TaxTMI 
TaxTMI 
2019 (7) TMI 1272
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....s. Return for the year was filed on 15/09/2011, declaring total income at Rs. 2,46,74,220/-. The case was selected for scrutiny assessment. During the course of scrutiny assessment proceedings, the AO noticed that the assessee has shown Short Term Capital Gain of Rs. 2,23,34,990/-. The details of Short Term Capital Gain are as under:- 3. The AO observed that on share purchase of Rs. 1,53,88,694/-. The assessee has sold shares of Rs. 3,77,23,684/-. The AO was convinced that the assessee is engaged in the business of trading of shares and therefore the income from capital gains is nothing but business income of the assessee. The AO further observed that sales of shares were made within a very short period and neither the volume nor the value of transaction is small. The assessee was asked to explain why profit on sale of shares shown as Short Term Capital Gain may not be assessed as income from business. The assessee filed a detailed reply referring to various judicial decisions and strongly contending that the Short Term Capital Gains from sale of shares should be assessed as such. 4. After considering the submissions of the assessee and after referring to various judicial dec....
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....e. The DR further pointed out that the shares of different companies have been traded in short period. In support of her contention, the Ld. DR relied upon the decision of the Co-ordinate Bench in the case of Mahesh Chandra Agarwal vs ACIT, Circle-36(1), New Delhi, (93 taxmann.com 246). The Ld. DR further relied upon the decision of the Hon'ble Delhi High Court in the case of CIT vs D & M Components Ltd. 364 ITR 179(Del.) and further relied upon the decision of the Coordinate Bench in the case of Smt. Prem Jain vs ITO in ITA No.2572/Del/2016. 10. We have given a thoughtful consideration to the order of the authorities below. The details of Short Term Capital Gains are exhibited elsewhere from which it can be seen that the assessee has purchased shares of six companies on various dates and have sold them on various dates. Doing transaction in only six scrips show that the assessee has done one transaction in every 61 days. By any stretch of imagination, this cannot be considered to be that the assessee was engaged in the high frequency transactions. Further it is not the case of the AO that the assessee was churning the shares, buying and selling the same shares again and agai....
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....lar No.6/2016 read as under:- "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-in-trade, is essentially a fact-specific determination and has led to a lot of uncertainty and litigation in the past. Over the years, the courts have laid down different parameters to distinguish the shares held as investments from the shares held as stock-in-trade. The Central Board of Direct Taxes ('CBDT') has also, through Instruction No. 1827, dated August 31, 1989 and Circular No. 4 of 2007 dated June 15, 2007, summarized the said principles for guidance of the field formations. 3. Disputes, however, continue to exist on the ....
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....urities. All the relevant provisions of the Act shall continue to apply on the transactions involving transfer of shares and securities." 13. On perusal of the aforementioned circular of CBDT shows that even Board recognised the fact that where the assessee itself, irrespective of the period of holding the registered shares, treated them stock in trade the income arising from transfer of such shares would be treated as business income which means that where the assessee hold the shares as investment, the income arising therefrom is nothing but capital gains. There is no quarrel that the assessee has purchased the shares out of its own fund and no borrowed funds have been utilised by the assessee in purchasing the shares. The only fact for treating the Short Term Capital Gain as business income is that the period of holding is very less but then the Act itself provides that wherever the holding period is less than 12 months, the gains from the sale of shares would be Short Term Capital Gain. The Act nowhere provides for the smallness of the period of holding. If it is less than 12 months, it will give rise to Short Term Capital Gains and if it is more than 12 months it will gi....