TaxTMI 
TaxTMI 
2014 (10) TMI 260
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....rm Capital gain as exempt u/s 10(38) of the Act and paid the tax on Short term Capital gain at concessional rate. The AO, however, held that the assessee has been indulging in Adventure in the nature of trade and accordingly assessed both Long term Capital Gain and Short term Capital gain as "Business income" of the assessee. In the appeal filed by the assessee, the Ld CIT(A) confirmed the order of the AO in respect of Short term Capital Gain. In respect of Long term Capital Gain, the Ld CIT(A) held that the same cannot be assessed as "Business income" and accordingly directed the AO to assess the gain as "Long Term Capital Gain" only. Aggrieved, both the parties have filed these appeals before us. 4. Before us, the Ld D.R placed strong reliance on Paragraph 6 and Paragraph 8 of the assessment order, wherein the assessing officer has analysed the share transactions carried on by the assessee during the year under consideration. In paragraph 6, the AO has stated that the assessee has dealt in 61 types of scripts with a sales turnover of Rs. 14.45 crores. The number of transactions was around 300. Accordingly the AO had expressed the view that the assessee cannot be considered as ha....
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....ssessable as business income. The Ld D.R submitted that the assessee has earned long term capital gain on four scrips only. However, the assessee has also purchased and sold in three scrips on short term basis, out of the four scrips shown under Long term Capital gain. The Ld D.R submitted that the mere holding of the above scrips for more than one year will not change their character as business asset. The Ld D.R further submitted that the assessee herself has declared speculation profit as business income. Accordingly he submitted that the assessing officer was justified in assessing both Short term Capital gain and Long term Capital gain as business income in the hands of the assessee. 7. On the contrary, the ld A.R submitted that the assessee is not precluded from holding two portfolios viz., one for 'Investments' and other for 'Stock in trade'. He further submitted that the assessee is a house wife and her intention was to hold the shares as Investment only. He further submitted that the assessee did not borrow any funds for her investment purpose, but utilized her own funds only for making investment. He further submitted that the assessment of the assessee for the assessmen....
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....Long term Capital gain of Rs. 252.69 lakhs. It appears that the assessing officer chose to assess them as Business income during the year under consideration, apparently for the reason that the assessee has made huge profit during the year under consideration. The AO has also considered other factors, such as share transactions were having high frequency and volume; the assessee has held them for short periods from 1 day to 299 days, repetitive transactions in same scrips, the assessee has earned speculative profits and the dividend earned is meager vis-à-vis the gain arising on sale of shares. 9. Both the parties have relied upon various case law to support their respective contentions. The AO has also placed reliance on the Circular No.4 of 2007 dated 15.6.2007 , wherein certain guiding factors that are need to be considered to decide about the nature of transactions has been stated. All the case laws reveal only one point that there is no straight jacket formula to decide about the nature of share transactions viz., whether it was carried as business activity or investment activity. The facts prevailing in each case has to be judged independently in order to resolve the ....
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....nd sold them more than one occasion. In a fluctuating market, it is within the scope of human probability that an investor also would follow similar kind of strategy of purchasing and selling scips in installments. 13. The AO has also pointed out that the holding period was less than one month in 106 transactions. There cannot be any dispute that the decision to hold the shares for a longer period may be reversed by an investor in a highly fluctuating market. We have already noticed that the short term capital gains account for about 20% of the total gains made by the assessee during the year. Hence, in our view, the short holding period in respect of certain scripts, in the facts and circumstances of the present case, cannot be taken as the determinative factor here. 14. The AO has further pointed out that the ratio of turnover to the value of share holdings work out to 4.61 times. There is a fallacy in this computation. What is required to be seen is the number of times, the funds of the assessee has been rotated. The higher the rotation of funds, the more the presumption that the assessee has acted as a business man. In the instant case, the AO has considered the value of shar....