TaxTMI 
TaxTMI 
2013 (8) TMI 412
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..../-. 3. The brief facts of the case are that assessee company is a registered sub-broker with SEBI and engaged in share broking business. It also made investments in shares and traded in shares. It has filed its return of income for A.Y. 2006-07 on 21.10.2006, declaring total income of Rs.89,47,150/-. The return was processed u/s 143(1) of the IT Act, 1961 on 29.03.2008, however, the case of assessee was selected for scrutiny assessment and a notice u/s 143(2) was issued on 11.10.2007, directing the assessee to appear on 24.10.2007. According to the AO, in response to the notice the authorized representative of the assessee appeared and submitted the requisite details. 4. On scrutiny of the accounts, it revealed to the AO that assessee has shown short term capital gains of Rs.68,06,698/- and long term capital gains of Rs.65,29,245/-. The AO formed an opinion that assessee has not made investment for earning short term capital gains, rather it was engaged in trading of shares. Therefore, he direct the assessee to explain, as to why short term capital gain should not be assessed as a business income of the year. The assessee has submitted its reply vide letter dated 10.10.2008, ....
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....aunaq Singh Swarn Sing (1972) 85 ITR 220 (SC) * Ashoka Viniyoga Ltd. Vs. CIT (1972) 84 ITR 264 (SC)" 5. The ld. AO has rejected the contention of assessee on the ground that he has called for the investment portfolio of the assessee for three years i.e. F.Y. 2003-04 to F.Y. 2005-06. 6. On perusal of these details, it revealed that in F.Y. 2003-04 assessee made investment only in two companies, in F.Y. 2004-05. The investment was in five companies and in F.Y. 2005-06 investment was in eight companies, which were not sold during the year. As against this, in the trading account assessee has traded thousands of shares pertaining to 199 companies. Thus according to the AO, the claim of consistency made by the assessee is not available on record. He further pointed out the defects in the resolutions passed by the Board with regard to share of India Glycoles Ltd. Referring to Circular No. 4/2007 dated 15.06.2007 and judgment of Authority for Advance Ruling reported in 288 ITR 641, ld. AO has observed that the claim of assessee for earning short term capital gain is not tenable, he accordingly assessed the short term capital gain of Rs.68,06,698/- as business income. 7. Dissat....
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....pital gain and not revenue receipt. 4.8 The facts of the appellant's case satisfy the above conditions. The company has demonstrated that it was holding shares both as stock in trade and as investment regularly. The books of accounts regularly maintained also confirm the fact of share holding in both portfolios. The shares held as investment are shown in Schedule 4 of the balance sheet and the P & L Account shows Dividend Income on investment and other separately. In the earlier year also a similar situation was reflected in the books of accounts and balance sheet and it was accepted as such. The purchase of shares for investment purpose was duly authorized by Board Resolutions. The shares held as investments were duly reflected in the Investment Register maintain as per the provisions of Companies Act. It is also observed from the balance sheet that the appellant company has not made the investments out of loans or advances. The source of funds for investment can reasonably be assumed to be reserves and surplus accumulated over a period of years. In view of these facts, the ratio of the decision of the Hon'ble ITAT in M/s Jindal Photo Investments Ltd. (Supra) is squarely applic....
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....r. On the other hand the investments are valued at cost in the balance sheet. The assessee shown dividend income in this year. He took us page 97 of the paper book for buttressing his contention. He further contended that as far as the claim of assessee with regard to long term capital gain, AO did not dispute, thus it suggests that assessee is holding investment portfolio. The share transactions for investment are delivery based. He also took us through page no. 35 of the paper book where investment in the last three years have been shown in terms of percentage; in F.Y. 2003-04 assessee has shown investment at 7.03% and trading at 92.97%, in F.Y. 2004-05 investment is on 2.23% and trading is at 97.77% of the turnover. In F.Y. 2005-06 trading is at 95.12% and investment is at 4.88%, thus according to the assessee there is no substantial changes in the pattern of investment shown by the assessee. On the strength of these details ld. counsel for the assessee claimed that ld. CIT (A) has rightly treated the income shown on sale of shares as a short term capital gain. For buttressing his contention, he relied upon following judgments: CIT Vs. Rohit Anand 327 ITR 445 (Del) CIT Vs.....
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....n during the time the asset was with the assessee. Has it been treated as stock-in-trade, or has it been shown in the books of account and balance sheet as an investment. This inquiry, though relevant, is not conclusive. (d)The fourth test is as to how the assessee himself has returned the income from such activities and how the Department has dealt with the same in the course of preceding and succeeding assessments. This factor, though not conclusive, can afford good and cogent evidence to judge the nature of transaction and would be a relevant circumstance to be considered in the absence of any satisfactory explanation. (e)The fifth test, normally applied in cases of partnership firms and companies, is whether the deed of partnership or the memorandum of association, as the case may be, authorizes such an activity. (f)The last but not the least, rather the most 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, then an inference can r....
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....olding is for investment or for trading and what distinction he has kept in the records or otherwise, between two types of holdings. If the assessee is able to discharge the primary onus and could prima facie show that particular item is held as investment (or say, stock-in-trade) then onus would shift to revenue to prove that apparent is not real. (8)The mere fact of credit of sale proceeds of shares (or for that matter any other item in question) in a particular account or not so much frequency of sale and purchase will alone will not be sufficient to say that assessee was holding the shares (or the items in question) for investment. (9) One has to find out what are the legal requisites for dealing as a trader in the items in question and whether the assessee is complying with them. Whether it is the argument of the assessee that it is violating those legal requirements, if it is claimed that it is dealing as a trader in that item. Whether it had such an intention (to carry on illegal business in that item) since beginning or when purchases were made. 10. It is permissible as per CBDT's Circular No. 4/2007 of 15- 6-2007 that an assessee can have both portfolios, one for ....