2015 (5) TMI 755

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....rief facts of the case are that in Asstt.Year 2007-08, the AO observed that during the year under consideration, the assessee has shown income from purchase and sale of shares in normal trades of Rs. 7,67,170/- and through portfolio management scheme ("PMS") of Rs. 52,30,240/- aggregating to Rs. 59,97,410/-. He observed that in Asstt.Year 2006-07, the assessee has indulged in similar modus operandi of transactions in shares through PMS and through normal sales through BSE/NSE in respect of sale of equities. After considering facts and circumstances of the case, the claim of the assessee for the short term as well as long term capital gain was rejected and taxed accordingly treating the same as business income. 3. On appeal, the CIT(A) accepted the appeal of the assessee, and directed the AO not to treat these transaction as business as against capital gain disclosed by the assessee by observing as under: "3.3 I have considered the facts of the case, assessment order and appellant's submission. Assessing officer treated income from share transactions done through PMS and stock exchange as business income as against capital gain disclosed by the appellant. Appellant submitt....

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....reas the sales held for a period up to 30 days, the same shall be treated as business transactions. In arriving at this decision, the ITAT Ahmedabad has considered several decisions of various benches of ITAT, high courts and Supreme Court. The ITAT Ahmedabad has also considered the circular issued by the Central board of direct Taxes and has come to this considered finding. The relevant extract of this order is quoted below- "The shares which are sold out of such investment this year were mostly purchased a year or earlier showing that the assessee had intention while purchasing them to hold them and they were reflected in that balance-sheet as investment. The assessee has enjoyed dividend income and declared the same in the return of income trading the transactions as investment, even if frequency of selling of shares may be more but in respect of shares held for a considerable longer period (for more than 366 days) as per finding given by the Learned CIT(Appeals). This finding remained uncontroverted. The assessee has earned gain of Rs. 37,52,281/-, on sale of those shares which were held for more than 366 days and upto 6832 days. In any case, when those shares were purchased....

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....re have been complied with. It is also a fact that he has not borrowed any money for investing in shares. Merely because, assessee had some -it would not by itself show that they were deployed in investment. Notwithstanding, even borrowing are required to settle payments obligations 10 respect of investments, like one takes loan for purchasing a house. In any case, high frequency transactions and low period holdings indicate trade, whereas low frequency transitions and high period holdings indicate investment. 17. In this case the assessee has discharged the onus of showing that it is making investment but Revenue is able to show that there are high frequencies and low holdings in many transactions of shares indicating that assessee has some intention of purchasing and selling shares as a trader. The case of the assessee is supported by the fact that it has entered the purchases in the books as investment, shares are valued at cost and Revenue is holding such accounting treatment as investment in the past. Thus, there cannot be a fixed criteria to decide as in the present case whether, assessee has traded in Shares eventhough assessee held them as investment. 18. Though it....

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....f jurisdictional tribunal on this issue on similar facts, it is held that whenever the assessee has held the shares for the period more than 30 days, the same is treated as investment resulting in long-term and short-term capital gain and wherever shares are held up to 30 days, the income arising there from is treated as business income of the appellant." 6. At the outset, the AR of the assessee filed before us, a copy of the order of this Bench of the Tribunal in the case of the assessee itself for A.Y.2006-07 in ITA No.2498/Ahd/2009 and CO No.227/Ahd/2009 order dated 30.3.2012 and submitted that the issue is covered in favour of the assessee by this order of the Tribunal. The DR concedes to this submission of the assessee that the issue is covered in favour of the assessee by the order of the Tribunal cited supra. 7. We have considered submissions of both the parties and perused the orders of the lower authorities. We find that the Tribunal in Asstt.Year 2006-07 while deciding the appeal of the Revenue and CO of the assessee held as under: "This appeal is filed by the Revenue against the order of the Ld. CIT (A)- III, Ahmedabad vide his order No. CIT (A)- III/81/CC2(2)/0....

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....ofit from share transactions amounting to Rs. 92,77,928/- as "business income" instead of "capital gains." 4. Aggrieved by the action of the A.O. in treating Rs. 92,77,928/- as "business Income" instead of "capital gains", the assessee carried the matter in appeal before the CIT (A). CIT (A) considered the factual position/explanation/rebuttal furnished by the appellant in respect of the premises adopted by the A. O. for reaching at his conclusion. On the basis of submissions, CIT (A) held that the sale/purchase of securities was apparently an independent activity and did not form the only source of share trading. The low ratio between purchases and sales and holding, the purchase of listed securities of independent companies and not as promoters, the delivery based transactions and the actual payment/receipts and not mere book entries, absence of lack of intra day trading and of repeated transactions of some scrips etc., were the factors based on which he concluded that the assessee was an investor. Thus, after considering the detailed submissions, facts on record, the Board's Circulars etc., he concluded that Assessing Officer was not justified in holding the appellant as ....