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Koradia Construction Pvt. Ltd. Versus The Dy. Commissioner of Income Tax – 9 (2) , Mumbai

2016 (11) TMI 1059 - ITAT MUMBAI

Treatment of profit arising on share transaction - business income or short term capital gain - Held that:- As decided in assessee's own case for A.Y. 2007-08 we find that it has not been disputed that the assessee has shown shares as investment right from the date of purchase and that was shown as such in the balance sheet of the assessee which was filed before the AO. In our humble opinion, the shares have to be treated as an investment and therefore any profit earned on the sale thereof is to .....

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IT(A) -20, Mumbai, dated 4-1-2010 for A.Y. 2006-07. 2. The only ground raised by the assessee in this appeal is the treatment of profit arising on share transaction of ₹ 1,05,41,397/- as business as held by the A.O. against short term capital gain as offered by the assessee. 3. Brief facts in this case are that the assessee is a company which is engaged in the business of development of real estate, speculation in shares and dealings in shares. The return of income was filed by the assesse .....

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assessee is not a small scale retail investor, but a trader in shares. For this, he held that for the majority of the share transactions, the assessee had sold shares within a period of 12 months of their acquisition. He also held that except in one script, the assessee has earned small long term capital gain, all other transactions are huge in volume resulting into voluminous, therefore, the amount earned by the assessee was not in the capacity of an investor, but dealer in shares. Aggrieved by .....

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or the assessee submitted a detail written submission in the form of comparative chart which demonstrated that the assessee is, in fact, engaged in the business of real estate development and in assessee s own case in A.Y. 2007-08, the Mumbai Bench of Tribunal in ITA No. 1054/Mum/2011 vide its order dated 27.9-2013 has held that the assessee is an investor and not a trader. He further relied on the order of the co-ordinate Bench of this Tribunal in the case of Sagar Construction vs. ACIT in ITA .....

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m capital gain of ₹ 7,24,45,273/- and in this year the assessee had earned short term capital gain of ₹ 1,05,31,812/-. In A.Y. 2007-08, the number of shares purchased are 24 whereas in the current year it is 26. The ld. Counsel for the assessee has mainly relied on the order of the Tribunal in assessee s own case of A.Y. 2007-08, where on identical facts and circumstances, the ITAT has held that the assessee to be an investor. He further submitted that during the year, the short term .....

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d the assessee as investor in A.Y. 2008-09, though the facts are similar, but both A.O. & ld. CIT(A) were at error in considering the assessee as trader in this year. He further stated that all transactions are delivery based transactions and are not with profit motive. 5. The ld. Counsel for the assessee also relied on the Board Circular No. 4 of 2007 as well as the Speech of Hon ble Finance Minister supporting his contention that all conditions should be same cumulatively and independent a .....

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and, therefore, intention of the assessee is evident that it wanted to maximize the profit. He also submitted that disclosure of shares in the books of account as investment cannot be the only criteria to decide the issue. The submission made by the ld. DR on less dividend received during the year was also to support its contention that the intention of the assessee is not an investor in shares but was profit therefrom. He also relied upon the orders of the A.O. as well as the ld. CIT(A) and co .....

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. The dispute is regarding the nature of income on sale and purchase of shares by the assessee. The issue, whether the income from sale and purchase of shares in a particular case should be treated as capital gain or as business income has been a debatable issue and there are conflicting decisions of the Tribunal on this issue. Each case is, therefore, to be based on its own factual situation. A perusal of the profit and loss account of the assessee shows that the assessee has separately shown s .....

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s part of the stock-intrade is a matter which is within the knowledge of the assessee who holds the shares and it should, in normal circumstances, be in a position to produce evidence from its records as to whether it has maintained any distinction between those shares which are its stock-in-trade and those which are held by way of investment The CBDT has also mentioned in its circular that it is possible for a tax payer to have two portfolios i.e. an investment portfolio and trading portfolio. .....

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legation of the Revenue authorities is that the assessee has indulged into high frequency transaction. This in itself could not mean that trading activities have been carried out. A prudent investor always keep a watch on the volatility of the market and makes sound investment decision in accordance with such market fluctuation and has the liberty to liquidate its investments in shares as and when necessary. The law itself has recognized this fact by treating the same as short term capital gains .....

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