TMI Blog2021 (10) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... o our aforesaid observations and re-determine the re-characterization of the income/surplus arising on the sale of shares under consideration. Effect of CBDT Circular No. 6/2016, dated 29.02.2016 - where an assessee irrespective of the period of holding opts to treat the listed shares and securities as stock-in-trade, then, the income arising from the transfer of such shares/securities would be treated as his business income. Also, the same further contemplate that in respect of shares and securities held by an assessee for a period of more than 12 months immediately preceding the date of its transfer, if the assessee desires to treat the income arising from the transfer thereof as capital gain, the same shall not be put to dispute by the A.O. In fact, the CBDT in its aforesaid circular had observed that in all other cases, the nature of transaction (i.e whether the same is in the nature of capital gain or business income) shall continue to be decided keeping in view the circulars issued by the CBDT., viz. Instruction No. 1827, dated August 31, 1989 and Circular No. 4 of 2007, dated June 15, 2007. We, thus, are of the considered view that the aforesaid Circular No. 6/2016, dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at was earned by the assessee on sale of shares as his business income, as against that reflected by him as Short Term Capital Gain (STCG). On appeal, the CIT(A) vide his order dated 24.05.2014 upheld the view taken by the A.O. On further appeal the Tribunal vide its order passed in ITA No. 4916/Mum/2011, dated 30.06.2014 restored the matter to the file of the CIT(A) with a direction to re-adjudicate the issue qua treating of the income/surplus on sale of shares as business income vis- -vis STCG after affording a reasonable opportunity of being heard to the assessee. The Tribunal while restoring the matter to the file of the CIT(A) had observed that both the lower authorities had in the course of their respective proceedings missed an important ingredient i.e the period of holding of the shares by the assessee and had directed that the said aspect be considered in the course of the set-aside proceedings. 4. In the course of the set-aside proceedings, the CIT(A) vide his order dated 04.09.2019 concluded that neither would it be fair and reasonable to treat the entire income earned by the assessee from purchase and sale of shares as his business income, nor would it be correct to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for determining the head of income under which the income/surplus on sale of shares was to be brought to tax. Reiterating his aforesaid contention, it was submitted by the ld. A.R that as the shares in question were purchased and held by the assessee as a Capital asset , therefore, the income/surplus on the sale of the same was duly offered for tax under the head STCG. Further, in support of his contention that the assessee had rightly reflected the income from sale of shares as STCG reliance was placed by the ld. A.R on the CBDT Circular No. 6/2016, dated. 29.09.2016. 6. Per contra, the ld. Departmental Representative (for short D.R ) relied on the orders passed by the lower authorities. 7. We have heard the ld. Authorized Representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the CBDT Circular No. 6/2016, dated 29.09.2016 that has been relied upon by the ld. A.R. As observed by us hereinabove it is the second round of appeal before us. On a perusal of the order passed by the Tribunal while disposing off the assessee s appeal vide its order passed in ITA No. 916/Mum/2011, dated 30.06.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the head business income and STCG, respectively. At this stage, we may herein observe that a vital test for deciding as to whether the income/surplus arising from the sale of shares is to be assessed as business income or STCG is determining the intention which the assessee had at the time of purchase of the shares. Our aforesaid view is fortified by the judgment of the Hon ble Supreme Court in the case of G. Venkataswami Naidu Co. vs. CIT (1959) 35 ITR 594 (SC). In its aforesaid order the Hon ble Apex court had, inter alia, observed, that it is the intention of the assessee at the time of purchase of an asset that would be a determinative factor for concluding as to whether the income arising on the sale of the same is to be assessed as business income or under the head capital gain. Now, in the case before us, if the purchase of shares were made by the assessee with an intention to resell the same at a profit, then, the income arising therefrom would undeniably be liable to be assessed as his business income. On the contrary, if the shares were purchased by him with an intention to hold the same, then, the income arising on a subsequent sale of the same was to be brought t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me as a capital asset. Accordingly, backed by the aforesaid fact the income/surplus arising on the sale of the balance shares (forming part of the aforesaid lot) shall have to be given a similar treatment. However, in case the assessee is found to have converted or treated such shares as the stock-in-trade of the business carried on by him, then, the income/surplus arising on the sale of such shares shall be assessed in the manner provided in the provisions of sub-section (2) of Sec. 45 of the Act. Accordingly, in terms of our aforesaid observations, we herein modify the view taken by the CIT(A) and direct the A.O to give effect to our aforesaid observations and re-determine the re-characterization of the income/surplus arising on the sale of shares under consideration. 9. Before parting, we may herein observe that the support drawn by the ld. A.R from the CBDT Circular No. 6/2016, dated 29.02.2016 is absolutely misplaced and misconceived. On a perusal of the aforesaid circular, we find that the same therein, inter alia, provides that where an assessee irrespective of the period of holding opts to treat the listed shares and securities as stock-in-trade, then, the income arising ..... X X X X Extracts X X X X X X X X Extracts X X X X
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