TaxTMI 
TaxTMI 
2014 (4) TMI 534
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....the assessee was normally deriving its income from the following sources: (i) Dividends received from mutual funds and equity shares; and, (ii) Interest from investment of capital in partnership firm. 3. During regular course of its business, the assessee made an investment of Rs.3 crores during the year in Tata Service Industries Fund (Dividend Plan) on 5.4.2005 for the purpose of earning dividend but this investment was prematurely redeemed on 21.12.2005 for Rs.4,24,70,700/-. The assessee had booked this profit as a short-term capital gain. The Assessing Officer (hereinafter mentioned as the AO), from the record, had found that the assessee had shown no intention of holding this investment for the full term and rather not even for a year and that the assessee redeemed the investment with a purpose to earn more profits. The AO came to the conclusion that the assessee had made profits from its investment without waiting long enough for the investment to yield benefits in the form of dividends. Consequently, the AO treated the investment shown by the assessee as its stock-in-trade and the revenue generated i.e. Rs.1,24,70,700/- was taken as business income of the assessee v....
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....ext of factual matrix and attending circumstances, it would be appropriate to analyse the backdrop in which concurrent findings by the CIT(A) and the ITAT were returned against the assessment framed by the AO. The matters which weighed with both the appellate authorities in returning finding in favour of the assessee, are as below: (i) Intention of the assessee at the time of making deposit was to make capital investment. Sequelly, the impugned deposit was shown under the head "investment" and not under the head "stock in trade" in the balance sheet ending 31.3.2006; (ii) Even in assessment-year 2005-06, such deposit made by the assessee had been shown under the head "investment" and not under the head "stock in trade" in the balance sheet for the year ending 31.3.2005, assessment for which was made in the assessment year 2005-06 and this stand taken by the assessee was not interfered with. Principle of consistency was in favour of the assessee. (iii) Deposit from which the taxable income was generated cannot be termed as tradeable item in the sense of shares etc. Units of the mutual funds are allotted as well as redeemed by the managers of the mutual funds itself at the p....
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....(Mumbai) and CIT Versus Girish Mohan Ganeriwala 260 ITR 417 (P&H) cited by the assessee, deposit had not been made by the assessee departing from its normal business activity. Rather, in the case in hand, the assessee used to earn its bread and butter only from dividends etc. earned from its investments made in the nature of equity shares, securities, debentures etc. It also had its earnings from interest accruing on its investments made in the partnership firm which again is engaged in earning income from investments etc. In short, the assessee is fully engaged in whole time business and trading activity of dealing in investments in shares, debentures, mutual funds etc. These are its stock-intrade as is raw material for a manufacturing concern. To demonstrate, as time is stock-in-trade for a chartered accountant or for a lawyer or for a practising engineer or for a professional alike similarly money and cash put in investments, deposits or even capital for earning profits as a regular course turns out to be stock-in-trade for an investment company, as is the assessee. 14. The assessee in that sense trades in money; it is its stock-intrade and thus, it earns its income by profit....
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.... investment company, would venture to enhance its capital by forclosing liquidity, then it will lose dynamics of its business and would become static earning only from interest or dividends received from its fixed and capitalised investments. Such an investment company then would lose the vibrance of its business. Such deposits are usually made by the investment companies like the assessee, as a strategy and pursuant to intelligent planning as stock in profitable trade, yielding fixed income when other derivatives may be in a situation of great flux giving no clear picture of high or low tides. 19. In short, the impugned deposit was clearly made in the usual course of its activity of trading in money and in the discharge of its normal business. Even though it was in the nature of tenurial investment, redemption of such investment during the same previous year of investment speaks volumes of the intention of the assessee that it had not intended to use such deposit as a capitalised investment. 20. Sequelly, booking this profit as a short term capital gain is clearly a strategic move of the assessee to blur vision of the revenue to show that such deposit was made in departure o....
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....employees. Sequelly, if all the facts and circumstances of the case are taken into consideration, by no means such impugned deposit can be taken to be distinct or different from other transactions carried out by the assessee during the year under consideration. This deposit was clearly made by the assessee to earn profits on its deposit and thus, was in the nature of stock-intrade and the revenue generated to the extent of Rs.1,24,70,700/- is to be assessed as business income. 24. It is important to note that this is not for the first time that such revenue income has been earned by short-circuiting the wait of tenurial investment but even earlier, the assessee had been undertaking such ventures. In the assessment year in question, the assessee had even sought to make adjustment for the brought forward unabsorbed short-term capital loss of the two previous years i.e. for a sum of Rs.1,93,776/- for the assessment year 2004-05 and for a sum of Rs.2,49,734/- of the assessment year 2005-06. It is clear that the assessee had been using the methodology of shifting its normal trading activity of some transactions into term investments and later had been getting the same redeemed before....