2016 (8) TMI 253

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.... 28.11.2008 & 26.10.2009 for assessment years 2006-07 and 2007-08 respectively. Shri A.K. Tulsian, L'd Authorized Representative appeared on behalf of assessee and Shri P.K.Chakaraborty, L'd Departmental Representative appeared on behalf of Revenue. 2. Since common grounds are involved in both the appeals except figure, therefore we heard them together and deem it appropriate to dispose of them by way of this common order. Therefore we are taking the facts of the case for AY 2006-07 as a lead case for the sake of convenience, we pass a consolidated order for both the appeals. Sole ground raised by Revenue is reproduced below:- "1) Whether on the facts and in the circumstances of the case, Ld. CIT(A) is justified in holding that the tr....

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....ch are running into 270 proximate for short term capital gains and about 100 approximate for long term capital gains. This regular activity of the assessee constitutes the business. The assessee has carried out large number transactions with large voluminous some of the transactions were completed within short period of time. The assessee till the assessment year 2004-05 was only in the trading of share and securities as apparent from the financial statement that there was no investment in AY 2004-05. The AO also observed that as per the memorandum of assessee its main business is to undertake the trading of shares and securities. In earlier assessment year, the Department never examined the issue on this line. Finally, AO treated the capit....

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....nder consideration assessee has earned substantial dividend income of Rs. 1.54 lakhs on these hares and mutual funds and assessee has also been subjected to STT on these transactions. I have also carefully considered the judgment of Mumbai ITAT in the case of Gopal Purohit which has been confirmed by Hon'ble Bombay High Court in 228 CTR 582 (Bom) and SLP filed by Dept. has also been rejected by the Hon'ble Supreme Court. The facts of the case under consideration are similar to the facts in the case of Gopal Purohit therefore, the AO is directed to treat profits on sale of shares as capital gains and accordingly he is directed to compute tax on capital gains in accordance with IT Act, 1961. Therefore, ground no. 1 is allowed...." ....

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....poses. We find from the balance-sheet of the assessee which are placed on pages 34, 35, 48, 49, 61 & 62 of the assessee's paper book - where assessee maintains two portfolios as discussed above. Even the CBDT Circular no. 4 of 2007 dated 15.06.2007 envisages the practice of assessee's maintaining dual portfolios. We also find that the decision was rendered by the Hon'ble Bombay High Court in the case of CIT vs. Gopal Purohit reported in 228 CTR 582 (Bom), wherein the assessee had maintained dual portfolios and ultimately the court held that the resultant gains from investment activity would be assessable as capital gains and not business income. We also find that the CBDT in its Instruction No.1827 dated 31.08.1989 has laid down certain....

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....ances. The most excruciating factor to be looked into at this juncture is the conduct of the assessee. The next point to be addressed in this issue is whether the frequency of transactions would alone indicate the trading activity. In this regard, we find the coordinate bench of Mumbai Tribunal had an occasion to consider the same in the case of Janak S. Rangawalla vs. ACIT (2007) 11 SOT 627 (Mum), wherein it was held that:- "It is the intention of the assessee which is to be seen to determine the nature of transaction conducted by the assessee. Though the investment in shares is on a large magnitude but the same shall not decide the nature of transaction. Similar transactions of sale and purchase of shares in the preceding years have....

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....are putting our reliance in the CBDT's Circular 6 of 2016 dated 29.02.2016, the relevant extract is reproduced below:- "a) Where the assessee itself, irrespective of the period of holding the listed shares and securities, opts to treat them as stock-in-trade, the income arising from transfer of such shares/securities would be treated as its business income, b) In respect of listed shares and securities held for a period of more than 12 months immediately preceding the date of its transfer, it the assessee desires to treat the income arising from the transfer thereof as Capital Gain, the same shall not be put to dispute by the Assessing Officer. However, this stand, once taken by the assessee in a particular Assessment year, shall rema....