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TMI Blog2010 (5) TMI 830X X X X Extracts X X X X X X X X Extracts X X X X ..... ited as profit on sale of investment . But assessee was found to have treated the profit as long term capital gain exempt u/s. 10(38) of the I. T. Act. The AO issued a show cause notice asking why such profit should not be treated as business income of the assessee . The reply of the assessee was that it is a non-banking finance company which makes long term investments as well as trading in short term holdings. The Company has its own funds for either purposes. The AO found no substance in this reply of the assessee. The AO further observed that Form No. 3CD describes the nature of business of the assessee as investment and trading in shares and securities, investment in properties. Therefore, making investment and earning profit on sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of trade. Accordingly, the gain was treated as profit and not capital gain exempt u/s 10(38) of the Act. In the light of such facts and circumstances of the case the income to the tune of ₹ 69,56,024/- was held as business income of the assessee and taxed it accordingly at normal rate applicable. In appeal, the Ld. CIT(A) confirmed this action of the AO. Aggrieved by the said order, now the assessee is in appeal before us. 3. At the time of hearing before us, the Ld. Counsel for the assessee while reiterating his same submissions as submitted before the lower authorities further submitted that the the assesee is an NBFC and has been engaged in holding investments in shares and granting of loans and advances. The company also traded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se to the Capital Gain which is subject matter of the present appeal. He also submitted that the decisions cited by the A.O. and the Ld. CIT(A) being- (i) Investment Ltd. Vs- CIT - 77-ITR-533 (SC) and (ii) G. Venkataswami Naidu Co. Vs- CIT - 35-ITR-594 (SC) on which great reliance has been placed by the Ld. CIT(A) are of no relevance in the facts of the present case. The decisions are otherwise also no affect in the present context of dealing in shares. There have been rapid strides in the development of trade, business and industry in the past decades from the period to which these decisions relate. The decision in the case of G. Venkataswami Naidu Co. Vs- CIT reported in 35-ITR-594 (SC) relates to 1940s in respect of sale of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d business and the capital market separate definitions of Long Term Short Term was introduced for holding in shares. The amendments brought in clearly shows the legislative intention that the Govt. intended to boost long-term-investments in shares securities and the capital markets. He also contended that the decisions relied on by the Ld. CIT(A) in particular those of (i) Gold Co. Ltd. -Vs.. CIT - 92- ITR-121 (Cal) and (ii) M. R. M. Plantation Ltd. Vs- CIT - 250-ITR-521 (SC) and (iii) Investment Ltd. Vs. CIT 77 ITR 533 (SC) have no application in the facts of the assessee s case.. 4. On the other hand, the Ld.DR relied on the orders of the lower authorities and prayed before the bench to confirm the same. 5. Afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mukund Engineering Ltd. 10,12,500/- 17,67,500/- Less : Book Value as on 31.3.04 15,67,777/- 1,99,723/- 2,00,703/- 7,83,500/- The assessee was maintaining two separate portfolios one for investment in shares and other for trading in shares is not disputed as is clear from the order of the Ld. CIT(A) in which both the portfolios have been reproduced as under from the assessment years 2002-03 to 2005-06 : TRADING A/C. INVESTMENT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gains as well as business income. 11. Assessing Officers are advised that the above principles should guide them in determining whether, in a given case, the shares are held by the assessee as investments (and therefore giving rise to capital gains) or as stock in trade (nd therefore giving rise to business portfolios). The Assessing Officers are further advised that no single principle would be decisive and the total effect of all the principles should be considered to determine whether in a given case, the shares are held by the assessee as investment or stock in trade. The case laws relied upon by the Ld. CIT(A) while confirming this addition are distinguishable on facts of the assessee s case. i) In the case of Gold Co. L ..... X X X X Extracts X X X X X X X X Extracts X X X X
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