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TMI Blog2012 (9) TMI 685X X X X Extracts X X X X X X X X Extracts X X X X ..... nning of the year was Rs.61.84 lakhs and excluding the amounts locked up in fixed deposits, shares, jewellery, etc, which was not utilized for purchase of shares, the liquid funds available out of capital was about Rs.40 lakhs. The AO has stated that assessee has ploughed back or rolled back the available capital almost 7 to 8 times in order to earn income out of purchase and sale of shares. He stated that this is more of a characteristic of a trader than an investor. 3. During the course of assessment proceedings, assessee filed its reply and in essence the arguments of assessee's representative were based on the following points: 1. The investments held by the assessee were not for the intention to carry on the business activity or adventure in the nature of business or trade. 2. The assessee has shown the shares as investment only as is evident from the balance sheet filed. 3. The assessee relied on the decision of the ITAT Bombay 'H' Bench in the case of Janak Rangwalia Vs. ACIT (2001) 11 SOT 627 and argued that the principles applied in that case applies to the facts of the assessee's case also. 4. The assessce also relied on the CBDT Circular No.4/2007 dtd. 1 5.6.07 whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities carried out by the assessee etc are required to be taken into account before the asset in question is held to be a capital asset or stock in trade. In each case it is the total effect of all relevant factors and circumstances that determines the nature and character of the asset. 11. The decision of the Supreme Court in Ramnarain Sons (P) Ltd. Vs. CIT 41 ITR 534 and Allahabad High Court in L. Sohanlal Gupta Vs. CIT 33 ITR 785 wherein it has been held that the intention of the assessee at the time of acquisition of the asset, whether the purchase is for the purposes of long term investment or for the purposes of dealing in shares is the dominant factor for determining the nature of asset. 4. The AO has stated that assessee's representative has culled out the guiding principles from various decisions and circulars that should be followed generally but has failed to do to match each of the said guiding principles with the facts of the assessee's own case and claimed that his case falls into the said guidelines. He has stated that it is necessary to ensure while applying a particular guideline or decision that the relevant facts of a particular case broadly fixes into the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing, Amtek Auto, Carborundum XB, Galaxy Ent, Gujarat Apollo, ICSA, Indoasian Fuse, Kirloskar Bros Ex, Kpit System, Megasoft, Munjal Show, MRO Tek etc., are only a few examples wherein the assessee had engaged in frequent purchase and sale. iii) Out of the total sale instance of 614 during the year, the instances of sale of scrips which were held for more than 6 months were just 47 - being less than 10% of overall transactions. This will fairly indicate the trading mood of the assessee. Whereas on the other hand the instances of sale of scrips that were held for a period of 30 days or less amounted to 252 - about 40% of the overall transactions. (iv) The opening capital of assessee was Rs. 61.84 lakhs out of which available liquid assets were about Rs. 40 Lacs and the assessee has rotated to achieve a turnover of about 3.56 crcres under STCG. (v) The opening stock of securities as on 1.4.05 was Rs. 36,24,318, from which the opening stock relating to long term capital gain Rs. 1,58,150 is excluded. Thus, the balance opening stock is Rs. 34,66,168/-. He has stated that the purchases were for Rs. 3,01,60,968/- and closing stock as on 31.3.06 was Rs.59,87,531/-. He has further state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess and only small part of income could be treated as income from short term capital gains. Ld CIT(A) has stated that considering the fact that out of total turnover of Rs.3.6 crores, assessee was holding shares of about Rs.34 lakhs as the opening stock of shares and carried forward about Rs.59 lakhs of closing stock of shares, has held that part of the income of the assessee i.e. approx 17% is treated as income from short term capital gain i.e. about Rs.10 lakhs and the balance income of Rs.44.82 lakhs be treated as income from business as assessed by the AO. Hence, department as well as assessee are in appeal before the Tribunal. 7. In the appeal filed by assessee, assessee has disputed the order of ld CIT(A) in confirming short term capital gain of Rs.44.82 lakhs as business income and whereas in the appeal filed by department, department has disputed the order of ld CIT(A) in treating 17% of income i.e Rs.10 laksh as short term capital gains. 8. During the course of hearing, ld A.R. stated the facts and submitted that assessee has also shown long term capital gains of Rs.3,42,635 but the same has been accepted by the AO. He submitted that only the short term capital gains of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies. Ld D.R. further submitted that out of sale and purchase of share transactions, assessee sold part of the shares on the same day and considered them as speculative transactions and part of scrips out of the same transactions treated as investment i.e. shares which were sold after 2 days or more. He submitted that the facts as stated by the AO and as per statement filed by the assessee at pages 7-21 of PB giving details of share transactions, the intention of the assessee is not to make investment but to deal in shares. He submitted that assessee entered into repetitive transactions of the same scrips. Therefore, the facts support that asssessee was a dealer in shares and not an investor. Ld D.R. referred to the decision of Hon'ble Delhi High Court in the case of CIT vs. Sahara India Housing Corporation Ltd., (2012) 2012 TPL 1265 (Delhi) in I.T.A.Nos.740/2009, 762/2009 & 847/2010 dated 27th April, 2012. He submitted that Hon'ble Delhi High Court after considering the decision of Hon'ble Gujarat High Court in the case of CIT vs. Rewashanker A Kothari, (2006) 283 ITR 338(Guj) stated that there are several parameters/tests which have to be applied to find out when income from trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee while dealing with the shares subsequently and not only on the basis of entry in the books of account. In this view, we are supported by the decision of Hon'ble Supreme Court in the case of CIT vs. Madangopal Radhey Lal, 73 ITR 652 (SC). An investor makes purchases with long term goal of earning income from the investment and he is not tempted to sell the shares on every rise and fall in the market which are the attributes of a trader. However, there may be situations when the investor may also sell the shares after short holding in order to reshuffle portfolio when prices are falling or to encash investment in case of exceptional gain or for some personal exigencies. Therefore, each case is required to be examined carefully to ascertain the true nature of transactions. 13. In the case before us, there is no dispute to the fact that there are number of transactions entered into by the assessee, the details of which are placed at pages 7-21 of PB, AO has stated that there are total 1228 transactions of purchase and sale of shares. The total amount of liquid fund with the assessee is only Rs.40 lakhs but purchase of shares was Rs.3,01,66,968. The sale of shares was to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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