TaxTMI 
TaxTMI 
2011 (1) TMI 28
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....he assessee has observed as under: "In course of examination of assessee 's accounts it is seen that the assessee in its .P&L A/c. credited a sum of Rs. 12,86,081/- towards profit on sale of investment and a sum of Rs.2,40,315/- towards sale of shares. In course of hearing the assessee was asked to furnish the details of purchase and sale of shares and profit on sale of investment Apart from that, the assesee was asked to furnish the entire transaction activity showing the date wise and script wise details of purchase and sale of investment activity. All the details were furnished. Further, the assessee was also asked to furnish a formal computation of total income, which was also furnished. On examination of all the details it is seen that no purchase was booked under the head 'trading a/c Whatever sale has been disclosed those were only from the opening stock As per quantitative analysis the closing stock was far 6865 shares. Out of that 4400 shares were sold during the year under consideration. On comparative study of the immediate preceding year, it is seen that in the said year opening stock was for onoy 5350 shares, purchased 104350 shares and sold 102800 shares. All these ....
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....re of transactions whether the same should be treated as investment activity or business activity, in their findings, the authority for advance rulings directed that the substantial nature of transactions the manner of maintaining books of a/cs, the magnitude of purchases and sales and the ratio between purchases and sales and the holding would furnish a good guide to determine the nature of transactions. Apart from that, it has clearly mentioned that ordinarily the purchase and sale of shares with motive of earning a profit, would result in the transaction being in the nature of trade/adventure in the nature of trade. but where the object of the investment in shares of a company is to derive income by way of dividend etc. then the profits accruing the change in such investment (by sale of shares) will yield capital gain and not revenue receipt. In the instant case, upto the immediate preceding year carried on investment activity at a negligible amount and transactions were very small in nature. All the major transactions were booked under the head "Trading". But, in the current year, the entire purchase and sale activity has been booked under the head Investment A paltry amount a....
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....the head "Income from Capital Gain" instead of treating this income from business without any genuine reason. He also contended that the assessee booked the entire purchase and sale activity under the head "investment". The innumerable numbers of transactions, huge quantity of shares dealt with and the volume of transactions throughout the whole year, clearly establishes the intention of the assessee about earning profit by such purchase and sale of share activity, though the same have been booked under the head "Investment Activity". He also contended that the Assessing Officer has rightly relied on the findings of theHon'ble Apex Courtin the case of Raja Bahadur Visheshwara Singh Vs. CIT 41 ITR 685 while rejecting the assessee's plea of such transactions as investment activity and the entire profit earned by such share transactions has rightly been treated as profit from trading activity. He, therefore, urged before the Bench to set aside the order of the Ld. CIT (A) and restore that of the Assessing Officer. 4. On the other hand, the Ld. Counsel for the assessee while reiterating the same submissions as submitted before the Ld. CTT (A) relied on his order and urged before the b....
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....arate set of port-folio, one relating to Investment in shares and another relating to business activities involving dealing in shares. This is also evident from the assessment order of the A.O. There were same transactions in shares held as stock in trade by the assessee. As stated by appellant, during the year appellant acquired and held all shares and units on Investment account as "Capital assets" and did not treat or convert any investment into stock in Trade. As seen from notes on accounts also, the appellant clarified the accounting policy for investment and incentives. In the recent decision of Lucknow Bench of Tribunal in the case of Sarnath Infrastructure (P) Ltd. vs. Asstt. CIT [2009] 120 TTJ 216, the Hon 'ble ITAT has considered almost all the important judicial decision laying down legal principles to determine the nature of transaction i.e trading or investment. The Tribunal has also considered the CBDT Circular No.4 of 2007. The Tribunal has summarized these principles in para 13 of then said order. The applicability of the principles to the facts of the case are analysed as below: (1) What is the intention of the assessee at the time of purchase of the shares' (or ....
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....tions and low holdings indicate trade where as low transactions and high holdings indicate investment). An investor may buy or sell everyday but that may not be considered such frequency as to lead to the inference of trading. It is only when particular scrip is brought and sold a number of times over a short period that an inference of trading as against investment may be drawn. In the case of the present appellant the allegation of frequency is not only unsupported, but incorrect as well. If scrip-wise details are analysed. The frequency was to be seen scrip-wise and not on the basis of shares of various companies being treated to be a single commodity and on this basis there was little frequency in the transactions of purchase and sale of shares by the assessee as per the details furnished by the Ld. A.R. The appellant also furnished the details of transactions. The opening numbers and cost of investment is 38122 shares worth Rs. 43,14.085/- and closing number and cost of investment is Rs. 1,12,546/- shares valued at Rs. 62,17,208/-. As per the details furnished by the appellant, there was a rollover of shares on 145 days basis and capital on 85 days basis, which cannot be rega....
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....urt of Bombay in the case of the Commissioner of Income Tax vs. Gopal Purohit in its judgment delivered on 6th .January, 2010 up held the judgment of the ITAT, Mumbai Bench that presentation of books of accounts is most crucial source of gathering intention of the assessee and that delivery based transactions in the present case, should be treated as those in the nature of investment transactions and the profit received there from should be treated either as short term or as the case maybe long term capital gain, depending on the period of holding The appellant also relied on the decision of the jurisdictional High Court in the case of CIT Vs. Bhagawati Prasad Agarwal in ITA No.22 of 2009 dated 29.04.2009. The Ld. A.R. further argued that under section 45(2) an assessee has an option to treat or convert a capital asset into stock in trade and the A.O. has no such option. The assessee has maintained proper books of accounts which have been audited. The audited profit and loss account disclose separately capital gains. The audited balance sheet distinctly shows investments at cost. As noted earlier A.O. has treated entire amount of capital gains as business income. A.O. has disallo....
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.... year under consideration and claimed the entire income as an exempt one u/s 10(34) of the I. T. Act. During the assessment proceedings, the assessee was asked to explain why a proportionate expenses will not be disallowed u/s. 14A of the Act for earning such exempt income. In reply, the assessee stated that no expenditure was incurred for earning such dividend income and nothing is disallowable u/s. 14A of the Act. The Assessing Officer, therefore, stated that the assessee utilized its common ifinds, common management and common establishment for earning both taxable and exempt income. Since no separate books of accounts are maintained by the assessee for such different heads of income, the Assessing Officer has no other alternative but to apportion the expenses towards exempt income on pro-rata basis and an amount of Rs.42,237/- has considered as disallowable u/s. l4A of the Act and added the same to the assessee's total income. In appeal, the Ld. CIT (A) confirmed this action of the Assessing Officer. Hence, the assessee is in cross objection before us. 9. At the time of hearing, the Ld. Counsel for the assessee while reiterating his same submissions as submitted before the low....