TaxTMI 
TaxTMI 
2014 (2) TMI 889
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.... the sum of Rs.19,27,179/- as income from business, from share trading as against short term capital gain shown in the return of income filed by the appellant. 2. On the facts and in the circumstances of the appellant's case and in law the learned CIT(A) has erred in upholding the assessment of the sum of Rs 61,67,584/- as income from business, as against Long Term Capital Gain on sale of shares shown in the return of income filed by the appellant held for more than one year. 3. The Learned CIT(A) failed to appreciate that these shares were held as Investments and not as Stock in Trade. Further these Investments were held as investment in the earlier years, hence sale of shares and Mutual funds cannot be treated as Business income. 4. The assessee craves leave to add, amend, alter or delete any of the above grounds of appeal." 2. Assessee, an individual, is engaged in the business of purchase and sale of shares. Details of dates of filing of returns, incomes returned, dates of assessment, assessed incomes, dates of orders of the CIT(A)can be summarised as under : Dt. of filing of Return Returned Income (Rs.) Date....
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....he share holding period was ranging from one day to maximum twenty two days were given in the assessment order, that though in the closing balance the investment in shares for the year under consideration was shown at Rs.3.30 Crores against the closing balance of shares at Rs.4.72 Crores in the immediately preceding year but on closure scrutiny of the details revealed that an amount of Rs.14,08,57,219/- was the investment claimed having already made in the earlier years including substantial purchase of shares of one company viz. JBF Industries Ltd. of which the assessee was one of the promoter-director, that nominal amount was found having invested in other shares that too during the fag end of the financial year, that the ratio of investments as compared to the earlier years investments is very marginal barring investment in assessee's own company wherein substantial purchases of shares were made during the year, that except seven scripts which were pertaining to the purchase of earlier years remaining 30 scrips were purchased and sold during the year, that the claim of the assessee that average period of holding of those shares were four months was deceptive as well as factually....
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....and distinguished. 4. Authorised Representative (AR) submitted that the assessee was an investor in shares and securities since last several years, that he regularly made investments in shares for several years, that the assessee had maintained regular books of accounts whereby he had shown the portfolios as an investment comprising of securities which were treated as capital assets, that the investments had consistently been valued at cost, that all the investments were strictly delivery based, that for the long term capital gains, the total scripts pertained to six companies and the total number of transactions were six, that the AO had accepted the long term capital transactions, that total scripts pertained to thirty seven companies as regards to short term capital gains, that the shares purchased by the assessee had not been sold immediately and the holding period on an average was 6 months in case of STCG and for LTCG it was more than a year, that the assessee did not deal in share transactions regularly and on an average only three to four transactions had been carried out in a month, that the assessee was having income from STCG and LTCG in earlier years, that the assess....
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....its Books of Accounts in the preceding AYs as well as in the AY. under consideration under the head 'Investment'. Further, it is also not disputed that the assessee has valued its shares at "cost' and not valued at cost of market price which-ever is lower". The Department has also not disputed the fact that in the preceding AYs, the Department has considered the profit on sale of shares AY5 under the head 'Capital Gain/Loss'. We observe that the Ld. CIT(A) has stated that out of 55 transactions, only 27 transactions are such where the holding period is less than 30 days and it is 30 percent of the Short Term Capital Gain that has been earned by the assessee. Therefore, majority of the shares are held by the assessee for a longer period and the majority of Short Term Capital Gain has been earned thereon. Therefore, we agree with Ld. CIT(A) that the fact that some shares have been held for less than 30 days, will not make the assessee, a trader in shares. We observe from the table at Pg. No. 10 of the Order of the Ld. CIT(A), that the assessee has been regularly earning Long Term Capital Gain as well as Short Term Capital Gain in the preceding AYs on sale of shares and the same has b....
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....r which is within the knowledge of the assessee, who holds shares and it should in normal circumstances be in a position to produce evidence from its records and whether it has maintained distinction between those shares which are its Stock-in-Trade and those which are held by way of investment. Mumbai Bench of ITAT in the case of Janak S Rangwalla [11 SOT 627(Mum)] has held that it is the intention of the assessee which is to be seen to determine the nature of transaction conducted by the assessee. Though the investment in share was at a large magnitude, but, the same would not decide the nature of transaction. It was also stated in the above case that the mere magnitude of the transactions does not change the nature of transaction, which are being assessed as 'Income from Capital Gains' in the past several years. 9. Considering the facts of the case and the cases cited (supra), we are of the considered view that Ld.CIT(A) has rightly held that the assessee has treated the shares as investment and not Stock in Trade. Therefore, we agree with the Ld. CIT(A) that the volume of transactions, frequency of transaction and period of holding etc., would not alter the natu....
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....ular are taken into consideration and the case laws relied upon by the FAA are analysed it becomes clear that assessee was carrying out business of shares in a systematic and organised manner. Short holding period, volume of the scrips and frequency of the transactions are measure factors to decide the issue as whether an assessee is an investor or doing a business of shares and securities. Considering the peculiar facts of the year before us, we are of the opinion that order of the FAA does not suffer from any infirmity. We find that in the case of Pradip U Patel (supra) Tribunal had found that that there were no repetitive transactions in shares of the same script in the financial year relevant to the AY. under consideration, that the assessee had used his own funds for the purchase of shares, that no borrowed fund was used by the assessee,that majority of the shares were held by the assessee for a longer period and the majority of STCG had been earned there on. One more relevant fact in that case was earning of dividend income of Rs.9,25,018/-by the assessee which was termed 'substantial' by the Bench.Thus,the facts of the case of Pradip U Patel are clearly distinguishable fr....