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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 ..... t by the tax authorities is about the conduct of the assessee, viz., 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 was brought out by the assessee, strongly militates against the stand taken by the assessee - CIT(A) has also pointed out that the assessee has rotated the funds several time, which is akin to the business activity - CIT(A) was justified in upholding the order of the AO in assessing the gain arising on sale of shares as the business income of the assessee – order of the CIT(A) is upheld – Decided against Assessee. - I.T.A. No. 9235/Mum/2010 - - - Dated:- 25-7-2014 - Shri B. R. Baskaran (AM) And Sanjay Garg, (JM),JJ. For the Appellant : Mrs. Aarti Vissanhji For the Respondent : Shri Sanjeev Jain ORDER Per B. R. Baskaran, A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of public issue is more and hence those activities are not normally undertaken by the persons indulging in business activity. Accordingly, the Ld A.R submitted that the tax authorities are not justified in assessing the gain arising on sale of shares as business income of the assessee. The Ld A.R further submitted that the assessing officer has assessed such income in the past years as well as in the subsequent years as Short term Capital Gain. When it was specifically asked as to whether those assessments were u/s 143(3) of the Act, the Ld A.R fairly admitted that they were 143(1) assessments. 5. On the contrary, the Ld D.R strongly defended the order passed by Ld CIT(A). Inviting our attention to the Statement of Share transactions placed in page 6 of the paper book, the Ld D.R submitted the assessee has entered in repetitive transactions and has sold the shares within short period as low as one week. In support of the said contentions, the Ld D.R pointed out the instances, where the shares have been sold within a short period. He further submitted that the assessing officer has thoroughly examined the conduct of the assessee by applying all parameters prescribed by the CBDT a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p during a day, nothing can be said/ nothing is final as to whether the said share would be sold during the rest part of the day or whether it would be retained by taking delivery. 7. The only basis of segregation of the transactions by the assessee is whether at the end of the day a delivery was taken or not. If part of the purchases is sold within the day, hen such part is treated as speculation business and the balance pat of the purchases for which delivery is taken is treated as investment . 8. Whether a transaction is speculative or investment is known only at the end of the day and not when the purchase order is placed. .. 13. Now, when we look at the facts of the case on hand in the backdrop of the judicial pronouncement and the above findings, the following situation emerges: a) The assessee is having a systematic course of activity which is evident from the fact that regular books of accounts, billing system, details of sales purchases etc. are all regularly maintained. b) The assessee is deeply involved in the activity of share transactions. From a perusal of the details of transactions, it is seen that the assessee had transacted in the stoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent activity. ii) Whether the purchase is made solely with the intention of resale at a profit or for long term appreciation and/or for earning dividends and interest. In the case of the Assessee, it was solely with the intention of selling at profit. In those cases where the loss was booked, it was because the further risk of holding the scrip is beyond the risk appetite . From the very short period of holding shares (in some cases held only for few days), there seems absolutely no intention of holding on for long term appreciation or for earning dividends etc. iii) Whether the sale of activity is substantial It is already seen earlier that the scale of activity and the amounts involved are substantial, iv) Holding period It is already mentioned that the holding period is very less. In most of the cases, it is less than 2 months. 8. We notice that the Ld CIT(A) also, after examining the facts prevailing in the instant case has endorsed the view taken by the AO. For the sake of convenience, we extract below the relevant observations made by the ld CIT(A). 3.14. If the above principles are applied to the facts of the appellant s cases, then it is seen from d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nes), the period of holding is less than 30 days in 106 (87 + 19) cases. Moreover it is noted that the assessee has purchased shares of same company at more tha single occasions of one day. Similarly, the shares purchased have been sold in parts also. This shows the intention of the assessee to adopt the policy of risk appetite and maximization of profit like a case of normal trader would do who is dealing in shares. The capital base of the Assessee is of ₹ 71.27 crores which suggest that most of the capital is blocked in other investment and the funds for sale purchase of shares are from unsecured loans of ₹ 53 lacs. It makes no difference whether the assessee has paid interest on borrowed money or not. The broker s bill has also been settled by difference. From the ledger a/c of the appellant in the books of the broker it is noted that during the year there were 69 occasions when there was a Dr balance i.e. the amount was due from the assessee to the broker. An investor would be the one who invest his surplus money but in this case at several occasions the money was due from the assessee in respect of the purchases made by her. So it was also akin to availing the outs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of all the above factors clearly suggests that the intention to purchase the shares was for trading or at least in the nature of adventure in trade and not for enjoyment of appreciation in value investment in shares or to earn dividend. 9. We notice that both the assessing officer and Ld CIT(A) has given a categorical finding that the activities carried on by the assessee in respect of share transactions are akin to the business activities. The Statement of Profit/loss arising on sale of shares furnished at page 6 to 10 of the paper book also shows that the assessee was indulging in short term trading activities during the year under consideration, i.e., the assessee has been selling shares within short span from the date of purchase. We notice that the shares allotted under primary issue were also sold within short period from the date of allotment. These kinds of transactions, in our view, add strength to the view taken by the tax authorities. The AO has also shown that the assessee has borrowed funds to the tune of ₹ 48.30 lakhs from close relatives and accordingly concluded that the assessee s own funds were insufficient to finance the investment made in shares. Thou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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