TaxTMI 
TaxTMI 
2014 (4) TMI 681
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.... ("STCG"), as was original claimed in assessment proceedings. The assessee appealed the order of the AO on various grounds to the CIT(A), of which only the issue of income from sale of shares arises in this appeal. The following question of law arises for decision: Did the ITAT fall into error in upholding the assessee's contention that the latter earned Short Term Capital Gain on account of sale of shares. 2. During the course of assessment proceedings, the assessee had made a claim of STCG for Rs. 3,10,62,544. On the basis of details of the sale and purchase transactions, the AO reached the prima facie opinion that the income was business income, and so, on 18th October, 2010, the assessee was asked to explain reasons for claiming STCG.....
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....cks on regular basis. c) The account indicates a cautious activity on persistent basis. d) The pattern of account, indicates a level of volume that would engage considerable time and attention of the assessee. Conclusion a) The assessee has chosen to take undue benefit of the amended provisions of the act vis-à-vis the quantum of activity to the period prior to amendment. b) The treatment given to the shares transaction by the assessee company is quiet arbitrary and is just to suit its convenience with an eye to reduce tax liability. The assessee has parked shares accordingly and there is no plausible logic for such action. c) Majority of the shares have been acquired, have disposed off in a very short period of time and by any ....
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....een claimed to have been investments are in fact the stock in trade only when viewed examined and analyzed against the parameter of dividend income alone, though in the instant case this is only one of the factors apart from others which have been discussed in the body of others. Thus in nutshell given the present situation of the assessee, I find that he is dealing in stocks on continuous and aggressive basis. The frequency of trades and the time gap between buying and selling of various scrips does not warrant investment for appreciation but a cautious decision to earn from price movement of stocks on regular basis. Further the account indicates a cautious activity on persistent basis. Further the pattern of account indicates a level of ....
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....end income thus does not lead to any conclusive findings. 4. On appeal, the ITAT sustained findings, holding that in more than 90% of the cases there has been only one transaction of sale and purchase. Further, the share of dividend income to investment income was considered to be insufficient, by itself, to bracket the income as business income. On the basis of the frequency and volume of transactions, thus, the ITAT held that the income was STCG. 5. Impugning this decision of the ITAT, learned counsel for the Revenue argues that a closer look at the accounts indicates that the dealing in shares in this case was not as investment, but rather, to transact in them as business. Though the shares were listed as investment, the frequency and ....
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....say that there is no single, universal standard to distinguish between the two. The Court must instead look into the nature of the shares, the volume and frequency of the transactions, the manner in which the shares have been shown by the assessee in its own books of account, dividend earned on the shares, if any. Rarely will any one factor be conclusive; the purpose of the exercise is to ascertain the true intention through a composite test. In some cases, volume becomes determinative; in others the duration of time it is held; at times it can be the manner it is shown in the books whereas in still, the use of borrowed funds could be decisive. 8. On a reading of the above accounts, the Court agrees with the concurrent findings of the ITAT....
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....rring within the shares already held. Even the sale/purchase transactions that have taken place as a ratio of the total shares held for that company is low, thus indicating the volume of shares held has not varied much. Just as aggressive and constant behavior as regards the portfolio suggests business activity, its absence suggests that the shareholding was as an investment. In fact, four of the shareholdings benefited from a subsequent bonus issue of shares, which again supports this characterization. In such circumstances, to hold that the portfolio is to be treated as business would deny the possibility of selling an investment based on a market factors, or dealing in them it at all. Indeed, the category of STCG, as opposed to a long te....