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TMI Blog2024 (7) TMI 842X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO in treating the short-term capital gain of Rs. 67,87,654/- as the business income of the appellant ignoring the fact of the assessee's case and also ignoring the guidelines prescribed by CBDT circular no.4/2007 dated 15.06.2007. 3. That the Ld. CIT(A) has erred on facts and in upholding the action of the AO in law in treating the short-term capital gain of Rs. 67,87,654/- as the business income of the appellant and has totally disregarded the rule of consistency, without there being any charge in the working of the assessee and despite the fact that the revenue had treated these transactions as Capital Gains for the A.Y. 2004-05 and 2007-08 and order passed u/s. 143 (30 A.Y. and 2005-06 order passed u/s. 143 (1) and A.Y. 2008-09 by the order passed by CIT- Appeals. 4. Those provisions of section 234B are not applicable in the case of the appellant. 5. That the impugned appellate order is arbitrary, illegal, bad in law and the violation of rudimentary principle of contemporary jurisprudence. 6. That the appellant craves leave to add, amend, alter vary and / or withdraw any or all the above grounds of appeal before or at the time of hearing of the appeal. 3. The brief f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lear from the Memorandum of Articles of the Association wherein the main objects of the company is to act as stock and share brokers and take the membership of the stock exchanges. This fact is also clear from the order of the Assessing Officer passed for the year 2004-05 u/s 143(3) that the assessee's National Stock Exchange ticket was surrendered in May, 2001. Assessee had shown shares in investment and valued these on cost at the end of the year. Thus, these facts go in favour of the assessee to show that these were investments. However, this alone shall not be sufficient to determine the true character of these transactions. The second aspect which needs to be considered for deciding the character of the shares is objective of the investment in the shares. In assessee's case, there was a surplus earned of Rs. 67,87,654/- on the purchase and sales of shares held for less than a year. Transactions are of large numbers. Normally an investor does not enter into so many transactions where profit is not the motive. The object of transactions can be seen only by the income derived as a dividend whether the transaction was entered into was to earn dividend or to earn the profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TAT Delhi the AO again assessed the income of the assessee. The AO therefore for the reasons noted in the order made the additions. He has submitted that Ld CIT(A) thereafter for the reasons noted in the order has dismissed the appeal. Therefore, he submitted that the order of CIT(A) be upheld. 8. Ld. Counsel for assessee has submitted that assessee has earned the income from the dividend which was shown in the profit and loss account. He has further submitted that intention of the assessee behind the investment was to earn the dividend and not to earn the profit. He has also submitted that assessee company was registered as share broker and as per the Memorandum of Association, the main object of the company was to deal in stocks and shares and to be a Member of Stock Exchange of India and abroad. However the assessee company surrendered NSE Ticket in May 2001. Thereafter the assessee was mainly deriving the income from capital gain interest and dividend. The income of return filed by the assessee for the AY 2004-05, 2005-06, 2007-08, 2008-09 & 2010-11 have been accepted or treated the income of assessee from the sale and purchase of shares as capital gain which shown from the ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s followed a consistent practice in regard to the nature of the activities, the manner of keeping records and the presentation of shares as investment at the end of the year, in all the years. The Revenue submitted that a different view should be taken for the year under consideration, since the principle of res judicata is not applicable to assessment proceedings. The Tribunal correctly accepted the position that the principle of res judicata is not attracted since each assessment year is separate in itself. The Tribunal held that there ought to be uniformity in treatment and consistency when the facts and circumstances are identical, particularly in the case of the assessee. This approach of the Tribunal cannot be faulted. The Revenue did not furnish any justification for adopting a divergent approach for the assessment year in question. Question (b), therefore, does not also raise any substantial question. 4. In so far as Question (c) is concerned, again there cannot be any dispute about the basic proposition that entries in the books of account alone are not conclusive in determining the nature of income. The Tribunal has applied the correct principle in arriving at the decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs that the main consideration which has weighed upon the Assessing Officer for the purpose of holding that the transaction in question is an adventure in the nature of trade and not an investment, is that for the purpose of purchasing the shares in question, namely, the shares of Euro Asian Securities Ltd. (Home Trade Ltd.), the assessee had obtained loan from M/s Maniram Consultants & Investments Pvt. Ltd. on interest at the rate of 30%, which according to the Assessing Officer, was an exorbitant rate. Though the assessee had purchased/sold other shares and units of mutual funds, this solitary transaction had been disputed by the Assessing Officer mainly because the assessee had purchased the shares in question from borrowed funds obtained on high rate of interest, which also forms the basis for the conclusion arrived at by the Assessing Officer that the transaction in question is an adventure in the nature of trade or business rather than a normal investment. ++Another reason for holding that the transaction in question is an adventure in the nature of trade or business is that the shares in question were held by Maniram Consultants till the entire loan was paid and were initi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st, which also forms the basis for the conclusion arrived at by the Assessing Officer that the transaction in question is an adventure in the nature of trade or business rather than a normal investment. ++Another reason for holding that the transaction in question is an adventure in the nature of trade or business_ is that the shares in question were held by Maniram Consultants till the entire loan was paid and were initially purchased in the name of Maniram Consultants in terms of the agreement between the assessee and Maniram Consultants. According to the Assessing Officer, since the assessee had not obtained physical possession of the shares in question at the relevant time, the assessee was not the owner of the shares in question. ++However, the reasoning adopted by the Assessing Officer loses sight of the fact that merely because the shares had been purchased from borrowed funds obtained on high rate of interest would not change the nature of the transaction from investment to one in the nature of an adventure in the nature of trade. Moreover, in the light of the findings recorded by Commissioner (Appeals) that the assessee had held the shares in question for fourteen mont ..... X X X X Extracts X X X X X X X X Extracts X X X X
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