Correct head of income on Gain on sale of shares

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Correct head of income on Gain on sale of shares



I.T.A. No.5178/DEL/2012

Short Overview of the case: 

 Issue was as to the Correct head of income
 Gain on sale of shares
 short term capital gain or business income
 As 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 of the company and shares had been shown as ‘investment’ in the Balance Sheet as per Schedule VI of the Companies Act, 1956 and not as stock-in- trade
 As per AO assessee is not maintaining separate books of accounts for the alleged investments and regular business and No separate bank account is maintained for diffracting the alleged investment made and for business activity.

ITAT observed and held as under:

 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 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.

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