TMI Blog2014 (7) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... s the intention of the assessee on quick profits - The transactions were continuous and regular in a systematic manner - the dividend income of the assessee vis-à- vis her investment in shares is too meager - the assessee has not taken any ground to specifically assail the findings of the AO in holding that the nature of business of the assessee is trading in shares. Once the assessee has not taken any steps to rectify the wrong observation, it is deemed that the same is correct - in the Audit Report (in Form 3CD) the nature of business stated is trading in shares - Even though the shares were shown in the balance sheet as investments and not as stock-in-trade - the shares held by the assessee for longer period may be treated as investment and the profit to be treated as long term capital gain - the magnitude, frequency and volume of transactions gives flavour of business income and the same is considered to be income from business – Decided partly in favour of Revenue. - ITA Nos. 1846 & 1847/Mds/2012 & Cross Objection Nos. 176 & 177/Mds/2012 - - - Dated:- 21-1-2013 - N. S. Saini And Shri Vikas Awasthy,JJ. For the Appellant : Mr. Shaji P. Jacob, Addl. CIT For t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin 30 days then the profit are to be considered as business income. Therefore, I direct the Assessing Officer to obtain complete details and compute taxable income under the head business income and capital gain as held above. These grounds of appeal are partly allowed. Aggrieved against the order of the CIT(A), the Revenue has preferred the present appeals. The assessee has also filed cross objections for both assessment years assailing the order of the CIT(A) on the ground that the CIT(A) has erred in holding that the shares held less than 30 days should be treated as business income. The assessee has also impugned the order of CIT(A) on the ground that the period of 30 days fixed by CIT(A) is against the provisions of the Income Tax Act. 3. The common issue involved in both the appeals is: Whether the gain arising from sale of shares is capital gain or business income? Since both the appeals have common issue they are taken up together for adjudication. 4. The learned DR submitted that the CIT(A) has erred in coming to the conclusion that gain arising from sale of shares held for more than 30 days is short term capital gain and the profit arising from shares which hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee is in the business of trading in shares. The A.R. submitted that in para 7(iii) of the order, the CIT(A) has wrongly mentioned that the appellant is in the business of dealing in shares. The AR contended that a perusal of the chart at page 10 to 19 and 29 to 37 would show the period of holding of various shares. The assessee is not making purchase of shares in any systematic manner or is dealing in shares of a particular company. Moreover, in the previous years, the assessee has been filing return of income claiming the income arising out of sale of shares as capital gain which has not been questioned or disputed by the Department. The A.R. submitted that the Assessing Officer has wrongly mentioned in the assessment order the nature of business as trading in shares . The assessee has placed on record the return of income for the assessment year 2005-06 and 2008-09 to show that the assessee has earned income from salary and income from house property as well. In order to support his contentions, the A.R. relied on the judgement of the Hon ble Bombay High Court in the case of CIT Vs. Gopal Purohit reported as 228 CTR (Bom) 582 and the judgement of the Hon ble Gujarat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e day at different rates at different times. The assessee herself has admitted the fact that she traded in shares of listed companies and in some of the cases the sale and purchase of shares have taken place on the same day. 9. The Assessing Officer has given details of transaction of shares in page 3 of the assessment order. The assessee has been dealing with four different share brokers i.e. 1. Apeejay Securities, 2. CD Equisearch 3. Sharekhan and 4. Maconohie Co. The assessee has been keeping a close watch on the market and the intention of the assessee was not to make an investment. There was huge number of transactions in the sale and purchase of shares and there were certain shares which were traded on the same day with the holding period of zero days. Looking into the assessee s conduct, it is clear that she had no intention to keep the shares to earn dividend or capital appreciation. All these facts clearly show that the assessee has been dealing in shares to earn quick profits. 10. The assessee may have been earning income from salary but this does not defy the fact that the sizeable income of the assessee is from trading of shares. The scale of activity is substan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and qua those shares it claimed to be treated as an investor and not a dealer on the ground that no question of law arose out of the order of the Tribunal. It was held that the question whether the assessee s business amounted to dealing in shares and in properties or was merely an investment was a mixed question of law and fact and the legal effect of the facts found was a question of law and this court ordered the case to be stated on two questions that it framed. One of the questions was similar to the first question in the present case, but the second question was a wider one, i.e., whether the profits and losses arising from the sale of shares etc. could be taxed as business profits. xxxxxx In July 1940, the appellant had borrowed, though without interest, a large sum of money to the extent of about ₹ 10,00,000, no doubt from his brother. He started a new account calling it No. 2 Investment Account. For the assessment years under appeal shares purchased and sold were of a large magnitude ranging from ₹ 4.68 lacs to ₹ 69 thousands in what is called the first account and from ₹ 9,64,000 or even if Port Trust Debentures are excluded ₹ 3,60,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e whole series of transaction effected by the person in the course of his activity. To infer from a course of transactions that is intended thereby to carry on business ordinarily the characteristics of volume, frequency and regularity indicating an intention to continue the activity of carrying on the transaction must exist. Looking into the volume, frequency, continuity and regularity of transactions of purchase and sale in shares by the assessee, it cannot be said that the assessee entered into this activity not with a profit motive. Therefore, only inference which can be drawn is that the income earned by the assessee out of sale and purchase of these shares was an income under the head profit and gains of business or profession . We see no justification in lengthy argument of the assessee s counsel that the profit arising to assessee on sale of shares acquired by it was assessable as income from capital gain . In our considered opinion, after considering the cumulative effect of the facts and circumstances of the case, the CIT is justified in treating the profit arising out of sale of shares acquired by the assessee as income from business. 13. The Mumbai Bench of the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the same to the facts of the present case, we do not agree with the findings of the CIT(A) that the profit arising from shares held for more than 30 days is to be considered as short or long term capital gain depending upon the period of holding and that where shares have been purchased and sold in less than 30 days, the profit has to be considered as business income. The Income Tax Act only recognizes the period for determining short term or long term capital gain. The criteria of 30 days for determining business income or capital gain, in our considered opinion, is neither recognized nor acceptable under the provisions of the Income Tax Act. The intention of the assessee in purchasing the shares was clearly to earn profits from sale and not to earn dividend or investment. 14. The A.R. had made a submission that the Assessing Officer as well as CIT(A) have wrongly come to the conclusion that nature of business of the assessee is trading in shares. A perusal of the documents on record show that in the grounds of appeal, the assessee has not taken any ground to specifically assail the findings of the Assessing Officer in holding that the nature of business of the assessee is tr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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