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TMI Blog2015 (4) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... /2012, ITA No.4164/Mum/2012 - - - Dated:- 18-2-2015 - Shri R.C.Sharma And Shri Vivek Varma JJ. For the Appellant : Shri S.C.Tiwari / For the Respondent : Shri Love Kumar ORDER Per R.C.Sharma (A.M.) : These are the cross appeals field by the assessee and Revenue against the order dated 26-3-2012, for the assessment year 2008-09, in the matter of order passed u/s.143(3) of the I.T.Act. 2. The solitary issue in both the appeals relates to taxing the capital gains as business income. 3. Rival contentions have been heard and record perused. The assessee filed return at income of ₹ 1.25 crores. The AO observed that the assessee has offered income out of dealing in shares as short term capital gains or long term capital gains depending on the period of holding. The AO stated that assessee s principal source of income is from purchase and sale of shares. The assessee is involved in the share business activities for several years. After dealing with number of script which were 13 and considering the transactions of purchase and sales of shares as well as holding period, the AO concluded that assessee was engaged in trading of shares. Accordingly, both long t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT vs. Associated Industrial Development Co. (P.) Ltd. [1971] 82 ITR 586 (SC) has observed as under: Whether a particular holding of shares is 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-in-trade and those which are held by way of investment. 7. We have deliberated upon various case laws cited by the ld. Authorized Representative and ld. CIT DR and in the context of factual matrix of the case. We had also deliberated on the case laws referred to by lower authorities in their respective orders. The question as to whether the assessee has earned capital gain or business profits on the shares sold by him depend on the facts and circumstances of each case. Such decision is to be arrived at by taking into account the intention of the assessee while purchasing the shares, as to whether the same was acquired for holding as investment or for doing business therein. The treatment given by the assessee in its books o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttled legal proposition that principle of res judicata do not strictly apply to the income tax proceedings, but at the very same time, it is well settled that principle of consistency under the same facts and circumstances is the fundamental of judicial principle, which cannot be brushed aside without proper reasoning. In this regard, reliance can be placed on the decision in case of S.M.K. Shares and Stock Broking Private Limited, I.T.A. No. 799/Mum/09 order dated 24.11.2010. In this proposition, the decision of Hon'ble Supreme Court in the case of Gopal Purohit, 228 CTR 582, is very much relevant and important. 8. Merely because the assessee liquidates its investment within a short span of time, which had given better overall earning to the assessee, would not lead to the conclusion that the assessee had no intention to keep on the funds as investor in equity shares, but was actually intended to trade in shares. 9. Here, it is pertinent to mention the intention of Government for introducing the security transaction tax and exempt the long term capital gain earned from sale of shares and levying 10 % tax on short term capital gain and earned on sale of shares. It is noted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to assessment year 2005-2006 and subsequent years. Through Finance Act, 2008, sections 111A and 115AD have further been amended whereby the rate of tax on such short-term capital gain has been raised to fifteen percent. Thus, w.e.f. 01.10.2004; on the share transactions subjected to STT; concessional tax rate of 10% (which has been increased to 15% from AY 2009-10) are applicable in respect of STCG whereas no tax is chargeable in respect of LTCG. It is also noted that the CBDT vide its Circular no.4/2007, dated 15.06.2007 has also recognized possibility of two portfolios, i.e. one 'Investment portfolio' comprising of securities which are to be treated as capital assets and the other 'Trading portfolio' comprising of stock in trade which are to be treated as trading assets. In view of these facts, profit arose on shares in respect of delivery based transaction are liable to be taxed as capital gain and not as business income. 10. Analysis of balance sheet of assessee reflects of holding of shares as investment. In the case of Gopal Purohit, 228 CTR 528 (Bom), SLP was filed by the Department against the decision of Bombay High Court and the same was dismissed by Hon& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res judicata does not apply to income tax proceedings, where a issue has been decided consistently in earlier assessment years in particular manner, the same view should prevail in subsequent years unless there is a material change in facts, meaning thereby, there must be material change in the facts. 12. The Indore Bench of the Tribunal in the case of ACIT vs Om Prakash Suri (supra) held as under:- 3. We have considered the submissions put forth by the learned Senior DR and also perused the material available on record. Brief facts are that in the past the assessee was engaged in road building contractor and was deriving income from contract receipts as well as from sale of gitti and during the impugned year, ventured into investment in share market. The income arising from F O transactions and daily trading in shares (without physical delivery) reflected as speculative business whereas the income on delivery based transactions of sale and purchase of shares, income was shown from capital gains. The learned AO considered the income which was based on purchase and sale of shares as business income on the grounds as narrated in the assessment order as well as at pages 3 and 4 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... folio and claimed that to be an investment folio. Undisputedly, the period of holding is less than one year, consequently, there is no infirmity in holding that these transactions would be treated as short term capital gain on which the applicable tax is @ 10% only. In view of this uncontroverted fact, there is no merit in the appeal of the revenue and the same is dismissed. Order pronounced in open Court on 4th August, 2010. 13. The aforesaid decision was affirmed by the Hon'ble Madhya Pradesh High Court reported in (2012) 19 ITJ 326 M.P. The Mumbai Bench of the Tribunal in the case of Shantilal M Jain vs ACIT vide order dated 27-04-2011 (ITA No. 269/Mum/2010) held that despite large volume of shares transactions, the Assessing Officer cannot ignore the rule of consistency to treat the gains on sale of shares as STCG. In that case, the assessee was engaged in the business of trading of investment in shares and securities offered ₹ 1.54 crores as short term capital gain and ₹ 2.91 crores from long term capital gain. The long term capital gain was accepted whereas short term capital gain was held to be business profit. Since in earlier assessment years the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X
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