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TMI Blog2024 (7) TMI 842X X X X Extracts X X X X X X X X Extracts X X X X ..... nths. The investor may buy or sell the shares everyday but that will not be considered such frequent as to lead to the inference of trading thus the motive of investment of the assessee was to derive income by way of dividend. The principal of consistency was not adopted by the AO. The revenue itself accepted the income of the assessee from the purchase of shares as capital gain for the A.Y 2004-05, 2005-06, 2007-08, 2008-09 2010-11 thus adopting the principal of consistency the income of the assessee should have been accepted as income from capital gain, so the addition made by AO treating as business income and confirmed by CIT(A), to be taxed under the head of capital gain. Appeal of the assessee is liable to be allowed. - Sh. S. Rifaur Rahman, Accountant Member And Sh. Sudhir Kumar, Judicial Member For the Appellant : Sh. Raghav Sharma, CA For the Respondent : Sh. Vivek Kumar Upadhyay, Sr. DR ORDER PER SUDHIR KUMAR, JM: This appeal by the assessee is preferred against the order passed by the Commissioner of Income Tax (Appeals)-XXV, New Delhi (hereinafter referred as CIT(A) dated 11.12.2019 pertaining to A.Y. 2006-07 under section 254/143(3) arises out of the assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also shown income from dividend which has been claimed as exempt income. 4. The assessee has filed return of income, declaring at Rs. 72,16,819/-. The case of the assessee was selected for scrutiny and assessment under section 143(3) has been framed on 24-12-2008 assessing the total income of Rs. 72,64,083/-. The AO had made the addition of Rs. 6787654/- on account of treatment of STCG as income from business and disallowance made u/s 14A at Rs 47264/-. Aggrieved the order of the AO the assessee has filed the appeal before the Ld CIT(A) who vide order dated 09-09-2010 has deleted the addition of Rs. 67,87,654/-and upheld the addition of Rs. 47264/-. Aggrieved with the order of the Ld CIT(A), the revenue has filed the appeal before the Ld ITAT . The Hon ble ITAT G Bench vide its order dated 13-07-2012 in ITA 5440/Del/2010 restored the matter to the AO with observing the following direction; 8. We have heard both the sides. We have also gone through the case laws relied upon by both the sides and also the relevant instructions issued by CBDT on this issue. There is a distinction between shares held as investment and shares held as stock-in-trade. Firstly, to ascertain the real chara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and sales of shares and volume is quite substantial. The purchases have been made more than 300 times and the corresponding sales have also been made in almost equal number of transactions. Therefore, the character of the shares held, whether they were investment or trading assets can be looked into only by verifying the source of dividend income, on pal which shares the dividend income had been earned. Whether the shares on which short term capital gain shown by the assessee were sold just prior to the declaration of the dividend date or these were sold post dividend. All these aspects are necessary to ascertain the objective of the assessee in investment in these shares. If the motive of investment is to realize profit by making purchases and sales of shares then it shall be definitely trading assets and the profits shall be treated as a business income, but if the objective of the investment is to derive income by way of dividend then the transaction of purchases and sales of shares would definitely yield capital gain and not business profit. For this aspect, we restore the issue to the file of Assessing Officer. 5. In the compliance of the direction of the Hon ble ITAT the, A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee from the purchase of shares as capital gain in the A.Y 2004-05, 2005-06, 2007-08, 2008-09 2010-11. Ld Counsel has relied the following Judicial pronouncements; Commissioner of Income Tax vs Gopal Purohit (2010)78 CCH0012 Mum HC in case the Hon ble Bombay High Court held that :- 2. The Tribunal has entered a pure finding of fact that the assessee was engaged in two different types of transactions. The first set of transactions involved investment in shares. The second set of transactions involved dealing in shares for the purposes of business (described in para 8.3 of the judgment of the Tribunal as transactions purely of jobbing without delivery). The Tribunal has correctly applied the principle of law in accepting the position that it is open to an assessee to maintain two separate portfolios, one relation meld investment in shares and another relating to business activities involving dealing in shares. The Tribunal held that the delivery based transactions in the present case, should be treated as those in the nature of investment transactions and the profit received there from should be treated either as short-term or, as the case may be long-term capital gain, depending up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see a Chartered accountant showing Income from profession and from purchase and sales of shares. During the impugned assessment year assessee has shown Long Term Capital gain from the sale of shares of Euro Asian Securities. Assessing Officer came to the conclusion that the income shown from sale of shares of Euro Asian Securities Ltd. was, in fact, assessable as business Income of the assessee. According to the Assessing Officer the dealing in the shares of Euro Asian Securities Ltd. CIT (A) allowed the appeal of the assessee, ITAT affirmed the order of the CIT (A). Matter reached to the High Court wherein it has been observed that merely because the assessee has purchased the impugned shares from funds borrowed at higher rate of interest and the assessee was not the real owner it cannot be said the transaction entered by the assessee was adventure in nature of trade. After hearing the parties the High Court held as under:- ++The Tribunal, in the impugned order, has concurred with the findings of fact recorded by Commissioner (Appeals). The Tribunal upon appreciation of the evidence on record has found that the facts and circumstances of the present case satisfy all Commissioner o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell as Commissioner (Appeals) have recorded concurrent findings of fact to the effect that the assessee had disposed of most of the shares held by him after more than a year or two; the investment made in the shares of Home Trade Ltd. was not very high; the assessee had not repeated the transactions of purchase and sale of shares of M/s Home Trade Ltd.; the assessee had not shown the shares in question as stock in trade; after the shares in question were sold, the assessee made investments under the provisions of section 54BC in the Bonds of NABARD, and the profit of purchase and sale of shares or investment in mutual fund was always shown on capital account, that is, capital gains either short term or long term, and that the same was accepted as such in earlier years. ++On a perusal of the assessment order, it appears that the main consideration. which has weighed upon the Assessing Officer for the purpose of holding that the transaction in question is an adventure in the nature of trade and not an investment, is that for the purpose of purchasing the shares in question, namely, the shares of Euro Asian Securities Ltd. (Home Trade Ltd.), the assessee had obtained loan from M/s Man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as capital gain. Insofar as the second ground for holding the transaction in question to be an adventure in the nature of trade, viz., that the assessee was not the legal owner of the shares and was not having physical possession thereof, is concerned, if the said ground were to be accepted, then, as had been rightly contended on behalf of the assessee, there was no transaction in the hands of the assessee and as such, there was no question of taxing the said transaction merely on the ground that the assessee had offered the same as capital gain. It is nobody's case that delivery of shares allotted was not taken at all. The shares were held by Maniram Consultants as security towards loan advanced to the assessee indicating that the assessee was the owner of shares which were offered and held as security. Appeal of the revenue is dismissed. 11. Ld counsel for assessee has submitted that assessees National Stock Exchange ticket was surrendered in May 2001. Assessee has shown shares in investment and valued these on cost at the end of the year. The objective of the assessee of the investment was to drive income by way of dividend yield capital gain and not the business profit. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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