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2015 (5) TMI 225 - DELHI HIGH COURT

2015 (5) TMI 225 - DELHI HIGH COURT - TMI - Transaction of shares - short term capital gain v/s business income - Held that:- In the given facts of the case, the mere circumstance that for the previous year, a part of the stock in trade was converted into investments would not have been conclusive as to whether the realisation out of purchase and sale of shares was by way of income from business. The AO had accepted the assessee's claim for long term capital gains and completed the assessmen .....

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sh in the light of the directions in Maxopp Investment Ltd. v. CIT, ( 2011 (11) TMI 267 - Delhi High Court ) - Decided against revenue. - ITA No.110/2015, CM Nos.2894-2895/2015 - Dated:- 15-4-2015 - S. Ravindra Bhat And R. K. Gauba,JJ. For the Petitioner : Ms Suruchi Aggarwal, Sr Standing Counsel For the Respondent : None ORDER 1. This matter is taken up today as 14.04.2015 was declared a holiday. 2. The only question which is sought to be urged by the Revenue in its appeal against the order o .....

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ation on account of its investment was offered in capital gains under two heads, i.e., long term capital gain and short term capital gain. For the assessment year in question, the claim for long term capital gain was accepted by the Assessing Officer but the claim for short term capital gain was disallowed. The Assessing Officer reasoned in this regard as follows: - "4.5 In the instant case, except one condition i.e. utilizing own funds all other conditions are against the assessee. The ass .....

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e that in his audit report the auditor has also described the naf siness of the assessee company as share trading' and not an investor. Therefore, in the light of above discussion there is no doubt that the profits earned by the assessee in the year were to be assessed as business income and nor short term capital gain. Accordingly, I treat the income of ₹ 41,46,235/- shown by the assessee as short term capital gain as business income. I am satisfied that by showing business income to .....

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ck in trade under the head of investment by itself was inconclusive as to whether the transaction in question was done by way of investment or business. The ITAT reasoned as follows: - "5. At the time of hearing before us, it is stated by the learned counsel that originally the assessee company was incorporated to do the finance business and after restrictions imposed by Reserve Bank of India, the company stopped its main business and started dealing in shares. However, during the accountin .....

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x thereon. The assessee showed long term capital gain where the holding of the shares was more than 12 months and short term capital gain where the holding was less than 12 months. That the Assessing Officer accepted the long term capital gain but with regard to short term capital gain, he observed that in the immediately preceding year, the conversion of closing stock of the shares' into investment was to take the advantage of differential rate of tax on short term capital gain and business .....

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22nd October, 2013 in Income Tax Appeal No.406/2013'. In the said case, under identical facts, the Conversion of stock-in-trade to the head 'investment' was upheld by the ITAT and Hon'ble Jurisdictional High Court dismissed the revenue's appeal. He further pointed out that the Assessing Officer wrongly held that the intention of the assessee was to act as a trader as in the past. He submitted that after the conversion of stock-in-trade as investment, the intention of the asse .....

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