TaxTMI 
TaxTMI 
TaxTMI 
2012 (10) TMI 1106
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....ng these as investment and thus were taken under the head "Capital Gain". From a perusal of the details submitted by the assessee the following facts emerged: 1.1 The assessee purchased and sold thousands of shares aggregating in total to almost one lakh shares during the year. 1.2 The assessee purchased and sold 52 different types of shares 1.3 The number of times on which the scrips were transacted by the assessee was 316 during the entire year, 1.4 The number of days on which the shares were purchased was 187 during the year. 1.5 The number of days on which the shares were sold was 157 during the year 1.6 Thus the assessee had adequate knowledge and experience to indulge in share trading. 1.7 The assessees indulged in buying and selling of shares on almost each day that the market was open. 1.8 Out of 316 times that the shares were transacted in the market the assessee sold of the shares -within a period of one month on 131 times. 1.9 Out of the 316 times the shares were transacted in the market it was only on 66 occasions that the shares were held on for more than 3 months before being sold in the market. 1.10 It would also not be out of placed to m....
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....nbsp; 3 25 INDUS IND BK LTD 4 2 2 26 ITCLTD 4 1 4 27 KEI INDUSTRIES 10 5 4 28 MANGALORE REFINERY &PETR 3 2 2 29 MTNL 4 3 3 30 MYSORE CEMENT 1 1 1 31 NAGARJUNA FERTILISER 6 4 4 32 NISSAN COPPER LIMITED 2 2 1 33 NOCIL 4 4 3 34 ORIENTAL BANK OFCOMMERCE 2 1 1 35 PETRONETLNG LIMITED 3 3 1 36 POWER TRADING CORP 20 13 6 37 PRISM CEMENTS LTD 16 6 9 38 RASHTRIYA CHEMICALSAND FERTILIZERS 2 1 2 39 RELIANCE NA TURAL RESO LTD: 9 6 6 40 RELIANCE PETROLEUM LTD 8 4 4 41 SONATA SOFT 23 12 8 42 SREI INFRASTRUCTURE FINLTD 8 6 2 43 SYNDICATE BANK 7 6  ....
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.... it is clear that the assessee's case clearly falls within the test laid down by the CBDT. Therefore, the purchase and sale of shares by the assessee is required to be taxed under the head 'Business'. 6.3 The Hon 'ble Supreme Court in the case of CIT V/s Distributors Baroda (83 ITR 377) where the question before the Hon'ble Supreme Court was whether the company could be said to be one, whose business consisted "wholly or mainly in the dealing in or holding of investments." The Supreme Court pointed out that in such a case the primary activity should be dealing in or holding of an investment. While dealing with the issue, the Hon 'ble Supreme Court also had gone into the question as to whether there could be any business of holding of investments. 6.4 This matter was examined by the Hon'ble Madras High Court in the case of CIT V/s. Amalgamations Pvt. Ltd. (108ITR 885). 6.5 Support can also be taken from the Madras High Court decision in the case of Commissioner of Income-tax vs. K.S. Venkatasubbaiah Reddiar [221 ITR 18]. 6.6 Reliance is also placed on the decision of Supreme Court in the case of State of Andhra Pradesh vs. H.Abdul Bakshi & Brs. [1....
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.... charged to tax under the head "Capital Gain". Reliance in this regard is also placed upon the following Judicial Decisions: (i) PMMohammed Meerakhan Vs. CIT [1969] 73ITR 735 (SC) (ii) Khan Bahdur Ahmed Alladin & Sons Vs. CIT [1968] 68 ITR 573 (SC) (iii) Janki Ram Bahadur Ram Vs. CIT[1965] 57 ITR 21 (SC) (iv) G. VenkataswamiNaidu & Co. Vs. CIT [1959] 35 ITR 594 (SC) (v) Eclat Construction (P) Ltd Vs. CIT [1988] 172 ITR 84 (Pat.) (vi) Raja Bahadur kamakhya Narain Singh Vs. CIT[1970] 77 ITR 253 (SC) (vii) Dalhousie Investment Trust Co. Ltd Vs. CIT [1968] 68 ITR 486 (SC) (viii) SugamchandC. Shah Vs. ACIT[2010] 37DTR (Ahd)(Trib) 345 Accordingly a sum of Rs. 808357/- is added to the total income of the assessee as income under the head "Business." 4. Before ld. CIT(A) assessee filed written submissions which has been reproduced by ld. CIT(A) in para 2.2 of his order. After taking into consideration these submissions of the assessee ld. CIT(A) has partly allowed the appeal of the assessee by observing as under:- "I have carefully perused the assessment order and the submissions given by the appellant. Perusal of the facts show the following aspects: (i....
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.... as a trader nor as fully investor. Demarcation is quite hazy; though in the books he is showing all the purchases as investment, but frequency of transaction in several cases is so large and holding period in many cases is so small - from 0 week to a week or so that assessee's defacto selling and purchasing the shares-as trader. He ^ also holding shares for long period - indicating that they are held as investment. Therefore, a criteria has to be fixed for determining as to when he is acting as trader and when as investor. Accordingly, we decide following criteria to hold when gain are to be taxed as profit to be earned under the business or to be taxed as short-term capital gain, we hold that if shares are not held even say for a month, then the intention is clearly to reap profit by acting as a trader and he did not intend to hold them in investment portfolio. We believe that if a person intends to hold his purchases of shares as investment, he would watch the fluctuation of rates in the market for which a minimum time is necessary, which are estimate at one month. Where shares are held for more than a month, they should be treated as investment and on their sale short-term ....
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..... CIT(A). Ld. D.R., on the other hand, placed reliance on the decision of this Tribunal in the case of Sugamchand C. Shah vs. ACIT and submitted that since ld. CIT(A) has followed this decision, the order passed by him may kindly be upheld. 7. Heard both the parties and perused the record. We find that assessee has shown short-term capital gain of Rs. 8,08,357/- on sale of shares and mutual funds. The A.O. has treated this as business income. We further find that there is no dispute that the investment made in shares and mutual funds have been shown by the assessee in the balance-sheet under the head "investment" and for making this investment assessee has not borrowed any fund. For deciding the issue whether the short-term capital gain shown by the assessee can be taxed as business income, there are various criteria/factors which have to be taken into account. One of the criterion is the intention of the assessee at the time of purchase of shares which is clear in this case that assessee purchased the shares for investment. Other criterion is whether the assessee has borrowed funds to purchase the shares. In this case the assessee did not borrow any money for making investment i....