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2016 (7) TMI 159 - ITAT DELHI

2016 (7) TMI 159 - ITAT DELHI - TMI - Activity of trading of shares - taxed under the head 'Income from Business & profession' or 'Short Term Capital Gains' - Held that:- From the details of purchase and sale and period of holding of shares, it is observed that the assessee has held 11 transactions of shares for more than 50 days and the balance were held for more than 100 days in total number of 30 transactions. In the previous year and the subsequent years relevant to the Assessment Year under .....

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Decided against revenue - I.T.A. No.1145/Del/2014 - Dated:- 9-6-2016 - N. K. SAINI, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER For The Appellant : Shri P Dam Kanunjna, Sr. DR For The Respondent : Shri M P Rastogi, Adv. ORDER PER BEENA A. PILLAI, JM: The present appeal filed by the Revenue, arises from the order dated 13.12.2013 passed by Ld. CIT(A) IX, New Delhi for the Assessment Year 2010-11 on the following grounds of appeal: 1. Whether on the facts and circumstances of the .....

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he principles laid down by the CBDT in Circular No. 4/2007 ? 3. Whether on the facts and circumstances of the case, the Ld. CIT(A) erred in holding that the magnitude of transaction is not relevant for determining the profit from sale of shares/ MF as business income or L TCG/STCG? 4. Whether on the facts and circumstance of the case, the Ld. CIT(A) erred in holding that the principle of Consistency is to be followed by completely ignoring the fact that the principle of res-judicata is not appli .....

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mpany registered with Reserve Bank of India (RBI) and is engaged in the business of trading in units of mutual funds and investment in shares and debentures. The assessee filed its return of income for the year under consideration on 21st October, 2010 declaring total income of ₹ 2,91,48,395/- and the same was processed u/s 143(1) of the I.T. Act, 1961. The case of the assessee was selected for scrutiny and statutory notices u/s 143(2) / 142(1) were issued. 2.2 During the assessment procee .....

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d mutual fund to the total income as basis. The Ld. AO held that the main activity of the assessee is trading in shares, and during the year, 60 transactions in shares were shown as capital gain. The volume of business, the volume of income from capital gain and the volume of investment indicates that trading in shares and mutual fund is the core activity of the assessee. The AO also noted that the time gap between purchase and sale of shares is very thin. The principle of consistency as argued .....

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the various parameters to be considered in determining whether the activity of trading of shares is to be taxed under the head 'Income from Business & profession' or 'Short Term Capital Gains'. 5.3 The Ld. Assessing Officer made following additions to the income of the assessee: Long term capital gain treated as business income Rs.55,80,788/- Short term capital gain Treated as business income Rs.1,59,15,398/- 5.4 Aggrieved by the order of Ld. Assessing Officer, the assessee .....

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actions of sale & purchase of units and, therefore, the income earned from such transaction should be treated as business income. 6.3 On the contrary, Ld. A.R. submitted that during the year under consideration, the assessee has sold only shares relating to Hindustan Construction and GMR Infrastructure. The remaining has been continued to be held as investment in the books of accounts, maintained by the assessee. Ld. A.R. submitted that the assessee is deriving income from business from capi .....

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ources are based on accounting principles and standards and the assessee has consistently been following the same accounting principle every year. He submitted that the assessee held the shares as investment and not as stock in trade. Ld. A.R. has submitted a list of shares held by the assessee during the year under consideration. Ld. A.R. has also placed reliance upon the decision of Hon'ble Jurisdictional High Court in the case of a sister concern of the assessee being CIT Vs Chowdary Asso .....

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s advanced by both the parties, orders passed by authorities below as well as the judgements relied upon by the Ld. A.R. It is observed that s the assessee has maintained itself throughout as investor. Ld. Assessing Officer had negated the assessee s contention merely because of the dealing in shares by the assessee. There is no doubt that the bulk of shares held by the assessee were form substantial period. The objective of the assessee is to get substantial capital gain and not earning profits .....

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observed that the assessee has been maintaining the clear distinction among its holdings, as units of mutual funds are held as stock in trade and shares are held as investments. Similar were the facts before Hon'ble Bombay High Court in the case of Gopal Purohit (supra). Hon ble Court has held that the principle of consistency is a basic factor to be considered while deciding the nature of income. The Hon'ble Bombay High Court has also held that the uniformity in maintaining the books o .....

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e from sale / purchase of shares has been assessed as Short term capital gain. It is an accepted fact that the assessee had shown the stocks in his books of accounts as investments and not as stock-in-trade and this important treatment from the accounting angle has a bearing on the issue. There is no stock in trade of shares in the Balance sheet of the assessee, rather these are consistently shown by the assessee under the head investments. The assessee company had shown the gains in earlier yea .....

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