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TMI Blog2010 (10) TMI 1018X X X X Extracts X X X X X X X X Extracts X X X X ..... she has earned capital gains (both long term and short term) from divestment of equity shares and redemption of mutual fund and income from other sources. During the year under appeal, the assessee filed the return of income on 01-08-2006 declaring total income of ₹ 1,62,36,349/-. The AO passed an order u/s 143(3) on 08-12-2008 wherein, he treated the long term and short term capital gains disclosed by the assessee as business income. As per the AO, the assessee traded in shares. In coming to such a conclusion, the AO listed a number of tests and gave his conclusion after applying these tests to the facts of the assessee's case. Aggrieved, the assessee carried the matter in appeal. The first appellate authority recapitulated 12 tests ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that the shares are held by the assessee as his stock in trade rather than as investment. (5) On the fact and in the circumstances of the case and in las the Ld. CIT(A) erred in holding that the assessee's use of own funds for purchase of shares would imply that the shares are procured for the purpose of investment, thereby ignoring the fact that the assessee being a high net worth individual may not require loan funds. (6) On the fact and in the circumstances of the case and in law the Ld. CIT(A) erred in treating business income as Short Term Capital Gain without appreciating the fact that the assessee's intention/motive while investing is not appreciation of investment but maximize the profit. (7) The appellant prays that the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollows : a) The assessee earns 92.68% of her income from share trading activity and income from other heads is only 7.3% of the total income and thus it is her usual business activity and not an incidental one. b) The assessee has invested in more than 40 companies and there was purchase and sale of shares for nominal profit and there was huge quantity of transaction. c) The intention of the assessee when analyzed, discloses that he had profit motive for entertaining into transactions. d) The fact that the assessee has disclosed the shares in its balance sheet as investment and not stock-in-trade is not conclusive. e) The transactions were in high volume and that the purchase and sales are continues and repetitive. f) The intention fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposit was received in the previous year. One more factual clarification was given by submitting that the assessee has not purchased and sold shares of the same company. She had been investing in different companies. He submitted that the first appellate authority has analyzed the facts of the case and has rightly pointed out that in cases where the assessee had sold the shares, the average holding of a share was 229 days and in cases where the assessee has not sold the shares, the average period of holding of shares as at 31st March, 2006 is 392 days. He further pointed out that the assessee has invested a substantial amount of ₹ 300.74 lakhs in mutual funds from out of a total investment of ₹ 676.48 lakhs as at 31st March, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ointed out that trading means high turnovers and low profits. He took this Bench through the order of the first appellate authority and specifically from page No. 3 to 11 and relied on the same. 7. Alternatively the learned counsel submitted that the AO should have valued the opening stock as well as the closing stock, and then only arrived at the business profit. Not doing so, as per the learned counsel, is bad in law. He prayed for relief. 8. The learned counsel for the assessee relied on the following case laws: i) ITO vs. Rohit Anand (2010) 127 TTJ (Del)(UO) 122 ii) Vinod M. Shah vs. Addl. CIT (2010) 38 SOT 503 (Mum). iii) Bharat Kunverji Kenia vs. Addl. CIT (2010) 130 TTJ (Mum) 86. 9. Rival contentions heard. On a careful cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ints to the moto of the assessee. It is also seen that the assessee has not borrowed money for making investments. The entire investments were made out of own funds. The assessee had well diversified port folio and has invested in over 40 companies. An amount of ₹ 300.74 lakhs, out of a total investment of ₹ 667.48 lakhs was made in mutual funds which works out to 45% of the investment. Out of 300.74 lakhs invested in mutual funds, ₹ 274 lakhs were invested in liquid mutual funds i.e. about 90%. No trader invests in such a manner. In our considered view, no trader in shares would make substantial investments in mutual funds. The assessee had no infrastructure for doing business in shares, nor has she incurred any expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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