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TMI Blog2010 (7) TMI 555X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer is directed to re-adjudicate the issue afresh keeping in view the observations made hereinabove in this order - Appeal is allowed for statistical purpose - ITA No. 2116/Ahd./2007 - - - Dated:- 23-7-2010 - SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI N.S.SAINI, ACCOUNTANT MEMBER Appellant by : Ms. Urvashi Shodhan. Respondent by: Shri D.S. Chaudhry, D.R. ORDER PER N.S.SAINI ACCOUNTANT MEMBER:- **** ***** **** **** 2. The sole ground of appeal raised in this appeal reads as under The Learned Commissioner of Income Tax (Appeals) erred in justifying the action of the Assessing Officer treating, the profit on sale of investments in shares through portfolio management scheme as tradi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orrowed money was utilised in acquiring of the shares. He further submitted that the shares in respect of which capital gain were claimed were actually received as delivery in the Demat Account of the assessee and the assessee after acquiring shares and holding them for certain period and then sold the shares. The above facts clearly demonstrate that the assessee acquired the shares as investor and not as a trader. Therefore, he contended that the lower authorities were not justified in treating the short term capital gain and long term capital gain derived by the assessee as business income merely on the ground that there were large number of transactions. He also relied upon the decision of this Tribunal in the case of Shri Sugamchand C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l as also a trader in shares. In other words, the assessee may acquire certain shares for the purpose of investment, profit on sale of which will be capital gain and simultaneously, it may acquire certain shares for the purpose of trading and profit on sale of such shares are to be assessed as business income. 7. In this regard it will be useful to take note of C.B.D.T s Circular No.4 of 2007 dated 15-06-2007 which lays down as under:- CIRCULAR NO. 4 OF 2007, DT. 15TH JUNE, 2007 Sub. : Distinction between shares held as stock-in-trade and shares held as investment - Tests for such a distinction. 1. The Income-tax Act, 1961 makes a distinction between a capital asset and a trading asset. 2. Capital asset is defined in section 2( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, made a mistake in observing whether transactions of sale and purchase of shares were trading transactions or whether these were in the nature of investment was a question of law. This was a mixed question of law and fact." 7. The principles laid down by the Supreme Court in the above two cases afford adequate guidance to the assessing officers. 8. The Authority for Advance Rulings (AAR) in Fidelity Northstar Fund Ors., In re (2007) 207 CTR (AAR) 297 : (2007) 288 ITR 641 (AAR), referring to the decisions of the Supreme Court in several cases, has culled out the following principles :- "(i) Where a company purchases and sells shares, it must be shown that they were held as stock-in-trade and that existence of the power to purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shes a guide for determining the nature of transaction by verifying whether there are substantial transactions, their magnitude, etc., maintenance of books of account and finding the ratio between purchases and sales. It will not be out of place to mention that regulation 18 of the SEBI Regulations enjoins upon every FII to keep and maintain books of account containing true and fair accounts relating to remittance of initial corpus of buying and selling and realizing capital gains on investments and accounts of remittance to India for investment in India and realizing capital gains on investment from such remittances. The third principle suggests that ordinarily purchases and sales of shares with the motive of realizing profit would lead to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lume of transaction and has not taken into consideration the other relevant factor. In our considered opinion for adjudicating the issue under consideration all the relevant factors should have been taken into consideration and after considering them together the issue should have been decided. We find that before us both the parties have not brought relevant material on the basis of which we could have evaluated all the factors. The parties have not brought before us the copy of the Balance Sheet of the assessee company so that it could have been found by us that whether any borrowed capital was acquired for acquisition of shares or not, whether the shares were classified as stock-in-trade or as investment in the Balance Sheet of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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