TaxTMI 
TaxTMI 
2010 (7) TMI 555
X X X X Extracts X X X X
X X X X Extracts X X X X
....estments in shares through portfolio management scheme as trading profit and assessing the same under the head business against the capital gain as returned by the assessee." 3. We have heard the rival submissions and perused the materials available on record. In the instant case the assessee claimed in the return of income Long Term capital gain of Rs.19,05,537/- and short term capital gain of Rs.11,37,486/- on sale of shares which were held as investment by it. The Learned Assessing Officer observed that the assessee has realized the above gain from Portfolio Management Scheme of Kotak Mahendra. He also observed that the total transactions under this scheme runs into 82 pages and has multiple transactions on daily basis in a large numb....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the decision of this Tribunal in the case of Shri Sugamchand C. Shah vs. ACIT Cir.3, Surat, (ITA No.3554/Ahd/2008), ACIT Circle-3, Surat vs. Shri Sugamchand C. Shah, (ITA.No.4024/Ahd/2008), ACIT Circle-3, Surat vs. Shri Sugamchand C. Shah, (ITA No.2219/Ahd/2009) and Shri Sugamchand C.Shah vs. ACIT, Surat (ITA No.1932/Ahd/09) dated 29-01-2010. The Learned Departmental Representative relied upon the orders of the lower authorities. 5. In the instant case, the issue which requires our adjudication is that whether the income earned by the assessee on sale of shares is to be assessed under the head capital gains as claimed by the assessee or under the head business income as held by the lower authorities. It is an undisputed proposition tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....asset and a trading asset. 2. Capital asset is defined in section 2(14) of the Act. Long-term capital assets and gains are dealt with under section 2(29A) and section 2(29B). Short-term capital assets and gains are dealt with under section 2(42a) and section 2(42b). 3. Trading asset is dealt with under section 28 of the Act. 4. The 4.Central Board of Direct Taxes (CBDT) through Instruction No. 1827 dated August 31, 1989 had brought to the notice of the Assessing Officers that there is a distinction between shares held as investment (capital asset) and shares held as stock-in-trade (trading asset). In the light of a number of judicial decisions pronounced after the issue of the above instructions, it is proposed to update the above ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat they were held as stock-in-trade and that existence of the power to purchase and sell shares in the memorandum of association is not decisive of the nature of transaction; (ii) The substantial nature of transactions, the manner of maintaining books of accounts, the magnitude of purchases and sales and the ratio between purchases and sales and the holding would furnish a good guide to determine the nature of transactions; (iii) Ordinarily the purchase and sale of shares with the motive of earning a profit, would result in the transaction being in the nature of trade/adventure in the nature of trade; but where the object of the investment in shares of a company is to derive income by way of dividend etc. then the profits accruing by ch....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly purchases and sales of shares with the motive of realizing profit would lead to inference of trade/adventure in the nature of trade; where the object of the investment in shares of companies is to derive income by way of dividends etc., the transactions of purchases and sales of shares would yield capital gains and not business profits." 10. CBDT also wishes to emphasise that it is possible for a tax payer to have two portfolios, i.e., an investment portfolio comprising of securities which are to be treated as capital assets and a trading portfolio comprising of stock-in-trade which are to be treated as trading assets. Where an assessee has two portfolios, the assessee may have income under both heads i.e., capital gains as well as bu....