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TMI Blog2011 (1) TMI 1056X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 2,65,91,810 which included short-term capital gain of Rs. 2,60,49,678. The AO required the assessee to show why the capital gain should not be treated as business income. In response to this the assessee informed the AO that it is a share broker. Apart from working for clients, the assessee has been doing share transactions for itself. These transactions are of two natures. One, as trader being taken as stock-in-trade wherein the difference of sale and purchase is shown as income under the head 'Income from business and profession' and second, wherein shares are purchased as investments and gain or loss on sale is shown under the head 'Capital gains'. The AO upon consideration of the reply was not satisfied and he treated the capital gain declared by the assessee as business income. 4. Upon assessee's appeal learned CIT(A) elaborately considered the issue and held as under for asst. yr. 2005-06 : "I have considered the submissions of the appellant. It is seen that the appellant has maintained two separate accounts for the share dealings one in respect of shares held as stock-in-trade and the other in respect of investment. As pointed out by the Authorised Representative of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ins. However, the AO has not accepted the claim of short-term capital gains, even though these shares had been shown as investment in the balance sheet. The learned Authorised Representative has strongly contended that the valuation of these shares had been shown in the balance sheet by treating this as investment and a consistent policy with regard to such shares have been followed by the appellant for the past several years. Accordingly, it is also observed that the AO has not brought out any differentiating facts as to how and why under similar circumstances though the claim of the appellant had been accepted in the earlier years, while in this year this should be treated differently. (c) The Authorised Representative has also highlighted various facts including maintenance of separate D-mat accounts for investments in shares; the clear intention of the assessee by not claiming any STT deduction on the shares claimed as investment and the losses on the sale of shares; being set off against gains on sale of shares, even though setting it off against business income would have been more profitable. These specific facts have not been controverted by the AO and the intention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch are to be treated as capital assets and a trading portfolio comprising of stock-in-trade which are to be treated as trading assets. Where an assessee has two portfolios, the assessee may have income under both heads i.e., capital gains as well as business income. AOs are advised that the above principles should guide them in determining whether, in a given case, the shares are held by the assessee as investment (and therefore giving rise to capital gains) or as stock-in-trade (and therefore giving rise to business profits). The AOs are further advised that no single principle would be decisive and the total effect of all principles should be considered to determine whether, in a given case, the shares are held by the assessee as investment or stock-in-trade." 6.1 It is thus clear that assessee was holding certain stock for the purpose of doing business of buying and selling and at the same time it was holding that other shares as its capital for the purpose of dividend income. These were duly recorded in separate accounts. Under the circumstances, we do not find any infirmity in the order of the learned CIT(A) in this regard and we uphold the same. 7. The next issue raised fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s quo. Had there been no ambiguity, there would not have been the necessity for the Calcutta High Court to pass such an order. The appellant made the payment as per the directions of the Calcutta High Court in the financial year 2004-05 only. Moreover, for the first time the SEBI issued demand notices quantifying the demand first provisional on 3rd Sept., 2004 and then final on 12th Oct., 2004. Therefore, the appellant has rightly claimed the expenditure in the year relevant to the assessment year under consideration. Further, respectfully following the decision of the Tribunal, Bombay in the case of Reliance Shares & Stock Brokers (P) Ltd. v. Addl CIT [2005] ITD 44 (Mumbai) [sic) in ITA No. 1302/Mum/2004 and the decision of Tribunal, Mumbai in the case of ITO v. Sureshchand Jain [2006] 102 TTJ (Mumbai) 970 : [2006] 100 ITD 435 (Mumbai) which are on all force and relate to the very same issue i.e., SEBI registration fees, I am of the opinion that the SEBI registration fees was a fees and was allowable as deduction in terms of section 43B of the IT Act. In view of the foregoing discussion not only the liability towards registration fees was quantified in the financial year 2004-05 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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