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TMI Blog2013 (9) TMI 473X X X X Extracts X X X X X X X X Extracts X X X X ..... rchased/held and, accordingly, gets to be decided at the stage of or upon acquisition itself. That the scrip may eventually be sold, in whole or in part, within a period less than that envisaged earlier, or within a period less than a year, is, however, a different matter, as perceptions and, consequently, decisions, even qua capital acquisitions, may vary or change with time. This would, however, not make it any less an investment, where acquired as such in the first place, so that the gain or loss arising thus would be a short term capital gain or loss, as the case may be - Following decision of CIT vs. Sutlej Cotton Mills Supply Agency Limited [1975 (7) TMI 2 - SUPREME Court] - Decided against assessee. - ITA No.7334/Mum/2011 - - - Dated:- 21-6-2013 - D. Manmohan And Sanjay Arora, JJ. For the Appellant : Shri Biren Gabhawala For the Respondent : Shri Surinder Jit Singh ORDER:- PER : Sanjay Arora This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals)-31, Mumbai ( CIT(A) for short) dated 27.09.2011, dismissing the assessee s appeal contesting its assessment u/s.143(3) of the Income Tax Act, 1961 ( the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s inconsistent therewith; the assessee adopting a different and ambivalent stand per its return of income. The difference between the business and the speculative transactions was a function of delivery (in shares), so that the said segregation was based on whether the transaction is delivery or non delivery based. Further, the volume of the shares sold, the profit on which is stated to be by way of gain on transfer of long term capital assets, i.e., LTCG by definition, constitute only 0.7% of the total volume of the shares traded in. The dividend received by the assessee, again, claimed tax-exempt, is only ₹ 15,60,450/-, which evidently was very low in relation to the capital employed. That is, clearly, the dividend earned, which arises only incidentally, is not the prime motive for the purchase of the shares, which is only to realize profit on their sale. In fact, the assessee has booked losses in as many as 66 (out of 100) scrips during the year, also profiling them as regards the various transaction types. The same clearly suggests the mindset of a businessman, so that seeking capital appreciation, which entails holding over a period, was not the prime motive, but of earn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m. In fact, the shares being held in the same D-Mat account, with in fact some (six) scrips being common, i.e., sold both at less than as well as more than one year, it is not even possible to determine the holding period the shares being homogenous, except by adopting a methodology or assumption, as first in first out (FIFO). The marking of some shares, purchased together, as capital assets, as against the balance as stock-intrade, merely because they stand sold subsequently, after a defined holding period (one year), is, thus, suspect. The income from the shares held for less than a year is admittedly being disclosed as business income. To say, therefore, that the income on the same or even other shares, where sold after over a year, would, the other facts and circumstances being the same, be of a different nature, i.e., as by way of realization of capital assets, was not justified. The turnover volume of the assessee s different share activities, i.e., - future and options (Rs.1348.19 crores), - delivery based, at less than one year (Rs.30.18 crore), - delivery based share trading (more than one year) (Rs.4.99 crores), and - non-delivery based/speculative tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has classified the F O transactions as well as the delivery based transactions in shares, except where sold beyond one year, as of business. The only bone of contention between the assessee and the Revenue, or the area of dispute, is in respect of delivery based transactions, where the holding period exceeds one year; the assessee claiming it to be LTCG, exigible to tax exemption u/s.10(38). Though it cannot be denied that merely because the assessee is engaged in share business, he cannot be denied exemption u/s.10(38) where otherwise exigible, but then to suggest so, or to state of it as being the only reason for the denial of the claim thereunder, wound be oversimplifying the Revenue s case, which is, as is to be, based on facts. The onus to establish that certain shares are being held by it as investments is only on the assessee, and particularly so in the instant case as, firstly, the assessee claims an exemption from tax of income on that basis and, secondly, for the reason that he is admittedly engaged in the share trading business, or at least in share transactions yielding business income (inasmuch as the F O transactions do not involve actual sale and purchase of share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed deploying funds realized on the sale of such shares. To contend, therefore, of some such shares as being capital assets on the premise that the same are sold beyond one year of their purchase, is, therefore, clearly untenable. The categorization as to whether the scrip acquired is as an investment or as a part of the assessee s trading stock is primarily one of intention with which the share is purchased/held and, accordingly, gets to be decided at the stage of or upon acquisition itself. That the scrip may eventually be sold, in whole or in part, within a period less than that envisaged earlier, or within a period less than a year, is, however, a different matter, as perceptions and, consequently, decisions, even qua capital acquisitions, may vary or change with time. This would, however, not make it any less an investment, where acquired as such in the first place, so that the gain or loss arising thus would be a short term capital gain or loss, as the case may be. In the instant case, there is no such classification done by the assessee, the onus of which is only on it, being required to demonstrate, i.e., in a cognizable manner, with reference to its accounts/records, that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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