9911796707
TMI Blog2013 (10) TMI 1388X X X X Extracts X X X X X X X X Extracts X X X X ..... he following grounds: 1) Respondent, an individual was a full time Managing Director in M/S Mahavir Packaging (manufacturers of corrugated boxes). In addition to this he was also engaged in activity of trading in Futures and options and also an investor in securities. 2) He was investing in securities since last 4-5 years and consistently showing his income therefrom as either STCG or LTCG as the case may be. The securities were always classified under the head Investments in Balance sheet. This was approved by CIT(A)-II, Nasik in earlier year (A.Y. 2006-07) by accepting the entire gain as capital gain. 3) For A.Y. 2008-09, under the identical facts, the AO accepted the assessee's claim of LTCG to the extent of Rs. 59,41,8197- which implies that she has accepted the assessee's claim regarding holding of investment portfolio. However STCG was treated as Business income by AO. 4) Thus, in view of the totality of facts and circumstances of the case, the dominant purpose of the transactions and the combined effect of various other factors including the case laws cited, the appellant prayed before learned CIT(A)-II, Nasik that the income from investment in securities may ple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emaining the same, assessee's claim deserved acceptance by following the rule of consistency. 4. The AO-erred in understanding the sale and purchase of appellant under F & 0 segment which comes to 61% and 63% respectively and not 6 % and 8% as alleged. 5. The AO erred in treating the income from securities as business income, despite the fact that the avg. period in case of appellant is 1.5 months (as worked out by AO herself) and as per settled judicial opinion in respect of shares with frequent transactions where shares are held for more than, a month they should be treated as investment and assessable as short term capital gains. 4. During the course of appellate proceedings, the assessee made detailed submissions which are detailed as under: 1. The AO erred in framing the assessment by not appreciating the facts of the case, books of accounts produced and submissions made by the appellant during the course of assessment proceedings. 2. The AO erred in non considering the decision of Hon'ble CIT(A)-II, Nashik for A.Y. 2006-07 in case of appellant under the identical set of facts. The AO failed to furnish any justification for adopting a divergent approach for A.Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TA No. 6429/Mum./2009, order dated 25/02/2011) wherein the assessee was also having income from STCG/LTCG, F & O trading & speculative trading and wherein it was held that despite high volume and short period of holding shares gain is STCG and that, on the principles of consistency, a different view cannot be taken on the same facts. 5. The AO erred in understanding the sale and purchase of appellant under F & O segment which comes to 61% and 63% respectively and not 6 % and 8% as alleged. As regards borrowings, the AO failed to appreciate that the appellant have not taken any unsecured loan during 2007-08. On the contrary, he has repaid the loans during the year substantially. Further, appellant has advanced substantial advances during 2007-08 to other parties out of borrowed funds, as can be verified from relevant account extracts. (The relevant table is attached as Schedule-I). This proves the major investment made in shares were from own capital and earning of the year. Without prejudice, the AO erred in concluding that the appellant is trader in shares merely on the basis of volume of transactions and use of borrowed funds, as this reasoning loses sight of the fact that mere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld for less than one month will be treated as profit from business. AO is directed to work out and compute short term capital gain and business profit accordingly. 6. The same has been opposed before us by the Revenue interalia stated that CIT(A) erred in directing the Assessing Officer to treat profit / gain earned on transaction of purchase and sale of shares held for more than one month as short term capital gain as against treated by Assessing Officer under the head "Business". On other hand, learned Authorized Representative supported the order of CIT(A) on this issue. 7. After going through the rival submissions made by the parties, we find that assessee is an individual along with other activity of dealing in trade of shares. Assessee had shown short term capital gains of Rs. 2,55,08,393/- and long term capital gains of Rs. 59,41,819/- and claimed exemption u/s. 10(38) of I.T. Act on account of trading of shares. Keeping in view of volume of transactions of shares period of holding, intention of assessee, use of borrowed funds and magnitude of purchases and sales, Assessing Officer treated short term capital gains as business income. Assessing Officer however, allowed exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,55,90,055 Purchases 1,99,73,193 (8%) 21,98,99739 (92%) 23,98,72,932 Sales 1,47,78,747 (6%) 23,68,97,231 (94%) 25,16,75,978 Closing Stock 3,29,56,902 Profit/loss (-) 51,94,446 3,43,64,338 The details of availability of funds with assessee were found as under: Opening Balance 43,58,618 Add : Profit 2,63,08,425 Less : Drawings 3,69,296 Less: Income Tax 5,00,000 Closing Balance 2,97,97,747 7.2 From the above, it was found that assessee has its own funds amount to Rs. 43,58,618/- and closing balance of Rs. 2,97,97,747/- including profit of Rs. 2,63,08,425/-. On perusal of balance sheet of the assessee, it was further noticed that the status of loan / borrowed funds was as under: Secured Loan 84,28,485 Unsecured Load 30,27,890 Total 1,14,56,375 7.3 The assess was engaged in frequent purchase and sale of shares which is evident from patter of purchase and sale of shares of Dena Bank, Infosys, Prithvi Info and Vijaya Bank as detailed below: DENA BANK Date Opening stock Purchases Sales 01/04/2007 319200 2000 24/04/2007 15000 04/05/2007 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10/2007 9000 11/10/2007 10 16/102007 1000 14/11/2007 5000 15/11/2007 5000 19/11/2007 20000 20/11/2007 5000 23/11/2007 710 26/11/2007 11500 27/11/2007 4000 28/11/2007 2800 29/11/2007 8000 30/11/2007 12384 03/12/2007 3000 03/12/2007 2000 10/12/2007 4425 13/12/2007 21459 13/12/2007 14886 20/12/2007 5000 24/12/2007 9629 24/12/2007 6430 26/12/2007 4532 27/12/2007 20000 27/12/2007 10000 31/12/2007 10000 31/12/2007 10000 01/01/2008 5000 01/01/2008 6205 10/01/2008 . 795 10/01/2008 10657 11/01/2008 5000 16/01/2008 16452 23/01/2008 1000 28/01/2008 1000 VIJAYA BANK ..... X X X X Extracts X X X X X X X X Extracts X X X X
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