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TMI Blog2013 (6) TMI 572X X X X Extracts X X X X X X X X Extracts X X X X ..... ee is to carry on business in shares to book profit rather than investment in shares. 2. The facts, are that the assessee is deriving income from capital gains and income from other sources. The assessee is an individual, who declared profit, earned in share transactions at Rs. 20,40,025/- and Rs. 3,54,067/- under the head short term capital gain and long term capital gain respectively and certain income, at Rs. 23,997/-, as speculation. In the course of assessment proceedings, the AO sought justification for the claim of the assessee with regard to long term capital gains (LTGC) and short term capital gain (STGC) in the transactions entered into by the assessee, in the shares claimed to be held by the assessee under "investments". The AO, sought details of transactions and other details, with respect to the activity carried on by the assessee. Having regard to the frequency of transactions, quantity of shares purchased and sold and the number of transactions, the AO was of the opinion that it was an organized activity of purchase and sale of shares with profit motive and, therefore, required the assessee to furnish the reasons as to why the same could not be treated as business i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axman 58 (Del.); f) Bharat Development (P) Ltd. vs. CIT 4 Taxman 58 (Del.); g) Punjab Co-operative Bank Ltd. vs. CIT 81 ITR 635 (PC) and h) Sardar Indra Singh & Sons Ltd. vs. CIT 24 ITR 514 (SC) (iv) The AO has further noted that the fact that the assessee has held shares for a short period and then sold them off indicates that the only intent of the assessee is to book profit on sale of shares. The fact that the assessee has sold large number of shares within a short period of purchase proves that there was no intention of the assessee to hold the shares as investment and earn dividend on the same. The assessee has repeatedly bought and sold shares after holding them for short duration with only one intent i.e. profit making. Reliance was placed by the AO. On the decision of the ITAT Ahmadabad Bench in DCIT vs. Deepa Shah 99 ITD 219. (v) The AO further held that most of the shares are bought and sold in few days while some other shares were held beyond few days. In view of the above reasons, the AO assessed short term capital gain and long term capital gains under the head 'business', which is contested in this appeal". 3. The AO, therefore, disallowed the capital gains, sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 05.1.06 200 20717 05.12.06 200 21743 334 1027 Jindal Vijayana Gar Steel 12.8.05 200 58374 17.4.06 200 72145 248 1695025 5. From the above, the assessee submitted before the CIT(A), that more than 75% of short term capital gain was earned by holding shares for more than 5 to 6 months and, therefore, the AO erred in holding that the assessee held the shares only for few days. He further contended that all the shares transacted were delivery based, as is evident by the demat account and that the assessee paid STT at a higher rate applicable to the investor which shows that the assessee was only an investor. Regarding long term capital gain, he submitted that the shares were held for more than 1 year and the total sale value of shares is only Rs. 14,52,962/- in respect of 8 transactions on which long term capital gain of Rs. 3,54,067/- was admitted. He further contended that the assessee held two shares for a period of 504 days and it is not a case where the assessee sold all the shares immediately after a period of 1 year. He relied on the decision of Hon'ble Mumbai Tribunal in the case of Gop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee was engaged in frequent transactions. The ratio of turnover to investment was more than one but less than two, it is true that the assessee undertook speculative transactions during this year and earlier year but that is no bar for the assessee to hold shares as investment as per the decision of the Hon'ble Hyderabad Tribunal in the case of Sha-La Investment and Financial Consultants Pvt. Ltd. vs. Dy. CIT (2 SOT 371). Further all the shares were transferred in the name of the assessee as evident from the demat account and the assessee paid STT at a higher rate applicable to the investor. Further, the assessee did not claim any payment of interest on borrowed funds which were utilized for investment in shares. A perusal of working of short term capital gains shows that the assessee earned short term capital gains by holding shares as below:- No. of days No. of scrips No. of Buying Transactions No. of sale # Transactions Capital Gain/Loss % of Total Gains/Loss 331-360 3 1 3 39044 1.91% 301-300 4 4 6 504555 24.73% 271-300 1 0 1 -7055 -0.35% 241-270 3 2 3 1893 0.09% 211-240 0 0 0 0 0.00% 181-210 1 1 1 -17661 -0.87% 151-180 9 9 8 960986 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liable to accepted. Accordingly, we reverse the orders of Revenue Authorities." Further, the Hon'ble Tribunal in the case of Janak S. Rangwalla vs. ACIT (11 SOT 627) held that the frequency and magnitude of transaction cannot be the criteria for determining the head of income. It was held as under: "The mere volume of transaction transacted by the assessee would not alter the nature of transaction. It is an established principle that income is to be computed with regard to the transaction. The transaction in whole has to be taken into and the magnitude of the transaction does not alter the nature of transaction. Though the principle of res judicata does not apply to the Income-tax proceedings as each year is an independent year of the assessment but in order to maintain consistency, it is judicially accepted principle that same view should be adopted for the subsequent years, unless there is a material change in the facts. Their lordships of Hon'ble Supreme Court in the Radhasoami Satsang vs CIT [1992] 193 ITR 321 have categorically held as under:- "... Strictly speaking, res judicata does not apply to income-tax proceedings. Though, each assessment year being a unit, what was de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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