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ACIT 25 (3) , Mumbai Versus Vinod K. Sharda

2015 (6) TMI 198 - ITAT MUMBAI

Transaction of shares - Short Term Capital Gains and Long Term Capital Gain or business income - Held that:- Activities of the assessee clearly prove that the assessee wanted to maximise the profit and not interested in appreciation of value of the scripts.In our opinion, entries in the books of accounts is one of the deciding factors,but not the conclusive factor to decide as to whether the assessee was a trader or investor of shares covered under the head STCG

In the present case,we .....

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see was not an investor, but was a trader.Thus,partly confirming the order of the FAA,we are are deciding the effective ground of appeal in favour of the AO,in part. - Decided in favour of assessee in part. - ITA No.6050/Mum/2010 - Dated:- 26-3-2015 - Sh. I P Bansal and Rajendra, JJ. For The Revenue : Shri Pawan Kumar Beerla For The Assessee : Shri Bhupendra Shah ORDER Per Rajendra,A.M. Challenging the order dt.10.06.2010 of the CIT(A)-35,Mumbai,the Assessing Officer(AO) has raised following Gro .....

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r holding with the assessee remains beyond few days, it will not change the nature of transactions and the assessee is very well engaged in the business of share trading, which denotes that the motive of the assessee is to carry on business in shares to book profit, rather than investment in shares. (ii) The appellant prays that the order of the Ld. CIT(A) on the above grounds be set aside and that of the AO. be restored. (iii) The appellant craves leave to amend or alter any ground or add a new .....

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t the assessee had reduced the Long Term Capital Loss from the capital gains, amounting to ₹ 4.34 Lakhs. We further found that assessee had shown income from other sources at ₹ 5357/-. Vide perusing the capital account he found that all the receipts of the assessee were arising out of transactions in shares and security except bank interest, that in the computation of income he had bifurcated the credit entries and offered the profit/loss on the sale of shares as STCG.To decide the i .....

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deration, that the share were purchased for ₹ 3.80 Crores and were sold for ₹ 1.45 Crores resulting in profit of ₹ 35.92 Lakhs. He analysed the statement of STCG filed by the assessee and found that most of scripts were sold on the same day or were bought or sold within a period of 3 to 5 months, that he had bifurcated the share transactions into two categories i.e. first where shares were to be delivered to the assessee and the second where no delivery was required to be taken .....

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e, that because a particular scripts was not sold for 12 months would not automatically make it a long Term Capital Asset, that the intention of the assessee was to hold the shares not an investment but rather the primary motive to book profit.Considering the frequency, volume and organised activity of purchase and sale of the shares with a profit motive the AO issued a show cause notice to the assessee asking him as to why the share transactions should not be treated as business income for the .....

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heads, that the entire profits arising out of purchase and sale of shares had to be assessed under the head Income from Business , that the benefit of exemption available to profit and shares claimed as LTCG and benefit of lower rate of taxation available to profits and shares claimed as STCG was to be disallowed. 3.Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA).Before him, it was argued that assessee was a senior citizen aged 67 yea .....

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urchased more than 10 years back, that there was no ground for treating the LTCG as business income, that major portion of capital gain was earn by holding shares for more than three months that the assessee had paid STT. The assessee relied upon the cases of Gopal Purohit (29SOT117)and Janak S. Rangwala (11 SOT 627). After considering the submission of the assessee and the assessment order.The FAA held that the assessee had derived LTCG of the ₹ 1.03 Lakhs on sale of 600 shares of Zicom E .....

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assessee had transferred all the shares in his name before sale as evidenced by the D-Mat Account, that the average holding period of shares was more than three months, that the assessee had not availed any borrowed funds for the purpose of investments of shares. Referring to the cases of Gopal Purohit and Janak S. Rangwala, he held that the delivery based transactions has to be treated as investment. Finally, he directed the AO to accept the claim of the assessee by accepting STCG and LTCG as .....

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resentative(AR) supported the order of the FAA. He relied on case of Gopal Purohit(336ITR287),delivered by the Hon ble Bombay High Court. 5.We have heard the rival submissions and perused the material before us.The only issue to be decided by us is as to whether the profits on the sale of shares during the year which had been shown by the assessee as Capital Gains arising out of investment in the shares in question is to be assessed under the head Income from Business or under the head Capital G .....

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ounding circumstances.Broadly,an investor purchase a share with a view to earning income in the form of dividend and for appreciation in value over a long period of time and is not motivated to sell shares on each and every rise in the value of shares which are, in fact, the attributes of a trader.To purchase shares and then wait for appreciation in their value in the long term is the classic example of an investor.There may be criteria and parameters,but individual parameters would not be decis .....

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rofits derived from an adventure in the nature of trade or outside its ambit. The facts and circumstances of each case would be determinative of the character of the receipt. The primary consideration in such cases relates to examining the nature of the transaction. Where a person invests money in an asset with intention to hold it, enjoys its usufruct for some time and then sells it at an enhanced price, it would be a case of capital accretion outside the scope of profits resulting from an adve .....

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roximately from his brokerage business.As a senior citizen,as claimed by the assessee himself,how much job of a Estate Broker he would have done is known to him only.Nothing is coming out of documents filed by the assessee in that regard.On the other hand we get a clear picture of his share business from the paper book filed by him.From the trading and P&L A/c it is found that the assessee had claimed depreciation of ₹ 1.10 Lakhs and expenditure under the head electricity had been paid .....

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