TMI Blog2018 (8) TMI 1636X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestments Ltd vs CIT [2018 (3) TMI 805 - SUPREME COURT OF INDIA] - ITA No. 5178/Del/2012 And ITA No. 5029/Del/2012 - - - Dated:- 23-8-2018 - SRI R. K. PANDA, ACCOUNTANT MEMBER AND SMT. BEENA A PILLAI, JUDICIAL MEMBER For The Assessee : Sh. Gautam Jain, Sh. Piyush Kr. Kamal, Advs And Sh. Lalit Mohan, CA For The Revenue : Ms. Rachna Singh, CIT, D. R. ORDER PER BEENA A PILLAI, JUDICIAL MEMBER Present Cross Appeals have been filed by Revenue as well as Assessee against order dated 23/07/12 passed by Ld. CIT (A)- 13, New Delhi for Assessment Year 2008-09 on the following grounds of appeal: ITA No . 5178/Del/2012 (Revenue s appeal) 1 . Whether the Ld . CIT(A) under the facts and circumstances of the case and in law was justified in holding that profit of Rs . 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 the hearing of the appeal . ITA No . 5029/Del/2012 (Assessee s appeal) 1 . The Ld . C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5, 202 6. BUR Energy Systems 5, 838 5, 838 7. Reliance Power Ltd. 1, 42, 896 1, 42, 896 8. Reliance Energy Ltd. 4, 08, 982 4, 08, 982 9. Grabal Alok Impex Ltd. 19, 00, 000 19, 00, 000 10. Prakash Industries Ltd. 12, 50, 000 NIL It was observed that assessee had disclosed income from sale of investments under the head other income and computed capital gain tax on it. During assessment proceedings, Ld. AO asked assessee to show cause, as to why, share transaction in such volume and frequency should not be treated as business income , instead of capital gains . From reply filed in response to show cause notice, Ld. AO recorded certain facts which are as under: From the reply filed by the assessee and issues involved, following facts emerges: ( a) The assessee did not maintain separate boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19th March, 2010 by submitting that During the relevant previous year the assessee company made transaction for purchase and sale of isolated scrip of GHCL . The income arising out of the above has been mistakenly treated as business income instead of capital gains by the assessee at the time of filing the return . 2 . 2 . On the basis of treatment of income by assessee in preceding Assessment Year, Ld. AO treated income earned by assessee from alleged investments as business income for year under consideration. Ld. AO further computed disallowance under section 14 A read with Rule 8D, at ₹ 7, 60, 000/-. 3 . Aggrieved by additions made by Ld. AO, assessee preferred appeal before the Ld. CIT (A). 3 . 1 . Ld. CIT(A) allowed plea of assessee regarding treatment of sale and purchase of shares tabulated hereinabove as capital gains , instead of business income , however, disallowance computed by Ld. AO under section 14 A was upheld. 4 . Aggrieved by the order of Ld. CIT (A) assessee as well as Revenue are in appeal before us. ITA No . 5178/Del/2012 (Revenue s appeal) 5 . Before us Ld. CIT-DR submitted that Revenue is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 10, however, there is no segregation of 2 categories, as observed by Ld. AO. 5 . 4 . She submitted that the frequency and the period during which assessee has purchased and sold shares of these 10 companies, clearly indicates intention that these were not ordinary purchases and sales made by assessee. Instead there was an object to derive income by way of profits. Emphasising upon the basic nature of share trading activity conducted by assessee, she submitted that income derived by assessee from such huge magnitude of sale and purchase of shares cannot be considered under the head capital gains . 6 . On the contrary, Ld. Counsel submitted that, major part of capital gain was earned from transaction of IPO offered by DLF Ltd. , and assessee held the shares for months before selling them. It was also submitted that delivery of shares from these 10 companies, was taken in depository account of assessee. Ld. Counsel submitted that assessee made these investments in few shares to take benefit of appreciation in the market, and, therefore, it cannot be considered to be part of regular business activity. He submitted that assessee was incorporated on November, 2006. Plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestments in shares and the other, which was treated as stockin- trade. Ld. CIT-DR submitted that there are no such bifurcations in the case of assessee before us, as is evident from page 34 and 35 of paper book wherein certain scrips held as investment has also been included for the purposes of trading. She submitted that there is overlap of 3 scrips being DLF Ltd, Reliance Power Ltd, Reliance Energy Ltd, which are common in list of investments declared by assessee and also forms part of stock-in-trade. She submitted that it is not true when assessee before authorities below stated that shares shown as investment in balance sheet is as per Schedule VI of Companies Act 1956, and not as stock- in- trade. It is observed that assessee before us is stated to be engaged in the 8 . We have perused the submissions advanced by both the sides in the light of records placed before us. Whether a person dealing with shares has made investment or has treated them as stock-in-trade, has been the subject-matter of considerable debate. It is a matter of intention of assessee, which has to be gathered from the conduct and surrounding circumstances. Various parameter/criteria have been elucida ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, as well as shares held as stock- in- trade. Assessee has placed at page 45, details of investments and at pages 46-50 Transaction Statements as on 31/03/08. For the sake of convenience page 45 of the paper book is reproduced hereinbelow: 8 . 4 . From the above it is very clear that assessee has purchased and sold scrips multiple times, on various dates alleged to have been held as investment within small durations. The magnitude of purchases on each date has been very large in respect of all these shares. Thus in our considered opinion frequency and volume of purchase and sale of shares shows, intention of assessee was to generate income through trade, rather than invest in them. 8 . 5 . Further in Smt . Prem Jain vs . ITO in ITA No . 2572/Del/2016 for Assessment Year 2011-12, this Tribunal with same combination, placing reliance upon decision of Hon ble Delhi High Court in the case of CIT vs D M Components Ltd reported in 364 ITR 179 had observed as under: 18 . We find the Hon ble Delhi High Court in the case of D M Components Ltd . ( supra) while deciding a somewhat identical issue has held that where there was sho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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