Commissioner Of Income Tax ... vs Consolidated Finvest & Holding ...
2011 Latest Caselaw 2506 Del

*               THE HIGH COURT OF DELHI AT NEW DELHI

+                         ITA No.6/2011

                                      Date of Decision : 10.05.2011

Commissioner of Income Tax
Delhi-I, New Delhi                                   ......Appellant
                        Through:              Ms. Prem Lata Bansal, Sr.
                                              Advocate, with Mr. Deepak
                                              Anand, Advocate.

                                 Versus

Consolidated Finvest & Holding Ltd.       ......Respondent
                          Through: Mr. Ajay Vohra, Ms. Kavita
                                    Jha & Mr. Somnath Shukla,
                                    Advocates.

CORAM :
HON'BLE MR. JUSTICE A.K. SIKRI
HON'BLE MR. JUSTICE M.L. MEHTA

1.     Whether Reporters of local papers may be                        NO
       allowed to see the judgment?
2.     To be referred to the Reporter or not ?                         NO
3.     Whether the judgment should be reported                         NO
       in the Digest ?

M.L. MEHTA, J. (Oral)

1. This appeal is directed against the impugned order dated 30th

October, 2009 of the Income Tax Appellate Tribunal

(hereinafter referred to as the "Tribunal) whereby the appeal

of the Revenue against the order of the CIT(A) was dismissed.

2. The assessee filed its return of the assessment year 2005-06

declaring income as `5.29 crore. Besides others, he also

declared short-term capital gain on sale of 206828 shares of

ONGC to the tune of `2,91,38,876.00. During the assessment

proceedings, the Assessing Officer noticed that assessee had

purchased 1,77,047 shares of ONGC on 29th March, 2004 and

31781 shares of ONGC on 17th May, 2004. The entire holding

of shares of ONGC except 2,000 were sold by the assessee

within a short span of 7 to 10 months. The assessee had

treated the surplus of `2,91,38,876 as short-term capital gain.

The Assessing Officer observed the transactions to be of the

nature of business transactions as assessee itself had stated

that he was having the business of investments and dealing in

shares and also most of shares were immediately sold after

their purchase. Accordingly, the Assessing Officer treated the

said profit as business income. The assessee challenged the

order of the Assessing Officer before CIT(A) which held the

profit to be capital gain and not business income. In appeal,

the Tribunal maintained the order of CIT(A). It is against this

impugned order that the Revenue is in appeal.

3. We have heard the learned counsel for the Revenue and also

the assessee and perused the records. There is no dispute

that the shares which were acquired were sold within a short

span of 7 to 10 months by the assessee. There is also no

dispute that the assessee had also asserted to be non-banking

financial company having business of investments and dealing

in shares. However, the facts which were noted by the CIT(A)

and also the Tribunal are worth considering. The assessee

was, in fact, engaged in manufacture of photographic goods

having manufacturing units at different places prior to the de-

merger of the photographic goods business into separate

company w.e.f. 1st April, 2004 on the scheme of de-merger of

the company approved by the High Court of Uttaranchal.

Though the de-merger took place w.e.f. 1st April, 2004, the

assessee continued to carry on the photographic goods

manufacturing until the date of the order of the High Court of

Uttaranchal approving scheme of the de-merger on 1st

November, 2004. The assessee also held long-term

investments in various other shares. The aforesaid shares of

ONGC were purchased by the assessee when it was a

manufacturing company and the aforesaid shares were not

purchased as part of any business activity of dealing in shares

at the time of purchase. The assessee was neither in the

business of investments nor dealing in shares, though it held

shares of different companies at the beginning of the relevant

previous year. The assessee had acquired those shares in a

public issue and had, in fact, shown them in the books of

accounts as investment and were booked under the head

"non-trade" and not "trading" investment. The intention to

acquire those shares as investment can be reflected from the

fact that it was holding most of the shares of other companies

since long period of time and was not entering into frequent

business of sale and purchase of shares. From the facts, the

CIT(A) and the Tribunal arrived at a finding of fact that the

acquisition of such shares in public issue with the intent of

holding them for a long period of time to achieve long-term

appreciation and the mere fact that the shares were sold in a

short span of time of its acquisition due to steep and

unanticipated rise in stock market does not mean that the

intention of the assessee at the time of purchase of shares

was not to hold them for a long period of time or to deal in

them. This was a pure question of fact arrived at by CIT(A)

and the Tribunal, and rightly so that the profit arisen from sale

of shares of ONGC during the relevant previous year was to be

treated under the head „capital gain‟ and not „profit or gain of

business and profession‟.

4. No question of law arises, the appeal is hereby dismissed.

M.L. MEHTA (JUDGE)

A.K. SIKRI (JUDGE) May 10, 2011 skw