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2016 (10) TMI 320 - ITAT KOLKATA

2016 (10) TMI 320 - ITAT KOLKATA - TM - Transaction of shares - nature of income - business income or capital gain - Held that:- From the plain reading of clause (a) of the said Notification No.6/2016 dated 29.02.2016 we find that it has been instructed that if the assessee is irrespective of the period of holding treat the transaction for sale-purchase of the share as stock-in-trade then the Department shall not dispute on this matter. Accordingly, in this case, assessee has been treating the i .....

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that basis the claim of the assessee should be held proper. Accordingly we are inclined to reverse the order of authorities below - Decided in favour of assessee. - ITA No.1125/Kol/2013 - Dated:- 12-8-2016 - Shri Waseem Ahmed, Accountant Member and Shri S.S.Viswanethra Ravi, Judicial Member For The Appellant : Shri Miraj D Shah, Advocate For The Respondent : Shri P.K.Chakraborty, JCIT-SR-DR ORDER PER Waseem Ahmed, Accountant Member:- This appeal by the assessee is directed against the order of C .....

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assessee is as under:- 1. On the facts and in the circumstances of the appellant s case and in law, the learned Commissioner of Income Tax (Appeals), VI, Kolkata [CIT(Appeals)] has erred in upholding the assessment of the sum of ₹ 88,05,787 as income under the head of Profits Gains of Business or Profession as against the appellant s claim in the return of income under the head Short Term Capital Gains . Shri Miraj D Shah Ld. Authorized Representative appeared on behalf of assessee and Shr .....

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business of investment and finance. The assessee for the year under consideration has field its return of income declaring total income of ₹69,44,430/- on 31.03.2010. Thereafter the case was selected for scrutiny under CASS and accordingly notice u/s 143(2) of the Act was issued. The assessee has declared its income from STCG at ₹ 88,05,787/- and Long Term Capital Gains (LTCG for short) of ₹8,45,589/-. The AO, during the course of assessment proceedings observed that the assess .....

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the assessee as to why STCG income declared by assessee should not be treated as business income . In response to the notice, assessee submitted that sale-purchase of share has been shown in its books of account as investment in the year under consideration and same was the position in the past years. However, AO disregarded the plea of assessee by observing that in most of the cases, sale-purchase of shares transactions have been completed in a period within one month to three months. The sale- .....

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h regard to sale-purchase of the share. However, Ld. CIT(A) rejected the plea of assessee and upholding the action of AO by observing as under:- 36. On the analysis of the various decisions relied upon by the appellant and the Assessing Officer it is observed that there is no specific terms and conditions, which can be applied mechanically to come to a conclusion. The issue regarding taxation of gains from shares depends upon the facts and circumstances of each case. The Hon'ble appellate Co .....

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uency of transactions; the assessees had dealt in delivery trading purely with the intention of making quick profits on a huge turnover; the period of holding of a majority of the stock was few days; in most of the transactions" the assessees did not even hold on to at least some part of the huge purchases and had engaged in the same scrips frequently; the intention of the assessees in buying shares was not to derive income by way of dividend on such shares but to earn profits on the sale o .....

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uch transactions; the assessee was purchasing and selling the same scrips repeatedly, and was switching from one scrip to another; the dominant impression left on the mind was that the assessee had not invested in shares; mere classification of these share transactions as investment in the assessee's books of accounts is not conclusive; the intention of the assessee at the time of purchase was only to sell the shares immediately after purchase; frequency of purchase and sale of shares showed .....

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een accepted by the Assessing Officer earlier Assessment Years u/s 143(1) and this is the first year of the scrutiny. The Assessing Officer has also accepted the closing balance to be investments for short term capital gain by the Assessing officer. There are peculiar facts and circumstances where in the earlier assessment years and even in the Assessment Year 2009-10 the investments shown by the appellant have been upheld as investments by the Assessing Officer in the order u/s143(1) except in .....

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f "Profit & Gains of Business" for the current assessment year i.e. 2008-09. It is held that the sale and purchase of shares shown in the investments portfolio except long term capital gains is treated as business income under the head of 'profits & gains of business' for current assessment year. The gain on sale of shares having short term capital gains is held to be assessed as business income. The long term capital gain shown by the assessee is accepted as long term .....

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s of each case giving the various points/issues considered for coming to a conclusion regarding the head of income under which the share profit is to be taxed. The long term capital gain amounting to ₹ 8,45,589/- is held to be long term capital gain exempted u/s 10(38) of the Income-tax Act, 1961. The amount of ₹ 88,05,787/- is held to business income instead of short term capital gain and ₹ 8,45,589/- as long term capital gain as declared by the appellant. These grounds of app .....

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Below. On the other hand, Ld. DR relied on the order of Authorities Below. 7. We have considered the rival contentions as well as relevant material on record. We have also carefully perused the various decisions relied upon by the parties. Though the arguments for both sides were also addressed on the merits of the issue, however, from the foregoing discussion, we find that AO has treated the STCG of assessee as business income on the ground that there were numerous and systematic transactions w .....

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see, the CBDT very recently has came out with a Notification No.6/2016 dated 29.02.2016 and relevant portion of the said Notification reads as under:- 3. Disputes, however, continue to exist on the application of these principles to the facts of an individual case since the taxpayers 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 fr .....

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Gin or Business Inc, shall take into account the followingITA a) Where the assessee itself, irrespective of the period of 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 tr .....

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keeping in view the aforesaid Circulars issued by the CBDT. From the plain reading of clause (a) of the said Notification, we find that it has been instructed that if the assessee is irrespective of the period of holding treat the transaction for sale-purchase of the share as stock-in-trade then the Department shall not dispute on this matter. Accordingly, in this case, assessee has been treating the income arising from the sale-purchase of the share as STCG, therefore, lower authorities cannot .....

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ns involved dealing in shares for the purposes of business. The Tribunal has correctly applied the principle of law in accepting the position that it is open to an assessee to maintain two separate portfolios, one relating to investment in shares and another relating to business activities involving dealing in shares. The Tribunal held that the delivery based transactions in the present case, should be treated as those in the nature of investment transactions and the profit received therefrom sh .....

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year is separate in itself. The Tribunal held that there ought to be uniformity in treatment and consistency when the facts and circumstances are identical, particularly in the case of the assessee. This approach of the Tribunal cannot be faulted. The Revenue did not furnish any justification for adopting a divergent approach for the assessment year in question. There cannot be any dispute about the basic proposition that entries in the books of account alone are not conclusive in determining t .....

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