TMI Blog2015 (5) TMI 755X X X X Extracts X X X X X X X X Extracts X X X X ..... M,JJ. For the Appellant : Shri Roopchand, SR For the Respondent : Shri S N Soparkar, AR ORDER Per Bench : These are two appeals filed by the Revenue against the order of the Commissioner of Income-Tax (Appeals)-VI, Ahmedabad dated 28.2.2011 for Asstt.Year 2007-08 and 19.5.2011 for Asstt.year 2008-09. In both the appeals, the Revenue has taken the following common grounds of appeals: 1. The ld.CIT(A) has erred in law and on facts in directing the AO to treat the income of ₹ 59,97,410/- for A.Y.2007-08 and ₹ 67,08,965/- for A.Y.2008-09 from transaction through PMS and market broker as capital gain, instead of business income as assessed by AO. 2. On the facts and circumstances of the case, the ld.CIT(A) ought to have upheld the order of the AO. 3. It is, therefore, prayed that the order of the ld.CIT(A) may be set aside and that of the AO be restored. 2. Brief facts of the case are that in Asstt.Year 2007-08, the AO observed that during the year under consideration, the assessee has shown income from purchase and sale of shares in normal trades of ₹ 7,67,170/- and through portfolio management scheme ( PMS ) of ₹ 52,30,240/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as business income of the assessee, therefore, he taxed the gains from these transactions as business income of the assessee. 5. On appeal, the CIT(A) accepted the appeal of the assessee and directed the AO to recalculate the income from business and income from capital gain in the light of his decision by observing as under: 2.3 I have considered the facts of the case, assessment order and appellant's submission. Assessing officer treated long-term and short-term capital gain disclosed by the appellant as business profit on the ground that appellant was not making investment but trading in shares. On the identical facts, ITAT Ahmedabad in the case of Shri Sugam chand C Shah Vs AC1T, circle- 3 , Surat in ITA nos 3554/AHD/2008 four AY 2005-06 and 1932/AHD/2009 for AY 2006-07 held that in cases the shares are held for more than 30 days, the transaction has to be categorised as an investment transaction whereas the sales held for a period up to 30 days, the same shall be treated as business transactions. In arriving at this decision, the ITAT Ahmedabad has considered several decisions of various benches of ITAT, high courts and Supreme Court. The ITAT Ahmedabad has also cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n many cases there is delivery of shares and share were registered in the name of the assessee. The holding period of the shares IS from 'o' days to '366' days. In some cases, the frequency of transactions are apparently substantial as on one day the assessee has purchased several scripts and sold several of them on the same day. 16. The question is whether therefore, merely from frequency of the transactions carried on by the assessee, he is treated as dealer in shares or still he is held as investor. As found in the case of Sarnath Infrastructure (P) Ltd. vs. Asstt.CIT (supra) also, assessee adduced evidence to show that his holdings are for investment as recorded in the books of account. The holdings are valued at cost, and such accounting has been accepted by the Revenue in earlier years. There is no material to show that assessee has declared himself as a trader in shares and legal requirements therefore have been complied with. It is also a fact that he has not borrowed any money for investing in shares. Merely because, assessee had some -it would not by itself show that they were deployed in investment. Notwithstanding, even borrowing are required to se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be taxed as to be earned under the business or to be taxed as short- term capital gain, we hold that if shares are not held even say for a month, then the intention is clearly to reap profit by acting as a trader and he did not intend to hold them in investment port-folio. We believe that if a person intends to hold his purchases of shares as investment, he Would watch the fluctuation of rates in the market for which a minimum time is necessary, which We estimate at one month. Where share are held for more than a month, they should be treated as investment and on their sale short term capital gain should be charged. Where shares are held for less than a month, gain on them should be treated as profit from business. 20. The assessee will give the working and Computing 'short-term capital gains on the above basis. The rest of the profit will be treated as assessable under the head business . Following the decision of jurisdictional tribunal on this issue on similar facts, it is held that whenever the assessee has held the shares for the period more than 30 days, the same is treated as investment resulting in long-term and short-term capital gain and wherever shares are he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... higher than the dividend income earned by the assessee. He further observed that sale proceedings in the name of one person has been distributed in the bank accounts of other persons in the group and purchases in name of a person have also been made from funds of other members. He further observed that the assessee had carried out substantial transactions in shares through a Portfolio Manager. The assessee had also deducted/reduced the income by claiming the fees paid to Portfolio Manager amounting to ₹ 2,01,396/-. Further, in the computation of total income, the assessee had claimed expenses like D-mat delivery charges, STT, service tax etc., and on pointing out the same, it was withdrawn by the assessee. In view of the aforesaid facts, the A.O. held the assessee to be a trader of shares and therefore, the activities of share transactions to be in the nature of trading/adventure in the nature of trade. Accordingly, he taxed the profit from share transactions amounting to ₹ 92,77,928/- as business income instead of capital gains. 4. Aggrieved by the action of the A.O. in treating ₹ 92,77,928/- as business Income instead of capital gains , the assessee ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned for looking after purchase and sale of shares; v) There was substantial dividend income; vi) His source of income was income from salary, capital gain, dividend and interest and he was not having any business income; vii) In the original return of income furnished from time to time, income from sale of shares was disclosed under the head capital gain and was accepted by Revenue as such under Section 143(1). When totality of all the above facts are considered, the inference drawn by the CIT (A) that the assessee is an investor in shares, appears to be correct. Apart from the above, on the principle of consistency also order of the CIT (A) on this point deserves to be upheld because in the original returns income from sale of shares was disclosed under the head capital gain and the same was accepted by the Revenue. ITAT, Mumbai Bench in the case of Gopal Purohit (supra) held that though in income tax proceedings the rule of res judicata does not apply but there should be uniformity in treatment and consistency under the same facts and circumstances. This decision is upheld by the Hon'ble Mumbai High Court in CIT vs. Gopal Purohit, 228 CTR 582 (Bom.). These dec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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