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2016 (7) TMI 251 - ITAT AHMEDABAD

2016 (7) TMI 251 - ITAT AHMEDABAD - TMI - Transfer of shares - CIT(A) directed AO to treat the gain on transfer of shares which was held by the assessee for less than 1 month as business income - business income v/s capital gain - Held that:- In view of the consistent stand of the Tribunal in the Asstt.Years 2005- 06 and 2006-07 and 2008-09, we are of the view that the assessee has to be treated as an investor. The ld.CIT(A) has considered the circumstances in an elaborate manner in order to bri .....

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s taken in the month of March, 2007 by way of overdraft against FDRs. It was for a very short period of time. Hence, this circumstance cannot be used against the assessee to record a finding that the assessee was a trader. - Neither in the Act nor in the Income Tax Rules any classification has been called for that if shares are held less than 30 days, then, the profit on sale of such shares would be treated as business income. On the strength of the circumstantial evidences, a composite opin .....

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against revenue In view of - ITA.No.3124/Ahd/2010 With CO No.1/ahd/2011 - Dated:- 1-6-2016 - SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER For The Revenue : Shri James Kuria, Sr.DR For The Assessee : Shri M.R. Shah, AR ORDER PER RAJPAL YADAV, JUDICIAL MEMBER: The Revenue is in appeal before us against the order of the ld.CIT(A)- II, Surat dated 13.9.2010 for the Asstt.Year 2007-08. On receipt of notice in Revenue s appeal, the assessee has filed CO bearing no. CO .....

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d in directing the ld.AO to treat the gain arisen on sale of shares as business income in respect of those shares, which were held by the assessee for period less than one month. . Since both the issues are inter-connected with each other, therefore, we take them together. 4. The brief facts of the case are that the assessee has filed his return of income electronically on 1.11.2007 declaring total income at ₹ 63,08,282/-. The case was selected for scrutiny assessment and notice under sect .....

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r, but directed the AO to treat the gain on transfer of shares which was held by the assessee for less than one month as business income by observing as under: 4.1 The main issue in the first ground of appeal is as to whether profit declared under long term capital gain and short term capital gain can be treated as business income; In regard to long term capital gain declared, the appellant has relied upon the order dtd.30.4.2009 in appeal No.CAS/II/260/08-09 of my predecessor passed in his own .....

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and, accordingly directed the Assessing Officer to delete the addition of the amount of long term capital gain as business income and allowed the appellant's ground of appeal. I find that the facts relating to long term capital gain in the year under consideration are same as in the immediate preceding year and hold that the finding given by the CIT(A) in the A.Y.2006-07 is also applicable in the year under consideration and, accordingly, direct the Assessing Officer to treat the capital ga .....

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ITAT, Delhi Bench has held that shares held for a period of one year or more should be treated as long term capital gain. Therefore, as far as this decision is concerned, it is applicable to long term capital gains. On the sale of shares held for more than a year or so, I have already relied upon the appellate order in the case of the appellant in the A.Y.2006-07 and directed the Assessing Officer to treat the long term capital gain declared in the return of income under the said head. 4.3. As f .....

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cy of transaction in several cases is so large and holding period in many cases Is so small - from 0 to a week or so that assessee is de facto selling and purchasing shares as trader. He is also holding shares for long period -indicating that they are held as investment. Therefore, a criteria has to be fixed for determining as to when he is acting as trader and when as investor. Accordingly, we decide following criteria to hold when gains are to be taxed as profit to be earned under the business .....

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be treated as investment and on their sale short term capital gain should be charged. When shares are held for less than a month, gain on them should be treated as profit from business." The decision in the case of Shri Sugamchand C Shan is, therefore, to be considered in the totality and peculiarity of the facts of the said case. As to what are the peculiarities in the case of Shri Sugamchand C Shah, can be culled out from the order, as under:- (i) The holding of shares sold, the profit o .....

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sactions and high period holding indicate investment (para 16) (v) The assessee has discharged onus of showing that it is making investment but Revenue is able to show that there are high frequency and low holdings in many transactions of shares indicating that assessee has some intention of purchasing and selling shares as a trader (para 17). (vi) There cannot be fixed criteria to decide as in the present case whether assessee has traded in shares eventhough the assessee held them as investment .....

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86/Mum/2007 in the case of Smt Sadhna Nabera in the A.Y.2005-06 also becomes important. The ITAT, Mumbai Bench in the said decision upheld the action of the Assessing Officer in treating the income from sale of shares declared by the appellant during the year under the head 'short term capital gain' as 'income from business activities' and dismissed the appeal of the appellant. The Hon'ble members while deciding the appeal of the appellant had examined the purchases and sales .....

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ase of Janak Rangwala Vs ACIT, 11 SOT 627(Mum) and held that the facts involved in the above two cases were not applicable to the facts of the case of Smt Sadhna Nabera. I have alluded to the above decisions to highlight the fact that in so far as the taxability of the shares traded from which capital gain income has been shown is concerned, there cannot be a universal formula. However, this issue has to be decided on the basis of some guidelines/ principles which will depend on the facts of eac .....

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hich is interest free and out of the same ₹ 40 lac is from share of HUF of the appellant. The appellant has also submitted that unsecured loan of ₹ 72.63 lac has been invested in FD with the ICICI Bank and SBI and for payment of advance tax, whereas secured loan of ₹ 25.25 lac has been obtained from ICICI bank and utilized for making payment to Ashit C Mehta - share broker, however, this loan has been obtained only in the month of March, 2007 by way of overdrafts against the FD .....

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interest on unsecured loans of ₹ 72.63 lac taken from his wife and from HUF of his father. The investment in those shares which is from the OD a/c. with the ICICI Bank has been from 06.3.2007 onwards only, which period is less than thirty days. The facts discussed above, therefore, show that the decision in the case of Shri Sugamchand C Shah(supra) relied upon by the appellant shall be applicable. Following the said decision, I direct the Assessing Officer that where shares are held for m .....

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conclusion did not meet approval of the higher appellate authority. This issue has been decided in favour of the assessee by the order of the ITAT passed in ITA No.127/Ahd/2009 and 2076/Ahd/2009 of the Asstt.Years 2005-06 and 2006-07. Similarly, the appeal of the Revenue bearing ITA No.2226/Ahd/2011 has also been dismissed by the Tribunal in the Asstt.Year 2008-09. He placed on record copies of the Tribunal s orders. The discussion made by the Tribunal in the Asstt.Year 2008-09 reads as under: .....

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the Assessing Officer. The assessee in that year also claimed investment in shares and disclosed income under the head of short term capital gain and long term capital gain. The ld. Assessing Officer treated the assessee as trading in share and assessed the income from purchase and sales of shares as a business income. The ld. Commissioner of Income Tax (Appeals) concurred with the conclusions of the Assessing Officer but the ITAT in ITA No. 127/Ahd/2009 vide its order dated 13-05-2011 held that .....

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l gain. The ITAT has made an elaborate discussion on the issue and referred a large number of decisions in order to determine whether the transactions of the assessee were of an investor or of a trader. The conclusions drawn by the ITAT on page 21 of the order are worth to note. It reads as under:- 5.12 In view of the foregoing, following the view taken in the aforesaid decisions, If we analyse the transactions in the instant case, we find that the assessee disclosed income from capital gains / .....

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es had been held by the assessee for a substantially longer period and the various criteria which the AO applied throughout the assessment order in treating the share transactions allegedly giving rise to STCG as income from business, could not be applied to the transaction in shares which had been held for much longer durations. It was further observed by the Id. Commissioner of Income Tax(A) when shares are held for long term, the motive is obviously to invest and not to deal as in a business .....

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have not brought to our notice any material or contrary decision in order to enable us to take a different view in the matter, we are not inclined to interfere with the findings of the Id. CIT(A). Therefore, ground no.1 in the appeal of the Revenue is dismissed. 8. Though the assessment order is based upon the observation of the Assessing Officer recorded in Assessment Year 2007-08 but it is demonstrated that the stand of the revenue is identical starting from Assessment Year 2005-06 to this as .....

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