TaxTMI 
TaxTMI 
2013 (10) TMI 548
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....not be taxed as business income. Assessee filed its reply and AO has stated that the reply filed by assessee vide letter dated 12.12.2007, is kept on record. He has stated that assessee's reply is not acceptable. That assessee invested in large scale during the year, has done purchase and sale of shares on high frequency and period of holding is also not very long. AO treated the said short term capital gain as business income and taxed @ 30% instead of @ 10% shown by the assessee. Being aggrieved, assessee filed appeal before ld CIT(A). However, ld CIT(A) has confirmed the action of AO. Hence, assessee is in further appeal before the Tribunal. 4. At the time of hearing, ld A.R. filed a statement of facts stating that assessee has shown short term capital gain as well as long term capital gain. He submitted that in respect of long term capital gain shown by the assessee, AO has accepted the same and there is no dispute in regard thereto. Ld A.R further stated from page 2 of statement of facts filed, that prior to 01.10.2004, there is a short term capital gain of Rs.3,80,665/- which is assessed @ 30%. He further submitted that after 1.10.2004, there is a short term capital gain o....
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....on 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 Vs 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 shares which are its stock-in-trade and those which are held by way of investment. 6. In....
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....re 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 capital assets and a trading portfolio comprising of stock-in-trade which are to be treated as....
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....te at which business income was to be assessed. On perusal of balance sheet at page 4 of PB as well as profit and loss account placed at page 5 of PB, we observe that assessee has specifically stated investment in shares at Rs.55,94,573 and has shown in the current assets the stock in trade of Mutual Fund. However, assessee has also stated specifically in the profit and loss account, details of long term capital gain, short term capital gain and speculative dealings in shares, besides showing interest and dividend income by the assessee in the assessment year under consideration. Further, it is also observed that assessee is maintaining separate details in respect of shares, held by the assessee under the head 'stock-in-trade' and shares held under the head 'investment'. Therefore, we find substance in the submission of ld A.R. that assessee is maintaining separate portfolio of shares held as investment and shares held as stock in trade. The above facts have not been controverted by the authorities below. We observe that authorities below have not accepted the profit shown by the assessee as short term capital gain mainly for the reason that in respect of some of the shares, the pe....
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....AT squarely apply to the case of the assessee. Considering the facts of the assessee, we hold that the short term capital gain aggregating to Rs.10,16,274/- shown by the assessee , be assessed under the head 'short term capital gain' instead of 'business income'. Hence, Ground No.1 of appeal is allowed. 9. In Ground No.2 of appeal, assessee has disputed the action of ld CIT(A) in confirming 50% of the disallowances made by the AO in respect of postage expenses and professional fees. 10. We observe that AO has made 50% disallowance in respect of postage expenses and professional fees claimed by the assessee on the ground that assessee has not shown any expenditure pertaining to exempt income. Ld CIT(A) also confirmed the action of AO. We also observe that AO is duty bound to disallow some reasonable expenses in regard to the exempt income. However, considering the transactions made by the assessee, we are of the view that it will meet the ends of justice to restrict the disallowance to 20% of the total claim of the assessee. Hence, this ground is partly allowed. 11. Ground No.3 of appeal relates to confirmation of 20% disallowance of telephone expenses. 12. Having heard ....