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2016 (9) TMI 245 - ITAT BANGALORE

2016 (9) TMI 245 - ITAT BANGALORE - TMI - Transaction of shares - business income or capital gain - Held that:- No doubt, as per CBDT circular No.4/2007, the assessee is permitted to maintain two portfolios i.e. trading as well as investment portfolio but the assessee is duty bound to produce evidence that certain transactions were intended to be by way of investment and some are by way of business transactions. As the issue has to be decided based on the facts of the case, in the absence of any .....

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s not justified to come to conclusion that the assessee is an investor without referring to any material or evidence. Therefore, we hold that the respondent-assessee is merely a trader in shares and profit arising on sale of such transaction should be assessed as business income. - Decided in favour of revenue - ITA No.803/Bang/2014, ITA No.1165/Bang/2013 - Dated:- 27-7-2016 - SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER and SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER For The Appellant : Shri Sunil Kumar .....

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e is an individual. He is mainly engaged in dealing with share transactions. He was maintaining both trading portfolio as well as investment portfolio. During the previous year relevant to assessment year 2005-06, assessee has shown shares held as stock-in-trade in earlier year i.e. October 2004 as investment and offered the gains arising out of sale of those scrips under the head short-term capital gains. The Assessing Officer (AO) held that though short-term capital gains should be assessed as .....

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a trader and therefore, accepted the contention of the respondent-assessee that he is only an investor. 4. Being aggrieved by this order of the CIT(A), the revenue is before us in the present appeals. The revenue raised the following grounds of appeal in ITA No.803/Bang/2014 for the assessment year 2005-06: 1. The order of the learned C1T(A) is opposed to law and facts of the case. 2. On the facts and in the circumstances of the case the learned CIT(A) erred in holding that the profits on secur .....

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sessee himself was treating the income from share trading as business income and only from AY 2005-06 onwards, i.e after introduction of Securities Transaction Tax, the assessee has switched to claim the same E S short term capital gains to avail the taxation benefit of 10%. 5. For these and other grounds that may be urged at the time of hearing, it is prayed that he order of the C[T(A) in so far as it relates to the above grounds may be reversed and that of the Assessing Officer may be restored .....

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usiness income. 3. On the facts and in the circumstances of the case the learned CIT(A) failed to appreciate the fact that the assessee was indulging in regular purchase and sale of shares and deriving the profits which is clearly in the nature of trading business in shares. 4. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the CIT(A) in so far as it relates to the above grounds may be reversed and that of the Assessing Officer may be restore .....

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s. On the other hand, the learned AR of the assessee relied on the orders of the CIT(A) and submitted that the assessee is entitled to maintain two portfolios i.e. trading as well as investment portfolio and he has referred to circular No.4/2007 dated 15th June 2007 issued by the CBDT. We heard rival submissions and perused material on record. The issue in present appeal is regarding the nature of income from share transactions entered into by the respondent-assessee. The issue, whether the shar .....

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single factor is conclusive. The most important factor is the intention of the assessee at the time of purchase which has to be gathered from the conduct of the assessee. The actual conduct has to be evaluated by analyzing the holding period etc. An investor makes purchases with a long term goal of earning income from investment and he is not tempted to sell the shares on every rise and fall in the market which are the attributes of a trader. The Hon ble Apex Court in the case of G.Venkata Swami .....

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or personal use, profession or enjoyment. iii. The repetition of the transaction. The Hon ble Supreme Court also held that the intention at the time of purchase of shares is an important criterion to determine the true nature of such transactions. Applying the above position to the facts of the present case, the AO held that the respondentassessee is a trader in shares on the consideration of volume and frequency of the transactions and in the immediately preceding year, they were shown as a tra .....

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