TMI Blog2011 (2) TMI 1127X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent. ORDER D. Manmohan, Vice-President The only ground urged by the Revenue, in this appeal, reads as under : "1. The learned Commissioner of Income-tax (Appeals), on the facts and circumstances of the case and in law in deleting the addition of Rs. 40,31,124 made by the Assessing Officer as business income as against STCG shown by the assessee. (ii) The learned Commissioner of Income-tax (Appeals), on the facts and circumstances of the case and in law, erred in not appreciating the factors like volume, frequency, period of holding as criterion to determine the nature of transactions." 2. The facts of the case revolve in a narrow compass. The assessee, an individual by status, declared total income of Rs. 47,43,640 in respect of the previous year relevant to the assessment year 2006-07. The income of the assessee comprises of share of profit from the partnership firms in which he is a partner, apart from capital gains and other sources. Though the return was originally processed under section 143(1) of the Act, the same was later taken up for scrutiny by issuing notice under section 143(2) of the Act. During the course of assessment proceedings, the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o tax in the year whenever such income was taxable. As regards the methodology followed in investment in shares assessee had given a detailed analysis to indicate that though investment in shares also involves risk, as a prudent investor assessee has given emphasis to wealth enhancement rather than keeping the profit maximisation as an immediate goal and, in the process, certain shares might have been sold after retaining them for a shorter period but that alone cannot be taken as a criteria to hold that the assessee traded in shares ; rather the average period of holding is at least 746 days in case of long-term capital gains which, in itself, show that the assessee's primary intention was to deal with shares as an investor and not to deal with them as a trader. 6. The aforementioned contention did not convince the Assessing Officer. Rather, he had proceeded to analyse the provisions for "security transaction tax" and the consequent changes made under the Income-tax Act to highlight that an investor would be taxed at a concessional rate and such concession is not available to a trader and hence he surmised that the assessee might have shown his portfolio as an investment rather ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the order of the learned Commissioner of Income-tax (Appeals), the Revenue is in appeal before us. The learned Departmental representative painstakingly referred to the observations of the Assessing Officer and, with the help of the chart given in paragraph 6.4 of the assessment order, it was contended that there was frequency and regularity of the transactions in purchase and sale of shares. In the opinion of the learned Departmental representative volume, frequency and regularity of the transactions is one of the essential tests to consider the nature of transactions and accordingly attempt was made to submit that in the instant case impugned transactions were effected in his capacity as a trader and not as an investor in shares. The learned Departmental representative has also relied upon following decisions of the Income-tax Appellate Tribunal in support of his contention that in a given case where facts are distinguishable or fresh facts are brought on record, principles of res judicata does not come into play in the income-tax proceedings and an appellate authority is free to take a different view on the matter without merely being guided by the conclusions reached by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntial requirements to be taken note of to distinguish the case of an investor from a trader. Learned counsel has prepared a chart to show that majority of the requirements were fulfilled in the assessee's case and hence it cannot be said to be a case of trading in shares, either on regular basis or as an adventure in the nature of trade. Learned counsel submitted that in his individual capacity he was not carrying on any business and even as a partner in Praphat Realtors, Jayant Pulse Mills and M/s. S. K. Oil Trading Company he was engaged in the business of dealing in oils, and construction and hence, purchase and sale of shares was an independent activity as compared to his usual trade or business. In the books of account the assessee declared the value of shares as an investment and not as stock-in-trade. Shares were purchased out of own funds and there was no repetition of transaction, i.e., once a scrip is sold, it is not bought again. It was also submitted that investments were made in purchase of bluechip company's share and the ratio of sales to purchase was not much as compared to the immediately preceding year. Shares were held for a substantial period of time on an avera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 2006-07 and 163 days for assessment year 2005-06. 4. Transactions were entered into continuously and regularly-No Yes There have been no transactions for 166 days and particularly no sale for 248 days and no purchase for 204 days. No regular and continuous transactions. 5. Purchases out of own funds Yes Purchases were made out of own post tax income. No borrowed funds have been utilised. 6. Substantial period of holding Yes Period of holding for STCG181 days (L.Y. 116 days) 7. Substantial ratio of sales to purchases and holding-No Yes The ratio is only 1.04 : 1 (L.Y. 1.36 : 1) 8. Substantial time devoted to the activity of shares-No Yes Actively engaged in partnership firm's business. 9. Only means of livelihood-No Yes Partner in other firms having substantial profit. Other means of livelihood available. Other income than of Rs. 24,44,439. 10. Characterisation of securities in books of account Yes Shown as investments in the balance-sheet and the books of account. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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