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TMI Blog2014 (5) TMI 936X X X X Extracts X X X X X X X X Extracts X X X X ..... also derives share of profit from M/s. Yubi Investment and Patel Investment. During the course of scrutiny assessment proceedings, the AO noticed that the assessee has shown Short term capital gains at Rs.19,67,450/-. The AO was of the strong belief that the assessee was actually doing business in trading in shares. The AO accordingly issued notice to the assessee to explain why the profit on sale of shares shown as Short term capital gains should not be taxed as business income in view of the Board's Circular No.4/2007. The assessee filed a detailed reply dated 01.12.2010. It was explained that the assessee is drawing salary of Rs.44,85,225 from M/s. Dinesh Mills Ltd. It was explained that the assessee has also invested in shares, mutual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions per month. By any stretch of imagination this cannot be considered as high frequency transactions . We further find that the assessee has a capital of Rs.9.60 crores. The assessee does not have any borrowings. The assessee has been showing bonds, debentures, fixed deposits, mutual funds and shares under the head "investment". In CIT v/s Madan Gopal Radhey Lal, [1969] 73 ITR 652 (SC), the Hon'ble Supreme Court has dealt with the issue and discussed the question:- "A trader may acquire a commodity in which he is dealing, for, his own purposes, and hold it apart from the stock-in-trade of his business. There is no presumption that such an acquisition, even if it is an accretion to the stock-in-trade of the business, is an acquisitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of trade or not. The distinction between the two types of transaction is not always easy to make. Whether the transaction is of one kind or the other depends on the question whether the excess is an enhancement of the value by realizing the security or a gain in an operation of profit making. The assessee might have invested capital in shares with an intention to resale these if in future their sale brings in a higher price. Such an investment though motivated by a possibility of enhancement value, did not necessarily render the investment a transaction in the nature of trade. 7. It is also to be noted that the long term capital gain has been accepted by the Assessing Officer. If the Assessing Officer is of the firm belief that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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