TaxTMI 
TaxTMI 
2017 (11) TMI 2049
X X X X Extracts X X X X
X X X X Extracts X X X X
....by the assessee under the head "short term capital gain" as business income. 3. Brief facts of the case are that the assessee has filed his return of income on 30.9.2008 declaring total income at Rs.31,99,920/-. On scrutiny of the accounts, it revealed to the Assessing Officer that the assessee has shown short term capital gain of Rs.27,77,007/- as against income from share trading of Rs.3,93,503/-. It is pertinent to observe that the assessee was maintaining two sets of accounts viz. (a) as an investor, and (b) as a trader, but both DEMAT accounts and treatment to the transactions were made separately in the accounts. Somehow the ld.AO was not satisfied with the declaration of short term capital gain. He treated the assessee as a trader....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ionary means, what one intends to accomplish or attain, it implies little more than what one has in mind to do or bring out. It suggests clear formulation or deliberation. Thus, it is always difficult to enter into the recess of the mind of an assessee to find out the operative forces exhibiting the intention for entering into the transaction. This would give rise a debate. Nevertheless, we have to look into the curious features of this case which will goad us on just conclusion. 6. Before we embark upon an inquiry on the facts of present case so as to find out, whether assessee is to be termed as involving in the trading of shares or to be treated as a simplicitor investors. We would like to refer certain broad principle culled out by I....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es are made for retention and appreciation its value? Former will indicate intention of trades and latter, an investment. In the case of shares whether intention was to enjoy dividend and not merely earn profit on sale and purchase of shares. A commercial motive is an essential ingredient of trade. (5) How the value of the items has been taken in the balance sheet? If the items in question are valued at cost, it would indicate 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r for investment provided it is maintaining separate account for each type, there are distinctive features for both and there is no intermingling of holdings in the two portfolios. 11. Not one or two factors out of above alone will be sufficient to come to a definite conclusion but the cumulative effect of several factors has to be seen." 7. The Hon'ble Gujarat High Court had also an occasion to consider this issue in the case of Commissioner of Income Tax vs. Riva Sharkar A Kothari reported in 283 ITR 338. Hon'ble court has made reference to the test laid by it in its earlier decision rendered in the case of Pari Mangaldas Girdhardas vs. CIT reported in 1977 CTR 647. These tests read as under: "After analyzing various ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... companies, is whether the deed of partnership or the memorandum of association, as the case may be, authorizes 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 transaction 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 proposition to the strength of holding then an inference can readily be drawn that the activity is in the nature of business." 8. In the light of the above, let us examine the facts of the present case. It emerges out from the record that the assessee maintained two separate accounts i.e. one for investment....