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2011 (5) TMI 946 - AT - Income TaxIncome from sale of shares - capital gain or business income - surplus on the sale of shares - HELD THAT:- It appears to us that basically the number of shares of a particular company purchased by the assessee had increased which substantially contributed to the increase in the value of the investment. This shows that the assessee is basically an investor more than a share dealer. The stand of the assessee has been accepted by the Revenue authorities in the asst. yrs. 2001-02 and 2004-05 in assessment orders passed u/s. 143(3). Therefore, there is enough evidence to show that the assessee is an investor in shares and the surplus arising on the sale of shares should be assessed as short-term or long-term capital gains, depending on the period of holding and not as business income. It thus appears to us that the CIT(A) took an incorrect view of the matter in the asst. yr. 2005-06 and that the CIT(A) who dealt with the appeal for the asst. yr. 2006-07 has taken the correct view of the matter and applied the appropriate principles correctly in holding that the assessee was an investor in shares. Since the AO had treated the assessee as a share dealer, he valued 184 shares of Infosys Technology at ₹ 4,896.21 per share. This included 46 original shares which were valued at ₹ 2,25,217. The average cost of 543 bonus shares of Tata Steel was valued at ₹ 68,526. The AO’s reasoning would have held good if his decision to treat the assessee as a dealer in shares is upheld. However we have held that the assessee is an investor in shares. The bonus shares cannot therefore be valued as if they are stock-in-trade. We therefore delete the additions of ₹ 2,25,217 and ₹ 68,526. In the result, the assessee’s appeal is partly allowed whereas the Department’s appeal is dismissed.
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