TaxTMI 
TaxTMI 
2015 (7) TMI 679
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.... F No. CIT(A)- XII/Kol/Batch/08-09/347-551 dt. 20.03.2009. It appears owing to typographical error in Form No. S6 dated of communication was stated as 20.02.2009. The actual date of commu9nication of the order of CIT(A)-XII-Kolkata is 20.03.2012." Ld. counsel for the assessee has not objected to the above as there is no delay, the appeal is within time. 3. First issue in this appeal of Revenue is against the order of CIT(A) in treating the income from sale of shares as Long Term Capital Gains (LTCG for short) as against the order of Assessing Officer in which the sale of shares were treated as "business income". For this, Revenue has raised following ground No.1:- "(1) On the facts and under the circumstances of the case, Ld. CIT(A) has erred in not taking the entire4 income arising out the sale of share/unit as income from business while the main business of the assessee during the year was only purchase and sale of shares." 4. Briefly stated facts are that the assessee-company is deriving the income from business as well as from investments. The assessee is engaged in the business of carpets, garments, shares and stocks etc., The assessee has disclosed its income from sale ....
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....ons, frequency of transactions, period of holding etc., would not alter the nature of transaction from investment to trading when the initial intention of the appellant was to hold the shares under investment and accordingly recorded in the books. As such the assets (shares) categorized under the head 'investment' are to be treated as capital assets and the profit on sale of such assets are taxable under the head 'capital gains'. As observed by the Hon'ble ITAT Kolkata Bench in the assessee of Reliance Trading Enterprises Ltd. (supra) the shares were purchased with an intention of earning dividend in addition to the prospect of making profit on sale of such investment shares at an opportune moment without making any hurry for sale ignoring dividend. Respectfully following the ratio laid down by the ITAT, Kolkata Bench in the case of Reliance Trading Enterprises Ltd., and the ratios laid down in the cases discussed, I hold the profit on sale of shares/units as capital gains as against business income assessed by the AO. However in the preceding para (point 11 of para 4.4), I have discussed the issue of conversion of 'investment into stock-in-trade and back again into investment'....
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....hether an activity amounts to 'trading activity' or 'investment activity'. As seen from the above facts, the assessee is justified in its argument that its original initial intension is to hold the shares as 'investments' and not as 'stockin- trade'. The intention of the assessee as is evident from the circumstances at the time of purchase of shares/units, is a relevant factor and often a conclusive factor in determining whether a transaction is in the nature of trade or in the nature of investment. The assessee had been keeping its holdings in certain companies from a few months to a few years, which clearly indicates that the motive and intention of the assessee is to earn returns in the form of capital gain apart from dividend income. 6. As regards the AO's observation that the assessee carried out numerous transactions with larger volumes, the assessee submitted that the volume of transactions carried out in terms of total holding is not large. It is further submitted that out of 113 scrips including mutual funds only 8 scrips were sold. According to assessee most of surplus (capital gain) was on account of sale/redemption of investment held for a long period. It is submitted ....
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....t. Going by the same arguments/logic and applying the same principles as laid down by the courts, the above conversion of investment into stock-in-trade in AY 2004-05 and continuing the trading under that head and again converting the closing stock under that head into 'investment' in the AY 2005-06 under consideration amounts to a clear change of intention depending on the circumstances. We have gone through ledger accounts of the assessee for the year under consideration and noticed separate ledger accounts in respect of conversion of stock-in-trade into investment. By converting the stock-n-trade into investment, it does not alter the character, nature and intention of that particular transaction especially in the context of capital gain versus business income. By bringing in stock-in-trade under the head investment the assessee could reduce the tax incidence considerably. The activity of 'trading in shares' carried out separately in the AY 2004-05 and again brought forward to be continued in the next AY i.e. 2005-06 under the head 'investment' is to be considered as trading activity only. Subsequent conversion and treatment given in the books of accounts do not alter the charac....
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.... and exclusively for the purpose of business. In support of the arguments, the assessee cited plethora of cases which are in favour of the assessee. 10. As seen from the assessment order except questioning the rationality of the expenditure in the absence of carpet business, the AO has not brought on record any material evidence to dispute the reasonability and purpose of the expenditure incurred. As argued by the assessee, the AO has not disproved expenditure incurred nor proved such expenditure was personal in nature or capital in nature. The books of accounts are audited and auditors have not pointed out any discrepancies in the nature of personal expenses or capital expenditure debited to profit and loss account. During the course of hearing, the Ld. counsel for the assessee clarified that the expenditure incurred on travelling and conveyance was mainly on account of foreign tour to interact with business people and to explore the prospects of export in carpets and garments which is otherwise the main line of business activity of the assessee. Accordingly, we confirm the order of CIT(A). 11. The issue in assessee's CO is as regards to disallowance of expenses relating to tota....