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2016 (7) TMI 816 - ITAT AHMEDABAD

2016 (7) TMI 816 - ITAT AHMEDABAD - TMI - Nature of income on sale and purchase of shares - Short term capital gains OR business income - Held that:- A perusal of the profit and loss account of the assessee shows that the assessee has separately shown Derivative profit, long term capital gains/short term capital gains on shares. In the balance sheet, the assessee has shown shares under the head 'investment'. These investment shares have been valued at cost. - The intention of the assessee a .....

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ME Court] has expounded the rule of consistency observing that if the facts are identical and the law has not changed then the view taken in the earlier years should be followed. CIT(A) did not erred in law and on facts in directing not to treat the short term capital gains earned by the assessee as business income. - Decided against revenue - ITA. No: 3437/AHD/2009 - Dated:- 7-7-2016 - SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER For The Appellant : Shri James Ku .....

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ployee, employed with the Indian Institute of Management, Ahmedabad. The return of income for the impugned assessment year was filed on 28.07.2006 declaring total income at ₹ 69,25,500/-. On the basis of AIR information, the return was selected for scrutiny under CASS and accordingly statutory notices were issued and served upon the assessee. 4. During the course of the scrutiny assessment proceedings, the A.O. noticed that the assessee has declared income from salary, capital gain on sale .....

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de by the assessee did not find favour with the A.O. who was of the firm belief that the length of period of ownership, the frequency/number of transactions and the utilization of borrowed funds clearly shows that the assessee was in fact trading in shares and treated the entire capital gains as business income of the assessee. 6. Aggrieved by this, the assessee carried the matter before the ld. CIT(A) and reiterated the claim of capital gains. After considering the facts and the submissions and .....

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was trading in shares and, therefore, the profits derived from the purchase and sale of shares have been rightly taxed under the head business income by the A.O. Per contra, the ld. counsel for the assessee reiterated what has been stated before the lower authorities. 9. We have carefully considered the rival submissions and have given a thoughtful consideration to the orders of the authorities below. 10. The dispute is regarding the nature of income on sale and purchase of shares by the assesse .....

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heet, the assessee has shown shares under the head 'investment'. These investment shares have been valued at cost. The Hon'ble Supreme Court in the case of CIT Associated Industrial Development Co Pvt. Ltd. 82 ITR 586, which decision has also been considered by the CBDT in its Circular No. 4/2007 dt. 15.6.2007, has observed that: "Whether a particular holding of shares is by way of investment or forms part of the stock-in-trade is a matter which is -within the knowledge of the a .....

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Business Income - Instructions in order to reduce litigation - reg.- Sub-section (14) of Section 2 of the income-tax Act, 1961 ('Act') defines the term "capital asset" to include property of any kind held by an assessee, whether or not connected with his business or profession, but does not include any stock-in-trade or personal assets subject to certain exceptions. As regards shares and other securities, the same can be held either as capita! assets or stock-in-trade/ trading .....

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, through Instruction No. 1827, dated August 31, 1989 and Circular No. 4 of 2007 dated June 15, 2007, summarized the said principles for guidance of the field formations. 3. Disputes, however, continue to exist on the application of these principles to the facts of an individual case since the taxpayers find it difficult to prove the intention in acquiring such shares/securities. In this background, while recognizing that no universal principal in absolute terms can be laid down to decide the ch .....

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treated as Capital Gain or Business Income, shall take into account the following a) Where the assessee itself, irrespective of the period of holding the listed shares and securities, opts to treat them as stock-in-trade, the income arising from transfer of such shares/securities would be treated 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 .....

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ntinue to be decided keeping in view the aforesaid Circulars issued by the CBDT. 4. It is, however, clarified that the above shall not apply in respect of such transactions in shares/securities where the genuineness of the transaction itself is questionable, such as bogus claims of Long Term Capital Gain/Short Term Capital Loss or any other sham transactions. 5. It is reiterated that the above principles have been formulated with the sole objective of reducing litigation and maintaining consiste .....

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he shares as investment, we do not find any reason to disturb the intention of the assessee. At this juncture, let us see the past and future assessments of the assessee:- Chart Showing Assessment Status of Short-term & Long-term Gains on Sale of Securities From A.Y. 2000-01 to A.Y. 2009-10 Assessment Year Sale Value of STCG Shares (Rs. ) Short-term Capital Gain (Rs.) Sale Value of LTCG Shares (Rs.) Long-term Capital Gain (Rs.) Dividend Income (Rs.) Assessment Status A.Y. 2000- 01 4,14,109 - .....

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