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TMI Blog2015 (6) TMI 520X X X X Extracts X X X X X X X X Extracts X X X X ..... , otherwise, are general nature. Hence the same are accordingly dismissed being not pressed. 3. Ground Nos.3 4 are relating to the issue as to whether the income earned by the assessee from sale and purchase of shares is to be assessed as capital gains or business income. 4. During the assessment proceedings, the Assessing Officer (hereinafter referred to as the AO) noticed that the assessee had disclosed short term capital gains of ₹ 48,64,832/- claimed to have been earned after 01.10.04. After set off of short term capital loss prior to 01.10.2004 of ₹ 3,06,778/- and other expenses of ₹ 11,17,091/-, the assessee had returned net short term capital gains of ₹ 34,40,863/-. The AO further observed that the assessee had also claimed long term capital loss prior to 30.09.04 at ₹ 1,19,697/-. The assessee had claimed long term capital gains after 01.10.04 at ₹ 3,75,069/-. The AO observed that the assessee had offered short term capital gains at a concessional rate of 10% as per the provisions of newly inserted section 111A of the Income Tax Act. He further observed that as per the amended provisions, the short term capital gains after 01.10.04 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I of Finance (2) Act, 2004 w.e.f. 01.10.2004. By the same Finance Act, Section 10(38), Section 111A and 88E were inserted bringing in a special scheme for taxation of trading and investing in respect of securities w.e.f. 01.10.2004. As per the said scheme, all the transactions of securities on stock exchange done on or after 01.10.2004 would entitle securities transaction tax. All long term capital gains arising on such securities were made exempt under section 10(38) and short term capital gains arising on sale of securities on which security transaction tax had been paid were entitled to a concessional rate of tax at the rate of 10% under section 111A. The traders were also compensated for the additional security transaction tax paid by way of rebate under section 88E. The Ld. A.R. has submitted that merely because the scheme of taxation was amended/changed during the mid of the year under consideration, the AO therefore ventured into the share transaction activity of the assessee and treated the assessee as trader, whereas, in the earlier assessment years, where such benefit of concessional rate of tax was not available to the assessee, the assessee s claim of investor in shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him from the eligible claims. In the year in which the assessee would be treated as a trader, the assessee would lose the benefit of set off of capital loss of the earlier assessment year. Then by treating the assessee as an investor in subsequent assessment year, the assessee would be denied the benefit of claim of set off of loss from sale and purchase of shares as the same being treated as business income/loss of the assessee in earlier assessment year. He has submitted that though principle of resdjudicata is not applicable to the income tax proceedings, however, the department is not supposed to change its stand every year as per its convenience and putting the assessee to loss and disadvantage in either of the situations as discussed above. The Ld. A.R. has therefore submitted that the assessee was essentially an investor and was required to be treated so by the Revenue, while computing the income from sale and purchase of shares for the year under consideration. 7. The Ld. D.R., on the other hand, has drawn our attention to the observations made by the AO with regard to volume and frequency of transactions and the interest paid by the assessee on the funds borrowed for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought with Finance Act, 2004 w.e.f. 01.10.2004. It is an admitted fact on the file that prior to the amendment when the tax of short term capital gains, as discussed above, was at par with that of business income, the department has been consistently accepting the treatment of income by the assessee as capital gains. Merely because the rate of tax has been reduced in respect of short term capital gains and long term capital gains have been exempt during the year by way of an amendment to the provisions as discussed above, that itself, cannot be a ground for the AO to depart from its consistent stand of treating the assessee as an investor and thereby to charge the income earned by the assessee from share transactions as business income. Moreover, as discussed above, the assessee had been maintaining two portfolios i.e. he was treating the delivery based purchases as investments and the non delivery based transactions as speculative. As discussed above, at the time of purchase of shares even during the year but prior to 01.10.2004, the assessee was not guided or influenced by lower tax rate in case of short term capital gains as the rate for business income and short term capital ga ..... X X X X Extracts X X X X X X X X Extracts X X X X
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