TMI Blog2010 (4) TMI 1102X X X X Extracts X X X X X X X X Extracts X X X X ..... ground be set aside and that of the Assessing Officer be restored. 3. The assessee is an individual engaged in the business of trading in dyes and chemicals. For A.Y. 2005-06, the assessee filed return of income declaring total income of ₹ 58,09,070/-. The assessee had shown short term capital gain of ₹ 56,50,910/-. On perusal of the details, the Assessing Officer noticed that short term capital gain arose on account of various transactions of sale and purchase of shares. Considering the volume and frequency of transaction in shares, the Assessing Officer was of the view that the gain on purchase and sale of shares should be treated as business income and not as short term capital gain. In reply to the query of the Assessing Officer, the assessee submitted as follows :- i) Assessee s main occupation is business of trading in dyes and chemicals for more than 20 years. ii) The shares are regularly shown under the head investment in shares. Investment is made out of surplus and the post tax income is invested in shares. It was built over a period of ten year. Assessee has also invested money in mutual funds. iii) The assessee has earned a substantial d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interpreted by the Assessing Officer, as a circumstance which will go to show that motive of the assessee was only to maximize profits which indicate that the assessee was doing business in purchase and sale of shares. Thereafter, the Assessing Officer has culled out principles applicable in deciding when a transaction ought to be treated as in nature business. The Assessing Officer also referred to the Circular No. 4 of 2007 dated 15.6.2007 of CBDT; wherein it was laid down that no single principle would be decisive and the total effect of all the principles should be considered to determine whether in a given case, shares are held by the assessee as investment or stock in trade. The Assessing Officer thus brought short term capital gain declared by the assessee to tax as business income. Aggrieved by the order of the Assessing Officer, the assessee preferred the appeal before learned CIT(A). 4. Learned CIT(A) was of the view that the income from purchase and sale of shares was to be assessed as capital gain and not as business income. In coming to the above conclusion, learned CIT(A) was of the view that :- (a) Intention of the assessee was always to hold shares as investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that it will depend upon the conduct of the assessee and circumstances of the case, where transaction is on capital account or in the nature of trade. Further reference was also made to the decision in the case of CIT Vs. Associated Industrial Development Co. Ltd., 82 ITR 586 (SC); wherein it was held that as to whether shares are part of investment or part of stock in trade is matter within the knowledge of the assessee and burden is on the assessee to show as to how he managed distinguish between the investment and stock in trade. 7. The issue to be decided is as to whether the gain on transaction of purchase and sale of shares undertaken by the assessee during the previous year is to be assessed under the head income from business as claimed by the revenue or income under the head capital gain as contended by the assessee. The answer to the above issue would depend on whether the assessee when he purchased the shares intended to treat them as investments i.e. a capital asset or a trading asset i.e. as stock in trade of business of trading in shares. Before we deal with the facts of the case of the assessee, we will briefly narrate the principles applicable in deciding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee s main occupation is trading in dyes and chemicals for more than 20 years. The assessee has shown shares as investment in its books of account. The assessee has not used borrowed funds to make investment in shares. The assessee earned substantial dividend income. Period of holding is about six months. Composition of income of the over a period of time have been given in the form of chart and it shows the following position :- AY. T.O.(Sales) Chemical business Gross Profit chemical business Short term Capital gains/loss Long Term capital gain Speculation profit 2007-08 13,630,583 681,247 1,296,460 559,998 - 2006-07 16,848,712 1,695,193 6,229,243 1,661,913 (195,451) 2005-06 20,209,919 1,893,705 5,650,910 - (682,536) 2004-05 16,441,966 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
