TMI Blog2013 (6) TMI 572X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts gets squarely covered by the decision of Gopal Purohit (supra). Thus Respectfully following the decisions above no reason to disturb the order of the CIT(A)stating that profit arising on sale of such shares cannot be assessed under the head business and the claim of the assessee that it is assessable under the head long term capital gains has to be accepted. Against revenue. - ITA No. 7787/Mum/2010 - - - Dated:- 19-6-2013 - Shri P. M. Jagtap And Shri Vivek Varma,JJ. For the Petitioner : Shri Manoj Kumar For the Respondent : Shri Beharilal ORDER Per Vivek Varma, JM:- The appeal arises from the order of the CIT(A) 35, Mumbai, dated 16.08.2010 wherein, the department has raised the following ground: On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to accept the claim of Short Term Capital Gain of Rs. 20,40,025/- and long term capital gain of Rs. 3,54,066/- on profit arriving from purchase sale of shares instead of business income treated by the AO without appreciating the fact that the assessee is dealing in large volume of shares, most of the shares are bought and sold within short period, while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... head business on the following grounds: Mere entries in the books of account showing shares as "Investment" is not determinative factor to decide the real nature of transaction. For this proposition the AO relied on various judgments including the decisions of the Supreme Court, a) Tuticorin Alkali Chemicals case 227 ITR 172 b) Chowringhee Sales Bureau's case 87 ITR 584 c) Punjab Distilling Industries Ltd's case 35 ITR 523 d) G. Venkataswami Naidu Co's case 35 ITR 594 e) Bazapur Sugar Factor's case 172 ITR 330 (i) Assessee is undoubtedly dealing in large number of shares is the sole business of the assessee. Most of the shares are bought and sold within short period. While some are not sold due to market conditions and their holding with the assessee remains beyond few days, it will not change the nature of transactions. The assessee is very well engaged in the business of share trading and runs a full fledged office for this purpose. (ii) The AO relied on the Circular No. 4/2007 dated 15.06.2007 issued by the Central Board of Direct Taxes (iii) For treating the profit on sale of investment in shares as business income, the AO relied upon following judgments: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd relatives, on which, no interest was paid. It was submitted that the assessee did some speculative transactions in shares, which were very nominal, but that by itself, would not debar the assessee from claiming the profit on sale of shares under the head capital gains. He admitted that the assessee showed speculative profit of Rs. 37,331/- in the preceding year, i.e. assessment year 2006-07 whereas for the current year, there was a speculation loss, which was claimed at Rs. 35,660/-. He further contended that the AO was wrong to hold that the assessee held most of the shares only for very few days. On the other hand, the assessee earned major portion of short term capital gain (Rs. 16,95,025 out of Rs. 20,40,025/-) from the shares held for fairly long period as shown below:- Purchases Sales Security Name Date Qty Amt. Date Qty Amt. *Holding Period Gain Loss GTC Industries Ltd. 9.12.05 10561 1178072 10.5.06 5000 1499211 152 -- 19.10.06 4000 802811 314 -- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y is of investment in nature on the basis of delivery and second activity is purely of jobbing (without delivery) which puts assessee's case on a more strong footing. Hence, in our view, the ratio of this decision is squarely applies to the fats of the present case. Accordingly, we hold that the delivery based transaction should be treated as of the nature of investment transactions and profit there from should be treated as short term capital gain or long term capital depending upon the period of holding. To conclude, we hold that, in the facts and circumstances of the present case, the assessee's claim of short term capital gain and long term capital on share transactions where the delivery has been taken or given and securities transaction tax has been paid is liable to accepted. Accordingly, we reverse the orders of Revenue Authorities". 6. Further the representative relied on the decision of Hon'ble Tribunal in the case of Janak S. Rangwalla vs ACIT (11 SOT 627) wherein it is held that the frequency and magnitude of transaction cannot be the criteria for determining the head of income. He further submitted that recently the Hon'ble Mumbai High Court has confirmed the decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 35821 1.76% 31-60 4 4 4 2107 0.10% 0-30 46 29 32 284616 13.95% Total 2949925 100.00% From the above, it could be seen that major portion of short term capital gains was earned by holding the shares for more than five months and in fact the short term capital gains earned on sale of shares by holding them for less than five months is not substantial. Further as seen from the capital account and balance sheet, the assessee has not claimed any interest paid on borrowings as the same were from relatives and friends. Considering the above facts, it cannot be said that the assessee was regularly trading in shares. Further it is seen that the assessee admitted long term capital gain of Rs. 3,54,067/- on sale of 8 scrips for Rs. 14,52,962/- after holding them for more than one year. The profit arising on sale of such shares cannot be assessed under the head business and the claim of the assessee that it is assessable under the head long term capital gains has to be accepted. Further, the Hon'ble Tribunal in the case of Gopal Purohit vs. JCIT (29 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unit, what was decided in one year might not apply in the following year, where a fundamental aspect permeating through different assessment years has been found as a fact. One way or the other and parties have allowed that position to be sustained by no challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year." The same view has been taken by the Hon'ble Delhi Court in CIT vs. Neo Poly Pack (P) Ltd. [2000] 245 ITR 492. Further the Hon'ble Mumbai Tribunal in the case of Gopal Purohit (29 SOTR 117) held that the delivery based transactions are to be assessed under capital gains and this decision has been confirmed by the Hon'ble Mumbai High Court by judgment dated 06.01.2010. In the light of the above jurisdictional decisions and for the other factual findings given above, I direct the AO to accept the claim of the assessee by accepting short term capital gain and long term capital gain admitted by the assessee". The CIT(A), thus, allowed the claim of the assessee and reversed the decision of the AO. 8. Against this decision, the department is in appeal. 9. Before us, the DR strenuously argued and defended the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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