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TMI Blog2016 (8) TMI 997X X X X Extracts X X X X X X X X Extracts X X X X ..... and accordingly statutory notices were issued and served upon the assessee. 5. While scrutinizing the return of income, the A.O. noticed that the assessee has shown short term capital gain at Rs. 70,29,388/- and long term capital gain at Rs. 32,42,293/-. The assessee was asked to furnish the relevant details pertaining to the capital gains. Assessee filed details scrip-wise and the same is extracted by the A.O from pages 2 to 4 of the assessment order. 6. After perusing the details filed by the assessee and observing that the assessee has entered into numerous transactions in shares/mutual funds during the year, the assessee was asked to explain why the gain on sale of shares be not treated as business income. 7. Assessee filed a detailed reply vide reply dated 26.11.2008 and strongly contended that it is an investment company and accordingly the shares have been shown as investment in the balance sheet. It was explained that the intention of the assessee company while acquiring the shares was to hold it as investment and it was never the intention of the assessee to trade in shares. It was further pointed out that the opening balance of investment in shares was at Rs. 2,43,54, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BDT in its Circular No. 4/2007 dt. 15.6.2007, has observed that: "Whether a particular holding of shares is by way of investment or forms part of the stock-in-trade is a matter which is -within the knowledge of the assessee who holds the shares and it should, in normal circumstances, be in a position to produce evidence from its records as to whether it has maintained any distinction between those shares which are its stock-in-trade and those which are held by way of investment" 15. The CBDT has further thrown light on this controversial issue in its Circular No. 6/2016 dated 29.02.2016 and the same reads as under:- Sub: Issue of taxability of surplus on sale of shares and securities - Capital Gains or Business Income - Instructions in order to reduce litigation - reg.- Sub-section (14) of Section 2 of the income-tax Act, 1961 ('Act') defines the term "capital asset" to include property of any kind held by an assessee, whether or not connected with his business or profession, but does not include any stock-in-trade or personal assets subject to certain exceptions. As regards shares and other securities, the same can be held either as capita! assets or stock-in-trade/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses, the nature of transaction (i.e. whether the same is in the nature of capital gain or business income) shall continue to be decided keeping in view the aforesaid Circulars issued by the CBDT. 4. It is, however, clarified that the above shall not apply in respect of such transactions in shares/securities where the genuineness of the transaction itself is questionable, such as bogus claims of Long Term Capital Gain/Short Term Capital Loss or any other sham transactions. 5. It is reiterated that the above principles have been formulated with the sole objective of reducing litigation and maintaining consistency in approach on the issue of treatment of income derived from transfer of shares and securities. All the relevant provisions of the Act shall continue to apply on the transactions involving transfer of shares and securities. 16. Considering the facts in hand, in the light of the aforementioned circular of the Board, in our considered opinion, the intention of the assessee at the time of the purchase of shares is paramount. If the assessee has clear intention of being an investor and showing the shares as investment, we do not find any reason to disturb the intention of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of trade or not. The distinction between the two types of transaction is not always easy to make. Whether the transaction is of one kind or the other depends on the question whether the excess is an enhancement of the value by realizing the security or a gain in an operation of profit making. The assessee might have invested capital in shares with an intention to resale these if in future their sale brings in a higher price. Such an investment though motivated by a possibility of enhancement value, did not necessarily render the investment a transaction in the nature of trade. 19. It is also an admitted fact that in the preceding years, the share transactions have been considered under the head capital gains. 20. Considering the facts in totality, we do not find any reason to interfere with the findings of the ld. CIT(A). Appeal filed by the Revenue is accordingly dismissed. ITA No. 383/Ahd/2013 for A.Y. 2008-09. 21. The substantial grievance of the revenue reads as under:- 1. The CIT(A) has erred in law and on fact in directing to consider profit from trading in shares held for more than 30 days as capital gains and not business income despite the fact that during the y ..... X X X X Extracts X X X X X X X X Extracts X X X X
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