TMI Blog2010 (2) TMI 1192X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment proceedings, it was noticed by the A.O. that there were numerous transactions made by the assessee on daily basis for large quantity of shares. Looking into the frequency and volume of transactions, the assessee was called upon by the A.O. to explain as to why short term capital gain should not be treated as profit from share trading business. In reply, the following submissions were made by the assessee before the A.O. : - Explanation vide letter dated 31.05.2005: Purchase and sale of securities pertains to investment on shares: I am not purchasing and selling shares as my business transaction. I am not in the business of purchasing and selling of securities. Whatever purchase effect by met is on account of investment in shares. I am of 79 years old (as at year ending 31.03.2004) retired person. I am investing my capital in shares/securities. I am managing my port folio of investment in shares and investment in shares in with motive of to earn dividend income and to have capital appreciation. The following points to be considered for determining that purchase and sale of shares and securities is on account of investment activity and not tradi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In my case, I have fulfilled all the 3 criteria as investor, I have made the full payments and taken delivery f the shares and recorded the transaction in my Books of Account as investment clearly showing that I have the intention to make the investment. Now for the income tax purpose, investments are held for a period les than one year, then it is short term capital gain/loss and if the investment is held for more than a year, then it is a long term capital gain/loss. There is no condition that investments should be held for a minimum period to prove it as an investment. Once the payment is made, delivery is taken and in the Books of account, it is recorded as investment, it is clearly an investment account. Intention is always decided by the investor who is making the investment and that intention can be proved how he has recorded the transaction in his Books of account. From the facts and circumstances of my case, you will kindly observe and appreciate that I am an investor for a very very long period making the investment in shares for the last several decades. Now I am 80 years old so I cannot think of any business activity. Investments may be sold consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the paper book to show the treatment given by the assessee to the relevant shares as investment. He also pointed out that there were no funds borrowed by the assessee for making the said investment and the shares were entirely purchased by the assessee from his own funds. He submitted that the assessee is a partner in the partnership firm and that is his main occupation and not the trading of shares as alleged by the authorities below. Referring to page 1 of his paper book, he also pointed out that dividend income from investment in shares of ₹ 4,35,871- was earned by the assessee in the shares and going by substantial income earned in the form of dividend, there was no reason for the authorities below to reject his claim that shares were held by him as investment and not stock in trade. It was also submitted that the assessee is 79 years old and has been investing in shares for the last 20-25 years. The shares sold also include bonus shares on long term holdings, but sold immediately on receipt, hence short term capital gain. It was further submitted that the A.O. s finding that assessee has done business cannot be accepted to the extent of short term capital gain alon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness activity. He contended that the impugned order of the ld. CIT(A) passed on this issue is thus well founded and urged that the same may be upheld. 8. The learned counsel for the assessee, in the rejoinder, submitted that the facts of each case are certainly relevant to decide the issue under consideration. He contended that such facts involved in the year under consideration, however, are exactly similar with that of the earlier years and the ld. D.R. has not been able to point out any distinguishing features. He contended that the Rule of consistency is therefore required to be applied to decide the issue in favour of assessee as was done in the earlier years. As regards the aspects of frequency of transactions and period of holding of shares highlighted by the ld. D.R., he contended that similar was the position involved in the case of Shri Gopal Purohit (supra) decided by the Tribunal in ITA No. 4854/Mum/08 wherein the similar issue was decided by the Tribunal in favour of the assessee accepting the treatment given to the shares as investment. He submitted that the income declared by the assessee as short term capital gain was mainly the profit earned by him on shares pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Tribunal that Rule of consistency must be applied in such cases and on the basis of the said Rule alone, the action of the Revenue Authorities to give such different treatment was not sustainable. 10. In the case of Shri Gopal Purohit (supra), the Tribunal also considered and decided on merit the issue relating to the exact head under which profit arising from sale of shares was chargeable to tax. In this context, the Tribunal noted that the opening and closing balance of investment in shares made by the assessee was about ₹ 90 lacs and ₹ 46 lacs whereas the sale of shares was only to the tune of ₹ 32 lacs. It was held by the Tribunal that the turnover to stock ratio in investment portfolio of the assessee thus was very low as compared to that in trading portfolio. In the present case also, the value of investment held by the assessee in shares as on 31.3.04 and 31.3.05 was to the extent of ₹ 1.09 crores and ₹ 1.33 crores whereas the value of shares sold during the year under consideration was only to the tune of ₹ 1.31 crores. The turnover to stock ratio in investment portfolio thus was very low as compared to that in any trading portfo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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