TaxTMI 
TaxTMI 
TaxTMI 
2016 (1) TMI 217
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....ief facts of the case are : The assessee is a wholesale trader of Bhusar and Rajma. The assessee filed his return of income on 31-10-2005 for the assessment year 2005-06 declaring income of Rs. 8,25,810/-. The case of the assessee was selected for scrutiny. Accordingly, notice u/s. 143(2) was issued to the assessee on 07-08-2006. During the course of scrutiny assessment, the Assessing Officer inter alia made additions/disallowances on account of income from sale of shares by treating the same as income from business and disallowance of Rs. 30,292/- u/s. 40(a)(ia) of the Act for non-deduction of tax at source on the payment of interest. Aggrieved by the assessment order dated 12-09-2007, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) vide impugned order upheld the findings of the Assessing Officer on both the above counts. Against, the findings of the Commissioner of Income Tax (Appeals) the assessee has come in second appeal before the Tribunal. 4. Shri M.K. Kulkarni appearing on behalf of the assessee submitted, that the assessee has been making investment in shares since long. The assessee has held the ....
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....he assessee has diverted funds from the business stating it to be idle for trading in shares. The ld. DR contended that the entries in the books of account are not conclusive. Therefore, the contention of the assessee that the shares are held as investment should not be accepted. In support of his submissions, the ld. DR placed reliance on the following decisions: i. Mazagaon Dock Ltd. vs. CIT Excess Profit Tax: 34 ITR 368 (SC); ii. CIT vs. Sutlej Cotton Mills Supply Agency Ltd: 100 ITR 706 (SC); iii. United Commercial Bank Ltd. vs. CIT: 32 ITR 688 (SC); and iv. Ornate Traders (P) Ltd. vs. ITO Mumbai: 24 SOT 125 (Mum) 6. The ld. Counsel for the assessee raised an objection that the author of the assessment order cannot defend his own order in appellate proceedings. The ld. Counsel further submitted that the decisions on which the ld. DR has placed reliance are not applicable in the facts and circumstances of the case. 7. We have heard the submissions made by the representatives of rival sides and have perused the orders of the authorities below. We have also considered the decisions on which the rival sides have placed reliance. Profit from sale of shares, whether revenue....
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....r No. 4/2007, indicating the principles to determine the nature of transaction in share. The broad criteria set out in the said circular is: 1. Intention of the assessee at the time of purchase of the shares. This can be found out from the treatment given to the purchase in the assessee's books of account. 2. Whether the assessee used borrowed money to purchase the shares, and paid interest for it. Money is generally borrowed to purchase goods for the purposes of trade and not for investing in an asset for retaining. 3. Volume and frequency of the purchases and sale/disposals. If purchase and sales are frequent, or there are substantial transactions shares, it indicates trade. Likewise, ratio between the purchases and sales and the holdings may show whether the assessee is trading or investing (high transactions and low holdings indicate trade whereas low transactions and high holdings indicate investment). Another related factor is the duration for which the shares are held. 4. Was the purchase and sale made for realizing profit, or for retention and appreciation in its value. The former indicates the purchases being part of trade; and the latter is indicative of the p....
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....t the assessee had not borrowed any fund for investment in shares and this fact cannot be lost sight off while deciding the true intention of the assessee." We find that the aforementioned decision of Tribunal supports the case of the assessee. There is no evidence to show that borrowed funds were utilized for investment in shares. It is true that the assessee had availed loan but the same was for the assesse's business and not for investment purpose. The department has not been able to show any nexus between the borrowings and purchase of shares. Thus, it cannot be said that funds were borrowed for making investment in shares. There is no doubt that volume and frequency of transaction is one of the guiding factors to find out whether the assessee is engaged in the business of purchase and sale of shares or making investment to have capital gains thereon. But it is not the sole criterion to determine the nature of investment. It is not the case of the Revenue that the shares were valued by the assessee in his books of account at cost or market value, whichever is less. Therefore, the profit from sale of shares held by the assessee cannot be said to be revenue receipt. It is an un....