TaxTMI 
TaxTMI 
2010 (10) TMI 816
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....e intervening period were invested not as a trader but as an investor duly accepted by the Department and the shares were held as investments. 3. For that on the facts and circumstances of the case the learned Commissioner of Income-tax (Appeals) should have accepted the case of the assessee that the long-term and short-term gain on the shares was correctly declared as such in the books of account and the return. 4. For that the learned Commissioner of Income-tax (Appeals) erred in confirming the action of the Assessing Officer in disallowing the depreciation claimed as per the tax audit report which was prepared in accordance with law. 5. For that on the facts and circumstances of the case the order of the Commissioner of Income-tax (Appeals) be modified and the assessee be given the relief prayed for." The facts of the case are that the assessee disclosed profit on sale of investment amounting to Rs. 65,06,878. The same was shown as long-term capital gain by the assessee. However, the Assessing Officer treated the same as business income of the assessee with the following findings in the assessment order:- "4.6 All the facts descr....
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.... amounting to Rs. 47,80,149. The entire investment was from the assessee's own sources and no loan was taken. On the above investment in shares, dividend of Rs. 81,706 was received. Similar was the position in the assessment year 2002-03 and the investment in shares was Rs. 47,18,149. There was no loan in the balance-sheet of the assessee. Shares were shown as investment and dividend of Rs. 3,60,592 was received. In the assessment year 2003-04, there was almost similar situation, i.e., investment in shares was out of share capital of the assessee. There was no loan. Investment in shares was amounting to Rs. 54,72,414 which was in the shares of twenty-nine different companies. That in this year, there was profit from sale of such shares as well as loss from sale of such shares. The same was offered as long-term capital gains/ loss, which was accepted by the Revenue. The dividend income received by the assessee was Rs. 4,32,549. In the assessment year 2004-05 again there was surplus from the sale of shares which was disclosed as long-term capital gain which was accepted by the Revenue. Dividend received by the assessee was Rs. 5,69,293. He pointed out that during the accounting year ....
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....bsp; (vii) Vinod M. Shah v. Asst. CIT [2010] 38 SOT 503 (Mumbai), I. T. Appeal No. 2731 (Mum) of 2009, ITAT Mumbai Bench "F"; (viii) CIT v. H. B. Stock Holdings Ltd. (No. 2) [2010] 325 ITR 320 (Delhi), I. T. A. No. 65 of 2009 dated November 16, 2009 (High Court of Delhi); (ix) Bombay Gymkhana Ltd. v. ITO [2008] 115 TTJ (Mumbai) 639; (x) Coloma Commercial Co. Ltd. v. Asst. CIT, I. T. A. No. 585/Kol/2009 dated May 14, 2010; (xi) Joint CIT v. Skri Deo Kumar Saraf, I. T. A. No. 411/Kol/2009 dated June 18, 2009; (xii) ITO v. Lookad Finance and Leasing Ltd., I. T. A. No. 659/Kol/2008 dated July 24, 2009; (xiii) Citadell Agencies P. Ltd. v. Asst. CIT [2007] 11 SOT 273 (Bom); (xiv) Sar Investment P. Ltd. v. Deputy CIT [2010] 40 SOT 566 (Ahd), I. T. A. No. 2116/Ahd/2007, ITAT, Ahmedabad Bench "A" dated July 23, 2010. The learned Departmental representative, on the other hand relied upon the orders of the authorities below. He has stated that recording in the balance-sheet is not decisive. Merely because the assessee had shown the shares as investment in the balance-sheet that does not prove that the assessee ....
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....ry to discuss these cases because the principle applicable to such transactions is that when an owner of an ordinary investment chooses to realise it and obtains a higher price for it than he originally acquired it at, the enhanced price is not a profit assessable to income-tax but where, as in the present case, what is done is not merely a realisation or a change of investment but an act done in what is truly the carrying on' of a business the amount recovered as appreciation will be assessable. In July, 1940, the appellant had borrowed, though without interest, a large sum of money to the extent of about Rs. 10,00,000, no doubt, from his brother. He started a new account calling it No. 2 investment account. For the assessment years under appeal shares purchased and sold were of a large magnitude ranging from Rs. 4.68 lakhs to Rs. 69 thousands in what is called the first account and from Rs. 9,64,000 or even if Port Trust debentures are excluded Rs. 3,60,000 to Rs. 30,000. The magnitude and the frequency and the ratio of sales to purchases and total holdings was evidence from which the Income-tax Appellate Tribunal could come the conclusion as to the true nature of the a....
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....important test is as to the volume, frequency, continuity and regularity of transactions of purchase and sale of the goods concerned. In a case where there is repetition and Continuity, coupled with the magnitude of the transaction, bearing reasonable proportion to the strength of holding, an inference can readily be drawn that the activity is in the nature of business." Coming to the facts of the assessee's case, we found that the assessee-company was formed with the object of dyeing and printing etc. of yam and fabrics. In the year 2001, the assessee-company started the process of setting up of its own dyeing and printing mill. However, the amount raised by the assessee by way of issue of share capital was not immediately utilised for the purpose of construction of building/acquisition of plant and machinery. It is seen from the balance-sheet for the year ended March 31, 2001 that the issued share capital of the assessee-company was Rs. 55 lakhs and in addition another sum of Rs. 40 lakhs was received as share application money. Thus, the total amount available with the assessee-company was Rs. 95 lakhs as against which the investment in the construction of building was....