TaxTMI 
TaxTMI 
2015 (3) TMI 705
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....so observed that the volume and frequency of the transaction is high and the intention of the assessee was to make profit on sale of shares and he had no intention to hold the shares for a long period to earn dividend. The AO observed that the assessee indulged in recurrent activity of investing in shares and also reinvesting the profits earned from such transactions within a short span of time giving it a character of trading activity depending on market fluctuations. It was observed by the AO that the assessee borrowed funds on various dates and purchased shares of Rs. 1,39,70,018 and sold shares of Rs. 90,86,837. Thus the AO concludedthe assessment for A.Y 2007-08 treating the profit earned on sale of sahres as business profits out of busines sincome and not as capital gains. AO rejected the claim of the assessee for Rs. 61,66,584 under the short term capital gain and prepared trading and loss a/c of sale and purchase transaction and arrived at the net profit of Rs. 70,45,550 and determined the total income at Rs. 88,85,670. 4. The assessee preferred appeals before the CIT (A). The assessee filed written submissions in support of his contentions as under: * The main ground in ....
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....sible that shares of a particular company would have been sold at different times in different lots. Therefore, the observations of the Assessing Officer about the contentions raised by the appellant are not factually true. No such contention was ever advanced. * The Assessing Officer has also drawn a chart (Table-1 at page-2 of the Assessment Order) to support that the appellant purchased and sold the very same share on the same day perhaps to support his conclusion that they were business transactions. In other words these are treated by the Assessing Officer as "buy today and sell today" transactions which are not delivery based. This is not true. No shares were ever sold without taking delivery. The appellant had taken delivery of the shares purchased by him and the shares were credited to his deemat account. The SIT was paid on all transactions. These shares were held by the appellant at all times in his deemat account. The shares were sold from the deemat account by debiting the deemat account. The Assessing Officer in table-1 furnished incomplete particulars. The shares sold which are shown in table-1 have been held for a sizable number of days in the deemat account as per ....
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....shares that were purchased were sold much later and the shares that were sold were bought much earlier. The Assessing Officer has ignored the number of days for which the shares were held in the deemat account of the appellant before sale. The appellant therefore is furnishing the details of the number of days these shares were held in his deemat account Name of the Script No. of shares purchased 12.07.2006 Date of sale of these shares No. of days held before sale ICIBAN 1000 27.07.2006 15 NATALU 1000 10.11.2006 121 RELPET 4000 18.09.2006 68 TATAPOW 420 27.07.2006 15 TOTAL 6420 Name of the Script No. of shares purchased 12.07.2006 Date of sale of these shares No. of days held before sale PUNTRA 600 01.04.2006 102 INNCOM 1000 25.04.2006 78 OPTCIR 1674 25.04.2006 78 PETLlNG 200 18.04.'2006 85 POWTRA 100 18.04.2006 85 PUNTRA 600 01.04.2006 102 TOTAL 4174 Name of the Script No. of shares purchased 28.07.2006 Date of sale of these shares No. of days held before sale ANOBAN 5000 15.01.2007 18 ASHLEY 9000 15.01.2007 18 KEG/N 1000 15.01.2007 18 POWTRA 3000 15.01.2007 ....
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....31.03.07 Date of sale of these shares in next year Total no. of days these shares were held before sale (i) (ii) (iii) (iv) (v) (vi) BPL 2000 01.03.2007 30 18.07.2007 139 BPL 2625 01.03.2007 30 09.04.2007 139 BSES 1 22.01.2007 68 28.06.2007 157 BROINI 186 31032007 1 09.04.2007 10 CAIIND 9000 1.3.2007 30 9.4.2007 39 COMTEC 100 13.2.2007 46 7.1.2008 328 GAUAMB 2000 1.3.2007 30 17.5.2007 77 EVIACC 220 31.3.2007 1 9.4.2007 10 HINLEV 1000 15.1.2007 75 7.5.2007 112 ICIBAN 800 28.02.2007 31 30.05.2007 91 IOECEL 245 31.03.2007 1 09.04.2007 10 INOFIL 144 31.03.2007 1 09.04.2007 10 KREBIO 4000 18.01.2007 72 28.05.2007 130 MUOLlF 271 31.03.2007 1 09.04.2007 10 MORLAB 5000 01.03.2007 30 09.04.2007 39 ORITRI 500 31.03.2007 1 09.04.2007 10 NATALU 2000 01.03.2007 30 28.05.2007 88 NCLlNO 5000 01.03.2007 30 28.05.2007 88 PRICE 10000 27.02.2007 32 28.05.2007 88 RELCOM 500 28.02.2007 31 19.02.2008 375 RELlNO 1001 14.02.2007 45 07.01.2008 327 RPGTRA 1000 15.01.2007 75 27.04.2007 102 SAGCEM 3050 06.02.2007 53 30.05.2007 113 TlSCO 600 06.02.2007 53 27.0....
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....08 and after considering the explanation provided by the appellant, the Assessing Officer had accepted the profit derived on the sale of shares as short term capital gain during the AY 2006-07. There is no change in the factual position between earlier years and the year under appeal. Even in the assessment years prior to 2006-07, the surplus on sale of shares were treated as capital gain and was taxed accordingly. * All the transactions involving sale of shares have been routed through the recognised stock exchange and were subject to STT. All the shares sold were first entered into deemat account of the appellant and it is only from the deemat account that the shares were sold. The sale of shares represented only those shares which were first purchased, held in deemat account and later sold. * The appellant followed consistent practice of keeping records and statements as his investment in shares at the end of the year. * This is not even a case where the appellant held some shares on trading account and some as investment. The entirety of the holding was on the investment account. It is also not the case that there has been a conversion of these investment into stock-in-trade....
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....stems (P) Ltd vs. ITO 6966/Mum/2007 30.04.2010 4 ACIT vs. Naishadh V. Vachharajani 6429/Mum/2009 5 Janak S. Rangwalla v. ACIT SOT 627 25.02.2011 6 CIT vs. Gopal Purohit 1121/2009 Mumbai HC 06.01.2010 Principle of Consistency 1 Radhasoami Satsang v. CIT S.C 193 ITR 321 2 DIT vs. Lovely Bal Shiksha Prasad S.C 266 ITR 349 3 Tarben Ramanbhai Patel v. ITO & Others GUJARAT 215 ITR 323 4 Dhansiram Agarwalla v. CIT GUWAHATI 217 ITR 4 5 CIT vs. Lagan Kala Upvan DELHI 259 ITR 489 6 CIT vs. Leader Valves Ltd P & H 295 ITR 273 7 P&H 295 ITR 273 7 CIT vs. Darius Pandole Bom. 330 ITR 485 Mere intention to earn profit does not convert investment into trading transaction 1 Janakiram Bahadur v CIT S.C 57 ITR 21 2 CIT vs. H. Holck Larsen S.C 160 ITR 67 Shares whether held as investment or stock in trade is within the knowledge of the assessee. 1 CIT v. Associated Industrial Development Co. (P) Ltd S.C 82 ITR 586 6. The assessee also submitted additional grounds of appeal which are as follows: * The appellant contends that the description in the cause title of the assessment order at Col.9, under the head nature of business sho....
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....t. The main reason that the AO delved upon for concluding that the capital gains as business income is based on frequency or period of holding and the volume of shares. During the course of appellate proceedings and also on the perusal of the submissions made by the appellant and objections raised by the AO and vice-a-versa, it is found that there are several incorrect facts made by the AO in the assessment order. These facts have no bearing on the issue which is before me. During the course of proceedings, the AR of the appellant drew a parallel and a comparative factual position in support of his contention from the decision of ITAT & Mumbai High Court in the case of Gopal Purohit. 6.1 It is observed that in the earlier years the AO has the claim of the appellant uninterrupted on identical facts which are prevalent during the year under consideration and allowed the same transactions as capital gains. Consistency is a degree of firmness and harmony of conduct with profession. There has to be an aim or a design or purpose or goal to execute a specified course of action with a proper form and pattern. Therefore, I agree that the above case law fits into the facts and circumstances....
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....chase and sale of shares or making investment to have capital gains thereon." In the instant cases before us, we found that the assessee has invested in shares of Indian Companies which is clear from the statement of shareholding of the assessee. Thus, the fact of the assessee investing in shares for the last several years is not in dispute. There is also no dispute to the fact that the assessee has treated the equity shares of Indian Companies as investment i.e. capital asset all along. The assessee has also valued the shares at cost thus given a particular treatment to the shares held as investment, therefore, without brining on record contrary material, the AO cannot change the intention and manner of investment being made by the assessee. Had the assessee valued the shares at cost or market price whichever is lower, the gain arising out of sale of shares could easily be treated as business income. Assessee had not valued the shares as stock but valued the same as investment. Thus, what was a capital asset will remain a capital asset unless a person holding the asset himself changes the nature by a specific action like conversion of capital asset into stock in trade. In view of....