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TMI Blog2012 (10) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the frequency and volume of share transactions. The assessee put forth the following reasons as to why the income from shares should not be treated as business income: i) Assessee is a doctor and the sale and purchase of securities are allied to her usual trade. ii) Intention of resale at a profit was for earning dividends and interest. iii) There is no change in scale of activities. iv) Transactions entered were not continuous and regular. v) Purchases are made out of own funds and borrowing from family members. vi) Generally holding shares for longer period. vii) Her livelihood does not depend upon the activities of buying and selling of shares. viii) Shares and securities are shown as investment in books of account. 4. The AO did not accept that assessee should not be treated as trader of shares stating the following reasons: a) The submission of the assessee that assessee is primarily a doctor and her livelihood does not depend upon the activity of buying and selling of shares has no relevance. b) The assessee's submission that she is consistently showing income under the head "capital gains" is not relevant as the principle of res-judicata does not apply to Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time can not be taken as investment of the assessee. Assessee made purchases and sales of speculative transactions of Rs.1,32,59,50,152 and Rs.1,32,68,82,207, respectively which speaks the volume of speculative transactions. 5. The AO considering the above facts and relying on departmental circular No. 4/2007 dated 15/6/2007 that no single principle would be decisive and the total effect of all the principles should be considered to determine whether, in a given case, the shares are held by the assessee as investment or stock in trade; held that the income shown by the assessee as STCG is business income and, accordingly, computed the same. It is relevant to state that AO also considered LTCG of Rs.15,69,181 as business income of the assessee. Being aggrieved, assessee filed appeal before ld CIT(A). 6. On behalf of assessee, it was contended that assessee was maintaining regular books of accounts whereby shares and securities are treated as capital assets. That the assessee had herself bifurcated the entries and offered the profit/loss on the sale of shares as business income in respect of speculation profits and long term and short term gains as capital gains separately. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own by the assessee is assessable as capital gain. Hence, department is in appeal before the Tribunal. 7. Ld D.R. referred to the facts as stated by the AO at pages 2 to 3 of the assessment order, which we have already discussed hereinabove in paras 3 & 4, and submitted that assessee has frequently been buying and selling shares on a day to day basis. Ld D.R. referred pages 64 to 78 of PB and submitted that on many occasions, the period of holding was varying from one day to a very few days. He submitted that even if the transactions in the books of account are reflected as investment, it could not be considered as determinative factor to decide the real nature of transaction and to substantiate his submission, ld D.R. placed reliance on the decision of ITAT Mumbai Benches in the case of Smt. Sadhana Nabera vs. JCIT (ITA No.2586/M/2009) order dated 26th March, 2010. Ld D.R. relying on the decision of Hon'ble AP High Court in the case of PVS Raju vs ACIT, (2012) 18 Taxman.com 2(AP) submitted that Their Lordships in para 15 of the order considered the factors which are to weigh to decide the issue as to whether the share transactions constitute stock in trade or an investment. He su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kapadia vs ITO(I.T.A. No.2053/M/07) dt.10.9.2009 3. Shri Vinod K. Nevatia vs ACIT(Income Tax Act No.6556/M/09 & 81/M/10) dt.3.12.2010 4. DCIT vs. SMK Shares & Stock Broking Pvt Ltd.(I.T.A. No.799/M/09) dt.24.11.2010 5. Mr Nehal V. Shah vs ACIT(I.T.A. No.2733/M/09) dt.15.12.2010 6. Mr Sanjeev Chawala vs JCIT(i.t.a. No.5614/M/-09) dt.13.8.2010 7. Nagindas P. Sheth (HUF) (I.T.A.No.961/M/10) dt.5.4.2011." 9. We have carefully considered the orders of authorities below and submissions of ld representatives of parties. We have also gone through cases cited by ld representatives of parties to substantiate their submissions. 10. The dispute is regarding nature of income from share transactions entered into by the assessee, as to whether profits shown by the assessee out of share transactions should be treated as investment activity or trading activity. 11. We may state that it depends on its own facts and circumstances. There are various factors such as frequency, volume, entry in the books of account, nature of funds used, holding period etc, which are relevant in deciding the true nature of transactions and no single factor is conclusive. The Hon'ble Gujarat High Court in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal exigencies. Since income from investment in shares which is in the form of dividend is received annually, normally an investor is expected to hold the shares for more than a year. Therefore, each case is required to be examined carefully to ascertain the true nature of transactions. 13. In the case before us, there is no dispute to the fact that there are number of transactions entered into by the assessee in respect of short term capital gain claimed by her, the details of which are placed at pages 64 to 78 of PB. On perusal of the said statement, we observe that there are repeated transactions entered into by the assessee. We observe that the very first transaction in respect of the company "Aarti Drugs Ltd ", details given at page 64 of PB, the assessee purchased 2500 shares on 23.6.2005 and sold them on 29.6.2005. Again the assessee purchased the shares of same company on 15.7.2005, 20.7.2005 and 27.7.2005 and sold them on various dates i.e. on 23.12.2005, 26.12.005 and 5.1.2006. Similarly, in respect of shares of the company 'Adlabs Films Ltd ", details given at page 64 of PB, we observe that assessee purchased shares on 20.6.2005 and sold the same on 21.6.2005 i.e. only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 847/2010 dated 27.4.2012 after considering the tests as laid down by Hon'ble Gujarat High Court in the case of CIT vs Rewashanker A Kothari, 283 ITR 338 has, inter alia, stated that the most important test is volume, frequency, continuity and regularity of transactions of purchase and sale of goods concern, on the basis of which, an inference can be drawn whether the activity is in the nature of business or not. We are of the considered view that all the tests as laid down in the above cases clearly apply to the facts of the case before us to hold that the transactions entered into by assessee for purchase and sale of shares is in the nature of trade and not an investment. Therefore the said profit of Rs.70,18,216 is in the nature of business profits. Hence, we hold that the AO is justified to assess alleged short term capital gain as business income of the assessee. 15. During the course of hearing, ld A.R. placed reliance on the decision of the Tribunal in the case of Gopal Purohit (supra) to argue that the income has to be assessed as income from investment. We have carefully perused the said order of the Tribunal which has been confirmed by Hon'ble Jurisdictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to be decided based on the facts available for a particular year and considering the facts of the present assessment year, we have no doubt that share transaction from which, assessee has declared STCG are in the nature of trading activity. Therefore, the said income has rightly been treated as business income. In view of above, the order of ld CIT(A) accepting the claim of the assessee in respect of STCG cannot be sustained. Hence, we set aside the order of ld CIT(A) in regard to STCG and restore the order of AO. 16. However, in respect of claim of the assessee of LTCG of Rs.15,69,181, we find substance in the submissions of ld AR that LTCG has arisen to the assessee in respect of scrips of only two companies and the period of holding is also more than 365 days. Further, it is also not disputed that there are only 6 transactions carried out by the assessee. Therefore, on the basis of the facts and principles, as discussed hereinabove, it can be said that said shares were held by the assessee as an investment. Hence, we are of the considered view that the profit of Rs. 15,69,181, on sale of shares scrips of two companies, details given at page 13, has rightly been considered by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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