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TMI Blog2015 (10) TMI 392X X X X Extracts X X X X X X X X Extracts X X X X ..... ppreciation or with a view to carrying on as business. Even various Courts and Tribunals have approved that treatment given by the assessee in its books of account as a vital factor to decide whether the assessee is a trader or an investor. We also found that the assessee has regularly treated shares as investment in the earlier year and has offered gain on sale of shares under the head "capital gain". In the case of Gopal Purohit (2010 (1) TMI 7 - BOMBAY HIGH COURT), the Hon'ble High Court also accepted tribunal's observations that the principle of res judicata is not attracted since each year is separate in itself. However, there ought to be uniformity in treatment and consistency when the facts and circumstances are identical, particularly in the case of the assessee. No merit in the action of the AO for not accepting assessee's claim for short term capital gains while accepting the long term capital gains on the similar investment made in earlier years. - Decided in favour of assessee. - ITA No. 129/Mum/2011 - - - Dated:- 7-8-2015 - R. C. Sharma, AM And Sanjay Garg, JM For the Petitioner : Shri Dharmesh Shah For the Respondent : Shri Neil Philip ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarding investor with regard to short term capital gains and held that assessee was trader in shares. Accordingly, short term capital gains offered by the assessee was not accepted, however, the AO has accepted the long term capital gains offered by the assessee. 3. By the impugned order, the CIT(A) confirmed the action of the AO with regard to treatment of short term capital gains against which the assessee is in further appeal before us. 4. It was argued by ld. AR that the assessee is carrying out his own business of import and export of marble and granite etc. Our attention was invited to trading, profit and loss account and balance sheet of earlier years, wherein the assessee was continuously carrying on the business of importer and exporter. He was also consistently investing in shares as investor, capital gains arose thereon was offered as capital gains depending on the period of holding and the same was accepted by the department. As per ld. AR only during the year under consideration the AO has changed the treatment of income which is contrary to the accepted legal position in view of the decision of the Hon'ble Bombay High Court in the case of Gopal Purohit, 33 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well settled law that the principles of consistency should not be ignored. Uniformity in treatment and consistency under the same facts and circumstances is one of the fundamentals of the judicial principles which cannot be brushed aside without proper reason. iv) The Hon'ble Bombay High Court in CIT vs. Gopal Purohit (228 CTR 582) has upheld the observations of the Mumbai tribunal that an assessee can have two portfolios i.e. one trading and the other an investment. It was held that, it is important to notice that the assessee has entered into two different types of transactions where both activities are entirely different in nature jobbing (without delivery), which puts assessee's case on a more strong footing. Hence, the delivery based transaction should be treated as of the nature of investment transactions and profit therefrom should be treated as short-term capital gain or long-term capital gain depending upon the period of holding . 5. Ld. AR further placed reliance on the following decisions :- i) CIT Vs. Gopal Purohit, 336 ITR 287; ii) Dr. Priyanka Doctor Vs. ACIT, ITA No.1454/Mum/2012, dated 22-4-2014; iii) Dr. Rahul Doctor Vs. ACIT, ITA No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al gain has also been allowed exempt u/s.10(38) of the IT Act and short term capital gains also accepted by department. In addition to the short term and long term capital gains, assessee was also earning dividend income on the sale of shares held as investment. There is no dispute to the well settled proposition that for deciding as to whether assessee is an investor in share or trader in share, so many factors are relevant which comprises of volume and frequency of transaction, intention of assessee while acquiring the shares which results into earning the dividend income, use of owned/borrowed funds for acquiring shares, period of holding of shares etc. One of the important factor for deciding the true intention of the assessee is to find out whether the assessee had intention to earn dividend by holding the shares as investor or to earn profit by trading in the same. It is also true that volume and frequency of transactions is an important indicator of the intention of the assessee, whether to deal in the shares as businessman or to hold the shares as an investor, but certainly not the sole criteria. The intention of the assessee while purchasing the share, is the important and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent brought with Finance Act, 2004 w.e.f. 01.10.2004. It is an admitted fact on the record that prior to the amendment when the tax on 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. 9. From the record we found that at the time of purchase and sales even during the period prior 1-10-2004, 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 gains was at par. The assessee, however, was treating himself as an investor and keeping the delivery based shares as investments in his account irrespective of the probable tax implic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eatment given by the assessee in its books of account as a trading asset or investment; treatment given in the books is indicative of assessee's intention whether to hold the shares with a view to earn dividend long term appreciation or with a view to carrying on as business. Even various Courts and Tribunals have approved that treatment given by the assessee in its books of account as a vital factor to decide whether the assessee is a trader or an investor. We also found that the assessee has regularly treated shares as investment in the earlier year and has offered gain on sale of shares under the head capital gain . 12. In the case of Gopal Purohit (supra), the Hon'ble High Court also accepted tribunal's observations that the principle of res judicata is not attracted since each year is separate in itself. However, there ought to be uniformity in treatment and consistency when the facts and circumstances are identical, particularly in the case of the assessee. Special Leave Petition filed by the Department against this order of Hon'ble Bombay High Court has been dismissed by the Supreme Court vide order dated 15th November, 2010. 13. In view of the above ..... X X X X Extracts X X X X X X X X Extracts X X X X
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