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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 ..... (i) That the Ld. Commissioner of Income Tax (Appeals) erred in confirming the action of Assessing Officer in assessing the gains of Rs. 1,10,25,787/- arising on sale of short term capital assets being investment in equity shares as "Profits and Gains of Business and Profession" instead of Short Term Capital Gains by holding the "investment in shares as stock in trade of the Company. (ii) That the Ld. Commissioner of Income Tax (Appeals) erred in confirming the order of the Assessing Officer in assessing the gains arising on sale 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 641 (SC). 4.3 In para 5 to 7 of the assessment order, the Assessing Officer has observed that with regard to the share transactions treated as long term and short term capital gain, the following characteristics indicated that the share transactions were in the nature of business income:- i) Transactions were regularly entered during the year. ii) Purchase and sale of shares were continuous. iii) The assessee is not maintaining separate books and accounts. iv) The holding period of shares was 10 days to 8 months for short 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 tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Ld. Commissioner of Income Tax (Appeals) further observed that the 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. Ld. Commissioner of Income Tax (Appeals) further noted that investment in share of JOL has been consistently shown as investment, since the date they were purchased and some 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner of Income Tax (Appeals) further observed that it is pertinent to note 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; that 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of ITO vs. Rohit Anand : 34 SOT 42. - Hon'ble Mumbai High Court decision in the case of C.I.T. vs. Gopal Purohit : 228 CTR 582. - ITAT, Mumbai Bench decision in the case of Gopal Purohit vs. JCIT : 29 SOT 117 - ITAT, Mumbai bench decision in the case of Management Structure and Systetms (P) Ltd. vs. ITO : ITA No. 6966/Mum/2007. - Hon'ble Delhi High Court in the case of C.I.T. vs. PNB Finance and Industries Ltd. : ITA No. 306/2010. - ITAT, Mumbai decision in the case of DCIT vs. SMK Shares and Stock Broking : 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/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .Y. 2001-02 and also in A.Y. 2004-05 for the purposes of making investment and earning dividend. Assessee's intent in this regard is clear to hold them as investment and earn dividend. The Board Resolution as well as audited balance sheet and P&L account in this regard amply fortify the assessee's intent. Moreover, all the shares have been purchased and retained by the assessee for a substantial period of time and during this period, the assessee has also received bonus shares. During the period of holding, the face value of the shares had also been revised from ₹ 10 to ₹ 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 ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intention of earning profits and not earning dividend. Thus, it is found that with respect to these shares transaction, the transactions were regularly entered during the year; purchase and sale of shares were continuous; holding period was very short; circumstances clearly indicate that the intention of the assessee was not to earn the dividend but to earn profit on sale and purchase of shares. The assessee has also shown speculation loss which indicate that share transactions in the nature of business were also being carried 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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