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2017 (1) TMI 504 - ITAT AHMEDABAD

2017 (1) TMI 504 - ITAT AHMEDABAD - TMI - Income from sale of shares - LTCG and STCG or business income - Held that:- While the volume, frequency and magnitude of transactions are relevant factors for determinative of nature of transactions, no single test by itself is determination of the issue. The cumulative effect has to be weighed to determine as to whether the impugned transactions bear the trappings of adventure in the nature of trade or commerce etc. or otherwise. On the totality of the .....

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he gains based on the period of holding of less than 30 days and more than 30 days is not supportable by the scheme of the Act. The STCGs as defined under section 2(42A) does not contemplate such bifurcation. Thus, the aforesaid action of the CIT(A) is a mere ipse dixit of the CIT(A) and is not sustainable in law. Hence, the plea on behalf of the assessee deserves acceptance. As a result, grievance of the assessee raised in ground No.1 is decided in favour of assessee. - I.T.A. No. 328/Ahd/2014, .....

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A) in granting partial relief to the assessee against the action of the Assessing Officer (AO) holding the Short Term Capital Gains (STCGs) and Long Term Capital Gains (LTCGs) arising on sale of shares as business income , the assessee has also assailed the order of the CIT(A) holding gains arising on sale of shares, where holding period is less than one month, to be business income of the assessee. 3. The relevant grounds of appeal raised by the Assessee and the Revenue read as under:- Assessee .....

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Capital Gains. 2. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in confirming the action of the assessing officer in disallowing ₹ 1,75,069/- u/s.14A whereas interest claimed by the assessee is ₹ 60,576/- only. Revenue s appeal in ITA No.357/Ahd/2014 for AY 2010-11 (1) On the facts and circumstances of the case, whether the Ld.CIT(A)-II, Surat was justified in treating income from share trading as .....

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ncluded STCGs of ₹ 56,57,594/-. The assessee has declared LTCGs of ₹ 18,96,152/-. The LTCGs noted above were claimed as exempt income under section 10(38) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). The assessee also availed concessional rate of tax at 10% under section 111A of the Act in respect of STCGs noted above. The AO after obtaining the requisite details concerning the transactions giving rise to LTCGs and STCGs concluded that the aforesaid g .....

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nd following the same, directed the AO to treat the income on sale of shares as STCGs or LTCGs as the case may be under the head capital gain in so far as gain arising on sale of shares which were held by the assessee for a period of more than one month. 6. The relevant para of the order of the CIT(A) is reproduced hereunder:- 7. As regards treatment of Short Term Capital Gain of ₹ 56,57,594/- and Long Term Capital Gain of ₹ 18,96,152/- as Business Income , the assessing officer has .....

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r for assessment year 2008- 09 are reproduced herein under:- 4.1 I have duly considered the above submission of the appellant and find that all the above three grounds of appeals taken by the appellant are identical to the grounds of appeal no.1,2,& 4 taken in the immediate proceeding assessment year, i.e. A Y 2007-08 vide Appeal No.CAS/II/287/09-10, which has been partly allowed by the undersigned vide order dated 15.09.2010. In view of the same, the issues involved in the instant appeal ar .....

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of the decision in the case of Shri Sugamchand C. Shah, vide ITAT, Ahmedabad Bench D order dated 29.01.2010 in ITA No.3554/Ahd/2008 and 1932/Ahd/2008, for the purchase of determining the short term capital gain, i.e. the shares which are held for a month and more but less than one year should be treated as investment and on their sale, profit shall be chargeable under the head short term capital gain, and, where shares are held for less than a month, gain from sale of these shares should be trea .....

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third grounds of appeal are, therefore, partly allowed. 7.1. Since the issue is partly covered in favour of the appellant by the decision of my predecessor (Appellate Order no.CASII/ 338/10-11 dated 24.06.2011, in appellant s own case, the assessing officer is directed to treat the Capital Gain from sale of shares held by the appellant for a period of one year or more as Long Term Capital Gain . The shares held by the appellant for a period of one month or more, but less than one year should be .....

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uently, the ground nos 1 and 3 are partly allowed in favour of the appellant. 7. The Ld.AR Mr. Rasesh Shah, at the outset, submitted that identical issue on similar facts has arisen before the Hon ble ITAT Ahmedabad in assessee s own case in ITA Nos.1970 & 2247/Ahd/2011 & Ors. for AY 2006-07 and also in other assessment years, order dated 31/05/2016 and the issue has been decided in favour of assessee on similar facts. Thereafter, the Ld.AR pointed out that the action of the CIT(A) in ho .....

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an intention to benefit from its capital accretion. He adverted to the assessment order and submitted that the shares are held as investment since long and the Income Tax Department as duly accepted the action of the assessee upto AY 2005-06. It was submitted that the assessee was actively engaged in textile trading as reflected from the high volume thereto which fact is also on record. During the relevant assessment year, the assessee has entered into 79 transactions in STCG only which includes .....

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justification for the CIT(A) to artificially restrict the relief only in respect of those shares which were held for more than 30 days. The Ld.AR accordingly prayed that his claim towards capital gain as per return of income deserves to be accepted in toto. 8. The Ld.DR for the Revenue, Mr.Prasoon Kabra, on the other hand, relied upon the order of the AO and submitted that there was a clear profit motive behind acquisition of shares. The frequency of transactions are also on the business scale .....

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ains as declared by the assessee on a business income as sought to be held by the AO. It is the case of the assessee that the shares were held as capital asset and not as a trading asset prior to its sale. The intention of the assessee in this respect can be gauged from the fact that the assessee is overwhelmingly engaged in textile business and therefore not occupied primarily as a trader. Secondly, it is claimed that the assessee has clearly maintained separation between investment in shares a .....

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,152/- were earned from 19 transactions where period of holding vary from 365 days to 1825 days. These facts do not support the assumption made by the AO with regard to volume, frequency and magnitude adverse to the assessee. We note that similar view has been taken by the Coordinate Bench of the ITAT in ITA Nos.1970 & 2247/Ahd/2011 & Ors. for AY 2008-09, order dated 31/05/2016 in assessee s own case while deciding the issue in favour of assessee. The relevant paras of the Tribunal s ord .....

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actual situation. A perusal of the profit and loss account of the assessee show that the assessee has separately shown Derivative profit, long term capital gains/short term capital gains on shares. In the balance sheet, the assessee has shown shares under the head 'investment'. These investment shares have been valued at cost. The Hon'ble Supreme Court in the case of CIT Associated Industrial Development Co Pvt. Ltd. 82 ITR 586, which decision has also been considered by the CBDT in .....

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in its Circular No. 6/2016 dated 29.02.2016, interalia observed 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 from sale of shares and securities (i.e. whether the same is in the nature of .....

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sessee 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 transfer thereof as Capital Gain, the same shall not be put to dispute by the A .....

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n of the A.O 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 for shares held less t .....

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Thus the assessee s claim cannot be negated on the basis of frequency of transaction. 22. Considering the entire facts in totality, we find that the assessee has shown shares as investment right from the year of purchase and that was shown as such in the balance sheet of the assessee which was filed before the A.O. 23. In our humble opinion, the shares have to be treated as investments and, therefore any profit earned on the sale thereof is to be treated as capital gains. 10. While the volume, f .....

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