TaxTMI 
TaxTMI 
2013 (7) TMI 164
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....me at Rs. 34,94,454/- by treating short term capital gains of Rs. 30,88,968/- as business income by making following observations with regard to the assessee's transaction of purchase and sale of shares: "1. Though the mode of trade was delivery, the period of holding of shares was very short. 2. The assessee did not hold on to the shares, despite huge purchases and then re-entered into the same scrips in a short span of time. 3. Due to the frequent buying and selling of the shares in a short span of time, the entire activity takes on the character of 'trade'. 4. The intention of the assessee was to make profit by sale of shares and he had no intention to hold shares for a long period to earn dividend. 5. He relied on the following decisions:- a. CIT Vs. Motilal Hirabhai Spg. & Sv. Col. Ltd. b. Raja Bahadur Visheswara Singh Vs. CIT, 41 ITR 685 (SC) c. Punjab Co-op Bank Ltd. Vs. CIT, 81 ITR 635 d. DCIT Vs. Deepa Shah 99 ITD 210, (Ah.) e. Smt. Sadhana Nabera Vs. ACIT, (ITA No. 2586/Mum/2009, dt. 26/03/2010). 6. Judging the assessee's transactions on the parameters laid down in the CBDT Circular 4 of 2007, dated 26/06/2007, the magnitude of purchases and sales, period of ho....
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....ial Authorities as mentioned by the CBDT, if are made applicable to the facts of the appellant's case, the appellant can in no terms be treated as doing business in shares or holding shares as stock-in-trade. The CBDT as a matter of abundant caution in conclusion advised the Aos that no single principle would be decisive and the total effect of all the principles should be considered to determine whether, in a given case, the shares are held by the assessee as investment or stock-in-trade. The fact of showing shares as investment and offering the resultant long/short term capital gains in the returns of income has been borne out of the assessment records of the appellant and this position was accepted by the department in past so many years and in none of the earlier assessment years the investments were treated as stock-in-trade." 5. The AR of the assessee relied upon various case laws before the CIT(A), which were extracted by the CIT(A) at para 4.4 of his impugned order on page 6. 6. The CIT(A) after considering the submissions of the AR of the assessee held that the CBDT Circular No. 4 of 2007, dated 15/06/07, Instruction No. 1827, dated 31/08/89 and various judicial decision....
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....o expect that even an investor would seek to sell his shares if the conditions so warrant, the action of the Assessee in purchasing the shares even while he was engaged in selling them, speaks of a trading motive. 4.21 The totality of facts relating to the transaction, thus, points to the assessee acting as a trader in shares not an investor. The action of the AO in assessing the profits from the sale of shares as profits an gains of business is upheld." 8. Aggrieved, the assessee is in appeal before us and submitted that the CIT(A) erred in sustaining the taxable gains arising from purchase and sale of shares has been income from business as against income from capital gains as disclosed by the assessee. 9. The learned DR besides relying on the orders of the authorities below, relied on the following case laws: 1. ACIT Vs. Anil Kumar Jain, [2012] 28 Taxmann. Com 236 (Hyd.) 2. PVS Raju Vs. Addl. CIT [2012] 340 ITR 75. 10. We have heard both the parties, perused the record and gone through the orders of the authorities below as well as the decisions cited. We find that the assessee has undertaken a total of 986 transactions resulting in the disputed profit/gains. The transacti....
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....re is made for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business it is properly attributable to capital. If, on the other hand, it is made not for running the business of working it with a view to produce profits it is relatable to stock in trade. In determining the question whether after acquiring the shares, the assessee dealt with it as an invest or or carried on business with it treating it as its stock-in trade or as a trading asset, what is relevant is that, if the case falls within the former category, receipts by way of sale of such shares will be capital receipts but if it falls within the latter the receipts will be trading receipts and profits the refrom 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 wh ether the investment transaction is a mere realization of the investment or an act done for making profit depends on the question whether ex....
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....e advantage of market fluctuation s lent the flavour of trade to such transactions; (j) The assessees were purchasing and selling the same scrips repeatedly, and were switching from one scrip to anot her; (k) Mere classification of these share transactions as invest- tment in the assessee's books of accounts was not conclusive; (l) The intention of the assessees at the time of purchase w as only to sell the shares immediately after purchase; (m) Frequency of purchase and sale of shares showed that the assessee never intended to keep these shares as investment; and (o) It is only for the purpose of claming benefit of lower rate of tax, under Section 111A of the Act, that they had clai med certain shares to be investment, though these transa- ctions were only in the nature of trade. 11. In the light of the above parameters and the decision of the jurisdictional High Court, on perusal of the statements incorporated by the assessing officer in the assessment order we find that the assessees have made several transact ions of purchase of shares during the relevant year under co nsideration, and if there high volume, frequency and regul- arity of the activity carried on by the asse....