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TMI Blog2014 (5) TMI 229X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant : Sh. Vikas Jain, Advocate For the Respondent : Sh. Sanjeev Sabharwal, Sr. Standing Counsel. MR. JUSTICE S. RAVINDRA BHAT (OPEN COURT) The appellant- hereafter called the assessee impugns an order of the Income Tax Appellate Tribunal ( ITAT ) dated 05-10-2012 whereby the latter allowed the revenue s appeal and upset the order of the Commissioner of Income Tax (Appeals). It is argued that having regard to the circumstances, the substantial question of law is that the Tribunal fell into error in holding that the profit derived from the sale of shares for AY 2007-08 was not short term capital gain, but business income. 2. In the return, the assessee, for the year 2007-08 claimed that Rs. 65,45,321/- had to be treated as short term capital gain, on account of sale of shares. The Assessing Officer noted that the assessee provided the funds to M/s Vimgi Investments Pvt. Ltd to trade in shares on his behalf, which is supported by the brokers notes and confirmed copy of the account of the broker filed by the assessee by letter dated 10.8.2009. Since the broker had traded on behalf of the assessee, practically on day-to-day basis, the Assessing Officer observed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l gains and not under the head business income and pass a consequential order accordingly. 4. The revenue approached the ITAT contending that a proper application of the law to the facts of the case revealed that the sums used to derive the income in question were not investments but clearly for business purposes and therefore they had to be treated as such. The ITAT, in its impugned order, by the operative portion, allowing the revenue s appeal, held as follows: 5.6 In the instant case, the assessee has been habitually trading in quoted shares and the frequency of such purchases and disposal as also the fact that with the investment of Rs. 1 crore in shares, the assessee had turnover of over of Rs. 1 crores indicates nothing but intention of trade. It may be pointed out that the assessee earned only a meager amount of dividend of Rs. 21,952/- in the year under consideration. A trader in a commodity is basically motivated by profit in selling the commodity on each and every rise in value, which is apparent in the instant case. High frequency, high volume and regularity of transactions are therefore the basic features of a trading transaction. An investor on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the stock-in-trade is a matter which is within the knowledge of the assessee who holds the shares and he should, in normal circumstances, be in a position to produce evidence from his records as to whether he has maintained any distinction between those shares which are his stock-in-trade ond those which are held by way of investment. 5.7 In the case of CIT, Bombay vs H Holck Larsen (160 ITR-67), the Hon'ble Supreme Court has held as under: In order to determine whether one was a dealer in shares or an investor, the real question was not whether the transaction of buying and selling the shares lacks the element of trading, but whether the later stages of the whole operation show that the first step - the purchase of the shares - was not taken as, or in the course of, a trading transaction. The totality of all the facts will have to be borne in mind and the correct legal principles applied to these. If all the relevant factors have been taken into consideration and there has been no misapplication of the principles of law, then the conclusion arrived at by the Tribunal cannot be interfered with because the inference is a question of law, if such an infer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted in this context that as one possessed of means, it was certainly open to the assessee to seek growth of its funds; to achieve that object it invested through two brokers. A proper application of all tests showed that the income was derived through short term capital gains. The funds belonged to the assessee; its business was not in shares or investments, it kept separate investment accounts. Urging that in view of these circumstances, the findings of the CIT (A) were reasonable, counsel stated that the ITAT should not have interfered with his order, as it was based on plausible reasoning. 6. In CIT v. Associated Industrial Development Co.(Ltd.) (1971) 82 ITR 586 (SC), the Supreme Court observed as follows: 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 hot rest purely on the technical question of onus whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly render the transaction in the nature of trade. 7. In the present case, the Tribunal considered all the relevant decisions, and indicated the tests applicable, correctly. It took note of the Circular (No. 4 of 2007) which, in turn encapsulates the law on the subject, and after analysing the nature of the transactions, i.e the duration of holding, the proportion of income derived as dividend, to the investment made, found that the income was by way of business or trade in shares. This court is of opinion that there is nothing perverse or unreasonable in the finding of the ITAT. The turnover of the shares was about Rs. 1 crore; the dividend earned for the period was only Rs. 21,952/-. The income or profits gained from sale of shares was to the tune of Rs. 65,45,321/-. Granted that the main line of business or commercial activity of the assesse was not share trading and he did not have a separate infrastructure or expenditure to support such trade; yet the volume of transaction in even the 25 scrips that were sold and purchased, coupled with the duration of holding both commented upon by the AO and the ITAT, went a long way in establishing that the intention behind these trans ..... X X X X Extracts X X X X X X X X Extracts X X X X
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