AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2015 (1) TMI 653
X X X X Extracts X X X X
X X X X Extracts X X X X
....ircumstances of the case in holding that the principle of res judicata does not apply to the fact of the case. 2. Ground No. 2: Disallowance of expenses of Rs. 33,367/-. On the facts and circumstances of the case and in law, the learned CIT(A) erred in upholding the action of the Assessing Officer of making disallowance of expenses of Rs. 33,367/-, while calculating Income under the head ' Income from other Sources'. 3. Ground No.3: Restriction in exemption available u/s 17(2) of the Act. On the facts and circumstances of the case and in law, the learned CIT(A) erred in by restricting the exemption available u/s 17(2)(vi) of the Act to Rs. 15,000/- in place of actual expenses incurred by the appellant of Rs. 90,090/- while calculating income under the head 'income from salary' without appreciating the proper facts of the case. 2. At the time of hearing, so far as, ground no. 1 is concerned, Shri Vijay Mehta, ld. counsel for the assessee contended that the assessee sold shares of 33 scrips in IPO and sale transactions for shares acquired under IPO are only 34. It was pleaded that the assessee sold shares of just two scrips, acquired in secondary market, and thus the sale transa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt in IPO is of 35 companies i.e. through primary market and also made investment in shares of five companies through secondary market. We find that about 99.99% of the total shares transacted by the assessee (valuewise) were allotted in IPOs (Primary Market) and the assessee disclosed the shares in the balance sheet as investment. It is not worthy that for the last many years, identical disclosure has been made as investment which has been accepted by the Department. For better appreciation, we are summarizing the facts hereunder, Sr. No Asstt. Year No. of Transaction in short term capital gain Total STGC (Rs.) Traded in shares Capital Gains as computed by the assessee accepted u/s. Assessment orders at Paper Book Page No. In IPO Others Total 1) 2005-06 9 1 10 25,36,635 No 143(3) 17-18 2) 2006-07 36 11 47 56,44,269 No 143(3) r.w.s 153A 21-23 3) 2007-08 14 - 14 28,15,011 No 143(3) r.w.s 153A 26-28 4) 2008-09 34 2 36 1,53,35,274 No Year under consideration - 5) 2009-10 7 4 11 2,79,159 Yes 143(3) r.w.s. 153A 29-32 6) 2010-11 15 6 21 2,73,77,413 Yes 143(3) r.w.s. 153A 33-36 7) 2011-12 34 53 87 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., they are less than 20 days which reflects intention of the assessee that it was not for the purpose of investment but for getting indulged in the adventure of trade. 4. Before us, the learned Counsel, Mr. Vijay Mehta, on behalf of the assessee, submitted that first of all, the assessee had purchased shares of 32 companies in the IPO out of 34 scrips. Other than the IPO only two sale transactions were through secondary market. In the IPO, only serious investors will make investment, because this is the best possible mode of acquiring shares at a lowest price and sold the same at an initially listing period which gives the best possibility of getting good sale price. All throughout the various assessment years, the assessee has been mostly engaged in making investment in IPO shares only and surplus arising out of sale of such IPO shares have been offered as capital gain which has been assessed by the Department mostly under section 143(3) not only in the earlier years but also in the subsequent years. The copy of assessment orders have also been placed in the paper book. In the case of a business venture, huge risk is undertaken, whereas in the case of IPO, there is very less risk....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... wherein the income has been offered as capital gain and the same has been accepted by the Department under scrutiny proceedings under section 143(3). Further, the investments have been made through own funds and no borrowed funds have been utilized. Thus, the intention of the assessee was only for the investment and not for trading of shares. Moreover, there is no repetitive transaction and all are delivery based, hence, any gain arising out of such transaction is to be assessed as capital gain. On the other hand, Revenue's case is that the period of holdings is quite less and number of transactions is also huge, therefore, it should be assessed as business income. While adjudicating such kind of cases, the primary parameter is to gauge the intention of the assessee. The period of holding may not be all relevant in the given facts of the case. In the present case, most of the investments have been made in IPO, which is only reflects the intention of investment for getting quick gain from sales immediately as and when the shares are listed in the Stock Exchange. The purchase of IPO is mostly done by the investors as there is less risk of loss. Further, the other attendant facts lik....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... facts, indicates that the intention of the assessee was making the investment, thus gains arising out of sale of shares should be assessed as capital gain and not business income as has been canvassed by the ld. CIT-DR. Admittedly, no borrowed funds were utilized for making the investment, frequency of transactions, intention of the assessee making investments main through IPOs, being best possible mode of acquiring shares at lowest price and sold the same at initial period, being the best possible opportunity to sell at the pick price, as is evident from page 67 of the paper book, wherein, we find that the assessee held the investment till the accounting period i.e. 31/03/2008 and sold the shares at prevailing price as on that date earning short term capital gain of Rs. 50,73,057, which is at the rate of 13.71% of returned income as against actual short term capital gain of Rs. 1,53,51,497/- which fetched returned income at the rate of 41.48%. It is also not worthy, the assessee retained 41% of the total sales acquired during the year and sold in subsequent years and the capital gains earned there from has been accepted as capital gains by the Assessing Officer in scrutiny assess....