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Commissioner of Income Tax-2 Versus IHP Finvest Ltd.

2015 (10) TMI 750 - BOMBAY HIGH COURT

Gains from the purchase and sale of shares and mutual funds - treated as Long Term Capital gains or business income - Held that:- Twin test applied by the Assessing Officer and the CIT (A) to hold that the respondent-assessee is a trader in shares and mutual funds is not correct. As pointed out above, as per CBDT circular No.4/2007 dated 15 June 2007 it is open to the respondent-assessee to hold the securities in two portfolios i.e. one investment portfolio and another trading portfolio. There i .....

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for trading. This intent would only be reflected in maintaining different accounts for the two. There is no allegations of shifting of scrips from trading to investment or vice versa. Moreover, it is also pertinent to note that the respondent – assessee had shown all its scrips treated as investments at cost, while those held as stock-in-trade were shown at cost or market value whichever is low. This again is an indication of the fact that the respondent – assessee held the scrips offered for t .....

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f consistency no fault can be found with the impugned order. For the above reasons, we are of the view that the view of the Tribunal is a reasonable and possible view. Gains treated as Long Term Capital gains - Decided in favour of assessee.

Disallowance under Section 14A r.w.r 8D - ITAT deleted the addition relying on case of Godrej & Boyce Mfg. Co.Ltd., [2010 (8) TMI 77 - BOMBAY HIGH COURT] wherein it is held that Rule 8D is prospective and applicable only from the AY 2008-09 - Held .....

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akhani ORDER P. C. This appeal under Section 260A of the Income Tax Act,1961 (the Act) by the Revenue assails the order dated 2 January 2013 passed by the Income Tax Appellate Tribunal (the Tribunal). The impugned order is in respect of Assessment Year 2006-07. 2. The Revenue has urged the following questions of law for our consideration:- (A) Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in holding that the gains from the purchase and sale of sha .....

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y relying on its decision in the case of Godrej & Boyce Mfg. Co.Ltd., [2010][328 ITR 81], wherein it is held that Rule 8D is prospective and applicable only from the AY 2008-09? Re:- Question A 3. The stock-in-trade is a company which maintains two separate accounts in respect of its dealing in mutual funds and shares i.e. one in respect of its trading and other in respect of its investment. During the subject assessment year, the respondent had declared long term capital gains of ₹ 50 .....

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als) (CIT(A)) by an order dated 23 November 2009 held that the respondent-assessee was a trader in shares and, therefore, the entire income of ₹ 50.04 lakhs offered as 'long term capital gain' is to be taxed as business income. In the above view, the order dated 12 November 2008 of the Assessing Officer was upheld. 5. On further appeal, the Tribunal by the impugned order held that the respondent-assessee maintains two separate portfolios / accounts in shares and particularly one he .....

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es held as stock-in-trade as per the accepted principle of cost or the market value of the share/unit whichever is less, while those held as investments, were always valued at cost. Moreover, it noted the fact that for earlier years the claim of the stock-in-trade under the head 'capital gains' was accepted. It held that on principle of consistency also the same has to be accepted. Thus, the impugned order allowed the appeal of the respondent assessee. 6. The Revenue's grievance is t .....

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fore, the Tribunal ought not to have reversed the finding of the two authorities. Our attention is invited to the relevant paragraphs of the orders of the Assessing Officer as well as the CIT(A) where the assessee was held to be a trader on account of following two considerations:- (a) the respondent - assessee had scrips of the same company both in investment as well as in its trading account/portfolios, (b) the stock-in-trade has full discretion to decide to show a particular scrip as an inves .....

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funds is not correct. As pointed out above, as per CBDT circular No.4/2007 dated 15 June 2007 it is open to the respondent-assessee to hold the securities in two portfolios i.e. one investment portfolio and another trading portfolio. There is no bar under the Act which prevents the assessee from investing partly as investment and partly for trading in the same scrip. Besides, the second test namely that it is at the sole discretion of the respondent to determine whether a particular scrip is to .....

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