TaxTMI 
TaxTMI 
TaxTMI 
2019 (1) TMI 1780
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....e the AO. 2.2 The Ld. CIT(A) erred in law and on the facts in deleting the disallowance u/s 14A read with rule 8D(ii) following the decision of the Ld. CIT(A) in the A.Y. 2008-09." 2. At the outset, Ld. Counsel submitted that both the issues now stand covered by the decision of the Tribunal in assessee's own case for the assessment years 2008-09 to 2011-12. On the other hand, Ld. DR strongly relied upon the order of the AO. 3. The facts in brief qua the issue of treatment of long-term capital loss of Rs. 23,00,136/- as business loss by treating it as a business income are that, Ld. AO in the course of assessment proceedings noted that assessee has invested the shares in mutual fund units which has been claimed as either as capital gain or capital loss by the assessee. However, he observed that, the department in the last several assessment years have been holding that these investments were stock-in-trade and accordingly, the gains from such shares and securities has to be treated as business income. He has also referred to the findings of the AO for the assessment year 2008-09 and 200910; and following the earlier years orders, he has treated the long-term capital loss shown b....
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....vestment by making entries is not decisive factor. It was on 01.04.2004 the shares were converted into investment portfolio and since A.Y. 2005-06; assessee has segregated the income under the head 'Capital Gains' and 'Business Income'. Apart from that, Assessing Officer has noted that magnitude of the transaction and the volume shows that assessee was into sale and purchase of share for the intention of business only and has also referred to the huge turnover and also highlighted various facts it has been discussed and incorporated in detail in the earlier part of the order. Now from the perusal of the schedule of investments especially investment made in the shares under the head 'Long-Term Capital Gain', we find that the major amount on amount of Long-Term Capital Gain is arising on account of sale of shares of Punjab Tractors Ltd. which is at Rs. 10,13,29,232/-, out of total Long-Term Capital Gain of Rs. 15,41,96,869/-, which has been treated as business income by the Assessing Officer. Shares of Punjab Tractors were acquired in the years 2005 and 2006 and since the date of purchase it was shown under the head 'investment', because these shares were acquired by the assessee for....
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....ver, we find that in the earlier years the Tribunal has taken a different view and held that even if the shares have been held under investment portfolio also, it can be taxed as business income. One of the core reasoning for arriving to this conclusion was that the assessee has been trading in shares and the audit report also suggest that the assessee is dealer in shares and prior to 31st March, 2004 assessee was a full-fledged trader of share. Thus, the intention of the assessee at the time of purchase became the decisive factor to hold that it was only for the business purpose. The conclusion of the Tribunal in this regard reads as under: - 8. We are of the opinion that the character of a transaction cannot be determined solely on the application of any abstract test or rule and the cumulative factors affecting the transactions have to be seen. Habitual dealing in a particular item and that too since inception is indicative of the assessee's intention of trading. Merely for taking benefit of provisions of sec. 111A of the Act applicable from the AY 2005-06, the assessee cannot be categorised as an investor, especially when the aforesaid facts speak otherwise and the Id. AR did....
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.... from the day of acquisition and it is not the case that these shares were earlier part of stock-in-trade which has been converted into investment after 01.04.2004. We have already held that the shares of Punjab Tractors Ltd. were acquired for controlling interest and ABN Amro shares are not tradeable in stock market and if one goes by the intention part, then these two scrips could never be held to be intended for trading purposes. Thus, the aforesaid decision will not be binding at least for these two scrips. For the other scrips also, if we see the volume of transaction and the period of holding, then we find that the transaction in the shares which was held for more than a year constitute 98.38%. For the sake of ready reference, the period of holding, volume of shares dealt, percentage of shares held in LTCG and other percentage of gain in shares are incorporated hereunder:- Period of Holding More than 365 days 81 to 364 days 91 to 180 days 60 to 90 days 30 to 59 days Less than 30 days Quantity of Shares 1,33,65,009* 53,003 1,01,571 43,971 78,813 67,802 Percentage to Total quantity 97.48% 03.8% 0.74% 0.32% 0.57% 0.49% Gain or loss 1,19,85,50,369 86....
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....d 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 in 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 as 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 to treat the income arisi....
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....n other situations, the issue was to be decided on the basis of existing Circulars issued by the CBDT on this subject. 2. Similarly, for determining the tax-treatment of income arising from transfer of unlisted shares for which no formal market exists for trading, a need has been felt to have a consistent view in assessments pertaining to such income. It has, accordingly, been decided that the income arising from transfer of unlisted shares would be considered under the head 'Capital Gain', irrespective of period of holding, with a view to avoid disputes/litigation and to maintain uniform approach. 3. It is, however, clarified that the above would not be necessarily applied in the situations where: i. the genuineness of transactions in unlisted shares itself is questionable; or ii. the transfer of unlisted shares is related to an issue pertaining to lifting of corporate veil; or iii. the transfer of unlisted shares is made along with the control and management of underlying business; and the Assessing Officer would take appropriate view in such situations. 4. The above may be brought to the notice of all the necessary compliance. 17.2 Now this circular has been ap....
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....shares for less than period of 12 months it does not straight away put in the bracket of trading activity, especially when there is no repetitive transaction of the shares. However in so far as detail of Short Term Capital Gain is concerned, the assessee has filed voluminous detail which has been neither examined or looked upon by the Assessing Officer or by the ld. CIT(A), therefore, we deem it proper that in so far as transaction of shares shown under the head 'Short Term Capital Gain', matter should be restored back to the file of the Assessing Officer to examine, whether there is any repetitive transaction; or whether similar scrips have been shown by the assessee in its trading portfolio; or there is frequent switching of same shares. The Assessing Officer will examine these aspects and will also examine it in the light of the clarification issued by the CBDT vide circular dated 2nd May, 2016. Thus, with this direction this issue is remanded back for limited purpose; and in so far as transaction of Long Term Capital Gain is concern, we hold that same is assessable as Long-Term Capital Gain and not business income. 20. Lastly, coming to the objection raised by the ld. CIT-DR ....