TMI Blog2012 (12) TMI 1006X X X X Extracts X X X X X X X X Extracts X X X X ..... rrent year. 3. On the facts and in the circumstances of the case and in law, the Ld CIT (A) also erred in treating business income as LTCG without appreciating the fact that the shares are held by the assessee as his stock in trade rather than as investment. 4. On the facts and in the circumstances of the case and in law, the Ld CIT (A) also erred in holding that the assessee s use of own funds for purchase of shares would imply that the shares are procured for the purpose of investment, thereby ignoring the fact that the assessee being a high net worth individual may not require loan funds. 5. On the facts and in the circumstances of the case and in law, the Ld CIT (A) also erred in treating business income as STCG without appreciating the fact that the assessee s intention/motive while investing is not appreciation of investment but to maximize the profit. 3. Briefly stated the relevant facts of the case are that the assessee is an individual and has share income from M/s. Creation by Shanagar. Assessee filed the return of income declaring total income of ₹ 1,49,75,240/-. In the return, assessee declared capital gains ₹ 1,07,35,512/- on sale of shares and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee mentioned that all the investments are shown in the books of account as investments not as stock-in-trade and all the transactions are delivery based. There are no speculative transactions to maintain two separate portfolios ie one for investment and another for trading. Further, it was submitted that assessee earned capital gains of ₹ 2,52,313/- out of Portfolio Management and outsourcing the Portfolio Management Services. From the above, assessee submitted that the claim made by the assessee must be accepted. However, the Assessing Officer rejected the same holding that the turnover of 19.27 cr and profit before tax of ₹ 9.69 cr, rejecting the investment to the extent of own funds amounts to business nature of the assessee. 86% of the shares were held for a period of longer than 15 days which shows that assessee acquired the shares not for only resale. On the facts relating to the 200 transactions, the transacting days of 90 out of 250 trading days in the year, it confirms the stand of the AO about the regularity in business transactions. Investments in diversified portfolio, around 80 companies odd, shows the systematic business activity and confirms the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.72 3.49 15-30 9.88 6.01 31-90 29.07 31.79 91-180 22.67 16.16 180-365 23.85 35.88 7. Regarding 205 transactions, the investment of ₹ 8.07 crores over a period of 90 days out of total 250 trading days of the year and in any case, this frequency cannot be considered as very high. Assessee relied on the decision of ITAT, Mumbai Bench in the case of Janak S Rangwalla vs. ACIT [11 SOT 627] for the proposition that the magnitude of investment does not decide the nature of investment. Holding of 80 different stocks which are listed in the stock exchanges shows the diversified portfolio and intention of the assessee for long term holding. The fact that assessee maintained two portfolios, trader as well as investor, and the shares maintained as investment were of the subject matter of the capital gains and those shown as stock-in-trade was declared as business income of the assessee. As seen from para 4.1 of the impugned order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that this is the first year and the claim of the assessee was upheld by the CIT(A). Further, he relied on the order of the AO in full. In respect of long term capital gains, Ld Counsel mentioned that the criterion of holding 12 months was duly considered as per the provisions of the Act. Therefore, the same should be upheld without any interference. Regarding claim of ₹ 84,88,017/- held as business income by the AO, Ld Counsel mentioned that CIT (A) rightly upheld the claim of the assessee as per the reasons given in para 3 and its sub paras. Further, he mentioned that assessee merely maintained 200 odd transactions against 2000 to 3000 transactions normally in a year i.e. @ 10 to 15 transactions in a day. With 90 days of transaction activity, by no stretch of imagination, the assessee cannot be called as a trader as held by the AO. Regarding holding period, Ld Counsel mentioned that the assessee got into resale mode, as and when there is news of erosion in value of the capital. The purchase of 8.07 cr, sale of ₹ 9.14 cr, 80 scrips, 205 transactions, absence of any speculative activity, absence of any borrowed funds for acquiring the shares suggests the capital inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxation of gains on sale of units of MFs as long term capital gains at the concessional rate of taxation if they are held for 12 months or more. Therefore, the order of the CIT(A) on this issue does not call for interference. Accordingly, relevant grounds are dismissed. 13. The second issue relates to the taxation of gains of ₹ 84,88,017/- earned on sale of securities held for the period less than 12 months: Briefly, relevant facts are that the purchase turnover of securities of the assessee for the year is ₹ 8.07 crores and sale turnover is ₹ 9.14 cr. Number of scrips are 80 and all of them are listed in the stock exchanges. Total number of transactions are 205. There is no speculative activity recorded in the year. Assessee has not used any borrowed funds for acquiring the shares. There are no intra-day trading. Assessee traded for 90 days out of the 200 and odd trading days in the year. Shares were always entered as investments in the books of accounts consistently like in the past years. AO accepted the claim of the assessee without any disturbance in the earlier years and this is for the first time, AO raised objections to the claims of the assessee. Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decide the nature of investment. Holding of 80 different stocks which are listed in the stock exchanges shows the diversified portfolio and intention of the assessee for long term holding. As seen from para 4.1 of the impugned order, CIT (A) discussed about the applicability of the CBDT Circular No.4 of 2007 which refers to various parameters and discussed the assessee conduct of not borrowing any funds for the business purposes which is one of the criterion of the Circular which was relied upon by the CIT (A) in the case of JCIT vs. Dinesh Kumar Gupta [2005] 2 SOT 126 (Del). It is a settled issue that the matters of this kind are mixed question of law and fact and the issue has to be decided based on the facts of each case. None of the lower authorities has gone into the relevant facts relating to the impugned issue involving many years and therefore we cannot give finding on the applicability of the rule of consistency to the instant case as held by the Apex court in the case of Gopal Purohit (supra). Therefore, we are of the opinion, the impugned order of the CIT(A) on this issue is proper and it does not call for any interference. Accordingly, relevant grounds of the revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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