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TMI Blog2010 (10) TMI 784X X X X Extracts X X X X X X X X Extracts X X X X ..... gains. Assessing Officer asked the assessee company to show cause as to why the assessee income should not be treated as business income. Considering the assessee's submissions Assessing Officer referred the Memorandum of Association of the company, which has the objects including acquiring, holding, issuing on commission, underwriting and dealing in stock funds, shares, debentures, debenture stock, bonds, obligations, securities and investments of all kind. Assessing Officer observed that that the object of the company as outlined above clearly shows that the assessee company intends to deal in shares, debentures, etc. with a profit motive. This profit motive itself indicates that the nature of purchase and sale of shares is adventure in the nature of trade. Assessing Officer further placed reliance upon the several case laws. Accordingly, Assessing Officer held that the transactions of sale and purchase of shares is business income of the assessee. He accordingly, denied the benefit of indexation of cost of acquisition of the shares sold and computed the business income on account of sale of shares at Rs.6079691/- which comprised of redemption amount of mutual funds of Rs.146913 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year under consideration. The appellant has also drawn my attention to the fact that out of the holding of 5,21,739/- shares of HDFC Bank, only 89996/- shares have been sold during the year, whereas the balance of Rs.4,31,743/- shares is held by the company, which is authorizes the company to deal in shares, etc. The Assessing Officer himself has taken note of the fact that the mere provision in the Memorandum of Association is not enough indicator of the nature and kind of activities engaged by the appellant. The Assessing Officer has apparently based his conclusion regarding the nature of sale of shares by the appellant during the year, merely on the above said provision in the Memorandum of Association. I do not find sufficient merit in the action of the Assessing Officer in treating the sale of shares of HDFC bank during the year as a business activity of trading in shares, since such a decision should be based on the consideration of facts as a whole and not merely one factor. The consideration of the facts as a whole clearly shows, as outlined hereinabove, that the appellant company did not engage in any purchase and sale of shares, that the shares have been held for more th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the conduct of the assessee, the entries in the accounts, resolution of the Board of Directors, etc. I find that the appellant's case is squarely covered by the ratio of the decision laid down by the apex court in the above said case. On overall consideration of the facts of the case, as discussed hereinabove, and the ratio of the decision of the Hon'ble Supreme Court in the cases of Madan Gopal Radhey Lal and Schedule Investment Co. Ltd. (Supra), I am of the view that the profit arising on the sale of shares has to be treated as long term capital gains. Accordingly, the addition of Rs.2,65,77,430/- is hereby deleted and the Assessing Officer is directed to recomputed the total income of the appellant company by treating the profit on sale of shares as long term capital gains." 4.1 He found that facts of the present year were similar and he did not see any reason to deviate from the reasoned findings of earlier orders. Accordingly, he decided the issue in favour of the assessee and directed to recompute the income of the assessee by treating the profit on sale of shares as long term capital gains. 5. Against this order the assessee is in appeal before us. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... renferred in the case of Madan Gopal Radhey Lal (supra) and in the case of Schedule Investment Co. Ltd. (supra). Considering all these facts of the present case, we find no reason to interfere in the order of Ld. Commissioner of Income Tax (Appeals) because neither the Assessing Officer nor the Ld. Departmental Representative of the revenue could bring anything on record to show that the assessee was engaged in the business of purchase and sale of shares on regular basis and hence merely because as per the object clause of the Memorandum of Association, the assessee can deal in shares, it cannot be held that any transaction by the assessee for purchase of shares or for sale of shares, purchased in earlier years is a business transaction. We, therefore, uphold the order of Ld. Commissioner of Income Tax (Appeals) on this issue. This ground of the revenue is rejected." 6.1 Since the facts of the present case are identical, both the counsels fairly agreed that the issue is covered. Accordingly, we uphold the order of the Ld. Commissioner of Income Tax (Appeals). Assessee's Cross Objection 7. In the cross objection it has been urged that Ld. Commissioner of Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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