TaxTMI 
TaxTMI 
2011 (5) TMI 315
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....n by the assessee on sale of shares as business income in place of treating the same as short term capital gains. 3. Rival contentions have been heard and records perused. The facts, in brief, are that during both the years under consideration, the assessee has declared profit earned on trading of shares as short term capital gains and worked out tax liability thereon at the rate of 10 per cent. In view of the frequency of the transactions, the period of holding and the intention of the assessee to earn profit by selling the shares within very short period and within the year itself, without earning any dividend income thereon, the Assessing Officer held that the profit so earned was in the nature of business income rather than short ter....
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....s not purchased for making investment but for earning profit immediately on their sale. He highlighted the frequency of transaction, which is normally entered by a person engaged in the business of shares. He further submitted that shares were not purchased with the intention to make investment and earn dividend income thereon but to make profit out of their sale. Therefore, he argued that the lower authorities were perfectly justified in treating the profit arising out of their sales as income from business rather than what was offered by the assessee as short term capital gains. 6. We have considered the contentions of both ld. Authorized Representative and ld. Senior D.R. and also deliberated on the case laws relied upon by them. From....
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....the same as investment, the same cannot be held to be as investment. Book entry is not conclusive but only a guiding factor for deciding the nature of transaction and its income on sale. Frequency of purchases and disposal of shares is also a guiding factor. If purchases and sales are frequent or there are substantial transactions in the shares, it would indicate trade. Habitually dealing in the shares is indicative of trade, similarly, ratio between the purchase and sales and the holdings may show whether the assessee is trading or investing in shares. High transactions and low holdings indicate trade whereas low transactions and high holdings indicate investment. Whether purchases and sales is for realizing profit or purchases are made fo....
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....estment in shares of a company is to derive income by way of dividend, etc., then the profit accruing by change in such investment will yield capital gains and not revenue receipt. The CBDT Circular No. 3 of 15-6-2007 has also emphasized that it is possible for taxpayer 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 the heads, i.e., capital gains as well as business income. Where the assessee have retained the shares for enjoying appreciation in value and not for the purpose of realization of pro....