Commissioner of Income-tax v. H. K. Financiers P. Ltd
[Citation -2015-LL-0512-3]

Citation 2015-LL-0512-3
Appellant Name Commissioner of Income-tax
Respondent Name H. K. Financiers P. Ltd.
Court HIGH COURT OF CALCUTTA
Relevant Act Income-tax
Date of Order 12/05/2015
Assessment Year 2007-08
Judgment View Judgment
Keyword Tags short-term capital gain • long-term capital gain • revenue receipt • stock-in-trade • market rate
Bot Summary: The views of the Tribunal precisely are as follows: On the other hand, the learned counsel for the assessee by referring the written submission made before the Assessing Officer at pages 30 to 32 and at pages 35 to 43, contended that since the assessee-company has maintained the accounts with applicable accounting standards, the investments which have been classified as long-term or carried at cost whereas the shares kept in the portfolio of the stockin-trade has been valued at market rate. After hearing the rival submissions and on a careful perusal of the material available on record, keeping in view of the fact that the assessee has shown the shares which are declared by him either longterm or short-term capital gains in the investment portfolio and there is no dispute that the same are being valued at cost and on the shareholding of the assessee which are stock-in-trade has been valued either at market rate or costs in trade. We find no justification of the Assessing Officer to treat the capital gains arising out of which are short-term as well as long-term investments portfolio to treat the same as business income. The systematic, organised and planned manner of transactions together with volume and frequency of transactions point to the only conclusion that the shares could not have been purchased for investment. We have today dictated a judgment in the case of CIT v. Merlin Holding Pvt. Ltd. 2015 375 ITR 118 wherein the following views have been expressed by us: From the tenor of the submissions made by Mr. Saraf noted above, it appears that the case of the Revenue is that in the facts of the case the finding that the income was earned from investment could not have been recorded. The judgment in the case of Dalhousie Investment Trust Co. Ltd. v. CIT reported in 1968 68 ITR 486 referred by the Assessing Officer does not assist the Revenue because in that on appreciation of facts it was found as follows: On the facts, that the appellant dealt with the shares of McLeod and Co. and the allied companies as stock-in-trade, that they were in fact purchased even initially not as investments but for the purpose of sale at a profit and therefore the transactions amounted to an adventure in the nature of trade. The facts of the case are not shown to be similar with those in the case of Dalhousie Investment.


JUDGMENT subject matter of challenge in appeal is judgment and order dated November 12, 2010, pertaining to assessment year 2007-08. views of Tribunal precisely are as follows: "On other hand, learned counsel for assessee by referring written submission made before Assessing Officer at pages 30 to 32 and at pages 35 to 43, contended that since assessee-company has maintained accounts with applicable accounting standards, investments which have been classified as long-term or carried at cost whereas shares kept in portfolio of stockin-trade has been valued at market rate. He further submitted that total number of transactions with purchases as well as sales are 220 in number and ratio between purchase and sale is 59: 41 and holding period in respect of 77 sale transactions are more than 12 months and 13 transactions which is less than 12 months. Under these circumstances he requested to uphold order to learned Commissioner of Income-tax (Appeals) and delete that of Assessing Officer. After hearing rival submissions and on careful perusal of material available on record, keeping in view of fact that assessee has shown shares which are declared by him either longterm or short-term capital gains in investment portfolio and there is no dispute that same are being valued at cost and on shareholding of assessee which are stock-in-trade has been valued either at market rate or costs in trade. We find no justification of Assessing Officer to treat capital gains arising out of which are short-term as well as long-term investments portfolio to treat same as business income. Therefore, we find no infirmity in order of learned Commissioner of Income-tax (Appeals) to be inferred with." Therefore, question for consideration was whether benefit on account of short-term capital gain and long-term capital gain was properly claimed by assessee. Revenue was unable to find fault with claim of assessee. Revenue was not in position to support judgment of Assessing Officer who refused to treat same way assessee wanted for following reasons: "It is concluded that those shares were purchased and sold with motive of earning profit and not with object of investing in those shares in order to derive income from that investments. systematic, organised and planned manner of transactions together with volume and frequency of transactions point to only conclusion that shares could not have been purchased for investment. This conclusion is also strongly supported by hon'ble Supreme Court in case of Dalhousie Investment Trust Co. Ltd. v. CIT [1968] 68 ITR 486 (SC). In view of above discussion total amount of capital gain for Rs. 39,18,709 as shown by assessee in its return of income is being taken as business income instead of capital gain as claimed by assessee." Assessing Officer has laid stress on motive. To begin with motive is something, which is locked in mind of person. No direct evidence as regards motive is possible. Motive can be inferred from conduct of person concerned but that is bound to remain inference, which may or may not be correct. We have today dictated judgment in case of CIT v. Merlin Holding Pvt. Ltd. (ITA No. 101 of 2011) [2015] 375 ITR 118 (Cal) wherein following views have been expressed by us (page 122): "From tenor of submissions made by Mr. Saraf noted above, it appears that case of Revenue is that in facts of case finding that income was earned from investment could not have been recorded. If that is proposition then it is for Revenue to show that such finding is not possible in law. That was not even suggested. What remains then is question of appreciation of evidence, which has already been done. No fruitful purpose is likely to be served by remanding matter. We do not find any issue, which has remained unattended. For aforesaid reasons, we hold that judgment under challenge is not perverse." judgment in case of Dalhousie Investment Trust Co. Ltd. v. CIT reported in [1968] 68 ITR 486 (SC) referred by Assessing Officer does not assist Revenue because in that on appreciation of facts it was found as follows (headnote): "On facts, that appellant dealt with shares of McLeod and Co. and allied companies as stock-in-trade, that they were in fact purchased even initially not as investments but for purpose of sale at profit and therefore transactions amounted to adventure in nature of trade. profit derived by appellant from sale of shares was, therefore, revenue receipt and as such liable to income-tax." facts of case are not shown to be similar with those in case of Dalhousie Investment. For aforesaid reasons, we are of opinion that views expressed both by Commissioner of Income-tax (Appeals) and Tribunal for reasons expressed therein are possible view. It is, therefore, not open to Revenue to contend that view taken by Tribunal is perverse. question formulated at time of admission of appeal does not appear to have been correctly formulated. question could only be, whether views expressed upon appreciating facts and circumstances of case were perverse. question is now formulated and is answered in negative. appeal is thus dismissed. *** Commissioner of Income-tax v. H. K. Financiers P. Ltd
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