TaxTMI 
TaxTMI 
2013 (1) TMI 868
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....cer in disallowing Rs. 28,47,311 out of interest expenses. The action is unjustified and unwarranted as the entire expenses have been wholly and exclusively incurred for the purpose of Petitioner's business activities". 2. The assessee in the present case is an individual. A return of income was filed at Rs. 26,67,570/- and carry forward short term loss of Rs. 1,17,70,414/-, was claimed in respect of sale and purchase of shares. The assessee was required to file details in respect of share transactions and it was noticed that there were certain non-delivery transaction which were to be treated as speculative transaction. However, during the course of assessment proceedings the assessee vide letter dated 17/10/2011 claimed that the activity of the assessee regarding sale and purchase of shares should be considered to be in the nature of business activity. It was pleaded that loss arising out of sale and purchase of shares should be allowed as loss arising out of business of sale and purchase of shares. A loss of Rs. 5,40,98,454/- was computed by the assessee in respect of sale and purchase of shares which has also been described at page-3 of the assessment order in the ....
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.... para 5 above 28,47,311 (17,98,011) d) Speculation business (as discussed in para 4 above) 2,14,55,056 E Capital Gains: Short Term Loss (as discussed in paras 4 above) c/f (3,53,47,944) F Income from other sources: (as per return of income) 51,18,490 Gross Total Income 2,70,76,435 Less: Deduction under Chapter VI-A (as per return of income) 1,06,500 Total Income 2,69,69,935 Rounded off to 2,69,69,940 3. Aggrieved assessee filed an appeal before Ld. CIT(A). The contentions raised before AO were reiterated. It was submitted that in earlier years the assessee had never traded in shares with large volumes and frequency, therefore, the shares were treated as investment. It was submitted that book entries do not reflect the correct nature of transaction. It is the conduct and substance which is to be seen to arrive at the conclusion about the nature and character of activity. Therefore, it was pleaded that mere showing the share trading activity as investment in the return cannot le....
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....al computation has been filed. From page 3 to 7 the details regarding sale and purchases of shares and securities have been listed. He submitted that the volume of sale and purchase is to the tune of Rs. 49.00 crores and Rs. 51.26 crores respectively. Referring to the details, he submitted that many of the transactions of sale and purchase have been done on the same date in one scrip in which assessee has incurred huge profit as well as loss. He submitted that frequency of the transaction, turnover of the assessee and average holding period of various scrips clearly indicate that motive of the assessee to carry out the activity of sale and purchase of shares was to carry out such an activity as business activity. He submitted that assessee under wrong impression had claimed the same as an activity giving rise to income under the head "capital gain". He submitted that the manner and mode in which the accounts are maintained by the assessee cannot determine the character of income and to ascertain the real character of income one has to consider the facts and circumstances of the case. He submitted that facts and circumstances of the case clearly describe that the activity of sale an....
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....n between shares held as investments and those held as stock-In-trade. (d) The treatment in the books of an assessee is not conclusive and if the volume, frequency and regularity at which transactions are carried out indicate systematic and organized activity with profit motive, then it becomes business profit and not capital gain. (e) Purchase with intention to resell can constitute capital gain or business profit depending on circumstances like quantity of purchase and nature of activity. (f) No single fact has any decisive significance and the question must be answered depending upon selective effect of all relevant materials brought on record. [Para 12]" On these facts it was held by the Tribunal that entire profit on sale of shares was to be considered as "business income" being in the nature of adventure in the nature of trade. (2) Jayshree Pradeep Shah, 131 ITD 326(Bom), wherein assessee was found to entered into voluminous transactions of purchase and sale of shares. It was also found that on certain shares assessee did not take delivery of shares purchased or sold. The income in respect to those were offered as business ....
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....res and it was held that the activity of sale and purchase entered into by the assessee was in the nature of business. (5) ACIT vs. Tarun Amarchnd Jain (2012) 21 Taxmann.com 319 (Mum) : On the facts that (i) assessee was regularly purchasing and selling shares in more than 50 scripts; (ii) most of the shares were sold within three months and in many cases within a month and in some cases within few days; (iii) assessee had also done repetitive transaction in the same scrip; (iv) total purchases of shares were for Rs. 2.61 crores and dividend income was only Rs. 65,675/- and (v) had used borrowed funds for the purchase of shares, therefore, assessee was held to have earned the income from sale of shares as business income. 7. Referring to above decisions it was submitted by Ld. AR that all the requirements to characterize the activity of the assessee as business are fulfilled, therefore, assessee should be held to have earned the income from sale and purchase of shares as business income. 8. So far as it relates to Ground No.2, it was submitted by Ld. AR that if the case of the assessee is accepted that the income from sal....
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....e purchased on 1/1/2009 amounting to Rs. 33,86,491/- were also sold on the same date for a sum of Rs. 37,42,852/- giving rise to income of Rs. 3,56,361/-. The shares purchased on 15/1/2009 amounting to Rs. 29,27,286/- were also sold on the same date for a sum of Rs. 31,71,621/- giving rise to income of Rs. 2,44,335/-. The share purchased on 31/1/2009 amounting to Rs. 11,26,071/- were also sold on the same date for a sum of Rs. 12,47,234/- giving rise to an income of Rs. 1,21,163/-. The share purchased on 22/8/2008 were sold on 18/9/2008 i.e. within a short span of 27 days. 12. The next scrip which can be mentioned is Edu Comp. This scrip has also been purchased and sold on the same date and the details are as under: Acq. Dt. Rate Acq.cost Sale Date Sales Consideration Net sale consideration Capital gains STT Paid 19/11/08 0850066 49643212 19/11/08 55219592 55219592 5576380 Yes 23/12/08 0000076 26009576 23/12/08 27691261 27691261 1681685 Yes 27/1/09 0500566 8339650 27/01/09 9058878 9058878 719228 Yes 05/02/09 8000388 2721078 05/02/09 2889159 2889159 168081 Ye....
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.... unable to appreciate that if an assessee under some misapprehension or mistake fails to make an entry in the books of accounts and all though, under the law, a deduction must be allowed by the ITO, the assessee will loss the right of claiming or will be debarred from being allowed that deduction. Whether the assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto and not on the view which the assessee might take of his rights nor can the existence or absence of entries in the books of accounts be decisive or conclusive in the matter. Therefore, simply for the reason that assessee had claimed the said income as giving rise to capital gain, which claim was later on revised during the course of assessment proceedings, it cannot be held that the activity of sale and purchase of shares entered into by the assessee has given rise to capital gain. It is required to ascertain that whether activity of sale and purchase of shares carried out by the assessee is in the nature of "business" or "capital gain". It has already been mentioned that the manner in which the assessee has carried out this activity clearly indicate that the intent....
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....ld not revise his claim. In the rejoinder Ld. AR referred to the decision of Hon'ble Jurisdictional High Court in the case of CIT vs. Pruthvi Brokers & Shareholders Pvt. Ltd. (supra). The questions before their Lordship of Bombay High Court were as under: "(A) Whether an assessee can amend a return filed by him for making additional claim for deduction other than filing a revised return ? (B) Whether, on the facts and circumstances of the case, the hon'ble Income-tax Appellate Tribunal, in law, was right in holding' that a claim of deduction not made in the original return and not supported by a revised return, is admissible ? (C) Whether, on the facts and in the circumstances of the case, the hon'ble Tribunal, in law, was right in not appreciating the fact that the Assessing Officer has no power to entertain a claim made by an assessee after filing a original return otherwise than by filing a revised return?" Their Lordship in that case referred to the decision of Hon'ble Delhi High Court in the case of CIT vs. Jai Parabolic 306 ITR 42(Del), wherein it has been held that Hon'ble Supreme Court in the case of Goetze (India) Ltd. vs. CIT(supra) had dismissed the appeal ma....