TMI Blog2011 (5) TMI 991X X X X Extracts X X X X X X X X Extracts X X X X ..... ee company is a share broker registered with NSE and BSE and carries on business of purchase and sale of shares on its own. During the year under consideration the assessee had shown income of ₹ 1,46,09,327/- including short term capital gains of ₹ 82,32,316/-. The AO required the assessee to explain as to why the short term capital gain should not be treated as business income. The assessee was also required to justify the facts on the basis of documentary evidence. In response to this query it was submitted by the assessee that it was possible for its taxpayer to have two portfolios i.e. an investment portfolio and trading portfolio. The assessee relying on CBDT Circular No. 4 dated 15/06/2007 submitted that the volume of busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had received dividend of ₹ 30,000/- on 25,000 shares of NTPC during the year under consideration. In view of these facts it was submitted that the shares were held as investment and the income arising on sale could not be assessed as business income. The assessing officer examined the contention of the assessee with reference to CBDT Circular No. 4 of 2007 dated 16/05/2007 and various decisions on the subject. The AO observed that the period of holding of the shares under investment portfolio varied from 15 days to 5 months. The assessee had not earned any dividend. The submission of the assessee that assessee had received dividends on shares of NTPC was misplaced. NTPC declared dividend on 10/03/2005 whereas the assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account. The shares have been shown as investment in the books of accounts. Therefore, profit on sale of shares shown as investments will be taxable as short term capital gains and not as business income. As regards stock-in-trade, the shares are purchased and sold on the same day without having taken delivery. Therefore, only the shares which were held as stock-in-trade were liable to be taxed as business income. The ld. AR of the assessee also submitted that shares held as investment have been valued at cost price. The ld. CIT (Appeals) examined the contention in the light of various decisions. She placed reliance on the decision of Hon ble Calcutta High Court in the case of CIT Vs. Guest Keen Metalfold Ltd. 115 ITR 205 (Cal.) wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trade. The assessee also filed details of stock-in-trade held on 31st March, 2005. The ld. AR of the assessee relied on the decision of Hon ble Bombay High Court in the case of Gopal Purohit Vs. JCIT 188 Taxman 140 (Bom.) and of Hon ble Supreme Court in the case of Anil Jain Vs. CIT 294 ITR 435 (SC) and Atlas Corporation Vs. ITO 57 ITD 139. In the case of Gopal Purohit Vs. JCIT (supra) Hon ble Bombay High Court has held that it is open to an assessee to maintain two separate portfolios, one relating to investment in shares and another relating to business activities involving dealing in shares. The Hon ble High Court has upheld the view taken by the ITAT that the delivery based transaction were to be treated as those in the nature of invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... copy of investment register for the relevant period. On perusal of register of investment it is seen that the assessee has acquired shares of NTPC as per Board resolution dated 12th October, 2004 and shares of State Bank of India on different dates from secondary market. The shares of Dena Bank has been purchases by making application in public offer as per Board s resolution. The acquisition of these shares in the investment register has been shown out of surplus funds. These shares were credited in Demat account and have been sold during the year except 25,000 shares of NTPC. Therefore, from the Board resolutions and entries in the books of accounts it is proved that these shares were held as investments and not as stock-in-trade. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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