THE HON BLE SRI JUSTICE G. CHANDRAIAH AND HON BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A. Nos. 26, 29 and 32 of 2015 COMMON ORDER:- (per Hon ble Sri Justice G. Chandraiah) These appeals, at instance of Revenue, arise from order dated 05.11.2014 in ITA Nos.1059, 1060, 1061 & 1062/Hyd/2013, of Income Tax Appellate Tribunal, Hyderabad Bench B , Hyderabad, for Assessment Years 2005-06, 2007-08, 2009-10 & 2010-11. 2. order impugned in these appeals, so also substantial question of law, being identical, appeals are taken together for disposal by this common order. substantial question of law raised reads as under: In facts and circumstances of case, whether Hon ble Tribunal (ITAT) is correct in law in holding that income earned by Respondent-assessee out of sale and purchase of shares is income under head Capital Gains as against Business income adopted by th Assessing Officer, without appreciating that Respondent-assessee has been buying and selling shares and Units of Mutual Funds through out year continuously and regularly through and organized, full time and day-to-day activity as also through day trading transactions? 3. Tribunal, vide its order dated 05.11.2014, after discussing various issues, held as under: 12. So far as merits of issue is concerned, perusal of assessment order would clearly reveal fact that AO has treated transaction in shares and units as trading activity only on consideration that they are very high in frequency and volume. Though, AO has observed that assessee has indulged in repetitive purchases and sales of same scrip, but, he has not given single instance where same share purchased by assessee was sold either on same day or within short duration. Only, because assessee had frequently purchased and sold shares of same company does not mean that same share was sold. Further, statement made in director s report in no way helps in coming to conclusion that share transactions are in nature of trading activity and not investment. It is further to be noted that AO has also observed that very name of assessee company indicates that activity in share transaction is in nature of business activity. In this context, he relied upon order of Tribunal in assessee s own case for AY 2006-07. Thus, from aforesaid facts it becomes clear that while coming to conclusion that transactions in shares and units are in nature of trading activity, AO more or less has adopted observation/finding of CIT and ITAT for AY 2006-07. However, aforesaid finding of both CIT and ITAT were found to be devoid of merit by Hon ble AP High Court while deciding assessee s appeal for AY 2006-07. Hon ble AP High Court after exhaustively dealing with nature of transactions and examining in detail found that transactions carried out by assessee in shares and units of mutual funds are in nature of investments only for following reasons: (a) investments are made with own funds and not with borrowed funds (b) closing stock was valued in books of accounts consistently at cost and not at cost or market price whichever is lower. (c) It had earned substantial dividend income. (d) More than 99% of total gains are long term capital gains and less than 1% is short term capital gain, 40% of investments are in mutual fund. (e) assessee never dealt in futures, derivatives and options. (f) All transactions of purchases and sales were delivery base excepting one solitary instance of Reliance Industries Ltd. (g) assessee was registered as NBFC with RBI. (h) assessee never claimed set off of lossess arising from sale of investments against other income. (i) Merely because of large frequency of volume of transaction, conclusion than assessee is trader cannot be drawn without considering period of holding of those shares by assessee. (j) trader in shares normally holds them for short time only and is unlikely to invest in unquoted shares or in mutual funds he is likely to borrow funds for his trading activity. (k) fact that assessee is monitoring stock market and buying at dips and selling at highs with intention to make profit from these transactions is not conclusive of fact that assessee is trader because even investor would not buy or sell blindly and take risk of suffering losses. (l) fact that assessee has administrative set up and incurs considerable administrative costs is not factor to hold that assessee is trader. (m) fact that assessee is making repetitive purchases and sales of same shares is factor in favour of holding that assessee is investor in view of amendments to section 10(38) and section 115JB of Act. (n) revenue had accepted that assessee was investor whose income is chargeable under head capital gains for number of years. Accordingly, Hon ble Jurisdictional High Court set aside order of ITAT as well as that of CIT. It is very much evident from reasons recorded as well as assessment order that only on basis of order passed in case of assessee for AY 2006-07, AO has concluded that income derived from transactions in shares and units should be assessed as income from business activity. As Hon ble High Court has upheld assessee s claim for AY 2006-07 and facts obtaining in impugned assessment year are different from facts considered by Hon ble AP High Court in AY 2006-07 or for that matter, parameters laid down by Hon ble High Court in 2006-07 do not apply to fact of present case, we do not find any reason to interfere with order of learned CIT(A). Accordingly, we dismiss grounds raised by department. 4. reading of extract would leave no manner of doubt that Tribunal had followed well settled principles which were set out in judgment of this Court in assessee s own case in Spectra [1] Shares and Scripts Pvt. Ltd. V. Commissioner of Income-Tax , for Assessment Year 2006-07, and hence question raised is squarely covered. It is also found that except for year 2006-07, for earlier years, assessee was assessed under head Capital Gains and not under Business Income , notwithstanding frequency of transactions involved, inasmuch as, at all times, assessee took delivery of shares and, at appropriate time, had sold them. 5. Inasmuch as substantial question of law raised in these appeals is squarely covered by judgment of this Court in Spectra Shares (1 supra), we see no reason to take different opinion. 6. appeals are, accordingly, dismissed. No costs. Miscellaneous petitions, if any pending in these appeals, shall stand closed. _____ G. CHANDRAIAH, J ___ CHALLA KODANDA RAM, J 15th June, 2015 ksm HON BLE SRI JUSTICE G. CHANDRAIAH AND HON BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A. Nos. 26, 29 and 32 of 2015 15th June, 2015 ksm [1] [2013] 354 ITR 35 (AP) Principal Commissioner of Income-tax-3 v. Spectra Shares Scripes Pvt. Ltd