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2016 (11) TMI 1156

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..... I RAVISH SOOD, JUDICIAL MEMBER For The Appellant : Shri C.N. Vaze, AR For The Respondent : Miss. Anupama Singh, DR ORDER PER D. KARUNAKARA RAO, AM: This appeal filed by the assessee on 1.2.2012 is against the order of the CIT (A)-27, Mumbai dated 17.10.2011 for the assessment year 2008-2009. In this appeal, assessee raised the following grounds which read as under:- 1. On the facts and in the circumstances of the case and in law, the Ld CIT (A) erred in confirming the order of the AO to treat the Short Term Capital Gain of ₹ 38,48,344/- earned by the assessee on transfer of listed shares as income from business. 2. Without prejudice to the above, if at all the above income is treated as business income, the appellant be entitled to a deduction under section 88E of an amount equal to securities transaction tax paid by her in respect of these transactions. 2. Briefly stated relevant facts of the case are that the assessee declared short term capital gains of ₹ 38,48,344/- in the return of income. On finding the assessee is engaged in the share transaction activity, AO proposed to treat the same as business activity and proceeded .....

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..... h the parties, we find, the assessee continuously engaged in the buying and selling of shares and reflected the same as investment activity and not as stock-in-trade. The claim of the assessee was accepted by the Revenue Authorities in the AYs 2006-07 and 2007-08. AO disturbed the claim of the assessee in the year under consideration and treated the same as a business activity and taxed the gains under the head income from profit and gains of business and profession‟. We have perused the orders of the Revenue Authorities cited before us with reference to the Circular No.6/2016 of the Board. We have also perused the order of the Tribunal in the case of M/s. R.R. Hosiery (supra) and find paras 6 and 7 of the said Tribunal‟s order are relevant in this regard. Considering the significance of the said paras for the sake of completeness of this order, we proceed to extract the same as under:- 6. We have heard the rival contentions carefully and perused the material placed before us and also have gone through the orders of authorities below including the decision of the Apex Court relied upon by the assessee. We have also considered the CBDT Circular as relied upon by th .....

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..... r understanding of the issue involved: ...... ..... After looking to the overall scenario of the assessee, we are of the considered view that the department cannot dictate the manner and method of treating the activity of assessee in shares as trading activity in one year while accepting the same as investment in shares in other years which were even scrutinized u/s 143(3), as it is clear from the above table. Moreover, the case of the assessee is fortified by the CBDT circular bearing number 6 of 2016 dated 29.2.2016 which is reproduced below for better understanding:- Circular No.6 of 2016, dated 29.2.2016: Sub: Issue of taxability of surplus on sale of shares and securities - Capital Gains or Business Income - Instructions in order to reduce litigation - reg.- 1. Sub-section (14) of Section 2 of the Income-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 capit .....

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..... subsequent years; c) In all other cases, the nature of transaction (i.e. whether the same is in the nature of capital gain or business income) shall continue to be decided keeping in view the aforesaid Circulars issued by the CBDT. 4. It is, however, clarified that the above shall not apply in respect of such tran sactions 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. Er (Rohit Garg) Deputy Secretary Government of India 5. It is reiterated that the above principles have been formulated with t he sale objective of reducing litig ation 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 shall continue to apply on the transactions involving transfer of shares and securities. 7. Taking into consideration the above circular and facts and circumstances of the case, we are of the considered view that the assessee was not carrying any trading activity into equity shares and securities and therefore, we are inclined .....

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