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2016 (10) TMI 162 - ITAT AHMEDABAD

2016 (10) TMI 162 - ITAT AHMEDABAD - TM - Share transactions - nature of income - business income or capital gain - Held that:- First we come to Assessing Officer’s reasoning that profits arising from sale of shares having less than a month holding period are to be treated as business income as per this tribunal decision in Sugamchand C. Shah vs. ACIT [2010 (1) TMI 942 - ITAT, Ahmedabad]. It is evident to us that yet another co-ordinate bench has already expressed disagreement with the earlier t .....

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entative fails to rebut this factual position. We observe in these peculiar facts and circumstances that this issue required to be examined afresh by the Assessing Officer as per law after affording adequate opportunity of hearing to the assessee. Ordered accordingly. - Decided in favour of assessee for statistical purposes. - ITA No.2810/Ahd/2011 - Dated:- 23-8-2016 - SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER For The Appellant : Urvashi Shodhan, A.R. For The Res .....

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as business income and also in further enhancing the same to the tune of ₹ 40,26,576/-. 3. We come to the relevant facts first. The assessee is a share trader. He filed return on 20.09.2008. The assessee had declared capital gain of ₹ 47,45,954/- arising from sale of shares during scrutiny. The Assessing Officer applied this tribunal s decision in case of Sugamchand C. Shah vs. ACIT to hold that the same profits arising from shares having holding period of less than a month would be .....

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proceeding the appellant furnished inter-alia two pages of share purchase-sales details consisting of holding period less than 30 days and less than a year. The quantity of shares purchase and sales affected by the appellant was substantial in these two category. The profits earned from the shares holding less than 30 days was ₹ 29,07,962/- and the profits from the share held for less than a year was ₹ 11,18,614/-. The appellant claimed STCG on the entire profit earned from the sale .....

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n lakhs) 1 Investment in Mutual Funds/Shares 96.62/1.47 209.76/237.03 220.19/101.24 2 Stock in Trade (Shares) 252.68 26.55 2.51 3 Loan 0.25 52.50 0.30 4 Income/Profits 8.57 30.76 10.61 5 Capital Gains both STCG & LTCG. 15.03 47.53 (-) 110.67 6 Sales figure Not provided Not provided Not provided From the Table above, it is very clear that the appellant has been substantially trading in shares and also investing in the Mutual Funds and shares. It is also clear that the investment in Shares was .....

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within 30 days or within a year is important to determine the nature of profits/gains. If the frequency of transactions is more, then it can be safely said that the profits/gains is Business income. The appellant had conceded that it is not a share broker and the appellant has been into both trading in shares and making investments in Mutual Funds & Shares. During the year, about 100% of the shares held for less than i year was sold. Thus, the intention of the appellant was clear from the b .....

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the case of Mahendra C Shah vs. Addl. CIT (ITAT, Mum.) should be applied. 6.3.7 In case of nvestment, the Investor before putting his money analyses the performance vis-a-vis the potential growth of the company in which the investment is to be made. He also bases his decisions on the market news. In case of a trading, the day to day position of the stock vis-a-vis the Sensex determine the purchase and sales of shares. The normal trend is that when the market is bullish go and sell and when the .....

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shell, speaks of the frequency of purchases and sales of shares done by the appellant during the year. I may quote here what the Hon'ble Supreme Court in the case of CIT vs. H. Holck Larsen (1986) 58 CTR (SC) 53, observed that the real question as Lord Raid said was not whether the transaction of buying and selling the shares lacks the element of trading but whether the later stages of the whole operation show that the first step the purchase of the shares - was not taken as, or in the, cour .....

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st of shares submitted before me were sold within a year of purchase. The holding of shares were between 1 day to 192 days. Except couple of scrips, the holding period of shares was less than 6 months. Most of the gain was earned in shares held for a period for short periods. (b) The AO has not disturbed the Investments recorded in the B/S. The only contention raised by the AO was that those shares which has holding period of less than 30 days, the profits from the sale of such shares was treate .....

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/profit on the sale of the shares as 'Capital Gains' and the same has been accepted by the A.O. but ratio of consistency cannot be applied in this case that the findings of the AO and my observations clearly pierce the veil of intention the assessee had to gain profits by dealing in short term period only. Moreover, the rule of res-judicata is not applicable to Income-Tax proceedings. (h) These facts indicate that the intention of the assessee was to gain profits by dealing in short term .....

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.9 In view of the above and considering the facts and circumstance, there can be no second opinion that the intention of the assessee was to gain profits by dealing in short term period only. Consequently, the income from sale of shares was assessable as "income from business" and not "short-term capital gains". Let me examine the decision in the case of Mahendra C Shah vs. Addl. CIT, Mum (ITAT, Mum.) relied upon by the appellant. In that case the Assessee was deriving income .....

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t the share holding periods varied from 533 days to 3981 days. Also in some cases, the holding period varied from 387 days to 9016 days as noted in para 16 of the Order. After analyzing the parameters, the ITAT, held in favour of the appellant. This case is completely distinguishable with the instant case. Because, here we are dealing with the shares which are held for at best 192 days only. The AO had not disturbed the profits and gains from the sale of investments in the form of Mutual Funds a .....

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e of para. 6.3.5 above that during the current year the appellant had accumulated shares investment from 1.47 lakhs in March ending 2007 to 237.03 lakhs in March ending 2008. Similarly, the S-I-T of shares in 2007 was 252.68 lakhs reduced to only 26.55 lakhs in March 2008. In this circumstances, I cannot disagree with the findings of the AO that the income from sale of shares was assessable as "income from business" and not "short-term capital gains". The AO is directed to tr .....

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