2016 (1) TMI 571

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....he assessee defended the conclusion arrived at in the impugned order. 2.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee, a private ltd. company, is a member broker with National Stock Exchange (NSC) and Bombay Stock Exchange (BSE). The business of the assessee consists of broking in shares, government and other securities, corporate advisory and mutual fund distribution. During the relevant period, the assessee made ten transactions in shares on exchange without delivery, which were duly treated by the assessee as speculative transaction. The assessee had been investing own funds in shares, mutual funds and other securities. The Assessing Officer treated the investment in shares as adventure in the nature of trade, consequently, he held the investment as trading asset by opining that huge funds were utilized by the assessee and caused substantial loss with commercial motive. The stand of the assessee is that the assessee was having net worth of Rs. 12.54 crores (as on 31/03/2008) and Rs. 12.61 crores (as on 31/03/2009), whereas, the investment in shares of listed companies was Rs. 72,17 lakhs and ....

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....dealing in shares for the purposes of business (described in paragraph 8.3 of the judgment of the Tribunal as transactions purely of jobbing without delivery). The Tribunal has correctly applied the principle of law in accepting the position that it is open to an assessee to maintain two separate port folios, one relating to investment in shares and another relating to business activities involving dealing in shares. The Tribunal held that the deliverybased transactions in the present case, should be treated as those in the nature of investment transactions and the profit received therefrom should be treated either as short-term or, as the case may be, long-term capital gain, depending upon the period of the holding. A finding of fact has been arrived at by the Tribunal as regards the existence of two distinct types of transactions, namely, those by way of investment on the one hand and those for the purposes of business on the other hand. Question (a) above, does not raise any substantial question of law. 3. In so far as question (b) is concerned, the Tribunal has observed in paragraph 8.1 of its judgment that the assessee has followed a consistent practice in regard to the nat....

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....any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. Meaning thereby, the term is of wide import and encompasses any facet of an occupation carried on with a profit motive. Whereas, Explanation -2 to section 28 reads as under:- "Where the speculative transactions carried on by as assessee are of such a nature as to constitute a business, the business (hereinafter referred to as "speculation business") shall be deemed to be distinct and separate from other business." The term "speculative transaction" has been provided in section 43(5) of the Act which is reproduced hereunder:- "(5) "speculative transaction" means a transaction in which a contract for the purchase or sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips: Provided that for the purposes of this clause- (a) a contract in respect of raw materials or merchandise entered into by a person in the course of his manufacturing or merchanting business to guard against loss through future price fluctuations in respect of his contracts for actual de....

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....dity derivative" shall have the meaning as assigned to it in Chapter VII of the Finance Act, 2013; (ii) "eligible transaction" means any transaction,- (A) carried out electronically on screen-based systems through member or an intermediary, registered under the bye-laws, rules and regulations of the recognised association for trading in commodity derivative in accordance with the provisions of the Forward Contracts (Regulation) Act, 1952 (74 of 1952) and the rules, regulations or byelaws made or directions issued under that Act on a recognised association; and (B) which is supported by a time stamped contract note issued by such member or intermediary to every client indicating in the contract note, the unique client identity number allotted under the Act, rules, regulations or bye-laws referred to in sub-clause (A), unique trade number and permanent account number allotted under this Act; (iii) "recognised association" means a recognised association as referred to in clause (j) of section 2 of the Forward Contracts (Regulation) Act, 1952 (74 of 1952) and which fulfils such conditions as may be prescribed and is notified by the Central Government for this purpose;]" I....