TMI Blog2016 (4) TMI 472X X X X Extracts X X X X X X X X Extracts X X X X ..... MBER AND SHRI LALIET KUMAR, JUDICIAL MEMBER For The Department : Shri Kartar Singh, CIT-DR For The Assessee : Shri Amit Sharma, CA, Shri Prashant Sharma, CA ORDER PER LALIET KUMAR, JM:- This appeal filed by the Revenue is directed against the order of the ld. CIT(A)-XXIII, New Delhi dated 20.06.2012 pertaining to A.Y 2008-09. 2. The only issue involved in this appeal reads as under: On the facts and in the circumstances of the case, the ld. CIT(A) has erred in directing the AO to assess the income as income from capital gain as disclosed by the appellant, as against assessed as business income by the AO. 3. Briefly stated, the facts giving rise to this appeal as enumerated in the first appellate orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum of ₹ 84,18,798/- to tax as income from business as against the income disclosed as short term capital gains of ₹ 47,12,342/- and long term capital gains of ₹ 30,58,841/-. Aggrieved, the assessee went in appeal before the ld. CIT(A) . 4. Before the ld. CIT(A), the ld. AR submitted that the assessee is a financial consultant engaged in the sale of fixed deposits, bonds, mutual fund units and life insurance products as an agent/broker. The assessee is also a distributor of mutual funds of various companies and no tax is deducted on the commission received from mutual fund companies in view of the provisions of section 194H of the Income-tax Act, 1961 ['the Act' for short] which stipulates that no such commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ins disclosed. The appellant has credibly argued that the Income Tax Act recognizes shares held for less than 12 months as short term capital assets, and provides for favourable tax treatment under section 111A. Thus, the statute categorically allows that shares may be capital assets, and specifically short term capital assets, even if held for a duration of 1 day or just under 12 months. {4.2} It has further been argued on behalf of the appellant that circular No. 4 dated 15.06.2007 of the CBDT provides that an assessee may be both an investor and a trader in shares and may have two portfolios, i.e. an investment portfolio comprising of securities which are to be treated as capital assets, and a trading portfolio comprising of stock- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to this activity, and it is verified that no borrowed funds have been utilized for the purchase of shares. So far as the frequency of transactions carried out is concerned, the entire transactions were carried out by the portfolio managers, and the appellant was not engaged in either purchase or sale. Thus there was no regular or day-to-day activity of trading on the part of the appellant. Undoubtedly, the appellant embarked on this activity of purchase and sale of shares with the intention to realize the appreciation in the value as well as to earn dividends, but it cannot be concluded that he was carrying on trading of shares as a business activity. In view of the above discussion, the appellant succeeds in his grounds of appeal and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st. Over the years, the courts have laid down different parameters to distinguish the shares held as investments from the shares held as stock-in-trade. The Central Board of Direct Taxes ('CBDT') has also, through Instruction No. 1827, dated August 31, 1989 and Circular No. 4 of 2007 dated June 15, 2007, summarized the said principles for guidance of the field formations. 3. Disputes, however, continue to exist on the application of these principles to the facts of an individual case since the taxpayers find it difficult to prove the intention in acquiring such shares/securities. In this background, while recognizing that no universal principal in absolute terms can be laid down to decide the character of income from sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be decided keeping in view the aforesaid Circulars issued by the CBDT. 4. It is however clarified that the above shall not apply to such transactions in shares/securities where the genuineness of the transaction is itself questionable such as bogus claims of long term capital/short term capital loss or any other sham transactions. 5. It is reiterated that the above principles have been formulated with the sole object of reducing the litigation and maintaining consistency in approach on the issue of treatment of income derived from transfer of shares and securities. All the relevant provisions of the Act shall continue to apply on the transactions involving transfer of shares and securities. Since the assessee has treated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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