ORDER
1. Heard on the question of admission.
2. The substantial question of law which is proposed to be raised by Revenue in the appeal is: Whether in the facts and circumstances of the case, the ITAT was justified in law in confirming the order of CIT(A) in holding that the profit earned from the transactions of shares and mutual funds as capital gain and not a business income without considering the volume and frequency of the transaction?
3. Mr. R.B. Mathur, learned counsel appearing on behalf of the appellant has submitted that there were substantial investments, which were made for several years, as noted in the order passed by the Income Tax Appellate Tribunal (in short, 'the ITAT'). He has further submitted that considering the amount so invested, it should be taken as income from business, not capital gain. He has placed reliance on decision of the Hon'ble Supreme Court in CIT v. Sutlej Cotton Mills Supply Agency Ltd., [1975] 100 ITR 706 .
4. After hearing the learned counsel for appellant at length and going through the decision rendered by the Hon'ble Supreme Court in Commissioner of Income Tax, Nagpur (supra) as well as the orders passed by Assessing officer, Commissioner of Income Tax (Appeals) and the ITAT, we are of the considered opinion that the intention of assessee was always to hold the shares as investment and not otherwise. The assessee held the shares for substantially long period, in earlier years, shares were declared as investment and was accepted by the Department. Following reasons have been given by the CIT(A) in para 2.3 of its order dated 23.3.2011:-
"2.3 I have carefully considered the discussion/reasoning of the Ld. AO on this issue given in the assessment order, the contentions/arguments of the Ld. AR and the material available on record. It is observed that the Ld. AO has considered the appellant as dealer in shares, mainly for the reasons that she had substantial holding of shares in this year and in earlier years, she had entered into share transactions regularly and the volume of such transactions was substantial. On the other hand, Ld. AR has contended that the assessee was regularly investing in shares, the shares were held for a substantially long period, in earlier years the shares were declared as investment and accepted by the Department, after selling the shares, the sale proceeds were invested in the purchase of property. Ld. AR has argued that, therefore, the same showed the intention of the assessee was always to hold the shares as investment and not otherwise. After giving careful thought to the arguments of the Ld. AR and the details placed on record, I find that the appellant assessee has regularly shown the shares as investment in the balance sheet filed by her with the return of income and that the returns of those years were accepted by the Department. It is also noted that in the immediately preceding A.Y. of 2006-07, the Ld. CIT(A)-34, Mumbai, in his order dated 30.3.2010 passed in the appellant's case had accepted that the appellant was an investor in shares and had directed the AO to assess the appellant's income from sale of the shares under the head 'capital gain'. Further, it is observed that during the year also, the appellant has entered into a number of sale transactions of those shares, which she had held for a period ranging from one year to six years. Therefore, I find merit in the argument of Ld. AR that had the assessee been a dealer in shares, the scrips would not have been held for such a long period by her. In this respect, it is seen from the relevant statement given in the paper book related to the shares sold and the corresponding dates of the purchase of those shares, that the appellant had held those shares for substantially long period of time. In addition, it is observed that the amount realized from the sale of shares has been utilized in the purchase of property. Therefore, that conduct of the assessee is a clear pointer to the fact that the assessee is an investor and not a dealer in the shares, in this regard, I find that Hon'ble Gujarat High Court, in the case of CIT v. Neeraj Amitdhar Shurti, 48 DTR 33, has held that where the assessee held the shares for 14 months, it was a long period for the purpose of LTCG and such shares could not be treated as stock in trade. Hence, in these facts and circumstances of the appellant's case and in view of the findings of the Ld.CIT(A) in the appellant's case for A.Y. 2006-07, I direct the Ld.AO to assess the appellant's income from the sale of shares under the head 'capital gains'. However, it is noted that the Ld.AR has filed a statement, before me, according to which the long terms capital of Rs .78,12,724/- claimed by the appellant in her return of income was not correct and as per the said statement, the correct long term capital amounted to Rs. 50,54,860/- only, and therefore, the remaining amount was to he held as the short term capital gain, over and above the amount of the short term capital gain already declared by the assessee in the return of income. The AO, is accordingly, directed to assess the long term capital gain at Rs. 50,54,860/- and the balance amount as short term capital gain. Consequently, this ground of appeal is treated as partly allowed."
5. Reasons given by the CIT(A) have been affirmed by the ITAT are found to be appropriate. The Hon'ble Supreme Court in Sutlej Cotton Mills Supply Agency Ltd.'s case (supra) has laid down that if the dominant intention was to carry on an adventure in the nature of business, the profit can be taxed, otherwise not. In other words, the question is whether the assessee purchased the share in a commercial spirit with a view to make profit by trading in them. The Apex Court has made the following observations: —
"24. Mr. Chagla for the respondent, contended that the only question to be asked and answered is: what was the dominant intention of the assessee when it purchased the shares? If the dominant intention was to carry on an adventure in the nature of business, the profit can be taxed; otherwise not. In other words, the question is whether the assessee purchased the share in a commercial spirit with a view to make profit by trading in them. The Tribunal found, after taking into account all the relevant circumstances that the dominant intention of the assessee was to make profit by resale of the shares and not to make an investment."
6. Consideringthe aforesaid dictum vis-a-vis the findings given, it is clear that the intention of assessee was not to carry on business; it was clearly a case of investments, which were made. Findings of CIT(A) and ITAT are based on facts which cannot be said to be perverse, rather appear to be correct and in accordance with the aforesaid decision of the Apex Court. Thus, we find that no substantial question of law arises in the appeal.
7. Accordingly, the appeal is dismissed.
SB