TMI Blog2013 (10) TMI 768X X X X Extracts X X X X X X X X Extracts X X X X ..... ent for the purpose of earning dividend, then the assessee would not have indulged in transactions of purchase and sale of shares in such frequency and regularity and in a systematic manner. This shows that the intention of the assessee is to earn profit. It is immaterial whether the assessee treats the shares as investments or stock in trade in its books of accounts. The assessee has not produced any material to prove that the finding of the Assessing Officer that the assessee has sold shares either on the same day or within very short period of purchase is not correct - activity of the assessee in purchase and sell of shares is in the nature of business and therefore the income derived from sale of shares has to be assessed as business income. The fact that the assessee has paid security transaction tax will not be determinative factor to hold that the income earned by the assessee is to be treated as short term capital gain – Decided in favor of Revenue. - ITA No.1161/Hyd/09 - - - Dated:- 31-1-2013 - Shri Chandra Poojari And Shri Saktijit Dey,JJ. For the Appellant : Sri T. Diwakar Prasad For the Respondent : Sri I. Rama Rao ORDER Per Saktijit Dey, Judicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come from sale of shares as business income. The assessee challenged the assessment order by preferring an appeal before the CIT (A). 4. The CIT (A) after considering the submissions of the assessee and following the decision of the Income-tax Appellate Tribunal, Mumbai Bench in the case of Sri Kunvarji Nanjikernia V/s. Additional. CIT (ITA No.6545/Mum/2008) held in the following manner:- " I have considered the above decision and in agreement with the ratio laid down in the above decision. In the case of the appellant for the earlier years the shares were declared as investments, the gain derived thereon was declared wither as short term capital gain or long term capital gain and the same have been taxed by the department accordingly. This year also the appellant followed the same method. The change in taxation is due to amendment of section 111A w.e.f. the assessment 2005-06, with concessional rate of 10% where the transactions have duly suffered security transaction tax. The benefit given by the law, to encourage the investors and get more funds for capital market, cannot be denied to the appellant. All the above facts show that the assessee is not a "trader" in shares. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness for which regular books of accounts are maintained. It was submitted that the assessee had been carrying on the transport business for last 15 years and the surplus fund generated from transport business is invested in shares. No borrowed funds are invested in shares. Nor there is any organized activity of investment in shares for which reason no books of accounts are maintained. The assessee never indulged in intra day trading in shares. It was further submitted the assessee dealt with in nearly 95 numbers of scrips during the year out of which 60 scrips were sold as opening investment and 63 scrips were held as closing investment. It was submitted that investment was made in number of scrips to avoid risk. It was submitted that long terms capital gain shown during the year has been accepted by the Assessing Officer. The assessee has also sold dividend income of Rs.2,84,771/-. It was submitted most of the shares were sold after holding for a minimum period of one months. It was submitted that the assessee has also paid security transaction tax. It was submitted that in order to constitute a business as defined u/s 2(13) of the Act characteristics of trade and business is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he was holding the shares as investment only and never as stock in trade. Whereas the department's contention is the assessee has carried on the share transaction as a business activity. In this regard, the intention with which such operation is carried on is relevant. If an owner of an investment realizes it and obtains a greater price for it, than the price at which he originally acquired it, the enhanced value obtained from realization or conversion may be profit from business. If the transaction is in the ordinary line of the assessee's business there would hardly be any difficulty in concluding it to be a trading transaction. But, where it is not the fact then it must be properly assessed to determine whether it is in the nature of trade. The surplus realised on the sale of shares would be capital if the assessee as an ordinary investor realizes his holding but it would be revenue if he deals with them as a trader. If the assessee is an ordinary investor, the income arising out of sale of shares is a capital gain. On the other hand, if he trades in shares in a regular and systematic manner with an intention to earn profit. If an individual invests in shares for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shares immediately after purchases; (m) Frequency of purchase and sale of shares showed that the assessee never intended to keep these shares as investment; and (n) It is only for the purpose of claiming benefit of lower rate of tax, under sec. 111A of the Act, that they had claimed certain shares to be investment, though these transactions were only in the nature of trade." 9. Considering in the light of the parameters laid down by the jurisdictional High Court in case of PVS Raju (supra), it is seen that as per the assessee's own admission, during the year he has dealt with 95 number of scrips of different companies. The Assessing Officer in the assessment order has mentioned specific instances where the assessee has sold shares either on the same day or within a very short period of 7 to 15 days. It is also a fact on record that the volume of turnover was because of the frequency and regularity of transactions and not due to huge investment. Even the CIT (A) in para 8.4 of his order has accepted the fact that there were not only numerous transactions but volume of transactions were also more. The CIT (A) also admits the fact that certain shares were purchased and sold ..... X X X X Extracts X X X X X X X X Extracts X X X X
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