TMI Blog2013 (9) TMI 328X X X X Extracts X X X X X X X X Extracts X X X X ..... However, as we have held that the income from shares is to be treated as business income, we accordingly restore this issue back to the files of the AO. The AO is directed to consider the claim of loss in the light of our decision, as per provisions of the law. Disallowance of the Set Off of Loss - Loss disclosed under the head brought forward Long Term Capital loss – Held that:- As the underlying nature of the transaction was the same i.e. F&O, therefore brought forward losses which were erstwhile treated as speculative losses were allowed to be set off against subsequent years F&O profit - the loss which the assessee claims to set off is Long Term Capital loss and there is no such amendment so far as claim of such loss is concerned. Therefore we do not find any merit in the claim of the assessee to allow set off of Long Term Capital loss against business income - prior to the amendment to Sec. 43(5), F&O transactions were treated as speculative transaction but post amendment, the same was treated as business transaction. Rebate u/s 88E on account of STT paid by the assessee - Interest u/s. 234B and 234C - Whether the CIT(A) erred in not allowing the entire loss arising o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being an investor. Thereafter, the AO analyzed shares as exhibited at pages 7 to 10 of the assessment order and found that the assessee is engaged in multiple trades in the same shares, the operation is systematic and regular. Drawing support from the Circular No. 4 of CBDT dt. 15.6.2007 wherein the guidelines have been issued to the AO on the question whether transactions of purchase and sale of shares are to be treated as trading transaction or to be treated as mere investment. The AO observed that the time devoted by the assessee is exclusively for trading in futures and options, shares in the stock market. The assessee is not engaged in any other activity even the concern in which the assessee is a proprietor is also dealing in shares and securities. The AO further pointed out that as the assessee is engaged in F O trading in stock market which in any case is a business income, therefore dealing in shares is an integral part of the same activity done in the stock market. The AO further noted that for the year under consideration, the assessee has borrowed funds at Rs.69.06 lakhs. Further, the holding period of 123 scrips running across 618 transactions is less than 30 days. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... site at www.bseindia.com please). This would reduce my business income by Rs.25,23,544.98, due to the loss in the value of shares held by me, if my investments are treated as closing stock and the valuation of same is done as mentioned above please. 3. Also, shares having Nil value have been written off to the extent of Rs.3,17,116.00, during the year, (already disclosed in my return) which may be allowed .as a bu1ness loss, in case I am treated as a Trader in Shares by you and not as an Investor (a statement of these shares has been also enclosed herewith please). 4. Since I have filed my Return of Income as an Investor, I have not taken the benefit of the Security Transaction Tax paid by me. In case I am treated as a Trader in Shares by you and not as an Investor, you may kindly give me the credit for the Security Transaction Tax paid by me please, while finalizing my Assessment Order for the A. Y.2006-2007. I am also enclosing herewith Original certificates of Security Transaction Tax for an amount of Rs.4,18,566.00. In case you are in disagreement with whatever is stated by me above, Sir, may I request you to kindly give me an opportunity to explain t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee, the AO did not accept the contention of the assessee. The AO was of the opinion that considering the volume and the frequency of the transaction alongwith the holding period added with borrowed funds, there is no doubt that the assessee is actually engaged in the business of purchase of sale of shares and cannot be said to be an investor. The AO relied upon the decision of the Tribunal Ahmedabad Bench in the case of DCIT Vs. Smt. Deepaben Amitbhai Shah (2006) 100 TTJ 1065 wherein it was held that whether or not a person carries on business in a particular commodity can be inferred from the volume, frequency, continuity and regularity of the transactions and the motive involved. The AO further rejected the submission of the assessee that in the preceding years the gains have been assessed as STCG/LTCG stating that the principles of res-judicata do not apply to income tax proceedings. Thereafter, the AO went on to treat STCG as business income and added Rs.72,04,778/- under the head business income. 3. The assessee questioned this before the Ld. CIT(A) and reiterated his submission that he is an investor and not a trader in shares. Further, wherever he has done transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iate his submission, the Ld. Counsel relied upon the decision of the Tribunal in ITA No. 961 1836/Mum/2010 emphasizing on his point that rule of consistency should be followed. The Ld. Counsel further placed reliance on the decision of the Tribunal in ITA No. 2690/Mum/2010. 5. Per contra the Ld. Departmental Representative strongly supported the findings of the AO and submitted that the Ld. CIT(A) having accepted that the assessee is engaged in voluminous transactions in the same scrips repeatedly , should have confirmed the assessment order instead of giving partial relief to the assessee. 6. We have considered the rival submissions and perused the orders of the lower authorities and the judicial decisions relied upon by the rival parties. The dispute is regarding the nature of income from sale and purchase of shares by the assessee. The issue, whether the income from sale and purchase of shares in a particular case should be treated as capital gain or as business income has been a debatable issue and there are conflicting decisions of the Tribunal on this issue. Each case is, therefore, to be based on its own factual situation. 7. Facts of the present case and as demonstr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad business income . 8. Other grounds in Revenue s appeal in ITA Nos. 329 6555/Mum/2010 are directly related to ground No. 1 and are accordingly allowed. 9. Ground No. 2 in assessee s appeal relates to the claim of set off of business loss from F O against income assessable for the year. 10. During the course of the assessment proceedings, the AO noticed that the assessee has earned income from trading in derivatives being Futures and Options to the tune of Rs. 23,95,631/- and has set off the same against the brought forward losses of Rs. 32,11,631/- and the balance is further carried forward to the subsequent assessment year. However, applying the proviso (d) to Section 43(5) of the Act r.w. notification No. 2 of 2006, the AO opined that a transaction in derivatives being Futures Options after 25th January, 2006 is deemed not to be a speculation transaction which means that prior to 25.1.2006 the same transaction was to be considered as a speculation transactions. In the light of the provisions of Sec. 43(5), the AO was of the opinion that only the income earned from the trading in derivatives before 25.1.2006 amounting to Rs. 17,60,728/- is allowed to be set off agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e basis of valuation of closing stock as per the recognized method cost or market value whichever is lower 15. As we have held that STCG is to be treated as business income, grievance raised by the assessee in ground Nos. 4 5 (supra) deserve to be reconsidered by the AO. We accordingly restore these issues back to the file of the AO. The AO is directed to examine the claim of loss of the assessee in the light of the decision that entire STCG is to be taxed under the head business income, after giving reasonable opportunity of being heard to the assessee. Ground No. 4 5 are allowed for statistical purposes. 16. Ground No. 6 relates to the claim of rebate u/s.88E of the Act on account of STT paid by the assessee. 17. This issue also requires verification by the AO in the light of the decision of ground No. 1. The AO is accordingly directed to consider the claim of the rebate u/s. 88E as per the provisions of the law after giving a reasonable opportunity of being heard to the assessee. Ground No. 6 is allowed for statistical purposes. 18. Ground No. 7 relates to charging of interest u/s. 234B and 234C of the Act. This grievance is consequential to the finding of ground N ..... X X X X Extracts X X X X X X X X Extracts X X X X
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