TMI Blog2013 (4) TMI 967X X X X Extracts X X X X X X X X Extracts X X X X ..... .w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to the Act ) held that the profit from trading in shares, mutual funds, future, options and money lending is to be treated as normal business income and thus is liable to be taxed @ 30%. Similarly for the assessment years 2008-09 2009-10, the Assessing Officer treated the profit arising from trading in shares, mutual funds etc. as business income by rejecting the claim of the assessee to consider it as capital gain. Aggrieved against the assessment orders for the respective assessment years, the assessee preferred an appeal before the CIT(A). CIT(A) following the order of the Tribunal (Jaipur Bench) in the case of ACIT Vs. Smt Kavita Devi Agarwal reported as 48 SOT 191 (Jp) held that profits arising from the sale of shares held for more than 30 days is to be considered as short or long term capital gain depending upon the period of holding and in cases where shares have been purchased and sold within 30 days , the profit arising from such transactions is to be considered as business income. 3. Aggrieved against the order of CIT(A), both the assessee and the Revenue has come in appeal before the Tribunal. The quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vii) All delivery based transactions have been treated as investment transactions and therefore, the profit received there from should be treated as short/long term capital gain depending upon the period of holding. In support of its contention, the learned counsel for assessee relied on the following judgements 1. CIT Vs. Allu Arvind Babu in [2013] 350 ITR 387 (Mad.) 2. CIT Vs.Jubilant Securities P. Ltd.[2011] 333 ITR 445 (Del) 3. Felspar Credit and Investment P Ltd. Vs. CIT in 346 ITR 121 (Mad.) 4. CIT Vs. S.Ramaamirtham in [2008] 306 ITR 239 (Mad.) 5. CIT Vs.Gopal Purohit in 336 ITR 287(Bom.) 6. Order of the Tribunal in ITA No.1029/Mds./11 in case of CIT Vs. R.F.DADABHOY decided on 07.02.13. 5. Per contra Smt.Ruby George, appearing on behalf of the Revenue submitted that the main business activity of the assessee is dealing in shares and mutual funds. She further contended that volume of transactions is equally important for determining the nature of transactions. The CIT(A) ought to have appreciated the fact during the years under consideration the assessee has indulged in voluminous share transactions. The purchase of shares by the assessee was not f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC)]. (b) It is possible for an assessee to be both an investor as well as a dealer in shares. Whether a particular holding is by way of investment or formed part of stock-in-trade is a matter which is within the knowledge of the assessee and it is for the assessee to produce evidence from his records as to whether he maintained any distinction between shares which were hold by him as investments and those held as stock-in-trade. [CIT vs. Associated Industrial Development Co. Ltd. 1972 CTR (SC) 239: (1971) 82 ITR 586(SC)]. (c) Treatment in the books by an assessee will not be conclusive. If the volume, frequency and regularity with which transactions are carried out indicate systematic and organized activity with profit motive, then it would be a case of business profits and not capital gain, [CIT vs. Motilal Hirabhai Spg. Wvg. Co. Ltd. 1977 CTR (Guj) 674: (1978) 113 ITR 173(Guj), Raja Bahadur Visheshwara Singh (Decd) Ors. vs. CIT (1961) 41 ITR 685(SC)]. (d) Purchase without an intention to resell where they are sold under changed circumstances would be capital gains. CIT vs. P.K.N. Co. Ltd. (1966) 60 ITR 65(SC). Purchase with an intention to resell would rend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the Tribunal , applying the same to the facts of the present case as culled out by the CIT(A) we do not agree with the findings of the CIT(A) that the profits arising from shares held for more than 30 days is to be considered as short/long term capital gain and the profits arising from shares which have been purchased and sold in less than 30 days, is to be considered as business income. The criteria of 30 days for determining the business income or capital gain, in our considered opinion is neither recognised nor acceptable under the provisions of the Income Tax Act, 1961. 9. The assessee has relied on some judgements/orders in support of his contentions, which are as under:- I) CIT Vs. Allu Arvind Babu (supra) : In the said case, the assessee had transacted in shares only for five days during the previous year, which resulted in loss. Assessing Officer as well as the CIT(A) held that the assessee had indulged in colourable device, adopted to set off income from other trade activities, and rejected the claim. The Hon ble jurisdictional High Court held that ultimately the intention and the circumstances alone have to be born in mind to decide the question as to wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udgement of the Hon ble Madras High Court in the case of S.Ramaamirtham will not support the case of the assessee. IV) Felspar Credit and Investment P Ltd.(supra): In the said case, the assessee- company was in the business of financing of hire purchase and investment. The assessee had earned profit from the sale of shares. The Assessing Officer treated the same as business income. On appeal, CIT(A) reversed the findings of the AO and treated the same as capital gains. On the appeal before the Tribunal, the Tribunal reverses the findings of the CIT(A) and upheld the findings of the Assessing Officer. The Hon ble jurisdictional High Court held that the assessee company right from the beginning of its incorporation held shares only as investment and 90% of its investment were only in the group companies. The assessee never intended to keep them as stock-in-trade and the Revenue had accepted the contention of the assessee for the preceding years and in the subsequent assessment years. It was during the Assessment Years 1992-93 1993-94 when substantial profit on sale of shares was earned by the company, the issue of considering the profit from sale of shares was racked up by the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A) on the issue and remit the file back to the Assessing Officer to decide the matter afresh after taking into considertion the following aspects: i) Whether the assessee is maintaining separate books of accounts for the two portfolios i.e. trading portfolio and investment portfolio? ii) Whether the assessee is maintaining separate bank accounts for investing in shares to be held as investment and trading in shares for business purpose. iii) What is the objective of acquiring the shares? Whether the objective is to acquire shares/securities as an investment and enjoy the income there from or to make profit by buying and selling shares in short run. iv) The ratio of dividend earned by the assessee vis- -vis profits earned from sale of shares v) What is the volume, frequency and regularity with which transactions were carried out by the assessee and whether these transactions were carried out in a systematic and organized manner? vi) The list of shares transacted in trading portfolio and investment portfolio. The Tribunal is a final fact finding authority. In the absence of complete facts, it would not be possible for the Tribunal to adjudicate the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeal of assessee is dismissed and that of the Revenue is allowed for statistical purpose. The same is remitted back to the file of Assessing Officer to decide the matter afresh on the basis of directions given in para-11 of the order. 13. The third effective ground of appeal assailing the order of CIT(A) for the A.Y. 2005-06 is disallowance of expenditure of ₹ 18,57,355/-. We find that the assessee has not been able to produce any documentary evidence to claim the said amount either before the Assessing Officer or the CIT(A). The duty was cast upon the assessee to substantiate his claim by furnishing relevant documents and proof in support of his contentions. The assessee has failed to discharge his duty. The CIT(A) has rightly confirmed the disallowance of expenditure. Even before the Tribunal, assessee has not been able to produce any document in support of his claim. Therefore, this ground of appeal of the assessee is dismissed. 14. The Revenue in appeal for Assessment Year 2005-06 has raised one more ground assailing the order of CIT(A) holding that profit on sale of units amounting to ₹ 91.43lakhs held by the assessee as bonus units in Chola Freedom STF ..... X X X X Extracts X X X X X X X X Extracts X X X X
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