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DEEPABEN AMITBHAI SHAH Versus DY. COMMISSIONER OF INCOME TAX

2016 (8) TMI 1003 - GUJARAT HIGH COURT

Transaction of shares - capital gain or business income - whether the assessee lady was a dealer in shares and was not an investor in shares? - Held that:- Considering the decision of this court in the case of Smt. Divyaben C. Shah (2001 (4) TMI 920 - GUJARAT HIGH COURT ) where this court has observed the test to be considered that “(i) The assessee have purchased almost all the scripts from primary market. (ii) The purchases during the year under consideration from the secondary market were qui .....

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e never held as stock-in-trade. (x) Shares purchased were never sub-divided into group with an intention to sell.", we are of the opinion that the assessee has made investment in shares as investor and therefore, the income arisen to the assessee out of sale of shares is assessable under the head capital gain and not profit and gains of business or profession. In that view of the matter, we set aside the order of the Tribunal. - Decided in favour of the appellant-assessee - TAX APPEAL NO. 1763 o .....

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e findings of the Commissioner of Income-tax (Appeals) by restoring the order of the Assessing Officer. While admitting the appeals, this court framed the following substantial question of law: Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee lady was a dealer in shares and was not an investor in shares? 2. The facts of the case are that the appellantassessee has, for the assessment years 1992-93, 1993-94, 1994-95, 1995-96 and .....

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full facts of the case, the impression that one gathers is that the appellant having substantial funds of about ₹ 57 lakh at her disposal, in the climate where investment in shares was considered as the most sound and rewarding investment, went in for purchase of large volumes of shares involving substantial funds. The fact that she purchased from open market, also she mostly went in for transfer of the shares in her name is an indicator that she had intention of making investments in sha .....

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econdary market through share brokers with the intention of selling them quickly for earning profit, would not send the shares to the companies for registration/transfer in his or her name. This again involved considerable time in getting the shares transferred to one s name and also expenditure in payment of stamp duty on such transfer. The facts, therefore, are appointed to an inference that the appellant had intended to invest her funds in shares. However, the other limb of the matter is that .....

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the purview of investment. Applying the test of dominant impression that one gets, looking at the nature of transactions, I am of the view that the appellant held most of the shares as her investment and not as stock in trade. Also, the facts show that the large magnitude of transactions was on account of large funds available with the appellant for investment. On the facts and circumstances of the case, the conclusion that she was a trader in shares is not warranted. However, the profits earne .....

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The Assessing Officer is, therefore, directed to verify the requisite facts and recompute her income on the basis spelt out above. 4. The learned counsel for the appellant has further contended that the Tribunal while setting aside the judgement of the Commissioner of Income-tax (Appeals) has not properly considered the decision of this court relied on by the appellant in the case of Dy. C.I.T. v. Smt. Divyaben C. Shah delivered on 18.4.2001 in Tax Appeal No. 104 of 2001 with Tax Appeal No. 105 .....

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finding recorded by the Commissioner of Income Tax, Appeals, arrived at a conclusion. In para 25, the Tribunal has pointed out the test to be considered as laid down in case of P.M. Moahmmed Meers Khan vs. CIT [ 73 ITR 735] and in the case of Khan Bahadur Ahmed Alladin & Sons vs. CIT [68 ITR 573]. The Tribunal after applying the test pointed out as under. (i) The assessee have purchased almost all the scripts from primary market. (ii) The purchases during the year under consideration from t .....

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estment. (ix) The shares were never held as stock-in-trade. (x) Shares purchased were never subdivided into group with an intention to sell." Keeping these aspects in mind and considering other decisions, the Tribunal arrived at a conclusion that the assessee never indulged in adventure of any trade. We find no substantial question of law arising in these appeals. The appeals are therefore dismissed. 5. The learned counsel for the appellant has relied on a decision of this court in the case .....

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3) 40 Taxmann.com 214 (Gujarat) and Commissioner of Income-tax v. Manish Nathulal Lavti reported in (2013) 36 Taxmann. Com 5 (Gujarat). 7. The learned counsel for the appellant has relied on the decision of this court delivered on 19.8.2013 in Tax Appeal No. 71 of 2013, more particularly, paragraph No. 3, wherein it has been observed as under: para - 3 ….........when in the immediate earlier year i.e. assessment year 2004-05 and with respect to the very shares, the Assessing Officer had a .....

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. Commissioner of Income-tax, Calcutta reported in (1965) 57 ITR 21 (SC) wherein it has been held by the Supreme Court as under: Held, on the facts, that the purchase and sale of the property was not an adventure in the nature of trade within the meaning of section 2(4) and the profit realised therefrom was not taxable under section 10 of the Indian Income-tax Act, 1922. The facts that the appellant made a profitable bargain when it purchased the property and that it had a desire to sell the pro .....

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e income-tax authorities. The question whether profit in a transaction has arisen out of an adventure in the nature of trade is a mixed question of law and fact. If a transaction is related to the business which is normally carried on by the assessee, though not directly part of it, an intention to launch upon an adventure in the nature of trade may readily be inferred. A similar inference would arise where a commodity is purchased and sub-divided, altered, treated, or repaired and sold, or is c .....

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In light of the above decisions, the learned counsel for the appellant submitted that the Tribunal has committed an error in reversing the judgement of the Commissioner of Income-tax (Appeals) and confirming the order of the Assessing Officer holding that the income arisen to the assessee out of shares was assessable under the head profit and gains of business or profession and not as capital gains. He has further submitted that now the Government has come out with subsequent Circular No. 6 of 2 .....

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or both. Determination of the character of a particular investment in shares or other securities, whether the same is in the nature of a capital asset or stock-intrade, is essentially a fact-specific determination and has led to a lot of uncertainty and litigation in the past. 2. Over the years, the courts have laid down different parameters to distinguish the shares held as investments from the shares held as stock-in-trade. The Central Board of Direct Taxes ( CBDT ) has also, through instructi .....

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from sale of shares and securities (i.e. whether the same is in the nature of capital gain or business income), CBDT realizing that major part of shares/securities transactions takes place in respect of the listed ones and with a view to reduce litigation and uncertainty in the matter, in partial modification to the aforesaid Circulars, further instructs that the Assessing Officers in holding whether the surplus generated from sale of listed shares or other securities would be treated as Capital .....

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transfer thereof as Capital Gain, the same shall not be put to dispute by the Assessing Officer. However, this stand, once taken by the assessee in a particular Assessment Year, shall remain applicable in subsequent Assessment Years also and the taxpayers shall not be allowed to adopt a different/contrary stand in this regard in subsequent years; c) In all other cases, the nature of transaction (i.e. whether the same is in the nature of capital gain or business income) shall continue to be deci .....

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n the issue of treatment of income derived from transfer of shares and securities. All the relevant provisions of the Act shall continue to apply on the transactions involving transfer of shares and securities. 10. Learned counsel for the respondent Mr. Varun Patel has supported the order of the Tribunal and contended that the Tribunal has rightly reversed the order of the Commissioner of Income-tax (Appeal) and restored the order of the Assessing Officer holding that the income arisen to the as .....

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single transaction or the manner in which the transaction is done is to be looked into and this is a pure question of law. Therefore, this court should not interfere with the order of the Tribunal. 11. We have heard learned advocate Mr. Shah for the appellant and learned counsel Mr. Patel for the respondent. Taking into consideration the question of law, we have considered that while the Assessing Officer has considered the income arisen to the assessee out of sale of shares as assessable under .....

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