TaxTMI 
TaxTMI 
2016 (7) TMI 1236
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....al gain being treated as business income/loss all these are adjudicated and disposed of together for the sake of convenience. 3. The facts in brief are that the assessee filed its return of income on 29.9.2008 declaring income at NIL. The said return was processed under section 143(1) of the Act. Thereafter the case was selected for scrutiny and statutory notices u/s143(2) and 142(1) of the Act were issued and served upon the assessee. The assessee has income from speculation business and capital gains. The AO during the course of assessment proceedings found that the assessee has incurred loss from the derivative trading of Rs. 27,14,30,253/ and assessee has incurred short term capital loss on equity shares of Rs. 7,57,10,331/-, Short term capital gain on equity shares of Rs. 2,57,89,650/- and long term capital gains on sale of shares Rs. 5,14,30,041/- besides showing speculation profit on equity shares of Rs. 10,471/-. The Long Term Capital Gains of Rs. 5,14,30,041/ on sale of shares was claimed as exempt income u/s 10(38) of the Act which arose from the sale of three scrips only. The AO came to the conclusion that dealing in equity shares both short term and long capital gain....
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....6 and 2007-08, the said scrips which were sold were accepted as opening and closing investment respectively and not as stock-in-trade and therefore the income accruing or loss arising there from would be long term/short term loss depending upon the period of holding of the particular script. Moreover, the shares were valued at the end of year at the cost and not at market value or cost whichever lower meaning thereby that shares purchased were purely of investments nature and accordingly valued at cost which was accepted by the department in the earlier years and thus, the intention of the assessee was to invest in shares and not to trade in shares as all the investments were delivery based. The assessee was doing trading in derivatives in option and futures and has earned gain/loss from the said activities accordingly. Besides, the AO has wrongly taken the basis of turnover for arriving at a conclusion that the assessee was doing huge trading activities in sharers. The ld. AR also argued that holding period or frequency of transactions or turnover should not be taken as basis to form an opinion whether the assessee was engaged in the activity of business in shares or investments i....
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....f Apex court relied upon by the assessee. We have also considered the CBDT circular as relied upon by the assessee. We find that the assessee was doing the activities of investments in shares and securities and was trading in derivatives in future and option. Over the years, the assessee has been showing the gain/loss from sale of shares being investments which was accepted by the revenue as is clear from the assessment order passed u/s 143(3) for the assessment years 2005-06 and 2007-08 by the department in the earlier years even in the scrutiny proceedings as is clear from the copy of the assessment orders for the assessment years 2005-06 and 2007-08, which are placed at pages 10 to 15 of the assessee's paper book. The assessee has been consistently showing closing and opening value of shares and securities at cost, under the head investment in shares as is clear from the copy of Balancesheet filed in the paper book. The assessee was not using any borrowed funds for the purpose of investment in shares and own funds were being routed for purchase and sale of the shares, as it is clear from the copy of balance sheet placed at page 4 of the paper book. During the year, the assessee ....
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....ble. Moreover, the case of the assessee is fortified by the CBDT circular bearing number 6 of 2016 dated 29.2.2016 which is reproduced below for better understanding : "Circular No.6 of 2016, dated 29th February, 2016 Sub: Issue of taxability of surplus on sale of shares and securities -capita. Gins or business income-instruction in order to reduce litigation-reg. 1. Sub-section (14) of Section 2 of the Income-tax Act, 1961 („Act‟) defines the term "capital asset" to include property of any kind held by an assessee, whether or not connected with his business or profession, but does not include any stock-in-trade or personal assets subject to certain exceptions. As regards shares and other securities, the same can be held either as capital assets or stock-in-trade/ trading assets or both. Determination of the character of a particular investment in shares or other securities, whether the same is in the nature of a capital asset or stock-intrade, is essentially a fact-specific determination and has led to a lot of uncertainty and litigation in the past. 2.Over the years, the courts have laid down different parameters to distinguish the ....