9911796707
TMI Blog2010 (8) TMI 699X X X X Extracts X X X X X X X X Extracts X X X X ..... Ramachandran and Dr. Anita Sumanth, advocates represented on behalf of the assessee. 3. In the Revenue's appeal, the Revenue has raised the following grounds : "1. The order of the learned Commissioner of Income-tax (Appeals) is contrary to law and facts of the case. 2.1 The learned Commissioner of Income-tax (Appeals) erred in holding that the shares of M/s. India Cements Ltd. (ICL) held by the assessee-company were in the nature of capital assets and transfer of such shares would result in long-term capital gains which is exempt in terms of section 10(38) of the Act, thereby, deleting the addition of Rs. 227.37 crores made by the Assessing Officer by treating the income from such transfer of shares as 'income from business'. 2.2 The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. Ltd. [1967] 19 STC 1 (SC). 2.5 The learned Commissioner of Income-tax (Appeals) failed to note that the assessee had acquired a significant part of the shares of ICL through borrowed funds and such a purchase by utilisation of borrowed funds has the trappings of a business only, since, it defines logic that a person would make an investment out of borrowings. 2.6 The learned Commissioner of Income-tax (Appeals) ought to have seen that the directors of the assessee-company had declared an operational profit of Rs. 229,12,02,833 of which the bulk portion constitutes the profit element in respect of shares of ICL. 2.7 It is submitted that the persons at the helm of affairs in the assessee-company had converted the company from a public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... multiplicity of the transactions of sale as also on the reason that borrowed monies had been used for investment in the shares. He further placed reliance on the decision of the co-ordinate Bench of this Tribunal in the case of Udevar Estate Investments [I.T. Appeal No. 1331(Mad.) of 2008, dated 5-8-2009 wherein the Tribunal relying upon the decision of the Hon'ble Supreme Court in the case of Raja Bahadur Visheshwara Singh v. CIT [1961] 41 ITR 685 had after considering the magnitude of the shares purchased and sold as well as the frequency of the transaction thereof which is an important test to determine whether such securities have been purchased on trading account or investment account, upheld the action of the Assessing Officer in asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000 and 2,80,49,483 shares as on March 31, 2004 on account of the issuance of rights shares and 3,48,86,625 shares as on March 31, 2005 and out of these shares 2,80,00,000 equity shares were sold during the relevant assessment year. Two crores shares were sold in September, 2005 and another 80,00,000 shares in March, 2006. It was thus the submission that from 1996 to March 31, 2005 the assessee had not sold any share as it was the promoter and controlling company of ICL. Subsequently during 2006 due to certain disputes the assessee had liquidated its substantial holding in ICL by selling 2,80,00,000 shares and the balance of 68,86,625 shares were held by the assessee as on March 31, 2006. The learned authorised representative drew our atten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the promoter shareholder of ICL. The assessee has been receiving substantial dividends year after year from ICL. The assessee has not sold even one share of ICL between 1996 to March 31, 1995. 7. The decision as relied upon by the learned Departmental representative in the case Udevar Estate Investments, cited supra, shows that the co-ordinate Bench of this Tribunal had followed the decision of the Hon'ble Supreme Court in the case of Raja Bahadur Visheshwara Singh (supra) wherein the important test to determine whether securities had been purchased under trading account or investment account, was the magnitude of the shares purchased and sold as well as frequency of the transaction thereof. In the present case, if this test is applied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is not to trade in the shares of ICL. The shares have been held by the assessee for acquiring and maintaining a controlling stake in the company, ICL. It is further noticed that the sale of the shares itself was to a substantial extent to other promoters forming a part of the assessee's group of companies, which again is a very high indicator that the intention of the assessee is not to trade in the shares of ICL but to retain a control in the company, ICL. In the circumstances, we are of the view that the finding of the learned Commissioner of Income-tax (Appeals) that the sale of the shares of ICL held by the assessee is in the nature of sale of capital asset and not in the nature of stock-in-trade is upheld. In the circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X
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