TMI Blog2013 (10) TMI 1388X X X X Extracts X X X X X X X X Extracts X X X X ..... me Tax (Appeals)-II [(in short CIT(A)- II], Nashik dated 24-01-2012 for A.Y. 2008-09 on the following grounds. 1. On the facts and in the circumstances of the case, the learned CIT(A)-II, Nashik erred in directing the A.O. to treat the profits / gain earned on the transaction of purchase and sale of shares held for more than one month as short term capital gain as against treated by the AO under the head Business Income 2. On the facts and in the circumstances of the case the order of the CIT(A) be cancelled and that of the A.O. be restored. 2. While the assessee has filed cross objections wherein, the he has raised the following grounds: 1) Respondent, an individual was a full time Managing Director in M/S Mahavir Packaging (manufacturers of corrugated boxes). In addition to this he was also engaged in activity of trading in Futures and options and also an investor in securities. 2) He was investing in securities since last 4-5 years and consistently showing his income therefrom as either STCG or LTCG as the case may be. The securities were always classified under the head Investments in Balance sheet. This was approved by CIT(A)-II, Nasik in earlier year (A.Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(3) of the I.T. Act treated the short term capital gains (hereinafter called as STCG) as income from business. Matter was carried before the first appellate authority on the following grounds. 1. The AO erred in framing the assessment by not appreciating the facts of the case, books of accounts produced and submissions made by the appellant during the course of assessment proceedings. 2. The AO erred in non considering the decision of Hon'ble CIT(A)-II, Nashik for A.Y. 2006-07 in case of appellant under the identical set of facts. 3. The AO misinterpreted the decision in case of CIT vs. Gopal Purohit wherein it was clearly held that modus operand! of assessee remaining the same, assessee's claim deserved acceptance by following the rule of consistency. 4. The AO-erred in understanding the sale and purchase of appellant under F 0 segment which comes to 61% and 63% respectively and not 6 % and 8% as alleged. 5. The AO erred in treating the income from securities as business income, despite the fact that the avg. period in case of appellant is 1.5 months (as worked out by AO herself) and as per settled judicial opinion in respect of shares with frequent tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ITAN0.2690/MUM/2010): Though it is the case of the revenue that due to volume, magnitude, frequency, continuity, regularity, the ratio between purchase and sale clearly indicate that income on account of purchase and sale of shares should be treated as income from business and not as income from STCG, the AO has from A.Y. 2003-04 to 2008-09 (except for the impugned year 2006-07), consistently accepted the income as being STCG. In these circumstances, the Rule of consistency as propounded by the Bombay High Court in Gopal Purohit 228 CTR 582 (Bom) is squarely applicable and the income has to be treated as STCG. Our view also stands fortified by ACIT v. Nashadh V. Vaccharajani (ITA No. 6429/Mum./2009, order dated 25/02/2011) wherein the assessee was also having income from STCG/LTCG, F O trading speculative trading and wherein it was held that despite high volume and short period of holding shares gain is STCG and that, on the principles of consistency, a different view cannot be taken on the same facts. 5. The AO erred in understanding the sale and purchase of appellant under F O segment which comes to 61% and 63% respectively and not 6 % and 8% as alleged. As rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares with frequent transactions where shares are held for more than a month they should be treated as investment and assessable as short term capital gains. Further, the AO accepted the assessee s claim of LTCG to the extent of ₹ 59,41,819/- which implies that she has accepted the assessee s claim regarding holding investment portfolio. 5. The CIT(A) having considered submissions on behalf of assessee held as under: In view of the facts and circumstances of the case and following the above referred decision of Hon ble ITAT Ahmedabad in the case of Sugamchand C. Shah Vs. ACIT, it is held that sale of shares held for more than one month would be charged capital gains and surplus of shares held for less than one month will be treated as profit from business. AO is directed to work out and compute short term capital gain and business profit accordingly. 6. The same has been opposed before us by the Revenue interalia stated that CIT(A) erred in directing the Assessing Officer to treat profit / gain earned on transaction of purchase and sale of shares held for more than one month as short term capital gain as against treated by Assessing Officer under the head Busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were sold in parts within a week of their purchase. 7.1 Regarding borrowed funds, it was observed that assessee might not have raised unsecured loan during the year, but total loan funds were shown at ₹ 1.14 crores as against current assets, loans and advances amounting to ₹ 83.00 lakhs only apart from investment of ₹ 3.29 crores. It shows that part of the borrowed funds has been utilized for business of shares. The assessee claimed to have paid some portion of shareholding to raise secured loans. It was also found that while trading in share comprises 96% of the assessee turnover, only 6% of turnover was from F O account. Details of the same are as under: Particulars F O Shares Total Opening Stock 1,55,90,055 Purchases 1,99,73,193 (8%) 21,98,99739 (92%) 23,98,72,932 Sales 1,47,78,747 (6%) 23,68,97,231 (94%) 25,16,75,978 Closing Stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18/07/2007 40000 20/07/2007 10000 24/07/2007 40000 26/07/2007 60000 30/08/2007 ' 10000 04/09/2007 76000 07/09/2007 8500 05/10/2007 25000 05/10/2007 10000 08/10/2007 47000 16/10/2007 43000 16/10/2007 5000 05/11/2007 190200 23/01/2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1000 13/12/2007 5000 14/12/2007 2000 20/12/2007 2000 24/12/2007 4000 11/01/2008 2000 14/01/2008 1000 15/01/2008 4000 16/01/2008 10 16/01/2008 500 17/01/2008 1500 18/01/2008 1 21/01/2008 8 01/02/2008 2000 04/02/200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27/12/2007 20000 27/12/2007 10000 31/12/2007 10000 31/12/2007 10000 01/01/2008 5000 01/01/2008 6205 10/01/2008 . 795 10/01/2008 10657 11/01/2008 5000 16/01/2008 16452 23/01/2008 1000 28/01/2008 1000 VIJAYA BANK Date Opening stock Purchases Sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05/11/2007 190000 13/11/2007 35000 16/11/2007 40000 19/11/2007 281632 01/02/2008 6263 11/02/2008 30000 8. Considering the totality and peculiarity of the facts, CIT(A) taking all facts and circumstances into consideration, held that sale of shares held for more than one month would be charged capital gain and surplus of shares held for less than one month will be treated as profit from business. CIT(A) was not justified to make above classification. This classification is not reasonable. Taking all facts and circumstances as discussed above, we hold that all the share transactions undertaken by assessee will be charged to capital gain irrespective of their holding period. Assessing Officer is directed to compute capital gain accordingly. This take care ..... X X X X Extracts X X X X X X X X Extracts X X X X
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