently showing gains on account of his investment portfolio
and offering them to tax under the head ‘capital gains’. In fact, right from
the AY : 2003-04 till AY: 200-10, the Revenue has consistently accepted the claim
of the assessee with regard to the gain made on its investment portfolio is
taxable under the head Capital gain except for the subject AY, the Revenue is
seeking to take a different view. The grievance of the Revenue is that in the
subject Assessment Year, there were borrowed funds. Thus, the gains claimed to
have been made on investments are in fact trading gains.
So far as borrowed funds are concerned, the Tribunal records
the fact that a small amount of loan was taken from the relatives and it did
not bear any interest. Moreover, the use of borrowed funds is not necessarily
attributable to the investments made, as there is no such finding given by the
authorities below.
The Hon. High Court dismissed the Revenue’s appeal upholding
the stand of the Assessee that the income earned on account of purchase and
sale of shares and mutual funds were chargeable to tax under the head ‘capital
gains’ and not as business income.
The High Court observed that even before the Tribunal, the
Revenue did not point out any variation in the facts and circumstances of the
case for the subject Assessment Year from those of the earlier and subsequent
years on account of income earned on investment. Moreover, the loan which has
been taken from relatives were for a small amount and further the use of these
borrowed funds were not established to be for purchase of shares for investment
by the authorities.
Therefore, in view of the fact that the Revenue
has been consistently taking a view that the income earned on investments is
taxable under the head capital gains no difference in facts and /or in law has
been pointed out to take a different view for the subject AY. Moreover, both
the CIT(A) as well as the Tribunal have concurrently come to a finding of fact
that the income earned on the investment portfolio is chargeable under the head
capital gains and not under the head ‘profits from trading of shares’ which is
not shown to be perverse. In the above view, the revenue’s Appeal was
dismissed.
