9911796707
TMI Blog2015 (10) TMI 2054X X X X Extracts X X X X X X X X Extracts X X X X ..... see of STCG. - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... h for the assessment year 2005-06, the Tribunal has decided the issue against the assessee in the appeal filed by the revenue, however, for the year under consideration, the facts are distinguishable and therefore STCG offered by the assessee should have been accepted by the authorities below. The learned authorised representative of the assessee has submitted that vide Finance Act,2004 new scheme of tax has been brought into statute wherein no tax is provided on LTCG from listed securities. It has also reduced the rate of tax to10% on STCG from listed securities. The definition of 'shortterm capital asset' being a share as per the provisions of sec.2(42A) remains unchanged despite the new scheme of tax on the capital gain from listed securities. The holding period for STCG and LTCG remains the same. As per the provisions of the IT Act subsequent to amendment in tax on capital gains from listed securities nothing has been introduced regarding any volume, frequency etc., as a test, benchmark for treating the transaction as investment or trading. Even otherwise, STT has been introduced just a volume based tax on purchase or sale of equity share. Therefore, STT has ruled out any diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usly increased from 800 points to 1000 points. Therefore, in a highly bullion market during the year it was natural for carrying out the bulk transactions and earning more STCG. He has further submitted that the assessee's main activity is providing consultancy services and has entrusted his portfolio to the manager/broker, the assessee has valued the investment at cost and shown the same as investment in the balance-sheet. There was no opening or closing stock as in the case of holding shares as stock-in-trade. Therefore, intention of the assessee at the time of purchase was only investment and not trading though the assessee has also carried out trading activity as well as future end option activity in separate portfolio and there is no bar for having two portfolios -one for trading and another for investment. The assessee is keeping separate account for trading as well as investment activity. He has relied upon the judgment of the Hon'ble jurisdictional High Court in the case of CIT vs. Gopal Purohit (228 CTR 582). Learned authorised representative of the assessee has submitted that the assessee is a management graduate in finance and runs his independent financial consultancy p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the assessee's own case for assessment year 2005-06. The Tribunal has given the finding for the assessment year 2005-06 after considering the nature of transaction, frequency, volume, sales, holding period of shares by the assessee. Therefore, in the absence of any material change in the facts and circumstances of the case for the year under consideration, the issue is covered by the decision of this Tribunal for the assessment year 2005-06. He has also relied upon the orders of the authorities below. 7. We have considered the rival submissions as well as the relevant material on record. At the outset, we note that an identical issue was considered by this Tribunal in assessee's own case for assessment year 2005-06 vide order dated 30/9/2010 in ITA No.5381/Mum/2009. The Tribunal has given its finding in paragraphs 13 & 14 as under: "13. We find that the assessee has to be treated on.ly as a trader, the total transactions being 461 in number. Further the decision of the Mumbai Bench of the ITAT in the case of Gopal Purohit 122 TTJ 97 where in respect of share transactions the ITAT accepted as investment and also on the principle of consistency in the matter of assessment. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e share transactions were in the nature of business transactions, we are of the considered opinion that there is no question of deviating from the view taken by the coordinate Bench. We concur with the findings of AO and allow the Revenue's appeal." It is clear that the Tribunal has given finding on the basis of peculiar facts for the assessment year 2005-06 by considering the number of transactions as 461. The Tribunal also relied upon the decision in the case of ACIT vs. V.Nagesh (supra) on the point that the case and issue has to be decided on the basis of the facts of each case and no single decisive test or straightjacket formula can be devised for getting quick answer to such questions. It is pertinent to note that for the assessment year 2005-06, the CIT(A) has decided the issue in favour of the assessee and the assessee, while challenging the order of the AO for the assessment year under consideration contended before the CIT(A) that the case of the assessee is covered by the order of the CIT(A) for the assessment year 2005-06. However, the CIT(A) did not accept this contention of the assessee and held in paragraph 7.7 of the impugned order as under: "7.7 The contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jindal Photo 100 7/4/05 15/4/05 23369 29504 6135 8 9. It is apparent that in the case of shares of M/s.Agrotech Foods there are only two transactions - one of the purchase of a large quantity on 15/4/2005 and another transaction of purchase of 1000 shares of the Agrotech Foods on 22/4/2005. These transactions are for purchase of the same scrip on two different dates and therefore, cannot be considered as repetitive transactions when there is no sale of the said scrip in between. The sale of shares of the said scrip was subsequent to the last purchase on 22/4/2005. Thus it is clear that the AO misunderstood the concept of repetitive transaction of shares in same scrip. However, we find that in case of Jindal photo there are repetitive transactions because after the initial purchase of shares on 7/4/2005 there is a sale on 13/4/2005 and 15/4/2005 and thereafter again there is a purchase on 18/4/2005 and so on. Thus as per details given by the AO, assessee has carried out repetitive transactions only in one scrip i.e. Jindal Photo. Further, as it is apparent from details of transactions that the AO has considered a single transaction of purchase or sale in one scrip on a si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n earned by the assessee from the transaction of purchase and sale of 11 scrips, the details of which are as under: Material Scrips from which Most of the STCG arose with Holding Period Name of Scrip Purchases Sale Gain/Loss Holding period in days 1 Cyber Media Ltd. 66,72,045 86,04,822 18,28,039 8 2 Fortune Info Ltd 62,80,882 77,02,659 13,23,179 147 3 Govind Rubber Ltd 2,31,06,538 3,12,55,143 77,85,876 84 4 IMP Power Ltd 64,28,187 92,61,936 23, 44, 683 312 5 Jindal Photofilms Ltd 73,55,136 87,42,526 11,49,860 308 6 Saksoft Ltd 81,78,341 89,03,274 24,03,557 199 7 Synergy Multi Ltd 2,83,51,976 3,05,37,187 19,72,058 344 8 Vivimed Labs Ltd 1,49,97,439 1,73,96,293 21,63,423 16 9 Bhagirath Engg Ltd 12,12,992 22,52,482 10,39,490 45 10 Ganesh Forge Ltd 58,00,538 71,16,479 13,15,941 16 11 Multi Arc Ltd 36,75,462 70,78,298 34,02,836 99 Total 11,20,59,536 13,88,51,099 2,67,28,942 1578 Brokerage, STT, etc not considered in P/S Average Holding Period 143 1 Avon Organic Ltd. 2,07,83,846 1,60,39,559 (50,70,553) 159 2 Kopran Ltd. 3,01,06,732 2,85,22,786 (20,56,565) 241 Total material loss 5,08,90,578 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g securities valued at, say, ₹ 100,000 will now bear a small tax of ₹ 150. The tax will be levied on the buyer. In the case of short-term capital gains from securities, I propose to reduce the rate of tax to a flat rate of 10 per cent. My calculation shows that the new tax regime will be a win-win situation for all concerned". By introduction of this new tax scheme for capital gain from listed securities, the Legislature has taken due care to get compensatory tax recovery by levying STT on sale and purchase of the securities on stock exchange irrespective of the outcome of the sale and purchase in the hands of the buyer and the seller. Therefore, the tax concession and exemption provided on LTCG and STCG on listed securities was considered to be made up from the STT. Therefore, the object of the new tax scheme is to minimize tax avoidance on the income arising from transaction of purchase and sale of listed securities. There was another object to be achieved by the introduction of this new scheme of tax that is to promote more and more transactions in the capital market and in the listed securities through stock exchange. Therefore, once the legislature has the object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and it is always advisable for investor to diversify the portfolio instead of going for a limited number of scrips involving more risk. Therefore, to mitigate the risk and erosion of capital base, it is a prudent decision to diversify the portfolio by investing in the multiple scrips. Further carrying out the trading and speculative transaction under a separate portfolio will not change the character and the nature of the transaction held in the investment portfolio. The Hon'ble jurisdictional High Court in the case of CIT vs. Gopal Purohit (supra) has held that the assessee can have two portfolios - one in trading and another investment. Even otherwise, there is no bar on a trader or dealer of shares having investment in shares. Therefore, the trading carryied out by the assessee in a separate portfolio will not have any impact or bearing in determining the nature of transaction under the investment portfolio. We further note that except in one scrip, there are no repetitive transactions carried out by the assessee. Therefore, in the overall facts and circumstances of the case, we find that the transactions carried out by the assessee in the investment portfolio cannot be given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es purchased were, as reflected from the holding period, intended towards the end of investment. This Court is not persuaded by the argument of the Revenue that an average of 4-5 transactions were made daily, and that only eight transactions resulted in a holding period longer than one year. This is because the number of transactions per day, as determined by an average, cannot be an accurate reflection of the holding period/frequency of transactions. Moreover, even if only a small number of transactions resulted in a holding for a period longer than a year, the number becomes irrelevant when it is clear that a significant volume of shares was sold/purchased in those transactions." Thus it is clear that for the purpose of evaluating the nature of transaction and intention of the assessee, predominant facts are to be taken into account. It is pertinent to note that when the assessee has given a treatment of these shares held under the investment portfolio in the books of account as investment, then, in absence of any thing contrary brought on record to disprove the primary evidence to reflect the intention of the assessee in carrying out the transaction the nature transaction being ..... X X X X Extracts X X X X X X X X Extracts X X X X
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