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TMI Blog2021 (2) TMI 231X X X X Extracts X X X X X X X X Extracts X X X X ..... hares has to be regarded as LTCG. As already observed, the only reason given by the AO for coming to the conclusion that income on sale of shares has to be regarded as business income is due to the fact that the cost of acquisition of the shares was less and the sale proceeds of those shares were very high and therefore the gain in question should be regarded as income from business. This approach of the AO is contrary to the tests laid down in the several Circulars in particular Circular No.4/2007. In the light of the subsequent Circulars pointed out above, we are of the view that the income on sale of shares has to be regarded as LTCG. We therefore uphold the order of CIT(A). In view of the above conclusion in the appeal of the Revenue, we are of the view that no adjudication is necessary in so far as the C.O. filed by the assessee is concerned. Accordingly, the same is dismissed. - ITA No. 1923/Bang/2018 C.O. No.126/Bang/2018 - - - Dated:- 5-2-2021 - SHRI N. V. VASUDEVAN , VICE PRESIDENT AND SHRI B. R. BASKARAN , ACCOUNTANT MEMBER Revenue by : Shri. Pradeep Kumar , CIT ( DR ) ( ITAT ) , Bengaluru Assessee by : Shri. Jehangir Mistri , Sr. Advocate ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x under the head Income from Business and therefore he issued a notice under section 148 dated 31.03.2010 on SWBL, the successor in interest of SWFSL, calling upon SWBL to file return of income by 15.04.2010. In response to the above on notice dated. 7.6.2010, SWBL filed a reply dated 28.06.2010 stating that the return of income already filed for the above Assessment Year (by SWFSL the predecessor of SWBL) may be treated as return filed in response to notice u/s.148 of the Act. 7. In the assessment proceedings, the assessee submitted that the initiation of reassessment proceedings under section 148 of the Act was merely a change of opinion and cannot be sustained. In this regard, it is seen from the copy of the reasons recorded by the AO dated 29.03.2010 that no new tangible material has come to the possession of the AO after conclusion of the assessment under section 144 of the Act on 31.12.2007 and the reasons mentioned in para 2 are that the long term capital gain (LTCG) on sale of shares has to be treated as a business profit because the main objects of the assessee was to act a financier and to finance commercial enterprise and that the transaction of sale of shares was m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he came to the conclusion that the gain on sale of shares has to be regarded as income from business because the cost price was very minimum and the sale price was an astronomical sum. Hence, the intention of the assessee was to make a business profit from the sale of the shares. This is the only reason given by the AO for coming to the conclusion that the gain on sale of shares has to be regarded as income from business. On the validity of initiation of reassessment proceedings, the AO held that while concluding the assessment under section 144 of the Act by order dated 31.12.2007, the AO did not express any opinion on the LTCG declared by the assessee and therefore there is no question of change of opinion in initiating proceedings under section 148 of the Act. 11. Aggrieved by the order of the AO, the Assessee preferred appeal before the CIT(A). Before the CIT(A), apart from reiterating the stand taken by the assessee before the AO, the assessee also relied on the decision of the Hon ble Supreme Court in the case of CIT Vs. Kelvinator India Ltd., 320 ITR 561 wherein the Hon ble Supreme Court has laid down that when assessment is completed under section 143(3) of the Act, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m dated 13.12.2005 laying down guidelines for assessing officers on tests for distinction between shares held as stock-in-trade and shares held as investment vide office memorandum, dated 13.12.2005 [F. No. 149/287/2005-TPL]which are reproduced as under:- Circumstances to be considered by the Assessing Officers in determining whether a person is a trader or an investor in stocks:- (i) Whether the purchase and sale of securities was allied to his usual trade or business/was incidental to it or was an occasional independent activity: it means if it would be an occasional activity it is an unusual transaction and can be treated as investment and not as a business activity. (ii) Whether, the purchase is made solely with the intention of resale at a profit or for long-term appreciation and/or for earning dividends and interest.: it means if the purchase is for sales only then it would be business activity and if it would be for long term then it would definitely be investment. (iii) Whether scale of activity is substantial: means scale and quantum of activity is also an important factor; (iv) Whether transaction was entered into continuously and regularly du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the books of accounts by an Assessee of the shares to ascertain the intention in acquiring shares. In para 3, the CBDT has laid down as follows: 3. Disputes, however, continue to exist on the application of these principles to the facts of an individual case since the taxpayers find it difficult to prove the intention in acquiring such shares/securities. In this background, while recognizing that no universal principal in absolute terms can be laid down to decide the character of income from sale of shares andsecurities (Le. whether the same is in the nature of capital gain or business income), CBDT realizing that major part of shares/securities transactions takes place in respect of the listed ones and with a view to reduce litigation and uncertainty in the matter, in partial modification to the aforesaid Circulars, further instructs that the Assessing Officers in holding whether the surplus generated from sale of listed shares or other securities would be treated as Capital Gain or Business Income, shall take into account the following - a) Where the assessee itself, irrespective of the period of holding the listed shares and securities, opts to treat them as stock ..... X X X X Extracts X X X X X X X X Extracts X X X X
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