Classfication of Shares when all such shares been bought in regular course business?

In the instant case, all the shares have been bought by the assessee in the regular course of his business, employing common funds, depositing them in the same D-Mat account, and even through the same broker and infrastructure. New shares are purchased deploying funds realized on the sale of such shares.

To contend, therefore, of some such shares as being capital assets on the premise that the same are sold beyond one year of their purchase, is, therefore, clearly untenable. The categorization as to whether the scrip acquired is as an investment or as a part of the assessee’s trading stock is primarily one of intention with which the share is purchased/held and, accordingly, gets to be decided at the stage of or upon acquisition itself. That the scrip may eventually be sold, in whole or in part, within a period less than that envisaged earlier, or within a period less than a year, is, however, a different matter, as perceptions and, consequently, decisions, even qua capital acquisitions, may vary or change with time. This would, however, not make it any less an investment, where acquired as such in the first place, so that the gain or loss arising thus would be a short term capital gain or loss, as the case may be. In the instant case, there is no such classification done by the assessee, the onus of which is only on it, being required to demonstrate, i.e., in a cognizable manner, with reference to its accounts/records, that the share classified as a long term capital asset was indeed bought/acquired as an investment. This is in view of, as aforesaid, the settled position of law, as clarified by the apex court per a number of decisions, viz. CIT vs. H. Holck Larsen (supra); CIT vs. Sutlej Cotton Mills Supply Agency Limited [1975] 100 ITR 706 (SC); CIT vs. Associated Industrial Development Co. Pvt. Ltd.[1971] 82 ITR 586 (SC); Dalhousie Investment Trust Co. Ltd. vs. CIT [1968] 68 ITR 486 (SC); G. Venkataswami Naidu & Co. vs. CIT [1959] 35 ITR 594 (SC). On the contrary, the books of account of the assessee’s business, point it to being one, composite business of trading in shares and, in fact, the only business carried on by the assessee. To contend or assert, or even state of some share as, in fact, representing investments for the purpose of returning income under the Act, would be of no moment. The income from the trading in shares has also been held and assessed as business income in the past. Under the circumstances, therefore, we have little hesitation in confirming the impugned order, holding the shares purchased, as well as being brought forward from an earlier year, for which the same have therefore been held as part of stock-in-trade, as only the trading stock of the assessee’ s business. We decide accordingly.

ITAT “A” BENCH, MUMBAI

BEFORE SHRI D. MANMOHAN, V. P.

AND SHRI SANJAY ARORA, A. M.

I.T.A. No. 7334/Mum/2011
(Assessment: 2008-09)

Karan R. Bahl Vs. ITO

Date of Hearing : 23.04.2013

Date of Pronouncement :21.06.2013