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Asstt. Commissioner of Income Tax Versus Late Smt. Manjula S. Badani By L/H Shashikant G. Badani

Income from purchase and sale of shares - Long Term Capital Gain as well as Short Term Capital Gains V/S business income - Held that:- We uphold the finding of fact given by the first appellate authority, based on the period of holding, the income derived by the assessee by way of dividends, the fact that there are no borrowings for investment in shares, the volume of transactions which as per the learned CIT(Appeals) was not high and the fact that the assessee has diversified portfolio and has .....

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espectfully following the decision of coordinate bench in case of assessee herself for AY 2006-07 it is held that long term capital gain and short term capital gain is not the business income of the appellant but is chargeable to tax under the head “capital gains”. - Decided in favour of assessee. - ITA No. 3432/Mum./2012 - Dated:- 19-5-2015 - Shri R. C. Sharma And Shri Sanjay Garg,JJ. For the Petitioner : Shri P.K. Birla For the Respondent : Shri Sanjay R. Parikh ORDER Per Sanjay Garg, Judicial .....

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e. For this, firstly AO analysed the Instruction no 1827 dated 31.08.1989, circular No. 4/2007 dated 15/6/2007 and then tested the facts of the case of the assessee on ten test such as usual trade or business of the assessee; nature, quantity, scale of the purchases and sales; motive test, characterisation in books of accounts; time devoted by assessee; holding period of securities etc. After considering the submission of the assessee on these tests, the AO held that the income from purchase and .....

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s and in the circumstance of the and in law the Ld CIT (A) erred in directing the assessing officer to treat the long term capital gain of ₹ 1,28,18,747/- as well as short term capital gain of ₹ 43,09,990/- as such and not as business income without appreciating the fact that the magnitude of transactions are voluminous in very frequent Interval which clearly establishes that the motive for transactions was to earn profit by pursuing an adventure in the nature of trade. b) On the fac .....

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e gain should be treated as capital gain in view of the fact that in past the department has accepted the gains as capital gain without examining whether the facts were similar or whether the departments stand in earlier year was correct. 4. The Learned DR submitted that there are numerous transactions in various companies and at frequent intervals that has resulted in the long term and short-term capital gain. Further holding period in some of the transactions is also very short. Investments ma .....

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against the motive of the profit and conduct of the assessee therefore investments in shares cannot be of capital assets but is stock in trade of the assessee. He further relied on the decision of Smt. Sadhna Nabera V ACIT 25(3) (ITA no 2586/Mum/2009) dated 26.03.2010 and said that in case of the orders of earlier years of the assessee cannot be followed without appreciating the facts of the year under appeal. Therefore, he vehemently submitted that short term and long-term capital gains disclos .....

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ts of the case for this year are far better and suggest that the income offered by assessee is short term and long-term capital gains only. To support his contention he submitted a chart showing 16 parameters of the transactions entered in to by the assessee to support that the case of the assessee is on stronger footing than compared to AY 2006-07 where the Tribunal has decided the issue in favour of the assessee. He submitted in paper book details of capital gain earned by the assessee showing .....

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that the assessee had earned substantial dividend income not only in this year but for the earlier assessment year also. He pointed out that all the transactions are deliver-based transactions. He submitted that the assessee has not claimed any administrative expenditure nor she had any infrastructure to do trading. He pointed out that trading means high turnovers and low profits. He further submitted another chart of period of holding compared with period of holding for AY 2006-07 to demonstra .....

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ded in ITA no. 5438/Mum/2009 where in the co -ordinate Bench of this Tribunal has deleted this issue as under and held that the short term and long term capital gain earned by the assessee from sale of shares is not business income of the assessee but chargeable to tax under the head capital gains . The relevant part of the said order is reproduced as under:- 10. The breakup of gains on divestment as given by the assessee are extracted below for ready reference: Holding Period. Gains 0 - 30 days .....

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mmitted while purchasing shares. Otherwise, a perusal of Annexure A-1 shows that the assessee in number of cases, which are listed in the last four pages of the Annexure, has held shares for more than 300 days. In fact the shares of LIC Housing Finance were held for more than 1000 days. In certain cases the holding period was 1400 days. The assessee has not purchased and sold shares in the same company more than once. The assessee earned dividend income of ₹ 19.48 lakhs during the year. Fo .....

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stment of ₹ 667.48 lakhs was made in mutual funds which works out to 45% of the investment. Out of 300.74 lakhs invested in mutual funds, ₹ 274 lakhs were invested in liquid mutual funds i.e. about 90%. No trader invests in such a manner. In our considered view, no trader in shares would make substantial investments in mutual funds. The assessee had no infrastructure for doing business in shares, nor has she incurred any expenditure either administrative or otherwise for investing an .....

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applied to find out whether a person has investment in shares or doing business in shares. Each case depends on the facts of each case. The intention of the person has to be gathered from the facts and circumstances of the case and if the intention is to trade or do business in shares, the income is assessable under the head "Profits and Gains" from business and if the intention is to invest in shares, the income or gains is assessable under the head "Capital Gains". 12. In .....

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assessee's own case for the earlier two assessment years, the fact that the assessee has invested substantial amounts in mutual funds etc., held that the assessee is an investor in shares and not a trader. Thus, we uphold the order of the first appellate authority and dismiss the appeal of the Revenue. 8. Now the facts of the present case needs to tested whether the issue is in this appeal covered by the order of Hon ITAT in case of assessee for AY 2006.07. therefore same is tested on follow .....

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