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TMI Blog2014 (4) TMI 1104X X X X Extracts X X X X X X X X Extracts X X X X ..... res as 'Income From Business' instead on 'Capital Gains'. On the facts and circumstances of the case and in law, the leaned CIT(A) erred in upholding the action of the Assistant commissioner of Income Tax Officer 12(1) ("the AO") of Assessing the gains from sale of shares amounting to Rs. 2,72721/- as 'Income From Business' instead of short term capital gains of Rs. 2,72,721/-. The Appellant prays that it be held that the gains on sale of shares be assessed under the head 'Capital Gains' as returned by the Appellant. The Learned CIT(A) erred in law and on facts and in circumstances of the case in holding that the principle of res judicata does not apply to the fact of the case. 2.0 Ground No.2: Disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res were not purchased from secondary market but was allotted through IPO, which was mostly held as capital asset. At the time of making the application in IPO, the shares were not listed in exchange and, therefore, are not tradable at the time of application being made. The funds are blocked for 30-45 days after which the shares are allotted and there is no certainty to the quantity of shares that may finally be allotted to the assessee. These shares, after allotment, cannot be sold before they are listed in stock exchange and, therefore, they cannot be treated as share trading activity. In the earlier years, the Department has assessed the transaction of IOP shares as capital gains. However, the Assessing Officer rejected the assessee's c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain which has been assessed by the Department mostly under section 143(3) not only in the earlier years but also in the subsequent years. The copy of assessment orders have also been placed in the paper book. In the case of a business venture, huge risk is undertaken, whereas in the case of IPO, there is very less risk involved. Moreover, the assessee has not borrowed any funds for the purpose of investment and investments has been made out of her own funds. In the books also, the purchase of shares in IPO has been shown as investment. Further, the assessee has no employee or salary cost and the total expenditure is only Rs. 2,170 out of which Rs. 1,780 is on account of accounting charges and Rs. 420 as bank charges. All the shares are del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e not immediate tradable items. In the IPO, the funds are blocked for 30-45 days after which the shares are allotted and that too the quantity of shares is not certain. It is only when the shares are allotted, they are listed in Stock Exchange and wherever there is some rise in value of the shares, the assessee immediately used to sell the same to book the gain. This practice of investment in IPO has been consistent since last several years and also in the subsequent years, wherein the income has been offered as capital gain and the same has been accepted by the Department under scrutiny proceedings under section 143(3). Further, the investments have been made through own funds and no borrowed funds have been utilized. Thus, the intention o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f sale of shares should be assessed as capital gain and not as a business income. The fundings of the Assessing Officer and the learned Commissioner (Appeals) are based on various decisions which cannot be held to be applicable universally in all the cases, because in such kind of transaction, each fact of the case has to be analysed, depending upon the intention of the assessee and also the other attendant circumstances. Consequently, we set aside the impugned order passed by the learned Commissioner (Appeals) and allow the ground no.1, raised by the assessee. 7. In ground no.2, the assessee has challenged the disallowance of Rs. 64,349 under section 14A. 8. The Assessing Officer noted that the assessee has derived dividend income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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