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2015 (6) TMI 605 - ITAT DELHI

2015 (6) TMI 605 - ITAT DELHI - TMI - Sale of shares - business income OR capital gains - CIT(A) confirming action of the assessing officer in assessing the gains arising on sale from long-term capital assets and gains arising on sale of short term capital assets, being investment in equity shares, as "business income" instead of "capital gains" declared by the appellant - Held that:- It was submitted by the ld. AR's that as and when the opportunity arose, the assessee sold the shares in the ope .....

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07, which has specifically spelled out the conditions to determine the nature of transaction which is in question of being whether it is in the nature of investment or trade. In the said circular of CBDT it has stated the principle laid down in the case of Associated Industrial Development Company (P) Ltd. [1971 (9) TMI 3 - SUPREME Court ] and in the case of H. Hoick Larsen (1986 (5) TMI 30 - SUPREME Court ) which afforded adequate guidance to the Assessing Officer while determining whether a tr .....

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sed (F&O). Also, by treating the delivery based transaction as an investment, the assessee clearly established that it did not take the first step as a trader, hence, the result of the delivery based transaction it was treated as short term capital gain or long term capital gain depending upon the period of holding of such shares. The tests of badges of trade evolved by Royal Commission of England and approved by the Hon‟ble Supreme Court are also not met by the assessee. Therefore, it can .....

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al gain of ₹ 2,77,73,257/- as business income is not sustainable in the eyes of law and so it need to set-aside and we do so. In the background of the aforesaid discussions, we set aside the finding of the ld CIT(A) and we allow the appeal. - Decided in favour of assessee. - ITA No. 5227/Del/2014 - Dated:- 12-6-2015 - SHRI S.V.MEHROTRA AND SHRI A. T. VARKEY, JJ. For The Appellant : Sh. Rohit Jain Adv, Sh.Sahil Mehta, CA For The Respondent : Smt.Y Kakkar, DR ORDER PER A. T. VARKEY, JUDI .....

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2. That the CIT(A) erred on facts and in law, in confirming action of the assessing officer in assessing the gains of ₹ 2,77,73,257/- arising on sale from long-term capital assets and gains of ₹ 4,06,124/- arising on sale of short term capital assets, being investment in equity shares, as "business income" instead of "capital gains" declared by the appellant. 2.1. That the CIT(A) erred, on facts and in law, in holding that the shares held and disclosed as "in .....

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nificant companies revealed that the intention of the appellant was to resell the shares, rather than to hold them or retain them as capital asset. 2.3 That the CIT(A) erred, on facts and in law, in affirming the action of the assessing officer in assessing capital gains as business of levelling various false/baseless allegations, without judiciously appreciating the submission of the appellant. 3. That the AO/CIT(A) erred on facts and in law in charging interest under section 2348 and 234C of t .....

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assessee derived his income from salary, interest; and his proprietary concern, M/s Ashish Chaudhary Stock Investment, (a sole proprietary concern) is engaged in share transaction. The appellant submitted his return of income declaring income of ₹ 14,10,350/- on 28.09.2010. In the computation of income filed along with it the assessee claimed exemptions u/s 10(38) of the Income Tax Act, 1961 (herein after the Act‟) on sale of shares. In the profit and loss account the assessee credit .....

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(2) & 142(1) of the Act were issued to him. 5. While scrutinizing the case of the appellant, the AO noticed that a sum of ₹ 7000/- was debited as professional charges and a loss of ₹ 12,11,585/- was also claimed which was set off against the above income. On perusal of the details filed by the assessee, it was further observed by the AO that in column 8(a) of form 3 CD of audit report, the nature of business or profession was written as "share transaction" Further on go .....

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claimed. The appellant also claimed loss of ₹ 12,11,585/- on sales of future shares as a loss from business or profession which was set off against income from other sources. 6. The claim of the long term capital gains as above became the bone of contention. Therefore a show cause notice was issued to the appellant by the AO vide letter dated 27.02.2013 asking the assessee to explain as to why the income arising from the sale of M/s Balrarnpur Chini, M/s GMR and M/s Pacelep amounting to &# .....

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As per Column 8(a) of from 3CD of the audit report, nature of business or profession has been written as share transaction, then why the income arising from the sale of share of Balrampur Chini, GMR and Pacelep amounting to ₹ 2,77,73,257/- has been shown as Long Term Capital Gain and /not shown as sales receipt of the business. It is clearly stated in section 2(14) of the I.T. Act, 1961 that the stock in trade of any business & profession is not a capital asset and capital gain-arises .....

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e as I don't indulge in day to day transaction of share. The shares purchased are with the motive of investment only and are held with me for long periods of time as an investment in my personal capacity. I am not sourcing money on interest or as a loan to carry any day to day business. l am also working as a director in the firm M/s Subhkarandas Chiranjilal Agencies Pvt. Ltd. and also helping my father in his daily work of textiles where I carry out the daily business activities. .........A .....

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same by stating as under- During the course of assessment proceedings, the assessee was asked about his business activity and he replied in written that he is engaged in stock trading. • Further as per column 8(a) of 3CD of assessee's audit report, nature of business or profession has been written as share transaction . • Moreover, the observation of assessee's computation of income for the A.Y. 2010-11 clearly indicates that the assessee has derived major part of income from s .....

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or in the above company. • Moreover assessee has declared only ₹ 24000/- salary income as a director from the so called company in his computation of income for AY 2010-11. Keeping in view of the above facts, I arrived at the conclusion that the assessee spent most of his time in no other work except share trading. • The assessee is running his business of share trading by making a sole proprietary firm named M/s. Ashish Choudhary stock Investment whose business premises address .....

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rom share trading of ₹ 2,77,73,257/-(Long Term) + ₹ 4,06,124/-(Short term) ₹ 2,81,79,381/- and suffered loss in future option share trading of ₹ 12,11,585/-. • The assessee has shown income from share trading as income from long term capital gain & short term capital gain" and claimed u/s 10(38) whereas loss from future option shares has been set off against interest income. • The assessee traded in a number of share and transaction were huge and he had .....

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tivity. • In reply to the questionnaire dated 09.01.2013 the assessee has filed a copy of ledger Account showing closing balance of ₹ 4,00.28,232/- as "Sale of Stocks". The assessee was further asked vide letter dated 27.02.2013 requiring the book of account and other information particularly why the capital gain claimed by you should not be treated as your income from business and profession. In reply filed by the assessee vide letter dated 09.03.2013 enclosing therewith a .....

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purchase of share as indicated in the D-Mat account of the assessee are produced here under: S. N. Name of share Date of transaction Buy (cr) Sold (Dr) Balance 1. Balrampur Chini 24.01.2008 06.02.2008 07.02.2008 05.03.2009 08.06.2009 11.06.2009 13.06.2009 13.06.2009 29.07.2009 31.07.2009 06.08.2009 17.09.2009 79200 21160 440 30000 10000 75000 5000 20800 10000 10000 10000 10000 79200 100360 100800 25800 20800 0 30000 20000 10000 20000 10000 0 2. SVC Resources 31.08.2007 14.07.2009 14.07.2009 17.0 .....

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27.07.2007 24.01.2008 18.07.2008 14.10.2008 17.10.2008 24.10.2008 31.10.2008 04.02.2011 05.02.2011 07.02.2011 07.02.2011 08.02.2011 08.02.2011 08.02.2011 09.02.2011 09.02.2011 10.02.2011 10.02.2011 11.02.2011 11.02.2011 14.02.2011 21.02.2011 21.02.2013 22.02.2013 25.02.2013 27.02.2013 01.02.2013 04.03.2013 04.03.2013 06.03.2013 07.03.2013 07.03.2013 07.03.2013 12.03.2013 13.03.2013 13.03.2013 4000 10000 1261 5000 3000 2000 2500 16071 50000 1000 3000 30000 30000 1155 611 3500 94 1849 3703 10000 .....

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4.2010 06.04.2010 07.04.2010 09.04.2010 13.04.2010 16.04.2010 19.04.2010 20.04.2010 21.04,2010. 21.04.2010 22.04.2010 28.04.2010 77094 47051 3300 51166 21700 15265 21800 19165 8200 5000 14800 21260 12002 3949 600 1735 24999 77094 124145 127445 178611 200311 215576 237376 256541 264741 269741 284541 305801 317803 321752 327752 334302 336037 361036 5. Ion Exchange (India) Limited 31.07.2009 31.07.2009 03.08.2009 12.08.2009 24.08.2009 20.10.2009 03.08.2010 04.08.2010 01.06.2011 01.06.2011 02.06.201 .....

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0 10000 338 2109 108776 3565 19075 3038 124203 30000 30100 7900 1962 38 7000 53963 17908 2592 4024 95077 18670 173579 26421 139662 400000 600000 625000 650000 660000 660338 662447 771223 774788 793863 796901 921104 951104 981204 989104 991066 991104 998104 1052067 1069975 1072567 1076591 1141668 1160338 133917 1360338 1500000 7. Valeccha Engineering Limited 16.05.2007 16.05:2007 21.05.2007 26.06.2001 26.06.2007 10.07.2007 12.07.2007 13.07.2007 I 2.11.2007 13.1l.2007 05.01.2008 15.01.2008 2I.10.2 .....

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2011 24.12.2011 04.04.2012 12.04.2012 20200 107 2393 500 9000 1227 6773 20000 40000 20200 20301 22700 23200 3200 12200 13427 20200 40500 200 40200 10. Parsvnath Development 08.05.2007 14.05.2007 14.05.2007 27.08.2009 20.10.2010 20.10.2010 9100 32 64 7500 1600 32 9100 1600 0 32 0 64 11. Morepen Laboratories Ltd 08.05.2007 24.10.2007 31.11.2007 22.11.2007 05.12.2007 03.02.2011 531004 300000 81004 45350 25000 37965 0 531004 450000 404650 379650 0 300000 9. According to AO, the assessee even on a si .....

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#8377; 4,07,48,118/- in share, the assessee had turnover ₹ 4,00,28,232/- indicates nothing but intention of trade. It was pointed out by the AO that the assessee earned only a meagre amount of dividend of ₹ 1, 09,444/- from the share he had with him in the year under consideration. 10. According to AO the facts and circumstances of the case indicate that the voluminous share transaction were in the nature of the business and purchase of share by the assessee was not for the purpose o .....

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rchase and sale of share through brokers and declared huge profit earned from this activity. The assessee has shown this income as long term capital gain and short term capital gain on the plea that the shares were held as investment. However, while going through the share account on demat account, it was noticed by the AO that the assessee had conducted number of transactions and traded in a number of share and transactions were huge. The AO notes that in determining the issue as to whether, af .....

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f the share was with the intention of dealing in the share as an investment or to treat it as stock-in-trade. The intention of the assessee is best known to him; however the conduct of the assessee shows his intention. In the instant case the transaction of share have been made which are in the ordinary line of assessor‟s business and the assessee has also accepted this fact by opening a share trading firm conducting share business. 12. Therefore, according to AO, what is important is that .....

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efore, the AO concludes in the instant case that the assessee has been habitually trading in quoted share by running a firm to conduct share business. And the accounts of the said business in shares are duly audited. The frequency of purchase and sale of shares and the regular profit earned there from being huge, indicated, nothing but intention of trade. The AO, pointed out that the assessee earned only a meagre amount of dividend in the year under consideration. All these factors according to .....

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der of ITAT Delhi Bench 'E' in the case ACIT, Circle-31(1), New Delhi Vs Manoj Kumar Samdaria (20l2)27 Taxmann.com 102 (Delhi), the AO was of the view that the assessee traded in share with the motive of profit. He, therefore, assessed the gain resulting from the sale of share of ₹ 2,81,79,381/- as business income. 15. Aggrieved the assessee preferred an appeal before the ld CIT(A) who was pleased to dismiss the same. 16. Aggrieved the assessee is before us. 17. The Ld. Counsel Shr .....

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15% was paid under section 111A of the Act. The assessing officer, made addition to the income of the appellant by bringing to tax the capital gains realized by the appellant in share investments by treating the same as business income. One of the objections raised by the assessing officer for treating the capital gains from investment in shares as business income is that as per Column 8(a) of Form 3CD of the audit report submitted by the assessee, the nature of business or profession has been w .....

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thout physical delivery on recognized stock exchange. 18. So, according to the ld AR, it is the second set of transactions which qualify as business of the appellant and for which the appellant has undertaken to get his accounts audited from a chartered accountant under section 44AB of the Act. According to him, it is settled law that transaction of sale and purchase of derivatives (without actual delivery) is to be classified under the business head. The Ld. AR pointed out that earlier as per s .....

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ransactions are are clearly share investments which are duly reflected in the audited balance sheet as investment‟ and the closing investment as on 31.3.2010 was ₹ 3,87,78,265. The capital gains from sale of the shares held as investment were added to the capital of the appellant in the balance sheet and duly shown in his return of income. And it is only for the second set of transactions that the tax audit was required. But for extra and abundant caution Tax-Audit has been done. The .....

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ld in this year to claim long-term capital gain and 3 scrip for short term capital gain. 21. The long-term capital of the assessee is as under:- 22. And the short-term capital gain is as under:- 23. The Ld. AR pointed out the following factors which would further corroborate the claim of the appellant showing the shares as investments: i) The shares were bought from appellant's own funds and there were no borrowings. The same can be seen from the audited balance sheet of the appellant. (Refe .....

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s is enclosed herewith (Refer Pg 1 0 and 11 of paper book, which is reproduced above in para 21 and 22 ) (iv) The total volume of trade of shares during the year was around ₹ 4 crores. So, the same cannot be said to be huge considering the daily average turnover on stock exchanges is to the tune of ₹ 5,000 crores. (v) To the observation of the AO that the appellant has earned a meagre dividend of ₹ 1,09,444/- during the year under consideration on opening share investment of &# .....

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n is to realize the capital appreciation, earning of dividends is incidental and cannot be a determining factor for classification of asset into 'Investment' or 'Stock in trade'. Further, there are so many mutual funds, etc. with growth option. So according to ld AR, if we go by the assessing officer's logic, then these mutual funds will always have to be classified as 'Stock in trade'. (vi) That the appellant is an investor in shares is an accepted position by the In .....

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-19 in paperbook) 24. Countering the next objection of the assessing officer that M/s Shubh Karan Das Chiranji Lal Agencies Private Limited, with whom the appellant is stated to be a director, the AO observed that this is no company which is existing and it is only an Agency; and that the appellant spends most of his time in no other work except share trading, the ld AR submitted that the assessing officer has reached this conclusion without fully appreciating the true facts. According to the ld .....

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iness in these firms. The ld AR pointed out that the combined turnover for the firms was to the tune of ₹ 41 crores during year 2009-10 and the appellant being the only son was responsible for the running the said firms. He was the authorised signatory in bank in both the firms and signs all the sale bills of the firm, which goes to show his involvement in the business. Further, as a customary practice and mark of respect for his father, he does not draw a salary from the proprietorship fi .....

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. 25. Countering the next objection of the assessing officer that the appellant is running his business in the name of proprietorship firm namely, M/s Ashish Choudhary Stock Investments and has a well developed infrastructure the Ld. AR submitted that there is no firm by the name of M/s. Ashish Choudhary Stock Investments. No bank account exists in this name. Further the Ld. AR wondered as to how a well developed infrastructure be maintained by incurring an expenditure of ₹ 7,000/- that to .....

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-capital realisation. In fact, in a share business portfolio, the possibility of earning profit is limited and there has to be large churning of shares during a short period of time and huge volumes to realize a substantial amount of profit. Thus, the fact that the huge amount of capital gains goes to show that the appellant is an investor and not a trader since the investments were made with a large time horizon. 27. The Ld. AR relied on the decision of jurisdictional Delhi High Court in the ma .....

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lassified as business portfolio and other as investment to be classified as capital gains. 28. It was pointed out by the ld AR that the said decision of the Hon‟ble Bombay High Court has now been affirmed by the Supreme Court vide judgment dated 15th November, 2010 in CC 16802 / 2010, 334 ITR 308 (St.) and emphasised consistency in tax treatment. Similarly, on the similar issue in the case of Jindal Photo Investment Ltd., the Hon‟ble Supreme Court dismissed the department's SLP o .....

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d 'the STCG realized by the appellant as business income ought to be deleted. 29. Reference was also made to the decision of Delhi High Court in the case of CIT vs. Rohit Anand 327 ITR 445 (Delhi). Attention was also invited to the decision in the case Of S.K. Finance vs DCIT: 13 ITR(Trib) 236 (Mum ITAT), dated o4.o2.2010, wherein the ITAT held that depending upon the frequency and volume of shares and comparing the same with the other decided cases, the profit from share investments was hel .....

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days 13,689 0.05 1 year - 2 year 14,020,161 49.75 More than 2 years 13,753,096 48.81 Total 28,179,381 31. In view of the table as above, the ld AR contended that the appellant‟s case is most strong as the period of holding is most and number of scrips as well as number of purchase and sale days is least. Attention was also invited to the decision in the case ACIT vs. Manoj Kumar Samdaria, relied upon by the AO is distinguishable on facts as in that case, there was sale of share within 2-3 .....

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ust Company Limited Vs. CIT. (1968) 68 ITR 486(SC) Raja Bahadur Visheshwara Singh v. CIT [1961] 41 ITR 685; Kkaran R Bahl Vs. ITO (60 SOT 63 (Mumbai) Commissioner of Income Tax, U.P v. Madan Gopal Radhey Lal, [1969] 73 ITR 652 (SC); DCIT v Mukeshbhai Babulal Shah (2013) 57 SOT 45 (Rajkot) (Trib.) N.K. Leasing Construction Ltd. Vs. CIT (2006) 285 ITR 330(AP) Manoj Kumar Samdari Vs. Commssion of Income Tax, ITA No.97 of 2014 (Del) 33. The ld DR pointed out the frequency of transaction made by the .....

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e strongly against the treatment of shares as Investment‟ are as under:- a) Assessee in past Assessment Years has no where shown in the balance sheet accompanying the returns as to which shares are held as investment which thus negates the very hypothesis of holding either as investment or as trading stock fails at the outset. Copy of balance sheet filed for A Y 08-09, 09-10 was enclosed for ready perusal of us b) In fact the account statement with Tamil Nadu clearly states that the openin .....

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n fact the reconciliation of so called alleged investment scrips with details on record is not done to support the stand of assessee as the so called scrips on which L TCG and STCG were shown in returns were not shown to the Revenue in details filed by assessee at that point of time. e) The assessee needless to add as per form 3CD for AYI-II is as per column 8(a) doing business in "shares transaction" like past years 08-09, 09-1 0, -This puts to rest any plea raised by assessee regardi .....

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/s Shubkaran Dass Chiranjivi Lall) . Such examplers abound in assesses case throughout 07-08 to 11-12. 36. In the light of the decisions relied upon by her, the ld DR vehemently supported the decision of the ld CIT(A) and urged us not to disturb the well reasoned order of the ld CIT(A). 37. We have heard the rival submission and perused the relevant material on record. Before proceeding further, we want to make it clear that any decision to hold shares as Investment‟ or Stock-in-trade̶ .....

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is kept in view while deciding as to whether the shares purchased by the assessee constituted stock-in-trade or investment. 38. Since the AO and the ld CIT(A) has held that the profit assessee earned is business income and not from investment as claimed by the assessee let us look into the meaning of the word business‟. We find that the word "business" connotes some real, substantial and systematic or organised course of activity or conduct with a set purpose, However, a singly a .....

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se of Saroj Kumar Mazumdar vs CIT 37 ITR 242, observed that where a 'transaction was not in the line of business of the assessee but was an isolated or single instance of, a transaction, the 'onus was on the Department to prove that the transaction was an adventure in the nature of trade. 40. The Hon‟ble Apex court in Raja Bahadur Kamakhya Narain Singh vs CIT: 77 ITR 253 observed as under: The surplus realised on the sale of shares, for instance, would be capital if the assessee is .....

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if in future their sale may bring in higher price. Such an investment, though motivated by a possibility of enhanced value, does not render the investment a transaction in the nature of trade. The test often applied is, has the assessee made his shares and securities the stock-in-trade of a business." 41. The Hon‟ble Gujarat High Court in the matter of CIT vs Manish Natkulal Lavti: 218 Taxman 308, dated 1.10.2012 has upheld the Tribunal's following observations and dismissed the .....

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; 83,712 from share trading and another sum of ₹ 53,84,239 as exempt income on sale of certain sales. This ₹ 53,84,239 was treated by the Assessing Officer as business income on sale of shares. We find that the CBDT in its circular No. A12007. dated 15-06-2007 examined this issue and after referring to the judgment of the apex court, instructed all its officers that it is possible for the taxpayer to have two portfolios, i.e., investment portfolio. When the assessee has two portfolio .....

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one or two occasions there was also purchase and sale of shares, we cannot say that the assessee is trading in shares. The transaction as extracted. by the Assessing Officer in the assessment order shows that the assessee never intended to trade in shares and being salaried person intended to investor. Therefore, the profit on sale of shares has to be classified as capital gain either as short term capital gain or long term capital gain depending upon the period holding. Since the CIT(A) has dir .....

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was to promote investment in capital markets, the said section being an incentive provision, should be liberally construed as held by the Supreme Court in the case of Bajaj Tempo Ltd. v. CIT : (1992) 196 ITR 188, wherein the Hon'ble Supreme Court observed as under: A provision in a taxing statute granting incentive for promoting growth and development should be construed liberally and since a provision for promoting economic growth has to be interpreted liberally, the restriction on it too h .....

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etween shares held for trading and shares held as investments and have clarified that total effect of all the principles should be considered in determining whether in a given case the shares are held by assessee as investment or stock in trade. In the case of CIT Vs. Associated Industrial Development Co. (P) Ltd., 82 ITR 586, the Hon‟ble Supreme Court had observed that whether a particular holding of shares is by way of investment or forms part of the stock-in-trade is a matter which is w .....

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arious shares and earned a long term capital gain of ₹ 2,77,73,257/- and short term capital gain of ₹ 4,06,124/-. The assessee also earned an amount of ₹ 1,09,444/- and ₹ 1,49,314/- from HDFC short term plan on account of dividend and ₹ 22,64,917/- from as interest income. The assessee filed its return of income for the assessment year on 28.09.2010 declaring an income of ₹ 14,10,350/-. 45. We have to keep in mind that an equity share of Indian Companies is no .....

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of time equity shares have become a popular mode of investment. There is huge variety to choose from. Due to globalization and various uncertainties of modern times, there is increasing volatility in the share market. This has affected the length of period of holding in the cases of investors also. Having regard to these various issues under the provisions of the Act where shares are held for one year and more, the same qualify to be assessed as long term capital assets. The period of less than .....

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ly intended for trading, the same would not be held for weeks or months. In the case of the present assessee, all the shares have been sold after the delivery of same were taken by it in its bank account. The expression similar transactions by the same person and same sort of property needs to be emphasized. An investor may buy or sell everyday but that may not be considered such frequency as to lead to the inference of trading. It is only when particular scrip is bought and sold a number of tim .....

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47. Further it was submitted by the ld. AR‟s that as and when the opportunity arose, the assessee sold the shares in the open market. According to him, the said gain was in the nature of short term capital gain which was duly offered for taxation in the return of income filed by the assessee firm for the year under consideration as well as earned long term capital gain on shares which were sold after one year. Further, it was brought to our notice that assessee has not borrowed funds for t .....

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ted in 160 ITR 67 (SC) which afforded adequate guidance to the Assessing Officer while determining whether a transaction is in the nature of investment or trade. When the ratio of these decisions when applied to the facts of the present case, then it would be found that assessee satisfied the requirements because as a rule, the assessee had taken delivery at the time of purchase and given delivery at the time of sale in respect of all the shares in its investment portfolio and the assessee had a .....

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sion of England and approved by the Hon‟ble Supreme Court are also not met by the assessee. Therefore, it cannot be said that the assessee has dressed up in such way so as to wear the badge of trading. 49. Admittedly the assessee does not indulge in advertising or canvassing of any kind whatsoever and there is no organized effort to obtain profit. 50. The intention of the assessee is the key to decide whether the transaction in shares was for trading or investment let us look into some cas .....

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899 the Supreme Court has held that the fact that the assessee had shown these shares as investment share in its books as well as in its balance sheet was by itself not conclusive but it was a relevant circumstances on which the tribunal could have relied for drawing its inference. 51. In Punjab state Industrial Development Corporate Ltd. Vs ClT 292 ITR (AT) 268 the ITAT Special Bench has held as under "shares may be held by an assessee as a capital investment or as stock in trade depending .....

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ncome. 52. The Hon‟ble Madras High Court in CIT Vs. Ramaamirtham reported in 306 ITR 239 has observed that there is nothing in law which prohibits a trader in shares to invest in shares. It further held as under: "Held, dismissing the appeal, that on the facts it was found that the assessee had been maintaining separate books of account for trading in shares and investment in shares. The assessee was carrying on the business only in the name of the company and the surplus earned from .....

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iness in shares and investments. On the facts both the first appellate authority and the Tribunal had correctly held that the surplus derived from the sale of shares had to be assessed under the head "Capital gains". The findings were based on valid materials and evidence and the order of the Tribunal was not a perverse one warranting interference. Similarly the Hon ble Madras High Court in CIT vs Trishul Investments Ltd. 305 ITR 434 has stressed on the intention of the assessee in det .....

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as a very thin line of demarcation. Even a single instance of transaction can be regarded as business an 'even multiple transaction sometimes is deemed as investments. So the criteria for deciding . whether it is investment or business are that of the intention of the assessee. Viz whether the assessee's real intention is to invest or the intention was in the nature of trade. The findings given by the Tribunal is that the assessee had no intention to trade in shares. Hence, the purchase .....

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bserved that: "Whether a particular holding of shares is by way of investment or forms part of the stock-in-trade is a matter which is within the knowledge of the assessee who holds the shares and it should, in normal circumstances, be in a position to produce evidence from its records as to whether it has maintained any distinction between those shares which are in stock-in-trade and those which are held by way of investment." 54. The Mumbai ITAT (having identical facts as in the case .....

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bay High Court reported at 228 CTR 582 (2010). In the present case, all the transactions are delivery based transactions only. The assessee also earned dividend of ₹ 1,09,444/- thereon. It is also noted that the appellant had not claimed the amount of SIT paid by it as business expenditure. 56. Further, the courts have decided that a person can be a trader as well as an investor for some types of transactions done with different motives. (i) Ram Narain Sons (P) Ltd. v ClT as reported in 41 .....

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started from 24th May 2009 till 25th September 2009 in respect to his claim for treating the gain a perusal of the table reproduced in Para 33 (supra) it reveals that as long term capital gains whereas for claiming short term capital gain the assessee has purchased the share from 12 June 2008 to 15th October 2008 and sale was between 5th May 2009 till 24th October 2009. The assessee paid STT at the time of sale of such shares. This table indicates that the assessee firstly purchased all the sha .....

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ssessment Year 2009-10 (66-72) DPB Vol-II), and when it is sold out in this assessment year obviously it will not figure as investment in the balance sheet of the relevant Assessment Year so from the said fact, it is discernible that the assessee had the initial intention to hold these shares as Investment‟. This is another reason to show the assessee‟s intention of holding the shares as investment ab initio. 59. The contention of the ld DR that investment in shares were not reflecte .....

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l‟ and she contended that if the assessee was investing in shares, he could have duly reflected it in the column specified for it in the ITR form. So the ld DR‟s contention was that assessee was in business of shares and has not so reflected about shares in the investment column. There is a flaw in the aforesaid contention of the ld DR, for the simple reason that a perusal of Page 1 of ITR form reveals Part A-Balance sheet where the particulars are required to be furnished of the pro .....

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in assessment year 2008-09. 61. It is also a matter of record that all the transactions in respect of shares were delivery based and were held for a substantial period of time prior to transfer. Furthermore, shares which were sold during the relevant assessment year were acquired in the earlier year(s) and were accepted to be investment in the assessment year 2009-10. Then, it is not open to the Revenue to contend that income from shares transferred is taxable as business income and not as capit .....

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2004 to 14.3.2013, i.e., for a period of 10 years. The said statement contains script wise details of the investment made by the appellant over a period of 10 years. Insofar as shares acquired during the intervening period, say in 2008, obviously the opening balance as on 01.04.2004 would be reflected as nil‟ in the statement from the period from 01.04.2004. Therefore, the contention of the DR that in respect of certain scripts opening balance is shown as nil is, it is incorrect. For examp .....

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ss income" by the appellant. In fact, it is the case of the appellant that income from F&O transactions, which are non-delivery based transactions, are on business/ trading account whereas, transactions on purchase and sale of shares, which are delivery based and held for substantial period of time prior to transfer, are of capital account. In identical circumstances, the Courts and various benches of the Tribunal in the following decisions have held that assessee has rightly declared n .....

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book of case law] • CIT v. M/s Devasan Investment Pvt. Ltd: ITA No. 1102 & 1103/ 20 II (Del.) [refer pages 15-33@27 of assessee paper book of case law] • CIT v. Jubilant Securities (P.) Ltd.: 333 ITR 445 (Del) • CIT v. CNB Finwiz LTd.: 228 Taxman 175 (Del) 64. As regards the contention of the DR that dividend was received in respect of shares held as investment as well as trading, it is common knowledge that shares would result in dividend, irrespective of the fact whether sh .....

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iness of dealing in F&O transactions. On perusal of clause 12(a) of Form 3CD, it is noticed that opening/ closing stock of inventory is shown as Nil, which supports the case of the appellant that shares were held as "investment" and not as "stock-in-trade". 66. The allegation of ld DR about frequent trading was vehemently denied by the ld AR. He took our attention to pages 4 to 10 of the assessment order, and showed us that the assessing officer has reproduced transaction .....

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imple reason as pointed out by the ld AR that the said firm has never traded/ invested / purchased shares, but is engaged in the family business of trading in textile. In fact, it is nobody‟s case, not even assessing officer/ CIT(A) that the advances were given by the appellant to the said firm for trading in shares. The contention of the ld DR is contrary to facts emerging from records and can best be termed as guess work. 68. The contention of ld DR that transaction in shares was not sub .....

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transfer. The following cases say that: CIT v. Gopal Purohit: 336 ITR 287 (Bom.) [affirming GopalPurohit: 122 TTJ 87 (Mum.) The Supreme Court has dismissed departmental appeal: 334 ITR 308 (st.) (SC). [refer pages 1-3 of assessee paper book of case law] CIT vs. Devasan Investment P. Ltd: [T As 1102 & 110312011 (Del HC) [refer pages 15-33 @ 27 of assessee paper book of case law] CIT v. Avinash Jain (2013) 214 Taxman 260/362 ITR 441 (Del) [refer pages 38- 39 & 40-47 @ 46 of assessee paper .....

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in M/s Balrampur Chini were acquired in January, 2008 and sold after holding the same for around 1 1/2 (one and half) years, supports the contention of the appellant that shares were acquired and held as investment and not as stock in trade. 71. The Contention of ld DR that dividend of ₹ 2,58,758/- is meagre taking into consideration the volume of investment the assessee has made questions the veracity of the claim, it should be remembered that receipt of dividend is dependent on various f .....

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and not applicable to the fact of the present case as elaborated hereunder:- a) Dalhousie Trust Company Investment: 68 ITR 486 (SC): In that case shares were held as stock-in-trade by the assessee and therefore profit was held to be in the nature of business income. In the present case, shares are held as "investment" and not as stock-in-trade and therefore, gain has rightly been offered for tax under the head "capital gain". b) Raja Bahadur Visheshwara Singh vs. ClL: 41 ITR .....

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g shares as "stock-in-trade" and was allotted bonus shares in proportion to its existing holding. In these facts, gain arising on transfer of shares were held to be in the course of and part of share dealing business and was held to be revenue receipt. In fact, in the said decision, the Apex Court categorically observed, "A trader may acquire a commodity in which he is dealing for his own purposes, and hold it apart from the stock-in-trade of his business. There is no presumption .....

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ssessee that the shares were held as investment. In the present case, the assessee has clearly discharged the aforesaid onus by pointing out that shares were held as "investment" and non as stock-in-trade as reflected in the financial statements, which has been held by the Supreme Court in the case of Karam Chand Thapar And Bros (P) Limited vs. CIT: 82 ITR 899 to be material factor. Further, all the transactions of purchase/ sale of shares were delivery based and there was substantial .....

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at the assessee did not compute capital gain in accordance with section 48, the Tribunal held that the dominant intention trading in shares. The aforesaid decision is not applicable to the facts of the present case inasmuch as the assessee dealt with only five scripts during the relevant year and the gains were computed in accordance with the provisions of section 45 of the Act. g) Manoj Kumar Sanda ria vs. CIT: ITA No.97 of2014: In that case, the Tribunal noticed that the shares were traded ver .....

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e‟s own funds without making any borrowing. This argument of the assessee has not been controverted on behalf of the Revenue by any cogent material, whereas, it is clear from a perusal of the audited balance sheet at P.4 of P.B. that the shares was brought from appellants own fund. 74. Apart from that, it is an undisputed fact that the assessee took delivery of such shares after making full payment and it was not a case of settling the transaction of purchase and sale of such shares during .....

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in the purchase of shares as Investment and showing profit from their sale under the head Capital gains‟. This treatment of profit from sale of shares held as investment has not been disputed by the AO in the assessments made u/s 143(3) of the Act. The assessee has placed on record a copy of the assessment orders for immediately preceding assessment year ( page 22-26 of paper book) in which there was Short-term capital gain‟ which has been accepted by the AO vide his order dated 22.1 .....

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