TaxTMI 
TaxTMI 
2011 (7) TMI 1187
X X X X Extracts X X X X
X X X X Extracts X X X X
....urchase and sale of shares. In addition to this he held that the assessee also dealt with Futures and Options and has incurred loss of Rs. 17,15,444/-, which has been offered to tax under the head 'business income'. The Assessee explained to the Assessing Officer that it has purchased and sold shares as a part of its investment and accordingly it has correctly offered to tax profits under the head "Capital Gain". However Assessing Officer held that profits are liable to be taxed under the "profits and gains of business and profession" for following reasons : i. The Appellant has purchased and sold shares with a view to earn profit and not to hold the same for earning income. ii. The Appellant has entered into purchase and sale of shares on a large scale and has repeatedly indulged the in the purchase and sale of shares. iii. The frequency and volume of transactions is quite high. iv. The Appellant has borrowed money for purchase sale and shares. v. The period of holding of shares is short. The Assessing Officer relied on following in case laws. i. Rajputana Textiles (Agencies) Limited vs. CIT(1961) 42 ITR 742 (SC) ii....
X X X X Extracts X X X X
X X X X Extracts X X X X
....purchase transactions which are much more than the scripts in which Assessee dealt. Thus the Assessee has purchased and sold shares in lots. For example shares of M/s. Andhra Sugar was purchased on 4 occasions and sold on 4 occasions. Similarly shares of M/s. Atul Limited were purchased on 7 occasions and sold on 13 occasions. These examples are only illustrative. The transactions of purchase and sale of shares are substantial, carried on continuous basis and have been carried out throughout the years. Further the Assessee has repeatedly purchased and sold shares of a particular script. For example shares of M/s. Atul Limited were sold in the month of May, 2005. These shares was again purchased in the month of June 2005 and sold on July, 2005. Similarly, the Assessee has entered into repeated transactions of purchase and sale in shares of M/s. Finolex Cables Limited. It is further seen that the Assessee has deployed borrowed fund for the purpose of purchase of shares even though it has earned net interest in the current year. The assessee earned net interest income because it has not paid interest on unsecured loans and as a result of this its interest income is more than the inter....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gement with some share brokers for the sale of large portion of total holding of 19,76,000 shares of the mill company which was to be acquired by the assessee. The sale price of the shares was fixed in the range of Rs. 5-8-0 to Rs. 5-13-0. On the basis of the above facts, it was held that the assessed never wanted to acquire the shares. The shares were acquired and sold merely to finance the acquisition of the managing agency." 6. Secondly for the proposition of the AO that purchase and sale of shares of substantial amounts at frequent intervals cannot be treated as investment in shares but treated as dealings in shares relying on the decision in the case of Raja Bahadul Visheshwara Singh 41 ITR 685 (SC), the Counsel submitted that the decision is not relevant to the facts of the present case in as much as the accounting treatment in the case of the assessee is uniform and there is no borrowings used for the purchase of shares. As regards the objection of the AO that even a single transaction may be considered as adventure in nature of trade it was submitted in the case of the assessee, the memorandum nowhere provides for share trading and also whether a particular transaction i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... No.140 of the paper book where Schedule-12 "Other Income" is appearing for ready reference. 10. The Ld. Counsel further referred to Page No.79 and also Page Nos. 80 to 88 of the paper book to explain the fact that approximately 78.55% of the total short term capital gains are arising due to transactions which have holding period of more than 60 days. Accordingly, it was submitted that the observation of the Assessing Officer and the CIT(A) that the period of holding in the case of the appellant is short is not correct. 11. The Ld. Counsel further pointed out at page 48 of the Paper book where the nature of business of the assessee is dealer in computer peripherals. At page 4 of the additional paper book, the assessee has given the chart showing number of transactions per script the books of accounts were produced and the balance sheet at page 97 and 101 from where the assessee pointed out that the shares were shown as investment consistently for all the years. At page 77, the chart showing the period-wise breakup of capital gain on sale of shares and submitted that the investor has also to take care of the percentage of total capital gain. In the definition of short term gai....