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TMI Blog2010 (10) TMI 784X X X X Extracts X X X X X X X X Extracts X X X X ..... ly from Assessment year 2008-09. - ITA No. 1422/Del/2009 - - - Dated:- 20-10-2010 - C.L. Sethi, Shamim Yahya, JJ. Pradeep Dinodia, A.R. and R.K. Kapoor, A.R. for the Appellant H.K. Lal, DR, for the Respondent ORDER Shamim Yahya: This appeal by the revenue and cross objection by the assessee emanate out of orders of Ld. Commissioner of Income Tax (Appeals) dated 16.1.2009 pertaining to assessment year 2005-06. Revenue's Appeal 2. The issue raised is that Ld. Commissioner of Income Tax (Appeals) has erred in directing the Assessing Officer to compute the profit of Rs.61,04,691/- on sale of shares as 'long term capital gain' as against assessed as income from business by the Assessing Officer. 3. Assessing Officer noted that in this case the assessee was engaged in the business of investment and finance. Assessee had shown income under the head 'short term capital gains' amounting to Rs.7,112/- and long term capital loss of Rs.11,15,745/- which has been carried forward for adjustment against future long term capital gains. Assessing Officer asked the assessee company to show cause as to why the assessee income should not be treated as busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year. I find sufficient force in the contention of the appellant that it is not a dealer in the debt mutual funds, therefore, it is held that the short term capital gain is to be assessed under the head 'Capital Gains'. As regards the sale of shares of HDFC Bank, I find that these shares were purchased on 27.1.1996 and have been held for a period of more than seven years before being sold during the year under consideration. The appellant has referred to the provisions of Section 2(42A), as per which if a share is held for more than 12 months, the same shall be treated as a long term capital asset. I also find that the appellant had purchased shares of Times Bank Ltd. (later converted into HDFC Bank by way of amalgamation) as long term investment as per the resolution passed by the Board of Directors, stating therein that 'the shares, when purchased, be treated as the company's investment'. These shares have all along been classified under the head 'Investment - Long Term' in the audited balance sheets from the year of purchase upto the year under consideration. The appellant has also drawn my attention to the fact that out of the holding of 5,21,739/- shares of HDFC Bank, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvance the case of the Assessing Officer for the reasons that the appellant company has not actually purchased any equity shares and there is no frequency of trading in shares at all. I also find that similar transactions of sale and long term investments in earlier years has been treated to be in the nature of long term capital gains by the Assessing Officer. In find merit in the reliance placed by the appellant company on the decision in the case of Schedule Investment Company Ltd. vs. C.I.T. (Supra) wherein it has been held that "the mere fact that a company has within its objects the dealing in investment in shares, does not give to the company the characteristics of a dealer in shares, but if other circumstances are proved, it may be relevant for the purposes of determining the nature of the activities of the company". The Hon'ble Supreme court have held in the case of Madan Gopal Radhey La, 73 ITR 652 (SC) that an assessee can hold assets, both as stock in trade as well as proprietary investment and the intention is to be gathered from the conduct of the assessee, the entries in the accounts, resolution of the Board of Directors, etc. I find that the appellant's case is squar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were purchased by the assessee on 27.1.1996 and have been held for a period of more than seven years before being sold during the year under consideration. In para no. 3.3 of his order, it is also noted by the Ld. Commissioner of Income Tax (Appeals) that the assessee has no business of buying and selling of shares after 1.4.97. It is also noted by the Ld. Commissioner of Income Tax (Appeals) in para no. 3.3 of his order that apart from the shares of HDFC bank, all others are debt mutual funds which have been sold by the assessee during the year and on the basis of these facts, a clear finding is given by Ld. Commissioner of Income Tax (Appeals) that the assessee is not a dealer in the debt mutual fund and therefore income arising on sale of these investments are to be assessed as short term capital gain and income arising on sale of shares of HDFC bank is assessable under the head long term capital gains. While deciding this issue, Ld. Commissioner of Income Tax (Appeals) has followed the judgement of Hon'ble Apex court renferred in the case of Madan Gopal Radhey Lal (supra) and in the case of Schedule Investment Co. Ltd. (supra). Considering all these facts of the present case, w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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