TaxTMI 
TaxTMI 
2023 (9) TMI 1313
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.... of the ITAT Rules. Judicial decisions considered wherever necessary. 3. Facts coming out from the assessment record show that the assessee filed its return of income on 30.09.2015 declaring income of Rs. 3,70,92,720/-. Return was selected for scrutiny assessment under CASS and, accordingly, statutory notices were issued and served upon the assessee. 4. During the course of scrutiny assessment proceedings and on perusal of the computation of income, the Assessing Officer noticed that the assessee has shown Long Term Capital Gains [LTCG] and Short Term Capital Gains [STCG] on sale of shares. The Assessing Officer found that the assessee is engaged in the business of trading in securities and formed a belief that profit arising from sale of shares should be treated as "business income" and accordingly, issued a show cause notice to the assessee to explain why the profit should not be taxed as "business income". 5. The assessee filed a detailed reply and explained that the management of the company, on the beginning of the financial year, decided to treat some shares as investment, which were purchased long time back. It was strongly contended that since the stock in trade wa....
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....e books of accounts and while making transactions in respect of these stocks. Similarly, all the future transactions of purchase of listed shares must be purchased with the intent of investments and would be treated as investments in the books of accounts here onwards." 11. In the balance sheet for the year under consideration, changes in Inventory has been shown a under: Particulars For the year ended 31^st March 2015 For the year ended 31^st March 2015 Inventory at the end of the period Shares 37440320.00 55365844.00 (a) 37440320.00 55365844.00 Inventory at the beginning of the period Shares 53165843.44 63884669.59 Trf to Inv 50063844.00 (b) 5101999.41 63884669.59 (Increase/Decrease in Inventory (b-2) 32338320.56 8718825.59 12. On the Asset side in the Balance Sheet, shares have been shown under the head "Non Current Investments". 13. On the aforementioned facts, let us now consider the CBDT Circular No. 6/2016 which is as under: "Circular No.6/2016 Government of India Ministry of Finance Department of Revenue Central Board of ....
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....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 arising from the transfer thereof as Capital Gain, the same shall not be put to dispute by the Assessing Officer. However, this stand, once taken by the assessee in a particular Assessment Year, shall remain applicable in subsequent Assessment Years also and the taxpayers shall not be allowed to adopt a different/contrary stand in this regard in subsequent years; c) In all other cases, the nature of transaction (i.e. whether the same is in the nature of capital gain or business income) shall continue to be decided keeping in view the aforesaid Circulars issued by the CBDT. 4. It is, however, clarified that the above shall not apply in respect of such transactions in shares/securities where the genuineness of the transaction itself is questionable, such as bogus claims of Long Term Capital Gain / Short Term Capital Loss or any other sham transactions. 5. It is rei....
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....es held by the assessee as stock in trade are chargeable to tax as "Business Income". 19. Based upon the CBDT Circular, when the ld. CIT(A) accepted the long term capital gain, then we fail to understand why the ld. CIT(A) hesitated in not accepting the short term capital gain on the same set of facts. 20. On a specific query from the Bench, in respect of the stand taken in subsequent years, the ld. counsel for the assessee pointed out that profits on sale of shares in subsequent years have been accepted as capital gains. This is also in line with the aforementioned CBDT Circular. 21. On similar set of facts, the Hon'ble Delhi High Court in the case of Express Securities Pvt Ltd 364 ITR 488 on the following facts held as under: Facts "The assessee is a company. In the return for the year in question, it had declared long-term capital gain of {- Rs. 3,34,65,931/- and the said gain was claimed as exempt under Section 10(38) of the Income Tax Act, 1961 (Act, for short). The respondent-assessee had claimed before the Assessing Officer that they were maintaining two sets of portfolio, i.e., investment and trading portfolio and the shares, which were sold and sub....
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....015, on the following facts: "3. The assessee is involved in investment business and had during the AY 2005-06 converted a part of its stock in trade into investment and maintained a separate account on that score. The realization on account of its investment was offered in capital gains under two heads, i.e., long term capital gain and short term capital gain. For the assessment year in question, the claim for long term capital gain was accepted by the Assessing Officer but the claim for short term capital gain was disallowed. The Assessing Officer reasoned in this regard as follows: - "4.5 In the instant case, except one condition i.e. utilizing own funds all other conditions are against the assessee. The assessee was a trader in the past and in order to take tax rate advantage the transactions are shown as STCG thus raising a question mark on the intention of the assessee. A large number of transactions have been made, purchase & sale transactions worth more than 14 crores have been made and hence volume of transactions is high. The activity was not only incidental in nature but the stock was converted into investment to take advantage of concessional tax rate.....