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Issues Involved:
1. Classification of shares as stock-in-trade or investment. 2. Disallowance of telephone expenses for personal use. Summary: Issue 1: Classification of Shares as Stock-in-Trade or Investment The primary issue was whether the shares held by the assessee, initially as stock-in-trade and later converted into investments, should be treated as stock-in-trade or capital assets. The assessee argued that the shares received from M/s. DSJ Financial Services Ltd. on 01-04-1996 were converted into capital assets and sold for the first time in the year under consideration, claiming the gains as long-term capital gains. The Assessing Officer (AO) and the CIT(Appeals) had previously treated these shares as stock-in-trade, citing the assessee's past trading activities and the lack of evidence for conversion into capital assets. However, the ITAT referred to CBDT Circular No. 4/2007, which distinguishes between shares held as stock-in-trade and investments, and concluded that the assessee's shares should be treated as investments. The ITAT found no evidence of frequent trading in the year under consideration and accepted the assessee's version, directing the AO to assess the profit on sale of shares under the head capital gains. Consequently, ground no. 1 was allowed. Issue 2: Disallowance of Telephone Expenses for Personal Use The second issue was the disallowance of Rs. 15,000/- for personal use of telephone expenses. The assessee contended that the estimate made by the ACIT was on the higher side. However, this ground was not pressed before the ITAT, and no additional ground was raised. Therefore, this ground was dismissed. Conclusion: The appeal was partly allowed, with the ITAT vacating the findings of the CIT(Appeals) on the classification of shares and directing the AO to assess the profit on sale of shares as capital gains. The disallowance of telephone expenses was upheld as the ground was not pressed. The order was pronounced in Open Court on 11th September 2009.
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