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TMI Blog2016 (4) TMI 737X X X X Extracts X X X X X X X X Extracts X X X X ..... lding that the assessee has made gains while buying and selling of shares by engaging services of portfolio manager’s is to that extent erroneous vis-à-vis the facts as emerging from the records. Under these circumstances , we have no hesitation in holding that the assessee is not a trader in shares and the assessee is an investor in shares and the gain arising there-from shall be charged to tax as capital gains and not as business income as held by the AO and confirmed by the CIT(A) in their respective orders and we set aside the orders of the authorities below and holds that short term capital gain earned by the assessee shall be charged to tax as short term capital gains in the hands of the assessee as offered to tax by the assessee in the return of income filed with the Revenue. - Decided in favour of assessee - I.T.A. No. 3200/Mum/2012 - - - Dated:- 15-4-2016 - Shri Amit Shukla, Judicial Member And Shri Ramit Kochar, Accountant Member For the Petitioner : Shri Dhirendra M. Shah For the Respondent : Shri Kailash Gaikward ( Sr. D.R. ) ORDER Per Ramit Kochar, Accountant Member This appeal, filed by the assessee, being ITA No. 3200/Mum/2012, is direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the magnitude, frequency of the share transactions carried out by the assessee directed the assessee to explain as to why the profit on sale of shares shown as short term capital gain should not be taxed as business income in view of the Board's Circular No. 4 of 2007. In response to the AO directions, it was stated by the assessee that the intention was only to hold shares as investment and to earn dividend and the assessee took delivery of all shares which are reflected in the demat account maintained by the assessee. The assessee submitted that gains on sale of such shares are incidental to the investment. As a prudent investor, he took advantage of selling his investment at a premium considering the market conditions. The transactions are not repeated and shares are held as investment. The assessee submitted that shares dealt by the assessee are considered as investments in records and as such the income thereof is to be considered as capital gain. On going through the scrip-wise details, the A.O. noted that the assessee has traded in about 22 different scrips. The period of holding varies from 20 days to 9 months and assessee has dealt in 18,711 shares ranging from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince long. His investment in shares in the year ending 31/03/2007, closing balance was ₹ 8,49,02,223/- and in that year (assessment year 2007-08) he had earned long term gain of ₹ 29,07,511/-and incurred short term loss of Rs.(-) 3,76,1.39/-, which have been accepted by the Revenue. The assessee submitted that all his investment in share are accounted for and held as 'investment' and accordingly shown in balance sheet under the head 'investment'. The assessee has engaged the services of portfolio manager for his investment in shares and mutual fund. Traders do not engage port-folio managers. It was only investors, who do not have just knowledge, who engage portfolio managers to advise and to do their investment. The numbers of transaction were very limited. Out of total number of 21 scrips which was sold, out of this 17 scrips were sold on 02/07/2007 and 3 scrips were sold on 17/04/2007. Thus, there only two transactions of sale on two days out of 365 days. Similarly there was no frequency of purchase. The investment in shares was done most of it in 2006, the previous calendar year. The holding period in almost all the cases were 108 days to 358 days. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame as income from business. The long term capital gain is not in dispute. The dispute is regarding the short term capital gains only. The purchases have been made in the preceding year. Out of 22 different scrips, the period of holding varies from 20 days to 9 months. There are no borrowed fund and the investment was made out of own funds and the same are reflected in the financial statements as investments from year to year. The assessee has placed his financial statements for the financial year 2007-08 in the paper book filed with the Tribunal which are placed at paper pages 1-7. The ld. Counsel submitted that the assessee is a pensioner. In the earlier year and in the subsequent assessment year, these activities have been treated as investment and capital gains declared by the assessee was consistently accepted by the Revenue. Principle of res judicata is not strictly applicable to Income Tax proceedings but principles of consistency is applicable. The assessee has placed on record(paper book page 41-43) assessment order dated 26.12.2007 passed u/s 143(3) of the Act by revenue for assessment year 2005-06 whereby the revenue has accepted the capital gain declared by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee is holding shares for a period of 20 to 354 days before being sold on which short term capital gain has arisen. The shares so sold during the year on which short term capital gain has arisen were bought in the preceding year and deliveries of the shares were taken by the assessee and held in the demat account maintained by the assessee. The assessee is also not indulging in repetitive purchases and sale of the same shares. The shares were mainly sold on three dates during the previous year i.e. on 17-04-2007, 02-07-2007 and 20-12-2007 and it is not that the assessee is frequently trading in shares nor the volumes are too high. The assessee has also not invested any borrowed funds for making investments in the shares and owned funds were deployed in purchasing the shares. Keeping in view the market conditions , the assessee has sold the shares to earn gains knowingly well that markets are volatile, complex and dynamic which is a normal , rational and usual behavior of the investor who deals in the stock market and it is not expected from a rational and prudent investor under the normal circumstances that he will wait for complete erosion in the value of shares or loss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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