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TMI Blog2013 (7) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... And Smt. Asha Vijayaraghavan,JJ. For the Appellant : Shri K. C. Devadas For the Respondent : Shri M. H. Naik ORDER Per Asha Vijayaraghavan, J.M. This appeal preferred by the assessee is directed against the order of CIT(A)-VI, Hyderabad, dated 03/01/2012 for the assessment year 2008-09. 2. Briefly the facts of the case are that the assessee is a partner in M/s United Engineering Corporation and filed his original return of income for the AY 2008-09 on 30/09/2008 admitting total income of Rs. 33,76,878/-, which was processed u/s 143(1). Subsequently, the assessee filed revised return on 03/02/2009 admitting his income of Rs. 33,26,878/-. The case was selected for scrutiny and statutory notices were issued and the details were called for and the assessment was completed u/s 143(3) of the Act. The assessee declared long term capital gains of Rs. 8,17,407/- and short term capital gains of Rs. 29,21,392/- on shares and equity funds. The AO determined the taxable income at Rs. 34,94,454/- by treating short term capital gains of Rs. 30,88,968/- as business income by making following observations with regard to the assessee's transaction of purchase and sale of shares: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge it is only 5.67% to the total volume. In other words 94.32% of the shares were delivered. This factor mainly decides that the appellant is a mere investor but certainly not a business man by any stretch of imagination. It is not out of place to mention that the appellant derived dividend income of Rs. 1,19,623/- on investments in shares/funds. The appellant submits that he has been holding certain investments for longer terms wherever it was expedient and making long term capital gains/losses and therefore he is an investor and not a business man. The intention of the appellant has always been to make investments in shares and to earn dividends and not trading in shares to earn profits. The AO ought to have seen that the Circular issued by the CBDT is mostly applicable to Corporate or Foreign Institutional Investors who transact in share market in large volumes and claim that they are mere investors for the purpose of availing concessional rates of taxes. The criteria laid down by the Judicial Authorities as mentioned by the CBDT, if are made applicable to the facts of the appellant's case, the appellant can in no terms be treated as doing business in shares or holding share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see is a trader in shares. The CIT(A) observed that the receipt of dividend is incidental and a by-product of the assessee's transactions and receipt of dividend alone cannot be conclusive for establishing the assessee's claim that the transactions have been undertaken as investment. 7. The CIT(A) elaborately discussed the issue of principle of res-judicata at para 4.16 of his order and referred the decision of the Supreme Court in the case of Radhsoami Satsang Vs. CIT, 193 ITR 321 (SC). On the question of intention of the assessee, the CIT(A) observed that the intention of the assessee is necessarily known only to the assessee and not to others. Thereafter, the CIT(A) held as follows:- "4.20 It is seen that in all the above scrips, the assessee has made both purchases and sales, on a continuous basis, during the year. Even while the assessee was selling the shares, it continued to purchase them and again sold them. This is not the normal behaviour expected of an investor. While it is reasonable to expect that even an investor would seek to sell his shares if the conditions so warrant, the action of the Assessee in purchasing the shares even while he was engaged in selling them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. The coordinate bench of the jurisdictional Tribunal in the case of ACIT Vs. Anil Kumar Jain, [2012] 28 Taxmann.com 236 (Hyd) held as follows:- 8. We heard both the parties and perused materials on reco- rd. The contention of the assessees is that it always treated the shares as investment, and there is no business activity whatsoever carried on by the assessees with reference to shares. 9. Now the question before us is not whether the assessees have carried on the investment activity or business activity. On the other hand, the question is when the assessees classi fied the shares in the books as investments, whether really they are 'investment' or 'stock in trade'. One of the relevant tests for determining whether it is in the nature of fixed ass et or constitutes stock in trade of the assessee's business. Fi xed asset is what the owner turns to profit keeping the asset in his own possession, stock in trade is what he makes profi t of by parting with it and letting it change masters. If the expenditure is made for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business it is properly attributable to capital. If, on the other ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18 taxmann.com 3 (AP)-- (a) The frequency of buying and selling of shares by the appellants were high; (b) The period of holding was less; (c) The quantum of turnover was on account of frequency of transactions, and not because of huge investment; (d) The intention of the assessee to make quick profits on a huge turnover; (e) No. of scrips shares held for fewer days; (f) Whether engaged in dealing in the same scrips frequently; (g) Intention of the assessee in buying shares is not to derive income by way of dividend on such shares, but to ear n profits on the sale of the shares; (h) Whether the assessees had indulged in multiple transact tions of large quantities with high periodicity. These periodic transactions selecting the time of entry and exit in each scrip, called for regular direction and management which would indicate that it was in the nature of trade; (i) Repeated transactions, coupled with the subsequent conduct of the assessee to re-enter the same scrip or some other scrip, in order to take advantage of market fluctuation s lent the flavour of trade to such transactions; (j) The assessees were purchasing and selling the same scrips repeatedly, and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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