TaxTMI 
TaxTMI 
2005 (5) TMI 564
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.... Officer to assess the income arising from sale and purchase of shares under the head "Capital gains" as against the action of the Assessing Officer in treating the same as Business Income. 3. The facts as far as assessment year 1996-97 is concerned are as follows. The assessee is a company. The main objects of the assessee-company as per its MOU is to carry on the business of hotel, restaurant, cafe, beer house, restaurant room, etc. During the previous year the assessee sold shares and earned a profit of Rs. 65,32,100 which was offered to tax under the head 'Capital gains'. The Assessing Officer noticed that the assessee was carrying on the activity of purchase and sale of shares on a regular basis. In this regard the Assessing Officer h....
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....ssessment years 1991-92, 1992-93 and 1993-94. That the Hon'ble Supreme Court of India held in the case of Raja Bahadur Kamakhya Narain Singh v. CIT [1970] 77 ITR 253 that profit made on the sale of shares where the Assessing Officer has not brought any material on record to show that the shares held by the assessee as investment in earlier year were converted into stock-in-trade of his business will be treated as capital gain and not business income. This has also been followed by the ITAT in the case of Shri Arjun Kapur. (b)Sale of 1,60,000 right shares of JPIL acquired in 1992-93 and 1993-94. The shares are held for more than one year hence treated as long-term capital asset. The profit from the sale of right shares, 1,42,000 acquired in....
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....stand of the assessee may be summarized as given in the Chart below : Sl. No. No. of shares Year of acquisition Remarks 1. 95,000 1990-91 Originally purchased as investor 2. 1,42,000 1992-93 Rights shares 3. 18,000 1993-94 Rights shares 4. 20,000 1993-94 Purchased from market 2,75,000 6. The Assessing Officer however rejected the plea raised on behalf of the assessee for the following reasons : a.That in assessment year 1994-95 the Assessing Officer had taken a view that the income on sale of shares by the assessee was to be assessed as business income and the CIT(A) had upheld the order of the Assessing Officer. b. The conduct of the assessee (frequency as well as the income generated by sale of shares) did indicate....
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.... JPIL was held by S.K. Jain and his family members. Mr. S.K. Jain is Vice Chairman and M.D. of JPIL. It was submitted that the assessee-company is one of the Holding Companies and a channel of investments in JPIL by S.K. Jain and his family. It was further submitted that the shares of JPIL were purchased by the assessee not with an intention to trade in shares but with a view to have a hold in the management of the company JPIL. The assessee also pointed out that when the shares were quoted at a very high price of Rs. 250 per share yet they were not sold. The assessee also pointed out that the assessee had to sell shares during the previous year only with a view to retire interest bearing debts so as to reduce the interest burden on the ass....
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....eal was taken up for hearing there was no appearance on behalf of the assessee . The ld. counsel for the assessee had duly taken note of the hearing of the appeal on 9-5-2006. But none appeared when the appeal was called for hearing. The appeal is therefore decided on merits after hearing the submissions of the ld. DR. The ld. DR principally placed reliance on the order of the Assessing Officer. According to him the intention of the assessee as explained by the Assessing Officer in the order of assessment for the assessment year 1996-97 was to hold the shares as stock in trade of business and not as a capital asset. 10. We have considered his submissions. At the outset we may mention that the fact that purchase and sale of shares was descr....
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....esent case the accounting treatment given by the assessee in his books of account by treating these shares as being held as investments and as a capital asset supports the plea of the assessee that profit on sale of these shares was to be assessed under the head 'Capital gains'. The main objects of the company is to run hotel, restaurant etc. The fact that in one of the other Objects Clause of the Memorandum there is an authority to carry on purchase and sale of shares cannot lead to the conclusion that the assessee held the shares as a stock in trade of a business. The assessee has been holding shares with a view to enable S.K. Jain and his family members to have a controlling interest in the company JPIL. When shares are so held it cannot....