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TMI Blog2014 (12) TMI 138X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the sales were really for the purpose of employing the monies that he had invested to his best advantage. Volume of frequency, continuity and regularity of transaction of purchase and sales are found in character and however what is more important is the intention of the assessee - the sale of shares held for more than one month would be charged capital gain and surplus of shares held for less than one month will be treated as profit from business - all share transactions undertaken by the assessee would be charged to capital gain irrespective of their holding, the AO was directed to compute the capital gain - the order of the CIT(A) is upheld and the AO is directed to treat the income from sale of shares as assessable under the head ‘capital gain’ and not as business income – Decided in favour of assessee. - ITA No.1645/PN/2012 - - - Dated:- 31-7-2014 - SHRI SHAILENDRA KUMAR YADAV AND SHRI G.S. PANNU, JJ. For The Appellant : Shri Nikhil Pathak Shri Suhas P Bora For The Respondent : Shri Rajib Jain ORDER PER SHAILENDRA KUMAR YADAV: The two appeals pertain to the husband and wife on similar grounds against the respective orders of the Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was shown, the same was accepted. The findings of the Assessing Officer are available at para 3.1 of order of CIT(A). 3.1 The matter was carried before first appellate authority, wherein the various contentions were raised on behalf of assessee as detailed in para 3.2 of the order of CIT(A), the CIT(A) having considered the same, upheld the order by detailed reasoning in para 3 of its order. 4. The same has been opposed before us on behalf of assessee. The stand of the assessee has been that the Assessing Officer in reassessment proceedings has treated the income from short term capital gains as business income mainly on the ground that the volume of transactions of shares is more, there is frequency in the transactions and therefore, the motive is earning of profit. Before us, the learned Authorized Representative has submitted that the CIT(A) has erred in law and on facts in confirming action of the Assessing Officer of treating short term capital gain on shares as business income. The CIT (A) has erred in law and on facts in not appreciating the fact that the assessee is an investor and not a trader. 4.1 The CIT (A) has also erred in law and on facts in not appreciatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law and fact. It is also a well settled principle that no singular factor is determinative of the question and that the same has to be inferred on the basis of cumulative effect of several factors such as, whether the purchaser was a trader; whether the purchase of the commodity and its resale was allied to his usual trade or business; the nature and the quantity of commodities traded; frequency and similarity of transactions usually associated with trade or business; the repetition of transactions; period of holding and also the intention of the purchaser at the time of acquisition. The Hon ble Supreme Court in the case of Venkataswami Naidu Co. (G) (supra) further cautioned that all the important factors are to be evaluated and the distinctive factors of a particular case shall be kept in mind while determining the character of the transaction. The assessee has referred to various case laws on the subject which are not being individually dealt with; so, however the sum and substance of the principles laid down is that in each case the total effect of all the relevant facts and circumstances shall determine the character of a transaction. 10. With this background, we may now ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the other hand, the learned Departmental Representative has submitted that the Assessing Officer was justified in holding that the income earned by the assessee amounting to 41,73,041/- on account of sale and purchase of share as business income. The learned Departmental Representative has also submitted that the frequency of investment shows that the assessee is a trader not investor. The ratio of decision of Hon ble Mumbai High Court in the case of Gopal Purohit (supra) supports the order of authorities below. According to the learned Departmental Representative, the details in respect of short term transactions prima facie reveals that there was frequency of holding in shares and magnitude of such transactions were also quite high. The Assessing Officer was justified in holding that purchase and sale transactions of shares bear all attributes of trade. The short term profit earned from such transactions amounting to 41,73,041/- is therefore, rightly assessed by the Assessing Officer that it arose out of trade and the same should be upheld. 5. After going through the rival submissions and material on record, we find that the Assessing Officer in re-assessment proceedings ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y tradable. They are properties carrying value and therefore should be consider as capital asset within the meaning of the term u/s. 2(14) of the Income Tax Act, 1961. In the case of the assessee it is not disputed by the Assessing Officer that the loss incurred by the assessee in respect of Futures Options transaction of Reliance Petro, it is also admitted that the assessee has hold this right for 93 days and therefore the action of the Assessing Officer to hold the said loss as a business loss and thereby drawing a conclusion that the shares which were held for a period of 36 days to 237 days as a business income was not justified. h. We find that the assessee during the year under consideration earned the income break up of which is as under. a) Income from House property 59500.00 b) Share of profit from firm M/s. L.L. Mutha 48893.00 c) Long term capital gain 481846.00 d) Short term capital gain 4288571.00 e) Income from other sources 41982.00 f) Dividend on shares 287925.00 g) PPF Interest Int. on Relief Bond 23065.00 5.1 From the above it is obvious that the main source of income is from investment activity. The entire investment in the shares is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above instruction, it is proposed to update the information of the assessee as well as for the guidance of the assessing officers. f) In the case of CIT (Central), Calcutta v. Associated Industrial Development Company (P) Ltd [1971) (82 ITR 586 (SC)], the Supreme Court observed that: Whether a particular holding of share 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-intrade and those which are held by way of Investment. g) In case of CIT, Bombay v. H. Hoick Larsen [(1986) (160 ITR 67 (SC)], the Supreme Court observed; The High Court, in our opinion, made a mistake in observing whether transaction of sale and purchase of shares were trading transactions or whether these were in the nature of investment was a question of law. This was a mixed question of law and fact h) The principles laid down by the Supreme Court in the above two cases afford adequate guidance to the assessing officers. i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing capital gain on investment from such remittances. The third principle suggest that ordinarily purchases and sale of shares with the motive of realizing profit would lead to interference of trade/ adventure in nature of trade; where the object of the investment in shares of the companies is to derive income by way of dividends etc; the transactions of purchases and sales would yield capital gains and not business profits . k) CBDT also wishes to emphasis that it is possible for a tax payer to have two portfolios, i.e., an investment portfolio comprising of securities which are to be treated as capital assets and a trading portfolio comprising of stock-in trade which are to be treated as trading assets. Where an assessee has two portfolios, the assessee may have income under both heads i.e. capital gains as well as business income. l) Assessing officers are advised that the above principles should guide them in determining whether in a given case, the shares are held by the assessee as investment (and therefore giving rise to business profits).The assessing officers are further advised that no single principle would be decisive and the total effect of all the principles sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n share is ancillary 5.5 In view of above, we find that volume of frequency, continuity and regularity of transaction of purchase and sales are found in character and however what is more important is the intention of the assessee. In the case of the assessee intention was to purchase the shares as investment and if it generates profit then to take a decision whether to sale and realize the profit. Hon'ble Bombay High Court in the case of CIT vs. Gopal Purohit, which has been approved by Hon'ble Supreme Court in 334 ITR 308 (St) wherein in similar circumstances the Supreme Court has dismissed the SLP of the Department and thus approved the decision of the High Court, wherein, the Hon'ble High Court has accepted the contention of the assessee treating the income from sale of shares as short term capital gain, which was treated as income from business by the revenue authorities. 5.6 We also find that ITAT, Pune Bench in the case of JCIT vs. Shri Chhatarmal Gokulchand Chhajer (supra), wherein, the CIT(A) taking all facts and circumstances into consideration, held that the sale of shares held for more than one month would be charged capital gain and surplus of shares ..... X X X X Extracts X X X X X X X X Extracts X X X X
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