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2018 (3) TMI 1030 - ITAT KOLKATAIncome from sale of shares - Treatment of Short Term Capital Gains as Business Income - assessee had maintained dual portfolio in its books of accounts i.e both investment and trading portfolio - Held that:- AO had already accepted the assessee’s stand of being an investor for Asst Years 2007-08 and 2008-09 by accepting the long term capital gains reported by the assessee. The dispute was only with acceptance of short term capital gains and for that limited purpose alone, the revenue was trying to treat the assessee as trader in shares and not investor in shares. This divergent stand of the lower authorities is not appreciated. The assessee had purchased the shares that the assessee had invested in the aforesaid scrips with an intention to earn dividend and for holding for quite a long period of time and earn capital appreciation thereon. These are also supported by the Board Resolution passed by the assessee company to treat the purchase of certain scrips in each year as investments, much prior to the introduction of concessional rate of tax in the statute pursuant to levy of STT. We also find from the perusal of the audited financial statements, the assessee has got sufficient own funds at its disposal which were used for making investments and no part of the borrowed funds were used for making investments. The trading transactions disclosed by the assessee comprised of 96 scrips (trading in shares) and 269 scrips (trading in derivatives) for the Asst Year 2006-07. The profit derived from these trading transactions were duly offered to tax by the assessee as business income and accepted by the revenue. The assessee had after conversion of stock into investment as on 1.4.2005 had held those shares for a reasonable period of time and the weighted average period of holding of those shares was 82 days. This shows the intention of the assessee to hold those shares as investments to earn dividend and reap the benefits of capital appreciation and at the same time, exit at a profitable moment depending upon the market conditions The treatment given by the assessee in respect of share transactions by separately offering business income and short term capital gains / long term capital gains does not warrant any disturbance and deserves to be accepted. Disallowance of Consultancy charges - Held that:- The only way is to understand the veracity of the transactions is by cross verifying the other side who had submitted those reports. He fairly agreed that let this matter be examined by the ld AO. We find that this request of the ld AR deserves to be considered in as much as the disallowance has been made only by way of suspicion by the ld AO. Accordingly, in the interest of justice and fair play, we deem it fit and appropriate to remand this issue to the file of the ld AO to decide the same by making necessary cross verifications from M/s Batliwala & Karani Securities India Pvt Ltd in the legal process known to law.
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