TaxTMI 
TaxTMI 
2012 (10) TMI 1106
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....he income under the head "Business & Profession", treating 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 ....
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.... 1 1 1 21 HIND.OILEXP 7 5 5 22 HINDALCO INDUSTRIES LTD. 2 1 23 HUGHES TELKCOM 1 1 1 24 IFCILTD 5 2 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  ....
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....is of which the AO has to decide whether income shown from purchase and sale of shares is to be taxed as income from capital gains or from business. The tests are: i) Whether dividend income has been earned or not from the shares? ii) The frequency of purchase and sale of shares, iii) The magnitude of purchase and sale. iv) The ratio between purchase and sale. v) The period for which the shares have been held. From the above test 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 t....
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....its and hence, the benefit of special rate of taxation @ 10% applied to the STCG is not allowed to the assessee and the entire transactions is treated as business transactions and accordingly, the profit / loss arising out of the share transactions is taken under the head "Business". In view of the ratio of Circular No. 4/2007 dated 15-06-2007 the STCG claimed by the assessee is treated as "Business Income ". However, the LTCG is treated as Investment of the assessee and is accordingly 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) 34....
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.... trader most of the time and also as an investor at times where he has held the shares for long term. In these circumstances, it is difficult to demarcate as to what transactions will qualify for trading transaction and otherwise as investment transactions. In these circumstances, the decision of Hon'ble Ahmedabad ITAT, the jurisdictional ITAT in the case of Sugamchand C. Shah vs. ACIT in ITA No. 3554/A/2008 would be clearly applicable to the present facts of the case. In that case, the Hon'ble ITAT has held that - "we find that the assessee is neither fully acting 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....
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....hort-term capital asset on the basis of holding period but no such criteria for treating the short-term capital asset has been prescribed under the statute. There is no indication of holding period of 30 days finds place either in the statute or in the circular/instructions as well as judicial pronouncement on the issue. He, therefore, prayed that ld. CIT(A) was not justified in trading the surplus amount received by the assessee on sale of shares which were held for less than 30 days as business profit instead of short-term capital gain. He also reiterated the submissions made before ld. 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 ....