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2019 (1) TMI 1636
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....me without considering the magnitude, intention, frequency of transactions which reflects modus operandi of assessee of share business as an adventure in the nature of trade. 2. The Ld CIT (A) has erred in not appreciation the fact that assessee has purchased shares of a very large amount of Rs. 12,02,54,365/- and sold the shares for Rs. 14,20,85,990/- . These figures themselves speak which is the prime activity and that is the dominant intention of the assessee. The magnitude of share transaction is on so higher side that it cannot be said that main activity of the assessee was of doctor's profession. 3. Appreciating the assessee's version that he is a leading eye surgeon having no time for carrying out share business and share business is not of his line, it may be mentioned that it is not necessary that a person should engage physically for carrying out such business that to when the assessee is having time for doing speculative business". 3. The grounds raised by the assessee are as under;- C.O. No.65/Ind/2012 (Assessment Year 2008-09) 01. On the facts and circumstances of the case and in law the Learned CIT- (A) appreciating the submiss....
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....eturn of income filed on 29.05.2008 declaring total income of Rs. 3,14,17,278/-. Case was selected for scrutiny and necessary notice u/s 143(2) of the Act was duly served upon the assessee. During the course of assessment proceedings Ld. Assessing Officer in short 'Ld.AO') observe that the assessee apart from earning professional income by running M/s. Chaudhary Eye & Retina Research Centre has also earned substantial income from purchase and sale of equity shares which included Long term Capital Gain at Rs. 35,22,054/- and Short Term Capital Gain at Rs. 1,18,57,282/-. Ld. Assessing Officer was satisfied with the claim of long term capital gain of Rs. 35,22,054/-. The Ld. Assessing Officer examined in detail about the profit from purchase and sale of equity shares at Rs. 1,18,57,282/- by calling necessary details of the equity shares purchased and sold and financial ledger for the transactions carried out during the year. After going through submissions made by the assessee as well as facts available on record Ld. AO came to a conclusion that the alleged profit of Rs. 1,18,57,282/- is a profit from running of share business which is in an adventure in the nature of business and the....
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....ome without considering the magnitude, intention, frequency on transactions which reflects modus operandi of the assessee of share business as adventure in the nature of trade. 8. Ld. Departmental Representative (DR) vehemently argued supporting following findings of Ld. Assessing Officer: "The submission of the assessee has been duly considered in reference to the - circular of the CBDT no. 4/2007, but not accepted because of the following reasons:- (i) The assessee is deriving income from the F & 0 as well as speculation share trading which are purely business income. The person who is in the Trading never can be an investor because by the pattern itself it is difficult to distinguish the Short Term Capital Gain and business trading in shares. (ii) The frequency of the transactions are also against the assessee. The sale value of the shares are in crores, the number of scrips are huge and by no stretch of imagination it can be said as "Investment". Therefore in totality of the facts and the circumstances the STCG shown of Rs. 1,18,57,2821- is treated as Business income from share trading. I am also satisfied that the assessee has submitted i....
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.... in shares held for a period for short periods; (b) In the earlier years the assessee has nil or small long term capital gain which indicates that holding investments for a longer period is not the main intention except few scrips which are carried over without any transactions year after year. Accordingly to the extent of investment activity in shares one can see that the assessee has invested in some 5 to 6 companies scrips which have been carried over from year to year in which there are no frequent or large number of transactions and these investments in shares can be considered as assessee's proper "investments"; (c) Purchase and sale of shares in short period indicates that the assessee purchased the shares with a motive to earn profit in short period; (d) The assessee borrowed funds to purchase shares; (e) The dividend received was meager; (iii) These facts indicate that the intention of the assessee was to gain profits by dealing in short term period only. Consequently, the income from sale of shares was assessable as "income from business" and not "short-term capital gains"; (8) Jayshree Pradip Shah vs ACIT C-25(2) I. T.A No....
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....f the assessee during the previous year was Rs. 1,01,51,786/ and Rs. 1,10,45,798/- respectively. The value of investment as on 31.3.2004 was only Rs. 11,14,054/-. (d) The purchase and sale of shares was the only activity of the-assessee. (e) The period of holding being very short it is reasonable to presume that the purchase was made with an intention to resell. (f) The scale of activity is substantial. (g) The transactions were continuous and regular besides being systematic. (h) Borrowed funds had been used for purchase of shares Learned counsel for the assessee's contention that borrowed funds were used to buy immovable property remains unsubstantiated and the findings of the Assessing Officer to the contrary should therefore prevail. (i) Substantial time devoted by the assessee to the activity of purchase and sale. In fact, the only source of income in the profit and loss account is from purchase and sale of shares. (j) All the shares sold and purchased arc of listed companies. (k) Composition of the dividend income is meager, which goes to show that the assessee never locked for returns from investment....
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....res has been treated by the Department as capital loss/gain. He. has. handsome money. He tries his luck by making investment in shares in good quantity. He has adopted the mode of investment in shares because money invested therein is readily realizable, without any efforts. The assessee's shares activity treated as investment in earlier years cannot be treated as business in subsequent year if facts are the same. Reliance is placed on the decision of High Court of Bombay in the case of Commissioner of Income Tax Vs. Gopal Purohit Income Tax Appeal No. 1121 0/2009 dated 06.01.2010. It is therefore submitted that the order of the CIT(A) be upheld and appeal of the Department be dismissed and cross objection of the assessee be allowed. He further submitted that On perusal of balance sheet filed by respondent from A. Y. 2002-03 to A.Y. 2011-12, you will appreciate the facts that the assessee is always making investments as under: i) Shares. and debentures. ii) Public Provident Fund. iii) Fixed Deposits. Financial Year Shares./ Debenture PPF Fixed Deposit 2001-02 75,94,928 2,21,860 16,68....
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....s were made by his own savings. So that, income from purchase and sale of shares by the assessee deserves to be treated as short term capital gain only. It is mentioned in CIT(A) order dated 30. 05.2011 on page No. 12 to 13. 01. On the facts and circumstances of the case and in law the learned CIT(A) appreciating the submissions made before him was fully justified in treating the addition of Rs. 1,18,57,282/- earned from sale and purchase of shares transactions as short term capital gain instead of adventure in the nature of trade as business income with considering the magnitude, dominant intension and nature of share transactions as an investment. It is submitted that the point has been discussed by learned CIT(A) in para 2.2, 2.3, 2.4, 2.5 & 2.6 .. The assessee is relies on the same. As already stated above the consistency is observed by the Department in the case of assessee right from A.Y. 2001-02 to 2007-08 except in the A. Y. 2004-05 reopened the case u/s, 147 of IT Act. In all these previous years losses/income from purchase and sale of shares has been treated by the Department as capital loss/gain. The said issue has already been decided by the learned CI....
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....ns routed through Demate account with State Bank of Indore. The copy of Demate account regarding investment in shares have already been filed before AO during the course of assessment proceedings, ii. The assessee has treated the entire investment in the shares as an investment only and not as stock-in-trade. Another important aspect to be considered here is that the assessee is not a share broker not is he having a registration with any stock exchange. The assessee invested his own money in shares/debentures. The appellant has not borrowed any money for investing in shares and used his own surplus funds and these fact not been disputed by the AO . In this connection the following papers/documents are as under :- a. Summary of short term gain on share transactions company wise is on page . 10 to 23 of paper book. b. Ledger copy of investment in shares and sale of shares during the year under consideration is on page 2.4 to 48 of paper book. c. Balance sheet and profit & loss account for the year ending 31 st March, 2008 is on page 49. to 51 of paper book. The learned CIT(A) is justified holding that the income derived by the ass....
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....ted that the order of the CIT(A) be upheld and appeal of the Department be dismissed and cross objection of the assessee be allowed. 10. We have heard the rival contentions, perused the record placed before us and have carefully gone through the judgments referred and relied by the Ld. counsel for the assessee. Issue before us raised by the Revenue is that whether the income of Rs. 1,18,57,282/- from sale/purchase of shares earned by the assessee during the year is to be taxed as short term capital gain or as a business income. 11. Submissions made by the Ld. counsel for the assessee mainly indicates that the assessee is a renowned eye surgeon and all the time he is very busy in his profession. He invests his professional income in fixed deposits and equity shares. He has not borrowed any money for investing in the equity shares. He is consistently showing the profits/loss from purchase/sale of equity shares under the head capital gain since last many years. Investment in the share has been disclosed as investment and not as stock in trade. The reliance has been placed on plethora of judgment in support of its claim that the impugned income of Rs. 1,18,57,282/- has been right....
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....der the head share trading, profit/loss. It shows that the assessee is suo moto accepting that regular business transactions of share trading are carried out by him. d. The profit and loss account has been audited by Chartered Accountant firm in order to certify the transactions shown under the head opening stock, purchase direct expenses, indirect income, share trading profit, F & O profit and closing stock. e. Moving on to the frequency of transactions carried out during the year ledger account of investment in shares purchases placed at pages 24 to 39 of the paper book dated 23.05.2018 shows that approx. 288 transactions took place for the purchase of equity shares which have been carried out throughout year. Similarly, around 162 transactions for sales have been entered with various share brokers including Arihant Capital Market Ltd., J.M. Finance P. Ltd. etc. Undisputedly the assessee had entered into multiple transactions for various listed companies however in the case of BOC India Ltd. around 70 transactions of sales took place during the year and the assessee purchased 1,07,640 equity share valuing at Rs. 1,58,73,054/- and sold the equity shares of the sa....
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....gain/loss from purchase and sale of equity shares claimed under the head short term capital gain by an auditor but the assessee has disclosed all the transactions relating to equity shares under the head profit and loss account and got it certified by the auditor. 16. Frequency of transactions also plays vital role in examining taxability of such transactions. Though it is pleaded that the assessee is a very busy Doctor engaged in the professional work but what transpires from the records is that the assessee is devoting his time and knowledge for regular purchase and sale of equity shares round the year. Even otherwise there is no Estoppel by law on the assessee to carry more than one business or profession. There are innumerable instances where a particular individual carries on multiple businesses from multiple locations then why cannot the assessee. 17. There seems to be a consistent touch of assessee with the equity market as frequent transactions of purchase and sale of the same script are done during the year which normally is not a practice of an investor because the investor usually invests and then wait for considerable time and the reason for such waiting is that t....
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....ross objection raising ground no.2. 24. Ld. Counsel for the assessee argued referring to following written submissions: 03. Disallowance made by the learned AO of Rs. 2,15,542/- by invoking the provision of section 14A to be read with Rule 8D of IT Rules, 1962. That the learned CITCA) has confirmed the disallowance made by the learned AO of Rs, 2,15,.542/- by invoking the provision of section 14A to be read with Rule ~ 8D of IT Rules, 1962 without pointing out his dissatisfaction for claim of expenditure incurred by the assessee for earning dividend income of Rs. 4,37,354/-. i. The appellant provided full details of expenses at Rs. 5,27,267/- out of which is already disallowed expenses of Rs. 66,700/- for long term capital gain which does not form part of total income. Further disallowance of Rs, 2,15,542/- out of dividend Income of Rs. 4,37,354/- for which assessee has not incurred any expenditure direct or indirect in relation to dividend income which is not form part of total income under the act for such previous year. The appellant has maintained the separate books of accounts regarding investment made in shares, mutual funds. The appellant has cl....
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....umstances of the case, the appellant provided the full details of expenses at Rs. 5,27,267 out of which is already disallowed of Rs. 66,700 for long term capital gain which does not form part of total income. Further disallowance of Rs. 2,15,542 out of dividend income of Rs, 4,37,354 for which assessee has not incurred any expenditure direct or indirect in relation to dividend income which is not form part of total income. vi The learned CIT(A) confirmed the disallowance made by the AO of Rs. 2,15,5421/- is not correct as per u/s 14A of the Act, which is not as per the facts of the case. Regarding similar issue in the case of Shri Sachin R. Tendalkar disallowance made by the AO u/s, 14A r.w. Rule - 8D for Rs. 76,55,841/- which has been deleted by learned CIT(A) as no expenses were claimed in the profit & loss account attributable to the earning of exempt income. Therefore, no disallowance was possible under the law. Held - That the amount of gain arising from sale/purchase of shares was assessed as income from capital gains. The copy of the same is on page 52to M of paper book. Disallowance u/s. 14A of the Act is not warranted. ....