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2016 (5) TMI 1543 - AT - Income TaxCharacterization of income - income from share trading transaction - short term capital gain or business income - HELD THAT:- We find that this issue has not been examined in depth by AO that whether at the time of purchase of shares of SGLPP assessee has borrowed funds specifically to buy the shares, which could have been verified from the bank account of the assessee and secondly whether assessee has maintained separate demat account to demarcate that at the time he bought the shares, his intention was to hold them as investment and to earn capital gain (short term/ long term) therefrom. These are very relevant in this case because assessee’s main business is of share trading and short term capital gain of ₹ 78.93 lacs has been earned which becomes further relevant because the total net profit in the audited profit and loss account is shown at 1.09 crores which is inclusive of the short term capital gain of ₹ 78.93 lacs which means that substantial turnover is of business but the substantial profit portion is coming from short term capital gain When we look up to the assessment order, we observe that ld. Assessing Officer has not dealt with the issue relating to interest expenditure nor has he co-related specifically the borrowings of funds with the impugned purchase transaction for buying of equity shares of SGLPP We are of the view that the order of ld. Assessing Officer is cryptic to the extent that proper verification of books of account was not made before making observation that the assessee is deemed to have taken borrowed funds for entering into the transactions of purchase/sales of shares shown in the short term capital gain and further ld. Assessing Officer has also not gone through the books of account to see as to whether assessee has maintained separate demat account which can prove the very intention of the assessee at the time of purchase of shares that they are intended to be held as investment and surplus or deficient, if any, arising in future will be shown as capital gain. - Appeal allowed for statistical purposes.
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