AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2013 (1) TMI 11
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....f share of profit from partnership firm, salary income, short term capital gains and income from other sources like interest, dividend, etc. The assessing officer while completing the assessment, treated the income of the assessee arising out of sale of shares as business income, rejecting the assessee's claim for taxing the same as short term capital gains. Against this finding of the assessing officer, assessee went in appeal before the CIT(A), who gave a finding that the income arising out of sale of shares has to be considered as income from short term capital gains, and thus allowed the appeal of the assessee. 5. Aggrieved by the above findings of the CIT(A), which are similar even in the order of the first appellate authority impugned in the appeal concerning Shri Rupender Jain as well, Revenue preferred the present appeals before us. 6. Learned Departmental Representative submitted that the assessees' have been carrying on the business in shares continuously in a systematic manner and there is high volume of business. Some shares on regular basis. Being so, it has to be considered as business activity of the assessee. The treatment given by the assessees in their books of ....
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....mat procedure has set in, the question of the assessee's taking over physical delivery of shares does not arise, as the shares stand automatically credited into the demat account of the assessees, the moment they are purchased. It was pointed out that the assessing officer took demat account as base for recording the purchase and sale transactions which is not correct, as instead, he should have taken the contract note which gives the details of actual purchase and sale. It was stated by the assessee that the chart was prepared by the assessing officer from the demat account only which shows that the assessee did not indulge in day trading where the delivery of the purchases is credited and sale is debited. He further submitted that the investment in shares at the end of the year is valued at purchase price only and not at cost or market value as it is in the case of stock in trade. The assessee recorded in the balance sheet on the asset side the purchase of shares as investment and never held the shares as stock in trade. It was further submitted that in respect of shares, the maximum period of holding is 12 months from the date of purchase for the purpose of short term capital ga....
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....ection 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 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 instructions for the information of assessees as well as for guidance of the assessing officers. 5. In the case of Commissioner of Income Tax (Central), Calcutta v. Associated Industrial Development Company (P.) Ltd. (82 ITR 586), the Supreme Court observed that: Whether a particular holding of shares is by way of investment or forms part of the stock-in-trade is a matter which is within the knowledge of the assessee who holds the shares and it should, in normal circumstances, be in a position to produce evidence from its records as to whether it has maintained any distinction between those s....
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....nciple furnishes a guide for determining the nature of transaction by verifying whether there are substantial transactions, their magnitude, etc., maintenance of books of account and finding the ratio between purchases and sales. It will not be out of place to mention that regulation 18 of the SEBI Regulations enjoins upon every FII to keep and maintain books of account containing true and fair accounts relating to remittance of initial corpus of buying and selling and realizing capital gains on investments and accounts of remittance to India for investment in India and realizing capital gains on investment from such remittances. The third principle suggests that ordinarily 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 c....
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....eipts but if it falls within the latter the receipts will be trading receipts and profits therefrom business income. The intention with which such operation is carried on is relevant. If a owner of an investment realizes it and obtained a greater price for it than the price at which he originally acquired, if the enhanced value obtained from the realisation or conversion of securities may be profit from business. The distinction whether the investment transaction is a mere realization of the investment or an act done for making profit depends on the question whether excess was an enhancement of the value for realising the shares by a gain in an operation of making profit. If the transaction is in the ordinarily lien of the assessee's business, there would hardly be any difficulty in concluding it to be a trading transaction, but where it is not, the fact must be properly assessed to determine whether it is in the nature of trade. The surplus realized on the sale of share would be capital, if the assessee an ordinary investor realising his holding, but it would be revenue if he deals with them as a trader. if the assessee is an ordinary investor, the income arising out of sale of sh....