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TMI Blog2015 (6) TMI 520X X X X Extracts X X X X X X X X Extracts X X X X ..... closed short term capital gains of Rs. 48,64,832/- claimed to have been earned after 01.10.04. After set off of short term capital loss prior to 01.10.2004 of Rs. 3,06,778/- and other expenses of Rs. 11,17,091/-, the assessee had returned net short term capital gains of Rs. 34,40,863/-. The AO further observed that the assessee had also claimed long term capital loss prior to 30.09.04 at Rs. 1,19,697/-. The assessee had claimed long term capital gains after 01.10.04 at Rs. 3,75,069/-. The AO observed that the assessee had offered short term capital gains at a concessional rate of 10% as per the provisions of newly inserted section 111A of the Income Tax Act. He further observed that as per the amended provisions, the short term capital gains after 01.10.04 were liable to be charged to tax at the rate of 10%. Before 01.10.04, the short term capital gains were charged at normal rates. He, thereafter, observed from the details of share transactions that the assessee had done numerous sale and purchase transactions in shares and further that interest bearing borrowed funds were also used for the said purpose. The assessee in the revised working had also furnished a loss of Rs. 2,95,052 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t under section 10(38) and short term capital gains arising on sale of securities on which security transaction tax had been paid were entitled to a concessional rate of tax at the rate of 10% under section 111A. The traders were also compensated for the additional security transaction tax paid by way of rebate under section 88E. The Ld. A.R. has submitted that merely because the scheme of taxation was amended/changed during the mid of the year under consideration, the AO therefore ventured into the share transaction activity of the assessee and treated the assessee as trader, whereas, in the earlier assessment years, where such benefit of concessional rate of tax was not available to the assessee, the assessee's claim of investor in shares had continuously and consistently been accepted. The Ld. A.R. has further brought our attention to the assessment order passed under section 143(3) of the Act for A.Y. 2006-07 i.e. subsequent year to the assessment year under consideration, wherein, the claim of the assessee of short term capital gains had been accepted by the AO. The Ld. A.R. has further brought our attention to the assessment order passed under section 143(3) of the Act for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year. He has submitted that though principle of resdjudicata is not applicable to the income tax proceedings, however, the department is not supposed to change its stand every year as per its convenience and putting the assessee to loss and disadvantage in either of the situations as discussed above. The Ld. A.R. has therefore submitted that the assessee was essentially an investor and was required to be treated so by the Revenue, while computing the income from sale and purchase of shares for the year under consideration. 7. The Ld. D.R., on the other hand, has drawn our attention to the observations made by the AO with regard to volume and frequency of transactions and the interest paid by the assessee on the funds borrowed for the purpose of investment in shares. He, therefore, has contended that the profits earned by the assessee from sale and purchase of shares were correctly taxed by the AO as business income. 8. We have considered the rival submissions. There is no dispute relating to the fact that the assessee in earlier years has been treated by the department as an investor. The assessee, as discussed above, has been continuously allowed the set off of short term capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year by way of an amendment to the provisions as discussed above, that itself, cannot be a ground for the AO to depart from its consistent stand of treating the assessee as an investor and thereby to charge the income earned by the assessee from share transactions as business income. Moreover, as discussed above, the assessee had been maintaining two portfolios i.e. he was treating the delivery based purchases as investments and the non delivery based transactions as speculative. As discussed above, at the time of purchase of shares even during the year but prior to 01.10.2004, the assessee was not guided or influenced by lower tax rate in case of short term capital gains as the rate for business income and short term capital gains was at par. The assessee, however, was treating himself as an investor and keeping the delivery based shares as investments in his account irrespective of the probable tax implication as there were no such tax implications as discussed above. The intention of the assessee, while purchasing the share, is the important and guiding factor as to whether the same was purchased with an intention of investment or for trading. The facts of the case as discus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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