AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2010 (3) TMI 1092
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....ated as short term capital gain or income from business. The assessee is an individual and Director/shareholder of M/s. Hemkanak Merchantile Pvt. Ltd. and Adhunik Finance Pvt. Ltd. Her husband is also Director and shareholder in Emerging Capital Advsors Ltd., Simcorp Fund Ltd. and Adhunik Finance Ltd. and all these companies are engaged in the business of share trading. For the assessment year under consideration the assessee had disclosed business and professional income Nil, short term capital gain before 01.10.2004 at Rs. 45,659/- and short term capital gain after 01.10.2004 at Rs. 79,74,441/- and income form other sources at Rs. 60,691/-. She also claimed dividend income of Rs. 2,24,307/- as exempt. On scrutiny of the details of short term capita gain disclosed the A.O. was of the opinion that the assessee has entered into voluminous transactions of purchase and sale of shares and out of these transactions some transaction in which delivery had not been taken, the assessee has treated as speculation loss and some of the transactions are treated as investments and losses were also claimed as set off against short term capital gain. The A.O. asked the assessee to explain why the ....
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....ent in shares as there is no intention of holding the shares as stock-in-trade and it was a regular practice of showing share purchases as investment and whatever shares are sold the gains were accounted for as capital gains. It was further contended that the assessee has borrowed money and utilised in investment in shares and this is not prohibited and was duly approved by the Hon'ble Apex Court in the case of CIT vs. Rajendra Prasad Moody 115 ITR 519 and it was also contended that intraday transactions resulting in loss of Rs. 7,499/- has no relevance and totally out of context for determining the capital gain on other shares. It was submitted that the intention of the assessee was always to hold the shares as investment but in few cases the shares purchased were sold of same day because of some wrong decision while making the investment. It will be a case of capital gain/loss and the A.O. was treating it as a speculation loss. The assessee also clarified that the Assessing Officer's finding that delivery of only 58637 shares were taken is not correct as assessee purchased 1 lakhs shares of TASC Pharma Ltd. out of which 61713 shares were received in the d-mat account of the a....
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....n loss/profit as no delivery was taken. Similar is the position about shares transacted after 01.10.2004 to 31.03.2005. Only few shares are not sold in few days. Only because some shares are kept in more than one year due to market condition will not change the nature of transaction. Appellant has taken loans from banks, financial institutions and private parties and related concern to the extent of Rs. 2.84 crors (earlier year Rs. 44.77 lacs as per Balance-sheet) to do share business and paid interest of Rs. 1,82,805/- in the current year. The other facts which indicate that assessee was dealing in shares as trader is that she has pledged the shares to ICICI & HSBC for availment of loan and also borrowed 96000 shares from its associate companies for the purpose of mortgage for loan. She has borrowed money from individuals, financial institutions, bank and associates concern and paid interest to the extent of Rs. 1,82,806/- on loan taken. No prudent person will incurred interest on loan for the purpose of investment but certainly for the purpose of business. The assessee was well acquainted with the activity of share market though her companies and family members and was using the ....
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....t of transactions is only one day and in some cases a few months. Recently Hon'ble CBDT had issued circular No. 4/2007 dated 15.06.2007 after considering various judgements on the identical issue and concluded three aspects to determine whether any transaction is trading or investment. a) Magnitude of purchase and sale b) Period of holding c) Motive behind it" 7. On the basis of this factual finding and also analysing the case laws regarding adventure in the nature of trade in para 3.8 and 3.9 the CIT(A) held that the assessee is engaged in adventure in nature of trade on full scale and it has shown purchase of shares as investment and gains as short term capital with a view to avoid tax. Investment shown in the books of account is nothing but stock-in-trade. Accordingly he upheld the action of the A.O., hence the assessee is aggrieved. 8. The learned counsel drawing our attention to the paper book filed in which the details of assessee's investments and share transactions are furnished, submitted that the assessee has investment of Rs. 1.70 lakhs at the end of F.Y. 2002-03 which has increased to Rs. 17.68 lakhs by the end of the year under appeal and the assessee i....
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....00 38358 700,910 38383 579,530 (121,380) Hiran orgo chem. 2500 38371 90,500 38399 120,650 30,150 Hiran orgo chem. 1834 38380 70,792 38399 88,509 17,716 (73,514) Gain on Shares held for the period from 31 day to 90 days TASC Pharma Ltd. 34807 38266 3,976,700 38309 4,803,371 1,826,671 TASC Pharma Ltd. 4000 38266 457,000 38338 704,880 247,880 TASC Pharma Ltd. 15000 38266 1,713,750 38352 2,636,550 922,800 Hiran orgo chem 50 38322 1,857 38359 1,742 (114) Hiran orgo chem 154 38322 5 ,718 38379 5,630 (89) Hiran orgo chem 96 38322 3,564 38393 4,394 829 Hiran orgo chem 354 38342 12,294 38393 16,203 3,908 Hiran orgo chem 781 38342 27,124 38399 37,691 10,567 Hiran orgo chem 875 38345 28,884 38399 42,228 13,344 Hiran orgo chem 1500 38348 52,035 38399 72,390 20,355 Hiran orgo chem 510 38352 18,513 38399 24,613 6,100 Hiran orgo chem 1866 38380 72,028 38422 101,193 29,166 3,081,417 Gain on Shares held for the period from 91 day to 180 days Micro Technology Ltd.....
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....s. Associated Industrial Development Co. P. Ltd. 82 ITR 586 that it is possible that the assessee to be both an investor as well as dealer in shares. Whether a particular holding is by way of investment or form part of stockin- trade is a matter within the knowledge of the assessee and it is for the assessee to produce evidence from the records as to whether he maintained any distinction between shares which are held as investment and those held as stock-in-trade. It is also held in the case of Motilal Hirabhai Spg. & Svg. Co. Ltd. 113 ITR 173 (Guj) and Raja Bahadur Visheshwara Sing 41 ITR 685 (SC) that treatment in the books by an assessee will not be conclusive and if the volume, frequency and regularity at which transactions are carried out indicate systematic and organised activity with profit motive then it becomes business profit not capital gain. In the case of CIT vs. PKN Co Ltd.60 ITR 65 it was held that purchase with an intention to resale will also, under the changed circumstance, would be capital gains. It is also held in the case of Saroj Kumar Mazumdar vs. CIT 37 ITR 242 by the Hon'ble Supreme Court that purchase with an intention to resale in order to gain profit....
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....0 GN17 SONI CAPITAL 06-Dec-00 500 11,071.07 GA021 BEST MULYANKAN 04-Apr-00 2,000 83,922.26 GA38 TATIA FINANCE 09-Dec-99 3,000 33,239.32 THIRUMALAI CHEM 1995-96 2,000.00 XPRO INTERNATIONAL 1995-96 3,215.00 255,314.44 16. Out of these, the investment in Adhunik Finance, Sarvodaya Labs, Soni Capital, Tatia Finance, Thirumalai Cehm, Xpro International have continued in the next year also whereas investments in Denim Organic and Vjilcdm to an extent of Rs. 90 ,000 were shown afresh and added to the investment list in the next year (2002-03). Some of the shares were disposed off and were shown under short term capital gain. The assessee has continued with the investment (in FY2003-04) in Adhunik Finance, Denim Organic, Sarvodaya Labs, Soni Capital, Tatia Finance and Thirumalai Chem and Xpro International. Some of the shares were also sold during the year as can be seen from the short term capital gain statement in the year under consideration. In the year 2004-05 relevant for this assessment year the assessee's portfolio of other shares is same except investment in Adani Exports Ltd. of 40240 s....
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.... shares and investment in a particular day was about Rs. 67,472/-. If assessee has by mistake invested in that scrip on a particular day, it is not explained how only this scrip was transacted from 16.12.2004 to 21.12.2004 frequently 19 times. Not only that in the same period, the assessee also invested in the same scrip on various dates to earn profit of Rs. 1,21,913/- on 10500 shares the cost of which was about Rs. 3,63,000/- and sold for a gain. It shows that the explanation given for the day-to-day transactions is not correct and the assessee has invested frequently in the particular scrip from 01.12.2004 to 28.01.2005 and sold the shares from 16.12.2004 to 11.03.2005 regularly earning both loss as well as gains in the same scrip. Another scrip which was transacted in high volume was the TASC Pharma Ltd. In this case the assessee has purchased 1 lakh shares to an extent of Rs. 1,14,25,000/- on 06.10.2004 and these shares were sold on 18.11.2004, 17.12.2004, 31.12.2004, 17.01.2005 and 18.01.2005 i.e. within a period of 3 months gaining an amount of Rs. 68,62,041/- in this transactions. As can be seen these 2 scrips have given large amount of gain. In addition, there was gain of ....