TMI Blog2012 (10) TMI 1106X X X X Extracts X X X X X X X X Extracts X X X X ..... r for trading. Therefore, we have no hesitation in holding that ld. CIT(A) was not justified in treating the surplus arising out of sale of shares held for the period of less than 30 days as business income instead of short-term capital gain shown by the assessee. - Decided in favour of assessee. - I.T.A. No.2818/Ahd/2011 - - - Dated:- 31-10-2012 - Shri D.K. Tyagi, Judicial Member AND Shri Anil Chaturvedi, Accountant Member. Department by : Shri D.K. Singh, Sr. D.R. Assessee by : Shri M.G. Patel, A.R. ORDER: This is assessee s appeal against the order of ld. CIT(A)-XIV, Ahmedabad 15.09.2011. 2. The only effective ground taken by the assessee is as under:- The ld. CIT(A)-XIV, Ahmedabad has erred in law as well as on facts of the case by confirming holding that the surplus arising out of the sale of share held for period of less then 30 days as business profit instead of short-term capital gain. 3. The A.O., in this case, has treated short-term capital gain on sale of shares amounting to ₹ 8,08,357/- shown in his return of income as business income by observing as under:- During the course of assessment proceedings it was noticed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on which sold 1 ALLAHABAD BANK 7 4 4 2 ANDHRA BANK 2 1 2 3 APOLLO TYRES LTD 1 1 1 4 ASHOK LEYLAND LTD 11 5 6 5 BAJAJ HINDUSTAN 1 1 1 6 BINANI CEMENT LIMITED 1 1 1 7 BIRLA POWER SOLUTIONSLTD 22 7 5 8 CHAMBAL FERTILIZERS LTD 7 4 1 9 CINEMAX INDIA LIMITED 8 7 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 29 MTNL 4 3 3 30 MYSORE CEMENT 1 1 1 31 NAGARJUNA FERTILISER 6 4 4 32 NISSAN COPPER LIMITED 2 2 1 33 NOCIL 4 4 3 34 ORIENTAL BANK OFCOMMERCE 2 1 1 35 PETRONETLNG LIMITED 3 3 1 36 POWER TRADING CORP 20 13 6 37 PRISM CEMENTS LTD 16 6 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 19-11-2010 furnished the reply. 5. The submission finished by the assessee has been carefully perused. However, as the succeeding observation would show the submission of the assessee is not acceptable. 5.1 During the year the assessee had carried out the purchase and sale of shares in a systematic and organized manner. 5.2 The volume of share transactions total ₹ 163.06 lacs 5.3 The transaction in shares had taken place in uncertain times wherein the market was fluctuating on a daily basis if not on an hourly basis. 6. In view of the above facts and circumstances the profits arriving from share transaction must be held as business income. Reliance is placed upon the ratio of the following Judicial Decisions: 6.1 Reliance is also placed on the English decision of the Commissioner of Inland Revenue V/s. Tyre Investment Trust Ltd. (1924) 12 TC 646 KB 6.2 Reliance in this matter is also placed on the CBDT's Circular No. 4/2007 wherein certain criteria have been laid down on the basis of which the AO has to decide whether income shown from purchase and sale of shares is to be taxed as income from capital gains or from business. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not with the object of investing its capital in these shares in order to derive income from that investment. Further, the volume of transactions, the frequency of transactions, the systematic and organized manner of the transactions strongly point to the conclusion that the shares could not have been purchased as an investment to earn income from dividends and that the purchase of these shares were with the object of selling them subsequently at an profit. The shares were in fact sold at considerable profits subsequently. All these facts lead to the inference that the assessee's transactions in buying and selling units/shares amount to business activities with the motive behind the transactions being to earn profits. This conclusion is also strongly supported by the Supreme Court in the case of Dalhousie Investment Trust Co. Ltd. vs. Commissioner of Income-tax [68ITR 486] and strong reliance is placed on this decision. 6.11 In view of the foregoing paragraphs, it is held that the assessee is into the business of trading in shares/units and hence, the benefit of special rate of taxation @ 10% applied to the STCG is not allowed to the assessee and the entire transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he loan taken by him is for the purpose of purchase of house property. The above facts show that on one hand the appellant has shown characteristic of an investor by showing long term capital gain and not taking any loan for investment in the share market. However, high frequency of transaction and short holding period in respect of the shares which had yielded short-term capital gain show the tendency and characteristic of a trader. It is also worth-noting that the number of scrips in which he has dealt during the year for shortterm capital gain are very high and much more than the number of scrips held by him for long term. The appellant has claimed that it does not maintain personal books of account but the shares have been purchased by him as investment. The claim of the appellant is not commensurate with the bear facts. The high frequency of transaction show that the appellant is acting as a trader and actively participating in the market for booking the profit. All these facts show that the appellant is acting as a trader most of the time and also as an investor at times where he has held the shares for long term. In these circumstances, it is difficult to demarcate as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s arising out of the sale of shares held for the period of less than 30 days is business income instead of short-term gain shown by the assessee. 6. Ld. counsel of the assessee, at the outset, submitted that Revenue is not in appeal against the order of ld. CIT(A) wherein ld. CIT(A) has accepted the short-term capital gain shown by the assessee for holding the shares more than 30 days. It was further argued that ld. CIT(A) has bifurcated the transaction of sale and purchase resulting in short-term capital gains on the basis of holding period on the criteria of more than 30 days and less than 30 days. There is a criteria u/s 2(42A) of the Act which defines the short-term capital asset as capital asset held by the assessee for not more than 12 months in the case of shares and other securities. Section 2(42B) further defines the short-term capital gain as capital gain arising from the transfer of short-term capital asset. Thus statute has prescribed criteria for treating the capital asset either as long term capital asset or short-term capital asset on the basis of holding period but no such criteria for treating the short-term capital asset has been prescribed under the statut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness loss and taking advantage of this by way of reducing the income of that year. Thus the intention of the assessee is clear that he has treated investment in shares as investment and not for the purpose of trade. The Revenue has not brought any material to show that assessee has invested in shares for trade . We further find that Revenue has not filed any appeal against the order of ld. CIT(A) treating the investment of assessee in shares for more than 30 days and less than 12 months as investment in short-term asset. There is no provision under the Act to indicate that the holding period of 30 days is relevant to decide whether any transaction is made for investment or for trading. Therefore, we have no hesitation in holding that ld. CIT(A) was not justified in treating the surplus arising out of sale of shares held for the period of less than 30 days as business income instead of short-term capital gain shown by the assessee. The order passed by him to this effect is set aside and the A.O. is directed to accept the short-term capital gain of ₹ 8,08,357/- on sale of shares and mutual funds shown by assessee in his return of income. This ground of the assessee is al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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