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TMI Blog2013 (9) TMI 328X X X X Extracts X X X X X X X X Extracts X X X X ..... he heads Short Term Capital gains at Rs.72,04,778/-, net profit for futures and Options at Rs.23,95,361/- and speculation income at Rs.11,38,242/-. Further, the assessee has also shown net loss from proprietary concern which is also engaged in the business of trading in shares and also income from bank interest, interest on loans and debentures etc. The assessee has also shown capital loss on sale of shares. 2.1 During the course of the assessment proceedings, the Assessing Officer observed that the so called Short Term capital gain is nothing but business income as appears from the facts of the case that the assessee is engaged in the trading of shares in the disguise of being an investor. Thereafter, the AO analyzed shares as exhibited at pages 7 to 10 of the assessment order and found that the assessee is engaged in multiple trades in the same shares, the operation is systematic and regular. Drawing support from the Circular No. 4 of CBDT dt. 15.6.2007 wherein the guidelines have been issued to the AO on the question whether transactions of purchase and sale of shares are to be treated as trading transaction or to be treated as mere investment. The AO observed that the time dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted as a Trader in Shares by you and not as an Investor and as per which an amount of Rs.9,42,607.00 is due to me, by way of refund of tax please. 2. You may kindly take into account, the value of the Closing Stock at Rs. 55,79,211.93, as against my Investment (at cost) Value of Rs.81,02,756.91 shown by me, in my Balance Sheet as at 31.03.2006 (the revised working in this connection is enclosed herewith for your ready reference please). This is in view of the fact that if I am treated as a Trader, then the closing stock should be valued at cost or market price, whichever is lower, as on 31.03.2006 (a xerox copy of the official Shares Price List of BSE as on 31.03.2006 is also enclosed herewith for your ready reference please. You may also get the same on BSE site at www.bseindia.com please). This would reduce my business income by Rs.25,23,544.98, due to the loss in the value of shares held by me, if my investments are treated as closing stock and the valuation of same is done as mentioned above please. 3. Also, shares having Nil value have been written off to the extent of Rs.3,17,116.00, during the year, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Capital Loss of Rs.36,41,307.69. This Short Term Capital Loss of Rs.36,41,307.69 should also be taken into account, while computing my Business Income, because you propose to treat my Short Term Capital Gains of the year, as Business Income. Therefore, this benefit of Short Term Capital Loss of Rs. 36,41,307.69 should also be allowed by treating as a Business Loss of the year. I hope, Sir, you would find the above in order please. I also hope that you would kindly treat my income, under the head "Short Term capital Gains only as stated by me earlier. However, in case you want to treat my income under the head "Business Income", I would request you to kindly give me all the benefits of a Businessman (Trader in shares) under the Income Tax Act. 1961 please. In case you need any further details, I would surely provide the same, as and when called for please." 2.4 After considering the facts and the submissions made by the assessee, the AO did not accept the contention of the assessee. The AO was of the opinion that considering the volume and the frequency of the transaction alongwith the holding period added with borrowed funds, there is no d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total addition of Rs.72,04,778/- from gains in shares under the head 'business income, the Ld. CIT(A) confirmed the addition only to the extent of Rs.64,02,991/- and directed the AO to treat Rs.8,01,787/- under the head STCG. 4. The assessee and Revenue being aggrieved by this finding of the Ld. CIT(A) are before us. The Ld. Counsel for the assessee strongly submitted that the assessee is maintaining separate books of account for investment and trading purposes. Not only that the assessee is also maintaining separate Demat account and bank accounts for the transactions undertaken in these two categories. The Ld. Counsel further argued that on similar set of facts, the assessee has been assessed as an investor and the gains have been accepted as STCG/LTCG in not only preceding assessment years but also in subsequent assessment years. To substantiate his claim, the Ld. Counsel filed copies of the assessment order for A.Y. 2008-09 and to further substantiate his submission, the Ld. Counsel relied upon the decision of the Tribunal in ITA No. 961 & 1836/Mum/2010 emphasizing on his point that rule of consistency should be followed. The Ld. Counsel further placed reliance on the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eding years but we do know the facts of the present case and considering the facts in totality, we have no hesitation to hold that the assessee is engaged in the business of purchase and sale of shares considering the peculiarity of the facts and circumstances in which the transaction has been done. At the same time, we find that the Ld. CIT(A) has grossly erred in directing the AO to treat Rs.8,01,787/- as Short Term Capital Gains. Once it is established that the nature of transactions are such that the assessee is trading in shares, it does not make any difference whether he has transacted in the same shares more than four times or less than four times. To that extent, we do not agree with the findings of the Ld. CIT(A). We accordingly reverse the findings of the Ld. CIT(A) and allow Revenue's appeal on this issue and dismiss assessee's appeal on the same issue. Accordingly, we confirm the findings of the AO. Rs.72,04,778/- is to be taxed under the head 'business income'. 8. Other grounds in Revenue's appeal in ITA Nos. 329 & 6555/Mum/2010 are directly related to ground No. 1 and are accordingly allowed. 9. Ground No. 2 in assessee's appeal relates to the claim of set off of bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was treated as business transaction. As the underlying nature of the transaction was the same i.e. F&O, therefore brought forward losses which were erstwhile treated as speculative losses were allowed to be set off against subsequent years F&O profit. However, in the present case, the loss which the assessee claims to set off is Long Term Capital loss and there is no such amendment so far as claim of such loss is concerned. Therefore we do not find any merit in the claim of the assessee to allow set off of Long Term Capital loss against business income. Ground No. 3 is accordingly dismissed. 14. Ground Nos. 4 & 5 read as under: "4. The Ld. CIT(A) erred in not allowing the entire loss arising of Rs. 25,23,545/- on account of valuation of closing stock as per the recognized method 'cost or market value whichever is lower.' 5. The Ld. CIT(A) erred in not allowing the loss arising of Rs.3,17,116/- on account of the shares written off on the basis of valuation of closing stock as per the recognized method 'cost or market value whichever is lower" 15. As we have held that STCG is to be treated as business income, grievance raised by the assessee in ground No ..... X X X X Extracts X X X X X X X X Extracts X X X X
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