Income from Share Trading in the nature of business cannot be treated as ‘Capital Gain’

We notice that assessee company is engaged in the business of trading in securities. During the year assessee has shown the sale of securities as business receipts at Rs. 73,91,026/-. We also observe that assessee has entered into as many as 7000 transactions of purchase and sale of around 4 lacs equity shares of a single company namely Suraj Stainless Steel Ltd. and the total value of shares sold is Rs. 8,58,03,298/-. We also find from the perusal of page 9 of assessment order depicting the transactions of purchase and sale carried on by the assessee in which even on a single day i.e. 14.11.2006 almost 63 transactions have been entered into of the same scrip. We also observe that the total share capital of the company was Rs. 2,42,000/- and the unsecured loan stood at Rs. 45 lacs which proves the fact that assessee has borrowed funds for entering into the share transactions. We also find that assessee has not controverted the fact during the assessment proceedings that the purchase and sale transactions of the very same scrip i.e. Suraj Stainless Steel Ltd. was entered into in preceding financial year also and sale value was treated as business turnover and unsold shares were shown as stock in trade. We therefore find that assessee is regularly in the business of purchase-sale of equity shares, share transactions entered during the year were in large number, funds were borrowed for the purpose of trading, no separate account has been maintained for the investment portfolio and all the transactions of purchase sale raised are only for one scrip namely Suraj Stainless Steel Ltd. In these facts and circumstances, assessee cannot take shelter of the CBDT Circular no. 4/2007 dated 15.06.2007. As far as the decision of co-ordinate bench in the case of Sugamchand C. Shah vs. ACIT (supra) is concerned there have been various decisions thereafter by the Jurisdictional High Court wherein it has been held that transactions cannot be bifurcated by the period of holding and actual nature of transactions with surrounding circumstances are to be seen and therefore the directions of ld. CIT(A) given to Assessing Officer will not stand for.

In the totality of facts and circumstances and our discussions above, we are of the considered opinion that the alleged short term capital gain shown by the assessee for A.Y. 2007-08 & 2008-09 at Rs. 1,13,05,165/- and Rs. 1,17,22,092/- should be treated as business income.

FULL TEXT OF ITAT ORDER

These two appeals of Revenue for A.Y. 2007-08 & 2008-09 are directed against the consolidated order of CIT(A)-VIII, Ahmedabad, dated 07.07.2011vide appeal nos.CIT(A)-VIII/ Addl. CIT. R. 4/682/09-10 & CIT(A)- VIII/ITO.Wd.4(4)/557/10-11, arising out of the separate orders u/s. 143(3) of the Act 22.12.2009 framed by ACIT, Range-4, Ahmedabad and ITO, Ward 4(4), Ahmedabad; respectively. During course of hearing none appeared on behalf of assessee. From the perusal of the order sheet, we observe that on various dates fixed for hearing since 10th March, 2015 neither assessee nor any counsel authorized on behalf of the assessee has ever appeared in these cases. On 09.02.2016, learned Departmental Representative was instructed to serve the notice to assessee. In compliance thereto notice was served through Income Tax Department to assessee on 09.02.2016. Even thereafter none appeared on behalf of assessee. In these circumstances, we have no option other than to proceed ahead to adjudicate the issues in this appeal with the assistance of learned Departmental Representative and the records
available.

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