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TMI Blog2013 (11) TMI 1330X X X X Extracts X X X X X X X X Extracts X X X X ..... high court in the case of Godrej & Boyce Mfg. Co. Ltd. v. Dy. CIT (2010) 328 ITR 81 (Bom.), while the ld. DR relied on the orders by the authorities below. 3. We have heard the parties, and perused the material on record. 3.1 In fine, while the assessee makes out a legal plea before us, seeking a remission back to the file of the AO, the Revenue objects on the ground that the stated consideration for the same has already been met by the first appellate authority, examining the matter only in light of the binding decision by the hon'ble jurisdictional high court (supra) being relied upon by the assessee before us, rendering his decision on facts, and qua which the assesse has been unable to demonstrate any infirmity. 3.2 We have given our careful consideration to the matter. We are inclined to accept the assessee's plea. No doubt, what the Revenue states before us is correct and, in fact, not disputed; the ld. CIT(A) has examined the disallowance as made and being agitated before him from the stand point of 'reasonableness', even as advocated by the hon'ble jurisdictional high court in the case of Godrej & Boyce Mfg. Co. Ltd. v. Dy. CIT (supra), drawing extensively from the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e determined on the basis of a pre-determined, generalized formula, de hors the facts of the case, viz. the quantum and profile of relevant expenditure, etc. We are also aware that a part of gains have been considered as long term capital gains, and a part of dividend would have arisen in respect of such shares as well. Is the assessee's activity a composite activity, would be a relevant question in this regard and, in any case, the activity being accepted as an investment activity to that extent, separate considerations would apply for disallowance in respect thereof. 3.3 In this view of the matter, in our opinion, the matter is required to be restored back to the file of the A.O. for fresh adjudication on merits, in respect of disallowance, if any, to be made u/s.14A, in accordance with law, and after allowing the assessee a reasonable opportunity to present its case before him. We decide accordingly. Grounds 1 & 2 of the assessee's appeal are thus allowed for statistical purposes. 4. The principal issue in appeal, agitated by the assesse per its grounds 3 to 5, is the character of the income arising on the transactions by way of purchase and sale of shares, entered into by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction, if any, is in any case, on the assessee, and which it has not discharged, so that the Revenue authorities were well justified in adopting the inferential findings for the immediately preceding year. 6. We have heard the parties, and perused the material on record. 6.1 The issue under reference essentially involves determination of the character of the shareholding by the assessee, i.e., whether as 'investment' or as 'trading stock', for resale at a profit, as soon as a profit opportunity arises on the horizon. In case of shares, where the market is volatile, so that a profit opportunity may arise immediately or soon after acquisition, prompting one to sell, i.e., may have no direct correspondence with the time period over which an 'investment' can be said to 'ripe' or 'mature' to yield capital appreciation, the matter assumes an added complexity. This is as a profit motive characterises both trade as well as investment. It is in fact this character of the share market, which also inflicts other commodity markets as well, that draws investors, traders & speculators alike to the share market, to make a killing or earn a handsome profit. An investor may yet not sell, though a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... high worth individuals or even corporates seeks such concerns to deploy their investible surplus to maximize their profits. 6.3 Our second observation is that the investment in shares as on 31/03/2006 has been found by the tribunal to represent the stock-in-trade of the assessee-company. That being the case, the profit or loss arising on the sale of these shares would only be in the nature of business income. This is only consequential and, rather, a natural corollary to the said shares having been determined as the assessee's stock-in-trade. In fact, unless some supervening circumstances are shown, the monies realised on such sale, that are ploughed back in the purchase of fresh shares, would also qualify for being considered as stock-in-trade, being only the deployment of its working capital funds in business, which the assessee-company has been found to be carrying. The assessee's claim that these shares have not been sold during the current year, i.e., continue to be held in stock is, ex facie, incorrect, as we observe several such shares in the detail of the capital gains earned during the year, viz. Amatex India Ltd., Bharat Electrical, Divi's Labora, Hindustan Zinc Ltd., e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the time being, and switches wholly or partly to the debt market, placing funds in more secured, i.e., lower risk, avenues. This would bring down the continuing investment or trading activity to near suspension, though to little effect. We may though also clarify that the stated number is not correct; the same being only the number of scrip-wise transactions, considering purchase and sale as one. Rather, a number of shares purchased during the year stand not sold by the year-end, and which are nevertheless purchase or business transactions, alebit without any income implication for the current year. This argument, thus, would be to no effect. Further on, the 'long term capital gain', i.e., the profit on shares held for more than 365 days is, at Rs.6.66 lacs only, as against Rs. 50+ lacs declared as 'short term capital gain'. Though not conclusive, this is again a strong indicator as to the shares being not intended to be held by way of 'investments', implying a holding, i.e., generally speaking, for a considerable period of time, over which only an investment is or can normally be expected to yield a reasonable return in an efficient market. It may not be necessary to under the ..... 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