9911796707
TMI Blog2010 (6) TMI 797X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 143(2) was issued on 7.8.2006 which was duly served upon the assessee. In response to the notice Shir Manoj Sharma and Shri S.K. Sureka Ld. Tax Consultants of the assessee company appeared before the AO and submitted the details required by the AO time to time. It emerges out from the asstt. Order that assessee company had sold 2, 09,500 shares of M/s. JOL for a total consideration of ₹ 175667689/-. The purchase value of these shares have been shown at ₹ 7174480/-. The assessee had earned a capital gain of ₹ 168492709/-. The said gain was claimed as exempt as per the provision of section 10(38) of the Income Tax Act 1961. The AO after going through the details of transactions formed an opinion that Assessee Company adopted a unique modus operandi of evading tax. He observed that shares of JOL held as stock in trade were kept unsold and the shares acquired during the year along with the erstwhile investment in such shares were reflected to have been liquidated resulting into accrual of long term capital gain which was claimed as exempt from levy of tax. According to the AO the sale of shares out of investment / acquisition without selling shares held as stock in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carried the matter in appeal before the Ld. First Appellate Authority. It filed detailed written submission which has duly been noticed by the Ld. First Appellate Authority. The main emphasis of the assessee is that it has been maintaining two separate accounts i.e. one for business purpose and the other for investment purpose. The assessee further contended that an investment company like the assessee can always maintain its investment account separately. According to the assessee an assessee is entitled to acquire and hold shares / securities either as investment for certain strategic reasons and derived income there from or a stock in trade with a view to resale the shares / securities and drive profit from sale of such shares on account of price changing. For the purpose of accessibility of profits derived from the sale of shares / securities, it is predominantly the intention of the assessee which is relevant. The intention of the assessee is tobe ascertained from the facts of the each case and the attendant circumstances. It is also be possible that some shares may be acquired and held by the assessee for the purpose of investment whereas other may be held as stock in trade. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substantial shareholder in JOL since 2000-01. The shares in JOL were acquired as part of promoter holding which is evident from web page of NSE submitted at page 22 of the paper book. 2) Substantial part of shareholding of the appellant in JOL has resulted from shares received on account of bonus/gift/merger and not on account of purchase made by the appellant. 3) The shares of JOL have been valued at cost by the appellant in the profit and loss account which has not been objected to by the statutory auditors / RBI. 4) The Sale of shares of JOL in the captioned assessment year was made out of investment portfolio and not out of stock in trade. 5) Sale proceeds of the shares have not been reflected as turnover and profit derived had been shown as profit on sale of investment. 6) The appellant has held all his investments for long period, with an objective of earning dividend income therefrom 7) The appellant had even converted the shares of JOL held as stock in trade into investment in the immediately succeeding assessment year, i.e. 2006-07, which further fortifies the conduct of the appellant to hold the shares as investments. In view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital asset has been defined in section 2 (14) of the Act as under : Capital asset means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include (i) any stock-in-trade, consumable stores or raw materials held for the purposes of his business or profession; xxxxx xxxxx xxxxx 8. A bare perusal of both these clauses would reveal that capital gains would be chargeable to tax on the transfer of any capita asset other than, inter alia, stock in trade held for the purpose of business or profession. Shares held as investment would qualify as a capital asset and profit arising on sale thereof would be taxable as a capital gain and not as a business profit. The moot question before us is whether shares sold by the assessee were held by it as investment or stock in trade. The apprehension of the AO in the asstt. order is that assessee failed to bring any evidence on the record which suggest that shares sold by it were not containing the shares from stock in trade, contrary to this belief the case of assessee is that it is maintaining two accounts one for investment and the other for stock in trade. The Hon b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence of any satisfactory explanation; (e) the fifth test, normally applied in cases of firms and companies, is whether the deed of partnership or the memorandum of association, as the case may be, authorizes such an activity; (f) the most important test is as to the volume, frequency, continuity and regularity of transactions of purchase and sale of the goods concerned. In a case where there is repetition and continuity, coupled with the magnitude of the transaction, bearing reasonable proportion to the strength of holding, an inference can readily be drawn that the activity is in the nature of business. 9. With the assistance of Ld. Representative we have gone through the pages No. 55-56 of the paper book wherein assessee has placed on record the details of shares held as investment starting from 15th July, 2000 upto 31st March, 2005 and the details of shares held in stock starting from 20th July, 2001 upto 31st March, 2005. From perusal of these details it would reveal that in the beginning assessee had made investment only in the shares because it is one of the promoter of JOL. Thereafter certain shares were acquired as a stock in trade and a large number of s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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