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2019 (7) TMI 1272 - AT - Income TaxCorrect head of income - gain from sale of shares - STCG or business income - revenue alleged that shares were never held for more than two months which shows that they were never intended to be held for investment purpose - HELD THAT - The details of Short Term Capital Gains are exhibited elsewhere from which it can be seen that the assessee has purchased shares of six companies on various dates and have sold them on various dates. Doing transaction in only six scrips show that the assessee has done one transaction in every 61 days. By any stretch of imagination, this cannot be considered to be that the assessee was engaged in the high frequency transactions. Further it is not the case of the AO that the assessee was churning the shares, buying and selling the same shares again and again. A trader may acquire a commodity in which he is dealing, for, his own purposes, and hold it apart from the stockin- trade of his business. There is no presumption that such an acquisition, even if it is an accretion to the stock-in-trade of the business, is an acquisition for the purpose of his business in each case the question is one of intention to be gathered from the evidence of conduct and dealings by the acquirer with the commodity. On perusal of CBDT Circular No.6/2016 shows that even Board recognised the fact that where the assessee itself, irrespective of the period of holding the registered shares, treated them stock in trade the income arising from transfer of such shares would be treated as business income which means that where the assessee hold the shares as investment, the income arising therefrom is nothing but capital gains. There is no quarrel that the assessee has purchased the shares out of its own fund and no borrowed funds have been utilised by the assessee in purchasing the shares. The only fact for treating the Short Term Capital Gain as business income is that the period of holding is very less but then the Act itself provides that wherever the holding period is less than 12 months, the gains from the sale of shares would be Short Term Capital Gain. The Act nowhere provides for the smallness of the period of holding. If it is less than 12 months, it will give rise to Short Term Capital Gains and if it is more than 12 months it will give rise to Long Term Capital Gains. There is also no dispute to the fact that all the transactions were delivery based transactions of listed companies routed through D-mat Account. No adverse finding is found in so far as these facts are concerned. Considering the number of transactions, the number of shares with the fact that no borrowed fund was utilised. We are of the considered view that the gains arising out of sale of shares has to be treated as Short Term Capital Gains. Ground no.1 is accordingly allowed. Earning commission from transactions in copper - assessee not adduce any direct evidence in support of purchase and sale of copper/cathode/rods - HELD THAT - No evidence has been furnished in respect of any godowns available with the assessee whether own or on hire. The bills referred to pertain to transactions on which the assessee has earned commission but no bills have been submitted to demonstrate that there was an actual delivery of goods, we are of the considered view that the copper/cathode/rods transactions that were purchased and sold on the same dates were clearly in the nature of speculation in the light of provisions of section 43(5), which provides the speculative transactions means a transaction in which the contract for purchase or sale of any commodity including stocks in shares is periodically or ultimately settled otherwise than by the actual delivery of transfer of the commodity or scrips. Considering the nature of transactions in light of the facts available on record, we do not find any error or infirmity in the findings of the Ld CIT(A). This ground of appeal is accordingly dismissed.
Issues Involved:
1. Classification of Short Term Capital Gain as business income. 2. Treatment of transactions of Swastick International as speculation losses. Issue-wise Detailed Analysis: 1. Classification of Short Term Capital Gain as Business Income: The assessee, a HUF engaged in real estate maintenance and trading of copper goods, filed a return declaring a total income of ?2,46,74,220/- for the Assessment Year 2011-12. The AO noticed that the assessee had shown a Short Term Capital Gain of ?2,23,34,990/- from share trading. The AO concluded that the assessee was engaged in the business of trading shares, thereby treating the Short Term Capital Gain as business income due to the high volume and short holding period of the transactions. The assessee argued that the intention at the time of purchase was investment, not business, and all transactions were routed through banking channels and D-mat accounts. The AO's stance was supported by the Ld. DR, who emphasized the high volume and short holding period of the shares, arguing that they were not intended for investment. The Tribunal, after considering various judicial decisions and the CBDT Circular No. 6/2016, noted that the assessee had purchased shares of six companies, doing one transaction every 61 days, which did not indicate high-frequency trading. The Supreme Court's decision in the case of Associated Industrial Development and P.M. Mohammed Meerakhan was cited, emphasizing the intention behind the transactions and the distinction between investment and trading. The Tribunal found that the assessee had used its own funds, not borrowed funds, and all transactions were delivery-based through D-mat accounts. The Act itself provides that gains from shares held for less than 12 months are Short Term Capital Gains, and there was no adverse finding on the nature of the transactions. Consequently, the Tribunal concluded that the gains should be treated as Short Term Capital Gains, allowing ground no.1 in favor of the assessee. 2. Treatment of Transactions of Swastick International as Speculation Losses: The AO observed that the assessee claimed a loss of ?7,18,907/- from Copper Trade, where copper cathode/rods/wires were purchased and sold on the same date without actual delivery. The AO found no evidence of godowns being maintained by the assessee and concluded that the transactions were settled otherwise than by actual delivery, treating the loss as speculation loss under section 43(5) of the Act. The assessee's counsel argued that the assessee earned commission from copper transactions but failed to provide direct evidence of actual delivery or godowns. The Tribunal noted the lack of evidence supporting the actual delivery of goods and upheld the AO's finding that the transactions were speculative in nature. The Tribunal found no error in the Ld. CIT(A)'s findings and dismissed ground no.2, treating the losses as speculation losses. Conclusion: The appeal filed by the assessee was partly allowed, with the Tribunal ruling in favor of the assessee on the classification of Short Term Capital Gain but upholding the treatment of copper transactions as speculation losses. The order was pronounced on 24/07/2019.
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