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2016 (8) TMI 765 - GUJARAT HIGH COURT

2016 (8) TMI 765 - GUJARAT HIGH COURT - TMI - Sale of shares - business income or investment income - Held that:- The transactions taken place in the year under consideration show that the assessee is indulged in purchasing and selling of shares within a short time i.e. within a period of twelve months. The assessee did not wait even for twelve months to dispose of the shares. Thus the assessee has carried on business in shares. Therefore, the intention of the assessee was not of an investment. .....

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( Per : Honourable Mr. Justice KS Jhaveri ) The assessee has filed these appeals under section 260A of the Income-tax Act, 1961, challenging the order of the Income-tax Appellate Tribunal (hereinafter referred to as the Tribunal ) dated 30.7.2002 whereby the Tribunal has allowed the appeal of the revenue by reversing the order of the Commissioner (Appeals) and confirming the order of the Assessing Officer. 2. While admitting the appeal, this court has framed the following substantial question of .....

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ded that the assessee s transactions in shares are his trading (business) transactions and treated long term capital gain and short term capital gain shown by the assessee as business income. Deduction under section 48(2) of the Act was denied to the assessee. Being aggrieved, the assessee went in appeal before the Commissioner of Income-tax (Appeals) who by his order dated 5.9.1995 allowed the appeal and directed the Assessing Officer not to treat the income as income from business but to treat .....

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ding years the assessee was held to be an investor of shares and in wealthtax the shares have been held to be on investment account and in the particular year the assessee was held to be a dealer in shares and the income was treated as business income. Therefore, the Tribunal was not justified in holding that the assessee is a dealer in shares and the shares sold were stockin- trade. He has relied on the decision of the Apex Court in the case of Commissioner of Income-tax v. Excel Industries Ltd .....

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ther than spend the taxpayers money in pursuing litigation for the sake of it. 5. The learned counsel for the revenue Mr. Desai contended that the assessee indulged in share badla transactions and that the book value and market value of shares were rising. The assessee utilized borrowed funds in acquiring new shares. He has further contended that the book value of the shares constituted major part of the total assets of the assessee. He has further contended that the other factors to treat the g .....

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. Moreover, assessee is also a broker on the Saurashtra Kutch Stock Exchange (SKSE) and indulges in badla transactions. At the same time it does not necessarily mean that a share broker himself cannot be an investor. Hence, the nature of commodity would not be decisive factor to resolve the dispute in this case. The Tribunal has further observed in paragraph No. 14 of the order thus: Having equipped ourselves with requisite guidance from their Lordships of various High Courts and the Supreme Cou .....

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case of Kesoram Industries where 10800 shares were sold out of 13190 shares purchased, and in case of TISCO, 8450 shares were sold out of 8600 shares. Rest all the shares were sold, the sales consideration for which amounted to ₹ 6,52,925/- and which resulted into a net gain of ₹ 1,48,601/- for the assessee. Only in one case (Grasim Industries), the holding was for 10 months, and in three cases the holding lasted for 6 to 7 months. In the remaining cases, the holding has not exceeded .....

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olding has ranged from zero days to 9 months. In the face of these facts, we fail to see any investment intention on the part of the assessee. How can one refute such an intention where shares have been sold within hours of acquisition or at the most within 2-4 months within the acquisition. Can it be said that when these shares were purchased, the purpose was of investment, but circumstances changed so much within hours or months that sale was triggered and hence sale proceeds should be regarde .....

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ritten submissions before the lower authorities, and it was argued before us also that assessee cannot be treated as a dealer in shares because he has neither converted his investments into stock-in-trade, nor is there such a finding by the AO. The argument is quite specious. If that was the case, then where was the need to enter into so much of exercise to gather the intention. If that was the case, then there would not have been a plethora of judgements that are before us. It was then argued t .....

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even for tweleve months to dispose off the shares. Thus, it strengthens our conclusion that the intention of the assessee was never that of investment. As a sequel to this, it can be argued that at least profit arising from those shares, which are held for more than twelve months should not be treated as business profits. We are not inclined to hold so because it is not ascertainable as to exactly when the assessee started dealing in shares. At least for the years under appeal, we are of the str .....

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make such a distinction, it cannot be regarded as an intelligible distinction because of the dominant impression left on the mind after considering all the facts and circumstances. I has been argued that the assessee has been offering huge dividend income for tax. This argument would have been acceptable, had the conduct of the assessee been different than what we found in entering into the transactions. Even where the assessee deals in shares, it is not that there cannot be any dividend income. .....

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