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TMI Blog2013 (1) TMI 868X X X X Extracts X X X X X X X X Extracts X X X X ..... action is unjustified and unwarranted as the entire expenses have been wholly and exclusively incurred for the purpose of Petitioner's business activities". 2. The assessee in the present case is an individual. A return of income was filed at ₹ 26,67,570/- and carry forward short term loss of ₹ 1,17,70,414/-, was claimed in respect of sale and purchase of shares. The assessee was required to file details in respect of share transactions and it was noticed that there were certain non-delivery transaction which were to be treated as speculative transaction. However, during the course of assessment proceedings the assessee vide letter dated 17/10/2011 claimed that the activity of the assessee regarding sale and purchase of shares should be considered to be in the nature of business activity. It was pleaded that loss arising out of sale and purchase of shares should be allowed as loss arising out of business of sale and purchase of shares. A loss of ₹ 5,40,98,454/- was computed by the assessee in respect of sale and purchase of shares which has also been described at page-3 of the assessment order in the following table: III Income from Business/Profession Specu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apter VI-A (as per return of income) 1,06,500 Total Income 2,69,69,935 Rounded off to 2,69,69,940 3. Aggrieved assessee filed an appeal before Ld. CIT(A). The contentions raised before AO were reiterated. It was submitted that in earlier years the assessee had never traded in shares with large volumes and frequency, therefore, the shares were treated as investment. It was submitted that book entries do not reflect the correct nature of transaction. It is the conduct and substance which is to be seen to arrive at the conclusion about the nature and character of activity. Therefore, it was pleaded that mere showing the share trading activity as investment in the return cannot lead to a conclusion that assessee was never in the business of share trading. Reference was made to the following decisions of the Tribunal to contend that the activity carried on by the assessee was in the nature of business activity: (1) Harsha N. Mehta vs. DCIT, 43 SOT 332(Bom). (2) Jayshree Pradeep Shah, 131 ITD 326(Bom). (3) Tarun Amarchand Jain, 21 Taxman.com 319 (Mum), it was held that in view of frequency and voluminous transaction the assessee was a dealer in shares and thus carrying out b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g period of various scrips clearly indicate that motive of the assessee to carry out the activity of sale and purchase of shares was to carry out such an activity as business activity. He submitted that assessee under wrong impression had claimed the same as an activity giving rise to income under the head "capital gain". He submitted that the manner and mode in which the accounts are maintained by the assessee cannot determine the character of income and to ascertain the real character of income one has to consider the facts and circumstances of the case. He submitted that facts and circumstances of the case clearly describe that the activity of sale and purchase of share carried out by the assessee was in the nature of business activity. He submitted that in the past assessee did not carry out such activity at such huge level and only isolated transactions of sale and purchases were done. He also submitted that assessee is not debarred from putting this claim during the course of assessment proceedings as according to well established law what is to be assessed is the income assessable under the Act and it does not depend upon the manner in which it has been shown by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion must be answered depending upon selective effect of all relevant materials brought on record. [Para 12]" On these facts it was held by the Tribunal that entire profit on sale of shares was to be considered as "business income" being in the nature of adventure in the nature of trade. (2) Jayshree Pradeep Shah, 131 ITD 326(Bom), wherein assessee was found to entered into voluminous transactions of purchase and sale of shares. It was also found that on certain shares assessee did not take delivery of shares purchased or sold. The income in respect to those were offered as business income. In respect of remaining transactions of shares, where assessee actually took delivery, the shares were shown as investment in the books of account. Since those shares were held for a period less than one month, those shares were considered as short term capital gain. The AO observed that having regard to number, volume and frequency of transaction of purchase and sale of shares where actual delivery was involved, the actual gain declared by assessee was to be considered as income from business. Ld. CIT(A) upheld the order of AO. From the facts it was found by the Tribunal that there were 800 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v) had used borrowed funds for the purchase of shares, therefore, assessee was held to have earned the income from sale of shares as business income. 7. Referring to above decisions it was submitted by Ld. AR that all the requirements to characterize the activity of the assessee as business are fulfilled, therefore, assessee should be held to have earned the income from sale and purchase of shares as business income. 8. So far as it relates to Ground No.2, it was submitted by Ld. AR that if the case of the assessee is accepted that the income from sale and purchase of shares is a business income then allowability of interest will become consequential. 9. On the other hand, it was submitted by Ld. DR that assessee himself has shown the income as income giving rise to capital gain. The shares were shown as investment in the balance sheet. Therefore, he submitted that AO was right in treating the income from sale and purchase of shares as income from capital gain. He submitted that as the treatment of the said income as business income is beneficial to the assessee, the assessee changed his stand which is not permissible in law. He also submitted that without filing the revised ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he next scrip which can be mentioned is Edu Comp. This scrip has also been purchased and sold on the same date and the details are as under: Acq. Dt. Rate Acq.cost Sale Date Sales Consideration Net sale consideration Capital gains STT Paid 19/11/08 0850066 49643212 19/11/08 55219592 55219592 5576380 Yes 23/12/08 0000076 26009576 23/12/08 27691261 27691261 1681685 Yes 27/1/09 0500566 8339650 27/01/09 9058878 9058878 719228 Yes 05/02/09 8000388 2721078 05/02/09 2889159 2889159 168081 Yes 10/02/09 1500718 2417658 10/02/09 2938092 2938092 520434 Yes 11/02/09 8006767 1782677 11/02/09 1948816 1948816 166139 Yes 12/02/09 9807551 897878 12/02/09 989283 989283 91405 Yes 13/02/09 4808538 1945854 13/02/09 2134433 2134433 188579 Yes 16/02/09 1000779 2030779 16/02/09 2158253 2158253 127474 Yes 17/02/09 1806529 1915653 17/02/09 2049470 2049470 133817 Yes 02/03/09 2500933 3788733 02/03/09 4098930 4098930 310197 Yes 06/03/09 5500853 2362280 06/03/09 2212646 2212646 -149634 Yes 12/03/09 2008143 3141029 12/03/09 3049730 3049730 - 91299 Yes Similar is the case with Ranbaxy Scrip, the detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ascertain that whether activity of sale and purchase of shares carried out by the assessee is in the nature of "business" or "capital gain". It has already been mentioned that the manner in which the assessee has carried out this activity clearly indicate that the intention of the assessee was to carry out such activity as trade and the motive of the assessee was to earn profit. The activity of sale and purchase of share was regular activity. The assessee has dealt with in the scrip of one company on various dates. They have been purchased and sold on the same date for which huge purchase price is paid and huge income is earned on the same date. The criteria on which it has to be determined that whether or not assessee is engaged in the activity of business of sale and purchase of shares have been described in the aforementioned decision relied upon by the Ld. AR in which it has been held that this question is a mixed question of law and fact; whether a particular holding is by way of investment or stock in trade within knowledge of the assessee and it is for the assessee to produce evidence from the record as to whether he maintain any distinction between shares held as investmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ship in that case referred to the decision of Hon'ble Delhi High Court in the case of CIT vs. Jai Parabolic 306 ITR 42(Del), wherein it has been held that Hon'ble Supreme Court in the case of Goetze (India) Ltd. vs. CIT(supra) had dismissed the appeal making it clear that the decision was limited to the power of assessing authority to entertain a claim of deduction otherwise than by way of revised return and did not impinge on the powers of the Tribunal. In the said case their Lordship of Hon'ble Jurisdictional High Court found that there were two important things. Firstly, the assessee was entitled to the deduction claimed. Secondly, the assessee made the claim not only before the AO but also independently before Ld. CIT(A) and the Tribunal. On these facts Hon'ble Jurisdictional High Court has held that the claim of the assessee was to be considered on merits and non-filing of revised return cannot debar the assessee to make a claim for which he has legally entitled. Therefore, reliance by the Ld. DR on the decision of Goetze (India) Ltd.(supra) is misplaced and on the basis this contention of the revenue, the relief cannot be denied to the assessee. 16. In view of the above disc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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