TMI Blog2011 (3) TMI 1711X X X X Extracts X X X X X X X X Extracts X X X X ..... the total assessed income. 3. The AO while examining the details furnished by the assessee found that assessee was engaged in buying and selling of shares on daily basis but holding period varied from 14 to 1404 days. The entire difference between purchase and sale price was claimed as short term capital gains where holding period was less than one year. The AO had bifurcated the profit on sale of shares into two and treated the profit on sale of shares held over one year as long term capital gains but in respect of those where holding period was less than one year the AO rejected the claim of the assessee for short term capital gain and treated it as business income. For arriving at this conclusion the AO gave following reasons :- (1) The motive behind investment was business. Assessee has only earned dividend of 80,273/- whereas profit on sale of shares was ₹ 21,00,907/-. Thus the ratio between dividend and profit is 1:25. (2) Shares were on frequent transactions. The assessee has invested in 99 scrips. It had made 203 purchase transactions and 230 sale transactions. Thus there are 433 transactions in 99 scripts. Such large frequently transactions clearly indicate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a house wife and does not have experience as a trader. She has inherited the shares from her parents. Though she is transacting the way pointed out by the AO but they are her investments and not stock-in-trade. He referred to the decision of the D Bench of this Tribunal in the case of Shri Sugamchand C. Shah in ITA No.3554/Ahd/2008 Asst. Year 2005-06 and others pronounced on 29.01.2010 wherein all the relevant authorities have been considered in detail and it has been held that where shares are held for less than a month it should be treated as business income and where shares are held for more than one but upto twelve months they should be treated as short term capital gains. He also submitted that if assessee would have been entirely trading in shares then the AO could have not assessed part of the profit as long term capital gain. The fact that the AO has treated part of the profit as long term capital gains shows that he also accepts that assessee has made investments and not entirely trading. He further submitted that if all the profits arising from sale of shares held for less than twelve months are treated as business income then provisions relating to short term capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar and no stock-in-trade exist on that date and the assessee has earned both long-term and short-term capital gains which means the assessee has also held shares for a period of more than 12 months. 8.1 Thus, the nature of activities, modus operandi of the assessee, manner of keeping records and presentation of shares as investment at the year end is same in all the years, hence; apparently, there appears no reason as to why the claims made by the assessee should not be accepted. However, the Revenue Authorities have taken a different view in the year under consideration by holding that principle of res judicata is not applicable to the assessment proceedings. There cannot be, in our view, any dispute on this aspect but there is also another judicial thought, that there should be uniformity in treatment and consistency under the same facts and circumstances and we have already found that facts and circumstances are identical, even though a different stand has been taken by the Revenue Authorities. This action of the Revenue Authorities has led us to ask ourselves that in this year why it has been done so. In the process to find the answer, we noted that there was a change in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Sarnath Infrastructure (P) Ltd. vs. Asstt.CIT(supra), the Tribunal considered the Circular No.4 of CBDT(2007) dated 15/06/2007, various other decisions, such as, CIT vs. Associated Industrial Co. Ltd. (1971) 82 ITR 586 (SC), CIT vs. H. Holck Larsen (H) (1986) 160 ITR 67 (SC), Fidelity Northstar Fund in re(2007) 207 CTR (AAR) 297; (2007) 288 ITR 641 (AAR), Fidelity Advisor Ser Series VIII In re (2004) 271 ITR 1 (AAR), JP Harrison (Watford) Ltd. vs. Griffith (H.M. Inspector of taxes) (1962) 40 Tax cases 281 (HL), Raja Vishewara Singh (deceased) vs. CIT (1961) 41 ITR 685 (SC), Central India Agencies Pvt.Ltd.v s. CIT (1970) 77 ITR 959 (All.), Mrs. Sarojani Rajah vs. CIT (1969) 79 ITR 504 (Mad.), Dalhousie Investment Co.Ltd. vs. CIT (1968) 68 ITR 486(SC), CIT vs. Associated Industrial Development Co.Ltd. (1971) 82 ITR 586 (SC), CIT vs. Sutlej Cotton Mills Supply Agency Ltd. (1975) 100 ITR 706 (SC) and culled out following principles which are described in para No.13 of that order:- 13. After considering above rulings we cull out following principles, which can be applied on the facts of a case to find out whether transaction(s) in question are in the nature of trade or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icular item is held as investment (or say, stock-in-trade) then onus would shift to Revenue to prove that apparent is not real. (8) The mere fact of credit of sale proceeds of shares (or for that matter any other item in question) in a particular account or not so much frequency of sale and purchase will alone will not be sufficient to say that assessee was holding the shares (or the items in question) for investment. (9) One has to find out what are the legal requisites for dealing as a trader in the items in question and whether the assessee is complying with them. Whether it is the argument of the assessee that it is violating those legal requirements, if it is claimed that it is dealing as a trader in that item ? Whether it had such an intention (to carry on illegal business in that item) since beginning or when purchases were made ? (10) It is permissible as per CBDTs Circular No. 4 of 2007 of 15th June, 2007 that an assessee can have both portfolios, one for trading and other for investment provided it is maintaining separate account for each type, there are distinctive features for both and there is no intermingling of holdings in the two portfolios. (11) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and make investment elsewhere. In our considered view, it is the decision of the assessee to dispose of an investment, if according to him, market value thereof have reached a plateau so as to make investment in other assets which have potential of appreciation in market value. This decision to sale his investment at high market price cannot convert an otherwise investment into trading. If in the past, the Department has accepted the sale of shares of holdings of more than a year as investment and profits thereon has been assessed under the head capital gain , then there is no reason to hold differently this year. We accordingly confirm the order of the Learned CIT(Appeals) in respect of holding that profit of ₹ 37,52,281/- should be assessed as 'long-term capital gain'. 15. In respect of profit of ₹ 55,40,679/- being 'short-term capital gain' as claimed by the assessee and held as profits assessed under that business by two authorities, we find that in many cases there is delivery of shares and share were registered in the name of the assessee. The holding period of the shares is from 0 days to 366 days. In some cases, the frequency of transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital gains and not profits. Therefore, only one criteria, i.e. Delivery of shares alone will not be sufficient to decide the issue. Even otherwise in Sarnath Infrastructure (P) Ltd.(supra) itself it has been held that cumulative effect of several factors will decide the issue. 19. Considering the totality and peculiarity of the facts of this case, we find that assessee is neither fully acting as a trader nor as fully investor. Demarcation is quite hazy; though in the books he is showing all the purchases as investment but frequency of transaction in several cases is so large and holding period in many cases is so small from 0 to a week or so that assessee is de facto selling and purchasing shares as trader. He is also holding shares for long period indicating that they are held as investment. Therefore, a criteria has to be fixed for determining as to when he is acting as trader and when as investor. Accordingly, we decide following criteria to hold when gains are to be taxed as profit to be earned under the business or to be taxed as short term capital gain, we hold that if shares are not held even say for a month, then the intention is clearly to reap profit by acting a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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