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TMI Blog2015 (5) TMI 675X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of short term and long term capital gains on the plea that the assessee was regularly dealing in shares and keeping in view the volume of transactions, period of holding etc., the gains so arose from the sale of shares were liable to be taxed as business income. 4. By the impugned order the CIT(A) accepted assessee's claim of short term and long term capital gains after having following observations:- "5.1 I have considered the submissions of the representative and stand taken by the A.O. Admittedly, the appellant has divided delivery based and treated the 1st category under the head capital gains. It is also seen that the appellant transferred all the shares in respect of which the capital gain was admitted in the name of the appellant as per the demat account and paid STT at the rate applicable to the investment. Even though the appellant has admitted profit from share trading, there is no bar for the same assessee to do business in. shares and also hold some shares as investment as held by the decision of Hon'ble Hyderabad Tribunal in the case of Shah-La Investments and Financial Consultants Pvt. Ltd vs. Dy.CIT (2 SOT 371). Further the same view was taken by the Hor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh it is an exception to the principle res judicata must be applied here. It is further' so because the payment of securities transaction tax is mandatory i.e. whether an assessee earns the profit or not or suffers a loss and by imposition of such tax, the Legislature has not given any benefit to individuals(s) entering into these transactions. Thus, in our view, in the facts and circumstances of the case, on the basis of principle of consistency alone, the action of the Revenue Authorities is liable to be quashed. 5.3 Further, the Horible Tribunal in the case of Janak S.Rangwalla Vs. ACIT (11 SOT 627) held that the frequency and rnagnitude of transaction cannot be the criteria for determining the head of income. It was held as under :- The mere volume of transaction transacted by the assessee would not alter the nature of transaction. !t is an established principle that income is be computed with regard to the transaction. The transaction in whole has to be taken into consideration and the magnitude of the transaction does not alter the nature of transaction. Though the principle of res judicata does not apply to the Income-tax proceedings as each year is an independent yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particularly because one has to infer the intention of the assessee which is primarily within his own knowledge. The conduct of the assessee assumes significance in this regard. It has been laid down in various judicial pronouncements that there is no acid test to decide this issue. In the present case we find that the Assessing Officer while passing assessment order under section 143(3) for assessment years 2001-02 and 2004-05, did not dispute assessee?s claim regarding profit on sale of investment. One more important aspect is that the assessee had not borrowed any fund for investment in shares and this fact cannot be lost sight off while deciding the true intention of the assessee." The above decision of the Hon'ble Mumbai Tribunal supports the case of the appellant especially when there are no commercial borrowings utilized for investment in shares. It is true that the assessee had availed loans but the same were from family members and consequently it cannot be said that the appellant borrowed from persons other than family members for the purpose of purchase of shares. 5.5 In the light of the above jurisdictional decisi.ons and for the other factual findings given above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out whether the assessee is engaged in the business of purchase and sale of shares or making investment to have capital gains thereon. In the instant cases before us, the assessee was investing in shares of Indian Companies, which is clear from the statement of shareholding of the assessee. There is also no dispute to the fact that the assessee has treated the equity shares of Indian Companies as investment i.e. capital asset all along. The assessee has also valued the shares at cost thus given a particular treatment to the shares held as investment, therefore, without brining on record contrary material, the AO cannot change the intention and manner of investment being made by the assessee. Had the assessee valued such shares at cost or market price whichever is lower, the gain arising out of sale of shares could easily be treated as business income. Assessee had not valued the shares as stock but valued the same as investment. Thus, what was a capital asset will remain a capital asset unless a person holding the asset himself changes the nature by a specific action like conversion of capital asset into stock in trade. In the instant cases before us, the assessee has not treated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a trader in securities, however, the gains were taxed as any other normal business income. Thus tax liability on the income from purchase & sale of shares as regards to the STCG & business income was at par. However, the issue of treatment of income from share transaction as capital gain or business income has in-fact arisen after the amendment brought with Finance Act - 2004 by insertion of provisions of section 111A and 10(38) as regards to levy of Transaction tax and exemption / concession on capital gain arising from securities entered in a recognized stock exchange. With a view to simplify the tax regime on securities transactions, a tax at the rate of 0.015 per cent. (see: change in rates on securities transactions, by Finance Acts, at appropriate head) is levied on the value of all the transactions of purchase of securities that take place in a recognized stock exchange in India. This tax is collected by the stock exchange from the purchaser of such securities and paid to the exchequer. The provisions relating to the securities transactions tax are contained in Chapter VII of the Finance (No.2) Bill, 2004, and came into effect from 01.10.2004. Further, clause (38) has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd purpose of the particular provisions introduction by the Finance Bill has been recognized by this Court in K.P. Verghese - vs ITO 1981), 131 ITR 597 (SC), at 609. Again in the case of R & B Falcon (A) Pvt. Ltd vs CIT (2008) 301 ITR 309 (SC), it was held that (Page 323):- Rules of executive construction in a situation of this nature may also be applied. Where a representation is made by the makers of legislation at the time of introduction of Bill or construction thereupon is put by the executive upon its coming into force, the carries great weight." 12. The Hon'ble Delhi High Court in ARJ Security Printers, 264 ITR 276 and Neo Pollypack Pvt Ltd. 245 ITR 492 (Del.) held that even when the doctrine of 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. 13. From the record, we found that assessee was consistently investing in shares. She has neither traded in the investment securities nor she had any intention to convert her inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shares were recorded in the balance sheet on the cost of acquisition only. The intention of assessee, period of holding, frequency of transactions are to be considered in totality while holding that profit arose on sale of shares is capital gain on business income. After applying various judicial pronouncements as well as CBDT Circular No.4/2007, dated 15th June, 2007, the CIT(A) has recorded a categorical finding that profit arose on sale of shares are liable to be taxed as short term and long term capital gains depending on the period of holdings. If the conclusion drawn in the impugned order, observations made from the assessment order, assertions made by respective counsel and the material available on record are kept in juxtaposition and analyzed, we find that the assessee had been consistently investing in shares and income arising from delivery based transaction of sale and purchase of shares had been shown as capital gains i.e. LTCG and STCG depending upon period of holding. The findings recorded by CIT(A) are as per material on record and nothing was brought on record by ld. DR to persuade us to deviate from the finding recorded by the CIT(A). Accordingly, we do not fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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