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TMI Blog2014 (4) TMI 534X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome from the following sources: (i) Dividends received from mutual funds and equity shares; and, (ii) Interest from investment of capital in partnership firm. 3. During regular course of its business, the assessee made an investment of Rs.3 crores during the year in Tata Service Industries Fund (Dividend Plan) on 5.4.2005 for the purpose of earning dividend but this investment was prematurely redeemed on 21.12.2005 for Rs.4,24,70,700/-. The assessee had booked this profit as a short-term capital gain. The Assessing Officer (hereinafter mentioned as the AO), from the record, had found that the assessee had shown no intention of holding this investment for the full term and rather not even for a year and that the assessee redeemed the investment with a purpose to earn more profits. The AO came to the conclusion that the assessee had made profits from its investment without waiting long enough for the investment to yield benefits in the form of dividends. Consequently, the AO treated the investment shown by the assessee as its stock-in-trade and the revenue generated i.e. Rs.1,24,70,700/- was taken as business income of the assessee vide an order dated 30.12.2008. 4. The Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppropriate to analyse the backdrop in which concurrent findings by the CIT(A) and the ITAT were returned against the assessment framed by the AO. The matters which weighed with both the appellate authorities in returning finding in favour of the assessee, are as below: (i) Intention of the assessee at the time of making deposit was to make capital investment. Sequelly, the impugned deposit was shown under the head "investment" and not under the head "stock in trade" in the balance sheet ending 31.3.2006; (ii) Even in assessment-year 2005-06, such deposit made by the assessee had been shown under the head "investment" and not under the head "stock in trade" in the balance sheet for the year ending 31.3.2005, assessment for which was made in the assessment year 2005-06 and this stand taken by the assessee was not interfered with. Principle of consistency was in favour of the assessee. (iii) Deposit from which the taxable income was generated cannot be termed as tradeable item in the sense of shares etc. Units of the mutual funds are allotted as well as redeemed by the managers of the mutual funds itself at the prescribed rates. Such units have no secondary market for buying and se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee, deposit had not been made by the assessee departing from its normal business activity. Rather, in the case in hand, the assessee used to earn its bread and butter only from dividends etc. earned from its investments made in the nature of equity shares, securities, debentures etc. It also had its earnings from interest accruing on its investments made in the partnership firm which again is engaged in earning income from investments etc. In short, the assessee is fully engaged in whole time business and trading activity of dealing in investments in shares, debentures, mutual funds etc. These are its stock-intrade as is raw material for a manufacturing concern. To demonstrate, as time is stock-in-trade for a chartered accountant or for a lawyer or for a practising engineer or for a professional alike similarly money and cash put in investments, deposits or even capital for earning profits as a regular course turns out to be stock-in-trade for an investment company, as is the assessee. 14. The assessee in that sense trades in money; it is its stock-intrade and thus, it earns its income by profits in sale and purchase of shares, securities and other investments as also by earn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will lose dynamics of its business and would become static earning only from interest or dividends received from its fixed and capitalised investments. Such an investment company then would lose the vibrance of its business. Such deposits are usually made by the investment companies like the assessee, as a strategy and pursuant to intelligent planning as stock in profitable trade, yielding fixed income when other derivatives may be in a situation of great flux giving no clear picture of high or low tides. 19. In short, the impugned deposit was clearly made in the usual course of its activity of trading in money and in the discharge of its normal business. Even though it was in the nature of tenurial investment, redemption of such investment during the same previous year of investment speaks volumes of the intention of the assessee that it had not intended to use such deposit as a capitalised investment. 20. Sequelly, booking this profit as a short term capital gain is clearly a strategic move of the assessee to blur vision of the revenue to show that such deposit was made in departure of its normal business and trading activity of sale and purchase of equity shares, scrips etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no means such impugned deposit can be taken to be distinct or different from other transactions carried out by the assessee during the year under consideration. This deposit was clearly made by the assessee to earn profits on its deposit and thus, was in the nature of stock-intrade and the revenue generated to the extent of Rs.1,24,70,700/- is to be assessed as business income. 24. It is important to note that this is not for the first time that such revenue income has been earned by short-circuiting the wait of tenurial investment but even earlier, the assessee had been undertaking such ventures. In the assessment year in question, the assessee had even sought to make adjustment for the brought forward unabsorbed short-term capital loss of the two previous years i.e. for a sum of Rs.1,93,776/- for the assessment year 2004-05 and for a sum of Rs.2,49,734/- of the assessment year 2005-06. It is clear that the assessee had been using the methodology of shifting its normal trading activity of some transactions into term investments and later had been getting the same redeemed before tenure and most of the times in the year of deposit itself and then had been showing it as short term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res and securities etc. Merely because there is single transaction or that such investment was in not freely tradeable commodity, does not change the profit intent of the assessee who is in the business of investments only. Therefore, the investment made by the assessee was rightly treated as stockin- trade and revenue generated to the tune of Rs.1,24,70,700/- was correctly assessed as business income by the AO. Rightly, no adjustment for the balance forward on account of short term capital loss of assessment year 2004-05 to the tune of Rs.1,93,776/- and for the assessment year 2005-06 to the tune of Rs.2,49,934/-, had been allowed by him. 28. So far as ITA Nos.226 and 227 of 2012 are concerned, unlike case of ITA No.39 of 2012, activities of the assessee in these appeals are so frequent and regular in their operation and in the usual course of business activity of the assessees that no case for treating the impugned income as resulting from transactions labelled as 'tenurial investments', is made out. 29. Sequelly, the question of law posed in earlier part of this judgment i.e. para 7 is answered in favour of the revenue and against the assessee. 30. Consequently, all t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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