2014 (7) TMI 1177 - HC - Income Tax

Sale of shares - ITAT held that the assessee was a trader in shares in question and not an investorHeld that - During the course of hearing before us, learned counsel for the appellant has submitted a chart in respect of shares held under investments for less than 366 days. We find, the transactions, i.e. sale and purchase of shares in the assessment year 2006-07 would be around 150 in number, if not more. The Tribunal has rightly observed that the assessee had invested in shares of Dabur Group and had earned dividend income on the said shares. Share of Dabur Group cannot be equated with the shares in question. Keeping in view the factual findings recorded by the authorities and the Tribunal in respect of assessment years 2005-06 and 2006-07, we do not see any reason to interfere that the shares shown as investment in balance sheet, were actually stock in trade. He also observed that shares of five companies were purchased and sold within a span of a few days.

Summary

Issues:
1. Assessment of whether the assessee was a trader in shares or an investor.
2. Determination of short term capital gains for assessment years 2005-06, 2006-07, 2007-08, and 2008-09.

Analysis:
1. For assessment years 2005-06 and 2006-07, the Tribunal concluded that the assessee was a trader in shares based on the nature of transactions and the number of shares held. The Income Tax Act amendments in 2004 provided benefits for shares held as investments, not as stock in trade. The Tribunal found that the assessee traded in shares throughout the year, selling shares shortly after converting them from stock in trade to investment. The High Court upheld the Tribunal's findings, emphasizing the factual basis and lack of justification for interference.

2. In the assessment year 2006-07, the Commissioner of Income Tax (Appeals) and the Tribunal affirmed that the shares shown as investments were actually stock in trade due to frequent sale and purchase activities. The appellant's argument regarding shares held for less than 366 days was countered by the significant number of transactions, especially involving shares of Dabur Group. The Court agreed with the authorities' findings and dismissed the appellant's plea for interference.

3. The appellant asserted that the facts for assessment years 2007-08 and 2008-09 were not adequately considered. A chart detailing the total number of transactions for short term capital gains in these years was submitted, arguing that the volume of transactions supported the appellant's case. The High Court issued notice for assessment years 2007-08 and 2008-09, indicating a need for further examination of the facts. ITA Nos.301/2014 and 302/2014 were dismissed, while notice was accepted for ITA Nos.300/2014 and 304/2014 for the subsequent assessment years.