TMI Blog2012 (10) TMI 402X X X X Extracts X X X X X X X X Extracts X X X X ..... capital gain is to be assessed under the head “Income From Business” solely on account of frequency of transactions cannot be sustained. As decided in The Commissioner of Income Tax Versus Gopal Purohit [2010 (1) TMI 7 - BOMBAY HIGH COURT] if the assessee has maintained two separate books of account, separate portfolios i.e., one in relation to investment in shares and other relating to business activities involving dealing in shares and such an approach has been consistently being followed by the assessee and allowed by the Department, the sale of shares shown under the head “Investment” cannot be treated and taxed under the head “Income From Business”. Thus the shares held as investment by the assessee and the income arising on sale of such shares is assessable under the heads “Short Term Capital Gains” & “Long Term Capital Gains” and not under the head “Income From Business” - in favour of assessee. - ITA no. 2838/Mum./2012 - - - Dated:- 31-7-2012 - SHRI B. RAMAKOTAIAH AND SHRI AMIT SHUKLA, JJ. Assessee by : Mr. Satish R. Mody Revenue by : Mr. Satbir Singh ORDER PER AMIT SHUKLA, J.M. The present appeal preferred by the assessee, is directed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted in the following manner which has been incorporated at Page 2 of the assessment order. Particulars 2004 05 2005 06 2006 07 2007 08 2008 09 Business Income 12335714 1614049 16297384 4379514 45358833 Short term capital gain 18908 12114859 24179425 75581467 86641282 Long term capital gain 651976 92352 3289280 0 286497522 Investments 1545714 13363472 49333100 68565023 29303386 Dividend from shares 375604 142188 355664 384471 1145932 4. The Assessing Officer, from the perusal of the record, observed that the assessee had shown long term capital gain of Rs. 28,64,97,522 and short term capital gain of Rs. 8,66,44,917, and income from business from the same trading of shares of Rs. 4,53,58,833. Further, regarding short term capital gain, the assessee had shown purchase of shares of Rs. 87,27,66,580, and sold the same for Rs. 95,96,50,926, thereby declaring short term capital gain of Rs. 8,68,84,346. Likewise, for long term capital gain, the assessee had purchased shares of Rs. 2,74,68,901, and had sold them for Rs. 31,41,73,642, and long term capital gain was shown at Rs. 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on several other decisions of the Tribunal. 6. The Assessing Officer rejected the said explanation and contentions of the assessee on the following grounds and reasoning: i) The assessee has dealt in two scrips namely Jaicorp Ltd. and Gujreclaim for long term capital gain and the period of holdings is between 15 and 18 months and the same scrips were also dealt with for earning of short term capital gain; ii) The assessee had shown dividend income of Rs. 11.45 lacs only on a turnover of Rs. 128 crores. Therefore, it cannot be said that the assessee had any intention of earning dividend on long term investment; iii) The average holding period of various scrips in short term capital gain are as low as ten days to few months; iv) The CBDT has laid down guidelines in Circular no.4/2007 dated 15th June 2007, for deciding such issue. These guiding principles have been formulated on the basis of ratio laid down by the Hon'ble Supreme Court in CIT v/s Associated Industrial Development Co. Pvt. Ltd., [1971] 082 ITR 586 (SC) and CIT v/s Holck Larsen (H.), [1986] 160 ITR 067 (SC). There are several decisions in favour of the Revenue with regard to various legal principles while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ock Exchange, one transaction may consist of several similar lots. In support of these contentions, various examples were shown from the records. Further, a majority of short term capital gain has been booked from the shares which were held for more than 90 days to 9 months. The assessee has also relied upon several decisions of co ordinate bench of the Tribunal in support of his case. 9. The learned Commissioner (Appeals) too rejected the contentions of the assessee after following the principles and guidelines laid down by the CBDT vide its circular no.4/2007, dated 15th June 2007, and the decision of the Tribunal in Harsha N. Mehta (supra) and Immortal Finance P. Ltd., ITA no.409/Mum./2010, order dated 20th October 2010. The learned Commissioner (Appeals) also pointed out various examples of the scrips where the assessee had carried out repetitive transactions. Finally, after relying upon various decisions, he upheld the reasons and analysis given by the Assessing Officer and dismissed the appeal of the assessee. Aggrieved, the assessee is in further appeal before the Tribunal. 10. Before us, the learned Counsel, appearing on behalf of the assessee, submitted that the most p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT v/s Suresh R. Shah, in ITA no.1974 of 2011, the Court has re affirmed the principles laid down in the judgment of Gopal Purohit (supra). He has also filed a chart giving comparative analysis between the assessee s case and the facts of Suresh R. Shah (supra) to demonstrate that assessee s case is squarely covered. 13. We have heard the rival contentions and on a careful consideration of the facts and circumstances of the case and on a perusal of the material on record, as well as the judicial pronouncements cited before us, we hold as under: 14. The issue of assessability of income under the head Capital Gains and Income From Business in such kind of transactions have come up for consideration in large number of cases. However, there is a very thin line distinction between the activities which can be considered purely for investment purpose or for trading purpose in such kind of cases. The parameters like volume, frequency of transactions, continuity, holding period, the intention of the assessee, treatment given in the books of account and host of other factors, though are very relevant for judging a transaction like this, whether it is purely for investment purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the assessee s contentions by the Assessing Officer as well as the learned Commissioner (Appeals). From the records it is seen that so far as long term capital gain is concerned, the assessee has only dealt with two scrips namely Jaicorp Ltd. wherein the assessee has gained maximum capital gains and the second scrip Gujreclaim . The period of holding ranges between 375 and 577 days which is evident from Annexure A to the written statement filed before the learned Commissioner (Appeals). The number of transactions was also not much as both the shares were coming from earlier years. Thus, so far as the long term capital gain is concerned, there cannot be any doubt that the same were for investment purpose only. 17. Insofar as shares dealt under the Short Term Capital Gain , it is seen that most of the gains have come from scrips which have been held for a period between 90 days and 9 months. The assessee has furnished period wise breakup of short term capital gain which is very relevant and is reproduced hereunder for the sake of appreciation: No. of Scrips Inv. Sale Value Amt. (Rs.) Net ST Gain (Rs.) % of total ST Gain (%) More than 9 months ..... X X X X Extracts X X X X X X X X Extracts X X X X
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