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TMI Blog2021 (2) TMI 539X X X X Extracts X X X X X X X X Extracts X X X X ..... Smt.Sheethal Borkar, Advocate For the Respondent : Sri.Kannan Narayanan, JCIT-DR ORDER PER GEORGE GEORGE K, JM : This appeal at the instance of the assessee is directed against CIT(A) s order dated 28.01.2016. The relevant assessment year is 2010-2011. 2. The solitary issue raised is regarding income arising from the sale of shares whether it should be assessed as income from capital gains or business income . The assessee had also raised additional ground. The issue raised in the additional ground is whether the CIT(A) is justified in not setting off business loss of the previous assessment year against the income arising from the sale of shares, which was assessed under the head business . 3. The brief facts of the case are as follow: The assessee is a company engaged in the business of trading and consultancy. For the assessment year 2010-2011, the return of income was filed on 29.03.2011 declaring total income of ₹ 41,12,140. The assessment was taken up for scrutiny by issuance of notice u/s 143(2) of the I.T.Act. During the course of assessment proceedings, the Assessing Officer noticed that the assessee had shown receipt of ₹ 1,4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r year against business income determined. The relevant finding of the CIT(A) reads as follow:- 6.2 Be that as it may, one is bound by the decisions of jurisdictional High Court and tribunals. In the aforesaid cases the judicial principles evolved based on the facts that the assessee should be in the knowledge of holding the shares either as stock in trade or as investments. Even the CBDT circulars relied upon by the appellant says that the assessee should maintain two portfolios one comprising of securities and another the stock in trade. In the instant case though the main objective of the appellant seen from the Memorandum of Association is that to subscribe for acquire shares stocks, debentures, debenture stocks, bonds mortgages and other securities by purchase .The appellant neither in its audit report nor in the notes forming part of the balance sheet and profit and loss account has not mentioned whether the purchase and sale of the shares in Nakoda Textile Industries were made for the investment purpose other than the share trading activity in accordance with the main objectives of the appellant. In view of the matters and the facts and circumstances of the case, I am o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed on record at page 104 of the paper book filed by the assessee. The shares so sold were offered to tax under the head short term capital gains and tax was paid accordingly u/s 111A of the I.T.Act. The assessee had brought forward losses of ₹ 86,56,924 pertaining to assessment year 2009-2010 and the same ought to have been set off if the profit on sale of shares is assessed as business income. The specific plea of the assessee that the business loss pertaining to assessment year 2009-2010 should be set off against the profits arising on sale of shares if the same is to be assessed as income from business, was not taken into consideration either by the A.O. or by the CIT(A). The computation and copy of the income-tax return filed for the assessment year 2009-2010, clearly depict there was a carried forward business loss of ₹ 86,43,210 (refer pages 105 and 106 of the paper book filed by the assessee). The assessee had transacted in purchase and sale of shares only in respect of one script, viz., M/s.Nakoda Textile Industries Limited. The purchases were made in instalments in the month of July 2009 and thereafter, these shares were sold in instalments. Hence, it is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchase and disposal in that particular item? If purchase and sale are frequent, or there are substantial transaction in that item, if would indicate trade. Habitual dealing in that particular item is indicative of intention of trade. Similarly, ratio between the purchases and sales and the holdings may show whether the assessee is trading or investing (high transactions and low holdings indicate trade whereas low transactions and high holdings indicate investment). (4) Whether purchase and sale is for realizing profit or purchases are made for retention and appreciation its value? Former will indicate intention of trades and latter, an investment. In the case of shares whether intention was to enjoy dividend and not merely earn profit on sale and purchase of shares. A commercial motive is an essential ingredient of trade. (5) How the value of the items has been taken in the balance sheet? If the items in question are valued at cost, it would indicate that they are investments or where they are valued at cost or market value or net realizable value (whichever is less), it will indicate that items in question are treated as stock-in-trade. (6) How the company (as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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