Company engage in purchasing and selling of securities can be treated as business activity

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
From the observation we can find the following fact.. The assessee is a company engaged in management consultancy, implementation of internal controls, system audits, arranging finance from financial institutions and financing and advisory services in the capital markets. It is also doing NBFC business and is a Non-banking Finance Company registered with the Reserve Bank of India and is engaged in financing business sine 1986. During the impugned assessment year it disclosed long-term capital gain of ` 43,16,233/- along with short-term capital gain of ` 13,21,932/- (STT paid) and STGS of ` 19,865/-. The Assessing Officer after examining the details of the transactions observed that the activity of selling and purchasing of shares and securities etc. was in the nature of business activity and it was not an activity of an investor. He noted that the assessee had purchased 65062 number of shares for ` 1,19,51,834/- and sold shares worth ` 1,32,92,947/-. Some 10000 shares of Escorts India Ltd. were held only for five days. 10000 shares of Nav Bharat Ventures were sold within 12 to 60 days and, thus, referring to the CBDT Circular No.4/2007 dated 15.06.2007 he held that the income therefrom is assessable as business income and, accordingly, the income therefrom has been treated to be income from business. Learned CIT (A) has accepted the claim of the assessee on the basis of the decision of ITAT in the case of the assessee itself dated 3rd September, 2011 for Assessment Year 2006-07 in which it has been held that the assessee has rightly shown the long-term capital gain and short-term capital gain on sale of shares held as investments and, following the said order, learned CIT (A) has decided the issue in favour of the assessee. The relevant portion of the order of ITAT has been reproduced by learned CIT (A) in his order.

Citation :
DCIT, Circle 10(1),New Delhi.(Appellant)Vs. Dynamic Consultant Pvt. Ltd.,(now known as P.R. Kumar Capital Advisors Pvt. Ltd.),U-2, Green Park Main, New Delhi.PAN: AAACD0042L (Respondent)