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TMI Blog2013 (11) TMI 203X X X X Extracts X X X X X X X X Extracts X X X X ..... PMS (Rs.33,16,415/-) as STCG. However, he treated the income earned by the assessee through online trading in shares (Rs.25,40,974/-) as business income, and framed the assessment accordingly. The reasoning given by the AO is that for assessment year 2005-06, on account of various factors, viz. the volume and number of transactions; the period of holding, etc., the transactions entered through ICICI Online were held to be in the nature of trading, and there was no change in the facts of the case for the current year. The ld. CIT(A), reversing the order of AO, agreed with the submissions of the Authorized Representative (AR), the counsel for the assessee, to the effect that assessee had been consistently investing in shares, bonds, mutual funds, etc., and has earned Long Term Capital Gains (LTCG) on sale thereof during the financial years relevant to the assessment years 2005-06 and 2006-07, which have been accepted by AO. The AO had also accepted the STCG earned by assessee on account of PMS transactions. It was further observed by the ld. CIT(A) that there are only 78 scrips held through ICICI Online, out of which in 70 scrips there was only a single transaction during the year a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fixed criterion that the income earned from shares through PMS is to be treated as investment income, while that earned by making direct online transactions is to be treated as business income. We have to see the overall facts and circumstances, as to whether in purchasing and selling the shares, her intention was to make profits through market management, or was to essentially secure appreciation in the value of her holding. The large number of transactions made by assessee show that she is in full-time business of transacting in shares. Though the dispute before us relates to the transactions made by assessee directly through the ICICI Online, we observe that not only a large number of transactions have been made directly through the ICICI Online, but the assessee has also made voluminous transactions through PMS. These transactions of purchase and sale have been made continuously and regularly throughout the year without any interval, showing that assessee was keeping a constant vigil on the ups and downs of the market, and purchasing and/or selling the shares accordingly. This type of conduct, it may be appreciated, cannot be said to be that of an investor; rather, has the char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsistently investing in shares and in earlier years she was treated to have earned income on capital account, in our view, has to be seen in light of the obtaining facts for the year, and has no legal force by itself. We can safely observe that for the relevant assessment year, the assessee has gained the characteristics of a business person through continuously, regularly and consistently making transactions in shares, which, reckoned on the whole, are voluminous. Though assessee may not have invested any borrowed capital, but we observe that that again is only indicative and not a fixed criterion. It is the assessment, on an overall appreciation of facts, that is material, so that no single criteria can be followed in this respect. 4.4 The next submission of the ld. AR is to the effect that almost 70% of the income has been earned by selling shares with a holding period of more than 200 days. We observe that it is not a criterion as to what income has been earned from the shares with holding period of 200 days or more, or having holding period of less than 30 days or even lesser, which all depends on the assessment of the anticipated price movement in the individual scrip vis-a- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear, then it essentially acquires the character of a business and not of investment. Though this argument was accepted while deciding the appeal for the assessment year 2005-06, but the same pleading for the subsequent year will show that the assessee has turned from an investor to a businessman. The boom in the market, and the consequent high returns, may perhaps have been the motivating or the enabling factors for the increased exposure or engagement in the stock market, but by itself would not decide on or be determinative of the character of the transactions. 4.6 The argument of the learned AR that the frequency of the transactions of investments in shares of different companies cannot be a criterion to understand the nature of the transactions is also not tenable. The ld. AR has given an example that a person may invest his money in fixed deposits of various Banks, so that he does not loose his capital in case of insolvency of any particular bank and, similarly, when an investor invests in various different companies, he does not become a trader nor it is the frequency of the transactions but the transactions per scrip that is to be seen. The said submission is of no moment i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion was treated as business income. The learned AR has picked up a few sentences from the judgment of the hon'ble apex court to stress his point. However, we observe that the assessee's case is not a case of a solitary transaction; rather, the sole motive of the assessee in making regular transactions of purchase and sale of shares is to earn profit by selling them at a higher rate. What the assessee in the case at hand is doing, in our view, is a business of sale and purchase of shares as commodity, taking conscious decisions all the time to either buy, hold or sell a scrip by keeping a constant vigil on the market as also the developments in the economy as well as in relation to the shares held or to be held. The law laid down by the hon'ble apex court in G. Venkataswami Naidu's (supra) case relied upon by assessee goes against assessee rather than help her. The Hon'ble Supreme Court in the said authority in clear words has held that in each case it is the total effect of all the relevant factors and circumstances that determine the characteristics of the transactions. No single or direct rule can be mechanically applied; rather, it is the facts and circumstances of each case whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact/s, and held that the profit of Rs.1,26,027/- did not arise to the assessee in the course of its business as a dealer in shares. It was thus ordered to be treated as capital and not a revenue receipt. The Hon'ble Supreme Court while dealing with the matter observed that it was never the case of the assessee at any stage that although he is a dealer in shares, but those shares which were the subject matter of sale were held by way of investment. It had mentioned throughout that all the shares were held by it as an investor, and that it could not be regarded as a dealer because the shares did not form its stock-in-trade. It was observed that upto a certain point of time the assessee had been assessed as an investor but the multiplicity of the transactions crossed successively over the years showed that assessee had ceased to be an investor and had become a dealer. The assessee should have contended that even on the assumption that it became a dealer and was no longer an investor in shares, the particular holding, on sales of which profit in question had arisen, had always been treated by it as an investment. The hon'ble apex court observed that though initially the onus is on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is showing her transactions in her accounts as capital investment, and later on claims it to be a business income, then such "admissions" can be a relevant factor against the assessee. However, if assessee is showing the investment in her books as capital investment, but the Revenue has challenged it as a business transaction/s, then such type of "admissions" cannot operate against the Department. So this authority is again of no help to assessee. 4.9 Another authority relied upon by the ld. AR styled as Gopal Purohit vs. Jt. CIT, 29 SOT 117 (Mum), to stress the point that delivery based transactions should be treated as in the nature of investment transactions, and not as income from business or profession. As the hon'ble apex court has observed in the above mentioned authority/s that there cannot be a fixed criteria or rule to judge that the income earned can be characterized as capital gain or business income, but the overall facts and circumstances of the case; the number of transactions; the conduct and intention of assessee, etc., are the relevant considerations. Hence the authority of the Mumbai Bench of the tribunal, and also another styled as Saranath Infrastructu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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