TaxTMI 
TaxTMI 
2013 (10) TMI 554
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....the appellant from year to year as investments and were duly reflected as such in the audited accounts. 2. The Ld. CIT(A) erred in confirming assessment of short term capital gain as business income being short term capital gain earned on sale of shares of Rs. 51,53,685/- and on realization of mutual funds of Rs. 14,54,752/- as income from business without properly appreciating the fact that investments are being reflected in the audited accounts as investments valued at cost are being held for sufficiently long time and acquired with an intention to hold as investment. 3. The Ld. CIT(A) failed to appreciate that a substantial portion of realization of investments has been carried through PMS organizers. Hence, activity of the appellant should have been held to be of investment. 4. The Ld. CIT(A) erred in allowing the expenses as claimed merely as the appellant's activity of investments and are being held as business activity without appreciating the fact that the appellant is a finance company and is engaged in the business of leasing, earning of interest etc. 5. The appellant pray that profit realized on realization of investments be directed to be assessed as capital gain an....
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....o between the purchases and sales and the holding would furnish a good guide to determine the nature of transactions. 2. Ordinarily the purchase and sale of shares with the motive of earning / profit, would result in the transaction being in the nature of trade! adventure in the nature of trade; but where the object of the investment in shares of a company is to derive income by way of dividend, etc. then the profits accruing by change in such investment (by sale of shares) will yield capital gains and not revenue receipt. 8. The AO, to explain his arguments, observed in the assessment order, "By no means, this assessee is a small scale retail investor. It has dealt in number of scripts of securities during the year. Majority of shares and mutual funds transactions which the assessee has entered purchase and sale of shares and mutual funds resulted in Short Term Capital Gains or loss. Out of a Total Net Gain of Rs. 2,09,37,029 an amount of Rs. 51,53,685/- pertain to Short Term gains. This represents and out of the total gains 25% of the gains have accrued within the period of holding of less than one year. In other words, in majority of the transactions the assessee had sold them....
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....property for himself or otherwise enjoying or using it, presence of such an intention is a relevant factor and unless it is offset by presence of other factors, would raise a strong presumption that transaction is in the nature of trade. The AO placed reliance on the decisions of Sardar Inder Singh & Sons vs CIT, reported in 24 ITR 415 (SC) and Dalhousie Investment Trust Co. Ltd. vs CIT, reported in 68 ITR 486, wherein, primarily it was held that the shares were sold with the purpose of earning profit, so that the transactions amounted to an adventure in trade, and concluded that, ".....looking at the assessee's business intention, the assessee is treated as trader in Shares and the entire capital gains of Rs. 2,09,37,029/- on securities transaction are assessed as business incomes". 9. Aggrieved, the assessee approached the CIT(A), before whom, the assessee reiterated its case and facts. 10. The CIT(A), after taking into consideration the submissions of the assessee, held, "...High frequency, high volume and regularity of transactions are, therefore, the basic features of a trading transaction. An investor on the other hand makes purchases with a view to earning income form the....
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....s in the books of account of the assessee. I am of the view that the above two aspects will not make any difference considering that the appellant has dealt in shares of more than 120 companies with holding periods in majority of the cases upto 3 months. The magnitude of the transactions indicate that the scripts were not intended to be held as an asset for steady appreciation but the shares were purchased and sold so as to earn profit. The A.O. has pointed out that, out of l22scrips, in the case of 79 scrips the holding period is less than three months. High frequency of transactions and low period of holding indicate that the intention of the appellant company was to purchase and sell as a trader. There is frequent dealing in shares on a large scale. The substantial time and effort is devoted towards this activity. In these circumstances, and from the facts of the case it is to be held that the appellant has been acting as a trader in securities and not as an investor. Therefore, the action of the A.O. in treating LTCG and STCG of Rs. 20937029 as business income arising from trading of securities is confirmed". 11. The CIT(A), thus, confirmed the order of the AO & disallowed the....
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.... months and six months and there are no intra-day transactions of shares under this head. On these facts and circumstances of the case, we hold that on the shares held as investment by the assessee, the income arising on sale of such shares is assessable under the head 'long term capital gain' and 'short term capital gain' and not 'business income' as held by AO and CIT(A). Accordingly, the order of the CIT(A) is reversed and the assessee's grounds are allowed. The AR, therefore, submitted that since the issue is covered by the assessee's own case in the preceding year, and there being no change in facts the order of the coordinate Bench, must be followed. 14. The DR relied on the orders of the revenue authorities, accepting that the issue is identical, as that in assessment year 2006-07. 15. We have gone through the orders of the revenue authorities and have also perused the details, as filed by the assessee, which were placed before the revenue authorities and have also perused the order of the coordinate Bench. We find that the facts are identical, as accepted by the DR. In these circumstances, as per judicial propriety, we do not find any reason to deviate from the decision ....