CIT vs Beena Rathi

In this appeal by the revenue the following questions of law has been framed for our consideration.

(a) Whether on the facts and circumstance of the case and in law, the ITAT was justified in upholding the application of the provision of section 43(5) and assessment of the income from such transactions as speculative income ignoring the true scope and correct interpretation of the term Actual Delivery of section 43(5) under the provisions of the Income Tax Act, 1961''?

(b) Whether on the facts and circumstance of the case and in law, the ITAT was justified in allowing the appeal of the assessee treating the transaction of shares as Short Term Capital Gains?

The respondent-assessee filed her return of income for the assessment year 2006-07 declaring a total income of Rs. 4.49 lacs. During the assessment proceeding, the assessing officer concluded that the short term capital gains offered by respondent-assessee for tax was infact speculation profit as the delivery of shares purchased and sold were not transferred into demat account but kept by the broker in his pool account.

In first appeal, the commissioner of income tax (the CIT(A)) upheld the order of the assessing officer and by application of section 43(5) of the income tax act held her income from dealing in share to be speculation income and not chargeable to tax as short term capital gains as declared by the respondent-assessee.

In second appeal, the tribunal by its order dated 25-09-2009 allowed the respondent assessees appeal. The tribunal held on facts that there is no dispute that share transaction entered into by the respondent-assessee was settled by actual delivery of scrips from the pool account of broker. The tribunal held following the decision of Rajasthan High court in the matter of Sripal Satyapal Vs. Income Tax Officer, that actual delivery of goods for a transaction to be non speculative, need not be by the assessee himself but could also be by his agent. On the aforesaid view, the tribunal held that the transaction of purchase and sales of shares were ultimately settled by actual delivery of scrips to the buyer from the pool account of the broker. In the circumstances, the tribunal concluded that transaction is not speculation transaction on application of section 43 (5) of the Act.

We note the tribunal, has decided the issue on a finding of fact that the shares purchased and sold by the respondent-assessee were actually delivered on her behalf by the broker from pool account. This decision being based on a finding of fact, the proposed question of law cannot be entertained. Accordingly, the appeal is dismissed with no order as to costs.