TMI Blog2016 (5) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... Whether on the facts and in the circumstances of the case and in law the ld. CIT (A) was justified in treating income arising from sales of shares as income from short term capital gain ignoring the facts that there were substantial and frequent transactions and motive was to earn profit and holding period of such shares was very short. 2. The brief facts of the case are that the assessee has filed the return of income on 29.09.2008 declaring total income of ₹ 85,86,760/-. The assessee derived income from business and income from other sources. The case was scrutinized under section 143(3). During the course of assessment proceedings, the AO observed that the assessee claimed investment activity and shown short term capital gain from share transaction of ₹ 73,70,214/-. Examination of D-mat accounts and transactions in brokers account furnished by the assessee makes it clear that purchase and sale of shares/units is not investment activity but it is the business of the assessee. During the course of the proceedings, the assessee was asked to submit an analysis of the entire port folio taking into consideration various parameters such as number of scrips, volume, f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business income, the ld. A/R replied as under :- As submitted earlier that the short term capital gain shown is on shares held by the assessee as investment. Assessee has been investing in shares from last several years and has been declaring Capital Gain on the same. All shares are on delivery basis. Even in the earlier years the assessee shown shares as his investment and declare capital gain if any arising at the time of sale which has been accepted and assessed as such. Assessee has never done share transaction with the intention of business. As is evident that the number of scripts is which assessee has invested are very less and the same has been done with the motive of investment and the assessee has regularly declared the same as his share investment. We are enclosing the copy of returns and computation showing the capital gain declared by the assessee in earlier years. Even CBDT in circular no. 4/2007 dated 15.06.2007 have clearly laid down the guidelines as to whether a share transaction is for purpose of investment of business and the assessee fulfills as criteria of the said circular. The AO considered the explanation of the assessee but could not found it non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rieved by the order of AO, the assessee carried the matter before ld. CIT (A) who after discussing the matter at length, allowed the ground of the assessee by observing as under :- I have considered the facts of the case and the submissions made. The submission of the appellant is acceptable. The addition has been made by the AO in a routine and perfunctory manner without bringing on record any material to justify the addition made. It is stated that in the A.Y. 2007-08 the short term capital gain of ₹ 2,83,209/- declared by the assessee under similar circumstances was not disturbed by the department. The decision quoted by the A/R for the appellant in the case of Nagindas P Sheth (HUF) vs. ACIT-21 (3) Mumbai ITA No. 961/MUM/210 A.Y. 2006-07 is clearly applicable wherein it was held that The assessee is an investor. Such being the case, merely because assessee transacted in 158 shares that should not be taken as a sold criterion to come to the conclusion that assessee is a trader in shares. It is not in dispute that in the books of accounts assessee has declared the shares as investment and the finding of the learned CIT (A) that only own funds were utilized for purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordingly would have reduced the tax liability by setting off the same from income of jewellery business. This consistent approach, even to the assessee s disadvantage, substantiates the investment in shares, being of capital assets. It was further submitted that the assessee has declared the short term capital gain of ₹ 2,83,209/- in the A.Y. 2007-08. The ld. CIT (A) has not disturbed the finding while passing the order under section 143(2) of the IT Act. The ld. A/R further relied upon the following judgments in support of his contention : CIT vs. Karamchand Thapar Sons Ltd. 115 ITR 250 (Cal.) Trupti Investment Co. vs. ITO 35 ITD 200 (ITAT Ahmedabad) CIT vs. Sugar Dealers 100 ITR 424 (All.) CIT vs. Guest Keen Neetlefold Ltd. 115 ITR 205 (Cal.) CIT vs. Manna Lal Nirmal Kumar Surana 264 ITR 116 (Raj.) CIT vs. Simpson General Finance Co. Ltd. 230 ITR 222 (Mad.) ACIT vs. Khetan Kumar A Shah, 242 ITR 83 (Kerala) Ashoka Viniyoga Ltd. vs. CIT 70 ITR 381 5.3. Before us the moot question which is required to be decided is whether the income earned by the assessee on account of share is required to be treated as business income or required to be trea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as its business income, b) In respect of listed shares and securities held for a period of more than 12 months immediately preceding the date of its transfer, if the assessee desires to treat the income arising from the transfer thereof as Capital Gain, the same shall not be put to dispute by the Assessing Officer. However, this stand, once taken by the assessee in a particular Assessment Year, shall remain applicable in subsequent Assessment Years also and the taxpayers shall not be allowed to adopt a different/contrary stand in this regard in subsequent years; c) In all other cases, the nature of transaction (i.e. whether the same is in the nature of capital gain or business income) shall continue to 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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