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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 ..... g dividend but with the dominant intention of resale in order to earn profits. The profits made by assessee was not of mere enhancement of value of shares, but was a profit made in the carrying on of a business scheme of profit making. The repetition and continuity of the transactions gave them a flavour of "Trade" - Decided against assessee. - ITA.No.901/Hyd/2013 - - - Dated:- 29-11-2013 - Shri Chandra Poojari, A.M. And Smt. Asha Vijayaraghavan, J.M.,JJ. For the Appellant : Shri S. Rama Rao (A.R.) For the Respondent : Shri M. H. Nair (D.R.) ORDER Per Smt. Asha Vijayaraghavan, J.M. This appeal filed by the assessee against the Order of the CIT(A)-IV, Hyderabad dated 30.03.2012 for the assessment year 2008-09. 2. Brief facts of the case are that the assessee filed his return of income for the assessment year 2008- 09 on 29.09.2008 declaring total income at Rs.1,08,87,040/-. The case was selected for scrutiny. Notices under sections 142(1) and 143(2) were issued and served on the assessee. During the year under consideration, the assessee has admitted short term capital gains from trading in shares at Rs.95,89,511/-. During the course of assessment proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the volume of the transactions carried out, the period within which the volumes were done, the continuity or lack of it etc., would determine the substantial nature of transactions. (ii) The manner of maintaining books of accounts - whether the assessee maintained books of accounts or not, whether the shares were valued as stock-in-trade or as investments will throw light on this aspect. (iii) Magnitude of purchases to sales - the Ratio of purchases to sales, the nature of holding, the receipt of dividends or otherwise, the motive of profit would suggest the nature of transactions. 4.1. The A.O. considering the above principles, drew the following conclusions : (i) The assessee has a turnover of about Rs.13 crores in more number of scrips, which is very huge for an individual. (ii) The assessee is involved in the activity of trading in shares throughout the year continuously. (iii) Except in a few cases, all purchases were done in the year itself. (iv) The assessee had received dividends on shares. (v) The assessee had a loan outstanding as on 31.03.2008 amounting to Rs.6,39,00,000/-, out of which Rs.3,45,00,000/- was taken during the previous year only. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e- entries in various scrips even in respect of shares whose delivery was taken. It is seen that while the assessee sold 5,000 shares, out of the total 10,000 shares held of GMR Infrastructure, on 11.10.2007, and further 5,000 on 17.10.2007, he repurchased 2,000 shares on 22.10.2007 and 4,000 on 23.10.2007. The 6,000 shares so purchased were sold off on 7.11.2007 itself. The assessee however again purchased 50 shares on 8.11.2007, which too were disposed off on 14.l.2008. The pattern of these transactions clearly show that even in respect of the shares whose delivery was taken, the assessee had acted in the manner of a trader. The classification of the two periods sought to be done on the basis of "delivery", therefore, has no merit. 6.6. Even in respect of shares of BHEL, a similar pattern emerges, where 100 out of 125 shares were sold by the assessee on 20.04.2007. The however purchased 50 shares each on 6.8.2007 and 7.8.2007, which too were disposed off on 9.8.2007. Once again 50 shares of BHEL were bought on 16.8.2007, which were sold off on 3.10.2007. 6.7. A similar pattern can be witnessed in the trading in the shares of Reliance Energy, whereof 75 shares, bought on 13.2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is seen that in the assessee's case also the ratio of sales to purchases of shares resulting in such profits is 1:1, even though the assessee has attained huge turnover of Rs.13.3 crores by putting in his own capital, borrowings, as also the funds by rotating the shares purchased. 6.13. Further, even if the transactions of the assessee in shares have been accepted as resulting in capital gains in the earlier years, it is an accepted judicial position that while consistency is an important indicator, the nature of transactions of an assessee needs to be decided after considering the totality of facts and the conduct of the assessee. It was long back that the Hon'ble Supreme Court in the case of Raja Bahadur Kamakhya Narain Singh vs. CIT (77 ITR 253) held that the conduct of the assessee is the determinative factor in judging whether shares are held on capital or trading account". 8. Accordingly, the learned CIT(A) dismissed the appeal of the assessee. 9. Aggrieved by the Order of the CIT(A) the assessee is in appeal before us. 10. The learned A.R. relied upon the Judgment of the jurisdictional High Court in the case of Spectra Shares Scrips Pvt. Ltd. vs. CIT- III (201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out with the intention of making equal profits. (vii) The assessee financed transactions with borrowed funds and own funds. 14. The CBDT circular No.4/2007 specifically states that no single principle can be taken and the total effect of all the principles should be considered to determine whether in a given case the shares are held by the assessee as investment or stock in trade. Hence, we are of the opinion that the share trading done by the assessee is nothing but trading activity done regularly with the sole intention of earning profit and hence, the entire income is to be treated as 'Income from Business'. Accordingly, placing reliance on the Judgment of the jurisdictional High Court in the case of PVS Raju and another vs. Addl. CIT 340 ITR 75 wherein it has been held that "Business Income or capital gains profit from sale of shares - assessee filed their returns declaring income form investment in shares, interest income, salary and capital gains. Assessee claimed share transactions should be treated as short term capital gains and taxed under section 111A. Revenue passed the order that assessee was trader in shares, hence it should be treated as business income. Assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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