TMI Blog2012 (12) TMI 1043X X X X Extracts X X X X X X X X Extracts X X X X ..... Billaiya, Accountant Member For the Appellant : Shri Rajarshi Dwivedy For the Respondent : Shri Vijay Mehta Shri J.B. Shah ORDER PER B.R. MITTAL, J.M. The Department has filed this appeal for the Assessment Year (AY) 2008-09 against the order of Ld. CIT(A) dt. 30-10-2011 disputing the order of Ld. CIT(A) to direct the Assessing Officer (AO) to assess profit on sale of shares amounting to ₹ 29,04,561/- as Short Term Capital Gain as against business income considered by the AO. 2. The relevant facts giving rise to this appeal are that the assessee filed his return of income on 24-07-2008 inter-alia showing Short Term Capital Gain of ₹ 29,04,561/-, Long Term Capital Gain of ₹ 36,83,915/- and interest income of ₹ 38,89,280/-. The AO enquired as to whether the Short Term Capital Gain shown by the assessee is to be considered as capital gain or business income of assessee. The assessee vide letter dt. 18-10-2010 submitted as under: 1.Assessee held the shares as Investment only and not as Stock-in-trade. He has been investing in shares of various companies since last more than 30 years. 2. In all the earlier Assessment his inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s engaged in the investment in shares for the last 30 years. It has been further stated that for A.Y. 2006-07 the assessment has been completed u/s.143(3) wherein also the profits on sale of shares has been assessed as Short Term Capital Gain and not as business income. The appellant has relied on the decision of the Bombay high Court in the case of Gopal Purohit 228 CTR 582(Bom) as well as in the case of Sugamchand C Shah 37 DTR 345 (Ahd), Sarnath Infrastructure P.Ltd. 120 TTJ 216 (Lko), Nehal V Shah (ITAT, Mumbai) etc to support his contentions that the gain on sale of shares held for less than 1 year should be assessed as Short Term Capital Gain only. It has been further contended that the assessee has capital balance of ₹ 10.99 Crores whereas the investment in shares as on 31.3.2008 was only ₹ 4.24 Crores and the remaining capital was invested in other assets which shows the intention of the assessee to be an investor and not as a trader. It is also stated the assessee has not borrowed any money and purchases has been made out of own funds only. The number of 65 transactions of sales involving 50 scripts cannot be said to be high frequency or volume. The assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stantial LTCG also, therefore if the period of holding for STCG and LTCG shares are seen together than also it will indicate that the primary intention of the assessee is to purchase shares for holding them for longer period for purposes of appreciation in value of his investment. The delivery of shares has been taken shares on all occasions. There is not much repeated purchase and sale of shares of same company during the year. The total number of short term shares purchased is 450184 and total number of share sold is 369578 only. The total sales turnover for short term shares is ₹ 7.24 Cr which is mainly due to high price value of the shares of the companies invested by appellant as the number of sale transactions are only 65. Further the turnover of 7.24 Cr to the holding of shares of ₹ 4.24 Crores shown in balance sheet at the end of the year suggests that turnover of the appellant is not even twice the value of shares held at the close of the year. In case of investor also the ratio of turnover to holding is not very high. A trader would normally rotate the stock or his capital several times in a year to achieve the high turnover with low capital or low investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t mere volume and magnitude of transactions does not alter the nature of transaction which are being assessed as capital in past several years unless there is a material change on the facts. The ratio of the decision of ITAT Mumbai in case of Gopal Purohit 122 TTJ 87 (Mum) which has been confirmed by Bombay High Court also, are applicable to the facts of the appellant as the appellant has also shown the LTCG as well as STCG on shares and in past the assessee has been accepted as an investor. The assessee has not used borrowed funds for purchase of the shares. He has rather earned substantial interest on surplus funds which shows that it is the surplus funds which are being invested in shares also. The assessee is a Civil Engineer and partner in the firm M/s. Shrishti Construction Company from which the share of profit have been received. Hence, it is not correct to say that the assessee has only the activity of buying and selling of shares. 3.5 The cumulative effect of all the facts of the appellant as discussed above lead to conclusion, that the appellant is an investor in shares for this year. Under these circumstances, the appellant cannot be treated to be trader in shares an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Investment added in the Books of Accounts. He further submitted that the assessee has valued the shares at cost and not at cost of market price which-ever is lower. Ld. AR further submitted that the assessee is not maintaining any fulfledged orginisation, staff etc., for the purpose of transactions in shares. He further submitted that the assessee has also shown a Long Term Capital Gain of ₹ 36,83,915/- which has been accepted by the AO. He submitted that the Ld. CIT has rightly considered the share profit of the assessee as Short Term Capital Gain. 8. We have carefully considered the orders of the authorities below and the submissions of Ld. Representatives of the parties. We have also considered the cases which have been referred to by the authorities below in their respective orders. We have also perused the relevant pages of the Paper Book and particularly Pg. Nos. 18 to 21 of the Paper Book which is a share holding chart in terms of number of days of the shares held by the assessee and the companies of which the assessee purchased/sold shares in the Financial Year relevant to the AY under consideration. On perusal of the details of the said shares, we observe that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Investment , the intention of the assessee is fortified that the same are held as investment and not as Stock in Trade. The Hon ble Gujarat High Court has laid down the following test in the CIT Vs. Rewashankar A Kothari [201 CTR 510] to decide whether the assessee was a dealer in shares or a mere investor. (1) The first test is whether the initial acquisition of the subject matter of the transaction was with the intention of dealing in the item or with a view to finding on investment. If the transaction, since inception appears to be impressed with a character of a commercial transaction entered into with a character of a commercial transaction entered into with a view to earn profit, it would furnish a valuable guide line; (2) The second test is to how the assessee dealt with the subject matter of transaction during the time the asset was with the assessee whether it has been treated as stock-in-trade, are being shown in the books of account and balance sheet as an investment; (3) The third is how the assessee himself has returned the income from such activities and how the Department has dealt with the same in the course of preceding and succeeding assessment. This fa ..... 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