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TMI Blog2021 (4) TMI 679X X X X Extracts X X X X X X X X Extracts X X X X ..... g financial consultancy and all allied and auxiliary services. As pointed out before us, there were many months where assessee had undertaken no transaction and in other several months assessee had transacted only in one scrip. Thus, such a pattern cannot be reckoned that there was a huge frequency of purchase and sale of shares. As stated above, the assessee has made investment and disinvestment in shares of 10 scrips which are all delivery based transactions and the main gain is only from one particular scrip i.e., DLF Ltd. If detail of date-wise transaction is taken into consideration of various scrips which are as under, then it can be seen that transaction are not huge which has been the allegation of the Assessing Officer. If we analyze given chart, then it can be clearly seen that out of above scripts, the gain/profit is mainly from one scrip, that is, DLF Ltd. Hence, it cannot be held the transaction is in the nature of business or profession. - Decided against revenue. - I.T.A. No.5178/DEL/2012 - - - Dated:- 8-4-2021 - Shri Amit Shukla, Judicial Member And Shri O.P. Kant, Accountant Member For the Appellant : Ms. Sunita Singh, CIT-DR For the Respondent : S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nitco Limited 5300 5300 3. Omaxe Limited 24426 24426 4. DLF Limited 6567294 6,567,294 5. Edelweiss 5202 5202 6. BGR Energy Systems 5835 5838 7. Reliance Power Limited 142896 142896 8. Reliance Energy Limited 408982 408982 9. Grabal Alok Impex Limited 1900000 1900000 10. Prakash Industries Limited 1250000 Nil 4. Thus, it was submitted that there were only 10 scrips in which the investment had been made during the year and the deliveries of all the shares purchased were taken in the depository account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate bank account is maintained for diffracting the alleged investment made and for business activity. The assessee was utilizing the sales proceeds of the alleged investments for the purpose of business. Similarly, the assessee was utilizing the funds of business for alleged purchase of investment/ shares. Merely, an assumption by the assessee that a particular purchase is investment is not sufficient. If it is allowed then every person shall opt for income trading of shares as capital gain income, only because tax on capital gain is either levied lesser rate or Nil rate. (b) The turnover of these shares was to the tune of ₹ 69,06,09,30,892/-. This in itself shows that it was trading activity. 6. Finally, the Assessing Officer treated the income from sale of investment in share as business income after observing and holding as under: In Asstt. Year 2007-08, the assessee itself treated its income as income from business and profession and considering this fact in mind the Assessing Officer accepted the plea of the assessee and the assessment was completed at the same figures without making any further addition as the department was taking the similar view in other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant that appellant did not either purchased or sold any shares in the month of June 2007, July 2007 and October 2007. It is also seen that in several months the appellant has transacted' only in single scrip. It is also observed that in the month of April appellant acquired shares of one company and did not sold anything. In the month of May appellant acquired shares of one company and sold shares of two companies. In the month of June and July there was no purchase or sale. In the month of August appellant acquired shares of one company only and did not sale anything. In the month of September and October, appellant did not make any investment in shares and sold only shares of one company in the month of September. In the month of November appellant acquired shares of one company but did not sell anything. In the month of December appellant acquired shares of two companies and also sold shares of two companies. In the month of January appellant acquired shares of one company and sold shares of one company. In the month of February appellant acquired shares of three companies and also sold shares of three companies. In the month of March shares of two companies were p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and purchase of shares. This observation of the ASSESSING OFFICER is factually incorrect. As stated above the appellant is engaged in the business of Financial Consultancy and advisors and from that business it has shown income of ₹ 141,84,797/- during the year. During the course of appellate proceedings, the appellant submitted that all transactions have been delivery based and were settled by way of payment, the appellant has also submitted that it has maintained separate records for investment and trading of shares without delivery. The holding of the shares on which short term capital has been claimed ranges from few days to few months. It is claimed by the appellant that investment was made in the shares with the intentions to hold the same for long term appreciation and for earning dividends. However, the investments was offloaded because of appreciation and maximizing the wealth. It is also contended by the appellant that period of holding of shares and non receipt of dividend income is not a decisive factor for treatment of particulars transaction as investment or trading transaction. It is further contended by the appellant that except in few cases the hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first of all pointed out that here in this case, the appeal was decided by the Tribunal through an ex-parte judgment, vide order dated 23.01.2017 wherein the Revenue s appeal was allowed. Thereafter, it was recalled being an ex parte order and was fixed to be heard on merits. Thereafter, the Tribunal again vide order dated 23.08.2018 had passed a detailed order on merits, wherein the Tribunal has decided the issue against the assessee holding that assessee has purchased and sold scrips multiple times, on various dates and looking to the magnitude of purchase of shares which is very large, therefore, the gain is to be taxed as Business income . However, the said order has again been recalled by the Tribunal to be heard fresh. She further submitted that in earlier years, the assessee itself had shown the transaction of shares as business income and only in this year the assessee has claimed transaction of short term capital gain. She also referred to the relevant observation and finding of the Assessing Officer given at pages 9 to 12 and also order made reference to the earlier order of the Tribunal dated 23.08.2018 specifically paragraphs 5 and 8, and therefore, she submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services. 10. Ld. Counsel submitted that learned Assessing Officer while treated the short-term capital gain amounting to ₹ 35,14,66,127/- earned on entire sale and purchase of shares as business income has noted that In Asstt. Year 2007-08, the assessee itself treated its income as income from business and profession . He pointed out that which has also been noted by learned Assessing Officer that assessee has moved petition u/s 264 in light of the guidelines issued by Central Board of Direct Taxes in circular no. 4/2007 dated 15.06.2007 that profit from sale of shares of GHCL be taxed under the head capital gain' and not under the head business income . He further added that in the preceding years i.e. assessment year 2007-08 assessee company earned profit from sale of shares of only in one company, namely GHCL and has no shares at the end of preceding assessment years on the contrary in the year under consideration assessee company has closing investment namely shares of M/s Prakash Industries Ltd., out of shares acquired during the year under consideration and, profit from sale shares of such shares has been offered by the assessee and accepted by the reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were as under: Opening Balance Purchase Sales In shares-Non trade (Quoted) Quantity Amount (Rs.) Quantity Amount (Rs.) Quantity Amount (Rs.) DLF Ltd. - - 65,67,294 559,51,80,629 65,67,294 592,27,38,140 Edelweiss Capita Ltd. - - 5,202 42,91,650 5,202 77,65,870 Nitco Tiles Ltd. - 5,300 10,72,805 5,300 10,58,740 Omaxe Ltd. - - 24,426 75,72,060 24,426 86,15,121 Orchid Chemical Pharmaceuticals Ltd. - - 5,40,230 14,06,48,490 5,40,230 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posed off 3 co s share March Acquired share of 2 co s Disposed off 2 co s share 14. Further, from the perusal of the details of capital gains, it is seen that, out of total capital gain of approximately ₹ 33.50 crores, amount of ₹ 32.75 crores has been earned on the investment of shares of M/s. DLF Ltd. The assessee had purchased 19,55,000 shares of DLF Ltd. on 6.11.2007 that were allotted to it under a public offering (IPO) at ₹ 925/- per share. Later on, when the price was increased to ₹ 1006/- per share, assessee found it to be a good opportunity to exit and from the said shares, it earned good gain. After sometime when the price of the said scrips went below its IPO price, assessee again purchased same share in the month of January, 2008 and February, 2008 and once again when the price got short up, the assessee has sold the same. It was in this scrip the assessee had tried to augment its gain looking to rise and fall of shares which any prudent person would like to do. Here, the delivery of all shares was taken in the depository account of the company and most importantly, he shares w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g trade and he is not an investor. The assessee in order to have maximum gain can buy and sell shares for a shorter duration in order to augment its gain and it is not necessarily the investment in shares should be for longer duration and if shares are transacted on a short term basis then it cannot be reckoned as business/trading activities. Hon ble Delhi High Court in the case of CIT vs. Vinay Mittal, 8 Taxman 106 (Del) on the facts of the case has following observation:- In the present case, the assessee is an employee and is in ice of a company. He has salaried income. The assessee had made purchases and had sold securities. He is maintaining two separate portfolios i.e. investment portfolio and trading portfolio. The Assessing Officer has admitted the said position in the assessment order. It is pointed out that the shares in question which are subject matter of short term capital gains form part of the investment portfolio and were not part of the trading portfolio. We are not concerned with the trading portfolio in the present case as profits and gains from the trading portfolio have to be treated as business income/loss. As far as seven shares/transactions sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case but when an assessee liquidates any investment, the said ratio will always be in favour of sales. [Emphasis supplied]. 18. Thus, when assessee itself has classified its shares into investment portfolio, and had sold the shares in the relevant year itself after making substantial gain, then it cannot be held that assessee was not an investor but a share trader. Here, the assessee s business as clarified by the ld. counsel was not dealing in purchase and sale of shares but for providing financial consultancy and all allied and auxiliary services. As pointed out before us, there were many months where assessee had undertaken no transaction and in other several months assessee had transacted only in one scrip. Thus, such a pattern cannot be reckoned that there was a huge frequency of purchase and sale of shares. As stated above, the assessee has made investment and disinvestment in shares of 10 scrips which are all delivery based transactions and the main gain is only from one particular scrip i.e., DLF Ltd. If detail of date-wise transaction is taken into consideration of various scrips which are as under, then it can be seen that transaction are not huge which has been the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,300 10,58,740 (14,065) OMAXE LIMITED QUANTITY RATE AMOUNT DATE QUANTITY RATE AMOUNT PROFIT 2-Aug-07 24,426 310.00 75,72,060 20-Sep-07 24,426 380.89 88,15,121 24,426 75,72,060 24,426 88,15,121 12,43,061 DLF LIMITED QUANT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11-Feb-08 24,26,248 799.49 193,97,66,320 13-Feb-08 2,00,504 812.58 16,29,21,702 14-Feb-08 3,60,000 860.65 30,98,33,736 15-Feb-08 10,00,000 851.75 85,17,51,609 19-Feb-08 1,19,081 857.91 10,21,60,952 21-Feb-08 1,01,493 833.60 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,838 28,02,240 5,838 52,18,963 24,16,723 RELIANCE POWER LTD. 1-Feb-08 1,42,896 450 6,43,03,200 13-Fbe-08 1,42,896 348.91 4,98,57,585 1,42,896 6,43,03,200 1,42,896 4,98,57,585 (1,44,46,615) RELIANCE ENERGY LIMITED (Currently known as Reliance Infrastructure LtdO). QUANTITY RATE AMOUNT DATE QUANTITY RATE AMOUNT PROFIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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