TaxTMI 
TaxTMI 
2021 (2) TMI 539
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....ncome was filed on 29.03.2011 declaring total income of Rs. 41,12,140. The assessment was taken up for scrutiny by issuance of notice u/s 143(2) of the I.T.Act. During the course of assessment proceedings, the Assessing Officer noticed that the assessee had shown receipt of Rs. 1,44,70,210 from sale of shares and after reducing the purchase value of the shares amounting to Rs. 1,03,78,536, the difference of Rs. 40,91,674 was offered to tax as short term capital gains u/s 111A of the I.T.Act. The assessee was asked to produce copy of memorandum and articles of association, details of the shares traded etc. The A.O. noticed that the assessee had shown the short term capital gains in respect of sale of shares in respect of one company, namely, M/s.Nakoda Textile Industries Limited. The A.O. in the assessment order dated 18.03.2013 passed u/s 143(3) of the I.T.Act, held that the assessee was essentially trading in shares and the income arising from the sale of shares should be treated as "income from business" instead of "income from capital gains". The A.O. in holding so, relied on the CBDT Circular No.4/2007 dated 15.06.2007, which states that mere classification of shares in books o....
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.... the purchase and sale of the shares in Nakoda Textile Industries were made for the investment purpose other than the share trading activity in accordance with the main objectives of the appellant. In view of the matters and the facts and circumstances of the case, I am of the view that purchase and sale of the shares of Nakoda Textile Industries Ltd within the financial year is in accordance with the main objectives of the appellant and not for the purpose of the investments. Therefore, the action of the Assessing Officer by treating the trading of the shares as business activity is hereby upheld." 5. Aggrieved by the order of the CIT(A), the assessee has preferred this appeal before the Tribunal. The learned Counsel for the assessee has filed two paper books, comprising of 139 pages. The details enclosed in the paper book is copy of the return for the assessment year 2010-2011, the memorandum of association of the assessee, the articles of association of the assessee, the CBDT Circular No.4/2007, copy of the return for the assessment year 2009-2010 and the judicial pronouncements relied, etc. The learned AR reiterated the submissions made before the Income Tax Authorities. 6. T....
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....ed in purchase and sale of shares only in respect of one script, viz., M/s.Nakoda Textile Industries Limited. The purchases were made in instalments in the month of July 2009 and thereafter, these shares were sold in instalments. Hence, it is not a case of repetitive purchase and sale of shares. The shares purchased in the earlier years have been held as "investments". As mentioned earlier, for investment of shares of M/s.Nakoda Textile Industries Limited, the assessee did not borrow any amounts, but utilized only surplus funds available with it. The object of the assessee from beginning is only as investment company. The objects were amended to include trading in commodities. There is no mention of "shares" for the purpose of trading. The assessee was having carried forward business losses. Therefore, declaration of income on account of sale of share under the head `business' would have resulted in set off of business loss. In other words, there would have been no advantage to the assessee in concerned assessment year, when income from sale of share is declared under `capital gains'. 7.1 The Hon'ble Apex Court in the case of CIT v. H.Holck Larsen reported in 160 ITR 67, had held ....
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....ate 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 stock-in-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 verse. 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 in the records or otherwise, between two types of holdings. If the assessee is able to discharge the primary onus and could prima facie show that particular item is held as investment (or say, stock-in-trade) then onus would shift to Revenue to prove that apparent is not real. 8. The mere fact of credit of sale proceeds of shares ( or for that matter any other item in question) in a particular account or not so much frequency of sale and purchase will alone will not be sufficient to say that assessee was holding the shares (or the items in question) for investm....