9911796707
TMI Blog2015 (5) TMI 675X X X X Extracts X X X X X X X X Extracts X X X X ..... arket price at the end of the year. On the contrary, 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. No reason to interfere in the findings recorded by the CIT(A), which resulted into treatment of profit on sale of shares as capital gains in place of AO’s treatment of business income. - Decided against revenue. - ITA No.2004/Mum/2011 - - - Dated:- 20-2-2015 - SHRI R.C.SHARMA AND SHRI VIVEK VARMA, JJ. For The Revenue : Shri Jitendra Kumar For The Assessee : Shri S.C.Tiwari Ms. Natasha Mangat ORDER PER R.C.SHARMA (A.M.) : This appeal is filed by the Revenue against the order of CIT(A), dated 12-1-2011 for the assessment year 2007-08, in the matter of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew to protect the amount invested by the appellant which would not convert the investment into stock-in-trade. Further it is seen that for A.Y. 2006-07, the appellant has admitted short term capital gain which was not disturbed by the A.O. Further there is no dispute that the shares were shown as investment in balance sheet which indicated the intention of the appellant to hold them as investment. Further the appellant paid STT at the rate applicable to the investor which is at disputed by the A.O. As contended by the representative, the entries in the books of accounts as investment indicates the intention of the appellant to hold them as investment. It is further seen that the appellant did nor sell most of the shares within very few days and many shares were held by the appellant for more than 60 days even though more than 50% of the short term capital gain was earned by holding shares for less than 60 days. The AO. himself accepted that the appellant held shares in few cases for 6-9 months. As held by the Hon'ble Mumbai Tribunal in the case of Gopal Purohit vs. JCIT (29 SOT 117) the principle of consistency should be followed and the very fact that the appellant admitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecided in one year might not apply in the following year, where a fundamental aspect permeating through different assessment years has been fond as a fact one-way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. The same view has been taken by the Hon'ble Delhi Court in CIT V. Neo Poly Pack (P) Ltd (2000) 245 ITR 492. 5.4 Recently the Hon?ble Mumbai Tribunal in the case of DCIT Vs. SMK Shares and Stock Broking Pvt. Ltd. in ITA No.799/Mum/09 dt.24.11.2010 for A.Y.2005-06 held as under in para 13. 13. CBDT, vide Circular No.4/2007 dated 15th June 2007) has observed that whether a particular holding of shares is by way of investment or form part of the stock in trade is a matter which is within the knowledge of the assessee who holds his shares and he should, in normal circumstances, be in a position to produce evidence from his records as to whether he is maintaining any stock-in-trade or holding the shares by way of investment. In the present case, it is not disputed that the assessee had maintained this distinction in its records. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich were purchased with the intention of investment. 7. The Hon ble Supreme Court in the case of CIT 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. 8. We have deliberated upon various case laws cited by the ld. Authorized Representative and ld. CIT DR 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 hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ple 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. 9. 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. 10. 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 that under the old provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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. 11. Even the Hon'ble Apex Court in the case of K.P. Verghese vs TO, 131 ITR 597 (SC) observed as under:- The task of interpretation of a statutory enactment is not mechanical task. It is more than a mere reading of mathematical formulae because few word possesses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies only as on 31-3-2007, having a market value of ₹ 71,47,342/- as against the cost price of ₹ 64,69,972/-. It is also not in dispute that the shares in respect of which assessee has claimed capital gain was held as investment in the balance sheet which indicated the intention of the assessee at the time of purchases. It is also not in dispute that the investment in shares were made for earning dividend income and merely because the assessee sold some of the shares during the year considering the market position, the same would not become stock-in-trade. It is also not in dispute that assessee has not claimed security transaction tax (STT) since he is an investor in share, while computing capital gains. There is no bar on the assessee to do business in shares and also hold some of the shares as investment as held by the coordinate bench in the case of Gopal Purohit, 122 TTJ 87, which was confirmed by the Hon ble High Court reported in 258 CTR 582 and the SLP against which has been dismissed by the Hon ble Supreme Court, vide order dated 15-12-2010. 14. It is also not in dispute that assessee has not borrowed any fund for investing in shares from the outside par ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
