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TMI Blog2016 (7) TMI 251X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be used against the assessee to record a finding that the assessee was a trader. Neither in the Act nor in the Income Tax Rules any classification has been called for that if shares are held less than 30 days, then, the profit on sale of such shares would be treated as business income. On the strength of the circumstantial evidences, a composite opinion has to be formed by the adjudicator exhibiting the fact whether the assessee is an investor or trader. Therefore, there cannot be any further classification. The ld.CIT(A) has erred in carving out an artificial classification on the basis of holding period of certain shares. In the result, we allow the CO filed by the assessee and direct the AO to treat profit on sale of shares as long term capital gain or short term capital gain in accordance with the holding period of the shares - Decided against revenue In view of - ITA.No.3124/Ahd/2010 With CO No.1/ahd/2011 - - - Dated:- 1-6-2016 - SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER For The Revenue : Shri James Kuria, Sr.DR For The Assessee : Shri M.R. Shah, AR ORDER PER RAJPAL YADAV, JUDICIAL MEMBER: The Revenue is in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the alleged short term capital gain, as income from business could not be applied to the transactions in shares which had been held for much longer duration, where the motive was obviously to invest and not to deal as in a business and the frequency of the transaction is more infrequent and spaced out, and, accordingly directed the Assessing Officer to delete the addition of the amount of long term capital gain as business income and allowed the appellant's ground of appeal. I find that the facts relating to long term capital gain in the year under consideration are same as in the immediate preceding year and hold that the finding given by the CIT(A) in the A.Y.2006-07 is also applicable in the year under consideration and, accordingly, direct the Assessing Officer to treat the capital gain amounting to ₹ 29,39,046/-under the head 'Long term capital gain . 4.2. In regard to short term capital gain, the appellant has relied upon the ITAT, Ahmedabad's order dtd.29.01.2010 in the case of Sugamchand C Shah in ITA No.3554/Ahd/2008 and 1932/Ahd/2009 in the A.Yrs 2005-06 2006-07 and ITAT, Delhi Bench's decision in the case of Arjun Kapur Vs DCIT 70 ITD 161. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and peculiarity of the facts of the said case. As to what are the peculiarities in the case of Shri Sugamchand C Shah, can be culled out from the order, as under:- (i) The holding of shares sold, the profit of which has been shown under short term capital gain has been valued at cost, and such accounting has been accepted by the Revenue in earlier years (para 16) (ii) There is no material to show that the assessee had declared himself as a trader in shares and legal requirements therefore have been complied with (para 16). (iii) The assessee has not borrowed any money for investing in shares (para 16) (iv) High frequency transactions and low period holdings indicate trade, whereas low frequency transactions and high period holding indicate investment (para 16) (v) The assessee has discharged onus of showing that it is making investment but Revenue is able to show that there are high frequency and low holdings in many transactions of shares indicating that assessee has some intention of purchasing and selling shares as a trader (para 17). (vi) There cannot be fixed criteria to decide as in the present case whether assessee has traded in shares ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is to the extent of ₹ 4.66 crore. There is secured loan from bank to the extent of ₹ 25.25 lac, and unsecured loan of ₹ 72.58 lac, which is interest free and out of the same ₹ 40 lac is from share of HUF of the appellant. The appellant has also submitted that unsecured loan of ₹ 72.63 lac has been invested in FD with the ICICI Bank and SBI and for payment of advance tax, whereas secured loan of ₹ 25.25 lac has been obtained from ICICI bank and utilized for making payment to Ashit C Mehta - share broker, however, this loan has been obtained only in the month of March, 2007 by way of overdrafts against the FDR and out of interest expense of ₹ 1.79 lac, interest of ₹ 28,057/- has been primarily incurred for payment of interest to the ICICI Bank on loan(OD a/c), which has been taken on FD created by investing unsecured loan of ₹ 72.63 lac, and interest on old loans has no nexus with investment in shares. The balance sheet of the appellant also shows that shares of ₹ 4,36,50,976/- as on 31.3.2007 are appearing in the schedule of investment. The appellant has also not claimed any interest on unsecured loans of ₹ 72.63 lac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No. 127/Ahd/2009 vide its order dated 13-05-2011 held that assessee is an investor and not a trader in shares. 7. In assessment year 2006-07 again, the Assessing Officer has made an addition of ₹ 62,67,735/- under the head business income instead of short term capital gain disclosed by the assessee. The appeal to the Commissioner of Income Tax (Appeals) did not bring any relief to the assessee but the Tribunal has accepted the contentions of the assessee and directed the Assessing Officer to treat the profit on sale of shares as short term capital gain. The ITAT has made an elaborate discussion on the issue and referred a large number of decisions in order to determine whether the transactions of the assessee were of an investor or of a trader. The conclusions drawn by the ITAT on page 21 of the order are worth to note. It reads as under:- 5.12 In view of the foregoing, following the view taken in the aforesaid decisions, If we analyse the transactions in the instant case, we find that the assessee disclosed income from capital gains / dividends in earlier years and the shares have all along been treated as investments in the books of account/balance sheets. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be treated as an investor. The ld.CIT(A) has considered the circumstances in an elaborate manner in order to bring the point at home that the assessee was an investor. The ld.DR has pointed out that the assessee has taken loan of ₹ 84.50 lakhs which might have been used for the purpose of investment in shares. He read over statement of facts filed along with appeal. We find that the ld.CIT(A) has considered this aspect in the finding extracted (supra). According to the finding of the ld.CIT(A), the loan taken by the assessee was not specifically used for the purpose of making investment. The loan was taken in the month of March, 2007 by way of overdraft against FDRs. It was for a very short period of time. Hence, this circumstance cannot be used against the assessee to record a finding that the assessee was a trader. 8. As far as the ground raised in CO is concerned, neither in the Act nor in the Income Tax Rules any classification has been called for that if shares are held less than 30 days, then, the profit on sale of such shares would be treated as business income. On the strength of the circumstantial evidences, a composite opinion has to be formed by the adjudicat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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