TaxTMI 
TaxTMI 
2016 (5) TMI 21
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.... for the Assessment Years ("AYs") 2006-07 and 2007-08 (two of the appeals before ITAT being the Assessee's appeals). 2. The common question sought to be urged in these appeals by the Revenue is whether the ITAT was justified in treating the income earned by the Assessee from the shares in which it invested its surplus funds as "Short Term Capital Gains" and not under the head "Income from Business and Profession"? 3. The Assessee Company was incorporated on 19th October 2004. In the first AY i.e. 2005-06 it declared income from the investment in shares as "Short Term Capital Gains". It, however, did not commence its main business activity i.e. business in real estate. 4. The Assessee filed its return of income for AY 2006-07 on 23r....
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.... from business and not Short Term Capital Gains. Accordingly, the profit earned by the Assessee on sale of shares within a period of 30 days from the date of purchase was treated as business income. Also the amount earned as surplus after a period of 30 days was treated as Short Term Capital Gains. Aggrieved by the above orders of the CIT (A) both the Assessee and the Revenue filed the appeals before the ITAT. 6. The findings of the ITAT, inter alia, were that the shares and securities were classified as investments in the balance sheet and the investments were not made out of any borrowed funds. It further noted that gains derived from the purchase and sale of shares by the Assessee was rightly offered to tax under the head capital gain....
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....T") guidelines issued on 13th December 2005. 8. There are certain factual aspects which have to be first considered before the above submissions of Mr. Manchanda can be examined. This has been adverted to by the ITAT in the impugned order. For the AY 2006-07, the sum of Rs. 1,75,51,496 was earned by the Assessee out of 41 shares/securities which could be classified as under: "(i) Rs. 1,01,92,939 on shares held for more than 90 days; (ii) Rs. 19,03,596 for shares held between 61 to 90 days and Rs. 18,45,019 for shares held between 31 to 60 days and Rs. 36,09,941 for shares held below a period of 30 days." 9. It was thus noted by the ITAT that the finding of the AO that the Assessee was holding majority of the shares f....
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....to earn profits. Among the factors highlighted by the CBDT are the scale of the activity and whether transactions were entered continuously and regularly during the assessment year. 12. In response to the query by the Court whether there is any determination by the AO as regards the frequency of the transactions, Mr. Manchanda stated that this aspect of the matter was perhaps not examined by the AO. 13. In the considered view of the Court this was one of the crucial factors which ought to have been weighed with the AO before coming to the conclusion that the earnings of the Assessee were not from the investment of the shares but business income. Merely because 41 shares/securities were bought and sold could not per se lead to the conc....