TMI Blog2013 (10) TMI 554X X X X Extracts X X X X X X X X Extracts X X X X ..... ld for a period of more than three months and six months and there are no intra-day transactions of shares under this head - on the shares held as investment by the assessee, the income arising on sale of such shares is assessable under the head 'long term capital gain' and 'short term capital gain' and not 'business income' as held by AO and CIT(A) - Following decision of M/s. Apollo Finvest (India) Limited, C/o. Shankarlal Jain & Associates Versus ITO, Ward-9(1), Mumbai [2013 (8) TMI 533 - ITAT MUMBAI] and The Commissioner of Income Tax Versus Gopal Purohit [2010 (1) TMI 7 - BOMBAY HIGH COURT] - Decided in favour of assessee. - ITA No. 674/Mum/2011, ITA No. 7273/Mum/2011 - - - Dated:- 12-6-2013 - Shri P. M. Jagtap And Shri Vivek Varma,JJ. For the Appellant : Shri S. L. Jain For the Respondent : Shri Manoj Kumar ORDER Per Vivek Varma, JM:- The two appeals arise from the orders of CIT(A) 19, Mumbai, dated 10.12.2012 and 05.09.2011, in the concerned assessment years. At the time of hearing, the AR, pointed out of the two appeals under consideration, detailed discussions on the issue has been made in assessment year 2008-09. We, therefore, proceed in assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,09,37,029 5. From the table, it is seen that in the capital gains, as claimed, the assessee had included short term capital gains, long term capital gains on shares as well as securities held in mutual funds. On being called to explain the contents of the above table, the assessee vide its letter dated 09.10.2010 explained that it had earned STCG of Rs. 51,53,685/- on the following categorization of holding periods: Shares held Capital Gains Upto 3 months 16,08,334 Upto 6 months 5,42,233 Above 6 months 30,03,118 Besides the above, it had sold certain mutual funds on which it had earned LTCG of Rs. 14,54,752/-. 6. Besides this, the assessee earned LTCG of Rs. 42,22,252/- on shares and Rs. 1,01,06,336/- on mutual funds, aggregating to Rs. 1,43,28,592/-. 7. The explanation given by the assessee, did not find favour with the AO, who held, "The assessee's own convenient and self serving categorization of portfolios into investment will not affect the reality of the situation. Conversely, just because investment portfolio is being maintained does not in any manner preclude from ascertaining t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carried out for buying and selling of securities respectively. When the quantity of securities purchased and sold was analyzed it turned out to be very voluminous. During the relevant assessment year, the assessee has purchased and sold 1,58,816 shares, which resulted in Short Term Capital Gain. Besides, the assessee has also sold 33,605 shares which resulted in Long Term Capital Gains. The above statistics illustrates the magnitude of transactions and the volume of shares traded by the assessee and prove the point that the assessee was not an investor but was a dealer in shares as under: 5 आ.अ.सं. Short Term Capital Gains On shares mutual fund - Rs. 66,08,437 Long Term Capital Gains On shares mutual fund - Rs.1 ,43,28,592 The statistics presented above establishes the point that the assessee earned huge profit which it has offered under the head 'Capital Gains' with a sole intention to reduce lower its tax Liability. The submission of the assessee are not tenable in light of Circular No. 4 of 2007 and relying on various judicial pronouncements. The AO, also commented on the motive of the assessee, wherein afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e books of account; the object clause in the Memorandum of Association authorizing such transaction; circumstances such as organized efforts made to earn income as well as loans and borrowings which are normally associated with a business activity; profit motive, etc. However, no single factor is conclusive and totality of the facts and circumstances have to be considered in arriving at a fair conclusion in the matter. Normally investment presupposes a time frame of holding of securities and frequent shuffling of the portfolio could indicate application of mind to book the profit The reason that the income tax act provide for terming transaction as STCG even if the holding period is one day does not imply that all such transactions would necessarily fall under category of capital gain. If the assessee purchases shares during the year and sells them frequently in short spell it may indicate business motive unless evidences are adduced in support that these were actually undertaken for compelling reasons e.g. pressing needs for fund ,a better option for reinvestment. The assessee is required to explain the reasons in respect of each of the transactions and a large frequency of transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erm capital gains', the assessee had shown sale of mutual funds at Rs.76,56,553/- and on shares 4,52,098/- whereas in 'short term capital gains', mutual funds had been shown at Rs. 14,29,925/- and sale of shares at Rs. 32,94,562/-. Assessee has also earned substantial dividend income which is evident from the fact that of Rs. 52,87,206/- had been shown as dividend. Further, it is also undisputed fact that assessee has maintained two separate accounts and has classified his acquisition of share investments under two heads. It is very pertinent to note that in the case of the assessee, sale of shares under the head 'investment' has always been considered as capital gain in the earlier years, which is evident from the fact that the same has been accepted by the Assessing Officer in scrutiny proceedings right from assessment year 2002-2003 to 2005-2006. Not only the assessee has followed this consistent approach with regard to the treatment of shares one as investments and other as stock in trade separately, but the same has also been consistently allowed by the Department. In view of these facts, the judgment of Hon'ble jurisdictional High Court in the case of CIT vs. Gopal Purohit re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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