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TMI Blog2012 (2) TMI 169X X X X Extracts X X X X X X X X Extracts X X X X ..... of short term capital assets of Rs. 1,10,25,787/- as income from business or profession. (iii) That the Ld. Commissioner of Income Tax (Appeals) erred in holding that the shares held and disclosed as investment were trading assets. (iv) That the Ld. Commissioner of Income Tax (Appeals) erred in directing the Assessing Officer to make the disallowance u/s 14A of the Act as per Rule 8D more particularly when the provisions of Rule 8D are not applicable to the facts of the case. Appellant craves leave to add, alter, amend or vary from the above grounds of appeal at or before the time of hearing." 3. The grounds raised in the Revenue's appeal read as under:- "(i) On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in directing the Assessing Officer to treat the income of Rs. 53,61,68,729/- earned on trading of long term shareholding as 'income under the head capital gain' instead of 'business income', as held by the Assessing Officer. (ii) The appellant craves leave to add, alter or amend any ground of appeal raised above at the time of hearing." 4. In this case the assessee is a private limited company which derives ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort term capital gain and at the same time the purchase to sale ratio was substantial. Circumstances indicate that the intention of the assessee was not to earn the dividend but to earn profit on sale/ purchase of shares. v) The assessee has also shown speculative loss which indicates that trading was being done by the assessee with the intention of earning profit out of share transactions. 4.4 The Assessing Officer has further emphasized that the assessee has wrongly interpreted the meaning of 'investment and capital assets' and used it for its benefit to deflate its tax liability. It was argued that keeping in view of the overall context and the frequent transactions of purchase and sale of shares by assessee company, including the quantity and volume of transactions, it can be concluded that the claim made by the assessee with regard to long term capital gain and short term capital gain is not justified. 5. Before the Ld. Commissioner of Income Tax (Appeals) made elaborate submission. Considering the above, Ld. Commissioner of Income Tax (Appeals) observed that the even though share transactions have been under taken by the company, the legal provision as well as CBDT Circula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me shares of JOL had also been sold in the immediately preceding financial year, in the A.Y. 2005-06, the claim of the assessee regarding the sale of these shares as long term capital gain has also been accepted by the department. 5.1 Ld. Commissioner of Income Tax (Appeals) further observed that on going through the fact of this particular case, it is observed that there only one transaction during the year relating to JOL shares which maintained separate DMAT account; that it cannot be said that there were frequent transaction; that the period of holding has been shown between one to three years; that the purchase of the shares were made partly out of borrowings and partly out of own funds; that the shares have been held with the intention of earning dividend; that assessee has clearly mentioned these shares as part of the investment in the balance sheet. Ld. Commissioner of Income Tax (Appeals) further observed that it important to note that in the present case the assessee has specifically maintained a separate DMAT account with regard to the shares of the JOL and has also shown dividends earned from the same in different years, clearly establishing that the shares have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of these shares should be treated as capital gain and not business income. Ld. Commissioner of Income Tax (Appeals) concluded as under:- "Keeping in view the various judicial pronouncements as well as CBDT circular on this issue, I am of the opinion that the appellant could hold some of the shares as investment and at the same time carry on the business of buying and selling of shares. Accordingly, with regard to the claim of the long term capital gain, the facts indicated that those shares had been held with the intention of investment. However, in the context of the sale of shares on which short term capital gain has been claimed by the appellant, the facts indicate that keeping in view the frequency of transaction, intention of the assessee to earn profits as well as most of these shares having been held in a separate DEMAT account, is pointing towards the fact that to the extent of these shares the appellant was carrying out business transactions. The appellant has also shown some speculation loss which further indicate that share transactions in the nature of business were also being carried out by the appellant. In view of the facts with regard to the shares which have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng : ITA No. 799/Mum/2009. - ITAT, Delhi Bench decision in the case of ACIT vs. Jubilant Securities P Ltd. : ITA No. 3337/Del/2008. - ITAT, Mumbai Bench in the case of Shri Vinod K. Nevatia vs. ACIT : ITA No. 6556/Mum/2009. - ITAT, Mumbai Bench in the case of DCIT vs. Vruschik Consultancy Services P. Ltd. : ITA No. 3774/Mum/2004. - Hon'ble Mumbai High court in the case of C.I.T. vs. Shri Darius Pandole : ITA No. 3053 of 2009. - ITAT Delhi Bench, in the case of DCIT vs. BMW Holdings P Ltd. : ITA No. 3187/Del/2010. - ITAT, Mumbai Bench, in the case of Vinod M. Shah vs. ACIT : 38 SOT 503 - ITAT Mumbai Bench in the case of ACIT vs. Sheela Chiniwala : ITA No. 5463/Mum/2009. - Hon'ble Apex Court in the case of C.I.T. vs. Jindal Photo Investment Ltd. SLP (Civil) No. 26867 of 2010 where the Court dismissed the petition filed by the department : 334 ITR (St.) 307 - Hon'ble Apex Court in the case of C.I.T. vs. Gopal Purohit : SLP (Civil) No. 32891 of 2010 where the Court dismissed the petition filed by the department : 334 ITR (St.) 308. - Delhi High court in the case of C.I.T. vs. Jubilant Securities P ltd. 333 ITR 445. - ITAT, Delhi Bench in the case of Amit Jain vs. ACIT : ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce value of the shares had also been revised from Rs. 10 to Rs. 5 per share. Assessee had been maintaining two separate DMAT accounts; these separate accounts were for long term investments and short term investments. Thus, Ld. Commissioner of Income Tax (Appeals) has given a finding that investment made by the assessee in the shares of JOL were intended to be retained for a longer period of time with the intention of earning dividend and obtaining long term capital gain. In this regard, Ld. Commissioner of Income Tax (Appeals) has noted that Assessing Officer has not disputed that with regard to the shares held for more than one year, there is any factual error made by the assessee. It is further noted that assessee has been consistently showing them as investment. Some of them had also been sold in the immediately preceding financial year, in the A.Y. 2005-06, the claim of the assessee regarding the sale of these shares as long term capital gain has also been accepted by the department. 7.3 In the background of the aforesaid discussion, we are of the opinion that shares in JOL has been held for substantial period of time on which dividend had also been earned and the same has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rried out by the assessee. Ld. Commissioner of Income Tax (Appeals) is correct in holding that whenever any investment is made by a person, a reasonable timeframe has to be kept in mind before the shares are sold, unless there are certain exceptional circumstances. In the present case, the shares have been claimed to be shown as investment have not been held as investment with the intention of earning dividends and therefore, merely because they have been shown as investment in the balance sheet does not strengthen their claim that sale of these shares should be treated as capital gain and not business income. The facts clearly indicate that keeping in view of the frequency of transaction, intention of the assessee to earn profits as well as most of these shares having been held in a separate DEMAT account, is pointing towards the fact that to the extent of these shares the assessee was carrying out business transactions. Thus, we agree with the finding that Ld. Commissioner of Income Tax (Appeals) with regard to these shares which have been shown as short term capital gain, these transactions cannot be treated as short term capital gains and have to be considered as business incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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