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TMI Blog2017 (11) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... urposes we are restoring this matter to the file of the A.O to make computation of business income as well capital gains on shares after verification of period of holding of such shares in accordance with our above directions. - I.T.A. No. 828/Mum/2012 - - - Dated:- 31-10-2017 - SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Assessee : Shri. Nitesh Joshi Apurava Shah For The Revenue : Shri. V. Justin ORDER PER RAMIT KOCHAR, Accountant Member This appeal, filed by the Assessee, being ITA No. 828/Mum/2012, is directed against the appellate order dated 14.11.2011 passed by learned Commissioner of Income Tax (Appeals)-9, Mumbai (hereinafter called the CIT(A) ), for assessment year 2008-09, appellate proceedings had arisen before learned CIT(A) from the assessment order dated 13.12.2010 passed by learned Assessing Officer (hereinafter called the AO ) u/s 143(3) of the Income-tax Act, 1961 (hereinafter called the Act ). 2. The grounds of appeal raised by the assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called the tribunal ) read as under:- The Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of each case and legal principals involved in settling the controversy are as under:- i. Whether a transaction of sale and purchase of shares is trading or investment is a mixed question of law and facts. ii. It is possible for an assessee is by way of investment or of stock in trade is a matter within the knowledge of the assessee and it is for the assessee to produce evidence from the records as to whether he maintained any distinction between shares held as investment and those held as stock in trade. iii. The treatment in the books by an assessee is not conclusive and if the volume, frequency and regularity at which transactions are carried out indicate systematic and organized activity with profit motive then it becomes business profit not capital gain. iv. Purchase with intention to resale can constitute capital gains or business profit depending on circumstances like quantity of purchase and nature of activity. v. No single fact has any decisive significance and the question must be answered depending on the collective effect of all relevant material brought on records. The AO relied upon several decisions of the courts as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scripts, as held by Royal Commission of England are normally the subject matter of trading and very exceptionally the subject of investment. ( vi) Usually the profits on this property have been realized in very short duration. 8. The AR of the assessee company was again specifically asked on 10.12.2010 why its income from the STCG should not treated income from business activities of the trading of shares. The AR of the assessee submitted written submission on dated 13.12.2010 and the relevant content is reproduced herewith. In this connection, we respectfully submit that the company has purchased shares and securities and taken delivery thereof and has held the shares securities as an investment and not so stock-in trade. The amount invested in buying shares and securities are for the purpose of earning dividend income and appreciation in the value of investment. Therefore , the assessee company has taken the delivery of shares and in support of delivery, we have submitted demat account of the company wherein shares are credited and when the company thought that the appreciation in investment is good, the company has sold the shares and the excess amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e be allowed deduction of Securities Transaction Tax paid by it , which claim of the assessee was also denied by learned CIT(A) as assessee did not raised any such claim before the A.O in the return of income filed with the Revenue , vide appellate order dated 14-11-2011 passed by learned CIT(A). 5. Aggrieved by the appellate order dated 14-11-2011 passed by learned CIT(A), the assessee filed an appeal before the tribunal. It was submitted by ld. Counsel for the assessee that the assessee is engaged in purchase and sale of shares as an investor and income is to be brought to tax as capital gains instead of business income. It was submitted that in the alternative if the said income is held to be business income, then STT paid by the assessee is to be allowed as business expenses. Our attention was also drawn to the orders of authorities below and it was submitted that assessee main business is real estate and it was submitted that the authorities below has not given any reasons before bringing to tax income from purchase and sale of shares as business income instead of income from capital gains . The learned counsel for the assessee submitted that investments in immovable proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gains arising from shares claimed by the assessee of ₹ 41,07,492/- , capital gains to the tune of ₹ 8,62,038/- were earned within 30 days of buying of the shares as the shares so bought were sold within 30 days. It was submitted that if it is held that the assessee is engaged in the business of dealing in shares wherein income is held to be assessed as business income, then STT paid should be allowed. It was submitted that this ground was raised before learned CIT(A) but he did not allowed the same as the claim was not made in the return of income filed with the revenue. He relied upon the decision of Hon‟ble Bombay High Court in the case of CIT v. Pruthvi Brokers Shareholders (2012) 349 ITR 336(Bom HC) and it was submitted that the additional ground can be taken up for the first time before appellate authorities. 6. The Ld. DR on the other hand submitted that the controversy is with respect to the treatment of gains earned on sales and purchase of shares wherein the assessee is claiming the same to be capital gain while revenue is contending the same to be business income . It was submitted by learned DR that the assessee is engaged in trading of shares wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the activity is a business activity or an investment to earn capital gains. It is also noted that in majority of the cases the assessee has sold the shares within 90 days of purchase. This is a mixed question of fact and law and is to be decided on the factual matrix of each case. It is also undisputed that the transactions for purchase and sale of shares entered into by the assessee are all delivery based transactions for sale and purchase of shares. After carefully considering the voluminous transactions entered into by the assessee during the year running into several pages of paper book from page no. 37 to 56 and the overall conduct of the assessee , we are of the considered view that gains arising from purchase and sale of shares which are squared within 30 days of purchase by the assessee , the same may be treated as a business income and correspondingly STT paid be allowed as deduction in accordance with law , while the transactions for purchase and sale of shares which are squared after 30 days of its purchase, the same may be treated as income from capital gains. In view of decision of Hon‟ble Bombay High Court in the case of CIT v. Pruthvi Brokers Shareho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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