TMI Blog2014 (4) TMI 681X X X X Extracts X X X X X X X X Extracts X X X X ..... ial factor being the frequency and volume of the trades to determine the true intention for which they are held - Considering the limited activity surrounding the shareholding of the assessee in relation to the 13 scrips, the order of the CIT(A) and the ITAT is upheld - the amount reported by the assesse is to be treated as STCG – Decided against Revenue. - ITA 180/2013 - - - Dated:- 16-4-2014 - S. Ravindra Bhat And R. V. Easwar,JJ. For the Petitioner : Mr. Kamal Sawhney, Sr. Standing Counsel with Mr. Raghvendra Singh, Advocate. For the Respondent : Mr. G.C. Srivastava, Advocate. ORDER Mr. Justice S. Ravindra Bhat 1. The Revenue today impugns concurrent findings of the Commissioner of Income Tax (Appeals) ( CIT(A) ) and the Income Tax Appellate Tribunal ( ITAT ). They had reversed the findings of the Assessing Officer ( AO ), who treated the assessee s income from sale of shares as business income, as opposed to Sort Term Capital Gain ( STCG ), as was original claimed in assessment proceedings. The assessee appealed the order of the AO on various grounds to the CIT(A), of which only the issue of income from sale of shares arises in this appeal. The fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ior to amendment. b) The treatment given to the shares transaction by the assessee company is quiet arbitrary and is just to suit its convenience with an eye to reduce tax liability. The assessee has parked shares accordingly and there is no plausible logic for such action. c) Majority of the shares have been acquired, have disposed off in a very short period of time and by any yard-stick they cannot be considered to be as investment. The frequency and volume of transaction in the instant case give an impression and is a strait pointer to the fact that the assessee did not intend to acquire the share with investment motive. In the case of an investment a person usually watches the market over a longer period of time before selling of the shares purchases were completed on the very same day. Virtually there is no dividend income earned on holding of such shares on which the short term capital gain is claimed from which it is very clear that apart from other consideration to this limited issue the assessee is a trader and not an investor as the assessee is not having an eye on the capital appreciation and that of earning a dividend. The earning of dividend and appreciation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sactions is an important indicator of the intention of the assessee, it is not the sole criterion; (d) the AO s conclusion that that since sale and purchase has been determined by the volatility of the market, it cannot be classified as investment is incorrect, as there is no bar in law to liquidating investment based on market factors; (e) dividend income is always based on the holding of shares on the record date, and thus, will not arise in case of shares sold before the record date or purchased after the record date. Absence of dividend income thus does not lead to any conclusive findings. 4. On appeal, the ITAT sustained findings, holding that in more than 90% of the cases there has been only one transaction of sale and purchase. Further, the share of dividend income to investment income was considered to be insufficient, by itself, to bracket the income as business income. On the basis of the frequency and volume of transactions, thus, the ITAT held that the income was STCG. 5. Impugning this decision of the ITAT, learned counsel for the Revenue argues that a closer look at the accounts indicates that the dealing in shares in this case was not as investment, but rather, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn as investments by the assessee, and not as stock in trade. This is an important (though not conclusive) factor. Further, of the 13 scrips in question, 8 were transacted only once; two have been transacted twice; one each has been transacted thrice and four times, and only one has been transacted regularly, i.e. ten times. The frequency of transactions speaks greatly to whether the shares were traded, i.e. whether the income earned was business income, or held for investment. The fact that in this case the shares were traded irregularly is a strong pointer that they were held as investment, lest there be a new category of static trading or business. The fact that there was a limited dividend drawn from these shares, though relevant, does not displace this conclusion, since dividend earned depends on whether the shares were held on the record date, and does not directly correlate to the time for which they have been held. The other factors, considered cumulatively, carry greater weight in this case. Trading contemplates a frequent sale and purchase of the commodity being traded. Infrequence, as in this case, as the general trend (notwithstanding only one share) cannot color the en ..... X X X X Extracts X X X X X X X X Extracts X X X X
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