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TMI Blog2015 (10) TMI 2005X X X X Extracts X X X X X X X X Extracts X X X X ..... siness income. In assessment year 2007-08, the CIT(A), following the decision of his predecessor in case of the assesee for assessment years 2005-06 and 2006-07 held that so far as the transaction of purchase and sale of shares resulting in long term capital gains was concerned, the same was liable to be taxed under the head 'capital gains 'and the purchase and sales of shares resulting in short term capital gains was liable to be taxed as business income. Accordingly, in assessment year 2007-08, Revenue is in appeal challenging the order of the CIT(A) holding that the transaction giving rise to long term capital gains are assessable under the head capital gains, whereas the assessee has filed the Cross Objection assailing the order of the CIT(A) in treating the short term capital gains earned on the purchase and sale of shares as a business income. Now, in so far as the assessment year 2009-10 is concerned, the Assessing Officer followed his earlier stand and treated the entire transactions, may be long term or short term, as assessable under the head 'business income'. The CIT(A) has also affirmed the action of the Assessing Officer in toto in contrast to the assessment year 2007 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have been classified as 'Investments' and not stock- in- trade. Accordingly, on the basis of the aforesaid fact-situation, it was sought to be pointed out that the nature and the manner in which the transactions have been carried out does not reflect any intention to trade in shares and, therefore, the Assessing Officer erred in treating the transactions as assessable under the head business income. 5. Referring to the order of the Tribunal dated 29/10/2010(supra) for assessment year 2005-06, the Ld. Representative for the assessee pointed out that the appropriate fact position was not brought to the notice of the Tribunal. In this context a reference has also been made to an affidavit filed by the director of the assessee company, namely, Shri Charaneep Singh. In the said affidavit the assessee company has sought to explain the circumstances in which appropriate facts were not brought to the notice of the Tribunal. The relevant contents of the affidavit are as follows:- "3. I say that the Assessment Orders for the Assessment Year 1998- 99,Assessment Year 1999-2000 & Assessment Year 2003-04 along with the Balance Sheet for these years, collectively appearing at Serial No.6 to 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment Year 1998-1999, Assessment Year 1999-2000 and Assessment Year 2003-2004 to highlight the fact that the department had followed a consistent approach right upto Assessment Year 2003-04 when the Assessment Orders passed under section 143(3) of the Income Tax Act,1961." 5.1 In the above background Ld. Representative for the assessee sought to make out a case that even prior to A.Y. 2005-06 Revenue had assessed income declared by the assessee from sale of shares either under the head ' capital gains' or business income as depicted by the assessee in its Balance sheet. Ld. Representative for the assessee pointed out that the income from sale of sales as 'capital gain' or 'income from business' was taxed prior to A.Y 2005-06 depending on the manner in which assessee had treated it in the Balance sheet. In support, reference was made to the copies of the assessment orders, computation of income and the Balance sheets pertaining to assessment years 1998-99, 1999-00 and also 2003-04, wherein assessee's position of assessing the income from sale of shares as capital gain was upheld. The relevant papers have been placed in the Paper Book filed before us. What is sought to be highlight ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred to the statement of short term capital gains for A.Y 2007-08 and pointed out that although the assesee has transacted in 35 Scrips, so however, number and frequency of transactions was quite high and it was asserted with respect to transactions in the case of M/s. Jindal Vijay Ltd., that there were repetitive transactions done by the assessee. Ld. Departmental Representative also asserted that the frequency and volume of the transaction does indicate that it was a case of trading in shares and not a case of sale of investments. The Ld. Departmental Representative also contended that there is no material to say that the fact-situation in the instant years is different from what was considered by the Tribunal in assessment years 2005-06 and 2006-07 7. We have carefully considered the rival submissions. The pertinent controversy in the present appeal, which we have already noted earlier, is the nature of the gain or loss earned by the assessee on sale and purchase of shares and securities. The assessee is a company incorporated under the provisions of Companies Act, 1956 and its main objects are stated to be the business of export of readymade garments. In the Assessment Year u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the relevant previous year was only to the tune of Rs. 10.97 lakhs, and investment in shares, which is said to have been made out of advances received for these exports, was Rs. 389.24 lakhs. The investments thus work out to over 35 times the annual export turnover, and yet it is funded out of advances received for exports. In this backdrop, the factual contentions of the assessee donot inspire much confidence. The assessee has claimed that since shares are held as investments in the books of accounts, it is beyond doubt or dispute that the shares are not held as stock in trade. A lot of emphasis is placed on the fact that the shares are valued at cost in the balance sheet which is done only for investments and not for stock in trade, as also the fact that the balance sheet schedules show these share holdings as investments. Undoubtedly, the accounting treatment is in important factor but this factor per se cannot be decisive of the question whether shares are held as stock in trade or investment. It is also useful to note that the audit report, at page 88 of the paper book, states that the assessee is dealing in shares and futures etc. It is only elementary that if a recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 006-07 and while disposing of the cross-appeals of assessee and the Revenue, the Tribunal vide its order dated 22/12/2010(supra) upheld the stand of the Assessing Officer of treating the entire capital gains i.e. both long term as well as short term, to be assessable as business income. The Tribunal essentially followed the earlier decision dated 29/10/2010(supra) on the ground that the earlier Bench in Assessment Year 2005-06 had reached to a factual finding that assessee had indulged in business transaction and not as investments. 7.4 In the above background the Ld. Departmental Representative appearing for the Revenue has canvassed the position that the impugned dispute be settled in favour of the Revenue following the precedents in assessee's own case. Ld. Representative for the assessee on the other hand, has attempted to demonstrate that the facts and the nature of the activity carried out in the instant assessment year stands on a different footing than those in Assessment Years 2005-06 and 2006-07 considered by the Tribunal. Secondly, it has also been sought to be canvassed that going by the principle of consistency the impugned transactions are liable to be assessed under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee, because upto assessment year 2003-04 Revenue had assessed the income declared by the assessee from sale of shares as either income from capital gain or income from business, depending upon the treatment given to the shares in the respective Balance sheets as 'Investment' or 'stock-in-trade'. In our considered opinion, the said plea canvassed by the assessee does not justify departure from the decisions of the Tribunal for Assessment Year 2005-06 dated 29/10/2010(supra) as also the decision for Assessment Year 2006-07 dated 22/12/2010(supra). We may notice here that while adjudicating the dispute in Assessment Year 2005-06, the Tribunal did consider the plea that prior to 31/3/2004 the shares were shown as investments. For this, we may refer to Para-2 of the order of the Tribunal dated 29/10/2010 (supra) for assessment year 2005-06, wherein operative portion of the order of the CIT(A) has been reproduced. Notably, in Assessment Year 2005-06 the CIT(A) had upheld the stand of the assessee that the gain earned on sale of shares was liable to be assessed under the head capital gains as against the stand of the Assessing Officer on treating such gain as business income. In coming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sistency was concerned, even prior to assessment year 2004-05 assessee was showing the shares as investments and that the same should have been applied in assessment year 2004-05 also, where assessee had himself changed the method of accounting in comparison to earlier year as well as in the subsequent years. This observation of the Bench is sought to be emphasized by the Ld. Representative for the assessee before us to support his plea that the orders of the Tribunal for assessment years 2005-06 and 2006-07 in assessee's own case be disregarded and instead the position prior to assessment year 2004-05 be applied as per rule of consistency. In our considered opinion, the decision in the case of Shri Chhitubhai N Patel(supra) has been rendered in the background of its own facts and circumstances. In fact, the Tribunal subsequently noticed that "since there are decisions on both sides on this point, therefore, each case has to be decided on its own facts" The aforesaid observation of the Tribunal itself suggests that each case is to be decided having regard to the totality of its facts and circumstances. Therefore, in our view the decision in the case of Shri Chhitubhai N Patel(supra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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