Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

The Asstt. Commissioner of Income Tax Versus M/s Shah Investor's Home Ltd

2015 (12) TMI 395 - ITAT AHMEDABAD

Profit earned on sale of shares - "business income" OR "short term capital gains" - Held that:- CIT(A) while deciding the issue in favour of the Assessee has held the profit earned to be as "capital gains" and has noted that Assessee has history of being an investor and claiming short terms capital gains and the activity of transactions were related to 5 scrips and the transactions were delivery based. He has further given a finding that it is not a case where the Assessee has done the transacti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t only short term capital gains to the extent of ₹ 27,193/- earned on the transactions which were not transacted through Demat account is to be attributed to the business of share trading. Before us, Revenue has not placed any material on record to controvert the findings of ld. CIT(A). Further, it is also a fact that in the earlier assessment years, Assessee had offered the profits as short terms capital gains and the same was also accepted by the Revenue. No reason to interfere with the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tated to be engaged in two business activities namely stock broking and depository activities. Assessee filed its return of income for A.Y. 2006-07 on 22.12.2006 declaring total income of ₹ 5,78,53,059/-. The case was selected for scrutiny and thereafter the assessment was framed under section 143(3) vide order dated 30.12.2008 and the total income was determined at ₹ 5,80,19,770/- interalia by considering the income shown by the Assessee as short term capital gains as business incom .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ance sum of ₹ 1,80,83,258/- has to be taxed as Short Term Capital Gain. In the case of Sardar Indra Singh & Sons Ltd. vs. CIT, 24 ITR 415, the Supreme Court was dealing with the case of a company which was incorporated with the object, inter alia of carrying the business of bankers, financiers, managing agents and secretaries and was also empowered to invest and deal with the monies of the company not immediately required for its business, upon such securities and in such matters as mi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s which produced the surplus were so connected with the carrying on of the assessee's business that it could fairly be said that the surplus was the profit and gains of such business. On the facts of this case, it was held that the surplus resulting of sale of shares and securities constituted business income. The facts of the present case are identical to the facts of the case cited supra. 3. On the facts and in the circumstances of the case and in law, the CIT(A) ought to have upheld the o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

red short term capital gains of ₹ 1,81,10,551/-. Considering the quantum of transactions and the value of transactions, the Assessee was asked to show cause as to why the income on sale of shares not be treated as "business income" to which Assessee interalia submitted that the shares in question were shown as investments and not as stock in trade in its books of accounts, the gains were earned only on 6 scrips and in previous years the Department had considered the Assessee to b .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

that dealing in shares was a regular business activity of the Assessee and therefore the activity of purchase and sale of shares cannot be treated as investment activity. He therefore treated the gains earned on sale of shares as "business income" as against the "short term capital gains" considered by the Assessee. Aggrieved by the order of A.O., Assessee carried the matter before ld. CIT(A) who vide order dated 26.02.2010 decided the issue in favour of the Assessee by holdi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of being an investor and claiming Short Term Capital Gains, a fact which cannot be ignored. Although it has shown a turnover of about ₹ 8 Cr, yet as rightly stressed by the Authorised Representative, firstly its main activities are related to shares of 5 scrips, Reliance being the predominant and secondly most of the transactions are delivery based. This becomes an important parameter to determine appellant's motive. 2.9. It will be axiomatic to say that mere turnover in itself is not .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

more than one transactions on some days). 2.10. In its submission dated 17/02/2010, the Authorized Representative has tried to prove that it meets the various tests laid down by the jurisdictional High Court in the case of CIT v/s. Rewashanker A. Kothari (supra), a case relied upon by the appellant. It has also tried to reckon its case from the point of view of guidelines laid in by ITAT Ahmedabad in the case of Himanshu J. Shah (supra). I would generally agree with what he has said. The fact t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

shares held for 30 days or less and ₹ 56,47,946/- (Rs. 49,32,209 + ₹ 7,15,737) pertain to those transacted within 60 days. Balance of the gain about 2/3rd pertained to shares held for over 60 days. Normally, as a businessman, the assessee may not have carried forward such an inventory. It shows his investor people. 2.12. One must also note that also during the year the appellant has shown Long Term Capital Gains of ₹ 9,42,688/- a point which goes in assessee's favour while .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. However, the details of the share transaction filed by the appellant, did show certain transactions where those were squared off the same day or where apparently "short selling" was indulged in. Bombay High Court, in the case of Gopal Purohit (supra) has held that "The Tribunal having entered a pure finding of fact that the assessee is engaged in two different type of transactions namely, investment in shares and dealing in shares for the purpose of business and held that the de .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ions were settled without taking delivery. He has segregated details of various transactions as per which the following situation emerges: (i) Long Term Capital Gains -Transaction through demat A/c. ₹ 9,42,688/- (shown of same value as claimed exempt in return of income) (ii) Short Term Capital Gains (net) -Transaction through demat A/c ₹ 1,80,83,158/- (iii) Short Term Capital Gains (net)-Not Transaction through demat A/c ₹ 27,193/- 2.17. Therefore, applying the ratio of the ju .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

to be taxed as Short Term Capital Gains . 2.19 Hence, this ground of appeal is partly allowed and Assessing Officer to rework his computation accordingly. 6. Before us, ld. D.R. pointed to the various findings and observations made by the A.O. He further submitted that the magnitude of transactions, volume of shares traded indicates that purchase and sale of shares was a business activity of the Assessee and not an investment activity and further submitted that the dividend earned was only ͅ .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

capital gains. It was also submitted that though the principle of res judicata do not apply to tax matters but the rule of consistency does apply. He further submitted that Assessee had not indulged into purchase, sale repurchase and re-sale of the same scrips again and again and that all the transactions were delivery based and the intention of the Assessee was always to be the investor of shares. It was also submitted that Assessee had hardly transacted in about 30 days in the year. He also po .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     bird's eye view     ↓  


|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version