ASSISTANT COMMISSIONER OF INCOME TAX VS KETHAN KUMAR A. SHAH
2002 P T D 1330
[242 I T R 83]
[Kerala High Court (India)]
Before Mrs. K. K. Usha and R. Rajendra Babu, JJ
ASSISTANT COMMISSIONER OF INCOME‑TAX
Versus
KETHAN KUMAR A. SHAH
I. T. A. No. 15 of 1999, decided on 06/08/1999.
Income‑tax‑‑‑
‑‑‑‑Capital gains‑‑‑Business‑‑‑Business income or capital gains‑‑‑Sale of shares ‑‑‑Shares held by share broker as personal assets and included in wealth tax return‑‑‑Gains assessable as capital gains ‑‑‑Assessee entitled to relief under S.54F‑‑‑Indian Income Tax Act, 1961, Ss. 28, 45, 48 & 54F.
The assessee was .a share broker. He contended that the profit on sale of certain shares held by him as personal investment was assessable as capital gains and not as business income. The Assessing Authority took the view that since the assessee was a dealer in shares, all the shares held by him should be treated as stock‑in‑trade and, therefore, the profit received by sale of the same should be assessed as business income. The Assessing Officer, therefore, denied the assessee's claim for relief under section 54F of the Income Tax Act, 1961. The assessee had been showing these shares in his wealth tax return 'from, the assessment year 1988‑89 as personal investment. These shares were never transferred or converted as stock‑in‑trade and no entry was made in the assessee's books of account. The Tribunal took note of the fact that the assessee had been showing in his wealth tax return, the personal investment in the shares and it was those shares which were sold by the assessee. The Tribunal held that the profit in respect of the sale of the shares was assessable only as capital gains. The Assessing Officer was directed to allow appropriate deduction under sections 54F and 48. On further appeal:
Held, dismissing the appeal, that so long as there was no material to show that the shares which the assessee claimed as personal assets and included in his wealth tax returns from 1988‑89 onwards, were acquired in the course of the assessee's business there was no reason to take a different view from that of the Tribunal. The Tribunal was fully justified in granting the assessee relief under section 54F.
CIT v. H. Holck Larsen (1986) 160 ITR 67 (SC) ref.
P.K.R. Menon and George K. George for Appellant.
Nemo for Respondent.
JUDGMENT
MRS. K.K. USHA, J.‑‑‑--This appeal, at the instance of the Revenue, is against the order, passed by the Income‑tax Appellate Tribunal, Cochin Bench, in I.T.A. No.793/Coch of ‑1994. The relevant assessment year is 1991‑92. The question that arises for consideration is whether the profit earned by the assessee on the sale of certain shares held by the assessee is assessable as capital gains or as business income. The Tribunal took the view that in the facts of this case, the profit has to be assessed as capital gains. Aggrieved by the above, the Revenue has come up in appeal.
The assessee is a share broker. He contended that the profit on sale of certain shares held by him as personal investment is assessable as capital gains and not as business income. The Assessing Authority took the view that since the assessee is dealer in shares, all the shares held by him should be treated as stock‑in‑trade and, therefore, the profit received by sale of the same should be assessed as business income. The Assessing Officer, therefore, denied the assessee's claim for relief under section 54F of the Income‑tax Act, also. On appeal by the assessee, the Commissioner of Income‑tax (Appeals), held that there was nothing to show that the assessee converted all the shares into stock‑in‑trade and so the profit in respect of the sale of shares was, assessable only as capital gains. The Assessing Officer was directed to allow appropriate deduction under section 54F and section 48 of the Income‑tax Act. Aggrieved by the above, the Revenue filed an appeal before the Tribunal. The Tribunal confirmed the view taken by the first appellate authority.
It is contended before us by learned senior standing counsel appearing for the Income‑tax Department that the assessee being a regular dealer in shares, all the shares held by him should have been considered as stock‑in‑trade. Learned counsel submitted that what is relevant is the nature of the original acquisition of the shares. If they were acquired in the course of business, it is irrelevant whether, subsequently, he had treated it as personal investment. In support of the above contention, he placed reliance on a decision of the Supreme Court in CIT v. H. Holck Larsen (1986) 160 ITR 67, where, it was observed as follows (page 75):
"The real question as Lord Reid said was not whether the transaction of buying and selling the shares lacks the element of trading, but whether the later stages of the whole operation show that the first step‑the purchase of the share‑‑‑was not taken as, or in the course, of, a trading transaction."
To apply the principle, it has to be examined whether the shares in question were originally acquired by the assessee in the course of his trade or business. No material had been placed before the Tribunal to show that they were so acquired. On the other hand, it is seen that the assessee had been showing these shares, in the wealth tax return from the assessment year 1988‑89 as personal investment. These shares were never transferred or converted as stock‑in‑trade and no entry was made in the assessee's books of account. The Tribunal took note of the fact that the assessee had been showing in the wealth tax return, the personal investment in the shares and it was those shares which were sold by the assessee. It was on this basis the Tribunal assumed that the shares were personal assets.
So long as there is no material to show that the shares which the assessee claimed as personal assets and included in the wealth tax returns from 1988‑89 onwards, were acquired in the course of the assessee's business, we find no reason to take a different view from that of the Tribunal, even applying the principle laid down in CIT v. H. Holck Larsen (1986) 160 ITR 67 (SC). The Tribunal was fully justified in granting the assessee relief under section 54F of the Income Tax Act, 1961.
In the result, the appeal fails and it stands dismissed.
M.B.A./672/FC?????????????????????????????????????????????????????????????????????????????????? Appeal dismissed