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TMI Blog2014 (4) TMI 866X X X X Extracts X X X X X X X X Extracts X X X X ..... e treated as business income and not capital gains – Decided in favour of Revenue. - ITA 561/2012, ITA 566/2012, C.M. No. 16325/2012 - - - Dated:- 21-4-2014 - S. Ravindra Bhat And R. V. Easwar,JJ. For the Appellant : Sh. N. P. Sahni, Sr. Standing Counsel and Sh. Nitin Gulati, Advocate For the Respondents : None ORDER Mr. Justice S. Ravindra Bhat 1. These two appeals by the Revenue question a common order of the Income Tax Appellate Tribunal ( ITAT ) by which the assessee s appeal in respect of its claim for short term capital gain was allowed and the Revenue s appeal in respect of the claim for long term capital gain was dismissed. The question of law which arises for consideration is whether the amounts claimed as long term and short term capital gains by the assessee could have been treated as such by the ITAT in its impugned order. 2. During the year under consideration (AY 2006-07) the assessee was engaged in the business of dealing in the auto spare pails and investment in bonds, mutual funds and other securities. On scrutiny of the accounts, the Assessing Officer felt that assessee has disclosed long term capital gains to the tune of Rs. 31,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in view the specific facts and circumstances and the nature of frequent share transactions of various companies, sample of which have been reproduced above. The most important aspect which needs to be highlighted is the nature and purpose for which the shares were purchased and subsequently sold. Since with regard to the shares claimed under short term capital gain, these indicate the intention of the appellant to trade in these shares, I am of the firm opinion that in the present circumstances, such transactions have rightly been held as income from business by the AO. Therefore, the claim of the appellant that these shares transactions were in the nature of investment does not appear to be convincing and to that extent this ground of the appellant is dismissed. Accordingly, subject to the above observations, I am inclined to hold that while the claim of long term capital gains amounting to Rs 31,13,006/- by the appellant is valid, the claim regarding short term capital gain amounting to Rs. 26,82,115/- does not appear to be logical and convincing. As a result, this ground of the appellant is partly allowed and relief is allowed only to the extent of amount of long term capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed this issue in that year but that does not obliterate the concept that books of account were before him and he must have considered all the aspects. The frequency of front is one factor which may goad to the adjudicating authority to construe the transaction as a business transaction but i.e. not be absolute criteria. This has been considered by the ITAT in a number of orders referred by us in the foregoing paragraphs. Thus taking into consideration all the facts and circumstances, we are of the view that the learned CIT(Appeals) has erred in treating part of the transactions as of investment and partly as a trading in the shares. We set aside the order of the learned CIT (Appeals) and direct the Assessing Officer to accept the claim of the assessee of long terms capital gain as well as short term capital gain 5. The Revenue argues that the impugned judgment is in error of law as it fails to give any weightage or importance to at least two tests particularly since the assessee in this case is also engaged in the investment business. It is emphasized that the failure of the assessee to maintain separate books of account in respect of its investments, and for regular busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances, the findings of the ITAT with respect to the amount claimed as long term capital gains are sound and do not call for interference. 8. The position with regard to short term capital gains, however, is different. The AO and CIT(A) held that separate books were not used. Amounts were freely transferred from the profits gained to business and vice-versa. However, perhaps the single-most telling circumstance is the kind of transactions which the CIT (A) noticed in paragraph 5 (c) of his order. A chart reflecting the volume, frequency, duration (of holding) criteria was prepared and reproduced in the Commissioner s order. That chart was only illustrative, and is extracted below: Name of the share Purchase date Sale date Jindal Photo 07.04.2005 07.04.2005 Infotech Ltd. 22.04.2005 22.04.2005 Zee Tele 02.05.2005 16.05.2005 Zee Tele 02.05.2005 17.05.2005 Sam Ele Development 23.05 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany (P) Ltd. 82 ITR 586 (SC) the Supreme Court held that: 3 it was open to the assessee to contend that even on the assumption that it had become a dealer and was no longer an investor in shares the particular holdings which had been cleared and the sales of which had resulted in the profit in question had always been treated by it as an investment. It can hardly be disputed that there was no bar to a dealer investing in shares. But then the matter does not rest purely on the technical question of onus which undoubtedly is initially on the revenue to prove that a particular item of receipt is taxable. Whether a particular holding of shares is by way of investment or forms part of the stock-in-trade is a matter which is within the knowledge, of the assessee who holds the shares and it should, in normal circumstances, be in a position to produce evidence from its records as to whether it has maintained any distinction between those shares which are its stock-in-trade and those which are held by way of investment. P.M. Mohammed Meerakhan v. Commissioner of Income-tax, Kerala, 73 ITR 735 (SC) is another judgment of the Supreme Court holding that it was not possible to evolve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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