TaxTMI 
TaxTMI 
2016 (1) TMI 643
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....sallowances:- Firstly, the Ld. CIT(A) has erred in law and on facts in treating the amount of long-term-capital-gains of Rs. 13,04,76,692/- on sale of shares as share trading income and assessing the same under the head "profit and gains of the business"; and Secondly, Ld. CIT(A) has erred in law and in facts in disallowing depreciation of Rs. 3,85,043/- without conducting any business activities during the year. 2. The brief facts qua the first issue is that, assessee is an individual who has declared long-term-capital-gain in share transactions amounting to Rs. 13,05,45,813/- which was claimed as exempt u/s 10(38). The AO required the assessee to furnish the details of share transactions along with the copies of bills, demat account....
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....ages 2 to 5 of the assessment order. However, the AO rejected the assessee's contention after referring to various case Laws on the issue that mere entry in the books of accounts (wherein the shares have been shown as investment) cannot be the only determinative factor for deciding the head of accessibility or its taxability and also referred to CBDT Instruction dated 16.05.2006. The AO noted that assessee had shown long-term-capital-gain on 6 scripts under the head "long-term-capital-gain" and the major gain has come from script named as "Pyramid Saimira Theatre Ltd." For Rs. 12,96,87,900/-. The details of such scripts as noted by the AO are as under:- 1 Bausch & Lomb Rs. 1,030/- 2 Genesys Security Rs. 6,47,135/- 3 ....
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.... assessee had been allotted shares from the promoters' quota directly and also noted that SEBI has noted certain discrepancy and some kind of alleged forged letter managed by the promoter of the company in the name of SEBI to make an open offer of the share particulars of Rs. 250/- per share that is, sold for more than 4 times of the original market price/IPO. Ultimately, it was found that, no such letter was issued by the SEBI on this script and price was rigged to get higher price of the shares. After all these observations, ultimately the AO has simply made the addition by treating long-term-capital-gain as income from business. This action of the AO too has been confirmed by the CIT(A) exactly on the same reasons as given by the AO. ....
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.... AO has held that assessee has not earned any dividend income. Lastly, in support of his contention that once the assessee has purchased these shares allotted through IPO, then it can be inferred as an investment in a capital asset, he filed various Tribunal decisions. 4. On the other hand, Ld. DR strongly relied upon the order of the AO and CIT(A). 5. We have heard the rival contentions and also perused the relevant material placed on record. Here in this case, the assessee had shown long-term-capital-gain mostly on sale of 3 scripts and particularly from the sale of script of M/S Pyramid Saimira. The assessee has bought these shares through IPO for sums aggregating Rs. 1,20,00,000/- in the month of May & November, 2006. This stock h....
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....hat the assessee's intention for purchasing the shares was purely for investment and to earn gain on a long term investment. Not only this, in earlier years also the assessee's investment in shares have been held to be assessed under the head "capital gain", because consistently assessee has been showing investment in shares in his personal Balance sheet purchased out of his own surplus fund. As pointed out by Ld. Counsel, the Ld. AO has misled himself by taking the Balance sheet of the Proprietary concern wherein the assessee had shown certain loan, whereas the investment have been made through personal account which is reflected in the personal Balance sheet, wherein there are sufficient own fund for making the investment. Thus, on these ....