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M/s. Deepak Pravinchandra Shah Versus The Addl. CIT 13 (1) , Mumbai.

2015 (6) TMI 520 - ITAT MUMBAI

Income from sale and purchase of shares - capital gains or business income - Held that:- The assessee is to be treated as an investor for the year under consideration also. We hold accordingly. The AO, therefore, is directed to treat the income from sale and purchase of shares as short term capital gains and long term capital gains according to the period of holding as per the provisions of law. - Decided in favour of assessee. - ITA No.6953/M/2008 - Dated:- 5-6-2015 - Shri R.C. Sharma and Shri .....

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ions of his client he does not press ground 1 & 2 which, otherwise, are general nature. Hence the same are accordingly dismissed being not pressed. 3. Ground Nos.3 & 4 are relating to the issue as to whether the income earned by the assessee from sale and purchase of shares is to be assessed as capital gains or business income. 4. During the assessment proceedings, the Assessing Officer (hereinafter referred to as the AO) noticed that the assessee had disclosed short term capital gains o .....

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t 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 purc .....

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7,56,814/-. The period of holding in case of many scripts was very short and there were voluminous transactions. He therefore held that the assessee could not be treated as investor in shares but as a trader. He accordingly assessed the short term capital gains and long term capital gains claimed by the assessee as business income of the assessee. 5. In appeal, the Ld. CIT(A) upheld the finding of the AO. The assessee has, thus, come in appeal before us. 6. We have heard the rival contentions of .....

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tal loss which could not be adjusted against the business income and income from other sources was allowed to be carried forward to the subsequent year. The Ld. A.R. has further brought our attention to assessment order passed under section 143(3) of the Act for the A.Y. 2003-04 wherein the assessee had been shown to be in brokerage, speculation business and having income from capital gains and other sources. The AO had accepted short term capital loss and long term capital loss claimed by the a .....

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urities transaction tax. All long term capital gains arising on such securities were made exempt 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 .....

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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 the A.Y. 2007-08, wherein the claim of the assessee of short term capital gains had again been accepted. Similarly, in the scrutiny assessment proceedings under section 143(3) of the Act for A.Y. 2008-09, th .....

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e total number of transactions during the year was 676, however, the 142 transactions were related to the shares which were purchased on different dates but were sold on the same date. He has further submitted that even the assessee had also earned the long term capital gains of ₹ 7,56,814/- and that even the short term capital gains were earned for investments retained for less than 30 days to even up to 330 days. The Ld. A.R. has further submitted that prior to the year under considerati .....

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consistency in its stand. By treating an assessee as investor in a year and a trader in another year and then again treating him as an investor in subsequent year would not only create uncertainty in the mind of the assessee but also disentitle him from the eligible claims. In the year in which the assessee would be treated as a trader, the assessee would lose the benefit of set off of capital loss of the earlier assessment year. Then by treating the assessee as an investor in subsequent assess .....

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e. 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 con .....

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wo types of transactions in securities. The assessee had shown investments and had claimed capital gains relating to the shares which have been purchased through delivery based transactions in D-mat account. The assessee had also been engaged in trading in shares which were speculative in nature. Income or loss arising out of such speculative transactions had been separately and specifically shown as speculative profit/loss in computation of income as well as in the balance sheet. The assessee h .....

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ng to an investor from the transfer of securities were charged depending on the period of holding of the said securities. Short term capital gains were taxed at applicable rates (normal rates) and long term capital gains were taxed at the rate of 20% after adjusting for inflation by indexing the cost of acquisition. For listed securities, the tax payer had an option to pay tax on long term capital gains at the rate of 10% but without indexation. In case of trader in securities, however, the capi .....

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ssed above, was at par with that of business income, the department has been consistently accepting the treatment of income by the assessee as capital gains. Merely because the rate of tax has been reduced in respect of short term capital gains and long term capital gains have been exempt during 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 .....

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siness 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 discussed .....

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