GOPAL KRISHAN VYAS,J. - (1.) In this Income Tax appeal, the following substantial question of law was framed while admitted the present appeal on 27.09.2010: "Whether Tribunal was justified in holding that transaction in question is a business transaction and not short term/long term capital?"
(2.) As per facts of the case, appellant is HUF, headed by Devendra Kumar Mittal, as "Karta". For the relevant year, source of income of the appellant HUF were interest income and income from purchase and sale of shares of listed companies through different stock exchanges. The holding of shares by the appellant HUF in some cases was for more than one or two years and in some cases the shares were purchased and sold within a period of one year. The assessee claimed this income from the transactions in the purchase and sale of shares under the head of short term and long term capital gains. No tax was paid on the long term capital gains claiming the same to be covered under Section 112 and paid tax @ 10% on the short term capital gain as per provisions of Section 111A. The Assessing Officer while examining the case treated these transactions of purchase and sale of shares as income from business and profession and taxed the same accordingly.
(3.) According to facts, the Assessing Officer made enquiry at the time of assessment, details as required by it, were submitted by the appellant. All the transactions were found recorded in the Demate Account of the appellant through recognized stock exchanges. The aforesaid facts are in dispute. At the time of assessment, the Assessing Officer while deciding the case observed that in the A.Y. 2005-06, number of transactions of purchase and sale was 247 times and the sale were 263 times, and thus looking to the volume of transactions, it was presumed that transaction of shares are in the nature of trade and business and in the nature of investment. The Assessing Officer further observed that the appellant has earned much dividend and thus it cannot be said that the amount was invested in the shares to earn dividend income and presumed that the shares were purchased to earn the profit and so these are trading transactions. The Assessing Officer made observation that purchase and sale through sister concern and also that shares were purchased by borrowed funds and while considering the Circular No. 4/07 dated 15.06.2007 issued by the CBDT finally passed the order of assessment.;