TMI Blog2010 (2) TMI 875X X X X Extracts X X X X X X X X Extracts X X X X ..... in F and O business in addition to the investment activity whereas the assessee had only investment activity, transactions in shares as investment activity. The order of CIT(A) is accordingly set aside and the claim of the assessee is allowed, appeal of the assessee is allowed. - IT Appeal No. 2731 (Mum.) of 2009 - - - Dated:- 26-2-2010 - R.V. Easwar, Rajendra Singh, JJ. Paresh Shaparia for the Appellant S.B. Morey for the Respondent ORDER Rajendra Singh, Accountant Member.- This appeal by the assessee is directed against the order dated 20-2-2009 of CIT(A) for the assessment year 2005-06. The only dispute raised in this appeal is regarding the nature of income from purchase and sale of shares, i.e., whether it should be treated as short-term capital gain as declared by the assessee or business income as assessed by the Assessing Officer. 2. The assessee is a working partner in the firm M/s. Zen Clothing Co. and Fiddler Clothing Co. which is engaged in the business of manufacturing and exporting of garments and garments panels and accessories. He is also a director of Chanakya International Pvt. Ltd. which is engage in export of garments and garme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of shares as investment activity in the books and the same pattern had been followed in earlier years in which the capital gain disclosed by the assessee had been accepted by the department. All purchases and sales were delivery based except three transactions which had to be squared up as requisite quantity were not available or due to punching error of the broker. The assessee had made no borrowings for purchase and sale of shares. It was also pointed out that holding period of shares in case of long-term capital gain was 400 days to 1200 days and in case of short-term capital gain it was 3 to 10 months. The average holding period in case of short-term capital gains was 122 days. The volume of share transactions was high because of huge capital investment by the assessee. The invested portfolio of the assessee was Rs.17.16 crores comprising of about 20 scrips only and there was capital gain only in 15 scrips. It was thus argued that frequency of transactions was not large considering the size of portfolio and number of scrips involved and therefore the assessee was only an investor and not a trader. It was explained that the assessee had been purchasing shares for appreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions. He therefore held that short-term transactions were the business activities of the assessee. Accordingly, he upheld the decision of Assessing Officer treating the short-term capital gain as business income. Aggrieved by the decision the assessee is in appeal before the Tribunal. 6. Before us the learned AR for the assessee reiterated the submissions made before lower authorities, that the assessee was an investor in shares and was not doing any business in share trading which was clear from the fact that the assessee had not claimed any expenses on these activities and had not borrowed any funds. The assessee did not have and exposure to F and O (derivative transactions) and all shares purchased were delivery based from which the assessee had also earned dividend. The average period of holding in case of short-term capital gain was 122 days, though the holding period was less than 60 days in some cases, this was mostly in loss cases as the assessee had to shuffle portfolio to contain loss of investments. In respect of such transactions, there was net loss of Rs.8,47,338 details of which have been placed at pages 16 to 19 of the paper book. It was pointed out that du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in respect of certain transactions in shares was accepted by the Tribunal on the ground that similar transactions had accepted by the department as investment activity in the earlier year and therefore there had to be uniformity of treatment and consistency in approach. The decision of the Tribunal has been upheld by the Hon'ble High Court in the order dated 6-1-2010 in income-tax appeal No.1121 of 2009. It was pointed out that the case of the assessee stood on a better footing and therefore, the claim of the assessee has to be accepted following the above judgment. 6.2 The learned DR on the other hand supported the orders of authorities below and placed reliance on the findings given in the respective orders. 7. We have perused the records and considered the rival contentions carefully. The dispute is regarding the nature of income received by the assessee from the purchase and sale of shares. The assessee is in the business of manufacture and sale of garments, garments panels and accessories. In addition the assessee has also been purchasing and selling shares. The assessee has been showing the purchase and sale of shares as investment activity and income has been decla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly 3-4 cases of purchases and sales during a month and considering that the sales and purchases orders are placed on telephone, these do not require any organized efforts. The assessee had no separate establishment for such activities and no expenditure had been claimed on this account. There were also no borrowings involved for the investment activity. Though the sale volume is apparently high at Rs.50 crores but the high volume is not because of very large number of transactions but because of large fund invested to the tune of Rs.17.16 crores. The average holding period is 122 days. Though in some cases the assessee has sold shares within a month of purchase but these mostly relate to the cases where the assessee had incurred losses. This has been explained on the ground that the assessee has to scuffle portfolio in loss cases and shift investments to some other portfolio for better appreciation. In cases where the holding period is less than one month the assessee has incurred net loss and therefore, there cannot be any intention of showing the transaction as investment to get any tax benefits. 7.3 In case of shares the holding period is comparatively much lower because of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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