TaxTMI 
TaxTMI 
2025 (11) TMI 1312
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....t the order of the learned CIT(A) dated 23 January 2012 had been passed and at no point was it communicated to the assessee. It was pointed out that on 6 November 2012 the assessee wrote to its then counsel enquiring about the status of the appeal for assessment year 2008-09 which shows that even ten months after the order the assessee still believed that the appeal was pending. The learned counsel further submitted that again on 2 January 2025 the assessee wrote another communication seeking details of proceedings for assessment years 2007-08 and 2008-09 thereby reaffirming that even after more than a decade the assessee still had no knowledge of any appellate disposal. 3. The learned counsel for the assessee also pointed out that the very issue involved in the present appeal had already been decided by the Tribunal in the assessee's favour in assessment year 2007-08 by order dated 9 May 2014. However even this favourable order had not come to the assessee's knowledge and the department itself gave appeal effect only on 4 March 2025 nearly eleven years later. This long delay on the departmental side itself indicates that neither party was aware of the earlier appellate developm....
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.... 2008-09 appeal before CIT(A). PB 88 09.01.2025 Application moved before DCIT, Circle 2(2)(1), Mumbai, seeking inspection of records for AY 2007-08 & AY 2008-09. PB 89 14.01.2025 Reminder sent to counsel's office. PB 88 04.03.2025 Intimation as to appeal effect pursuant to ITAT's order dated 09.05.2014 for AY 2007-08 PB 90 19.03.2025 Proposal for adjustment of refunds against demand for AY 2008-09. PB 92 05.04.2025 Assessee's email disagreeing with proposal for adjustment of refund against demand for A.Y.2008-09 PB 93 21.05.2025 Extracts of CIT(A)'s order dated 23.01.2012 received by Assessee pursuant to inspection applications. Pages 7,9,13,14,17,20,25,26,27, 28 missing PB 94 04.07.2025 Assessee writes to AO, informing that copy of order received 22.05.2025 was not complete, and seeking further documents and details PB 112 14.07.2025 Copy of CIT(A) order for A.Y.2008-09 received 16.07.2025 Appeal filed before ITAT, disclosing 21.05.2025 as date of receipt of CIT(A)'s order Form 36 7. Having considered the above submissions and the detailed sequence of events we find that the expla....
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....l is admitted for adjudication on merits. 13. On merits the learned counsel for the assessee submitted that the assessee has always been an investor and not a trader. It was pointed out that the object clause of the company does not contemplate trading in shares that shares have consistently been shown as investments in the balance sheet that they have always been valued at cost and not at cost or market value whichever is lower and that the assessee has earned significant dividend income. These factors according to the learned counsel show that the intention was to hold investments and earn income and appreciation and not to carry on business. It was further submitted that in earlier scrutiny assessments the department has accepted the treatment of gains as capital gains and that the coordinate bench in assessment year 2007-08 on identical facts held that the gains were taxable as capital gains. On section 14A it was submitted that the assessee had already disallowed most of the relevant expenditure suo motu and the Assessing Officer invoked Rule 8D mechanically without recording satisfaction. 14. The learned Senior Departmental Representative supported the orders of the low....
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.... orders, as well as the decisions cited by the learned AR and DR during the course of hearing before us, in the context of the factual matrix of the instant case. From the record, we found that assesses company was incorporated to carry on business on distribution, marketing and trading in automobiles. During the year under consideration, the assessee has income by way of interest, dividend and short term and long term capital gains on shares/securities. From the object clause, we found that assessee company was not incorporated to carry on business of dealing in shares. It has no power to carry on business on dealing in shares. The short term and long term capital gains/loss earned by the assessee was declared under the head 'capital gains depending upon the period of holdings of the shares sold during the year. However, the AO assessed the net gain as 'business income. It is settled law that for the purpose of assessability of profit derived from sale of shares, it is predominantly the intention of the assessee which is relevant. Such intention of the assessee is to be gathered from the facts and circumstance of each case. The issue whether shares/securities held by an as....
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.... department under scrutiny assessment in earlier assessment year i.e. Α.Υ. 2005-06 & 2006-07 as capital gains and not as business income. As the assessee was having surplus funds, the management of the assessee decided to invest available funds in various shares/securities to eam dividend income and also to earn appreciation in the capital value, rather than keeping the funds idle. A resolution was passed in the Board Meeting of assessee company wherein it was resolved that surplus funds to be held as part of investment portfolio. The shares so purchased held as investment and not as 'stock-in-trade' and assessee also earned substantial dividend Income of Rs.41,98,958/- on such investment. Thus, the quantum of dividend Income earned by assessee also supports its intention of investment in shares. Furthermore, in the audited financial statement of the assessee company, the entire investment portfolio was reported under the head 'investment and not as 'stock-in-trade'. The assessee has recorded the script name of each investment. We had also verified the audited financial statement of the assessee, in Note 1(v) in Schedule 8- notes to accounts formin....
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....allow the position to be changed in a subsequent year." 7 The profit derived from sale has been shown as 'profit on sale of Investment and offered in return of income as short term or long term capital gains depending on period of holding shares held in investment account as on 31-3-2006 and which were sold during the year and profit/loss thereon was offered under head of long term capital gain/loss, were value at cost only, and at cost or market price whichever is lower. Had the assessee valued such shares at cost or market price, whichever is lower, there would have been justification in the inference drawn by the AO to the effect that assessee was doing business in shares. All these facts substantiated the stand of the assessee with regard to holding of shares as investment with an intention to earn appreciation in value and also earn dividend income and not to earn profit by trading in shares/securities. 8. Hon'ble Supreme Court in the case of CIT Vs. Associated Industrial Development Company (P) Ltd. 82 ITR 586(SC), has held as under :- "Whether a particular holding of shares is by way of investment or forms part of the stock-in-trade is a ma....
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....chase and sale of shares is assessable as business profits or as capital gains. The Hon'ble Jurisdictional High Court upheld the decision of the tribunal that the resultant gain is assessable as Capital gains instead of Business Income, inter alia, in view of the followings: i) the delivery based transactions have been shown as investments in the books, ii) the shares shown as investments were valued at cost; iii) nature of activities, modus operandi of share transactions, manner of keeping records and presentation of shares as investments is same in all the years and hence apparently there appears no reason as to why the claims made by the appellant should not be accepted; The Hon'ble Bombay High Court also accepted tribunal's observations that the principle of res judicata is not attracted since each year is separate in itself, however, there ought to be uniformity in treatment and consistency when the facts and circumstances are identical, particularly in the case of the assessee Special Leave Petition filed by the Department against this order of Hon'ble Bombay High Court has also been dismissed by the Supreme Court vide order....
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....of its investment at a short interval, cannot be solitary yardstick for treating such action as an adventure in the nature of trade, giving rise to business profits, when all the surrounding circumstances, Indicate otherwise. No where the AO has indicated any transaction of purchase of shares without taking delivery and making full payment of such investment. Even in the case of investment it is for the assessee to decide when to dispose them off so as to have a maximum return out of them. There is no theory that the shares held as investment should be disposed of only at the time of need or in emergency The assessee had all the nghts to dispose the investment to reap the maximum benefit when the prices of scripts are high so as to eam better gain. It is true that frequency and volume of transaction is one of a guiding factors to find out as to whether assessee deal in shares as trading asset or hold shares as investor, but certainly not a criteria. A prudent investor always keep a watch on the market trend and, therefore, not barred under law from liquidating his investment in shares. The law itself has recognized this fact by taxing these transactions under the head "Short Term C....
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....ital gains and short-term capital gains were taxed at the rate of 10% (without indexation) and 30% respectively. In case of a trader in securities, however, the gains were taxed as any other normal business income. Thus tax liability on the income from purchase & sale of shares as regards to the STCG & business income was at par However the issue of treatment of income from share transaction as capital gain or business income has in-fact arisen after the amendment brought with Finance Act 2004 by insertion of provisions of section 111A and 10(38) as regards to levy of Transaction tax and exemption /concession on capital gain arising from securities entered in a recognized stock exchange. With a view to simplify the tax regime on securities transactions, a tax at the rate of 0.015 per cent. (see: change in rates on securities transactions, by Finance Acts, at appropriate head) is levied on the value of all the transactions of purchase of securities that take place in a recognized stock exchange in India, This tax is collected by the stock exchange from the purchaser of such securities and paid to the exchequer. The provisions relating to the securities transactions tax are contained....