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TMI Blog2014 (8) TMI 273X X X X Extracts X X X X X X X X Extracts X X X X ..... Dynamics. During the year under consideration, the Assessee had suffered speculation loss in Futures and Options to the extent of Rs. 14.95 lakhs. The Assessee had also declared STCG on shares transactions to the tune of Rs. 12.11 lakhs. The AO after going through the Volume of transactions, repetition of transactions, period of holding, conduct of the Assessee etc., took the view that the assessee has indulged in share trading operations as a sustained business activity. In this regard, the A.O also took support from various case laws. Accordingly, he held that the income from shares trading activity should be assessed under the head "Income from Business". Accordingly, he assessed the gains arising on sale of shares referred above i.e. Rs. 12.11 lakhs as "business income" of the assessee. In the appeal filed by the Assessee, the ld. CIT(A) also confirmed the action of the AO. Aggrieved, the Assessee has filed this appeal before us. 4. The Ld A.R submitted that the share trading is not the main activity of the assessee and she is also engaged in other activities also. Referring to the Statement of share transactions, the ld A.R submitted that the single order placed for purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent activity or a it is a sustained business activity. 7. We notice that the assessing officer has examined the activities and conduct of the assessee and accordingly has come to the conclusion that the assessee is driven mainly by "profit motive", as prevalent in a business venture. The following views expressed by the AO are relevant here:- "6. In view of the fact that during the year, the assessee had indulged in both the speculative and delivery-based transactions in the same scrip, the following points are relevant: 1. The assessee does not know at the time of placing the purchase order whether she is going to speculate in the share (i.e. purchase and sale on the . same day without delivery) or whether she is going to take delivery of the shares. 2. Decisions about squaring off during the day or taking delivery are totally guided by the market prices of the scrip in the later part of the day. 3. No scrip-wise and transaction-wise payments are made by the assessee. 4. If the assessee has profits from speculative transactions during the day, the same are adjusted against the amounts payable for delivery-based transactions, if any. This implies that there are no separate bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... big quantity of shares and also huge amounts of payments and receipts. g) The assessee's transactions are characterized by circulation/rotation of the same money, which is the normal feature of a business. h) The assessee claims to be simultaneously in the business of share trading as well as investments, implying that she is already into the business of transactions in shares. Her so called "investment" activity is at best an integral part of the share trading activity, or at worst, an associated part of his business but definitely not a "separate activity". i) It is evident that there is a high frequency and repetition of purchase & sale of shares. j) At the time of placing purchase order, the assessee is not sure whether she would take delivery of the shares or not. 14. It is relevant here to mention the recent circular of Hon'ble CBDT on the issue of the shares held as stock-in-trade and the shares held as investment. The Instruction No. 1827 dated 31.8.89 was supplemented with this Instruction dated 16.5.2006. The factors that are relevant for deciding the case are listed below: i) Whether the purchase and sale of securities was allied to her usual trade or busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose for speculative business at the time of purchase. Even there is no distinction in utilistion of funds for these two activities if it were two distinct activities treated by the assessee.. It is only after purchase, if assessee decides to take the delivery it treats such shares as investment. Such is distinction is very artificial and not present at the point of purchase; rather it is only a subsequent decision depending upon the manner in which prices of that shares move. Hence the turnover and transactions of speculative business also need to be considered to decide the nature- of activity being carried by the assessee. So the total turnover achieved for shares including the speculative transactions but excluding, the derivative transaction in future & Options, comes to 2.61 Cr involving 285(266+ 19) transactions. The shares held as closing balance are of only Rs. 45.45 lacs which is only 17.45 % of the total turnover of Rs. 2.61 Cr suggesting that a small portion of the capital has been rotated several times to achieve a turnover of more than 2.6 crores just as done in a trading. business. Besides this the assessee has also dealt in Future & Options. If the turnover and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is dealing in speculative and non-speculative transactions, but the assessee does not make any distinction while placing order for purchase or making payment to the broker. Brokers bill have been settled by netting off irrespective whether the sale or purchase of shares was for speculative buying or for investing in shares. Thus no distinction has been maintained by the assessee in its conduct or the funds utilized. The dividend of Rs. 38,823 earned during the year is miniscule as compared to the profit earned on the sale of shares which shows that the shares were. not held for enjoying the dividend also. The assessee has shown a loss of Rs. 14.95 lacs in, dealing in derivative transactions in Future & options at NSE. The Assessee herself is treating this loss as non-speculative business loss. So once the assessee is dealing in one type of activity which is admittedly a business activity where also the turnover is in several crores and the funds deployed are out of the same capital, it cannot be said that in respect of transactions in shares the assessee was only an investor when there is nothing to show that the actual conduct, intention to purchase and fund utilization for differ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iz., the assessee decides to take delivery of shares purchased by her only at the end of the day depending upon the price movement of those shares, which means that the decision to hold it as investment is not taken at the time of purchase, which is the crucial factor to determining about the nature of transactions. If the intention had been to hold it as investment, usually, an investor is least bothered about the short term price movements. The conduct of the assessee in this regard, which was brought out by the assessee, strongly militates against the stand taken by the assessee. Further the ld CIT(A) has also pointed out that the assessee has rotated the funds several time, which is akin to the business activity. 10. Hence, on a conspectus of the matter, we are of the view that, in the facts and circumstances prevailing in the instant case, the Ld CIT(A) was justified in upholding the order of the assessing officer in assessing the gain arising on sale of shares as the business income of the assessee. Accordingly we uphold his order on this issue. 11. In the result, the appeal filed by the Assessee is dismissed. The above order was pronounced in the open court on 25th July, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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