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TMI Blog2013 (12) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... .13.33 Crores and the trading activity was conducted on regular basis throughout the year. Looking at the quantum of the business done by the assessee in share trading activity and the profit motive involved in the business, it was proposed by the A.O. to treat this activity of the assessee as an "adventure in the nature of trade' in view of the provisions of section 2(13) and, accordingly, to hold the income offered under the head 'short term capital gains' as 'business income'. 3. In response, the assessee submitted that the intention is only to invest but not to trade and accordingly he has been showing the shares as investment in the return of income. Further, the AR of the assessee stated before the A.O. that the intention of the assessee which is investment and wherever the conditions are favourbale, the assessee has been encashing the investment. In this regard, the learned AR of the assessee relied on the decisions in the case of CIT vs. NSS Investments 277 ITR 149 (MAD) and CIT vs. Mohakampur ICE and Cold Storage 281 lTR 354 (All.) wherein it was held that the intention is very clear not to do business but only investment and should be assessed as capital gains. The AR of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an. 4.2. The Assessing Officer concluded that the share trading done by the assessee is intend to trading activity done regularly with the sole intention of earning profit and hence, the entire income offered under the head 'Short term capital gains' is to be treated as "Income from Business". 5. Aggrieved, the assessee filed an appeal before the CIT(A) and reiterated contentions raised before the Assessing Officer. 6. The CIT(A) held that "as could be seen from the decision of the Hon'ble Supreme Court in the case of G. Venkataswamy Naidu & Co. (35 ITR 594), it clearly emerges that the question whether the transactions of an assessee amount to a business activity depends on the peculiar facts of the case. A similar position emerges from the decision of the Hon'ble Patna High Court in the case of Eclat Constructions (P) Ltd. VS.'CIT (supra). Besides, it has been held in a number of judicial pronouncements, such as that in the case of CIT vs. Raunaq Singh Swaran Singh (85 ITR 220) that the crucial test to decide whether a transaction is in the nature of 'investment' or 'trading' has to be judged by the initial intention of the person at the time of purchase of shares etc. The Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons clearly go to show that there is no merit in the contention of the assessee that it was having two separate portfolios for 'trading' and 'investment', as the very contention regarding the delivery transactions being 'investment' proves to be incorrect. 6.9. Besides, as seen from the details of share transactions, all the purchases resulting Short term Capital gains were made during the year itself. As against the turnover of Rs. 13.3 crores in these shares, the assessee had nil stock thereof in his hand at the year end. In respect of these shares, therefore, the ratio of purchase of shares to sales was around 1:1, with the closing stock being NIL. . . . . . .". 6.10. . . . . . . . . 6.11. From the discussion regarding the transactions of the assessee, it clearly emerges that the assessee had indeed undertaken share trading activity as a regular business, which was carried out consistently and single mindedly throughout the year. As against the obvious conduct of the assessee, in the light of the judicial pronouncements discussed above, a single transaction may also constitute an "adventure in the nature of trade". In the case of the assessee however, there is a manifest regu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Spectra Shares and Scrips Pvt. Ltd. vs. CIT is not applicable to the assessee firstly because that is the case under section 263 of the Act. Whereas, the case before us is against the Order of the CIT(A) decided on appeal against the assessment order passed under section 143(3) of the I.T. Act, 1961. 12. Secondly, in the present case, the assessee has made several transactions of purchase and sales during the relevant year under consideration and the high volume of frequency and regularity of the activity carried on by the assessee in systematic manner is striking. If the assessee's case is considered within the parameters laid down by the jurisdictional High Court in the case of PVS Raju vs. Addl. CIT 340 ITR 75 then the activity carried on by the assessee in purchase and sale of shares would partake the character of business activity and it cannot be said that the assessee had merely made investments in shares. The decision of the ITAT, Hyderabad Bench in the case of ACIT vs. Anil Kumar Jain 54 SOT 77 is also supports our view while holding that the assessee is carrying on business activity of trading in shares. 13. In order to determine whether the assessee had inve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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