TaxTMI 
TaxTMI 
2010 (2) TMI 695
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....details of business income and STCG the Assessing Officer noticed the following. The assessee entered into voluminous transaction of purchase and sale of shares during the previous year. Out of the above transactions of purchase and sale of shares, some of the transactions were purchase and sale where the assessee did not take delivery of shares purchased or sold. In some of such transactions the assessee incurred loss and in some such transactions, the assessee derived profit. The profit from such transactions was more than the loss from such transactions by Rs. 36,503. The assessee considered this profit as speculative income and the same was offered to tax as business income by the assessee in the return of income. 4. In respect of the remaining transactions of purchase and salt of shares, the assessee actually took delivery of the shares purchased and then sold them. These shares were shown by the assessee as investments in its books of account. Since these shares were held by the assessee for a period of less than 12 months, the gain on sale of these shares were considered as short term capital gain and a sum of Rs. 9,21,339 was offered to tax under the head 'short term capit....
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....res in 48 companies were purchased with the intention to hold them as investments. The Assessing Officer therefore concluded that the ratio to purchase of shares held as investments to purchase of shares with a view to trade was 1:4 and therefore all the transaction of purchase and sale of shares have to be held as having been done as a business venture. (e) The assessee utilized loan taken from a minor member of the family and Pradip M. Shah, HUF for purchase and sale of shares which indicate that the purchase and sale of shares were indicates that the purchase and sale of shares were done by the assessee as a business venture and not as an investor. 8. Before learned CIT(A), the assessee submitted that she was investing in shares for the past 18 years and has claimed income on sale of investments either as STCG or LTCG and the department has accepted such claim made by the assessee. It was submitted that volume and frequency at which the shares were purchased or sold is not determinative factor. The intention at the lime of purchase to treat the purchases as investment and not as stock in trade of business is important. The Assessing Officer has overlooked this asp....
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....e rival submissions. The issue to be decided is as to whether the gain of Rs. 9,21,339 on transaction of purchase and sale of shares undertaken by the assessee during the previous year is to be assessed under the head 'income from business' as claimed by the revenue or income under the head 'capital gain' as mentioned by assessee. The answer to the above issue would depend on whether the assessee when he purchased the shares intended to treat them as 'investments' i.e., a capital asset or a trading asset i.e., as stock in trade of the business of trading in shares. Before we deal with the facts of the case of the assessee, we will briefly narrate the principles applicable in deciding the above issue as laid down in several judicial pronouncements :- (a) Whether a transaction of sale and purchase of shares were trading transactions or whether they were in the nature of investments is mixed question of law and fact. Learned CIT v. H. Holck Larsen [1986] 60 ITR 67/26 Taxman 305 (SC). (b) It is possible for an assessee to be both an investor as well as dealer in shares. Whether a particular holding is by way of investment or formed part of stock in trade is a ....
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....ssessee to be STCG. Such transactions were about 800 in number during the previous year. The maximum holding period was from 1 day to maximum 6 months. The conduct of the assessee in showing income from delivery based transactions as STCG and non-delivery based transaction as business income only shows that but for actual delivery even income from those transactions would have been considered as speculative income and business income. In other words the nature of speculative transactions have been considered by the assessee herself to constitute business. The income from delivery based transactions are sought to be projected as STCG only because there was actual delivery and because they were shown as investments in the books of account of the assessee. We are of the view that the above two aspects will not make any difference to the nature of the transaction where delivery is effected considering the other facts prevailing in the case of the assessee viz. , (a) The volume and frequency of the transactions which were about 800 in number where the holding period was between minimum of 1 day to maximum of 6 months. (b) Shares of more than 200 companies had b....