2016 (3) TMI 1180
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....right to add, alter, modify, amend or withdraw any of the grounds of appeal before bearing. 3. As the grounds of appeals for Asst. Years 2005-06 & 2006-07 are common in nature so we will deal ground of appeal for Asst. Year 2005-06 and the decision thereof shall be applied to appeal for Asst. Year 2006-07 also. 4. Briefly stated facts of the case as culled out from the records are that assessee is an individual and having source of income from capital gains, dividend and interest etc. and filed her return of income on 30.10.2005 showing total income at Rs. 14,68,542/-. During the course of assessment proceedings details regarding purchase/sale of shares were produced and scrutinized pursuant to notice u/s 143(2) of the Act issued on 7.9.2006 followed by notice u/s 142(1) of the Act along with questionnaire on 6.8.2007. After examining the frequency of transactions of purchase/sale of shares ld. Assessing Officer was of the view that transactions of purchase/sales of shares held for not more than 12 months should be covered under the head business income and not as short term capital gain and accordingly assessed the same as business income. However, ld. Assessing Officer accepted....
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....vide further guidelines for determining whether a person is trader in stocks or an investor in stocks. It is seen that the appellant's case fails on a majority of counts. The purchases are made solely with the intention to sell at a profit and not for long term appreciation or for earning dividend, purchases are being entered into continuously and regularly, the scale of activity is substantial, purchases are being made out of initial borrowings from the husband of the appellant. The total holding period for securities bought and sold is also very short. Ratio of sales to purchases and holding is also indicative of a business activity. It is also seen that total number o." stocks dealt in by the appellant is also quite large which indicates that the appellant is not an investor but a trader in stock and the activity is clearly "adventure in the nature of business". In the result, the appeal is dismissed. 6. Aggrieved, assessee is now in appeal before the Tribunal. Ld. AR reiterated the submissions made before lower authorities and mainly emphasized on the fact that assessee is an investor investing in shares, securities and bonds and not at carry on business activities nor doe....
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....r find that assessee has been consistently claiming short term capital gain and long term capital gain from transactions relating to equity shares of listed companies from Asst. Year 2005-06 onwards and it has been held in various decisions that if an assessee is treating transactions of purchase/sale of shares under the head of long term and short term capital gain consistently in its return of income and no major funds have been borrowed to finance this activity and then the same should be accepted by the Revenue. We find that Hon. Jurisdictional High Court in the case of CIT vs. Vaibhav J. Shah HUF(supra) has dealt with following substantial question of law which arose for their consideration before the Hon. Court has observed as under :- "Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by CIT (A) in directing to tax the income earned from trading in shares under the head 'LTCG/STCG' as shown by the assessee instead of taxing it under the head 'Income From Business & Profession"? 5. We have gone through the record. We find that the Commissioner of Income-tax (Appeals) and the Appellate Tribunal both have held in favour o....
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....a valuable guideline. [b] The second test that is often applied is as to why and how and for what purpose the sale was effected subsequently. [c] The third test, which is frequently applied, is as to how the assessee dealt with the subject matter of transaction during the time the asset was with the assessee. Has it been treated as stock-in-trade, or has it been shown in the books of account and balance sheet as an investment. This inquiry, though relevant, is not conclusive. [d]The fourth test is as to how the assessee himself has returned the income from such activities and how the department has dealt with the same in the course of preceding and succeeding assessments. This factor, though not conclusive, can afford good and cogent evidence to judge the nature of transaction and would be a relevant circumstance to be considered in absence of any satisfactory explanation. [e] The fifth test, normally applied in cases of partnership firms and companies, is whether the Deed of Partnership or the Memorandum of Association, as the case may be, authorises such an activity. [f] The last but not the least, rather the most important test, is as to the volume, frequency, continui....
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....irty six months immediately preceding the date of its transfer. Section 2(42-B) defines 'short-term capital gain' to mean capital gain arising from the transfer of a short-term capital asset. Under section 28(\), the profits and gains of any business carried on by the assessee, at any time during the previous year, is chargeable to income tax under the head 'profits and gains of business or profession'. Under section 45(1) any profits or gains, arising from the transfer of a capital asset effected in the previous year, is deemed to be income of the previous year in which the transfer took place. Section lll-A, inserted by Finance Act, 2004, relates to tax on short-term capital gains in certain cases and, under sub-section (1) thereof, where the total income of an assessee includes any income chargeable under the head 'capital gains', arising from the transfer of a short-term capital asset being an equity share in a company and such transaction is chargeable to securities transaction tax, the tax payable by the assessee shall be the aggregate of the amount of income tax calculated, on such short-term capital gains, at the rate of fifteen per cent, [Para 8] ....
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....m short-term capital gains on sale of shares and mutual funds as business income instead of short-term capital gains claimed by the assessee. It is further found that the average period of holding of shares sold by the assessee giving rise to the short-term capital gains is more than 125 days. It is further found that the investment in share was made by the assessee out of his own funds plus non-interest bearing funds. In other words, the assessee neither paid any interest nor claimed any other expenses relating to the sale transactions of such shares and mutual funds. There was neither any intraday transaction made by the assessee in shares nor there was any trading in shares on 'future and option' basis. The percentage of capital gain of less than 30 days is only 5.13 per cent which is very negligible considering the total amount of short-term capital gains of Rs. 10,28,646. [Para 12] Applying the ratio of the decisions in the case o/"Asstt. CIT v. Satpal Singh Sethi [I, T. Appeal No. 3650 (Mum.) of 2010, dated 30-9-2011J; Hitesh Satishchandra Doshi v. Jt. CIT [2011] 46 SOT 3367 12 taxmann-com 79 (Mum.); Chetan R. Parikh v. ITO [IT Appeal No. 1569 (Mum.) of 2010, date....
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....ce the taxpayers find it difficult to prove the intention in acquiring such shares/securities. In this background, while recognizing that no universal principal in absolute terms can be laid down to decide the character of income from sale of shares and securities (i.e. whether the same is in the nature of capital gain or business income), CBDT realizing that major part of shares/securities transactions takes place inn respect of the listed ones and with a view to reduce litigation and uncertainty in the matter, in partial modification to the aforesaid Circulars, further instructs that the Assessing Officers in holding whether the surplus generated from sale of listed shares or other securities would be treated a<; Capital Gain or Business income, shall take into account the following- 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, if the assessee desires ....