TaxTMI 
TaxTMI 
2011 (4) TMI 42
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....ssessee is dealing in shares business in the form of buying and selling of shares and securities and different other kind of share dealings. Therefore, he was of the opinion that the primary business of the assessee is dealing in shares. Therefore, he asked the assessee to explain as to why the income shown as STCG & LTCG should not be treated as business income being income from share trading activities and not income from capital gains. 2.1 The assessee submitted that the same cannot be treated as business income since the assessee is doing investment in shares and securities in recognized stock exchanges. The investments are acquired with the intention to hold for a longer period and not for trading. It was submitted that most of the investments are very old. The scrips traded in intraday without delivery and gain or loss from derivative transactions are treated as business income. It was submitted that this type of method of accounting is being consistently followed and accepted even in 143(3) assessments in earlier years. However, the Assessing Officer was not satisfied with the explanation given by the assessee. He noted that the assessee is dealing in share trading....
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....lier years. The investments were valued at cost and the assessee has not taken any benefit of diminution in the value of shares and securities by way of valuing the stock at cost or market value, whichever is lower since the shares & securities had not been held as stock in trade. The shares are not purchased for immediate sale and were purchased and kept for reasonably long period till the time the objective is achieved. The dividend income from such investments was offered for taxation in the return of income filed by the assessee. There has not been any change in these investments in the form of purchase and sales during the period from inception till today. It was submitted that the conduct and intention of the assessee clearly shows that assessee makes investment with intention to hold them as its investment and not with the intention to hold them as stock in trade to do business in them. The CBDT circular no.4/2007 dated 15th June 2007 was brought to the notice of the CIT(A). It was submitted that the assessee has only one portfolio comprising of securities which are to be treated as capital asset. Neither the assessee has any trading activity nor he has any trading portfolio....
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....t to which it is the means of livelihood. x) The characterization of securities in the books of account and in balance sheet as stock in trade or investments." 4.1 The CIT(A) noted from the various details furnished by the assessee that the assessee, in the instant case has indulged in purchase/sale of shares on a large scale. Purchase of shares of Rs. 1098 lacs and sale of shares of Rs. 1241 lacs during the year show that the assessee indulged in share transactions on a regular basis and on a substantially high scale. The assessee has traded in as many as 85 scrips in 188 transactions and in as many as 1631852 shares during the year with frequency and regularity. Only in 21 scrips there have been some opening balances. Rest of the scrips have all been purchased and sold during the year. The holding period in several shares has been merely a few days and in a few cases the purchase and sale has been on the same day and there is even one instance of forward sales. He further noted that simply because value of the investment is shown to be at cost, that per se would not change the real nature of the activity. Further, the principle of res judicate is not applicabl....
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....nting to Rs. 1,54,03,274/- which was assessed as an income from business instead of income under the head capital gains; ii) The ld CIT(A) has totally ignored and has not taken into consideration relevant facts of the case and also the past assessments of the appellant wherein the same income has been consistently declared and assessed under the head income from capital gains. iii) The ld CIT(A) has failed to appreciate that on the facts of the appellant's case the decision of the jurisdictional High Court in the case of CIT vs Gopal Purohit decided on 6th Jan 2010 is squarely applicable. The appellant therefore, prays that treatment of short term capital gains under the head of business income instead of capital gains income deserves to be deleted. 2 On the facts and in the circumstances of the case and in law the appellant prays your honour to grant such other and/or consequential relief as your honour may deem fit and proper" 6 The ld counsel for the assessee reiterated the same submissions as made before the Assessing Officer and the CIT(A). Referring to page 1 of the paper book, he submitted that the assessee has shown STCG at ....
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....m others ; therefore no interest has been charged on loans given. 6.4 On being questioned by the Bench to explain para 10 of the said reply wherein it was submitted that the assessee has taken secured loan from HDFC bank against the hypothecation of shares and securities, ld counsel for the assessee submitted that the assessee has borrowed funds from the Bank against pledge of shares, which has been utilised for the proprietary ship business of Deepkala Collections and no part of the funds has gone to purchase or sale of shares. 6.5 Referring to the decision of the Tribunal in the case of Mr Nehal V Shah in ITA No.2733/Mum/2009 order dated 15.12.2010 for Assessment Year 2005-06 and the order of the Tribunal in the case of ACIT vs Naishadh V Vachharajani in ITA No.6429/Mum/209 order dated 25.2.2011 for Assessment Year 2006-07, he submitted that under identical circumstances, STCG on account of purchase and sale of shares has been accepted by the Tribunal. He submitted that the assessee's case is in a much stronger position; therefore, income from STCG declared by the assessee should be accepted and the order of the CIT(A) be set aside. 6.6 The ld DR, on....