TaxTMI 
TaxTMI 
TaxTMI 
2016 (7) TMI 171
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....e whereby the assessee has treated the same as the long term capital gain exempt u/s 10(38). 3. The appellant craves to leave, to add, alter or amend any ground of appeal raised above at the time of the hearing. 3. Brief facts of the case, as obtaining from the assessment order, are that in the relevant assessment year, the assessee company was engaged in the business of purchase and sale of shares, debentures, stock bonds and securities. The assessee filed its return of income declaring total income of Rs. 17,38,820/-. The AO noticed that assessee had claimed exemption u/s 10(38) in respect of long term capital gain amounting to Rs. 97,96,248/- and short term capital gain was declared at Rs. 1,007/-. Further, long term capital gain [as per proviso to section 112(1)] amounting to Rs. 52,676/- was also declared. The AO observed that assessee was doing share trading, which was both delivery based and non-delivery based. The AO has observed that since the business of the assessee was trading in shares, therefore, he required the assessee to explain why capital gain declared on shares/ securities should not be treated as business income as the business of the assessee was trading in....
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....ss income. 7. Ld. counsel for the assessee submitted that assessee was not trading in shares. The consistent practice of assessee was to hold shares as investment. In this regard ld. counsel referred to the balance-sheet of assessee wherein in Schedule 4, relating to investment, contained at page 48 of the PB, 838882 equity shares of Rasandik Engineering Industries India Ltd. were held as investment as on 31.3.2004 a well as on 31.3.2005. Ld. counsel further referred to the written submissions filed before ld. CIT(A), contained at page 23 of the PB, wherein details of share holding as on 31.3.2004 and 31.3.2005 was as under: Name 2003-04 2004-05 No. of Shares Amount No. of shares Amount Rasandik Engineering Industries India Ltd. 814396 7618277.00 838882 16232324.00 Jay Bharat Maruti Ltd. 100 2010.00 100 2010 Automotive Stampings and Assemblies Ltd. 60 370.00 60 252 Tata Motors Ltd. 1500 746015.00 1500 746015 Tata Steel Ltd. 300 117585.00 450 117585 JBM Auto Components Ltd. 40 148 Total 616356 8484257.00 841032 17098334.00 8. Further, it was pointed out that the investment in shares had been mad....
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....a period of more than one year. In this connection, it is relevant to note that for the immediately preceding three assessment years, namely, 2005- 06, 2006-07 and 2007-08, the AO adopted similar approach as in the year under consideration but the CIT(A) overturned the assessment order on such point by holding similar income to be capital gain instead of business income assessed by the assessee. 5. Principle of consistency requires that the view taken in one year should be followed in subsequent years, unless the facts or the legal position justifies departure therefrom. The Hon'ble Bombay High Court in CIT Vs. Darius Pandole [(2011) 330 ITR 485 (Born.)} has held that income from sale of shares treated as business income in earlier years by way of assessment u/s 143(3) cannot be taken as capital gain in subsequent year. The essence of the judgment is that the principle of consistency should be followed and the parties should not be allowed to register departure from the existing position time and again. In the like manner, the Hon'ble Bombay High Court in CIT VS. Gopal Purohit (2011) 336 ITR 287 (Born) has held income from shares as Business income on the basis of the rul....
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....ies India Ltd. is in Auto ancillary and therefore the assessee company has made investment on long- term basis in similar auto sector companies such as Jay Bharat Maruti Ltd. (100 shares) Automotive Stampings & Assemblies Ltd. (60 shares) and Tata Motors Ltd. (1500 shares). Besides these it has made investment in Tata Steel Ltd. (450 shares). The details are contained in Schedule 4 to the accounts. 3. The investment have been made from own fund over a period of time and are classified as long term investment in the books and accounts of the assessee company. 4. The investment is held in dematerialized form. The sales from the demat accounts are recognized on First in First out (FIFO) basis. 5. The copies of demat accounts are enclosed to show the long-term holding of the shares. 6. The opening balance of holding in Rasandik Engineering Industries India Ltd. shares was 814396 equity shares on 01- 04- 2004. The same were dematerialized as under:- Opening as on 01.04.04 in demat account 39,696 20.09.04 - dematerialized 1,600 23.09.04 - dematerialized 2,50,000 24.09.04- dematerialized 5,23,100 8.14.396 During the year 2004-05 the company had purchased 1,8....
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....eneral and require no adjudication. 20. Apropos ground no.3, brief facts are that assessee had filed return declaring loss of Rs. 20,06,475/-. The AO noticed that the assessee had declared long term capital gain (claiming exemption u/s 10(38) amounting to Rs. 3,23,56,173/- and short term capital gain amounting to Rs. 37,93,206/-. The AO has further noticed as under: "The perusal of the details filed by the assessee In respect of its claim of long term capital gains shows that the gain of Rs. 9841195/- has basically been derived from the sale of the scrip - Rasandik Engineering Industries India Ltd. It is the same scrip in which the assessee has also done non-delivery based speculative trading and declared speculation profits on the same. Therefore, when the assessee has itself declared business income from the trading in the shares of Rasandik Engineering Industries India Ltd., the claim of the assessee that it has derived long term capital gains from the same scrip cannot be accepted. Thus, the entire gains derived by the assessee from the purchase and sale of shares is held to be business income of the assessee". 21. Thus, the facts in the present assessment year as regards g....
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....perusal of the details filed by the assessee in respect of its claim of long term capital gains shows that the gain of Rs. 9841195/- has basically been derived from the sale of the scrip - Rasandik Engineering Industries India Ltd. It is the same scrip in which the assessee has also done non-delivery based speculative trading and declared speculation profits on the same. Therefore, when the assessee has itself declared business income from the trading in the shares of Rasandik Engineering Industries India Ltd., the claim of the assessee that it has derived long term capital gains from the same scrip cannot be accepted. Thus, the entire gains derived by the assessee from the purchase and sale of shares is held to be business income of the assessee." 30. He, accordingly, treated the profit on sale of shares as business income. Ld. CIT(A) following the order for AY 2005-06, allowed the assessee's claim. Thus, the facts in the present assessment year, as regards ground no. 2, are similar to the facts as obtaining in AY 2005-06. Therefore, for the very same reasons as in AY 2005-06, above, we uphold the action of ld. CIT(A) on the issue in question. Ground is dismissed. 31. Apropos gr....
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....e hands of a person who is a shareholder of the lender company and not in the hands of a person other than a shareholder. On the second question: The expression shareholder referred to in Sec.2(22)(e) refers to both a registered shareholder and beneficial shareholder. If a person is a registered shareholder but not the beneficial shareholder than the provisions of Sec.2(22)(e) will not apply. Similarly if a person is a beneficial shareholder but not a registered shareholder then also the provisions of Sec.2(22)(e) will not apply." 37. Ld. CIT(A), thus, concluded as under:- "Perusal of the provisions of section 2(22)(e) and the judicial decisions cited above show that deemed dividend will be taxed in the hands of the share holder. In the instant case since the appellant was not a share holder of the company, therefore, the assessment of the deemed dividend in the hands of the appellant was not correct. In view of the findings above and judicial precedents on the subject, this ground of appeal is allowed in favour of the appellant. 38. Ld. counsel pointed out that now this issue is also concluded by the decision of Hon'ble Delhi High Court in the case of CIT Vs. Ankitech P. Ltd....