TaxTMI 
TaxTMI 
2017 (10) TMI 537
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....unwarranted, uncalled for and against the facts and circumstances of the case. 3) The action of the Ld. CIT(A) in confirming the action of the Ld. Assessing Officer in not allowing loss from Jobbing in Share to be carried forward is illegal, arbitrary, unwarranted, uncalled for and against the facts and circumstances of the case. 4) The action of the Ld. CIT(A) in confirming the action of the Ld., AO in not allowing STT paid against Business Income of Shares is illegal, arbitrary, unwarranted, uncalled for and against the facts and circumstances of the case. 5) The action of the Ld. CIT(A) in confirming the action of the Ld. AO in not allowing set off of brought forward losses of Rs. 45,60,675/- against the Short Term Capital Gains of sale of shares for current assessment year of Rs. 32,96,534/- as claimed in the Income Tax Return is illegal, arbitrary, unwarranted, uncalled for and against the facts and circumstances of the case. 6) The action of the Ld. CIT(A)'s in confirming the action of the AO in not giving a finding regarding carry forward of losses of short term Capital Gains to be carried forward for subsequent years is illegal, arbit....
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....investment for appreciation but a cautious decision to earn higher profit from price movement of shares on regular basis. Further the account indicates a level of volume that would engage considerable time and attention of the assessee. Considering the magnitude and frequency of trade in shares it can be easily concluded that the motive of the assessee was never earning capital gain by investing in shares. The motive of the assessee was to earn higher profit from trading in shares. The fact is that the assessee is dealing in stocks and shares. In view of the above, the profit earned on share trading on delivery basis is treated as income from normal business and profit earned on share trading on jobbing basis is treated as income from speculation business and assessed under the head "Income from business or profession" 3.5 The assessee has declared net gain of Rs. 19,05,581/- from share transactions on delivery basis and net loss of Rs. 2, 13,0077- from share transactions on jobbing basis on transactions done through M/s K.K. Securities Ltd. He also declared net gain of Rs. 18,05,920/-from share transactions on delivery basis and net loss of Rs. 97,528/- from share transac....
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.... by CBDT dated 15.06.2007. He further submitted that the assessee's transactions all alone have been with the sole intention of maximizing the investment growth and not to deal as businessman or speculator. In case of jobbing transactions, the AO has not given any finding that the speculative transactions constituted speculative business. He also relied on a number of decisions. 6. On the other hand, the ld. DR relied on the order of the lower authorities and submitted that the ld. CIT(A) has done reasoned order which does not require any interference. The assessee has done huge transactions in shares and has also done intraday transactions. It is clear from the finding of the Assessing Officer on the tables noted at para No. 3 of the assessment order that the intention of the assessee was not to invest in shares, but to earn profit from sale of shares. The assessee has not received any dividend during the year. 7. After hearing both the parties and perusing the materials available on record and the orders of the authorities below, we find that during the year, the assessee has purchased and sold the shares of Rs. 22.03 crores and odd and Rs. 24.12 crores and odd respectively....
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....m 50 (Mum.) and decision dated 6th January, 2012 in the case of Diligent Services (P.) Ltd. v. Asstt. CIT [IT Appeal Nos.3299/Delhi/09 and 3318/Delhi/09]. On the other hand, the ld. AR on behalf of the assessee supported the order of the ld. CIT(A) while contending that their claim as an investor has been accepted in the preceding year. Inter alia, the ld. AR relied upon decision dated 6-1-2010 in CIT v. Gopal Purohit [2010] 188 Taxman 140 (Bom.), upholding decision of the Tribunal in Gopal Purohit v. Jt. CIT [2009] 29 SOT 117 (Mum). 5. We have heard both the parties and gone through the facts of the case as also the aforesaid decisions relied upon by both the sides. The issue before us is as to whether the shares quoted in stock exchange and traded in by the assessee, which were classified as "investment" in their books of account, were their "investment" or their "stock-in-trade"? The AO treated short term capital gains of Rs. 65,45,321/-, on sale of such shares as business income while the ld. CIT(A) following the view taken in. M/s Gopal Purohit (supra) accepted the claim of the assessee, reflecting the income under the head 'short term capital gains'. The asse....
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....r, is chargeable to income tax under the head "profits and gains of business or profession". Under Section 45(1) of the Act 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 111-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. 5.2. If the shares purchased by the assessee are held to be capital assets, short term capital gain on sale of such shares could fall within the ambit of Section 111A of the Act, and such capital gains would be subject to tax at a lower rate. If the shares are held by the assessee as stock in trade, profit on the sale of such s....
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....n the year under consideration and classified as investment in books were actually intended to be held as long term investments. Profits realised by the sale of shares may be capital if the seller is an ordinary investor changing his securities, but it may be income if the seller of the shares is trading in shares, as held in Raja Bahadur Visheshwara Singh v. CIT [1961] 41 ITR 685 (SC). The substantial nature of the transactions, the magnitude of the shares purchased and sold and the ratio between the purchases and sales and the holdings, reveals the intention of the assessee as a trader in shares and not as an investor.. In the instant case, the assessee had opening investment of Rs. 1 crore in shares while shares worth Rs. 4.10 crore have been sold and shares of the value of Rs. 4.9 crore were purchased. The fact that few shares were held for only a day or two reflects the dominant or even sole intention to resell, which is a relevant factor and raises a strong presumption, but by itself is not conclusive proof, of trade. The intention to resell would, in conjunction with the conduct of the assessee and other circumstances, point to the business character of the transactions. [CI....
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....are for realizing profit or purchases are made for retention and appreciation in its value? Former will indicate intention of trade and latter, an investment. In the case of shares whether intention was to enjoy dividend and not merely earn profit on sale and purchase of shares. A commercial motive is an essential ingredient of trade. (5) How the value of the items has been taken in the balance sheet ? If the items in question are valued at cost, it would indicate that they are investments or where they are valued at cost or market value or net realizable value (whichever is less), it will indicate that items in question are treated as stockin- trade. (6) How the company (assessee) is authorized in memorandum of association/articles of association ? Whether for trade or for investment ? If authorized only for trade, then whether there are separate resolutions of the board of directors to carry out investments in that commodity ? And vice versa. (7) It is for the assessee to adduce evidence to show that his holding is for investment or for trading and what distinction he has kept to the records or otherwise, between two types of holdings: if the assessee i....
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....o the notice of the Assessing Officers that there is a distinction between shares held as investment (capital asset) and shares held as stockin- trade (trading asset). In the light of a number of judicial decisions pronounced after the issue of the above instructions, it is proposed to update the above instructions for the information of the assessees as well as for guidance of the Assessing Officers. 5. In the case of CIT v. Associated Industrial Development Company (P) Ltd. [1971] 82 ITR 586, the Supreme Court observed that (headnote) : Whether a particular holding of shares is by way of investment or forms part of the stock-in-trade is a matter which is within the knowledge of the assessee who holds the shares and he should, in normal circumstances, be in a position to produce evidence from his records as to whether he has maintained any distinction between those shares which are his stock-in-trade and those which are held by way of investment. 6. In the case of CIT v. H. Holck Larsen [1986] 160 ITR 67, the Supreme Court observed (page 87) : The High Court, in our opinion, made a mistake in observing whether transactions of sale and purchase o....
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....t of place to mention that regulation 18 of the SEBI Regulations enjoins upon every FII to keep and maintain books of account containing true and fair accounts relating to remittance of initial corpus of buying and selling and realizing capital gains on investments and accounts of remittance to India for investment in India and realizing capital gains on investment from such remittances. The third principle suggests that ordinarily purchases and sales of shares with the motive of realizing profit would lead to inference of trade/adventure in the nature of trade ; where the object of the investment in shares of companies is to derive income by way of dividends etc., the transactions of purchases and sales of shares would yield capital gains and not business profits. 10. The Central Board of Direct Taxes also wishes to emphasise that it is possible for a tax payer to have two portfolios, i.e., an investment portfolio comprising of securities which are to be treated as capital assets and a trading portfolio comprising of stock-intrade which are to be treated as trading assets. Where an assessee has two portfolios, the assessee may have income under both heads i.e., capital ga....
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....bject-matter of transaction was with the intention of dealing in the item, or with a view to finding an investment. If the transaction, since the inception, appears to be impressed with the character of a commercial transaction entered into with a view to earn profit, it would furnish 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 the transaction and would be a relevant circumstance to be considered in the absence of any satisfactory expla....
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....t in contrast to an investor who buys the commodity for holding it so as to earn some income from investment and have decent appreciation. In case of shares, income is in the form of annual dividend and therefore, an investor in shares will normally be holding shares for more than a year and any sale before one year has to be explained from the circumstances of the case. The profit motive is also relevant but this is also not conclusive because even an investor may earn profit by way of appreciation. As is apparent from the aforesaid facts, the transactions of purchase of shares, and thereafter selling it with in few days and most of the time within a month, with a view to earn profit, reflects motive of the assessee as a trader and not an investor. In the instant case, purchases as well as turnover are continually increasing and the assessee has regularly dealt in purchase and sales of shares. Profit motive is also clearly evident in making the transaction. In Gopal Purohit (supra), the assessee has been continually holding the shares as investment from year to year. This is not the situation in the instant case. In the case of CIT v. Associated Industrial Development Co. (P.) Ltd....
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....ears and Revenue could not show any shares sold which had been purchased during the year or in the immediately preceding year. Therefore, only in respect of such cases, the decision in case of Gopal Purohit (supra), could be applied. The Hon'ble High Court of Bombay upheld the decision of the Tribunal in the case of Gopal Purohit (supra), on the ground that there was no substantial question of law involved. Even before Hon'ble High Court, there was no question raised that all delivery based transactions have necessarily to be treated as investment activity. Thus, the decision of the Tribunal as well as the Hon'ble High court in case of Gopal Purohit (supra),cannot be considered as a precedent for the proposition that all delivery based shares have to be treated as investment activity. The assessee can also be a trader in case of delivery based purchases and sales, which is a normal feature of any trading activity. Therefore, reliance placed by the ld. AR on the decision in the case of Gopal Purohit (supra) is totally misplaced. 6. In view of the foregoing,we are of the opinion that the character of a transaction cannot be determined solely on the application of....
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....e ld. CIT(A) on this issue. The case laws relied by the assessee are distinguishable and not applicable in the present fact situation of the case in hand. 8. Further the Assessing Officer has noted that there is net speculation loss on jobbing transactions of Rs. 2,13,007/- which has not been allowed to the assessee for carry forwarding in the next year because the assessee has filed the return on 20.03.2011 and the ld. CIT(A) has upheld the action of the Assessing Officer which, in our opinion, does not call for any interference. The return of income has been filed belatedly. Therefore, the loss cannot be carried forward as per provisions of the Income-tax Act. Therefore, the ground taken by the assessee for carry forward of the speculation loss is also dismissed. 9. In view of the above discussion, the appeal of the assessee is found to have no merits and is accordingly dismissed. 10. In the result, the appeal is dismissed. Order pronounced in the open court on 09.10.2017. ============= Document 1 Date Name of the scrip No. of share Value No. of Value of purchsed shares purchased shares sold shares sold 13.04.2009 Axis Bank 42206 ....
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....10.2009 ICICI Bank 1000 9,60,920/- 1000 9,61,060/- 15.10.2009 | Axis Bank 563 5,63,600/- 563 5,64,487/- 20.10.2009 ICICI Bank 5700 54,02,836/- 5700 53,87,982/- 20.10.2009 Tel Eighteen 16500 15,02,924/- 21.10.2009 Tel Eighteen 1000 88,900/- 21.10.2009 ICICI Bank 400 3,70,800/- 400 22.10.2009 ICICI Bank 6487 58,70,342/- 6487 3.71,800/- 58.35,782/- 22.10.2009 ICICI Bank 1213 10,90,275/- 22.10.2009 Tel Eighteen 4000 3,49,000/- 23.10.2009 ICICI Bank 1213 11,03,617/- 27.10.2009 ICICI Bank 10100 86,57,500/- 10100 86,85,960/- 30.10.2009 ICICI Bank 6000 47,20,500/- 6000 47,34,644/- 03.11.2009 ICICI Bank 1350 10,38,600/- 1350 10,83,986/- 04.11.2009 DLF Ltd. 1400 4,34,500/- 1400 4,86,100/- 06.11.2009 ICICI Bank 4027 34.21,483/- 4027 34,37,677/- 09.11.2009 ICICI Bank 3411 29,23,213/- 3411 29,32,160/- 10.11.2009 ICICI Bank 6900 62,09,600/- 6900 61,94,590/- 10.11.2009 Tel Eighteen 5000 3,92,714/- 11.11.2009 Tel Eighteen 11.11.2009 ICICI Bank 12.11.2009 Tel ....