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2016 (1) TMI 643 - ITAT MUMBAI

2016 (1) TMI 643 - ITAT MUMBAI - TMI - Sale of shares - long-term-capital-gains or profit and gains of the business - Held that:- The assessee’s intention for purchasing the shares was purely for investment and to earn gain on a long term investment. Not only this, in earlier years also the assessee’s investment in shares have been held to be assessed under the head “capital gain”, because consistently assessee has been showing investment in shares in his personal Balance sheet purchased out of .....

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as assessable under the head “capital gain” and not as ‘business income’.- Decided in favour of assessee.

Disallowance of depreciation - AO has made the disallowance as there was no business activity carried out by the assessee in his proprietary concern ‘Cherry International’ - Held that:- We find that assessee had shown loss from proprietary concern, M/s Cherry International. After including depreciation, the loss has increased to ₹ 2,83,490/-. Even if there was a temporary l .....

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by the assessee is allowed. - Decided in favour of assessee. - ITA No. : 3879/Mum/2013 - Dated:- 9-11-2015 - SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Appellant : Shri Vijay Mehta For The Respondent : Miss Anupama Shukla ORDER PER AMIT SHUKLA, JM: The aforesaid appeal has been filed by the assessee against impugned order dated, 06.03.2013 passed by CIT(A)-29, Mumbai for the quantum of assessment passed u/s 143(3) for the assessment year 2008-09. In vario .....

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e year. 2. The brief facts qua the first issue is that, assessee is an individual who has declared long-term-capital-gain in share transactions amounting to ₹ 13,05,45,813/- which was claimed as exempt u/s 10(38). The AO required the assessee to furnish the details of share transactions along with the copies of bills, demat account etc. In response to the show cause notice as to why the profit/gains declared as long-term-capital-gain should not be treated as business income, the assessee s .....

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ing three separate sets of Balance sheets; one, for the proprietary concern, Cherry International; second, for share trading income; and third, for personal account. The assessee all throughout and consistently has been showing purchase of shares as investments in the personal account which have been accounted for in the books of accounts under the head investment only. All these shares which have been sold in this year have been shown in the personal Balance sheet as on 31st March, 2006 and als .....

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oks of accounts (wherein the shares have been shown as investment) cannot be the only determinative factor for deciding the head of accessibility or its taxability and also referred to CBDT Instruction dated 16.05.2006. The AO noted that assessee had shown long-term-capital-gain on 6 scripts under the head long-term-capital-gain and the major gain has come from script named as Pyramid Saimira Theatre Ltd. For ₹ 12,96,87,900/-. The details of such scripts as noted by the AO are as under:- 1 .....

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emoved from the working of long-term-capital-gain. Further, the assessee has not earned any dividend income and noted that assessee had purchased 3,99,950 unquoted shares of Pyramid Saimira for consideration of ₹ 1,19,98,250/- in May & November, 2006 which had a lock-in-period 12 months and were subsequently sold in the months of January to March, 2008 for a consideration of ₹ 14,16,86,117/- and thereby earning a profit of ₹ 12,96,87,900/-. He has also noted the fact of ava .....

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the Initial Public Offer (IPO) was launched and assessee had been allotted shares from the promoters quota directly and also noted that SEBI has noted certain discrepancy and some kind of alleged forged letter managed by the promoter of the company in the name of SEBI to make an open offer of the share particulars of ₹ 250/- per share that is, sold for more than 4 times of the original market price/IPO. Ultimately, it was found that, no such letter was issued by the SEBI on this script an .....

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uge frequency or repetitive transaction. The assessee had held the investment in shares for a minimum period of 499 days and maximum period of 842 days; Secondly, about 89% of the total investment was made in script of M/s Pyramid Saimira which had a lock-in-period of one year and was actually was kept for a period of 17 months. In the earlier years, similar nature of transactions have been held to be assessable under the capital gain and in support he has referred to various assessment orders p .....

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g investment; Lastly, he submitted that these investments have always been classified in Balance sheet as investment and valued at cost and, therefore, such a gain cannot be treated as business income . He further clarified that, assessee has earned dividend income of ₹ 23,300/- which the AO has held that assessee has not earned any dividend income. Lastly, in support of his contention that once the assessee has purchased these shares allotted through IPO, then it can be inferred as an inv .....

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month of May & November, 2006. This stock had a lock-in-period of 12 months from the year of launch of the said company in Bombay Stock Exchange. These shares have been sold during the month of March, 2008 for a consideration of ₹ 14,16,86,117/-, thereby earning a gain of ₹ 12.97 crores. The AO at page 11 of the order had noted the order of SEBI wherein it has been found that the promoter of Pyramid Saimira had forged letter for rigging the share price. From the perusal of the SE .....

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imira through IPO and once that is so, then the normal presumption is that it is mostly done by an investor for the purpose of investment as there is less risk of loss and also it fortifies the intention that it is for the purpose of treating it as an investment and not as a stock-in-trade. Here in this case as pointed out by ld. Counsel the average period of holding of most of these shares is 628 days which is fairly a long period. In certain scripts assessee had also incurred loss. On these fa .....

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self by taking the Balance sheet of the Proprietary concern wherein the assessee had shown certain loan, whereas the investment have been made through personal account which is reflected in the personal Balance sheet, wherein there are sufficient own fund for making the investment. Thus, on these facts and circumstances, we hold that the shares which have been held as investment in the Balance sheet are to be treated as assessable under the head capital gain and not as business income . Accordin .....

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