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2015 (9) TMI 284 - ITAT AHMEDABAD

2015 (9) TMI 284 - ITAT AHMEDABAD - TMI - Treatment to profits derived from share transaction - business income OR short term capital gains - Held that:- The CIT(A)’s findings extracted demonstrate frequency and magnitude of share transactions, assessee’s accounting treatment, holding period, absence of any borrowed funds being utilized in shares etc. to name a few decisive factors. It has come on record that assessee’s identical profits in preceding assessment year stand treated as capital gain .....

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e scripts. This gross amount involves a sum of ₹ 22,09,327/- i.e. more than 90% arising from sale of M/s Guj. Heavy Chemicals scrips carried over from preceding assessment year only. This leaves behind other four scrips. Two of them have holding period less than a month i.e. 18 days and two days; respectively involving profits of ₹ 7,873/- and ₹ 2,600/-. We take into account non usage of borrowed funds, separate portfolio being maintained along with judicial consistency as in p .....

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enue for A.Y. 2005-06, arise from order of the CIT(A)-VIII, Ahmedabad dated 20- 11-2009 in appeal no. CIT(A)-VIII/DC-4/259/259/07-08, in proceedings under section 143(3) of the Income Tax Act, 1961; in short the Act . 2. The assessee s sole substantive ground challenges the CIT(A) s order affirming the Assessing Officer s action treating its profits derived from share transaction amounting to ₹ 23,95,926/- as business income instead of short term capital gains. The Revenue s grievance on t .....

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comprised of a sum of ₹ 2,850/- relevant to the period from 01/04/2004-01/10/2004 and ₹ 23,92,476/- from 01/10/2004-31/03/2005. The Assessing Officer sought to treat both these long and short term capital gains as business income. The assesssee pleaded to have admitted business income stated hereinabove from trading activity and capital gains in question from its investment. And stated that the shares in question had been purchased in previous assessment years having substantive hol .....

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capital gains in question as business income. 4. The CIT(A) has partly accepted assessee s contentions as follows:- 5.3 During the appellate proceedings the Ld. A.R of the appellant objected to the A.O's action and submitted as under: "The Learned AO. has reproduced our submission and in conclusion in para 4 on page 4 of the AO has observed that (a)The intention of the Assessee at the time of purchase transactions are same in a/I the transactions but only, c$ |/7e time of finalisation .....

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provided. From the copies of said Accounts, it is absolutely clear that at the time of purchase, shares acquired as Investments has been taken on the same day to investment Account and shares acquired for the purpose of trading business has been taken to Purchase Account. Copies of the said account are attached for your ready reference. The finding given is without any basis or clinching evidence and therefore it is nothing but presumption only. Moreover, the factual summarized position of the t .....

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ain - (Loss) 1 Guj. Heavy Chemicals Ltd. 7 416847 1,26,54,935 1,04,45,608 22,09,327 2 Reliance Cap. Ltd. 1 500 89,943 1,04,45,608 7,873 3 GTL 2 2400 270,220 267,620 2,600 4 Vishal Exports 2 25000 600,926 428,250 1,72,676 5 ICICI Bonds 3 30 210,000 207,150 2,850 Total Gain / (Loss) 23,95,326 From the summary above, your honour will observe that your assessee has dealt in only 5 scripts, which has been held as investment for more than one year and which has been sold during the year and therefore .....

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39;s capital & reserves and f/r%ainly intention of the assessee and accounting treatment given in the books of accounts, income has 3n correctly computed under the head capital gain and as none of the provision relating to business 'income are applicable on facts of the case, income assessed as business income need to be deleted and it may kindly be directed to assess the same as per the total income computed. (b) The assessee by writing the transactions in particular fashion can not cha .....

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Hon'ble Bombay Tribunal in the case of J.M. Share & Stock Broker Ltd. Vs. J.C.I.T. IT A No. 2801 / Mum. / 2000 reported in Bombay Chartered Accountant Journal Volumn 39 part V on. page 519 has clearly taken a. view that the such cases income has to be assessed as Income from Capital gain. Copy of the said decision is also attached. (c) The contention of the assesses is also not accepted on the ground that each assessment year are independent and department has preferred an Appeal before .....

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ith the period of holding such shares. The summary filed by the Id. A.R is as under: Long Term Capital Gain Sr.No Name of the scrip No. of transactio ns Quantity Period of holding (Approx) Sales Price Purchase Price Gain (loss) 1 Nirma Ltd. 2 1300 32mths 4,69,058 3,27,970 1,41,088 2 Zee Telefilms Ltd. 1 6500 19 mths 11,12,213 4,87,500 6,24,713 3 Tata Chemicals Ltd. 1 1000 20 mths 1,65,811 71,500 94,311 4 IGL 1 1000 15mths 1 ,03,009 48,000 55,009 5 Shri Rama Multitech Ltd. 1 1700 30 mths 10,200 7 .....

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Loss) 23,95,326 5.5 As regards appellants claim for long term capital gains, it is seen that the period of holding of the shares on which long term capital gains has been claimed varies from 15 months to 32 months therefore, under these circumstances it cannot be held that the appellant had purchased the shares for the purposes of trading. Therefore under these circumstances, the appellant's claim for treating the surplus of ₹ 8,52,221/- on the sale of such shares as Long term capital .....

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in case of the shares of Gujarat Heavy Chemicals Ltd. in the span of seven to ten months. The frequency of transactions entered into by the appellant in such a short span clearly reveals its intention of trading in such shares. Apart from the above, it is further seen that in the case of Vishal Exports in the span of one month the appellant has made two transactions. Therefore, under these circumstances, I have no hesitation In holding that the appellant made trading in the shares which have bee .....

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d gone through the case file. Both sides argue strongly for their respective grounds. The sole issue that arises for our consideration is as to whether the assessee s claim of impugned share profits of ₹ 8,52,221/- and ₹ 23,95,326/- treated as long term and short term capital gains respectivly is to be accepted in toto, in part; or to be rejected; as done by the CIT(A) and Assessing Officer; respectively. The CIT(A) s findings extracted hereinabove demonstrate frequency and magnitude .....

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