9911796707
TMI Blog2017 (11) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... business income instead of as short term capital gain. 2. Without prejudice, in not allowing the appellant an adjustment for Securities Transaction Tax if the said income was taxable as business income merely on the ground that the same was not claimed before the AO. The appellant craves leave to add, alter or amend the grounds as may be advised from time to time." 3. The assessee is a company engaged in the business of renting of properties thereby deriving income from house property and dealing in shares . The sole issue in this appeal between rival parties is a dispute between the revenue and the assessee as to treatment of income arising from dealing in share to be charged to tax as income from capital gains or to be charged to tax as income from business. The revenue is treating gains arising from purchase and sale of shares as business income while the assessee is contending that the said income arising from sale and purchase of shares is an income chargeable to tax as income from capital gain. The assessee was called upon to explain the same by the A.O and the assessee submitted before the AO as under:- "In this connection, we respectfully submit that the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der dated 13-12-2010 passed by the AO u/s 143(3): " Various courts have time and again interpreted that the intention of the assessee is of paramount importance in determining whether the assessee has been a trader or an investor. The source of funds utilized also sheds light on the nature of transaction and its intention. A singular transaction or multiple transactions are determined as to be in the nature of adventure for earning profits or with a view to invest and enjoy the fruits thereof on the basis of intention. To sum up the assessee is treated as trader in shares on following grounds:- (i) The purchase and sale of shares is not an unrelated activity but main business of the assessee. (ii) It is a well settled law that even a singular transaction of purchase and sale could be in the nature of trade. But here the assessee has continuously and systematically carried out the activity of trading in shares over the period of one year. (iii) The assessee has borrowed funds to fund her activity for purchase and sale of shares. The presence of borrowed funds imparts the activity the colour of trade rather than investment. (iv) In the absence of definitive reason on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is invested in buying property. Therefore, the total interest payment claimed against the property income. On the sale of shares, the STT is charged and same is disallowed by the company while computing its total income which clearly shown that the investment which company has sold are capital gain, long-term or short-term and not business income. As per Memorandum of Articles of the company, the company's main activities to carry business of builders, engineers, contractors, construction, to purchase and lease exchange or otherwise lands, building and hereditaments of any tenure of description, any state or interest therein. In the Memorandum of Articles, nowhere the main object of the company to deal in shares and securities business. Since the assessee company's object is not to trade in shares and securities, it cannot be treated as business income on sale of shares and securities. In the object of incidental or ancillary, the company can invest in shares and securities to earn dividend and interest. Thus the amount received on sale of shares is correctly shown as a short -term capital gain by the assessee company and paid taxes accordingly. The investment made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ores were raised which were utilised by the assessee for the purposes of making investments in properties. He drew our attention to the paper book / page no.5 wherein audited balance sheet is placed . He also drew our attention to page 7 of the paper book where schedule of investments is placed wherein the total investments held by the assessee as of 31-03-2008 were to the tune of Rs. 6.28 crores , out of which investments in properties are to the tune of Rs. 4.07 crores Our attention was also drawn to the schedule of unsecured loans which is placed in paper book / page 7 and our attention was drawn to details of financial expenses of Rs. 20.02 lacs paid on unsecured loan raised are placed page no. 9 of the paper book which constituted interest on debentures of Rs. 14.65 lacs and other interest of Rs. 5.37 lacs . The learned counsel for the assessee also drew our attention to page no. 37 to 56 wherein all the detail of capital gain earned by the assessee are placed . He also drew our attention to page no. 14 to 34/paper book wherein Memorandum and Articles of association of the company is paced and it was claimed that main object clause of the company is to deal in real estate . Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt transactions of shares and hence frequency of transactions itself reflected that the assessee is doing this activity as business activity. Our attention was drawn to page 37-56/paper book. It was claimed that the assessee has not claimed any income from sales and purchase of real estate and it is only income earned from the house property which is offered for tax under the head income from house property. The learned DR prayed that the matter may be set aside and restored to the file of the A.O. 7. We have considered revival contentions and perused the material on record . We have observed that the assessee is declaring income from house property as well income from capital gain in the return of income filed with the Revenue. The dispute is within narrow compass wherein the assessee is contending that the income from sale and purchase of shares be treated as capital gains while revenue is contending the same to be business income. The assessee duly explained before us that no interest bearing borrowed funds were utilised for buying the shares. The assessee has duly explained that the interest of Rs. 20.02 lacs was paid towards borrowed funds which were invested in immovable pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
