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TMI Blog2014 (5) TMI 997X X X X Extracts X X X X X X X X Extracts X X X X ..... e magnitude of transaction does not alter the nature of transaction that does not decide the intention of assessee - The total number of purchase transactions were only six and the sale transactions were only eight - By no stretch of reasoning, this frequency can be said to be very frequent so as to lead to the conclusion that assessee was trading in shares. Merely because the assessment of speculation profit is as per the provision contained u/s 43(5) would not lead to ipso facto conclusion that assessee’s intention was to trade in shares - Mere assessment under a particular head of income is no criteria for determining the overall intention of assessee - An investor also can enter into speculative transactions as there is no prohibition under the Act - Only the income is to be assessed as business income - this aspect cannot form the basis for deciding the intention of assessee in respect of those shares where assessee has taken delivery of shares and then sold them within a short gap of time – there is no reason to interfere with the order of CIT(A) – Decided against Revenue. - ITA No. 3338/Del/2011 - - - Dated:- 28-4-2014 - Shri S. V. Mehrotra And Shri A. T. Varkey,JJ. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd sold only one script during the year. The assessee has undertaken only 6 no. of purchases during the year. Assessee has earned Dividend from the above. The above fact is evident from the details furnished, copy of contract note, broker ledger account, demat account statement etc. In view of the above, it is submitted that the assessee should not be treated as carrying on the business of trading in shares and the income from short term capital gain should not be treated as income from business and profession as it would be against the principles of natural justice and the spirit of law . 3. The AO did not accept the assessee s contention and pointed out that merely dealing in one script is not a relevant fact in deciding the issue whether the share transactions are for business purposes, since any person is at liberty to deal in one script or more while doing business. He further pointed out that assessee had purchased 2,80,500 number of shares and had sold the same during the year. He pointed out that from the contract notes, which were running in hundreds, it was evident that assessee had done sale/purchase regularly during the year. He observed that purchase and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years on an average. The holdings in shares had been recorded as an investment in books of account and not as stock-in-trade. The assessee further pointed out that it had entered into limited number of transactions for purchase and sale and that too only in one script, the details of which were as under: Month No. of Scripts Purchase Sale April 1 1 - May 1 2 2 June - - - July - - - August - - - September - - - October - - - November 2 1 1 December 1 2 1 January 1 1 6 February - - - March - - - Total 7 10 5. With reference to this chart, the assessee pointed out that the following findings recorded by AO, are not correct: 1. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is clearly proves that the money has not been put in purchase sale of shares as an investor but as a prudent businessman. (para 1 of page no. 3 of the assessment order). 7. With reference to these observations, the assessee pointed out that quantum of gain does not change the nature of transactions and assessee had actually earned dividend income of Rs. 17,500/-. It was further submitted that whether the amount of dividend was commensurate with the amount of investment gain cannot be considered as a yardstick to hold that the assessee was carrying on the business activity. The assessee pointed out that ultimately it is the intention of the assessee which is important which was to earn dividend as well as realize the appreciation in investment. The assessee further submitted as under: The assessee has during the year depending upon the advise of the broker, market sentiment, economic scenario and to protect the investments, sold the shares which has resulted into capital gain and the same has been offered for taxation in the return of income as per the provision of the Income Tax Act, 1961. Merely because the assessee has sold some investment and realized some gain does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preceding years, is consistently declaring the gain/profit on the sale of the shares under the head Capital Gain either Long Term and Short Term as the case may be and the same has been accepted by the department. It is true that the rule of res judicata is not applicable to the Income Tax Proceedings, but it is also well settled principle that if there is no change in the facts, then there should be consistency in the approach. 8. Ld. CIT(A) deleted the addition for the detailed reasons given from para 5.1 to 5.13 of his order. 9. Ld. DR submitted that assessee had earned speculative profit which shows assessee s intention of doing business of share dealing. She submitted that ld. CIT(A) referred only to historical facts and drew conclusion on the basis of different facts. She submitted that assessee had dealt in large volume of shares. There had been no opening and closing stock in which assessee traded. The assessee had earned very little dividend and huge profits which clearly shows assessee s intention of doing business. The average holding period was less than 1 year. He further submitted that there has been wrong appreciation of facts by ld. CIT(A)in arriving at a f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be taken into consideration to find out the true intention of assessee. The factors which are relevant in this regard are mainly as under: 1. Whether the shares were treated as investment in books of account, balance sheet, etc. or as stock in trade? 2. Whether in earlier years also the shares were held as investment or as stock in trade? 3. There is no prohibition in holding certain shares as stock in trade and this aspect is to be examined with reference to books of account. 4. Frequency of transaction. 5. Period of holding. 6. Total number of transaction undertaken during the year. 13. Circular No. 4/2007 dated 15/06/2007, lays down certain guidelines for determining whether the securities were held as investment and stock-intrade. The said guidelines are as under: (i) Where a company purchases and sells shares, it must be shown that they were held as stock-in-trade and that existence of the power to purchase and sell shares in the memorandum of association is not decisive of the nature of transaction; (ii) the substantial nature of transactions, the manner of maintaining books of accounts, the magnitude of purchases and sales and the ratio betwee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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