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TMI Blog2015 (5) TMI 928X X X X Extracts X X X X X X X X Extracts X X X X ..... e transactions before the Assessing Officer. It is also a fact that during the year, the assessee has earned substantial dividend income of 3,51,49,900/-. The CIT (A) has given the relief to the assessee relying on the judgment of Hon'ble Delhi High Court in the case of CIT vs. Rohit Anand [2010 (8) TMI 232 - Delhi High Court] wherein held that although even a single transaction can be in the nature of trade, however, where the assessee has demonstrated that his intention was never to trade in shares. Then, revenue cannot change the position otherwise. The investments have been made by the assessee out of his own fund and the shares were held quite for a long period. The Income-tax Act itself provides that when the shares are held for a period of more than a year or more will be treated as long term capital asset, contrary to the fact that other assets to be called as long term asset have to be held for more than 36 months. These shares were being treated as investment in earlier years and this fact has been accepted by the Assessing Officer. Substantial dividend income was being earned on these investments.The assessee is holding the shares by taking the delivery by making full pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... city. 3. The return of income for assessment year 2006-07 was filed declaring income at ₹ 1,33,77,935/- on 23.10.2006 which was processed u/s 143(1) of the Income-tax Act, 1961. The assessee has claimed that investments realized during the relevant period to the assessment year 2006-07 were held as investment portfolio at the close of the previous year relevant to assessment year 2005-06. These investments were also reflected as investment at the beginning of previous year relevant to assessment year 2006-07. These investments have been reflected as investments in the books of accounts. It was also claimed that earlier Assessing Officer has accepted this position of investments in the books of accounts. Shares and securities held as investments were valued at cost subject to provision for diminution in their value. The shares held as trading stock-in-trade were valued at cost or market value whichever is lower. Such treatment was being accepted by revenue since long. It was also claimed that most of these investments realized during the year were held as investment for more than a year. Even some of them were held for more than 2 to 4 years. Thus, assessee's intention al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as investment in earlier year and which fact has been accepted by the Assessing Officer. The assessee has also earned huge dividend income from such shares. The Assessing Officer merely because of the total volume of transaction is substantial, is guided to hold the income as business income. However, he failed to recognize that the volume of transaction includes the appreciation in shares also and such appreciation has been offered for tax. If volume of transaction is the criteria, what is to be examined is how frequently the transaction is done, whether the transaction is settled in the course of the day of trading itself or in the settlement period itself so as to avoid payment of full purchase price. Here the assessee has been holding the shares by taking delivery and making full payment for such investment. In such circumstances, the transactions are to be treated as giving rise to the capital gain and cannot be branded as trading of making investment so as to determine whether the transaction was for dealing in shares or making investment for earning dividend and appreciation from such investment." As per Hon'ble Delhi High Court four basic elements to decide the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been disputed by the AO. The proposition has been accepted by the Board also in Circular No.4/2007 that the assessee is entitled to maintain two portfolios. In the case of the assessee, in the preceding years, the assessee is consistently declaring the gain/profit on the sale of the shares under the head 'Capital Gain' either Long Term and Short Term and the same has been accepted by the AO. It is true that the rule of res judicata is not applicable to the Income Tax Proceedings, but at the same time, it is also well settled principles that if there is no change in the facts, then, there should be consistency in the approach of the Revenue authorities while deciding the tax liability of the assessee." 4.6. The proposition laid down by the Hon'be Mumbai ITAT in the above mentioned case insists on consistency as well as it has also relied on Circular No.4/2007 of the C.B.D.T., which is an important factor to decide the issue. I have also gone through the latest judgment of Hon'ble Delhi ITAT dated 28.1.2011 in the case of ACIT vs. M/s. Bulls & Bears Portfolios Ltd., reported at - 2011-TIOL-109-ITAT-DEL, wherein in para 6 of the order Hon'ble Tribunal has hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be taxed as profit to be earned under the business or to be taxed as short term capital gain, we hold that if shares are not held even say for a month, then the intention is clearly to reap profit by acting as a trader and he did not intend to hold them in investment port-folio. We believe that if a person intends to hold his purchases of shares as investment he would watch the fluctuation of rates in the market for which a minimum time is necessary, which we estimate at one month. Where shares are held for more than a month, they should be treated as investment and on their sale short term capital gain should be charged. When shares are held for less than a month, gain on them should be treated as profit from business." The criteria laid down by the Hon'ble Tribunal is very much appropriate so as to decide the issue in this regard. Accordingly, it is held that shares which were held for less than thirty days will be treated as trading income and remaining shares will automatically come under the category of investment to be treated as capital gains." 4.8 In view of the above discussion the bifurcation of the shares held for less than 30 days on the basis of work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stment to trading account. It was also pleaded that there was high volume of purchase and sales of shares. 7. On the other hand, ld. AR relied on the order of the CIT (A). Ld. AR has placed reliance on the decision of Hon'ble Supreme Court in the case of CIT vs. Associated Industrial Development Company Pvt. Ltd. - 82 ITR 586 . He has also placed reliance on the decision of Hon'ble Supreme Court in the case of Raja Bahadur Visheshwar Singh vs. CIT - 41 ITR 685 for the proposition that an investment made by a person in shares with the intention to resell them in future bringing in a higher price, though motivated for a possibility of enhanced value, will not necessarily render the investment of transaction in the nature of trade. It was also submitted that the gain realized also include gains realized on sale of bonus shares of Tata Iron & Steel Co. Ltd., Federal Bank and K.E.C. Infrastructure Ltd. It was also submitted that the accounts maintained by the assessee company and in the light of ratio laid down by Hon'ble Supreme Court in the cases of CIT vs. Associated Industrial Development Company Pvt. Ltd. - 82 ITR 586 andRaja Bahadur Visheshwar Singh vs. CIT - 41 ITR 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 2 to 4 years. This fact itself shows that assessee was not having a trading motive which is essential ingredient for a trade. He also submitted that the valuation of these shares at the end of the year whether these were valued at cost or market value or net realizable value whichever is less is also an aspect to determine whether the assets have been held as investment or stock-in-trade. The ld. AR also submitted that CBDT has already clarified in its circular that assessee can have two portfolios of shares, one is trading and another is investment. It was also pleaded that none of the factor alone are sufficient to come on a definite conclusion but it is the cumulative effect of these factors which will determine the character of the holding of the shares. 8. We have heard both the sides on the issue and also considered the material available on record. We have also considered the case laws relied upon by both the sides. It is a fact that assessee is showing these shares in its investment portfolio in the books of accounts. Shares sold were shown in the balance sheet for the previous year relevant to assessment year 2005- 06 as investment and the same has been carried forward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthorities while deciding the tax liabilities of the assessee. In this case, the assessee was consistently declaring gain on sale of investments of shares under the head long term capital gain or short term capital gain and this position was being accepted. The CIT (A) has also relied upon the decision of ITAT, Mumbai Bench in the case of ACIT vs. M/s. Bulls & Bears Portfolios Ltd. reported in - 2011-TIOL-109-ITAT-DEL wherein when the assessee has declared investment in the balance sheet then the realization of the same has held to be capital gain. After analyzing the facts of the case and considering various case laws in terms of facts under consideration, we are of the view that CIT (A) has rightly granted the relief to the assessee. We uphold the order of the CIT (A) on this issue. 8.1 Since we have approved the CIT (A)'s view that investments declared in the books of accounts shall not be treated as trading in the shares as business, therefore, the shares held as investment at the beginning of the year, even if these are sold within a period of 30 days, then also capital gain arises in respect of trading profit, this amount shall be treated as short term capital gain. 9. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue has been contended as under:- "The ld. AO has assessed interest on loans of ₹ 18,47,672/- as "Income from other sources" under the head 'Business' as shown by the appellant. Ld. AO has computed the interest on loans under the head income from other sources with out giving any reason what so ever and absence of any reason is enough to reverse this treatment by your good self. The fact of the matter is that the appellant was engaged inter-alia in the business of granting of loans and was registered NBFC. Detailed submissions have been made in earlier ground relating to pleading and evidences about this activity having been made, which may please be treated to have been addressed here. There is no finding nor could it be, by ld. AO that it was not the business of the appellant as may be seen from the plain reading of the assessment order. He has just treated the interest income from the business as income from other source and that too with out assigning any reason. There is paradox in the approach of ld. AO that one hand he is bent on treating the all along accepted activity of making investment in shares as business. Thus, when the assessee earns in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stered as NBFC. There is no clear cut finding regarding this aspect in the order of the authorities below. CIT (A) has rather based his order on the fact that assessee is claiming capital gain on sale of shares, hence, no business income. This reliance is not justified as assessee is a NBFC and doing business of granting loan. Hence, we allow this ground of assessee's cross objection. 15. Ground No.3 of the cross objection is general in nature and does not require any adjudication, hence, the same is dismissed. 16. In the result, the appeal filed by the revenue (ITA No.2558/Del/2011) is dismissed and the cross objection filed by the assessee (CO No.209/Del/2011) is partly allowed. ITA NO.2894/DEL/2011 & CO NO.210/DEL/2011 17. Ground no.1 taken by the revenue reads as under :- "On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in holding that out of the income of ₹ 41,42,72,140/- from transactions in shares and securities held by the A.O. as business income, only an amount of ₹ 1,60,05,383/- would comprise business income and the remaining ₹ 39,75,66,757/- would comprise capital gains. 18. Assessee has also filed cross obje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd. of Kolkata and the assessee company, the assessee company booked 7500 sq. ft. of semi built-up area forming part of the committed area of 25000 sq. ft. in favour of M/s. Sunsam Properties Pvt. Ltd. by CHANDRAS GREENS PROJECTS of Kolkata in a plot of land situated at Eastern Metropolitan Bye-pass commonly known as BANTALA HILLOCK and made full payment of consideration therefore from time to time. 4. Obligation of Sunsam Properties Pvt. Ltd. was to get the plans of the building sanctioned, construct, erect and complete new building within a period of 30 months from the date of execution of the agreement in accordance with plan sanctioned by Kolkata Municipal Corporation and to arrange tenant in respect of the said properties. 5. However, there being delay in the completion of the project, appellant could find willing buyer in M/s. Helgier Development and Construction Company Pvt. Ltd. Accordingly, the company assigned its rights in favour of Helgier Development and Construction Company Pvt. Ltd. by agreement dated 20th September, 2006. On such transfer it earned a profit of ₹ 1,53,00,000/-. 6. Appellant is not in the business of acquiring, developing and selling of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he circumstances of the case, the Ld. CIT (A) has erred in directing that out of the entire business income of ₹ 23,77,08,067/- treated as such by the A.O., only a sum of ₹ 8,00,777/- be assessed as business income and the rest of ₹ 23,69,07,290/- be treated as income under the head 'Capital Gains'. 27. Assessee has also filed cross objection by taking the following ground on this issue :- "1. That the learned CIT (Appeals) has erred in holding that interest earned by the assessee company is income from other sources and not income from business. 2. That the learned CIT (Appeals) has erred in treating short term capital gains arising from realization of shares held as investment as on 31st March 2006 and accepted as such in assessment year 2006-07, though sold within a period of 30 days." 28. We have heard the rival submissions. The aforesaid issues in the revenue's appeal and cross objection filed by the assessee are decided by us in paras 8 & 8.1 of this order. Accordingly, following our aforesaid decision, we dismiss ground no.1 of the assessee's appeal and allow the cross objections filed by the assessee on the aforesaid issues. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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