TaxTMI 
TaxTMI 
2014 (1) TMI 846
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....ssessee was also director of M/s. Prime Broking Company Ltd. from which he had received salary. The assessee had also derived income from house property and interest income. The AO further noted that the assessee had entered into certain transactions in shares from which income had been declared as short term capital gain and long term capital gain. The assessee had purchased shares worth Rs.35,44,80,540/- and sold them for Rs.37,08,67,635/- and declared gain of Rs.1,50,92,723/- as short term capital gain. The assessee had also purchased certain other shares for Rs.93.00 lacs and sold them for Rs.2,45,72,964/- and gain from these transactions amounting to Rs.1,52,14,989/- was declared as long term capital gain. The AO observed that the assessee was dealing in large volume of shares with very high frequency and most of the shares were bought and sold in few days. The AO therefore asked the assessee to explain as to why short term capital gain and long term capital gain declared by assessee from share transactions should not be treated as business income. The assessee submitted that the shares under reference had been purchased with a motive to earn dividend income and appreciation i....
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.... the Assessing Officer observed that principle of resjudicata was not applicable in income tax proceedings. Considering the facts and circumstances mentioned earlier, the Assessing Officer held that the assessee was dealing in shares with motive to earn profit in short span as a trader. He, therefore, treated both short term capital gain and long term capital gain aggregating to Rs.3,03,07,712/- as income from business. 3.2 The assessee disputed the decision of Assessing Officer and reiterated the submissions made earlier that the shares had been purchased as investment which had also been entered as investment in the books of account. The intention of the assessee was to make investment and not trade in shares. The assessee had also sold some of the shares after holding for more than a year. The shares had also been sold after holding for short period considering the market conditions and future perception of the investor. Similar transactions in the earlier years had been accepted as investment by Assessing Officer after scrutiny under section 143(3). Therefore, for consistency and uniformity in treatment, claim of the assessee had to be accepted. 3.3 CIT(A) however did not....
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....reme Court in case of Distributor (Baroda) P. Ltd. v. Union of India (155 ITR 120). As regards long term capital gain, CIT(A) observed that the assessee was dealing in share market and merely because a few shares happened to be held for a longer period did not imply that the shares represented investments. CIT(A) distinguished the decision of the Tribunal in case of Shri Mahendra C Shah vs. ACIT in ITA No.6289/Mum/2008 dated 18th May 2011 on the ground that in that case the number of companies whose shares were held remained more or less constant, whereas in case of the assessee the mix of scrips had also been changing from year to year. The decision of Pune Bench of Tribunal in case of ARA Trading & Investments vs. DCIT in ITA No.499/PN/2008 was also distinguished on that ground . In that case, the assessee had made investment through portfolio manager for appreciation in value and that assessee was not engaged in trade. CIT(A) accordingly confirmed the order of Assessing Officer treating the short term capital gain and long term capital gain as business income. Aggrieved by the decision of CIT(A), assessee is in appeal before the Tribunal. 4. Before us, the ld. AR reiterated t....
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....nal in the case of Arjun Kapur vs. DCIT (70 TTJ 161). 5. The ld. CIT- DR appearing for the revenue, on the other hand, strongly supported the orders of the authorities below. It was argued that each case has to be decided on the basis of own facts and no two cases were identical. It was submitted that the judgments relied upon by the ld. AR were distinguishable on facts. In this case the assessee had frequently purchased and sold shares after short holding and also there were repetitive transactions in the same scrips. Dividend earned was only nominal and incidental. Considering the facts and circumstances of the case, the profit earned on sale and purchase of shares has been rightly assessed as business income by authorities below. As regards claim of the assessee that similar transaction was accepted as investment in the earlier year, the ld. CIT- DR placed reliance on the judgment of Hon'ble Supreme Court in the case of New Jehangir Vakil Mills Co. Ltd. vs. CIT 49 ITR 137, in which it was held that the fact that in the earlier assessment year the assessee was treated as an investor would not estop the assessing authorities from considering for the purpose of computation of pr....
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....ares for more than a year. However there may be situations when the investor may also sell the shares after short holding in order to reshuffle portfolio when prices are falling or to encash investment in case of some personal exigencies. Each case is required to be examined carefully to ascertain the true nature of transactions. 7. In this case the details of share transactions held period-wise have been given by the assessee at page 69 to 73 of the paper book both in respect to long term capital gain and short term capital gain. As regards short term capital gain, the assessee had done transactions in purchase and sales in six different scrips. The total purchases are substantially high worth Rs.35,44,80,540/- on which gain of Rs.1,50,92,723/- has been shown. The holding period of shares in this case varies from less than a week to a little over three months. Out of total gain of Rs.1.50 crores the assessee has earned gain of about Rs.1.52 crores in transactions in relation to one scrip i.e. Aban Lloyd. In some other scrips there were loss which reduced the overall gain. An interesting feature is that the assessee had entered into regular and repeated transactions in this scri....
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....nd 2007-08 as well as in subsequent year i.e. 2010-11 have been accepted by Assessing Officer as investment activity. Therefore, to maintain consistency and for uniformity of treatment, the transaction should be accepted as investment activity in this year also. However considering the facts of the case we are unable to accept the arguments advanced by the assessee. On careful perusal of the assessment orders for earlier assessment years and subsequent year on which reliance has been placed by the assessee, we find that the nature of transactions i.e. whether business activity or investment activity has not been examined in these orders. There is no reference to this aspect in the assessment orders nor any details of share transactions have been given therein. The Assessing Officer in these orders has only made disallowance of some expenses and addition to house property income. Therefore there was no conscious decision of the Assessing Officer to accept share transaction as investment activity. The plea of consistency can be accepted if the revenue has taken a particular view in a particular matter which it is required to follow in the subsequent year for the sake of consistency. ....
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....income as held by the Tribunal in the said case. We have carefully perused the order of the Tribunal in the case of Gopal Purohit (supra), but we find that there is no universal finding in that case that all delivery based transactions have to be treated as investment. It is pertinent to note that the Tribunal in case of Gopal Purohit (supra), had decided the case following the decision of Tribunal in case of Sarnath Infrastructure Pvt. Ltd vs. ACIT (2009) (120 TTJ 216) holding that facts in the case of Sarnath Infrastructure Pvt. Ltd (supra), were identical. However, it is noted that in case of Sarnath Infrastructure Pvt. Ltd (supra), the shares sold out of investment account had been held for 2-3 years and revenue could not show any shares sold which had been purchased during the year or in the immediately preceding year. Therefore, only in respect of cases where facts are identical to those in case of Sarnath Infrastructure Pvt. Ltd. (supra), the decision in case of Gopal Purohit (supra), could be applied. The Hon'ble High Court of Bombay had upheld the decision of the Tribunal in the case of Gopal Purohit (supra), on the ground that there was no substantial question of law invo....