TMI Blog2009 (7) TMI 901X X X X Extracts X X X X X X X X Extracts X X X X ..... res by taking delivery and making full payment for such investment. In such circumstances, the transactions are to be treated as giving rise to the capital gain and cannot be branded as trading in shares. What is relevant is the intention of the assessee himself at the time of making investment so as to determine whether the transaction was for dealing in shares or making investment for earning dividend and appreciation from such investment. The total number of shares dealt in respect of long-term portfolio is only 5. This cannot be considered as voluminous transaction. Therefore, this transaction in shares cannot be said to be with intention to deal in such shares. Rather the transactions were with intention of earning appreciation from su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ong-term capital gain declared is Rs. 3,01,34,600. (2)The total transaction in respect of short-term gain declared is Rs. 11,11,50,910. Therefore, these transactions are for making profit and not for earning dividend or interest. (3)The total transaction in purchase and sale of shares is Rs. 15,95,75,381. (4)The transactions have been entered into from 1-5-2005 to 31-3-2006. There is continuous purchase and sale of shares. It is not one time investment but continuous series of operation. (5)The purchases are made out of own funds and not borrowed funds. (6)The period of holding varies from 360 days to 20 days. (7)There is regular pattern of purchase and sale. (8)Looking to the volume of transaction, the assessee is devoting su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are only entered into based on specific advice from market advisors with a view to maintain an ideal and balanced portfolio that is geared towards growth. Sometimes capital market crisis due to political/global conditions along with investment climate may warrant a transaction decision to be made. 6. All investments are from own funds. 7. As these are capital assets the typical holding period of these investments are long-term, i.e., more than 1 year. The investments are with an aim towards capital appreciation. Short-term investments are typically more risky and would easily erode capital. 8. The ratio of sales to holding and purchases is very low. Sales have always been lower than the holding and purchases. 9. I do not devote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over Rs. 31 lakh from the investment. Dividend income is directly related to investments and a trader in share would not ordinarily received dividend to that extent. Average holding period in respect of long-term capital gain comes to more than 2 years 9 months and in respect of short-term capital gain, the period of holding is of 5 months. Thus considering the period of holding it does not amount to trading in shares. He also held that the investment is out of the own funds and not borrowed funds which is relevant to consider the intention of the assessee. He also held that no expenses have been made for carrying out share purchase and sale activity and are also not claimed. The shares are treated as investment in the books of account. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l before us challenging the action of the learned CIT(A) treating the income as capital gain and not as business income. 8. Whereas the learned DR Shri Stephan George sought to rely upon the finding of the Assessing Officer, the learned counsel for the assessees Shri Sanat Kapoor reiterated the submissions made before the CIT(A) and his findings thereon. 9. We have carefully considered the relevant facts and the findings of both the authorities below. The assessee in his individual capacity carries on business of jewellery. Apart from said business, the assessee invested in shares and treats shares as investment in his books of account. This itself manifests the intention of the assessee as to whether he proposed into dealing in sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted by the Assessing Officer. The assessee has also earned huge dividend income from such shares. The Assessing Officer merely because of the total volume of transaction is substantial, is guided to hold the income as business income. However, he failed to recognize that the volume of transaction includes the appreciation in shares also and such appreciation has been offered for tax. If volume of transaction is the criteria, what is to be examined is how frequently the transaction is done, whether the transaction is settled in the course of the day of trading itself or in the settlement period itself so as to avoid payment of full purchase price. Here the assessee has been holding the shares by taking delivery and making full payment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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