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2013 (5) TMI 445 - AT - Income TaxGain on shares and mutual funds - short term capital gains v.s business income - assessability of income - assessee is a private limited company in business of consultancy relating to tours and travels and allied service - Held that:- On a perusal of the transaction, it is seen that the assessee has shown gain on sale of equity shares at ₹ 91,32,471, and gain on sale of mutual fund of ₹ 92,23,053. For short term capital gains, the number of scrip entered into are 74, however, in most of the cases, the average holding period is far more than 100 days. The over all average of period of holding is around 184 days. Insofar as the allegation of the Revenue is concerned that the number of transactions have been undertaken in the sale of 74 scrips, the same cannot be taken as primary parameter to hold that it should be treated as business activity because it is a known phenomenon in Stock Exchange that a single transaction is split into many smaller transactions while trading in the Stock Exchange through computers. As the assessee has, all throughout, been showing purchase of shares as investment in the books of account and the same has been classified in the balance sheet under the head "Investment" & has been treated to be capital gain in the assessment years 2004-05 and 2005-06 by the AO under scrutiny proceedings wherein the order has been passed u/s 143(3). In the assessment year 2008-09, the Commissioner (Appeals) has accepted the gain from transactions of shares to be assessable under the head "Short term Capital Gain". Thus, if the same facts are permeating through all the assessment years, it cannot be held that on similar nature of transactions, the income from shares has to be assessed as "Income From Business" as also all the transactions undertaken are delivery based and the assessee has not undertaken any speculative or derivative trading of shares showing that intention was never to indulge in trading of shares and as no interest bearing borrowed funds or loans have been diverted for purchase of shares rather they have been purchased from the surplus funds available with the assessee & most of the gain has come from sale of mutual funds, which cannot be traded in Stock Exchange. This also goes to prove that the assessee is mainly an investor & the assessee's intention was to purchase the shares for holding it as investment. In view of above gain arising from sale of shares is assessable under the head "Short Term Capital Gain" and not under the head "Income From Business" - In favour of assessee.
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