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2017 (1) TMI 1246 - ITAT DELHI

2017 (1) TMI 1246 - ITAT DELHI - TMI - Profit earned on sale of shares - short term capital gain OR business income - Held that:- We are of the opinion that conduct of the assessee reflect the intention of business activity and, thus, we, accordingly, hold the shortterm capital gain declared by the assessee amounting to ₹ 35,14,66,127/- as the profit and gains from business activity of purchase and sale of shares. Accordingly, the ground of the appeal of the Revenue is allowed. - ITA No. 5 .....

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12 are as under: 1. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in holding that profit of ₹ 35,14,66,127/- earned by the assessee on sale of shares is short term capital gain and not business income. 2. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of hearing of the appeal. 3. The grounds of appeal raised by the assessee in ITA No. 5029/Del/2012 are as under: 1. The learned CIT(A) .....

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of appeal. 4. The briefly stated facts of the case as culled out from the order of the lower authorities are that the assessee company was engaged in buying, selling and dealing in securities, shares debentures, bonds units etc. For the year under consideration, the assessee filed return of income declaring total income of ₹ 36,56,50,924/- on 30/09/2008. The income declared consisted of income under the head profit and gains of business and profession amounting to ₹ 1,41,84,797/- and .....

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r holding for a small period. He further observed that: (i) No separate books of accounts were maintained for alleged investments and business activity (ii) turnover in the share was to the tune of ₹ 69, 06, 09, 30, 892/- (iii) the assessee was frequently trading in a particular scrip and the intention was to earn profit and not dividend, otherwise the assessee would have held the shares for a longer period. (iv) In the assessment year 2007-08, the assessee himself treated the income from .....

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assessee filed appeal before the learned Commissioner of Income-tax (Appeals), who held the activity of buying and selling of the shares as investment activity. On the issue of disallowance under section 14A of the Act read with Rule 8D of the Rules, the learned Commissioner of Income Tax (Appeals) gave part relief to the assessee. Aggrieved, both the Revenue and the assessee are in appeals raising the grounds as reproduced above. 5. The hearing in the above appeals were adjourned from time to .....

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tive relied on the order of the Assessing Officer and submitted that in view of facts and circumstances of frequency and volume of transactions in purchase and sale of shares coupled with the facts of money borrowed for purchase of shares, no separate books of accounts for business and investments etc., the Assessing Officer has rightly held the activity of purchase and sale of shares as the business activity. In respect of the ground No. 1 raised by the assessee in its appeal, the learned Sr. D .....

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n of the learned Sr. Departmental Representative and perused the relevant material on record. As far as the ground in the appeal of the Revenue is concerned, we find that assessee himself in the preceding year has declared the activity from buying and selling of the shares under the head profit and gains of business/profession . The assessee submitted details of the shares purchased and sold during the year, which has been reproduced by the Assessing Officer in the assessment order as under: 8. .....

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6,567,294 5 Edelweiss Capital Ltd 5,202 5,202 6 BGR Energy Systems 5,838 5,838 7 Reliance Power Limited 142,896 142,896 8 Reliance Energy Limited 408,982 408,982 9 Grabal Alok Impex Limited 1,900,000 1,900,000 10 Prakash Industries Limited 1,250,000 Nil 9. The Assessing Officer in the assessment order has also commented upon the frequency of the transaction as under: The shares of Orchid Chemicals & Pharmaceuticals Ltd. purchased on 04.04.2007 and were sold on 04.05.07, 7.05.2007, 9.05.2007 .....

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business dealing. Similarly, shares of this company purchased on 8th and 11th February were again sold between 13 to 27 February, 2008 on 8 occasions. The shares of Reliance Energy Ltd. were purchased on 15th February, 2008 and 24th March, 2008 were sold within 10 days and secondly on the very next days of purchase. Similarly, in the case of M/s Grabal Alok Impex Ltd. the shares were purchased on 18th March, and sold on 27th and 28th March, 2008. 10. The facts also show that assessee has made f .....

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unting to ₹ 35,14,66,127/- as the profit and gains from business activity of purchase and sale of shares. Accordingly, the ground of the appeal of the Revenue is allowed. 12. In respect of the ground No. 1 of appeal of the assessee, we find that the learned Commissioner of Income-tax (Appeals) has passed a well reasoned and comprehensive order on the issue in dispute, which is reproduced as under: As regards the disallowance of 0.5% of expenses of the average investment as administrative e .....

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