TMI Blog2015 (12) TMI 1227X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer is satisfied that the assessee has consistently treated the shares investment account as her investment for long-term purposes and has not shifted the stock in investment account to shares trading stock account or share derivatives account or vice versa then the Assessing Officer will accept the claim of the assessee of claiming deduction under section 10(38) of the Act for long-term capital gains from sale of equity shares and if contrary results are discovered by the Assessing Officer from the records made available by the assessee then such total income from the transaction of purchase/sale of shares in all the three sub-groups account shall be treated as business income - Decided in favour of assessee for statistical purposes. - I. T. A. No. 2930 /Ahd/ 2011 (assessment year 2008-09). - - - Dated:- 15-10-2015 - KUL BHARAT (Judicial Member) and MANISH BORAD (Accountant Member) Albinus Tirkey for the appellant. Ms. Urvashi Shodhan, authorised representative, for the respondent. ORDER The order of the Bench was delivered by 1. Manish Borad (Accountant Member).-This is an appeal by the Revenue against the order of the Commissioner of Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to produce evidence from his records as to whether he has maintained any distinction between those shares which are his stock-in-trade and those which are held by way of investment . 4. If this ratio of the hon'ble apex court is made applicable to the facts of the case of the assessee, it is clear that whether a particular transaction can be treated as trading or investment will be based on the intention of the assessee and intention can be judged on the basis of the records of the assessee and it clearly transpires from the past records of the assessee that the shares held by the assessee forms part of the stock-in-trade. 5. Taking reliance on the above judicial pronouncement, the Assessing Officer went ahead in making the addition of ₹ 28,81,963 in the hands of the assessee by treating the profit from sale of equity shares as business income whereas the assessee has claimed it as long-term capital gain from sale of shares eligible for exemption under section 10(38) of the Act. 6. Aggrieved, the assessee went in appeal before the Commissioner of Income-tax (Appeals) who has elaborately discussed the issues of the case and finally deleted the addition made by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies and the Appellate Tribunal. It was never the case of the assessee at any stage that although it was a dealer in shares those shares which were the subject-matter of sale were held by way of investment. It had maintained throughout that all the shares were held by it as an inves tor and that it could not be regarded as a dealer because the shares did not form its stock-in-trade. That case of the assessee was negative because of the extensive dealings and other facts and circumstances which were taken into consideration. The figure of purchases and sales as also of the profits relating to the years 1954 to 1957 which were set out in the order of the President of the Tribunal justified the view that although up to a certain point of time it had been assessed as an investor, the multiplicity of the transactions occurring successively over the years supported the departmental stand that the assessee had ceased to be an investor and had become a dealer. . . . Whether a particular holding of shares is by way of investment or forms part of the stock-in-trade is a matter which is within the knowledge of the assessee who holds the shares and it should, in normal circumstances, be in a po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sold shares were held by the appellant as 'investment' and not as 'stock-in-trade' as wrongly concluded by the Assessing Officer. The particular ledger account as 'shares investment account' was conveniently ignored by the Assessing Officer. Even otherwise also, the entry in the books of account are not conclusive to hold the sale of shares as business income. There is absence of multiplicity of the transactions occurring successively over the year and extensive dealings. There was absence of frequency continuity and regularity of transactions of purchase and sale of shares as the most important test laid down by the hon'ble Gujarat High Court in the case of CIT v. Rewashanker A. Kothari [2006] 283 ITR 338 (Guj) for the activity in the nature of business. In view thereof, the profit earned on sale of shares of the aforesaid four companies was assessable under the head 'long-term capital gains' and not as 'business income'. The Assessing Officer was thus not jus tified in holding the profit on sale of shares as business income. The said finding of the Assessing Officer is not sustainable and rejected. He is directed to assess the profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d authorised representative tried to convince that the assessee who even if has shown the total investment and stock as closing stock of shares business shown under the head current assets in the audited balance-sheet and has not bifurcated the stock in the balance-sheet but has been regularly maintaining sub-groups of holding in shares under shares investment account, shares derivative account and shares stock account and at the end of the year the surplus/ deficit on account of shares held under investment account are shown under the head capital gain in the return of income and the surplus/ deficit from the transactions from purchase/sales of shares under shares stock account and shares derivative account are being shown as business income. 10. We have heard the rival contentions and gone through the facts and circumstances of the case and perused the material on record. The issue before us is to examine as to whether the Assessing Officer is correct in treating the surplus amount arising out of sale and purchase of shares at ₹ 28,81,963 as business income, whereas the assessee has claimed it as long-term capital gain. The Assessing Officer has treated the aforesaid s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total 28,81,963 12. From the material placed on record it is noticed that the assessee has claimed the following equity shares held under share investment account as on March 31, 2006, March 31, 2007 and March 31, 2008. For the ease of comparison quantity of equity shares as on March 31, 2006, March 31, 2007 and March 31, 2008 have been placed together in one chart against the particular company : Share investment account Particulars Quantity as on 31.3.2006 Quantity as on 31.3.2007 Quantity as on 31.3.2008 AIPL 5,045 nos. 5,045 nos. 5,045 nos. AMAL Co Poly Fibres 475 nos. 475 nos. 475 nos. A.S.E. 130 nos. 130 nos. 130 nos. Asea Ltd. DEB 24 nos. 24 nos. 24 nos. Bartronics India Ltd. 25,000 nos. 22,000 nos. 3,000 nos. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22,000 nos. on March 31, 2007 but the difference of 3,000 nos. is not appearing in the long-term capital gains for the assessment year 2007-08. (2) The shares of Britania India Ltd. (50 nos.) and shares of Sayaji Ind. Ltd. (368 nos.) which were shown up to March 31, 2006 are not appearing in the share investment account as on March 31, 2007, this transaction is also not forming part of long-term/short-term capital gains for the assess ment year 2007-08. (3) Following equity shares which were appearing in the shares investment account as on March 31, 2006 as well as on March 31, 2007 but are not appearing in the shares investment account as on March 31, 2008. BFL Software (500) Birla 3M (200) Gujarat Foils (100) Indo Gulf Fertilizer Corpn. (500) Kerala Ayur (500) Neycl Shares (1000) Padmani Tech (200) SSI (200) Telco (100) ..... 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