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TMI Blog2016 (10) TMI 1350X X X X Extracts X X X X X X X X Extracts X X X X ..... d an order dated 04/03/2011, whereby the CIT held that the AO while concluding the assessment u/s.143(3) of the Act, did not properly examine the question as to whether the gain on purchase of sale of shares and security had to be assessed under the head of "Capital Gain" or "income from business". The CIT, Circle-1 directed the AO to make an assessment afresh and consider the question in the light of CBDT Circular No.4 dated 15.06.2007. 4. It is pursuant to the aforesaid order of the CIT, Circle-1, Kolkata dated 04/03/2011 passed u/s.263 of the Act that the AO examined the question as to whether the short term gain declared by the assessee has to be assessed under the head of income from business. The AO held that the gain on sale of shares had to be under the head "Income from Business" and in coming to the above conclusion the AO made the following observations: "The A/R's argument that the assessee company during the relevant period had been engaged in investment in shares and not trading in shares is not acceptable. In order to determine whether the securities were purchased for investment or for business purposes to get the income in the shortest possible period it has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ACIT vs. Trupuraprasad N Pandya in ITA No.1336/Mum/2010 has held that when the assessee is doing huge number of transactions and none of the securities is retained even for one year then the income derived by the assesee from share transactions is a business income. In view of the above discussion, it is held that the profit of Rs. 5,57,30,140/- earned by the assessee on sale and purchase of shares and mutual fund is business income of the assessee and not short term capital gain." 5. Aggrieved by the order of the AO, the assessee preferred appeal before the CIT(A). Before the CIT(A), the Assessee contended that in the past similar transactions were considered as giving raise short term capital gain in the assessment of the assessee. The assessee also pointed out merely because there was large volume and frequency of transaction, it cannot automatically make the nature of the transaction as trading in shares. In this regard the Assessee relied on the decision of the Hon'ble ITAT (Mumbai) in the case of Janak S. Rangawala 11 SOT 627. The assessee also placed reliance on the decision of Hon'ble ITAT (Mumbai) in the case of Gopal Purohit 122 TTJ 87 wherein it was held that in In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess head or not is covered by the decision of jurisdictional High Court in the case of Himalaya finance & Investment Co. in ITA No. 260 of 2008, G. A. No. 1271 of 2008. The aforesaid decision of the jurisdictional High Court is squarely applicable in the instant case. Hence, the proposal to revise the assessment order on the aforesaid issue is also dropped. The facts and the issue involved in the year under appeal are identical to those in the assessment year 2007-08; and consequently, in the year under appeal, the short term capital gain cannot be assessed as business income. Moreover, on perusal of the Balance Sheet of the year under appeal, preceding years and subsequent years, it is observed that the appellant company had regularly made the investments in shares and mutual funds which was accordingly reflected in the balance sheet under the head "Investments". There was no stock in trade of shares and there is no evidence that the appellant had converted its investment into stock in trade. In all the preceding and subsequent years, the appellant had declared the income under the head capital gain depending on the period of holding. The capital gain so declared by the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt or formed part of stock in trade is a matter which is within the knowledge of the assessee and it is for the assessee to produce evidence from his records as to whether he maintained any distinction between shares which were hold by him as investments and those hold as stock in trade. (CIT Vs. Associated Industrial Development co. Ltd., 82 ITR 586 (SC). (c) Treatment in the books by an assessee will not be conclusive. If the volume, frequency and regularity with which transactions are carried out indicate systematic and organized activity with profit motive, then it would be a case of business profits and not capital gain. CIT Vs. Motilal Hirabhai Spg. And Wvg. Co. Ltd., 113 ITR 173 (Guj); Raja Bahadur Viswshwara Singh Vs. CIT, 41 ITR 685 (SC). (d) Purchase without an intention to resell where they are sold under changed circumstances would be capital gains. CIT Vs. PKN, 60 ITR 65 (SC). Purchase with an intention to resell would render the gain profit on sale business profit depending on the circumstances of the case like nature and quantity of article purchased, nature of the operation involved. Saroj Kumar Mazumdar Vs. CIT, 37 ITR 242 (SC). (e) No single fact has any dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings u/s.263 on this issue. The order u/s.263 for the assessment year 2007- 08 was passed on 22.02.2012 wherein the CIT accepted the fact that the profit earned by the assesses on sale of investment shares is taxable under the head "Capital Gain" and not business income. The CIT in the said order expressed the view that the facts of the Assessee's case were similar to the case decided by the Hon'ble Kolkata ITAT in the case of M/S.Himalaya Finance & Investment Co.Ltd. ITA No.1708/Kol/2007 order dated 17.8.2007. The decision of the Hon'ble ITAT in the case of M/S.Himalaya Finance & Investment Co. Ltd. (supra) has been approved by the Hon'ble Kolkata High Court in ITA No.260 of 2008 order dated 6.8.2008. In the light of the above circumstances prevailing in the case of the assessee, we are of the view that the conclusion of the CIT(A) that the income from sale of shares and units declared by the assessee as capital gain has to be accepted is correct and calls for no interference. 12. In CIT Vs. Gopal Purohit 228 CTR 582 (Bom), the question of law raised was regarding whether STCG declared by the Assessee was to be assessed as business income or not. Question (b) considered by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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