TaxTMI 
TaxTMI 
2013 (7) TMI 408
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....assessee was involved in speculation business as speculative loss of Rs. 4039 has been declared. Further from the profit & loss account he noticed that assessee has shown short term capital gain of Rs. 11,25,859 on sale of shares and has also declared business income by way of commission brokerage at Rs. 3,55,638, against which she had appropriated loss from futures and options equity of Rs. 1,44,067. The total expenses claimed against earning of such income was at shown Rs. 34,662. The long term capital gains of Rs. 23,47,474 on sale of shares was claimed as exempt under section 10(36) and income in the return of income was mostly offered from short term capital gains. In view of these facts the Assessing Officer issued a detail show cause notice to the assessee as to why the short term capital gains should not be treated as profits arising out of business activity. The entire content of the show cause notice has been reproduced by the Assessing Officer from pages 2 to 5 of the assessment order. In response, the assessee submitted that she was not a dealer of shares and therefore there was no question of earning business profit from liquidation of shares as she is not engaged in o....
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....f the assessee. 3. Before the CIT(A) the assessee made very elaborate submissions which have been incorporated from pages 3 to12 of the appellate order. The sum and substance of assessee's contention were as under. i) The assessee has carried on three type of transaction in the securities market during the year, that is, trading in future and options, intra-day trading which were non-delivery based transactions (speculation) and delivery based transactions. The delivery based transactions were only with the intention of the investment and not for the business. Hence purchase was shown as long term capital gain and short term gain. The closing investment at the year end was valued at actual cost instead of actual cost or market value whichever is less, which is done in the case of stock-in-trade. ii) The frequency and volume had to be seen scrip wise, as there was a little frequency in the transactions of purchase and sale of shares. It is only when particular scrip is bought and sold a number of times over a short period, then an inference of trading can be drawn. The summary of scrip wise frequency and volume of sale was given which has been incorporated by the CIT(A) fro....
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....hares and in several cases the shares has also been sold on the same date or after a day or two or within a week or a fortnight. 5) At several occasions, assessee had purchased large quantities of shares in one go and sold them in small quantities over a period of time, acting as a stockiest, purchasing goods in bulk and selling it in retail like a normal trader. 6) Assessee has not earned any long term capital gain, even in a single scrip, whereas she has transacted in a large number of scrips. 7) Further, the turnover is also very high. A cumulative analysis of all these factors leaves no doubt about the intention of the appellant, who is a trader and not an investor in shares. Accordingly, it is held that the A.O has correctly assessed the income from shares disclosed as short term capital gains as business income." Accordingly, he confirm the action of the A.O, that the income from sale of shares has to be assessed as business income and not short term capital gain. 5. Before us Learned Counsel submitted that the assessee though, has conducted trading in futures and options and non-delivery based transaction, however, the same pertain to very few scrips. For example i....
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....that the assessee was a trader in shares and is not an investor. She extensively read the relevant observation of the Assessing Officer and CIT(A). 7. We have carefully considered the rival submissions, perused the relevant findings of the A.O as well as CIT(A) and also the material placed on record. The main issue for consideration before us is whether the gain of Rs. 11,25,860 arising out of sale of shares can be held as business income or short term capital gain. From the details and records submitted before us, it is gathered that the assessee had shown net long term capital gain of Rs. 23,47,474 from sale of shares, which has been claimed as exempt. This long term capital gain has been accepted by the Assessing Officer. The assessee has also purchased number of scrips which has been sold during the year, aggregating to Rs. 65,07,179 on which short term capital gain of Rs. 11,25,860 has been declared. Around fifty percent of scrips have been held for a period ranging between six months to one year, the other scrips have been held for the period ranging mostly between 2 to 6 months. There are only few scrips which has been held up to the period of 30 days on which short term c....