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2012 (9) TMI 685 - AT - Income TaxAddition on account profits from share transaction as trading activity - Whether profits out of share transactions, treat it as investment activity or trading activity – Shares sold without taking delivery, same has been shown as speculative gains - Where the part of delivery has been taken, the same has been shown as short term capital gains – Held that:- Following the test laid down by Hon’ble Gujarat HC in the case of Rewashanker A Kothari (2006 (1) TMI 80) that the most important test is volume, frequency, continuity and regularity of transactions of purchase and sale of goods concern, on the basis of which, an inference can be drawn whether the activity is in the nature of business or not. Assessee has ploughed back or rolled back the available capital almost 7 to 8 times in order to earn income out of purchase and sale of shares. Assessee sold 91.6% shares purchased during the year. 40% of overall transactions are those scripts in which the holding period was 30 days or less. 10% of overall transactions where the period of holding is more than 6 months. Therefore, shares transactions from which assessee has earned short term capital gains were in the nature of trading activity of the assessee. Decision in favour of revenue. Addition on adhoc basis treating share transaction as trading activity – CIT(A) upheld the 17% addition out of transaction in shares treated as investment – And balance as trading activity on basis of opening & closing stock, shares turnover – Held that:- As the part of the profit should be considered in the nature of short term capital gains but no reason has been given which could be set to fit in the principles laid down in judgement of various cases of Hon’ble Supreme Court as well as Hon’ble High Courts to support the said observation of ld CIT(A). Therefore, hold that the entire profits shown by the assessee on purchase and sale of shares has rightly been considered by AO as profit from business and not short term capital gains. Decision in favour of revenue
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