TMI Blog2013 (5) TMI 717X X X X Extracts X X X X X X X X Extracts X X X X ..... er the head investment portfolio and, hence, the short term capital gain or long term capital gain as the case may be, will be applicable. In view of these facts and circumstances, the grounds of the assessee for both of the years allowed and direct the AO to assess the profit under the head short term capital gain instead of under the head business profit. In favour of assessee. - ITA Nos.2274&8013/Mum/2011 - - - Dated:- 1-5-2013 - Shri R. K. Gupta, JM And Shri P. M. Jagtap, AM,JJ. For the Petitioner : Dr. K. Shivaram Mr. Ajay R. Singh For the Respondent : Mr. V. V. Shastri ORDER Per Shri R.K.Gupta, JM: These two appeals have been preferred by the assessee against the order leaned CIT(A)-26, Mumbai relating to the assessment years 2007-08 2008-09. 2. Since common issues are involved in both the cases, therefore, for the sake of convenience, both these cases have been heard and disposed of by this consolidated order. 3. The assessee in both the appeals is objecting in confirming the action of the AO as to income earned on transaction in shares of Rs.1,11,89,670/- subject to STT is taxable under the head "income from business or profession" instead o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out on 05.01.2007 and 12.01.2007. The AO also noticed that shares of Bank of India were purchased on 02.5.2006 and sold out on 02.5.2006, 03.5.2006 and 08.5.2006. Thus, according to the AO, in all preceding years similar involvement of the assessee is there for doing day-to-day transactions. It is further noted by him that the same date transactions have been included as speculation income. The AO has mentioned that no separate account has been kept for this speculation and capital gain but has merely been shown as an investment in balance sheet, which does not alter the true character and nature of the transaction. The dividend income is earned by chance and not because of there is an investment with motive of earning dividend. Further, Ld. AO has mentioned in para 3.5 the series of involvement and earning of profit from purchase and sale of shares. According to the AO, all these facts clearly establish the profit earning motive by day-to-day transaction of the shares. Therefore, according to him, as per definition of profit u/s. 2(13) of the Income-tax Act, appellant's activity comes under the meaning and definition of 'business and profession'. Accordingly, the AO treated the sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the learned CIT(A), here before the Tribunal. A fact sheet was also filed. Copy of the decision of the Hon'ble Bombay High Court in the case of Shri Ashvinkumar K. Kapadia, passed in ITA No.5510 of 2010, was also filed, where similar issue was decided in favour of the assessee. Again reliance was placed on the decision of the Hon'ble High Court in the case of Gopal Purohit (supra). Reliance was also placed on various other case laws mentioned in the written note placed on record. 9. On the other hand, learned DR has placed reliance on the order of learned CIT(A). 10. After considering the order of AO, CIT(A) and other material on record, we found that the assessee deserves to succeed on the issue involved for both of the years. We noted that the department itself has accepted the short term capital gain shown by the assessee while passing assessment under Section 143(3) for assessment year 2006- 07 and for assessment year 2009-10, copy of which is placed at pages 35 45 respectively. Both these assessments were completed under Section 143(3) and similar transactions were made and they were accepted. Different yardstick adopted for these two years under consideration, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter considering the submission, learned CIT(A) found that there is no dispute that both the assessees are investor and dealers in shares. Income from derivative transactions is shown under the head of business income. Similarly, income from day trading is also offered under the head of business income. Similarly, on account of investment in shares, the long term capital gain or the short term capital gain has been offered for taxation, as the case may be. The CIT(A) noted that only Rs.1.43 lakhs or odd was taken on loan for the purpose of making investments in shares which comprises 0.37% of total investments. Total investments in the shares and mutual funds were to the tune of Rs.3.83 crores. The contention of the assessees that a portfolio investment is classified separately in the balance sheet and on this account, the assessees had earned dividend income of Rs.66,52,110/-. Accordingly, CIT(A) held that the AO was not correct in holding that the entire transaction as business transaction. The CIT(A) has also observed that mere fact that the assessee has invested a consideration amount in the share market and consequently the volume of transactions is heavy, cannot lead to the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of CIT, Bombay vs H Holck Larsen (160-ITR- 67), the order to determine whether one was a dealer in shares or an investor, the question was not whether the transaction of buying and selling the shares lacks the element of trading, but whether the later stages of the whole operation show that the first step -- the purchase of the shares -- was no ken as, or in the course of a trading transaction. The totality of all the facts will have to be borne in mind and the correct legal principles applied to these. If all the relevant factors have been taken into consideration and there has been no misapplication of the principles of law, then the conclusion arrived at by the Tribunal cannot be interfered with because the inference question of law, if such an inference was a possible one, subject, however, that all the relevant factors have been duly weighed and the considered by the Tribunal, the inference reached by the Tribunal should not be interfered with." 13. In view of the aforesaid decisions, we are of the view that whether the profit from the shares is a capital gain or business income - Whether the shares are held by the assessee as investments or - Whether the shares are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it will be regarded to be the business income. Dividing the capital gain into two parts i.e. the short term gain or the long term gain itself prove that the period of the holding cannot be the criteria for determining whether the profit derived by the assessee is a long term capital gain or short term capital gain. 16. The CIT(A), we noted in this case while allowing the appeal of the assessee has relied on the decision of the ITAT Nagpur bench in the case of Dineshbhai C. Patel (HUF) in 1TA No.616/2008, which confirmed the decision of the C1T(A), the copy of the decision was filed before us. The appeal against the decision of the Nagpur Bench in the case of Dineshbhai C. Patil (supra) has been dismissed by the High Court vide order dated 28 10 2010 holding that no substantial position arise and the Tribunal, on the basis of the material on record, hold that the shares were purchased by the assessee as investment and the gain arising on sale of those shares were allowable to be taxed as capital gain. It is not denied that in this case also, the assessee was holding the shares as investment. Holding of the shares as investment itself prove the intention of the assessee as regards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctional High Court and SLP against that decision has been dismissed by the Supreme Court We accordingly, confirm the order of the CIT(A) and dismiss both the appeals." 13. Similar facts are involved in the present case. Therefore, respectfully following the decision of the Tribunal and the Hon'ble High Court mentioned above, we hold that the learned CIT(A) was not justified in confirming the order of AO, who took the transaction as business transaction instead of treating the same as short term capital gain. Learned CIT(A) has confirmed the order of AO by observing that the transactions are frequent transactions, however, we are of the view that the holding period cannot be taken into consideration because under the Act itself, it has been provided that where the holding period of shares are more than one year then the long term capital gain will be applicable and where the holding period is less than one year, then the short term capital gain will be applicable, subject to the transaction are shown under the head investment portfolio. Therefore, whether the transaction are frequent or holding period is less, they are shown under the head investment portfolio, therefore, the tran ..... X X X X Extracts X X X X X X X X Extracts X X X X
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