2006 (12) TMI 261 - AT - Income Tax

Disallowed set off - Long term capital loss adjust against with short term capital gain - Purchase and sale of shares - nature of transaction - HELD THAT:- The mere volume of transaction transacted by the assessee would not alter the nature of transaction. It is an established principle that income is to be computed with regard to the transaction. The transaction in whole has to be taken into consideration and the magnitude of the transaction does not alter the nature of transaction. Though the principle of res judicata does not apply to the Income-tax Proceedings as each year is an independent year of the assessment but in order to maintain consistency, it is a judicially accepted principle that same view should be adopted for the subsequent years, unless there is a material change in the facts.

Assessee is holding the shares as investment from year to year. It is the intention of the assessee which is to be seen to determine the nature of transaction conducted by the assessee. Though the investment in shares is on a large magnitude but the same shall not decide the nature of transaction. Similar transactions of sale and purchase of shares in the preceeding years have been held to be income from Capital Gains both on Long Term and Short Term basis. The transaction in the year under consideration on account of sale and purchase of shares is same as in the preceding years and the same merits to be accepted as Short Term Capital Gains. There is no basis for treating the assessee as a Trader in shares, when his intention was to hold the shares in Indian companies as an investment and not as stock-in-trade. The mere magnitude of the transaction does not change the nature of transaction, which are being assessed as Income from Capital Gains in the past several years. The Assessing Officer is directed to set off the Long Term Capital Loss against the Short Term Capital Gain of the year under consideration. The grounds of appeal raised by the assessee are allowed.

In the result, the appeal filed by the assessee is partly allowed.