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2016 (9) TMI 151 - ITAT MUMBAI

2016 (9) TMI 151 - ITAT MUMBAI - TMI - Sale and purchase of shares - short term capital gain or Business Income - Held that:- Mere volume or magnitude does not alter the nature of transaction, which are consistently assessed as income from capital gains from past years and even in future years by revenue. Where the assessee was holding large magnitude of shares as investment from year to year and transaction of shares in preceding years as well for the future years had been held as income from c .....

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ssessing Officer to assess the same as short term capital gain. - Decided in favour of assessee - ITA No. 5350/Mum/2011 - Dated:- 29-8-2016 - Sh. Mahavir Singh, JM And B.R. Baskaran, AM Revenue by: Ms. Vinita Menon Assessee by: Shri Vijay Mehta ORDER Per Mahavir Singh, JM This appeal by the assessee is arising out of the order of CIT(A)-27, Mumbai in Appeal No.CIT(A)27/Addl.CIT16(1)/220/07-08 Order dated 03.03.2011. Assessment was framed by ACIT,Cir.16(1) under section 143(3) of the Income tax A .....

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ecision of ld. Assessing Officer in treating the Short Term Capital Gain of ₹ 18,41,755/- as appellants Business Income. The appellant prays that gains of ₹ 18,41,755/- should be treated as Short Term Capital Gain and not business income. 3. Briefly stated, facts are that the assessee is in the business of dealing in shares and earned income from business, Long Term Capital Gains (LTCG) on sale and purchase of shares, Short Term Capital Gains (STCG) on mutual funds, STCG on sale of s .....

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was also of the view that buying and selling of shares in short period and gain arising out of the same, that also by using borrowed funds definitely involves risk and it is organized activity, hence, same is business. According to AO, the assessee has also taken help from professionals and paid professional fee for sale and purchase of shares. Accordingly, he treated this STCG declared by the assessee at ₹ 18,41,755/- as income from trading in shares i.e. the business income. 4. Aggrieved .....

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ale transactions and no churning is involved. Nevertheless the appellant has not furnished any explanation whatsoever to controvert the fact recorded by the A.O. that the appellant has borrowed an amount of ₹ 1,01,44,225/- from Rohit Financial Services which has been used in purchase and sale of shares during the year. It is an accepted principle that an investor does not involve in borrowing of funds for the purpose of investment. Further the appellant herself submitted before the A.O. th .....

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ppellant as appellant s business income. The appellant fails on this ground. Aggrieved, the assessee is in second appeal before the Tribunal. 3. Before us, the ld. Counsel for the assessee apart from taking us through the assessment order and the order of the CIT(A), drew our attention to the ledger account of Rohit Financial Services and stated that the observations of the lower authorities that loan funds were used for purchase and sale of shares is totally wrong. He narrated that the correct .....

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or purchase of shares is depicted. According to ld. Counsel for the assessee this amount is loan taken for purchase of shares, but was repaid subsequently and for this he produced copy of ledger account of Rohit Financial Services. Ld. Counsel for the assessee also stated that this ledger account of Rohit Financial Services clarifies purpose of taking loans from Rohit Financial Services, which is not for investment in the scrips of Munjal Auto of ₹ 32,52,662/- in the month of July. The ass .....

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ding of shares is 5-6 months. Ld. Counsel for the assessee also had taken us through the statement of accounts, the balance sheet and Schedules appended thereto to show that these shares were held as an investment. Further, ld. Counsel for the assessee also explained that the assessee has used this scrip as investment and Revenue has accepted the same as investment and also the income declared by assessee is LTCG in future years. Ld. Counsel for the assessee drew our attention to page 5 and 6 of .....

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argued that none of the authorities below has examined these facts in proper perspective and just by recording wrong facts decided the issue. On the other hand ld. CIT-DR heavily relied on the assessment order and that of the order of CIT(A). 4. We have heard the rival contentions and gone through the facts and circumstances of the case. We find from the statement of ledger account of Rohit Financial Services that there is outstanding balance as on 01.04.2004 at ₹ 66,56,623/- and closing .....

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en by the assessee after the purchase of shares on 29.07.2004. It is also a fact that the assessee has kept these shares as investment in its accounts and holding period is almost 4 to 8 months. Admittedly, the assessee has kept these investments for the purpose of long term and short term gains but not for the purpose of business. Revenue in earlier years i.e. 2004-05 has treated these transaction as investment and for this assessee has enclosed the details of accounts. Assessee has also filed .....

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actions. The first set of transactions involved investment in shares. The second set of transactions involved dealing in shares for the purposes of business (described in paragraph 8.3 of the judgment of the Tribunal as transactions purely of jobbing without delivery). The Tribunal has correctly applied the principle of law in accepting the position that it is open to an assessee to maintain two separate port folios, one relating to investment in shares and another relating to business activitie .....

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d and those for the purposes of business on the other hand. Question (a) above, does not raise any substantial question of law. 3. In so far as Question (b) is concerned, the Tribunal has observed in paragraph 8.1 of its judgment that the assessee has followed a consistent practice in regard to the nature of the activities, the manner of keeping records and the presentation of shares as investment at the end of the year, in all the years. The revenue submitted that a different view should be tak .....

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