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2016 (9) TMI 252 - GUJARAT HIGH COURT

2016 (9) TMI 252 - GUJARAT HIGH COURT - TMI - Profits from sale of shares - 'business income' OR 'capital gain' - Tribunal held that the assessee lady was a dealer in shares and was not an investor in shares - Held that:- This Court is of the opinion the ITAT has committed serious error of law in holding that the assessee lady was a dealer in shares and was not an investor in shares. It is required to be noted that for the assessment year 1992-93 the department had accepted the status of the ass .....

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ed 23/09/2005 passed by the ITAT in ITA No.26/Ahd/1999 for the assessment year 199394, whereby the appeal of the assessee came to be dismissed confirming the order passed by the CIT (A). 2. The facts of the case are that assessee filed the return of income on 15/10/1993 declaring the total income of ₹ 14,04,304/, accordingly return was processed under Section 143 (1)(a) of the Act. The assessee is investor in shares. The AO after examining the share dealings of the assessee for the three y .....

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axed as Long Term Capital Gains and Short Term Capital Gains. 2.1 The matter was carried before the CIT (A) which has uphold the action of AO in treating the profits from sale of shares as 'business income' is in order and thereby partly allowed the appeal of the assessee. 2.2 The matter was further carried before the ITAT by the assessee by contending that the CIT (A) and the AO has committed serious error by treating the long term capital gain / short term capital gain / loss as shown .....

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in shares and was not an investor in shares ? 4. Learned Counsel for the assessee has mainly contended that the ITAT has failed to appreciate that for the assessment year 1992-93 the department had accepted the status of the assessee to be an investor and purchasing the shares of six companies and selling the shares of three companies ought not to have converted the status of the assessee from investor into a dealer. He has further contended that for the assessment year 1992-93 the market was a .....

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ndered in Tax Appeal No.1763 of 2005 and allied matters dated 08/06/2016 wherein similar question has been considered in favour of the assessee. 5. On the other hand, learned Counsel for the Department has supported the order passed by the ITAT and has contended that all the orders were passed after considering the material placed before them and the orders passed by the authority is not required to be interfered with. In support of the contention, learned Counsel for the department has placed r .....

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was not an investor in shares. It is required to be noted that for the assessment year 1992-93 the department had accepted the status of the assessee to be an investor and purchasing the shares of six companies and selling the shares of three companies could not have converted the status of the assessee from investor into a dealer. 7. Similar question had arisen before this Court while deciding Tax Appeal No.1763 of 2005 and allied matters and relevant observations made therein are reproduced he .....

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738/- as against the long term capital gain at ₹ 7,84,422/- and ₹ 6,86,333/for Assessment Yerar 1993-94 and 1994-95 respectively, which is clear from the record. It is also clear that the shares were not shown as stock-in-trade and there was no finding recorded that there was any conversion. The Tribunal after considering various judgments as also keeping in mind the finding recorded by the Commissioner of Income Tax, Appeals, arrived at a conclusion. In para 25, the Tribunal has poi .....

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t out of borrowed funds. (iv) The shares have been acquired by way of subscription to the public issue. (v) The shares have been held for fairly long period. (vi) The shares once sold have never been repurchased. (vii) In the immediately preceding years, the shares shown have been accepted as investments. (viii) The purchase of shares was with an intention of keeping them as investment. (ix) The shares were never held as stock-in-trade. (x) Shares purchased were never sub-divided into group with .....

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was held as follows: Where assessee, a salaried class person, earned profit amounting to ₹ 70 lakhs on sale of shares, Tribunal was right in holding assessee as investor and treating gain as capital gain as against business income treated by Assessing Officer. 6. Similar view is taken in the case of Commissioner of Income-tax v. Saurabh Rameshchandra Lavti reported in (2013) 40 Taxmann.com 214 (Gujarat) and Commissioner of Income-tax v. Manish Nathulal Lavti reported in (2013) 36 Taxmann. .....

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consideration, no error and/or illegality has been committed by the CIT(A) as well as Income-tax Appellate Tribunal in deleting the additions made by the Assessing Officer and treating it as business income for the purpose of short term capital gain and long term capital gain.. 8. Reliance is placed on the decision of the Supreme Court in the case of Janki Ram Bahadur Ram v. Commissioner of Income-tax, Calcutta reported in (1965) 57 ITR 21 (SC) wherein it has been held by the Supreme Court as un .....

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cluded by purchasing the property to start a venture in the nature of trade. It is for the revenue to establish that the profit earned in a transaction is within the taxing provision and is on that account liable to be taxed as income. The nature of the transaction must be determined on a consideration of all the facts and circumstances which are brought on the record of the income-tax authorities. The question whether profit in a transaction has arisen out of an adventure in the nature of trade .....

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ent dealings and the manner of disposal may be such that the transaction of purchase of land cannot be assumed without more to be a venture in the nature of trade. The profit motive in entering a transaction is not decisive, for an accretion to capital does not become taxable income merely because an asset was acquired in the expectation that it may be sold at a profit. 9. In light of the above decisions, the learned counsel for the appellant submitted that the Tribunal has committed an error in .....

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me-tax Act, 1961 ( Act) defines the term capital asset to include property of any kind held by an assessee, whether or not connected with his business or profession, but does not include any stock-in-trade or personal assets subject to certain exceptions. As regards shares and other securities, the same can be held either as capital assets or stock-intrade/ trading assets or both. Determination of the character of a particular investment in shares or other securities, whether the same is in the .....

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e of the field formations. 3. Disputes, however, continue to exist on the application of these principles to the facts of an individual case since the tax payers find it difficult to prove the intention in acquiring such shares/securities. In this background, while recognizing that no universal principal in absolute terms can be laid down to decide the character of income from sale of shares and securities (i.e. whether the same is in the nature of capital gain or business income), CBDT realizin .....

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holding the listed shares and securities, opts to treat them as stock-in-trade, the income arising from transfer of such shares/securities would be treated as its business income. b) In respect of listed shares and securities held for a period of more than 12 months immediately preceding the date of its transfer, if the assessee desires to treat the income arising from the transfer thereof as Capital Gain, the same shall not be put to dispute by the Assessing Officer. However, this stand, once t .....

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n respect of such transactions in shares/securities where the genuineness of the transaction itself is questionable, such as bogus claims of Long Term Capital Gain/Short Term Capital loss or any other sham transactions. 5. It is reiterated that the above principles have been formulated with the sole objective of reducing litigation and maintaining consistency in approach on the issue of treatment of income derived from transfer of shares and securities. All the relevant provisions of the Act sha .....

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