TaxTMI 
TaxTMI 
2016 (7) TMI 690
X X X X Extracts X X X X
X X X X Extracts X X X X
....ds as under : "1. Treatment of income under the head short-term capital gain as business income : On the facts and in the circumstances of the case and in law the learned Commissioner of Income-tax (Appeal)-23 (hereinafter referred to as the learned CIT(A)) erred in upholding the finding of the learned Assessing Officer assessing the short-term capital gains as income from business and profession. 1. That the orders of both the learned Commissioner of Income- tax (Appeals) and the learned Assessing Officer are bad in law and on facts." 3. The brief facts of the case are that the assessee is an individual having business income, being proprietor of (i) M/s. Movements, (ii) M/s. International Ship Agency, and (iii) M/s. S. B. Shroff engaged in the business of transporters, hire charges and cargo handling agents. The assessee also received salary from Silver Shield Energy Pvt. Ltd. The assessee is also having receipt of share of profit from partnership firms (i) M/s. Cargo Handlers and Stevedors, (ii) M/s. Shroff and Co. (cargo handling agent), and (iii) M/s. Shroff and Co. (CHA). 4. During the course of scrutiny assessment proceedings under section143....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e. The Assessing Officer observed that the prime intention of the assessee was to trade in shares and not to hold them as investment. Therefore, the assessee's motive was to earn maximum profit and the profits were again ploughed back to earn more profits. Thus, the entire activity of the assessee has to be treated as business in trading in shares and it cannot be treated as investment. The assessee entered into substantial number of shares and during the period the assessee dealt in number of transactions of 65 scrips and the holding period varies from 5 to 342 days and the motive of the assessee is to earn profit. The assessee wherever got an opportunity sold the shares at higher price and re-entered the share again at the lower price. Hence, the objective of the assessee was not to make investment but to earn profit and the entire activity was treated as business by the Assessing Officer. Thus, the entire short-term capital gain of Rs. 32,70,593 earned by the assessee was treated as business income of the assessee by the Assessing Officer, vide assessment orders dated December 27, 2010, passed under section 143(3) of the Act. 5. Aggrieved by the assessment orders dated De....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as business income or capital gains under the provisions of the Act. Several factors such as intention of the taxpayer while purchasing the shares, whether borrowed funds were used, frequency of purchase and sale of shares, period of holding, declaration in the balance-sheet, etc., are to be considered for classifying the dealing in shares as business vis-a-vis investment. The learned Commissioner of Income-tax (Appeals) observed that the Assessing Officer pointed out the magnitude of the transaction and the period of holding, while apart therefrom the transactions in sale purchase of shares are repetitive and the learned Commissioner of Income-tax (Appeals) produced the following chart showing the repetitive transactions whereby the assessee is re-entering the market by purchasing the scrips after having sold the earlier holding in the same share : Name of the scrip Date/s of sale Date/s of purchase after selling earlier holding Alphageo (India) Ltd. 9-4-2007 10-5-2007 Aurinpro Solutions Ltd. 21-8-2007 30-8-2007 Karuturi Global Ltd. 5-4-2007, 17-4-2007, 6-7-2007 9-6-2007, 9-7-2007, 19-12-2007 26-12-2007, 27-12-2007, 1-1-2008, 7-2-2008 Kemrock....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rieved by the appellate orders dated December 16, 2011, of the learned Commissioner of Income-tax (Appeals), the assessee is in second appeal before the Tribunal. 9. The learned counsel for the assessee submitted that the short-term capital gain earned by the assessee on investments made in shares has been classified as business income by the Revenue authorities. The assessee is consistently following the same principle whereby delivery based buying and selling in the shares is classified as investment and gains arising there- from are classified as short-term and long-term depending upon the period of holding of shares, and the same principles has been adopted in the earlier years which have been accepted by the Revenue even in the scrutiny proceedings. The assessment orders under section 143(3) of the Act for the assessment years 2006-07 and 2007-08 whereby the Revenue has accepted the short-term capital gain and long-term capital gain earned by the assessee on shares, vide order dated December 30, 2008, and December 16, 2009, respectively are placed in the paper book pages 27-29 and 38-39 respectively. The learned counsel for the assessee submitted that the principle of consi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f Management Structure and Systems Pvt. Ltd. v. ITO (ITA No. 6966/Mum/2007 for the assessment year 2004-05, vide orders dated April 30, 2010). The learned counsel submitted that the long-term capital gain declared by the assessee is not disturbed by the Revenue and only short-term capital gain on sale of shares has been brought to tax as business income. The learned counsel for the assessee submitted that there was dividend income earned of Rs. 2.57 lakhs on shares investment which reflect that shares are held as investment and objective is to earn return on investment and not merely profit on sale and purchase of shares. The learned counsel for the assessee submitted that, without prejudice, the shares in which holding of shares is more than 30 days be taken as short- term capital gain up to the period of one year, while the period of holding up to 30 days should be classified as business income. The learned counsel submitted that the assessee has invested in mutual funds also. 10. The learned Departmental representative, on the other hand, submitted that there were repeated transactions of sale and purchase of shares. The assessee has re-entered the same shares again after sel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n treated as business income by the Revenue and brought to tax under the head "Income from business". The principle of res judicata is not applicable in Income-tax proceedings. The assessee is declaring the investment in shares at cost which is also accepted by the Revenue in the earlier years also in the scrutiny assessment under section 143(3) of the Act. The assessee has kept the funds with the broker whereby the broker is buying and selling the shares on behalf of the assessee with respect to the share transactions. All the shares were purchased and sold on delivery basis. No speculative transaction or F & O transactions has been undertaken by the assessee. The assessee has deployed his own money for the purchase of shares and no borrowed funds were utilised for the purchase of shares. On the other hand it is also observed that frequency, volume and magnitude of the transactions of sale and purchase of shares are very large and also the assessee is making re-entry in the shares by purchasing again the same scrip after selling the same scrip. The details of the transactions of sale and purchase of shares and the resultant gains arising therefrom are placed in the paper book whic....