AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2017 (2) TMI 494
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....r to treat the amount earned on sale of shares as short term capital gain and not business income and consequently to levy tax under Section 111A of the Income Tax Act (hereinafter referred to as "the Act"), revenue has preferred the present Appeals with the following proposed questions of law; (A) Whether the ITAT was justified in confirming the decision of the learned CIT(A) in holding the share transactions as investments despite the fact that motive of transactions admittedly was earning the profit (maximization of wealth in words of assessee) coupled with huge number transactions 160 sales to 123 purchases, with very less holding period, many were less than a month, transaction to stock ration was as high as 4? (B) Whether ITAT was justified in giving decision on the basis that department accepted the order of learned CIT(A) in earlier years, while department had just not gone in appeal as tax effect was below the prescribed monetary limits? (C) Whether ITAT was justified in giving its finding by misinterpreting the numbers of days when transactions has been done to numbers of transactions, which make its order perverse? [3.0] For the sake of convenience the facts in Ta....
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....ir Mehta, learned Counsel appearing on behalf of the revenue has submitted that looking to the frequent transactions of purchase and sale of shares and the duration of purchase and sale were very short, the learned tribunal ought to have held that the income derived by the assessee on shares was required to be treated as business income. It is further submitted by Shri Sudhir Mehta, learned Counsel appearing on behalf of the revenue that considering the aforesaid circumstances, in fact the CBDT issued instructions No.1827 dated 31/08/1989 for the Officers and Circular No.4/2007 dated 15/06/2007 for the Officers and taxpayers. It is submitted that the aforesaid Circulars were issued based on the analysis of factors considering various judgments of various High Courts. It is submitted that to consider whether the purchase /sale transactions constitute investment or trading the following facts as mentioned in the aforesaid Circulars are required to be considered; 1. motive for the original purchase as perceived at the time of sale. 2. The length of period of holding of the shares 3. the frequency of sale of shares 4. the circumstances responsible for the sale of shares 5. the....
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....e learned tribunal have concurrently held that the activities of the assessee were not in trading but in investment, and therefore, the amount of Rs. 2,59,43,473/- is rightly directed to be treated as short term capital gain and not as business income as observed and held by the Assessing Officer. It is submitted that both the learned CIT(A) and the learned tribunal have considered in detail the intention of the assessee and the Clause contained in the partnership deed by which there is prohibition of trading in the shares and even the losses incurred by the assessee was never considered and treated as business, and therefore, as such, no substantial question of law arise in the present Appeals. Shri S.N. Soparkar, learned Senior Counsel appearing on behalf of the assessee has relied upon the decision of the Division Bench of this Court in the case of Commissioner of Income-tax, Ahmedabad - III Vs. Nita M. Patel reported in [2-14] 42 taxmann.com 125 (Gujarat). Making the above submissions and relying upon the above decision, it is requested to dismiss the present Appeals. [7.0] Heard the learned Counsels appearing on behalf of the respective parties at length. The short question, ....
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....h shares which have been held by the appellant - firm for various periods ranging from 1 day to 180 days, the appellant has incurred loss of around Rs. 1.27 crores. There could have been no motive to incur such loss by way of short term capital loss and get a set off against short term capital gain which would save tax @ 10%. The appellant could have very well shown the above loss as business loss and could have set off this loss against other business income which would have saved substantially more tax. Further, the stipulation of the partnership deed reproduced above is clear and categorical. While the firm is permitted to carry on trading in bonds, debentures and derivatives, it is debarred from engaging in trading in shares and mutual funds. The partnership deed is a legal document and is binding on all the partners. There are four partners in the appellant - firm and the terms and conditions of the partnership deed are binding on them. If a partnership firm flouts mandatory provisions of the partnership deed which is a legal contractual agreement, the opposing partners can always challenge and all the legal consequences would follow. Further, a legal document has to be read a....
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....reafter accumulated shares were sold. Even the assessee firm has not involved itself in hedging transactions of shares. Summary of some transactions are as under; I also feel that the Assessing Officer was not justified in drawing any adverse inference from the Board's circular referred to above. The Circular only stipulates certain guidelines which can be applied to the particular facts and circumstances of a given case. In any case, even this circular is not adverse to the assessee firm considering the purchase and sales of shares, the period of shareholding, delivery of shares, payment for purchase of shares, registry of shares in its name etc. 5.5 Another important feature is that the appellant has not utilized any borrowed funds for purchases of shares and only surplus funds have been invested. 5.6 I also find that the shares which have been purchased by the appellant-firm have been delivered and registered in the name of the firm through a demat account and the transactions have not been settled through a broker without registration in the name of the firm. Further, different broker-codes have been used for F & O transactions and for purchases and sales of shares. In an....
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....to equity shares through the primary or secondary market or through any portfolio management schemes recognized by the Securities and Exchange Board of India and/or in units of mutual funds and such equity shares /units shall constitute the investment portfolio of the partnership and not stock in trade" 10. We proceed further and find that the assessee has always valued its investments at cost price and not market price. Its short term capital gains read the impugned sums of Rs. 2,59,43,473/- comprising a sum of Rs. 2,95,48,114/- from a single scrip namely M/s. Reliance Natural Resources Ltd. purchased on 05th April, 10th May, 23rd May and 2nd July, 2007 (this last day involves three transactions). This followed shall of the scrip involving all shares on 04/03/2008. The same makes it clear that the assessee's holding period of these shares ranging from 8 to 11 months during which not even a single share was sold. If we exclude this scrip, what is left is net result of loss of Rs. 36 lacs approximately. We confronted the Revenue with all this factual evidence. It fails to controvert the lower appellate authorities' findings that the assessee has always been treating its shares and....