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Issues involved: The issue raised is the treatment of the assessee as an investor in shares as opposed to a trader by the Assessing Officer.
Summary: The Appellate Tribunal ITAT Delhi heard an appeal by the Revenue against the order of the Ld. Commissioner of Income Tax (Appeals) for the assessment year 2005-06. The assessee declared income from long term/short term capital gains and income from business and profession. The Assessing Officer observed that the assessee held shares mainly of group companies as investments and was engaged in the purchase and sale of shares and mutual funds as stock-in-trade. The Assessing Officer found the treatment by the assessee regarding the gain derived from the sale of shares to be unacceptable. Upon appeal, the Ld. Commissioner of Income Tax (Appeals) considered the matter extensively. The appellant company, recognized by the Reserve Bank of India as a Non-Banking Financial Corporation, had an investment portfolio and held certain shares as stock-in-trade. The shares held in stock-in-trade were converted into investments with the approval of the Board. The Ld. Commissioner of Income Tax (Appeals) concluded that the appellant was a regular investor and not a trader in shares based on the facts presented and relevant legal precedents. After hearing both sides, the Tribunal upheld the decision of the Ld. Commissioner of Income Tax (Appeals). It was noted that the shares held in stock-in-trade were converted into investments, and the difference in value between the purchase price and market value had been accounted for by the assessee. Separate books were maintained for trading and investment portfolios, and the conversion from trading to investments was done following due process. Therefore, the Tribunal dismissed the appeal filed by the Revenue. In conclusion, the Tribunal affirmed the decision of the Ld. Commissioner of Income Tax (Appeals) regarding the treatment of the assessee as an investor in shares, and the appeal by the Revenue was dismissed.
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