AI Drafter 
TaxTMI 
TaxTMI 
2013 (6) TMI 930
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....t the genuineness of expenditure. 5. That the appellant craves leave to add or amend any grounds of appeal before the appeal is finally heard or disposed off." 2. As regards grounds No.1 & 2, the brief facts are that the assessee is running three proprietary concerns, which are tabulated in para 3 of AO's order as under: Name of the proprietary concern Nature of Business Turnover for financial year 2006-07 Turnover for financial year 2005-06 M/s. Jay Kay Gas Co. Unit II, New Delhi. Transportation 26402/- 686762/- M/s. Jay Kay Gas Co. UnitII, Kichlu Nagar, Ludhiana. Distribution of LPG Gas Cylinders 3,31,99,961/- 29567153/- M/s. Jay Kay Gas Co. UnitII Kichlu Nagar, Ludhiana. Distribution of LPG Gas Cylinders 18457274/- 16047603/- M/s. Batra Valves New Delhi. Manufacturing of LPG Valves 2,43,45,475/- 1,53,76,529/- The assessee has declared short term capital gains of Rs.56,94,698/- which was revised later at Rs.49,39,023/- and after the claim of security transaction tax amount of short term capital gain from the transaction in share was revised from Rs.56,94,698/- to Rs.49,39,023/-. On the ba....
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....n between shares held as stock in trade and shares held as investment. The said principle has also been laid by the Authority for advance Rulings in Fidelity Northstar Fund & Ors reported in (2007) 207 CTR (AAAR) 297 : (2007) 288 ITR 641 (AAR), referring to the decisions of the Hon'ble Supreme Court in several cases. The Hon'ble Supreme Court has also laid down guidelines to make distinction between stock in trade and investment in shares in the case of Raja Bahadur Visheshwara Singh (Decd) and Others vs. CIT, Bihar and Orissa 41 ITR 586 and the decision of Hon'ble Supreme Court in the case of Income Tax Bombay vs. H.Holck Larsen 160 ITR 67. The assessed short term capital gain claimed by the assessee as business income being net profit earned by the assessee from the transaction in shares through M/s. PNR Securities Pvt. Ltd; and M/s. Karvy Stock Broker and the security transaction tax of Rs.7,62,545/- was also added to the total income of the assessee. 5. The Ld. CIT(A) after considering the arguments made by the assessee confirmed the action of the AO in treating the transaction made by the assessee as business transaction and produced the purchases and sales made during the ....
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....ed in the various other businesses which are either conducted by him in his individual capacity or as partner in various firms which requires his whole time involvement. The details of the proprietorship concerns and partnership concerns are as under: a) Batra Valves - Manufacture of Valves (turnover 2.4 cr.) Proprietorship concern. b) Batra Bros - Transport Business. (Turnover - 5cr) 51% share. c) Aishi Ram Batra Unit-II Srinagar - Turnover 10 cr (51% share) d) M/s. Jai Chemicals - Formulation of pesticides (Turnover - 10 cr (15% share) e) Aishi Ram Batra Jammu - Running of Petrol Pump. (Turnover - 3 Cr) 51% share) f) M/s. India Gas Cylinders - Manufacturing of LPG Gas Cylinders. Turnover 5 cr - 19% share. g) Batra Car Care Centre -Running of Petrol Pump, Delhi Turnover-10 Cr. 17% share. h) Besides that the assessee is Managing Director of Stresscrete P. Ltd. Batra Fin Cap P Ltd. and Batra Associates Ltd. i) Chairman of AB Hotels Ltd. j) The assessee is also on Board of Directors of Mount Shivalik Industries Ltd. Gayson Engineering P. Ltd; Batra Hotels Enterprises P. Ltd; Laxmi Ancillaries P.....
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.... Reliance in this regard is placed on the following judgments wherein it has been held that even if the nature of asset is changed ( sale of plot by cutting into smaller plots) the same cannot be termed as Business of the Assessees. In the case of the assessee the shares are sold as and when there are increase in prices of shares: - ACIT vs. Sh.S.K.Kaintal in ITA No.846 & 1063/Chandi/2007 (Chd Trib) - ACIT vs. Rajesh Kumar Aggarwal in ITA No.539/Chandi/2006 (Chd. Trib). b) Ordinarily the purchase and sale of shares with the motive of earning a profit, would result in the transaction being in the nature of trade/adventure in the nature of trade; but where the object of the investment in shares of a company is to derive income by way of dividend etc. then the profits accruing by change in such investment (by sale of shares) will yield capital gain and not revenue receipt." In this regard it is submitted that the assessee has declared dividend income of Rs.1,72,86,993/- and out of the same Rs.38,18,593/- has been earned from investment in shares and mutual funds. Thus, the AO is even factually wrong in stating that no Dividend income has....
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.... Mittal is an individual and for the assessment year 2007-08 had filed his return of income on 31.10.2007 declaring total income of `6,00,62,080/-. Long term capital gains of `2,59,52,165/- which was claimed as exempt and this included short term capital gains of 5,53,32,591/- from sale and purchase of various securities. 3. The Assessing Officer held that the two amounts should be treated as business income and not income from capital gains and an addition of `8,12,84,756/- was made. The said addition was deleted by the first appellate authority and the Tribunal by the impugned order has affirmed the said deletion. 4. The appellant before us has filed a chart giving the details of the sale purchase transactions which are subject matter of the assessment year 2007-08. The chart reads as under : ******** Table Not Complete ****** 5. During the course of hearing ld. counsel for the Revenue has stated that as far as long term capital gains is concerned the findings recorded by the CIT(Appeals) and the Tribunal are correct and Revenue cannot really contest the same. He however, submits that as far as short term capital gains i....
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....-term capital assets and gains are dealt with under section 2(42A) and section 2(42B). 3. Trading asset is dealt with under section 28 of the Act. 4. The Central Board of Direct Taxes (CBDT) through Instruction No. 1827 dated August 31, 1989, had brought to the notice of the Assessing Officers that there is a distinction between shares held as investment (capital asset) and shares held as stock-in-trade (trading asset). In the light of a number of judicial decisions pronounced after the issue of the above instructions, it is proposed to update the above instructions for the information of the assessees as well as for guidance of the Assessing Officers. 5. In the case of CIT (Central), Calcutta v. Associated Industrial Development Co. (P) Ltd. [1971] 82 ITR 586, the Supreme Court observed that : "Whether a particular holding of shares is by way of investment or forms part of the stock-in-trade is a matter which is within the knowledge of the assessee who holds the shares and it should, in normal circumstances, be in a position to produce evidence from his records as to whether it has maintained any distinction between those share....
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....arriving at business income or held as investment in capital assets. The second principle furnishes a guide for determining the nature of transaction by verifying whether there are substantial transactions, their magnitude, etc., maintenance of books of account and finding the ratio between purchases and sales. It will not be out of place to mention that regulation 18 of the SEBI Regulations enjoins upon every FII to keep and maintain books of account containing true and fair accounts relating to remittance of initial corpus of buying and selling and realizing capital gains on investments and accounts of remittance to India for investment in India and realizing capital gains on investment from such remittances. The third principle suggests that ordinarily purchases and sales of shares with the motive of realizing profit would lead to inference of trade/adventure in the nature of trade; where the object of the investment in shares of companies is to derive income by way of dividends etc., the transactions of purchases and sales of shares would yield capital gains and not business profits". 10. CBDT also wishes to emphasise that it is possible for a tax payer to have two portfolios, ....
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....ned the income from such activities and how the Department has dealt with the same in the course of preceding and succeeding assessments.This factor, though not conclusive, can afford good and cogent evidence to judge the nature of transaction and would be a relevant circumstance to be considered in absence of any satisfactory explanation. (e) The fifth test, normally applied in cases of partnership firms and companies, is whether the deed of partnership or the memorandum of association, as the case may be, authorises such an activity. (f) The last but not the least, rather the most important test, is as to the volume, frequency, continuity and regularity of transactions of purchase and sale of the goods concerned. In a case where there is repetition and continuity, coupled with the magnitude of the transaction, bearing reasonable proportion to the strength of holding, then an inference can readily be drawn that the activity is in the nature of business." 9. In the present case, the assessee is an employee and is in service of a company. He has salaried income. The assessee had also made purchases and had sold securities. He is maintaining two....
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....t and the figures noted above in this order were available and on record at the time of original assessment. He has not mentioned whether the assessee had indulged in frequent transactions in the previous period or subsequently. Merely because the assessee had sold the said shares in the relevant year and made substantial gains and could not show basically the objective for acquiring the shares was not as an investor but as a trade. The ratio of sales and purchase may be relevant in a particular case but when an assessee liquidates any investment, the said ratio will always be in favour of sales. 10. The Tribunal in the facts of the present case has examined and correctly applied test/criteria, which has to be applied. We may note that in the earlier assessment years, transactions in the investment portfolio by the assessee were accepted by the Assessing Officer." 8. The Ld. DR, on the other hand, relied upon the orders of both the authorities below. 9. We have heard the rival contentions and perused the facts of the case. The assessee has claimed short term capital gain and on identical facts, the Department has accepted the investment in shares and short-term....
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....see has declared dividend income of Rs.1,72,86,993/- and out of the same Rs.38,18,593/- has been earned from investment and the AO is factually wrong in stating that no income from dividend income has been earned and therefore, the finding of the A.O. cannot be accepted and are against the facts of the present case and therefore, it cannot be said that the assessee has made purchase and sale of shares in the nature of trade. On identical facts, the department has accepted in assessee's own case for the assessment year 2005-06 in the assessment finalized under section 143(3) of the Act. Investment in shares, the computation of income and assessment order placed at PB 1 to 6 where dividend income from sale of shares is clearly visible and also the short term capital gain. The computation of income for the A.Y. 2006-07 is placed at PB 7-8 where the disclosed dividend income and the capital gains on the identical facts have been accepted by the department. 9.1 The department has not pointed out any different facts as compared to the assessment yeas 2004-05 & 2006-07 in assessee's own case. In the facts and circumstances of the case, the AO cannot take a different view. The reliance ....
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.... was a dispute regarding the structure of Board of Directors of the said Company for which the matter was pending before the CLB. It was submitted that the A.O. as well as the CIT(A) was not correct in stating that the amount spent could not be termed as a allowable business expenditure as the Assessee is only earning dividend and meeting fees income from the said Company. The Assessee is a Director in many of the concerns. The complete list of the concerns wherein the Assessee has a business link has been provided.The assessee filed the petition before the CLB to save the goodwill and reputation of the business.Though the assessee is not earning any business income from the said Company but the other business of the Assessee are directly linked to each other. If the status of the Assessee as a Chairman in M/s AB Hotels is affected, it would naturally affect all other businesses of the Assessee. Moreover, the Assessee is earning annual dividend income of more than Rs. 1 Cr. from M/s AB Hotels Ltd. It is true that the Dividend income is exempt in the hands of the Assessee but it is just the shift of the hands that the Company is paying Corporate Dividend Tax on the same. The Dividen....