TMI Blog2010 (10) TMI 573X X X X Extracts X X X X X X X X Extracts X X X X ..... appeals are filed by the Revenue for asst. yrs. 2005-06 and 2006-07 against separate orders of the learned CIT(A)-VIII, Kolkata. We have heard these appeals together and dispose of the same by this common order for the sake of convenience. 2. The common ground taken by the Revenue except the variation in amount, is as under:- "That the learned CIT(A) erred on facts and in law in holding that the income of Rs. 1,01,78,950 for asst. yr. 2005-06 and Rs. 57,86,982 for asst. yr. 2006-07 was income from short-term capital gains rather than business income despite the clear findings of the AO that the main motive of the assessee was to earn profits by trading in shares rather than investments." 3. Brief facts of the case are that the assessee-company is an investment company and is also engaged in moneylending business. It has offered income from moneylending business as business income and profit/loss arising out of sale of shares taken under capital investment portfolio has been declared under the head "Capital gains". During assessment year (for asst. yr. 2005-06), the assessee derived income from dividend of Rs. 8,51,258 and earned profit on sale of investments of Rs. 3,05 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the exact nature, character and scope of the transactions. 5(e) The scrips on which the assessee has claimed short-term capital gain, the assessee has received dividend of Rs. 2.44 lakhs only, as against the gain (difference of sale and purchase) of more than one crore rupees. Rest of the dividend has been received on the shares in long-term capital gain. No person will carry out a turnover of more than 9 crores rupees to get dividend of Rs. 2.44 lakhs. The dividend received is only incidental, as the assessee happened to hold these shares on record date. Therefore, the motive in sale and purchase of shares is not earning of dividend but to earn business profit. 6(a) The assessee has also claimed speculation loss of Rs. 59,279. This loss is in the spot market as well as in the F and O market. As regards the loss in the spot market, it is seen that the assessee has traded throughout the year. An investor would not indulge in the speculative transactions. 6(b) The magnitude of purchase and sale is very large. The statement of so called short-term capital gain, filed with the return of income runs into 9 pages. 95 per cent of these transactions have taken place after 1st O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estment and obtains a higher price with a gain, the gain is not profit. [Raja Bahadur Visheshwara Singh (Decd.) and Ors. vs. CIT (1961) 41 ITR 685 (SC)]. 13. As earlier said, assessee's accounts consistently exhibited the holding of shares as investment as opposed to stock-in-trade. Though the investment treatment may not be taken as conducive evidence, yet it is a circumstance with bearing as a presumption of the intention of investment. Reliance can be placed on Karam Chand Thapar and Bros. (P) Ltd. vs. CIT (1971) 82 ITR 899 (SC) and Ashoka Viniyoga Ltd. vs. CIT (1972) 84 ITR 264 (SC). In any case, here the circumstances cumulatively show:- (1) that the assessee had never been a dealer in shares, (2) he has been exhibiting the shares as investment from the inception which fact is clear manifestation of intention of investment, (3) purchase and sales were by reason of the mercurial behaviour of the shares creating uncertainty which led to alterations of the portfolio, and (4) the sudden buoyancy of certain industrial sectors and industrial units required adjustment of investment portfolio, and (5) the gains arose fortuitously without any calculation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that the closing stock has been constantly valued by the assessee at the cost first in and first out basis and he further established that the closing stock has been shown at the last purchased rate. However, while executed in the statement, they have mentioned average of the last purchases when there are more than one purchases, To establish this fact, he filed the name of the scrips which are treated by the assessee in closing stock and the value of the last purchases. Therefore, he requested that the learned CIT(A)'s observation is correct to this point and since the assessee is constantly showing all the shares as investment since its incorporation it is not fair on the part of the Revenue to treat the same as business income of the assessee. Therefore, he requested to uphold the order of the learned CIT(A). 7. After hearing the rival submissions and on careful perusal of the material available on record, we find force in the submissions of the assessee that the assessee is an investor and made the investment only for the purpose of earning dividend. The learned Departmental Representative has not been able to produce any evidence in support of his contention that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actions with a motive of making investment as well as trading if they are separately shown in books of account. In fact the separate treatment of delivery based purchase and sale of shares under the investment portfolio and purchase and sale under future and options etc., with profit motive by appellant is the only reliable evidence available to show that the transactions related to delivery, based purchase and sale of shares resulting in capital gain are entered into with the intention of investment. As far as volume of transactions is concerned, it can only be an indicative factor but it cannot be a determinative factor in analyzing any transaction. In current days, change in portfolio is required on the basis of performances of the companies in various industrial and other sectors and volatile share market. The volume of purchase and sale of shares under investment is only incidental to the necessary changes required in maintaining a healthy investment portfolio of shares in a volatile share market. 4.2 In the guidelines of Circular No. 4 of 2007 of CBDT, it is mentioned that no single principle would be decisive and the total effect of all the principles should be considere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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