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TMI Blog2017 (10) TMI 1242X X X X Extracts X X X X X X X X Extracts X X X X ..... AL MEMBER: Assessee is in appeal before the Tribunal against order of the ld.CIT(A)-5, Ahmedabad dated 12.3.2015 passed for the Asstt.Year 2006-07. 2. Assessee has taken two grounds of appeal, which included sub-grounds also. In brief solitary grievance of the assessee is that the ld.CIT(A) has erred in treating short term gain disclosed by the assessee at ₹ 13,99,030/- as business income. 3. Brief facts of the case are that the assessee has filed its return of income on 27.12.2006 declaring total income at ₹ 13,50,504/-. The assessee at the relevant time was engaged in the business of share trading and having short term capital gain and long term capital gain. On scrutiny of the accounts, it revealed to the AO that the assessee has disclosed long term capital of ₹ 29,00,986/- and short term capital gain of ₹ 13,99,030/-. The ld.AO after making an analysis of the accounts of the assessee treated the assessee as trader in the shares and assessed the alleged long term capital gain and short term capital gain as business income. On appeal, the ld.CIT(A) has accepted stand of the assessee with regard to long term capital. The ld.CIT(A) has treated the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whom he was acting as managing agent. Thus, in those facts obviously the shares were held as a business asset being the managing agent therefore, the sales proceeds are nothing but the business receipts. In our case no such facts are on record and hence the cited case law decision is not applicable. 3.9. Further with regard to the judgment of Hon'ble Gujarat High Court in the case of H. Mohammed Co. Vs. CIT has held that the treatment of the deficit in the stock of furniture due to destruction when let out' and spoilage could not be allowed as trading loss:' The facts- of the cited case are not applicable over the case of the appellant and hence could not be relied upon. 3.10. With regard to the short term capital gain the appellant has 'derived the income of ₹ 13,99,030/- on the total sale proceeds of shares and securities at ₹ 1,77,68,963/-. The volume of sale proceeds and also the purchases value are very high. Moreover the frequency of transactions are also very high. The appellant had even derived the profits by rotating the shares and bifurcation of its holding period for short term capital gain is as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch will goad us on just conclusion. 5. Before we embark upon an inquiry on the facts of present case so as to find out, whether assessee is to be termed as involving in the trading of shares or to be treated as a simplicitor investors. We would like to refer certain broad principle culled out by ITAT Lucknow Bench in the case of Sarnath Infrastructure Pvt. Ltd. reported in 120 TTJ 216. These tests read as under:- 13. After considering above rulings we cull out following principles, which can be applied on the facts of a case to find out whether transaction(s) in question are in the nature of trade or are merely for investment purposes: ( 1) What is the intention of the assessee at the time of purchase of the shares (or any other item). This can be found out from the treatment it gives to such purchase in its books of account. Whether it is treated stock-in-trade or investment. Whether shown in opening/closing stock or shown separately as investment or nontrading asset. ( 2) Whether assessee has borrowed money to purchase and paid interest thereon? Normally, money is borrowed to purchase goods for the purpose of trade and not for investing in an asset for ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hem. Whether it is the argument of the assessee that it is violating those legal requirements, if it is claimed that it is dealing as a trader in that item? Whether it had such an intention (to carry on illegal business in that item) since beginning or when purchases were made? 10. It is permissible as per CBDT s Circular No. 4 of 2007 of 15th June, 2007 that an assessee can have both portfolios, one for trading and other for investment provided it is maintaining separate account for each type, there are distinctive features for both and there is no intermingling of holdings in the two portfolios. 11. Not one or two factors out of above alone will be sufficient to come to a definite conclusion but the cumulative effect of several factors has to be seen. 6. The Hon ble Gujarat High Court had also an occasion to consider this issue in the case of Commissioner of Income Tax vs. Riva Sharkar A Kothari reported in 283 ITR 338. Hon ble court has made reference to the test laid by it in its earlier decision rendered in the case of Pari Mangaldas Girdhardas vs. CIT reported in 1977 CTR 647. These tests read as under: After analyzing various decisions of the apex co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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