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DCIT, Circle-10, Kolkata Versus Trisys On The Net Pvt. Ltd.

2016 (8) TMI 253 - ITAT KOLKATA

Profit on transactions of voluminous and frequent purchase and sale of shares - capital gain or business income - two investment portfolio - Held that:- We find from the balance-sheet of the assessee where assessee maintains two portfolios as discussed above. Even the CBDT Circular no. 4 of 2007 dated 15.06.2007 envisages the practice of assessee’s maintaining dual portfolios. We also find that the decision was rendered by the Hon'ble Bombay High Court in the case of CIT vs. Gopal Purohit report .....

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reatment given in the books of accounts which is indicative of assessee’s intention whether to hold the shares with a view to earn dividend and long term appreciation or with a view to carrying on as business. We further find the intention of the assessee to maintain two independent portfolios i.e. one for investment purposes and one for trading purposes when he converted his stock in trade into investment on dated 1.4.2004. - We hold that surplus is chargeable to capital gains only and asse .....

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II, Kolkata dated 04.08.2011. Assessments were framed by DCIT, Circle-10, Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide his orders dated 28.11.2008 & 26.10.2009 for assessment years 2006-07 and 2007-08 respectively. Shri A.K. Tulsian, L d Authorized Representative appeared on behalf of assessee and Shri P.K.Chakaraborty, L d Departmental Representative appeared on behalf of Revenue. 2. Since common grounds are involved in both the appeals except fi .....

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stematic manner resulted in profit amounting to ₹ 7896893/- have given rise to capital gain and not the business income. 3. Briefly stated facts are that assessee in the present case is a Private Limited Company engaged in business of shares trading and shares investment on long term basis. During the year, inter alia, assessee has earned following income:- Short Term Capital gain without STT ₹ 9,941 Short Term Capital gain with STT ₹ 2,01,224 Long Term Capital gain without STT .....

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its stock into investment with effect from 01.04.2004. However, AO has disregarded the plea taken by assessee by holding that the business had been carried on its share trading business transactions in a systematic and organized manner with view to minimizing risk and maximized gain. The assessee has done numerous transactions of buying and selling shares / units of mutual funds which are running into 270 proximate for short term capital gains and about 100 approximate for long term capital gain .....

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shares and securities. In earlier assessment year, the Department never examined the issue on this line. Finally, AO treated the capital gains income as business income after having reliance in various judgments and CBDT s Circular No.4 of 2007 and passed the assessment order accordingly. 4. Aggrieved, assessee preferred an appeal before Ld. CIT(A), where it was submitted that the CBDT in its Circular no. 6/2016 has clarified that it is possible for a taxpayers to have two portfolios - i.e., an .....

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f the assessee and the assessment order, it is noticed that assessee is engaged in trading business and holding shares and mutuual fund in two portfolios. I have considered the findings of the AO as well as the written submissions filed by the appellant along with the case laws relied by the appellant and the facts of the case. It is noticed that assessee is consistently showing purchase of these shares and mutual funds as capital investment in its books of account & balance sheet and these .....

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by Dept. has also been rejected by the Hon'ble Supreme Court. The facts of the case under consideration are similar to the facts in the case of Gopal Purohit therefore, the AO is directed to treat profits on sale of shares as capital gains and accordingly he is directed to compute tax on capital gains in accordance with IT Act, 1961. Therefore, ground no. 1 is allowed…. Being aggrieved by this order of Ld. CIT(A) Revenue is in appeal before us. 5. Before us Ld. DR contended that the c .....

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trade. The investment made by assessee is very much covered by the Notification issued by CBDT No.6 of 2016 dated 29.02.201 and he relied on the order of L d CIT(A). 6. We have heard rival contentions and perused the materials available on record. From the foregoing discussion, we find that assessee has declared its capital gains income which AO treated as business income on the ground that numerous transactions with large voluminous were made by assessee in systematic and organized manner. So i .....

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paper book - where assessee maintains two portfolios as discussed above. Even the CBDT Circular no. 4 of 2007 dated 15.06.2007 envisages the practice of assessee s maintaining dual portfolios. We also find that the decision was rendered by the Hon'ble Bombay High Court in the case of CIT vs. Gopal Purohit reported in 228 CTR 582 (Bom), wherein the assessee had maintained dual portfolios and ultimately the court held that the resultant gains from investment activity would be assessable as ca .....

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s business. We further find the intention of the assessee to maintain two independent portfolios i.e. one for investment purposes and one for trading purposes when he converted his stock in trade into investment on dated 1.4.2004. 6.1 We are putting our reliance on the judgment of Hon'ble Madras High Court in the case of CIT v. S.Ramamrithan (2008) 217 CTR 206 (Mad), while distinguishing trading and investment, observed that the intention of the assessee is relevant to determine whether an a .....

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ent must be decided according to the general common sense view of these who deal with those matters in the particular circumstances. The most excruciating factor to be looked into at this juncture is the conduct of the assessee. The next point to be addressed in this issue is whether the frequency of transactions would alone indicate the trading activity. In this regard, we find the coordinate bench of Mumbai Tribunal had an occasion to consider the same in the case of Janak S. Rangawalla vs. AC .....

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on account of sale and purchase of shares is same as in the preceding years and the same merits to be accepted as short term capital gains. There is no basis for treating the assessee as a trader in shares, when his intention to hold the shares in India companies as an investment and not a stock in trade. The mere magnitude of the transaction does not change the nature of transaction, which are being assessed as income from capital gains in the past several years. The Assessing Officer is direct .....

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ature has not made any distinction on the basis-of frequency of transactions. The benefit of shortterm capital gains can be availed of for any period of retention of shares up to 12 months. Although a ceiling has been proved, there is no indication as regards the floor, which can be as little as one day. The question essentially is a question of fact. We are putting our reliance in the CBDT s Circular 6 of 2016 dated 29.02.2016, the relevant extract is reproduced below:- a) Where the assessee it .....

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