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TMI Blog2015 (12) TMI 1227X X X X Extracts X X X X X X X X Extracts X X X X ..... s and circumstances of the case, the learned Commis sioner of Income-tax (Appeals) ought to have upheld the order of the Assessing Officer. 3. It is therefore, prayed that the order of the learned Commissioner of Income-tax (Appeals) may be set aside and that the order of the Assess ing Officer be restored to the above extent. 2. Briefly stated the facts of the case are that the assessee filed return of income for the financial year 2007-08 relevant to the assessment year 2008- 09 on September 29, 2008 declaring total income of Rs. 11,43,940. The case was selected for scrutiny and assessment was completed by issuance of notice under section 143(2) of the Act on December 23, 2010. In the return of income filed by the assessee exemption under section 10(38) of the Act of Rs. 28,81,963 was claimed on account of long-term capital gain from sale of equity shares of four companies which were held for more than one year. However, the Assessing Officer did not accept the claim of the assessee and treated the surplus from sale of the above referred equity shares as business income mainly for the reason that the assessee was showing the investment in shares under the head "stock-in-trade" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of CIT v. Associated Industrial Development Co. P. Ltd. [1971] 82 ITR 586 (SC). The facts of the case were that during the assessment year 1957-58, the assessee- company, which acted as managing agents of various companies, sold certain shares of the managed companies, and claimed the net profit arising therefrom as capital gain and not income in its hands, stating that the immediate necessity for the sale of those shares was the reduction of an overdraft with its bank. The assessee had never been treated as a dealer in shares in any of the past assessments and its holdings in the various companies were treated as investment and not as stock-in-trade of the assessee's share-dealing business. The Income-tax Officer held that the profit was taxable as the assessee was entitled, under its memorandum of association to deal in shares. On appeal, the Appellate Assistant Commissioner upheld the Income-tax Officer's orders. On second appeal, the Tribunal held that the assessee was a dealer in shares which were confined to the shares of the managed companies. On reference the High Court observed that the facts that part of the shares were subscribed for the purpose of acquiring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f sale of all the shares held by the assessee were being credited as and when the sales were made and that these shares had not been sold with any amount of frequency could not be regarded as sufficient to establish that these shares had been held by way of investment. Even otherwise it was for the Appellate Tribunal to give its decision on facts and since no decision was invited from the Tribunal as to whether the shares in question had been held by way of investment it was not open to the High Court to give its finding on that question which was essentially one of fact and which it was within the jurisdiction of the Tribunal to determine. Hence the Tribunal was justified in holding that the profit arose to the assessee in the course of its business as a dealer in shares and as such was liable to be assessed as a revenue receipt.' 2.13 The aforesaid decision of the hon'ble Supreme Court cannot be applied in the case of the assessee. Even this decision favour the appellant. There is no case of the extensive dealings and other facts and circumstances which were taken into consideration. There is absence of the multiplicity of the transactions occurring successively over the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from sale of shares should be taxed as business income and not long-term capital gain. 9. On the other hand, the learned authorised representative for the assessee along with relying upon the submissions made before the Commissioner of Income-tax (Appeals) also submitted that the assessee is normally dealing in shares and securities. But has kept separate records in respect of long-term investment as well as trading of shares. The long-term capital gain arose only from few scrips which were held for a period of more than 12 months. The learned authorised representative also submitted that the assessee has bifurcated his closing stock of shares in three sub- groups namely-'shares investment account', 'shares delivery account' and 'shares derivatives account' and the total closing stock as on March 31, 2008 in these sub-groups was Rs. 39,41,814, Rs. 26,02,542.66 and Rs. 19,439.81 respectively which in total comes to Rs. 65,63,823.89 shown in the audited profit and loss account. The learned authorised representative also submitted that the assessee has been showing profit from trading of shares as well as long-term capital gains from sale of shares held for in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax (Appeals) has given his finding on facts which has not been controverted by the Revenue. 11. Now in order to examine the contentions of the learned authorised representative in regard to the claim of the assessee of maintaining three separate sub-groups out of which two sub-groups namely-share stock account and shares derivatives account, there is no dispute as the same has been treated as a part of business stock and the income from transactions in these sub-groups has been shown as business income by the assessee and has been duly accepted as business income by the Assessing Officer. The only sub-group which needs to be examined is the share investment account for which the learned authorised representative has placed on record the sub-group share investment account as on March 31, 2006, March 31, 2007 and March 31, 2008 and asserted upon that the surplus and deficit from sale of shares held in this sub-group has been consistently shown as capital gain. Before we analyse this aspect we reproduce below the details of long-term capital gain shown by the assessee in the relevant financial year for the year under appeal : Name of company Date of purchase No. of shares Net ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm 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) 14. Thus this raises question-that if all these shares were sold during the financial year 2007-08 then why the long-term capital gains/long-term capital loss has not been shown by the assessee in her claim of total long- term capital gains as filed in the return of income and what treatment has the assessee given to these shares in its books of account. 15. From the above analysis, it is clear that there has been some deviati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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