TaxTMI 
TaxTMI 
2010 (12) TMI 1166
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.... dividend income of Rs. 5,23,396/- and interest on government bond of Rs. 2,34,000/- and claimed exemption. The AO verified the details of the transactions on sale and purchase and noticed that the assessee himself treated the share dealing as business in the assessment year 2004-05 and offered gain on the sale of shares as trading profit. The AO asked the assessee as to why the gain from sale of shares should not be taxed as business income in stead of short term or long term capital gain. 4. In response, the assessee explained that the assessee is a senior citizen and is alone in the family and his health does not permit him to do the business. He does transactions of shares through share broker, Jawai Securities Limited. He left investment and disinvestment of shares in the hands of the broker as he is not in a position to decide the worth of the investments. The assessee filed the details regarding the purchase and sale of shares for the last 2-3 years and it has been shown in the books of account as investments. The AO did not accept the version of the assessee. The AO was of the view that the volume and periodicity of transaction does not alter the nature of the transactio....
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....ssessment year 2001-02 therefore no capital gain was offered by the assessee, however, the profit on sale of shares was offered as income from business and profession due to the increase of volume of transactions. The learned AR further submitted that except the assessment year 2004-05, the assessee has been consistently treating the purchase of shares as investment and therefore if the principle of consistency is applied, the transaction should be treated as investment. He has filed the chart showing various details of sales and purchases and submitted that during the period relevant to the assessment year under consideration, the assessee has done 38 transactions of purchases and 41 transactions of sales and thus, the total number of transactions during the year was 79. As far as the number scripts is concerned the learned AR has submitted that only the assessee has purchased the shares of 22 scripts during the year. The learned AR of the assessee has submitted that where the holding period of shares is less than one month, the assessee has sold these shares not for earning the profit but to avoid the loss to the assessee being the prudent person. He has further submitted that....
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....at there is no basis of facts recorded by the authorities below that the assessee has been maintaining full office cum residence for the purpose of share trading. He has pointed out that that no stock and no office expenses are debited in the books of account by the assessee, therefore, observations made bys the lower authorities is without any basis. 9. We have considered the rival contentions and relevant record. The assessee has filed the chart giving details of share purchased and sold and also short term capital and long terms capital gain. The chart is reproduced below: Shri Chhiturbhai N Patel Statement showing details of sales and purchase of shares for the year ending 31.03/2006 SHORT TERM CAPITAL GAIN Name of scrip Name of scrip Holding period(in days Purchase amount Sales Amount Capital gains Dividend No. of transaction during the year purchase + sales 31 InfoTech ltd 8,400 156 1,105,895.00 1,509,780.00 403,885.00 2 + 2 ACC Ltd 1200 4 575296.00 560490.00 (14,806.00) 1 + 1 Bongaingaon Refinery 6100 76 573717.00 433700.00 (140017.00) 366....
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....actions of sales in a month during the year under consideration. There is no straight jacket formula to decide the nature of transaction to be treated as investment or trading. The Board has issued guidelines vide instruction no.1827 dated 31.08.1989 to determine whether the transactions to be treated as trading or investments which are reproduce below for the sake of convenience : "i. Whether the purchase and sale of securities was allied to his usual trade or Business was incidental to it or was an occasional independent activity; ii. Whether the purchase is made solely with the intention to resale at a profit or for long term appreciation and / or for earning dividends and interest; iii. Whether scale of activity is substantial; iv. Whether transactions were entered into continuously and regularly during the assessment year; v. Whether purchases are made out of own funds or borrowings; vi. Typical holding period for securities brought and sold; vii. Ratio of sales to purchases and holding; viii. The time devoted to the activity and the extent to which it is the means of livelihood; ix. The characterization of securities in the books of account and i....