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2015 (8) TMI 882 - ITAT DELHI

2015 (8) TMI 882 - ITAT DELHI - [2015] 42 ITR (Trib) 401 (ITAT [Del]) - Income from sale & purchase of shares - “Long Term Capital Gain” OR ‘business income’ - AO finalized the assessment observing that entire sale/ purchase of shares deserved to be treated as ‘business income’ rejecting the special tax treatment as per section 111(A), denying exemption u/s 10(38) - CIT(A) granted relief to the assessee - Held that:- AO has not demolished the fact that the assessee utilized its own funds for the .....

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ery low. The observations of the AO in this regard are baseless, which were rightly demolished by the CIT(A).

The view taken by the CIT(A), treating the impugned income as long term capital gain, is sustainable in accordance with law and provisions of the Act and, thus, we uphold the same. - Decided against revenue. - ITA no. 3490/Del/2013 - Dated:- 14-8-2015 - SHRI J.S. REDDY AND SHRI C.M. GARG, JJ. For The Appellant : Smt. Parwinder Kaur Sr. DR For The Respondent : Shri Rakesh Kumar .....

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ed facts, giving rise to this appeal, are that the case was selected for scrutiny under CASS and a notice u/s 143(2) and another notice u/s 142(1) of the Income-tax Act (for short the Act ), along with questionnaire was issued to the assessee on 1-7-2010. The AO finalized the assessment by observing that the alleged long term capital gain, earned on entire sale/ purchase of shares, deserved to be treated as business income and, thus, he treated the same as business income by rejecting the specia .....

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of the CIT(A) and paper book of the assessee, spread over in 161 pages. 5. Ld. DR, supporting the assessment order, submitted that a Portfolio Manager is an agent of the investor and though he may carry on certain transactions in his own name, such transactions are in his capacity as an agent of the investor. Ld. DR further submitted that, therefore, such transactions are the transactions of the investor, carried out through an agent and the income from such transactions is liable to tax as the .....

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s benefit to avoid tax incident. Therefore, the AO was right in treating the income therefrom as business income . Ld. DR vehemently contended that the impugned investment shown by the assessee was not actually an investment, but a wrong interpretation adopted by the assessee. Therefore, the action of the AO was correct which was wrongly demolished by the CIT(A). 5.2. Ld. DR parted his argument with the final submission that impugned order may be set aside by restoring that of the AO. 6. In repl .....

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t the assessee has shown shares under the head investment in the audited balance-sheet, prepared in accordance with the provisions of the Companies Act, 1956. Ld. AR further pointed out that the assessee utilised its own funds and not the borrowed funds for the purpose of investment in quoted shares, which were actually investments and, therefore, the CIT(A) was correct in directing the AO to treat the impugned income/ profit as long term capital gain instead of business income . 6.2. Ld. AR too .....

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raised by the revenue is without merits and the same may kindly be dismissed. 7. On careful consideration of submissions of both the sides and very careful reading of the impugned order, we note that he CIT(A) granted relief to the assessee with following observations and conclusions: 5.3. It is observed that The appellant has shown the shares under the head 'investments' in the audited balance sheet and prepared in accordance with the provisions of Companies Act, 1956. The appellant ha .....

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he year. The infrastructure of the appellant company IS also very small which represents the Investment activity rather than a trading activity which would require a much bigger infrastructure. The appellant company have earned dividend income during the year on shares purchased by it. Since the shares have been held under investment portfolio thus the decrease in value as against cost has not been claimed as loss which otherwise would be available if the shares are held as stock in trade. There .....

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as held that: "We are aware of the fact that, strictly speaking, res judicata does not apply to IT proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be ch .....

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₹ 5,00, 12,879/- as an income from short them capital gain and sale of 3,88,797 shares for ₹ 6,65,02,340/- as long term capital gain as against the "Income from business" assessed by the A O? b) Whether, on the facts and circumstances of the case and in law, the Hon 'ble ITAT was justified in holding that principle of consistency must be applied here as authorities did not treat the assessee as a share trader in preceding year, in spite of existence of similar transact .....

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he principle of law in accepting the position that it is open to an assessee to maintain two separate port folios, one relating to investment in shares and another relating to business activities involving dealing in shares. The Tribunal held that the delivery based transactions in the present case, should be treated as those in the nature of investment transactions and the profit received there from should be treated as short term or, as the case may be, long term capital gain, depending upon t .....

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activities, the manner of keeping records and the presentation of shares as investment at the end of the year, in all the years. The revenue submitted that a different view should be taken for the year under consideration, since the principle of resjudicata is not applicable to assessment proceedings The Tribunal correctly accepted the position, that the principle of res judicata is not attracted since each assessment year is separate in itself. The Tribunal held that there ought to be uniformi .....

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