TMI Blog2011 (5) TMI 1035X X X X Extracts X X X X X X X X Extracts X X X X ..... es below, material available on record and the decisions relied upon in view of the arguments advanced by the parties. 4. The relevant facts are that the assessee company in the hotel business for the last 30 years having around ₹ 3 to 4 crores of turnover in the last 2 - 3 years claimed to have earned capital gains from the sale of the shares, wherein they had invested in earlier years. It was claimed that the said investment was made from the surplus funds generated out of the profits of the hotel business. The investments made in the shares of certain company were reflected in the Balance Sheet under the head investment and not as stock-in-trade. In support, Balance sheet as on 31.3.2005 was made available for perusal. It was submitted by the assessee that the shares held as investments in the books were accepted by the department as investment for the assessment year 2001-02. It was further submitted that what is relevant is frequency of the transaction and not the volume of the transaction. It was submitted with the assistance of chart giving details of long-term and short-term capital gain, that even though in the case of long-term capital gain, the transactions are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the assistance of Annexure 6, he submitted that the transaction pertaining to sale and purchase in respect of capital gain were carried on for 49 days during the year when the stock exchange was open for transaction almost on 250 days during the year. During this period, there was no transaction at all in the months of April, August, September and October. In the remaining months, only 2 to 10 transactions were there. The ld AR submitted further that the intention as to whether to make investment in shares or to trade is to be seen at the time of purchase of shares. The ld AR referring to page No 6 of the Paper Book No. I submitted that the company has paid up capital of ₹ 25 lakhs and its reserves (accumulated profits) are ₹ 474 lakhs, i.e. almost 19 times the share capital. Even before making gain on sale of investment during the year under appeal, the assessee had reserves (accumulated profits) of ₹ 225 lakhs, i.e. almost 9 times the share capital as on 31.3.2004. He also drew our attention to page 36 of Paper Book No. I to support his submission that the object clause of the Memorandum of Association does not permit the assessee to carry on business in buyi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the conclusion that the claimed capital gain was business income and not out of investment. He placed reliance on the following decisions: (i) CIT v H. Holck Larsen 160 ITR 67 (SC); (ii) Management Structure Systems v ITO, ITA No 6966/Mum/07 (AY 2004-05), order dated 30.4.2010; (iii) CIT v PNB Finance Industries Ltd. ITA No 306/210 dated 18.10.2010 (Delhi H.C); (iv) ACIT Ors. v Vinod K Nevatia, Mumbai ITA No 6556/Mum/09 Ors. (A.Y. 2005-06), Order dated 03.12.2010 (v) DCIT v. SMK Shares Stock Broking P. Ltd. Mumbai ITA No 799/Mum/09 (A.Y 2005-06), Order dt 24.11.2010; (vi) Mr Neval V Shah v ACIT ITA No 2733/Mum/09 (A.Y 2005-06), Order dated 15.12.2010; (vii) Sarnath Infrastructure P.Ltd. v. ACIT 120 TTJ 216 (Luck); viii) Gopal Purohit v JCIT 29 SOT 117 (Mum) (upheld by the Hon ble Bombay High Court in CIT v Gopal Purohit) (ix) Radhasoami Satsang v CIT 193 ITR 321 (SC); (x) CIT v Nirmal Commercial Ltd. 213 ITR 361 (Bom)(FB). 8. The ld DR, on the other hand, tried to justify the orders of the authorities below. He submitted that the share transaction in the case of assessee suddenly increased during the year suggesting that it was trade i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of Gopal Purohit v JCIT (supra) has also held that if the items in question are valued at cost, it would indicate that they are investments or where they are valued at lower of cost or market value, it will indicate that the items in question are treated as stock-in-trade. The Hon ble Delhi High Court in the case of CIT v. PNB Finance Industries Ltd. (supra) has been pleased to hold that if shares are shown as a capital asset in the Balance sheet from the date of purchase and no objection was taken by the AO in the earlier years, he cannot hold it to be stock-in-trade without there being any change in facts. The Hon ble Supreme Court in the case of Radhasoami Satsang v CIT (supra), which has also been followed by the Hon ble Bombay High Court in the case of CIT v Shree Nirmal Commercial Ltd. (supra), and Gopal Purohit (supra), held that though the doctrine of res judicata does not apply to tax proceedings and that each year is a separate year, yet the rule of consistency must be followed and the income that was taxed under the head capital gains in earlier year must also be taxed under the same head of income when the facts and the law on the subject are unchanged. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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