Vv imp. case...every delivery based trabsaction not investme

CA AYUSH AGRAWAL (Kolkata-Pune-Mumbai) (26986 Points)

26 December 2012

the details given that in most of the cases shares have been sold on the very date of purchase which shows that sales have been made even without taking delivery. Thus most of the transactions are speculative in nature. In fact the assessee while givingthe details of the transactions has himself mentioned “Speculative Short Term Capital Gain”. The other shares have also been sold after a short duration of holding. The numbers of transactions are very large and the assessee is almost buying or selling on the daily basis. There are 3000 transactions and the details run through several pages. The pattern of transactions clearly shows that the assessee is trading in shares and is not an investor. Therefore, we do not find any merit in the claim of the assessee that the shares have been bought and sold as an investment activity.

The ld. AR for the assessee has relied on the decision of the Tribunal in the case of Gopal Purohit(supra) to argue that income from all delivery based transactions has to be assessed as income as held by the Tribunal in the said case. We have carefully perused the order of the Tribunal in the case of Gopal Purohit (supra), but we find that there is no universal finding in that case that all delivery based transactions have to be treated as investment. It is pertinent to note that the Tribunal in case of Gopal Purohit (supra), had decided the case following the decision of Tribunal in case of Sarnath Infrastructure (P.) Ltd. v. Asstt. CIT [2010] 124 ITD 71 (Luck.) holding that facts in the case of Sarnath Infrastructure (P.) Ltd. (supra), were identical. However, it is noted that inSarnath Infrastructure (P.) Ltd. (supra), the shares sold out of investment account had been held that 2-3 years and revenue could not show any shares sold which had been purchased during the year or in the immediately preceding year. Therefore, only in respect of such cases, the decision in case of Gopal Purohit (supra), could be applied. The Hon’ble High Court of Bombay had upheld the decision of the Tribunal in the case of Gopal Purohit (supra), on the ground that there was no substantial question of law involved. Even before Hon’ble High Court there was no question raised that all delivery based transactions have always to be treated as investment activity. Thus the decision of the Tribunal as well as the Hon’ble High court in case of Gopal Purohit (supra), cannot be considered as a precedent for the proposition that all delivery based shares have to be treated as investment activity. The assessee can also be a trader in case of delivery based purchases and sales, which is a normal feature of any trading activity. Therefore, in our view reliance placed by the ld. AR on the decision in the case of Gopal Purohit is misplaced. Each case has to be decided based on its own facts. Considering the facts of this case, we hold that the share transactions from which the assessee has shown short term capital gain were of the nature of trading activity of the assessee and accordingly we set aside the order of the CIT(A) treating the short term capital gain as business income.