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CIT Versus Amit Jain

2015 (3) TMI 720 - DELHI HIGH COURT

Capital gain v/s business Income - Whether the transaction in question was rightly held by the Tribunal in the nature of investment and not in the nature of trade? - Held that:- In the present case, there is no dispute that the opening investment cost for the relevant year AY 2006-07 was ₹ 2.60 crores; the corresponding closing value was ₹ 4.70 crores. Furthermore, the Court notices that the assessee derived, in addition to the short term capital gains, dividend income to the tune of .....

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held by him. Significantly, dividend income amounting to about 4% of the value of the investment was earned by the assessee. What appears to have weighed almost conclusively with the tax authorities in the first and second instance is the value and frequency of the transactions. As underlined by us, that factor alone cannot be conclusive and would have to be weighed along with the totality of facts. An important detail which cannot be overlooked by the Court is that in all past periods and even .....

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unchanged. Thus ITAT's findings and view cannot be faulted in the circumstances of the case - Decided in favour of assessee. - ITA No. 517/2012, CM No. 15387/2012 - Dated:- 3-3-2015 - S. Ravindra Bhat And R. K. Gauba,JJ. For the Petitioner : Mr Rohit Madan, Sr. Standing Counsel For the Respondents : Mr Ajay Vohra, Sr. Adv. Ms Kavita Jha & Mr Vaibhav Kulkarni, Advs. ORDER S. Ravindra Bhat, J. (Open Court) 1. By an order dated 25.09.2013, the following question of law was framed: - Whether th .....

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the AO formed an opinion that the assessee's claim of ₹ 2.61 crores being short term capital gains was not admissible having regard to the nature of the transaction. The assessee had during the relevant assessment year traded in 329 scripts (as against the 1833 scripts held by him). Having regard to the frequency and volume of the transaction and the further circumstance that the assessee did not report any other form of income in his returns, the AO felt that short term capital gain a .....

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mpugned orders. According to the assessee, the primary intention for making investment in shares is to earn dividend income, to keep the capital funds available with the assessee intact, to ensure that the capital invested in the shares grow over a period of time on account of the capital appreciation and to be part of growth of the investee company. He demonstrated on the record that he has been making investment from the last two decades as an investor. The past history available on page Nos.2 .....

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STCG=In dispute. 2007-08 LTCG & STCG Intimation u/s 143 of the Act. 2008-09 LTCG & STCG Assessment u/s 143 (3) of the Act, accepting the long term capital gains declared in the return. 11. It also emerges out from the record that assessee being investor has not been maintaining any office established or keeping any staff. He is also not registered with any authority or body such as stock exchange and SEBI etc. He is not maintaining regular books of account but submitted the details in re .....

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own name and not in the name of any business entity i.e. firm etc. According to the assessee, he has received substantial dividend income of ₹ 10.10 lacs. The learned counsel for the assessee at the time of hearing pointed out that dividend yield on investment was around 2.10% which is much higher than normal expected yield of 1.5% on the shares invested. For buttressing this aspect, he drew our attention towards indices of the sensex. He placed on record these details." 5. It is con .....

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income or on account of capital gains: "(a) The first test is whether the initial acquisition of the subject matter of transaction was with the intention of dealing in the item, or with a view to finding an investment. If the transaction, since the inception, appears to be impressed with the character of a commercial transaction entered into with a view to earn profit, it would furnish a valuable guideline. (b) The second test that is often applied is as to why and how and for what purpose .....

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s dealt with the same in the course of preceding and succeeding assessments. This factor, though not conclusive, can afford good and cogent evidence to judge the nature of transaction and would be a relevant circumstance to be considered in absence of any satisfactory explanation. (e) The fifth test, normally applied in cases of partnership firms and companies, is whether the deed of partnership or the memorandum of association, as the case may be, authorises such an activity. (f) The last but n .....

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ner of Income Tax v. Central News Agency Pvt. Ltd., (ITA 1032/2011, decided on 9.9.2014). 6. Learned senior counsel for the assessee contended that the record clearly indicates that as against 1833 shares held by the assessee, only 329 were traded at the relevant time. Of the ₹ 2.61 crores claimed as short term capital gain, ₹ 1.72 crores were derived from the sale of 35 scripts; the counsel emphasises that this denoted 65% of the short term capital gain reported during the assessmen .....

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for the Revenue to successfully state that the character of income is otherwise, some unique facts or evidence had to be placed on record - both of which were absent. 7. Learned counsel lastly submitted that the conclusions of the AO and the CIT (A) were largely based on the fact that the volume and transaction was considerable and yielded substantial income. 8. The factors which Courts and Tribunals have to take into consideration whilst deciding whether income gained during a particular period .....

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tax, Kerala, 73 ITR 735 (S.C.)and Commissioner of Income Tax v NSS Investments Ltd 2007 (277) ITR 149 (Mad). It was in the light of these decisions that the CBDT Circular No. 4/2007, was issued, indicating the principles applicable in this regard. These criteria are: (1) Intention of the assessee at the time of purchase of the shares. This can be found out from the treatment given to the purchase in the assessee's books of account. (2) Did the assessee borrow money to purchase the shares, an .....

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r investing (high transactions and low holdings indicate trade whereas low transactions and high holdings indicate investment). Another related factor is the duration for which the shares are held. (4) Was the purchase and sale made for realizing profit, or for retention and appreciation in its value. The former indicates the purchases being part of trade; and the latter is indicative of the purchases being an investment. Furthermore, it would be relevant to ask whether the intention behind the .....

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its Memorandum / Articles. In the present case, there is no dispute that the opening investment cost for the relevant year AY 2006-07 was ₹ 2.60 crores; the corresponding closing value was ₹ 4.70 crores. Furthermore, the Court notices that the assessee derived, in addition to the short term capital gains, dividend income to the tune of nearly ₹ 10 lakhs. The authorities have all emphasised that even while seeing the cumulative effect of the tests, in the given facts of a case, .....

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