TaxTMI 
TaxTMI 
TaxTMI 
2016 (5) TMI 29
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....g the course of assessment proceedings, the AO observed that the assessee claimed investment activity and shown short term capital gain from share transaction of Rs. 73,70,214/-. Examination of D-mat accounts and transactions in brokers' account furnished by the assessee makes it clear that purchase and sale of shares/units is not investment activity but it is the business of the assessee. During the course of the proceedings, the assessee was asked to submit an analysis of the entire port folio taking into consideration various parameters such as number of scrips, volume, frequency of transactions and their systematic and period nature. The details regarding the inherent nature of the port folio were duly analyzed in the light of CBDT Circular No 4 of 2007 dated 15.06.2007, decision of Apex Court in the case of CIT vs. Associated Industrial Development Company Pvt. Ltd. etc. The AO discussed the activity of the assessee as under : 3. The details submitted by the assessee along with return of income and during the course of assessment proceedings, D-mat account of assessee and transactions in D-mat account of broker reveals that assessee has done voluminous transactions in shares ....
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....invested are very less and the same has been done with the motive of investment and the assessee has regularly declared the same as his share investment. We are enclosing the copy of returns and computation showing the capital gain declared by the assessee in earlier years. Even CBDT in circular no. 4/2007 dated 15.06.2007 have clearly laid down the guidelines as to whether a share transaction is for purpose of investment of business and the assessee fulfills as criteria of the said circular." The AO considered the explanation of the assessee but could not found it non-tenable. Intention of the assessee was not investment which is already discussed supra. Mere delivery of shares does not decide the nature of transactions. It has the holding period; frequency of transaction and other criteria laid down determines nature of transactions. Mere fact that assessee has taken delivery, at most, put the nature of business as non speculative business income. The AO observed that the assessee himself has claimed that on the basis of shares, allegedly closing stock of the assessee lying with broker, he is allowed to purchase & sale of shares on credit. Such nature of transaction merely forti....
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....ed by the A/R for the appellant in the case of Nagindas P Sheth (HUF) vs. ACIT-21 (3) Mumbai ITA No. 961/MUM/210 A.Y. 2006-07 is clearly applicable wherein it was held that " The assessee is an investor. Such being the case, merely because assessee transacted in 158 shares that should not be taken as a sold criterion to come to the conclusion that assessee is a trader in shares. It is not in dispute that in the books of accounts assessee has declared the shares as investment and the finding of the learned CIT (A) that only own funds were utilized for purchase of shares was not contradicted by the learned DR. It was also highlighted by the learned CIT (A) that assessee had not indulged in any squaring-up of the transactions on the same day. On a conspectus of the matter, we are of the view that the transactions of purchase and sale of shares, in the instant case, deserves to be considered as investment and profit thereon has to be assessed to tax under the head "capital gains". Hence, in view of these facts and judicial decision referred by the A.R for the appellant it is held that it is not in dispute that in the books of accounts has declared the shares as investment and the findi....
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....ITD 200 (ITAT Ahmedabad) CIT vs. Sugar Dealers 100 ITR 424 (All.) CIT vs. Guest Keen & Neetlefold Ltd. 115 ITR 205 (Cal.) CIT vs. Manna Lal Nirmal Kumar Surana 264 ITR 116 (Raj.) CIT vs. Simpson General Finance Co. Ltd. 230 ITR 222 (Mad.) ACIT vs. Khetan Kumar A Shah, 242 ITR 83 (Kerala) Ashoka Viniyoga Ltd. vs. CIT 70 ITR 381 5.3. Before us the moot question which is required to be decided is whether the income earned by the assessee on account of share is required to be treated as business income or required to be treated as short term capital gain. After the matter was heard on 11.02.2016, the CBDT came out with the Circular No. 6/2016 dated 29.02.2016 in the following manner :- "Sub-section (14) of Section 2 of the Income-tax Act, 1961 ('Act') defines the term "capital asset" to include property of any kind held by an assessee, whether or not connected with his business or profession, but does not include any stock-in-trade or personal assets subject to certain exceptions. As regards shares and other securities, the same can be held either as capital assets or stock-intrade/ trading assets or both. Determination of the character of a particular investment i....