TaxTMI 
TaxTMI 
2015 (4) TMI 756
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the head long term capital gains on the sale of shares. Other than capital gains the assessee has shown dividend income of Rs. 1,99,958/- and debenture interest at Rs. 484/- 3. In the assessment proceeding, AO asked the assessee to explain as to why profits on the purchase and sale of shares, shown under the head short term capital gains, should not be brought to tax under the head "Business Income". The assessee filed detailed submissions vide letters dated 17.122007 and 26.122007. The AO also noticed that the assessee has used borrowed funds for the purchase of shares. The frequency of purchase and sale of shares was considered to be high and this activity being the main source of income of the assessee. The AO further noticed that the assessee has paid service tax, transaction charges and turnover tax and D-mat charges on these transactions. The AO held that the assessee was trading in shares. According to the AO, i) The sole intention was to book profit, ii) Trading in regular intervals and payment of professional charges, iii) Ratio of sales and purchases i.e. one to one sales and purchases, iv) Devotion of time and money in the activity as a means of livelihood of asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....answer. Various court of this country has laid down principles that should guide and assist the AO to determine the true nature of transactions carried out by the assessee. These are only guidelines and ultimately answer to the question will rest on The facts of each case and this question has to be answered by taking all facts into consideration. Reference can be made to the decision of the Supreme Court in the case of G. Venkatswamy Naidu and company 35 ITR 594 wherein honorable Supreme Court observed that 'the presence of all these factors may help the court to draw an (inference that a transaction is in the nature of trade, but it is not a matter of merely counting the numbers of facts and circumstances pro and cons, what is important is to consider their distinctive character.' CBDT bas also issued clarified this issue from time to time. First clarification was in the form of instruction 1827, dated August 31, 1989 and second clarification was by circular no 4.12.2007. In the circular certain legal principles were brought to the knowledge of the AO and it was emphasized that ultimately it the AO who has to decide the issue by taking into consideration all facts of each....
X X X X Extracts X X X X
X X X X Extracts X X X X
....41 12. N S S Investment Pvt Limited 277 ITR 149 (MAD) 13. CIT Vs Motley Finance Limited. 190ITR 719 These legal principles are only illustrative and not exhaustive. Therefore the AO has to decide the issue on the facts and circumstances of each case. 3.2 In the case of the Assessee it has shown short term capital gains of Rs. 24,82465/-. The AO has wrongly taken the figure at Rs. 23,12,026/-. it is seen that the assessee has frequently and continuously indulged in purchase and sale of shares. Even the turnover of the assessee is many times more than the average fund employed by the Assessee for investment. The assessee has indulged in purchase and sale of shares of 48 companies. The turnover of the assessee of those shares, profit from which was shown by the assessee under the head "Short term Capital Gain" is Rs. 2,43,32,164/-; whereas the average investment of the assessee in shares is only Rs. 98.77 lacs. Thus the turnover of the Assessee is nearly three times of average fund used for investment. It is further seen that the assessee company has only two shareholders. These two persons are also the directors of the Assessee company. These persons are Mr. S.P. Tulsian and his wi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rted the orders of the revenue authorities. 13. We have heard the arguments and have perused the material placed before us and the orders of the revenue authorities. On going through the order of the CIT(A) and the material placed on record, we find that the CIT(A) has taken into consideration the facts as well as legal position and the circulars of the CBDT, but did not interpret the same judiciously, as per the apparent facts of the case. Since the number of transactions were 48 in the entire year, this according to the CIT(A) was high in the case of the investor. This view by the CIT(A) baldly sustaining the observation of the AO. When we look into the facts, we find that the assessee is neither holding any SIT portfolio, nor was he indulging into sale and purchase on a regular interval basis. We also find that the department has accepted the status of the assessee as that of an investor in the preceding years as well as in the subsequent years. 14. This shows the consistency of the approach by the assessee as well as by the department. However, in the instant years, the revenue authorities did not specify anything to suggest that somehow the facts were different, or conduct o....