Nandury Sobha Rani, Hyderabad V. Addl. CIT, Hyderabad

ITA 332/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61941 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 04-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NIVEDITA BISWAS DR
• Assessee Lawyers: V SIVA KUMAR
• Keywords: Capital asset; Business income; Depreciation; Opportunity of being heard; Rule of consistency; Question of law; Futures and options

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.332/HYD/2011 : ASSESSMENT YEAR 2007 -08 SMT.NANDURY SOBH A RANI, HYDERABAD. ( PAN - ABEPN 6221 B) V/S ADDL. COMMISSIONER OF INCOME - TAX, RANGE-6, HYDERABAD (APPELLANT) (RESPONDENT) ITA NO.333/HYD/2011 : ASSESSMENT YEAR 2007 -08 S HRI NANDURY TEJAS WY , HYDERABAD. ( PAN - ACNPN 3831 F) V/S ADDL. COMMISSIONER OF INCOME - TAX, RANGE-6, HYDERABAD (APPELLANT) (RESPONDENT) APPELLANTS BY : SHRI V.SIVA KUMAR , AR RESPONDENT BY : SMT. NIVEDITA BISWAS ,DR - CIT DATE OF HEARING 3.5.2012 DATE OF PRONOUNCEMENT 2 .7.2012 O R D E R PER D.KARUNAKARA RAO, ACCOUNTANT MEMBER: THESE TWO APPEALS, FILED BY TWO RELATED ASSESSEES , ARE DIRECTED AGAINST SIMILAR BUT SEPARATE ORDERS OF THE CIT(A) IV, HYDERABAD BOTH COMMONLY DATED 13.1.2011. SINCE THE GROUNDS I NVOLVED IN BOTH THE APPEALS ARE IDENTICAL, AT THE REQUEST OF THE ASSESS EES, THESE APPEALS ARE CLUBBED AND HEARD TOGETHER FOR THE SAKE OF CONVENIE NCE. 2. GROUNDS OF APPEAL, IDENTICAL IN BOTH THE APPEAL S EXCEPT FOR THE AMOUNT INVOLVED, AS TAKEN FROM APPEAL ITA NO.3 32/HYD/2011, ARE AS FOLLOWS- 1. THE ORDER OF THE LEARNED CIT(A)-IV, DT. 13/1/2011 IS CONTRARY TO LAW AND FACTS. ITA NO.332 & 333/HYD/2011 SMT. NANDURY SOBHA RANI AND SHRI NANDURY TE JASWY, HYDERABAD. 2 2. THE APPELLANT CONTENDS THAT THE ASSESSMENT OF SHORT TERM CAPITAL GAIN OF RS.2,29,92,072/- ON SALE OF SHARES AS BUSINESS I NCOME IS ERRONEOUS. THE LEARNED CIT(A) ERRED IN UPHOLDING TH E ORDER OF THE ASSESSING OFFICER. 3. THE LEARNED COMMISSIONER OF INCOME-TAX HAS SELECTIV ELY CONSIDERED THE FACTS AND IGNORED THE REMAINING FACTUAL POSITIO N WHICH SUPPORTED THE APPELLANTS PLEA THAT THE SURPLUS REALISED ON S ALE OF SHARES IS LIABLE TO TAX AS CAPITAL GAIN. 4. THE CIT(A) ERRED IN IGNORING THE BASIC SUBMISSIONS THAT WHERE THE APPELLANT PURCHASED THE SHARES THE INTENTION WAS TO HOLD THEM AS INVESTMENT. 5. IT IS CONTENDED THAT THE CONDUCT OF THE APPELLANT, THE TREATMENT IN ACCOUNTS, THE LENGTH OF HOLDING OF THE SHARES, THE RECEIPT OF DIVIDEND ALONG WITH OTHER FACTORS AMPLY DEMONSTRATES THAT TH E APPELLANT TREATED THE SHARES AS INVESTMENT ONLY AND NOT FOR T RADING. 6. THE APPELLANT CONTENDS THAT SHE IS ENTITLED TO DEPR ECIATION ON COMPUTER PROJECTION DEVICE AND UPS @ 60% TREATING T HEM AS COMPUTERS AND NOT AT 15% WHICH IS THE GENERAL RATE. THE LEARNED CIT(APPEALS) ERRED IN REJECTING THE APPELLANTS SUBM ISSION AND UPHOLDING THE RATE OF DEPRECIATION AT 15%. FROM THE ABOVE, IT IS EVIDENT THAT THERE ARE TWO IS SUES FOR ADJUDICATION IN THESE APPEALS. THE FIRST ISSUE IS WITH REGARD TO TH E HEAD OF INCOME AND APPLICATION OF TAX RATES U/S. 111A OF THE ACT IN RE SPECT OF THE SUM OF RS.2,29,92,722 IN THE CASE OF SMT. SOBHA RANI AND RS.3,92,26,418 IN THE CASE OF SHRI. TEJASVI. THE SECOND RELATES TO T HE APPLICABLE RATE OF DEPRECIATION ON (A) PROJECTION DEVICE AND (B) UPS, I.E. WHETHER 15% AS HELD BY ASSESSING OFFICER OR 60% ACCLAIMED BY THE REVENUE.. 3. RELEVANT FACTS OF THE FIRST ISSUE, AS TAKEN FROM THE APPEAL OF SMT. SOBHA RANI ARE THAT THE ASSESSEE FILED RETURN OF INCOME FURNISHING THE SUM OF RS.2,29,92,072 EARNED ON PURCHASE AND SA LE OF SHARES UNDER THE HEAD SHORT TERM CAPITAL GAINS, AND ACCORDINGL Y COMPUTED AND PAID THE TAX AT THE RATE APPLICABLE TO SHORT-TERM CAPITA L GAINS IN TERMS OF T6HE PROVISIONS OF S.111A OF THE ACT. DURING THE ASSESS MENT PROCEEDINGS, ASSESSEE WAS ASKED TO SUBSTANTIATE WITH DETAILS TO PROVE THAT THE ASSESSEE WAS NOT A TRADER BUT AN INVESTOR AS CLAIME D IN THE RETURN. ON EXAMINING DETAILS, THE ASSESSING OFFICER CAME TO TH E CONCLUSION IN RESPECT ITA NO.332 & 333/HYD/2011 SMT. NANDURY SOBHA RANI AND SHRI NANDURY TE JASWY, HYDERABAD. 3 OF THE SHARES HELD FOR PERIOD LESS THAN 12 MONTHS T HAT THE ASSESSEE IS A TRADER AND NOT INVESTOR AND ACCORDINGLY DENIED TH E BENEFITS OF THE CONCESSIONAL RATE SPECIFIED U/S. 111A OF THE ACT, C LAIMED BY THE ASSESSEE, AND TAXED THE SAME AS BUSINESS PROFIT. HOWEVER, AS SESSING OFFICER DID NOT DISTURB THE LONG TERM CAPITAL GAINS STATUS IN R ESPECT OF THE GAINS EARNED ON SALE OF SHARES HELD FOR PERIOD LONGER THA N 12 MONTHS. FOR COMING TO THE ABOVE CONCLUSION WITH REGARD TO THE I MPUGNED SHORT TERM CAPITAL GAINS, THE ASSESSING OFFICER WAS DRIVEN BY THE DETAILS ON THE FREQUENCY OF BUYING AND SELLING OF SHARES, PERIOD O F HOLDING, VOLUME OF TURNOVER, WHICH IS TO THE TUNE OF RS.29.55 CRORES I N THE CASE OF SOBHA RANI AND THE TURNOVER OF RS 156 CRORES IN THE CASE OF TEJESWAY AS MENTIONED IN PARA 6.2 OF THE ORDER OF THE CIT(A). 4. FROM THE ABOVE FACTS, THE ASSESSING OFFICER CONC LUDED THAT THE INTENTION OF THE ASSESSEE IS TO CARRY ON TRADING AC TIVITY. IN THE PROCESS, THE ASSESSING OFFICER REJECTED THE ASSESSEES SUBMI SSIONS THAT (A) ASSESSEE REFLECTED THE IMPUGNED SCRIPS AS INVESTMEN T IN THE BOOKS OF ACCOUNT; (2) THE SHARES PURCHASED AND SOLD ARE ENTI RELY DELIVERY BASED; (3) NO INTRA-DAY TRADING ACTIVITY; (4) EXISTENCE OF DIVIDEND INCOME DECLARED IN THE RETURN; (5) THERE IS CARRY FORWARD OF SHARES TO THE SUCCEEDING YEARS UNDER THE HEAD INVESTMENT. THE AS SESSEES CLAIM THAT SHE IS AN INVESTOR WAS REJECTED AFTER CONSIDERING T HE PROVISIONS OF CIRCULAR NO.4/2007 DATED 16.6.2007. FINALLY ASSESSING OFFIC ER SUMMED UP BY SAYING THAT THE OVERALL INTENTION OF THE ASSESSEE I S TO MAKE BUSINESS PROFITS AND SHE HAS NO INTENTION TO HOLD THE SHARES FOR LONGER PERIOD TO EARN DIVIDENDS. REGARDING SCHEDULE 7 (INVESTMENTS) TO THE BALANCE SHEET, THE ASSESSING OFFICER HELD THAT ONLY FIVE SH ARES WERE HELD AS ON 31.3.2007, ALTHOUGH ASSESSEE PURCHASED MANY SCRIPS AND SOLD DURING THE YEAR. ASSESSING OFFICER CONSIDERED AND REJECTED TH E WRITTEN SUBMISSIONS OF THE ASSESSEE VIDE LETTER DATED 9.12.2009 WHEREI N IT WAS SUBMITTED AS FOLLOWS, I.E. .. INVESTMENTS ARE LONG TERM, ACCORDINGLY I HAVE ITA NO.332 & 333/HYD/2011 SMT. NANDURY SOBHA RANI AND SHRI NANDURY TE JASWY, HYDERABAD. 4 MAINTAINED THE BOOKS OF ACCOUNTS. MY INTENTION OF INVESTMENTS ARE LONG TERM INVESTMENTS. I AM NOT DOING BUSINESS OF SECURI TIES. . 5. FACTS RELATING TO THE SECOND ISSUE RELATING TO THE DEPRECIATION ON THE LCD AND UPS ARE ALSO NARRATED ON PAGE 4 OF T HE IMPUGNED ASSESSMENT ORDER AND BRIEFLY STATED, ASSESSEE CLAI MED DEPRECIATION ON LCD PROJECTOR AND UPS AT THE RATE OF 60% AS APPLICA BLE TO COMPUTERS AND COMPUTER SOFTWARE. THE ASSESSING OFFICER HELD THE ABOVE ITEMS AS OFFICE EQUIPMENT AND ALLOWED DEPRECIATION THEREON AT THE R ATE OF 15% ONLY. IN THE PROCESS, THE ASSESSING OFFICER RELIED ON THE OR DER PASSED IN THE CASE OF HER SON, SHRI N.TEJASVY FOR THE SAME ASSESSMENT YEA R. THE ASSESSEE SUBMIT THAT THE SINCE THE ASSESSEE IS ENGAGED IN TH E BUSINESS OF LEASING OF COMPUTERS AND COMPUTER PERIPHERALS, THE COMPUTE RS INCLUDE COMPUTER PERIPHERALS, COMPUTER SOFTWARE, LCD PROJEC TORS, WHICH ARE COMPUTER ENABLED PERIPHERALS ONLY. ASSESSEE RELIED ON THE DELHI BENCH DECISION OF THE TRIBUNAL IN THE CASE OF ACIT V/C. C ONTAINER CORPORATION OF INDIA LTD.(280 ITR (AT) ). THE ASSESSING OFFICER DISTINGUISHED THE ABOVE DECISION AND RESTRICTED THE DEPRECIATION BOTH ON LC D PROJECTORS AND UPS TO 15% ONLY. 6. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER ON THE ABOVE TWO ISSUES, RELEVANT TO THE PRESENT APPEAL, ASSESSE E FILED APPEALS BEFORE THE CIT(A). 7. DURING THE PROCEEDINGS BEFORE THE CIT(A), ASSES SEE REITERATED THE ABOVE SUBMISSIONS MADE BEFORE THE ASSESSING OFF ICER AND FILED FURTHER SUBMISSIONS TO DEMONSTRATE THAT THE PERIOD OF HOLDI NG RANGED MOSTLY FROM 250 TO 400 DAYS AND AS ON 31.3.2007 AND ASSES SEE HOLDS ON THE CLOSING STOCK OF SHARES TO THE VOLUME OF RS.1.04 CR ORES INVOLVING FIVE SCRIPS . FURTHER, IT IS MENTIONED THAT IN RESPECT OF THE VERY SAME SCRIPS, WHICH WERE HELD FOR MORE THAN ONE YEAR, ASSESSEES CONTENTION FOR ITA NO.332 & 333/HYD/2011 SMT. NANDURY SOBHA RANI AND SHRI NANDURY TE JASWY, HYDERABAD. 5 ASSESSING THE SAME AS LONG TERM CAPITAL GAINS HAS B EEN ACCEPTED, BUT THE CLAIM OF THE ASSESSEE WITH REGARD TO SHORT-TERM CAP ITAL GAINS WAS DENIED, HOLDING THAT THE SAME ARE ASSESSABLE AS BUSINESS IN COME. ASSESSEES EMPHASIZED NOT ONLY ON THE FACT THAT ALL THESE IMPU GNED TRANSACTIONS ARE DELIVERY BASED TRANSACTIONS AND THERE IS NO BUY AND SELL OF THE SAME ON DAY BUT ALSO THE FACT OF EARNING OF DIVIDEND OF DI VIDEND TO THE TUNE OF RS.2,38,408 DURING THE YEAR. REFERRING TO THE DEC ISION OF HONBLE SUPREME COURT IN THE CASE OF JANAKI RAM BAHDUR RAM V/S. CIT(57 ITR 21), ASSESSEE SUBMITTED THAT MERE INTENTION TO EARN PROFIT AT A LATER DATE DOES NOT CONVERT INVESTMENT INTO A TRADING TRANSACT ION. FURTHER RELYING ON THE APEX COURT DECISION IN THE CASE OF H. HOLCK LAR SEN (1670 ITR 67), ASSESSEE CONTENDED THAT SALE OF SHARES AT LATER DA TE AT A PROFIT, BY ITSELF WILL NOT RESULT IN AN ASSET PURCHASED AS AN INVESTM ENT BEING CONSTRUED AS A BUSINESS TRANSACTION OR STOCK IN TRADE INTO INVES TMENT. FURTHER REFERRING TO BOOKS OF ACCOUNT, IT WAS MENTIONED THA T THE ASSESSEE HAS BEEN CONSISTENTLY MAINTAINING RECORDS SHOWING SUCH PURCHASE AND SALE OF SHARES AS INVESTMENTS, WHICH WAS ACCEPTED IN THE PA ST MANY YEARS AT LEAST FROM THE ASSESSMENT YEAR 2004-05 ONWARDS AND THIS IS FOR THE FIRST TIME THAT THE ASSESSING OFFICER DISTURBED THE CLAIM OF THE ASSESSEE IN THE ASSESSMENT YEAR 2007-08, IGNORING THE FACT THAT THE REVENUE ACCEPTED THE CLAIM OF THE ASSESSEE IN THE PAST AND RELIED ON THE MUMBAI BENCH DECISION OF THE TRIBUNAL IN THE CASE OF GOPAL PUROH IT V/S. JCIT(29 SOT 117), WHICH WAS SUBSEQUENTLY UPHELD BY THE MUMBAI H IGH COURT AND THE APEX COURT. FURTHER, IT WAS MENTIONED THAT THE ASS ESSEE NEVER TOOK LOANS FOR THE PURCHASE AND SALE OF SHARES AND THERE FORE, THERE WAS NO PAYMENT OF INTEREST BY THE ASSESSEE. IN FACT, ALL THE SHARES WERE PURCHASED OUT OF OWN FUNDS AVAILABLE FOR INVESTMENT WITH THE ASSESSEE. 8. IT WAS FURTHER SUBMTITED BEFORE THE CIT(A) THA T THE FACTS ARE IDENTICAL AND THEREFORE THE ASSESSING OFFICER ERRED IN DISTURBING THE ASSESSEES CLAIM IN THE YEAR UNDER APPEAL. THE CIT( A) REMANDED THE ITA NO.332 & 333/HYD/2011 SMT. NANDURY SOBHA RANI AND SHRI NANDURY TE JASWY, HYDERABAD. 6 ABOVE SUBMISSIONS TO THE ASSESSING OFFICER AND THE ASSESSING OFFICER SUBMITTED HIS REPORT, RELYING ON THE BOARD CIRCULAR NO.4 OF 2007 TO HOLD THAT THE ASSESSEE CARRIED ON TRADING ACTIVITY ONLY. IN THE SAID REMAND REPORT, THE FACT OF HIGH VOLUME INVOLVING HUGE NUM BER OF SCRIPS AND TRANSACTIONS AND THE FREQUENCY AND REGULARITY AT W HICH TRANSACTIONS WERE HIGHLIGHTED, WHICH LED THE ASSESSING OFFICER TO ASS ERT THAT THE PROFIT MOTIVE IS EVIDENT AND THEREFORE THE PROVISIONS OF S .111A ARE INAPPLICABLE TO THE FACTS OF THE CASE. THE ASSESSING OFFICER AL SO RELIED ON THE BOMBAY BENCH DECISION OF THE TRIBUNAL IN THE CASE OF SADHA NA NABERA V/S. ACIT (ITA NO.2586 / MUM/2009 DATED 26.3.2010), WHEREIN FACTS OF THE CAS E OF GOPAL PUROHIT WERE DISTINGUISHED IN FAVOUR OF THE R EVENUE. 9. IN RESPONSE TO THE COPY OF THE REMAND REPORT FU RNISHED TO THE ASSESSEE FOR COMMENTS AND IT WAS SUBMITTED BY THE ASSESSEES THAT THEIR CASES ARE IDENTICAL TO THE CASE OF GOPAL PUROHIT (S UPRA). FURTHER, IT WAS MENTIONED THAT MERE MULTIPLICITY OF TRANSACTIONS DO ES NOT ALTER THE NATURE OF TRANSACTIONS, RELYING ON THE MUMBAI BENCH DECISI ON OF THE TRIBUNAL IN THE CASE OF JANAK S.RANGAWALA V/S. ACIT(11 SOT 627) . 10. ON CONSIDERING THE OBJECTIONS OF THE ASSESSEE AS WELL AS THE REMAND REPORT FURNISHED BY THE ASSESSING OFFICER, THE CIT(A) SUMMED UP IN PARA 6 OF THE IMPUGNED ORDER AND THE GIST OF TH E SAME INCLUDE THAT ENTRIES IN THE BOOKS OF ACCOUNT IS NOT CONCLUSIVE AND REFERRED TO THE A.P. HIGH COURT JUDGMENT IN THE CASE OF CIT V/S. J.D. IT ALIA (141 ITR 953) AND SUPREME COURT JUDGMENT IN THE CASE OF CIT V/S. BAZP UR CO-OP SUGAR FACTORY LTD. (172 ITR 330) FOR THE PROPOSITION THAT NAME AND LABEL GIVEN BY A PARTY TO A PARTICULAR AMOUNT IS NOT CONCLUSIVE . RELYING ON THE SUPREME COURT DECISION IN THE CASE OF TUTICORIN ALK ALIES (221 ITR 172), THE COMMISSIONER HELD THAT ENTRIES IN THE BOOKS OF ACCOUNT ARE NOT A DETERMINING FACTOR AS TO THE REAL NATURE OF THE TRA NSACTION. THE CIT(A) ALSO MENTIONED THAT THE QUESTION WHETHER A TRANSACT ION AMOUNTS TO A ITA NO.332 & 333/HYD/2011 SMT. NANDURY SOBHA RANI AND SHRI NANDURY TE JASWY, HYDERABAD. 7 BUSINESS ACTIVITY OR OTHERWISE DEPENDS ON PECULIAR FACTS OF THE CASE AND RELIED ON THE JUDGMENT IN THE CASE OF G.VENKATASWAM Y NAIDU & CO. (35 ITR 594). REFERRING TO THE FACTS OF THE PRESENT CA SE, THE CIT(A) NOTED THAT THE ASSESSEES TURNOVER IS RS.29.55 CRORES, TH E OPENING STOCK AS ON 1.4.2006 STOOD AT RS.2.24 CRORES AND CLOSINGS TOCK AS ON 31.3.2007 AT RS.1.04 CRORES AND THE DIVIDEND EARNED DURING THE Y EAR IS ONLY RS. 2,38,408. REGARDING THE ASSESSEES ARGUMENT RELATIN G TO THE INTENTION OF MAKING THE INVESTMENT, THE CIT(A) IS OF THE OPINION THAT THE ASSESSEE CAN ACQUIRE SHARES IN DUAL CAPACITY AS INVESTMENT AND AS TRADER. THE ONUS IS ON THE ASSESSEE TO DEMONSTRATE THAT HE IS AN INVEST OR, WHICH HE FAILED TO DO SO. IN THE ABSENCE OF ANY EVIDENCE IN THAT BEHA LF, THE INTENTION OF THE ASSESSEE HAS TO BE JUDGED BASED ON THE VOLUME, FRE QUENCY AND REGULARITY OF TRANSACTIONS AND RELIED IN THIS BEHA LF ON THE DECISION OF THE APEX COURT IN THE CASE OF SAROJ KUMAR MAJUMDAR V/S . CIT(37 ITR 242). FOR THE PROPOSITION THAT EVEN IF A PURCHASE IS WITH AN INTENTION TO RESELL FOR PROFIT, IT WOULD AMOUNT TO BUSINESS PROFIT, DEP ENDING ON THE CIRCUMSTANCES SUCH AS THE NATURE QUANTITY OF PURCHA SE AND NATURE OF OPERATION INVOLVED. FURTHER, THE CIT(A) ANALYSED T HE SCRIPS AND FOUND THAT THE SCRIPS COVER 11 COMPANIES ONLY, OUT OF WHI CH NINE COMPANIES WERE FULLY SOLD IN SUBSEQUENT YEARS AND AT THE END OF THE YEAR, ASSESSEE HELD ONLY SHARES OF KARUR VYSYA BANK LTD. AND HIFCO MARBLE LTD. THE OTHER DETAILS SUMMED UP BY THE CIT(A) BEFORE HOLDIN G THE ASSESSEE AS A TRADER ARE NOTED IN PARA 6.5 TO 6.7 OF THE IMPUGNED ORDER, WHICH READ AS UNDER- 6.5 IF WE ANALYZE THE CASE OF THE APPELLANT, IT C AN BE SEEN THAT THE OPENING STOCK OF SHARES AS ON 1.4.2006 CON SISTED OF SCRIPTS OF 11 COMPANIES ONLY. HOWEVER, EVEN OUT O F THE SAME, SHARES OF 9 COMPANIES WERE FULLY SOLD IN THE SUBSEQUENT YEAR. AS AT THE YEAR END THEREFORE, THE APPELLANT CONTINUED WITH SHARES OF KARUR VYSYA BANK LTD. AND HIFCO MARBLE LTD. ONLY. AT THE SAME TIME, DURING THE YEA R, THE APPELLANT ENTERED INTO A NUM BER OF TRANSACTIONS IN OVER 50 SCRIPS AND ALL THE SHARES SO ACQUIRED WERE SOLD OF WITHIN THE YEAR ITSELF. IT CAN BE FURTHER SEEN THAT OUT OF TH E TOTAL 174 TRANSACTIONS, SHARES ACQUIRED IN 131 TRANSACTIONS W ERE SOLD ITA NO.332 & 333/HYD/2011 SMT. NANDURY SOBHA RANI AND SHRI NANDURY TE JASWY, HYDERABAD. 8 OF WITHIN 120 DAYS OF THEIR PURCHASE. OUT OF THESE , SHARES PURCHASED IN 54 TRANSACTIONS WERE RESOLD WITHIN 60 DAYS, WHEREAS 35 WITHIN 330 DAYS, AND 10 WITHIN LESS THAN 10 DAYS. IT CAN ALSO BE SEEN THAT IN RESPECT OF SHARE S OF KARUR VYSYA BANK LTD., THE APPELLANT WAS HOLDING 6000 SHA RES AS ON 1.4.2006. SHE PURCHASED 10000 SHARES OF THE SAID COMPANY ADDITIONALLY DURING THE YEAR. OUT OF THE TO TAL 16000 SHARES HOWEVER, ONLY 8299 SHARES OF THE SAID COMPAN Y WERE RETAINED AS ON 31.3.2007, WHILE THE REMAINING WERE SOLD OFF. THE DEALINGS IN THIS MANNER INDEED BETRAY THE CLAIM OF INVESTMENT. THE PATTERN OF TRANSACTIONS INDICATES T HAT THE APPELLANT HAD A SYSTEMATIC APPROACH OF BUYING SHARE S AT DIPS AND SELLING AT HIGHS, SO AS TO ENCASH THE BENE FIT AS AND WHEN IT ACCRUED, THE PERIOD BEING EVEN AS LESS AS 1 0 DAYS IN SOME CASES. 6.6. AS REGARDS RELIANCE OF THE APPELLANT OF THE SAID COMPANY ON THE DECISIONS OF THE HONBLE MUMBAI HIGH COURT IN THE CASE OF JCIT VS. GOPAL PUROHIT (SUPRA), THE HONBLE MUMBAI ITAT THEMSELVES IN THEIR SUBSEQUENT DECISION IN THE CASE OF SMT. SADHANA NABERA (SUPRA) HAVE OPINED THA T IN THE CASE OF GOPAL PUROHIT, THE ASSESSEE HAD CONSIST ENTLY BEEN INVESTING IN SHARES AND THAT RATIO OF SALES T O INVESTMENT IN THE SAID CASE WAS NEVER LESS. ACCORDI NGLY, THE HONBLE ITAT HAD APPLIED THE PRINCIPLE OF CONSISTENCY TO HOLD THAT THE ASSESSEE WAS MAKING INVESTMENTS AS PER LAS T YEARS IN THE SAID CASE. HOWEVER, IN THE APPELLANTS CASE THE RATIO OF SALES TO INVESTMENT IS VERY HIGH, AS THE APPELLA NT HAS ATTAINED A HUGE TURNOVER OF RS.29.55 CRORES BY INVES TING A CONSIDERABLY LESSER SUB AND ROTATING THE SAME FUNDS AGAIN AND AGAIN IN VARIOUS SCRIPTS FOR ACHIEVING SUCH TUR NOVER. 6.7. IN THE LIGHT OF THE ABOVE MENTIONED FEATURES OF THE TRADING PATTERN OF THE APPELLANT. THE ARGUM ENTS REGARDING DIVIDEND EARNED BY THE APPELLANT IN SOM E OF THE SCRIPTS AND NON BORROWAL OF FUNDS FADE INTO INSIG NIFICANCE. I, THEREFORE, HAVE NO HESITATION IN HOLDING THAT TH E ASSESSING OFFICER HAS RIGHTLY CONSIDERED THE APPELLANT AS A TRADER IN SHARES AND NOT AN INVESTOR, SO AS TO GIVE THE BEN EFIT OF THE PROVISIONS OF SEC.111A IN RESPECT OF THE GAINS MADE BY HER ON SHARE TRANSACTIONS. THE ASSESSMENT OF THE GAIN O F RS.2,29,92,072/- AS BUSINESS INCOM E AND THEREFORE UPHELD AND GROUND NO.S 2 & 3 ARE DECIDED AGAINST THE APPEL LANT. 11. REGARDING DEPRECIATION ON LCDS AND UPS, THE C IT(A) DISCUSSED THE DEFINITION GIVEN TO THE COMPUTER SYST EM AS PROVIDED IN EXPLANATION (A) TO S.36(1)(III) OF THE ACT AND MENT IONED THAT THE COMPUTER SYSTEM INCLUDES DEVICES INCLUDING INPUT A ND OUTPUT DEVICES AND ITA NO.332 & 333/HYD/2011 SMT. NANDURY SOBHA RANI AND SHRI NANDURY TE JASWY, HYDERABAD. 9 CAME TO THE CONCLUSION THAT LCD PROJECTORS ARE ONL Y OF ADDITIONAL UTILITIES AND NOT OUTPUT DEVICE IN ITSELF, AND THEREFORE, HE CONFIRMED THE APPLICABILITY OF DEPRECIATION RATE OF 15%. SIMILAR LY, REGARDING UPS, THE CIT(A) CAME TO THE CONCLUSION THAT THE UPS ARE NOT LIKE PRINTERS OR SCANNERS AND ACCORDINGLY CONFIRMED THE DISALLOWANCE MADE BY THE CIT(A) OUT OF DEPRECIATION CLAIMED BY THE ASSESSEE ON THES E ITEMS. 12. AGGRIEVED BY THE ORDERS OF THE CIT(A), ASSESSE E PREFERRED THE PRESENT APPEAL BEFORE US. 13. IN THE OTHER APPEAL, ITA NO.333/HYD/2011 OF SH RI.NANDURY TEJASVY, BUT FOR THE AMOUNTS AND OTHER NUMBERS ON S CRIPS, TURNOVER, TRANSACTION ETC INVOLVED, OTHER FACTS OF THE CASE A ND THE SUBMISSIONS ARE MUTATIS MUTANDIS THE SAME, AND HENCE, THE SAME NEED NOT BE REPEATED OVER AGAIN. 14. DURING THE PROCEEDINGS BEFORE US, LEARNED COUN SEL FOR THE ASSESSEES, REITERATED THE CONTENTIONS MADE BEFORE T HE LOWER AUTHORITIES AND ALSO URGED THAT THE ASSESSEE HAS BEEN CONSISTEN TLY ACCOUNTING THE SHARES AS INVESTMENTS IN THE BOOKS OF ACCOUNTING. HE SUBMITTED THAT THE BOOKS OF ACCOUNT OF THE ASSESSEES CLEARLY REFLECTED THE IMPUGNED SCRIPS AS INVESTMENTS AND NOT AS STOCK IN TRADE. HE FURTH ER SUBMITTED THAT SO FAR AS LONG TERM CAPITAL GAINS ARE CONCERNED, THE A SSESSING OFFICER ACCEPTED THE CLAIM OF THE ASSESSEES IN RELATION TO THE VERY SAME SCRIPS AND TREATED THEM AS INVESTMENTS ONLY, AND IT IS ONL Y IN RELATION TO THE SHORT TERM CAPITAL GAINS, HE ADOPTED THE STAND THAT THE SCRIPS ARE HELD AS STOCK IN TRADE AND NOT AS INVESTMENTS. HE SUBMITTED THAT THERE IS NO DISPUTE WITH REGARD TO THE FACT OF EARNING OF DIVID ENDS BY THE ASSESSEES AND THE DELIVERY BASED INVESTMENTS MADE BY THE ASSE SSEES. IT IS FURTHER SUBMITTED THAT THE FACTUM OF THE INVESTMENTS MADE B Y THE ASSESSEES OUT OF THEIR OWN FUNDS AND NOT OUT OF ANY BORROWED FUND S IS IGNORED BY THE ITA NO.332 & 333/HYD/2011 SMT. NANDURY SOBHA RANI AND SHRI NANDURY TE JASWY, HYDERABAD. 10 REVENUE. LD COUNSEL FOR THE ASSESSEE FURTHER HIGHLI GHTED THAT NORMALLY THE EARNING OF PROFIT IS COMMON FACTOR BOTH IN THE CASE S OF INVESTMENTS AS WELL AS TRADING ACTIVITY AND HE SUBMITTED THAT NEIT HER FREQUENCY OF INVESTMENTS NOR THE TURNOVER/VOLUME OF THE SCRIPS I N WHICH INVESTMENT IS MADE IS A CLINCHING OR DECISIVE FACTOR AND THEREFOR E, EACH CASE HAS TO BE EXAMINED INDEPENDENTLY BASED ON THE MOTIVE OF THE A SSESSEE WHILE MAKING THE TRANSACTION OF PURCHASE OF SHARES. LE ARNED COUNSEL FOR THE ASSESSEE, OPPOSING THE FINDINGS ARRIVED AT BY THE C IT(A) ON THIS ISSUE, SUBMITTED THAT THE DECISION OF THE APEX COURT IN TH E CASE OF GOPAL PUROHIT (SUPRA) IS CLEARLY APPLICABLE TO THE FACTS OF THE P RESENT CASE AS THE REVENUE ACCEPTED THE CLAIM OF THE ASSESSEE IN THE P AST AYS. LD COUNEL FILED COPIES OF LARGE NUMBER OF CASE LAWS TO DEMONS TRATE THAT THE CLAIM OF THE ASSESSEE NEED NOT BE DISTURBED AND PLEADED FOR REVERSAL OF THE ORDER OF THE CIT(A). 15. PER CONTRA , SMT. NIVEDITA BISWAS, LD CIT-DR STRONGLY SUPPORTING THE VIEW TAKEN BY THE REVENUE AUTHORITIE S AND SUBMITTED THAT THERE IS NO DISPUTE ABOUT THE FACTUAL MATRIX OF EAC H OF THE TWO CASES IE EXISTENCE OF ENTRIES IN THE BOOKS OF ACCOUNT AS INV ESTMENT AND NOT AS STOCK IN TRADE, EARNING OF DIVIDEND INCOME OUT OF T HE SAID INVESTMENTS OR EFFECTING PURCHASES OUT OF THE OWN FUNDS AND NOT OU T OF THE BORROWED FUNDS. FURTHER, SHE SUBMITTED THAT THERE IS ALSO NO DISPUTE ABOUT THE DELIVERY BASED INVESTMENTS MADE BY THE ASSESSEE. HO WEVER, THE LD DR SUBMITTED THAT THE FREQUENCY OF THE TRANSACTIONS OF PURCHASE AND SALE, HIGH VOLUME OF TURNOVER, MAGNITUDE OF THE TRANSACTI ONS ETC DEFINITELY HAVE TO BE CONSIDERED WHILE DECIDING THE ISSUE AND THE ASSESSEES INTENTION BASED ARGUMENTS IN DECIDING THE NATURE OF THE IMPUGNED TRANSACTIONS AND CONCLUDING ON THE PROPER HEAD OF I NCOME. SHE SUBMITTED THAT ONLY ON APPRECIATION OF THE TOTALITY OF THE FA CTS AND CIRCUMSTANCES OF THE EACH OF THE CASE, ONE HAS TO ARRIVE AT APPROPRI ATE CONCLUSION IN EACH CASE. IN THIS BEHALF, SHE RELIED ON THE DECISION OF MUMBAI BENCH OF THE ITA NO.332 & 333/HYD/2011 SMT. NANDURY SOBHA RANI AND SHRI NANDURY TE JASWY, HYDERABAD. 11 TRIBUNAL IN THE CASE OF HARSH MEHTA DATED 16.7.2010 , SPECTRA SHARES AND SCRIPS (P) LTD ITA NO 748/HYD/2011 AND PVS RAJU 34 0 ITR 75 FOR THE PROPOSITION THAT THE SHORT TERM CAPITAL GAINS DISCL OSED MUST BE ASSESSABLE AS BUSINESS INCOME. 16. WE HAVE HEARD BOTH SIDES OF THE LITIGATION AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND OTHER MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THERE IS NO DISPUTE ON THE FACTUAL ASPE CTS OF THE MATTER IN THIS CASE. THEREFORE, THE ONLY DISPUTE RELATES TO THE CO RRECT HEAD OF INCOME UNDER WHICH THE IMPUGNED PROFIT EARNED BY THE ASSES SEE ON THE SALE OF SHARES HELD FOR PERIOD LESS THAN 12 MONTHS HAS TO B E ASSESSED, VIZ. WHETHER UNDER THE HEAD BUSINESS OR UNDER THE HE AD CAPITAL GAINS. THE CASE OF THE ASSESSEE IS THAT WHETHER THE TRANSA CTIONS IN QUESTION SHOULD BE TREATED AS BUSINESS OR INVESTMENTS IS THE QUESTION OF FACT OR AT THE MOST A MIXED QUESTION OF LAW AND FACT AND TH E SAME VARY FROM CASE TO CASE. TRANSACTIONS OF EACH CASE HAVE TO BE DECIDED INDEPENDENTLY BASED ON MATERIAL FACTS OF THAT CASE. WE HAVE PERUS ED VARIOUS CITATIONS PLACED BY THE PARTIES BEFORE US. 17. THE GIST OF THE SOME OF THE CITATIONS QUOTED B EFORE ARE AS FOLLOWS. IN THE CASE OF CIT V/S. PNB FINANCE & INDUSTRIES LT D.(46 DTR 345), WHEREIN SHARES WERE HELD FOR SEVEN YEARS, THE DELHI HIGH COURT HELD THE SAME AS INVESTMENT AND PROFIT ON SALE IS ASSESSABLE AS CAPITAL GAINS, NOTWITHSTANDING THE FACT THAT THE OBJECT INCORPORAT ED IN ITS MEMORANDUM OF ASSOCIATION STATES THAT THE ASSESSEE CAN DEAL IN SHARES. IT WAS HELD THAT A TAX PAYER CAN HAVE TWO PORTFOLIOS, I.E. AN I NVESTMENT PORTFOLIO COMPRISING OF SECURITIES WHICH ARE TO BE TREATED AS CAPITAL ASSETS, AND A TRADING PORTFOLIO COMPRISING OF STOCK IN TRADE, WHI CH ARE TO BE TREATED AS TRADING ASSETS. SIMILAR IS THE VIEW TAKEN BY THE GUJARAT HIGH COURT IN THE CASE OF CIT V/S. NIRAJ AMIDHAR SURTI(48 DTR 33) , WHERE SHARES WERE HELD FOR 14 MONTHS. SIMILARLY, IN THE CASE OF CIT V/S. N.S.S.INVESTMENTS ITA NO.332 & 333/HYD/2011 SMT. NANDURY SOBHA RANI AND SHRI NANDURY TE JASWY, HYDERABAD. 12 (P) LTD., MADRAS HIGH COURT, BASED ON THE BOOK ENTR IES MADE AND CONSIDERING THE FACT THAT THE SHARES IN QUESTION WE RE NEVER TREATED BY THE ASSESSEE AS STOCK-IN-TRADE AND THEY WERE HELD FOR E ARNING DIVIDEND ONLY, HELD THE SHARES IN QUESTION AS INVESTMENT AND THE R ESULTANT PROFIT ON SALE AS ASSESSABLE UNDER THE HEAD CAPITAL GAINS, AS AG AINST THE ACTION OF THE DEPARTMENT IN ASSESSING THEM AS INCOME FROM BUSINES S. IN THE CASE OF CIT V/S. TRISHUL INVESTMENTS LTD.(305 ITR 434), THE MADRAS HIGH COURT, OBSERVING THAT THE ASSESSEE-COMPANY HAVING BEEN INC ORPORATED TO ENGAGE IN THE BUSINESS OF INVESTMENT IN SHARES AND SECURITIES, HELD THAT SHARES PURCHASED COULD NOT BE A BUSINESS ASSET IN T HE HANDS OF THE ASSESSEE, AND HENCE THE ASSESSEE RIGHTLY OFFERED TH E RESULTANT GAIN ON SALE UNDER THE HEAD CAPITAL GAINS. IN THE CASE OF JANAK S.RANGWALLA VS/ ACIT(11 SOT 627), MUMBAI BENCH OF THE TRIBUNAL HELD THAT MERE MAGNITUDE OF THE TRANSACTION DOES NOT CHANGE THE NA TURE OF TRANSACTION, WHICH IS BEING ASSESSED AS INCOME FROM CAPITAL GAIN S IN THE PAST SEVERAL YEARS. ON THE FACTS OF THE DISCLOSURE OF PROFITS PA RTLY AS BUSINESS INCOME AND PARTLY AS SHORT TERM CAPITAL GAINS, HON BLE AP HIGH COURT HELD IN THE CASE OF PVS RAJU 340 ITR 75 THAT THE IMPUGNED SHORT TERM CAPITAL GAINS ARE ASSASSABLE AS BUSINESS PROFITS. SAID HIGH COURT OBSERVED THAT WHEN THE FREQUENCY OF TRANSACTIONS ARE HIGH AND THE DOMI NANT INTENTION IN PURCHASE OF SHARE IS RESALE AND NOT FOR EARNING OF THE DIVIDEND AND OF COURSE, THE FIGURES RELATING TO THE FREQUENCY OR VO LUME ARE NOT MENTIONED IN THE SAID JUDGMENT. SIMILARLY, THE COORDINATE BEN CH DECISION IN THE CASE OF A SPECTRA SHARES AND SCRIPS (P) LTD VIDE ITA NO 748/HYD/2011 HAS BEEN EXPLAINED BY THE ASSESSEE AS DISTINGUISHABLE O N FACTS FROM THAT OF THE ASSESSEE IN VIEW OF THE EXTREMELY HIGH FREQUENC Y OF SHARES TRANSACTION. ASSESSEE FILED A CHART SHOWING THE NIN E DISTINCT DIFFERENCES FROM THE FACTS OF THIS CASE AND WE FIND THAT THE SC ALE OF TRANSACTIONS AND THE VOLUME IS RELATIVELY MORE VIS A VIS THE FACTS O F THE INSTANT CASE. 18. THE DECISION OF THE TRIBUNAL IN THE CASE OF HA RSHA MEHTA DATED 16.7.2010 IN ITA NO.1859/MUM/2009, WAS PRONOU NCED ON THE FACTS ITA NO.332 & 333/HYD/2011 SMT. NANDURY SOBHA RANI AND SHRI NANDURY TE JASWY, HYDERABAD. 13 OF 70 TRANSACTIONS INVOLVING 35 SCRIPS WITH THE TUR NOVER OF NEARLY RS.3- CRORES. TRIBUNAL CAME TO THE CONCLUSION THAT THE GA IN ON SALE OF THE SHARES HAS TO BE TREATED AS BUSINESS INCOME, WHEN T HE HOLDING PERIOD IS ONE MONTH TO SEVEN MONTHS. IN THE CASE OF HARSHA MEHTA (SUPRA), THE BOMBAY BENCH OF THE TRIBUNAL HAS DECIDED THE ISSUE BASED ON THE FACT THAT THE ASSESSING OFFICER ARTIFICIALLY CATEGORIZED THE TRANSACTIONS BASED ON THE HOLDING PERIOD, BY CONSIDERING THE GAIN ON SALE OF SHARES HELD FOR MORE THAN 30 DAYS AS CAPITAL GAIN ARISING FROM INVE STMENT, AND ON SALE OF SHARES HELD FOR LESS THAN 30 DAYS AS BUSINESS INCOM E. HOWEVER, THE TRIBUNAL HAS NOT APPROVED SUCH CATEGORIZATION MADE BY THE ASSESSING OFFICER. TRIBUNAL DECIDED THE SAME CONSIDERING THE WELL ESTABLISHED LEGAL PRINCIPLES ON THE ISSUE AND PARAGRAPH 12 IS RELEVAN T, WHICH IS AS UNDER. 12. . (A) IT IS POSSIBLE FOR AN ASSESSEE TO BE BOTH AN INVEST OR AS WELL AS DEALER IN SHARES; (B) WHETHER A TRANSACTION OF SALE AND PURCHASE OF SHARE S IS A TRADING OR INVESTMENT TRANSACTION IS A MIXED QUESTION OF LA W AND FACT. (C) WHETHER A PARTICULAR HOLDING IS BY WAY OF INVESTMEN T OR OF STOCK OF STOCK IN TRADE IS A MATTER WITHIN THE KNOWLEDGE OF THE ASSESSEE AND IT IS FOR THE ASSESSEE TO PRODUCE EVIDENCE FRO M THE RECORDS AS TO WHETHER HE MAINTAINED ANY DISTINCTION BETWEEN SHARES HELD AS INVESTMENTS AND THOSE HELD AS STOCK IN TRAD E. (D) THE TREATMENT IN THE BOOKS OF AN ASSESSEE IS NOT CO NCLUSIVE AND IF THE VOLUME, FREQUENCY AND REGULARITY AT WHICH TRANS ACTIONS ARE CARRIED OUT INDICATE SYSTEMATIC AND ORGANISED ACTIV ITY WITH PROFIT MOTIVE, THEN IT BECOMES BUSINESS PROFIT & NO T CAPITAL GAIN. (E) PURCHASE WITH INTENTION TO RESELL CAN CONSTITUTE CA PITAL GAIN OR BUSINESS PROFIT DEPENDING ON CIRCUMSTANCES LIKE QUA NTITY OF PURCHASE AND NATURE OF ACTIVITY. (F) NO SINGLE FACT HAS ANY DECISIVE SIGNIFICANCE AND TH E QUESTION MUST BE ANSWERED DEPENDING UPON SELECTIVE EFFECT OF ALL RELEVANT MATERIALS BROUGHT ON RECORD. 19. FROM THE ABOVE, IT IS EVIDENT THAT THERE IS NO ONE FIXED CRITERION TO DECIDE THE ISSUE ON HAND AND THERE IS NEED FOR CONSIDERING THE VARIOUS FACETS AND WEIGH ALL OF THEM BEFORE DECIDI NG THE GROUNDS. APEX ITA NO.332 & 333/HYD/2011 SMT. NANDURY SOBHA RANI AND SHRI NANDURY TE JASWY, HYDERABAD. 14 COURT DECISION IN THE CASE OF ASSOCIATED INDUSTRIAL DEVELOPMENT CO. P. LTD. (82 ITR 586); IN THE CASE OF HOLCK LARSEN (168 ITR 67); AAR DECISION IN THE CASE OF 288 ITR 641 AND CBDT CIRCULAR NO.4 O F 2007 DATED 15.6.2007 ARE HELPFUL FOR RELEVANT GUIDELINES FOR D ECIDING WHETHER A PARTICULAR TRANSACTION RESULTED IN CAPITAL GAINS OR OTHERWISE. GIVEN THE PECULIAR FACTS OF THE CASES, IN OUR OPINION, ALL TH E AVAILABLE FACETS CAN BE SUMMARIZED UNDER THE FOLLOWING HEADINGS FOR THE PUR POSE OF THE ANALYSIS AND ADJUDICATION AND THEY ARE: (A) TREATMENT AS GIVEN IN THE BOOKS OF ACCOUNT IN RESPE CT OF THE IMPUGNED TRANSACTIONS. (B) FREQUENCY, MAGNITUDE AND REGULARITY OF THE IMPUGNED TRANSACTIONS; (C) OTHER ISSUES SUCH AS WHETHER THE DIVIDEND IS EARNED OR WHETHER THE TRANSACTIONS ARE DELIVERY BASED OR OTHE RWISE; THE CONDUCT OF THE ASSESSEE; (D) ORIGINAL AND DOMINANT INTENTION; AND (E) CONSISTENCY OF THE REVENUE APPROACH IN ACCEPTING TH E CLAIM OF THE ASSESSEE DESPITE THE APPLICABILITY OF THE PRINC IPLE OF RES JUDICATA ROLE OF JUDGMENT OF THE APEX COURT IN THE CASE OF GOPAL PUROHIT (SUPRA) 20. LET US EXAMINE HEREUNDER, THE ABOVE ASPECTS I N THE LIGHT OF THE FACTS OF THE PRESENT CASES. (A) TREATMENT GIVEN IN THE BOOKS OF ACCOUNT: IT IS AN UNDISPUTED FACT THAT BOTH THE ASSESSEES UNDER CONSIDERATION HA VE BEEN CONSISTENTLY SHOWING THE IMPUGNED TRANSACTIONS AS INVESTMENTS AN D CONSEQUENTLY, THE PROFITS ON SALE OF SUCH INVESTMENTS HAVE TO BE TREA TED AS CAPITAL GAINS. THERE IS ALSO NO DISPUTE SO FAR AS CLAIM ON LONG TE RM CAPITAL GAINS IS CONCERNED, AS THE ASSESSING OFFICER ACCEPTED WITHO UT DISTURBING THE CLAIM OF THE ASSESSEES. THE DISPUTE RELATES TO THE SHORT TERM CAPITAL GAINS ITA NO.332 & 333/HYD/2011 SMT. NANDURY SOBHA RANI AND SHRI NANDURY TE JASWY, HYDERABAD. 15 SEGMENT ONLY. THE ASSESSING OFFICER TOOK THE VIEW T HAT CONSIDERING THE HOLDING PERIOD OF THE SHARES IN QUESTION, THE PROFI T ON THE SALE OF THE SHARES HAS TO BE TREATED AS BUSINESS INCOME. THE AS SESSING OFFICER ANALYSED THAT IN THE CASE OF SMT.SHOBHA RANI, OUT O F 174 TRANSACTIONS, 43 TRANSACTIONS INVOLVED THE SHARES HELD FOR A PERIOD LONGER THAN 4 MONTHS AND REST OF 131 TRANSACTIONS RELATE TO SHARES WERE HELD FOR PERIOD LESS THAN FOUR MONTHS ONLY. IN THE CIRCUMSTANCES, THE A SSESSING OFFICER CAME TO THE CONCLUSION THAT THE TRANSACTIONS HELD FOR LE SS THAN FOUR MONTH HAVE TO BE HELD AS BUSINESS TRANSACTIONS AND THE SAME WA S CONFIRMED BY THE CIT(A). BUT, THE FACT IS THAT ALL THESE TRANSACTION S WERE SHOWN AS INVESTMENTS SO FAR AS THE ENTRIES IN THE BOOKS OF A CCOUNT ARE CONCERNED. THE CIT(A) DISCUSSED THIS FACTUAL POSITION STATING THAT THE ENTRIES IN THE BOOKS OF ACCOUNT ARE NOT DECISIVE FACTOR. IN THE P ROCESS, THE CIT(A) IGNORED THE LEGAL POSITION THAT NO SINGLE CRITERION OF THIS KIND IS GOING TO DECIDE THE NATURE OF THE TRANSACTION AND THERE IS N EED FOR WEIGHING ALL THE FACETS BOTH QUANTITATIVE AND QUALITATIVE FACETS OF THE TRANSACTIONS. IN THE PROCESS, HE IGNORED THE SET LEGAL PRINCIPLE THAT TH E VARIOUS ASPECTS NOTED ABOVE HAVE TO BE CUMULATIVELY CONSIDERED FOR DECIDI NG THE ISSUE AND NO SINGLE ASPECT LIKE ENTRIES IN THE BOOKS CAN BE CONS IDERED AS A CLINCHING ONE TO BE VIEWED IN ISOLATION. THEREFORE, WE CANNO T APPROVE THIS KIND OF STAND-ALONE BASED DECISION OF THE CIT(A). HE SHOULD HAVE CONSIDERED OTHER PARAMETERS ALSO WHILE DECIDING THE NATURE OF THE TRANSACTIONS IN THE INSTANT CASES AND THE PARAMETERS MAY BE BOOK ENTRIE S, DIVIDEND EARNINGS, FACT OF DELIVERY BASED TRANSACTIONS, IMPUGNED INVES TMENTS ARE MADE OUT OF THE OWN FUNDS AND NOT OUT OF THE BORROWINGS ETC. IT IS A WELL ESTABLISHED LEGAL PRINCIPLE THAT THE ENTRIES IN THE BOOKS OF ACCOUNT ARE NOT DECISIVE BUT IT IS EQUALLY A SETTLED LEGAL PRINCIPL E VIDE THE JUDGMENT IN THE CASE OF PVS RAJU, SUPRA THAT CERTAINLY IT IS ONE OF THE CRITERIA WHICH MUS T BE CONSIDERED FOR DECIDING THE NATURE OF THE TRANSA CTIONS. IN THE SAID JUDGMENT, HONBLE AP HIGH COURT COMMENTED THAT NO SI NGLE CRITERION IS DECISIVE IN DETERMINING THE QUESTION WHETHER A PART ICULAR RECEIPT IS CAPITAL ITA NO.332 & 333/HYD/2011 SMT. NANDURY SOBHA RANI AND SHRI NANDURY TE JASWY, HYDERABAD. 16 OR REVENUE. THE ANSWER TO THE QUESTION MUST ULTIMAT ELY DEPEND ON THE FACTS OF EACH PARTICULAR CASE AS HELD BY THE SUPREM E COURT IN THE CASE OF SAURASHTRA CEMENT LTD 325 ITR 422. THEREFORE, CONSI DERING THE ENTRIES IN THE BOOKS OF THE ASSESSEES, THE ORIGINAL INTENTION IS DISPLAYED AND ON THIS SCORE, THE ASSESSEE CLAIM GETS STRENGTH. (B) FREQUENCY, MAGNITUDE AND REGULARITY OF THE TRANSACTIONS : WE HAVE NOTED HEREINABOVE, THE NUMBER OF TRANSAC TIONS, FREQUENCY, VOLUME AND REGULARITY OF THE IMPUGNED TR ANSACTIONS RELATING TO SHARES HELD FOR PERIOD LESS THAN 12 MONTHS. PARA 6. 2 OF THE CIT(A) ORDERS IN BOTH THE CASES PROVIDES NUMERICAL OF THE TRANSAC TIONS AND ACCORDINGLY, THE RS 29.55 CRORES IS THE TOTAL TURNOVER AND IT IN CLUDES BOTH PURCHASES AND SALES IN THE CASE OF SOBHA RANI AND IN THE CAS E OF TEJESWY, THE PURCHASES ARE TO THE TUNE OF RS 77 CRORES AND SALES OF RS 80 CRORES. AO IS OF THE VIEW THESE FIGURES DENOTE HUGE AND HIGH FREQ UENCY. FURTHER, SCRIPS TRANSACTED ARE ONLY 138 IN THE CASE OF TEJESWY AND 54 IN THE CASE OF SOBHA RANI. AO DESCRIBED THEM AS VERY HIGH AND THE SAME WAS CONFIRMED BY THE CIT(A). BUT NEITHER OF THE ORDERS CONTAINS T HE REASONS FOR OPINING OR DESCRIBING IT SO. WE HAVE TO EXAMINE THE SCALE O F FREQUENCY OF SHARE TRANSACTIONS AND FIND THAT THERE IS THE TERM HIGH FREQUENCY IS UNDEFINED. HOWEVER, IT WAS HELD BY THE MUMBAI BENCH OF EH TRIB UNAL IN THE CASE OF NAGINDAS P.SHETH (ITA NO.961 & 1836/MUM/10), COPY O F WHICH IS FILED AT PAGE 48 OF THE PAPER-BOOK THAT MERELY BECAUSE THE ASSESSEE TRANSACTED IN 158 SHARES, IT SHOULD NOT BE TAKEN AS SOLE CRIT ERIA TO COME TO THE CONCLUSION THAT THE ASSESSEE IS A TRADER IN SHARES. THUS PARA 7 OF THE SAID ORDER IS RELEVANT IN THIS REGARD, AND RELEVANT PORT ION OF THE SAME IS EXTRACTED BELOW- 7. ...SUCH BEING THE CASE, MERELY BECAUSE ASSESS EE TRANSACTED IN 158 SHARES THAT SHOULD NOT BE TAKEN AS A SOLE CRITE RION TO COME TO THE CONCLUSION THAT ASSESSEE IS A TRADER IN SHARES. IT IS NOT IN DISPUTE THAT IN THE BOOKS OF ACCOUNTS ASSESSEE HAS DECLARED THE SHA RES AS AN INVESTMENT AND THE FINDING OF THE LEARNED CIT(A) THAT ONLY OWN FUNDS WERE UTILISED ITA NO.332 & 333/HYD/2011 SMT. NANDURY SOBHA RANI AND SHRI NANDURY TE JASWY, HYDERABAD. 17 FOR PURCHASE OF SHARES WAS NOT CONTRADICTED BY THE LEARNED DR. IT WAS ALSO HIGHLIGHTED BY THE LEARNED CIT(A) THAT ASSESSE E HAD NOT INDULGED IN ANY SQUARING-UP OF THE TRANSACTIONS ON THE SAME DAY . ON A CONSPECTUS OF THE M ATTER, WE ARE OF THE VIEW THAT THE TRANSACTIONS OF PURCHASE AND SALE OF SHARES, IN THE INSTANT CASE, DESERVES TO BE CONSIDERED AS INVESTMENT AND PROFIT THEREON HAS TO BE ASSESSED TO TAX UNDER THE HEAD CAPITAL GAINS. W E DIRECT THE ASSESSING OFFICER ACCORDINGLY. SIMILAR VIEWS WERE EXPRESSED BY THE MUMBAI BENCH OF THE TRIBUNAL IN ANOTHER CASE OF JANAK S. RANGWALA (11 SOT 627)(MUM) , COPY OF WHICH IS FILED AT PAGE 10 OF THE PAPER-BOOK. AT PARA 6 OF TH E SAID ORDER OF THE TRIBUNAL, IT IS HELD THAT MERE VOLUME OF TRANSACTIO NS ENTERED INTO BY THE ASSESSEE WOULD NOT ALTER THE NATURE OF THE TRANSACT IONS. IN PARA 7 OF THE SAID JUDGMENT IT IS HELD AS FOLLOWS- 7. IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE IS HOLDING THE SHARES AS INVESTMENT FROM YEAR TO YEAR. IT IS THE INTENTION OF THE ASSESSEE WHICH IS TO BE SEEN TO DETERMINE THE NATUR E OF TRANSACTION CONDUCTED BY THE ASSESSEE. THOUGH THE I NVESTMENT IN SHARES IS ON A LARGE MAGNITUDE BUT THE SAME SHALL N OT DECIDE THE NATURE OF TRANSACTION. SIMILAR TRANSACTIONS OF SALE AND PURCHASE OF SHARES IN THE PRECEDING YEARS HAVE BEEN HELD TO BE INCOM E FROM CAPITAL GAINS BOTH ON LONG TERM AND SHORT TERM BASI S. THE TRANSACTION IN THE YEAR UNDER CONSIDERATION ON ACCO UNT OF SALE AND PURCHASE OF SHARES IS SAME AS IN THE PRECEDING YEAR S AND THE SAME MERITS TO BE ACCEPTED AS SHORT TERM CAPITAL GAINS. THERE IS NO BASIS FOR TREATING THE ASSESSEE AS A TRADER IN SHAR ES, WHEN HIS INTENTION WAS TO HOLD THE SHARES OF INDIAN COMPANIE S AS AN INVESTMENT AND NOT AS STOCK IN TRADE. THE MERE MAGN ITUDE OF THE TRANSACTIONS DOES NOT CHANGE THE NATURE OF TRANSACT ION, WHICH ARE BEING ASSESSED AS INCOM E FROM CAPITAL GAINS IN THE PAST SEVERAL YEARS. THE ASSESSING OFFICER IS DIRECTED TO SET OFF THE LONG TERM CAPITAL GAINS AGAINST THE SHORT TERM CAPITAL GAINS OF THE YEAR UNDER CONSIDERATION. THE GROUNDS OF APPEAL RAISED B Y THE ASSESSEE ARE ALLOWED. THUS, MERELY 158 SCRIPS WERE TRANSACTED AS IN THE C ASE OF NAGINDAS P.SHETH (SUPRA), THE TRIBUNAL CAME TO THE CONCLUSIO N THAT THE ORIGINAL INTENTION WHICH IS DISPLAYED BY THE ENTRIES IN THE BOOKS SHOULD BE GIVEN MORE WEIRTAGE OVER THE FREQUENCY OF TRANSACTIONS. A S SUCH, THERE ARE NO STANDARDS TO DESCRIBE PARTICULAR NUMBER OF TRANSACT IONS SHOULD BE DESCRIBED AS LOW OR AVERAGE OR HIGH OR VERY HIGH. L OW OR HIGH FREQUENCIES DEPEND HEAVILY ON THE EXTENT OF CAPITAL INFUSED BY THE ASSESSEE AND IT ITA NO.332 & 333/HYD/2011 SMT. NANDURY SOBHA RANI AND SHRI NANDURY TE JASWY, HYDERABAD. 18 VARY FROM ONE PERSON TO THE OTHER. IN THIS INSTANT CASE, THE FREQUENCY CANNOT BE DESCRIBED HIGH AS ON AN AVERAGE, THE ASSE SSEE ENTERED IN THE PURCHASE TRANSACTION NOT EVEN ONCE EVERY ACTIVE DAY . SAME IS THE DISCUSSION WITH REGARD TO OTHER FACETS SUCH AS MAGN ITUDE AND REGULARITY OF THE TRANSACTIONS. (C) ORIGINAL AND DOMINANT INTENTION: THIS IS ANOTHER ASPECT THE AP HIGH COURT HAS CONSIDERED IN THE CASE OF P V S R AJU SUPRA WHILE DECIDING THAT CASE. THE HONBLE HIGH COURT IS OF THE VIEW THE PURCHASES OF SHARES MADE WITH A VIEW TO RESELL FOR PROFIT FREQUE NTLY SHOULD BE DESCRIBED AS BUSINESS TRANSACTIONS AND NOT THE CAPITAL GAINS TRANSACTION. THUS, THE ISSUE OF DOMINANT INTENTION IS CLOSELY LINKED TO F REQUENCY, MAGNITUDE AND TURNOVER OF THE TRANSACTIONS AS THE FREQUENCY IS DE PENDENT ON THE RESELL TRANSACTIONS. (D) OTHER ISSUES SUCH AS WHETHER THE DIVIDEND IS EA RNED OR WHETHER THE TRANSACTIONS ARE DELIVERY BASED OR OTHE RWISE; THE CONDUCT OF THE ASSESSEE: THERE IS NO DISPUTE ON THE FACT THAT THE ASSESSEES BEING INDIVIDUALS ARE NEITHER BROKERS OR SUB-BROKERS NOT THE CORPORATE BODIES. HOWEVER, IT APPEARS THAT THEY AR E WELL INFORMED INDIVIDUALS ABOUT THE CAPITAL MARKET TRENDS. REGAR DING DIVIDENDS, IT IS AN UNDISPUTED FACT THAT SOBHA RANI REGISTERED DIVIDEND S TO THE TUNE OF RS.2,38,408/- AND THE TRANSACTIONS IN QUESTIONS ARE ENTIRELY DELIVERY BASED. RS 8,38,073/- IS THE DIVIDEND EARNED BY TEJE SWY, WHO ALSO REGISTERED THE DEALINGS WITH FUTURES AND OPTIONS IN THE YEAR UNDER CONSIDERATION. THUS, THESE FACTS GO TO SUPPORT AND STRENGTHEN THE STAND OF THE ASSESSEE THAT THEY ARE ONLY INVESTORS AND HE LD THE SHARES IN QUESTION ONLY AS INVESTMENTS. (E) CONSISTENCY OF THE REVENUE APPROACH IN ACCEPTIN G THE CLAIM OF THE ASSESSEE DESPITE THE APPLICABILITY OF THE PRINCIPLE OF ITA NO.332 & 333/HYD/2011 SMT. NANDURY SOBHA RANI AND SHRI NANDURY TE JASWY, HYDERABAD. 19 RES JUDICATA ROLE OF JUDGMENT OF THE APEX COURT IN THE CASE OF GOPAL PUROHIT (SUPRA): THE JUDGMENT IN THE CASE OF GOPAL PUROHIT IS RELEVANT FOR THE RATIO THAT THE REVENUE OUGHT TO MA INTAIN CONSISTENCY OF TREATMENT TO THE CLAIMS OF THE ASSESSEE SO LONG AS THE MATERIAL FACTS OF ISSUE OVER THE AYS ARE IDENTICAL. THE CASE OF THE A SSESSEES BEFORE US IS THAT THE DECISION OF BOMBAY HIGH COURT AND APEX COU RT IN THE CASE OF GOPAL PUROHIT (SUPRA) APPLIES. ON THE OTHER HAND, T HE CASE OF THE REVENUE IS ENTIRELY OPPOSITE. IN THIS CONTEXT, WE HAVE EXAM INED THE FACTS OF THE CASE OF SOBHA RANI AND CONSIDERED THE ASSESSEES ARG UMENT THAT THE ASSESSEES HAVE BEEN CONSISTENTLY PURCHASING THE SHA RES AND SELLING THE SAME, AND THE CLAIM OF THE ASSESSEES WAS ACCEPTED O VER THE YEARS BY THE ASSESSING OFFICER AND WITH THE EXCEPTION OF THE CUR RENT AY AND SUBSEQUENT ONES. IN THIS YEAR AND THAT TOO ONLY IN THE SEGME NT OF SHORT TERM CAPITAL GAINS, THE ASSESSING OFFICER HAS NOT ACCEPTED THE C LAIM OF THE ASSESSEE IN RESPECT OF SHARES HELD FOR LESS THAN ONE YEAR. THI S KIND OF INCONSISTENCY FROM THE POINT OF VIEW OF THE REVENUE IS NOT APPREC IATED IN VIEW OF THE DECISION OF THE APEX COURT IN THE CASE OF GOPAL PUR OHIT (SUPRA). IT IS SO HELD BY THE COURT DESPITE THE SETTLED POSITION IN L AW THAT THE PRINCIPLE OF RES JUDICATA DOES NOT APPLY TO THE INCOME-TAX PROCEEDINGS. 21. WE HAVE EXAMINED THE ABOVE LEGAL PRINCIPLE TO THE FACTS RELATING TO THE CASE OF SMT. SOBHA RANI. IN THIS CASE FOR THE P RECEDING AY, VIZ. 2006- 07, THE ASSESSEE INVOLVED IN PURCHASE OF SHARES TO THE TUNE OF 73,000 AND DID NOT SELL ANY SHARES DURING THE YEAR, WHEREAS IN THE YEAR UNDER CONSIDERATION, VIZ. ASSESSMENT YEAR 2007-08, ASSESS EE REGISTERED BOTH PURCHASES AND SALES. THE CLAIMS OF THE ASSESSEE WAS ACCEPTED FOR THE AY 2006-07 AND REJECTED IN RESPECT OF THE STCG IN THE CURRENT YEAR. REVENUE AUTHORITIES SHOULD HAVE ANALYSED THESE RELEVANT MAT ERIAL FACTS AND THE DISTINGUISHING FACETS BEFORE DISMISSING APPLICABILI TY OF THE JUDGMENT OF THE APEX COURT IN THE CASE OF GOPAL PUROHIT (SUPRA). WE DO NOT SUFFICIENT BREAK UP OF FIGURES PERTAINING TO THE CASE OF TEJES WY. ITA NO.332 & 333/HYD/2011 SMT. NANDURY SOBHA RANI AND SHRI NANDURY TE JASWY, HYDERABAD. 20 22. TO SUM UP, ON THE CRITERION OF ORIGINAL INTEN TION AND THE MAKING ENTRIES OF THE IMPUGNED TRANSACTIONS IN THE BOOKS OF ACCOUNT AT THE TIME OF EFFECTING PURCHASES, THERE ASSESSEES HA VE UNDISPUTEDLY REFLECTED THEM AS INVESTMENTS AND NOT AS STOCK IN T RADE. THEREFORE THE ORIGINAL INTENTION IS TO TREAT THEM AS INVESTMENTS. THUS, THE CLAIM OF THE ASSESSEE HAS TO BE JUSTIFIED ON THIS CRITERION. HOW EVER, CLAIM OF THE ASSESSEE CANNOT BE DECIDED BASED ON SINGLE CRITERIO N. 23. REGARDING THE ALLEGATION OF HIGH FREQUENCY, H IGH VOLUME OR MAGNITUDE, REGULARITY ETC, AS ALREADY DISCUSSED, TH ERE IS NO DEFINITION FOR THESE EXPRESSIONS. IT IS THE OPINION OF THE AO/CIT( A) WHICH IS FORMED NOT BASED ON ANY COMPARABLE CASES OR CASE LAWS. FOR SOM EBODY, ONE TRANSACTION FOR A DAY AND MANY NOT BE HIGH FOR THE OTHERS, IT IS MANY BE A CASE OF INSIGNIFICANT. NEITHER THE CIT(A) NOR THE AO HAS BROUGHT OUT ANY COMPARABLE CASES TO DEMONSTRATE THAT THE TRANACTIO NAL FREQUENCY OR NUMBER OF TRANSACTIONS HAVE TO BE BRACKETED AS HIG H AND THEREFORE, THE DOMINANT INTENTION OF THE ASSESSEE IN PURCHASE OF T HE SHARES IS TO RESELL THE SAME AND NOT FOR INVESTMENT. THE JURISDICTIONAL JUDGMENT IN THE CSE OF BVS RAJU SUPRA DOES NOT REFER TO THE NUMBER OF T RANSACTION TO CATEGORISE THE FREQUENCY OF TRANSACTIONS AS HIGH. T HEREFORE, IN OUR OPINION, WITH 174 TRANSACTIONS INVOLVING AROUND 58 SCRIPS IN THE CASE OF SOBHA RANI AND 138 SCRIPS IN THE CASE OF TEJESWY, T HE SAME OUGHT NOT TO HAVE BEEN CONSIDERED TOO HIGH FOR AN YEAR AS ON AN AVERAGE BASIS AND AS THE ASSESSEES ENTERED INTO NOT EVEN ONE TRANSACTION PER ANY WORKING DAY. IT IS NOT THE CASE IN THE INSTANT CASES THAT THE AS SESSEES ENTERED INTO 10S OR 100S OR 1000S OF TRANSACTIONS EACH AND EVERY DAY . THEREFORE, THE ONE TRANSACTION EVERY ALTERNATE DAY SHOULD BY NO MEANS BE CONSIDERED HIGH. AT THE MAXIMUM, IN THE SCALE OF LOW, MIDDLE, HIGH A ND VERY HIGH, THE AFOREMENTIONED TRANSACTIONAL FREQUENCIES OF THE PRE SENT ASSESSEES MAY FALL SOME WHERE IN THE CATEGORIES OF LOW AND THE MI DDLE LEVELS AND ITA NO.332 & 333/HYD/2011 SMT. NANDURY SOBHA RANI AND SHRI NANDURY TE JASWY, HYDERABAD. 21 CERTAINLY NOT IN HIGH AS HELD BY THE REVENUE AUTH ORITIES. HOWEVER, OUR OBSERVATION IS SUBJECTED TO OUTCOME OF THE EXERCISE OF DELVING OF ANY COMPARABLE CASES BY THE CIT(A) IN THE REMAND PROCEE DINGS. 24. REGARDING VOLUME/TURNOVER, AROUND 25 CRORES I N THE CASE OF SOBHA RANI AND RS 70 CRORES OF PURCHASES + RS 88 CR ORES OF SALES IN THE CASE OF TEJESWY, IN OUR OPINION, WE NEED TO EXAMINE IF IT CONSTITUTES VERY HIGH OR OTHERWISE. IT IS A FACT THAT THE SIZE OF TH E TRANSACTIONAL VOLUME AND THE TURNOVERS ARE DEPENDENT ON TYPE SHARES TOO. THE ORDERS OF THE CIT(A) DOES NOT DISCUSS THE TYPE OF SHARES AND IF T HE HIGH VALUE SCRIPS ARE INVOLVED. 25. IT IS ALSO RELEVANT TO MENTION HERE THAT THE MERE HIGH FREQUENCY DOES NOT DECIDE THE NATURE OF THE TRANSAC TION AS MERE BOOK ENTRIES DOES NOT DO SO. REGARDING TURNOVER, VOLUME AND FREQUENCY, IN THE CASE OF ACIT V/S. BRIGHT STAR INVESTMENT (P)LTD. (2 4 SOT 288), THE BOMBAY BENCH OF THE TRIBUNAL HAS HELD THAT THESE P ARAMETERS ARE NOT DETERMINANTS AND DECISIVE. AS PER THIS JUDGMENT, TH E BOOK ENTRIES AND THE INTENTION OF THE ASSESSEE ASSUMES VERY SIGNIFIC ANT. PROFIT EARNING MOTIVE OF THE ASSESSEE IS ALSO HELD TO BE NOT A DEC IDING FACTOR. AS FOR THE PRINCIPLE OF CONSISTENCY AND APPLICABILITY OF THE D ECISION OF THE BOMBAY IN THE CASE OF GOPAL PUROHIT (SUPRA), WE FIND THAT THE SAME IS NOT PRIMA FACIE APPLICABLE TO THE FACTS OF THE PRESENT CASES IN VI EW OF THE MATERIAL DIFFERENCES ON FACTS. THEREFORE, WE ARE OF THE OPIN ION, THE ISSUE HAS TO BE EXAMINED AGAIN BY THE CIT(A) TO ASSESS AND EVALUATE IF THE TRANSACTIONAL FREQUENCY IN QUESTION FALL IN THE CATEGORY OF HIGH OR MIDDLE OR LOW. CIT(A) MAY ATTEMPT TO COLLECT REQUISITE DATA FOR DESCRIBIN G THE IMPUGNED FREQUENCY AS HIGH AND THEREFORE GIVE FINDING ON THE DOMINANT INTENTION AS OUTLINED BY THE JURISDICTIONAL HIGH COURT IN THE CA SE OF BVS RAJU SUPRA. ITA NO.332 & 333/HYD/2011 SMT. NANDURY SOBHA RANI AND SHRI NANDURY TE JASWY, HYDERABAD. 22 26. DELIVERY BASED TRANSACTION OF SHARES TOGETHER WITH THE FACT OF ORIGINAL INTENTION OF TREATING THE SAME AS INVES TMENTS IN THE BOOKS OF ACCOUNTS STRENGTHEN THE ASSESSEES CLAIMS AS INVEST MENT. FACT OF EXISTENCE OF EARNING OF DIVIDEND IN BOTH THE CASES CEMENTS THE ASSESSEES CLAIM. IT IS ALSO UNDISPUTED FACT THAT THE ASSESSEES OWN FUNDS WERE INVESTED IN THE SHARES AND NOT THE BORROWED FUNDS. IN OUR OPINION, THESE FINDINGS CERTAINLY GO IN FAVOUR OF THE ASSESSEES C LAIM. REGARDING THE CRITERION OF DIVIDEND EARNED BY THE ASSESSEE, WE FI ND THAT THE ASSESSEE- SOBHA RANI EARNED THE DIVIDEND OF RS 2,38,408/- AND IT IS NOT KNOWN IF ANY PART OF THE SAME RELATES TO THE IMPUGNED SHORT TERM CAPITAL ASSETS HELD AS STOCK IN TRADE BY THE AO. SIMILARLY, ASSE SSEE- TEJESWY REGISTERED THE DIVIDEND AROUND RS 8 LAKHS AND THERE IS NO BREA K FOR THIS TOO. CIT(A) SHOULD OBTAIN THE SAME BEFORE COMMENTING ON THE ISS UE BASED THIS CRITERION TOO. 27. FURTHER, IT IS A SETTLED LEGAL PROPOSITION THA T MERE ENTRY OF TRANSACTIONS AS INVESTMENT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE IS NOT CONCLUSIVE IN MATTERS OF DECIDING THE CAPITAL N ATURE OF THE SHARES TRANSACTIONS. HOWEVER, IT IS ALSO SETTLED LEGAL PRI NCIPLE, THE ENTRIES IN THE BOOKS AS INVESTMENT IS JUST ONE OF FACETS HELPFUL F OR DECIDING THE SAID NATURE. IT IS SO CONSIDERING THE INITIAL INTENTION AND MINDSET OF THE ASSESSEE. WHEN THE ASSESSEE ENTER INTO THE TRANSACT ION OF PURCHASE OF THE SHARE ON A PARTICULAR DAY/TIME AND THE ASSESSEE OR HIS ACCOUNTANT HAS TO PASS ENTRY OF SUCH TRANSACTION IN THE BOOKS OF A CCOUNTS, HE HAS TO TAKE A CONSCIOUS DECISION TO TREAT THE SAME EITHER AS IN VESTMENT OR TRADING TRANSACTION AND THIS CONSCIOUS DECISION REFERS TO T HE INITIAL INTENTION MENTIONED ABOVE AND ASSUME VERY SIGNIFICANT FOR DEC IDING THE TRANSACTIONAL NATURE, WHETHER INVESTMENT OR TRADING ONE. IN THE INSTANT CASE, THE UNDISPUTEDLY, THE ASSESSEE IS ENGAGED IN INVESTMENT PORTFOLIO AS ACCEPTED BY THE REVENUE WITH REGARD TO THE LONG TER M HELD SCRIPS. WE ALSO FIND THE REVENUE ARTIFICIALLY DIVIDED THE SAME BUNDLE OF SCRIPS OF THE ITA NO.332 & 333/HYD/2011 SMT. NANDURY SOBHA RANI AND SHRI NANDURY TE JASWY, HYDERABAD. 23 SAME COMPANY INTO LONG TERM CAPITAL ONES AND THE ST OCK IN TRADE SOLELY BASED ON THE HOLDING PERIOD. IN THE PROCESS, THE AO AND THE CIT(A) GAVE A SLIP TO THE SET PRINCIPLE THAT NO ONE FACET OR CR ITERION LIKE HOLDING PERIOD SHALL DECIDE THE NATURE OF THE TRANSACTION. REVENU E OUGHT TO CONSIDERED ALL THE ABOVE MENTIONED FACETS CUMULATIVELY OF THE IMPUGNED TRANSACTION AND WEIGH THE SAME BEFORE OPINING THAT THE SHARE HELD FOR LESS THAN 12 MONTHS CONSTITUTES STOCK IN TRADE OF THE ASSESSEE AND NOT THE INVESTMENT AS CLAIMED IN THE BOOKS BY THE ASSES SEE. 28. THEREFORE, THE INITIAL INTENTION AND CONSEQUEN TIAL ENTRIES OF TRANSACTION IN THE BOOKS OF THE ASSESSEE SUPPORT TH E CLAIM OF THE ASSESSEE WITH REGARD TO THE SHORT TERM CAPITAL GAINS. FURTHE R, CONSIDERING NOT EVEN ONE SHARE TRANSACTION PER ANY WORKING DAY OF THE CA PITAL MARKET OPERATIONS, ON AN AVERAGE, THE VOLUME, FREQUENCY, M AGNITUDE AND REGULARITY IS NO SO HIGH AND THEREFORE THE REVENUE HAS WRONGLY HELD THAT THE FREQUENCY AND VOLUME IS HIGH. 29. THEREFORE, WE ARE OF THE OPINION THAT THE VIEW TAKEN BY THE REVENUE AUTHORITIES CANNOT BE OUTRIGHT WHEN THERE A RE NO FINDING ON VARIOUS ASPECT OR CRITERIA SET BY THE JURISDICTIONA L HIGH COURT IN THE CASE OF BSV RAJU SUPRA. WE ACCORDINGLY SET ASIDE THE IMPUG NED ORDERS TO THE FILES OF THE CIT(A) ON THIS ISSUE, AND DIRECT HIM D EFINE THE HIGH FREQUENCY WITH THE HELP OF THE COMPARABLE CASES ON HAND. ASSE SSEE IS ALSO DIRECTED TO ASSIST THE CIT(A) IN THIS REGARD. IF NEEDED, HE MAY FILE ANY FRESH DOCUMENTS BEFORE THE CIT(A) THAT WOULD HELP THE CIT (A) TO COME TO THE CORRECT CONCLUSIONS. ON THE ISSUE OF APPLICABILITY OF THE APEX COURTS JUDGMENT IN THE CASE OF GOPAL PUROHIT SUPRA, THERE IS NO ADEQUATE DATA BEFORE US AT LEAST IN THE CASE OF ASSESSEE-TEJESWY . CIT(A) IS DIRECTED TO EXAMINE THE APPLICABILITY OF THE SAID CASE AFTER OB TAINING ADEQUATE AND RELEVANT DATA. CIT(A) IS ALSO DIRECTED TO EXAMINE E ACH OF THE CRITERIA SET BY VARIOUS COURTS IN VARIOUS CASES INCLUDING THE CR ITERION OF DOMINANT ITA NO.332 & 333/HYD/2011 SMT. NANDURY SOBHA RANI AND SHRI NANDURY TE JASWY, HYDERABAD. 24 INTENTION. IT GOES WITHOUT SAYING THAT THE CIT(A) SHALL GRANT REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEES WITHOUT FAIL. ACCORDINGLY, THE ASSESSEES GROUNDS ON THIS ISSUE ARE ADJUDICATED PRO-TANTO . 30. THE SECOND ISSUE RAISED IN BOTH THE APPEALS RE LATES TO THE ISSUE OF RESTRICTING THE ALLOWABLE DEPRECIATION ON UPS AND LCD, WHICH ARE COMPUTER ENABLED AND COMPUTER BASED OPERATIVES. ASS ESSEE CLAIMED HIGHER DEPRECIATION OF 60% AND THE SAME WAS RESTRIC TED TO 15% BY THE AO AS CONFIRMED BY THE CIT(A). ON THIS ISSUE, THE L EARNED COUNSEL FOR THE ASSESSEE, REITERATING THE CONTENTIONS URGED BEFORE THE LOWER AUTHORITIES, SUBMITTED THAT THE REASONING GIVEN BY THE CIT(A) FO R RESTRICTING THE CLAIM OF THE ASSESSEE FOR DEPRECIATION ON UPSS/LCD PROJEC TORS TO 15% IS NOT CORRECT. HE PLACED RELIANCE ON THE FOLLOWING DECIS IONS IN SUPPORT OF HIS CLAIM- EXPEDITORS INTERNATIONAL (INDIA ) P.LTD. V/S . ADDL. CIT(118 TTJ(DEL) 652)= (2010)2 ITR 153 AND CIT V/S. ORIENT CERAMICS & INDUSTRIES LTD. (2010) 3 ITR (TRIB) 246(DEL) VIDE ORDER DATED 11.2. 2010, OMNI GLOBE INFORMATION TECHNOLOGIES INDIA P LTD 12 TAXMANN.COM 124 DELHI) AND OTHER CITATIONS. 31. LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTH ER HAND, STRONGLY SUPPORTED THE ORDERS OF THE ASSESSING OFFI CER AND THE CIT(A) AND SUBMITTED THAT NO INTERFERENCE ON THIS ISSUE IS CAL LED FOR. 32. WE HEARD BOTH THE PARTIES ON THIS ISSUE AND P ERUSED THE ORDERS OF THE LOWER AUTHORITIES AND OTHER MATERIAL AVAILABLE ON RECORD, INCLUDING THE WRITTEN SUBMISSIONS FILED AND THE DEC ISIONS RELIED UPON BY THE PARTIES. WE FIND THAT AS AGAINST THE CLAIM OF THE ASSESSEE FOR DEPRECIATION AT 60%, THE ASSESSING OFFICER ADOPTED ONLY A RATE OF 15% STATING THAT UPS CAN PERFORM OTHER FUNCTIONS ALSO A ND HENCE NEED NOT BE PART OF COMPUTER AND HENCE NOT ELIGIBLE FOR DEPRECI ATION AT THE RATE OF 60%. WE FIND THAT THIS ISSUE IS COVERED IN FAVOU R OF THE ASSESSEE BY THE ITA NO.332 & 333/HYD/2011 SMT. NANDURY SOBHA RANI AND SHRI NANDURY TE JASWY, HYDERABAD. 25 DECISIONS RELIED UPON BY THE LEARNED COUNSEL THIS B EHALF. IN THE CASE OF EXPEDITORS INTERNATIONAL (INDIA) (P) LTD. (SUPRA), THE DELHI BENCH OF THE TRIBUNAL, FOLLOWING ITS OWN DECISION IN THE CASE OF THAT VERY ASSESSEE, HELD THAT PERIPHERALS SUCH AS UPS, PRINTERS, SCANNERS, M ODEM, NT SERVERS, ETC. FORM INTEGRAL PART OF THE COMPUTER AND HENCE THE SA ME ARE ELIGIBLE FOR DEPRECIATION AT THE RATE APPLICABLE TO COMPUTERS, V IZ. 60%. OTHER DECISIONS FOR THE SAME PROPOSITION INCLUDE THE FIND ING OF THE TRIBUNAL IN THE CASE OF OMNI GLOBE INFORMATION TECH INDIA P LTD , SUPRA . THE DECISION OF THE TRIBUNAL IN THE CASE OF CONTAINER CORPORATIO N OF INDIA LTD REPORTED IN 30 SOT 284 DELHI ALSO HELPS FOR THE SAKE OF PRIN CIPLE INVOLVED. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE TRI BUNAL, WE SET ASIDE IMPUGNED ORDER OF THE CIT(A), AND DIRECT THE ASSESS ING OFFICER TO ACCEPT THE CLAIM OF THE ASSESSEES FOR DEPRECIATION ON UPS, LCD PROJECTORS ETC. APPLYING A RATE OF 60%. ASSESSEES GROUNDS ON THIS ISSUE ARE ALLOWED. 33. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSE ES ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE COURT ON 02/07/2012 SD/- SD/- (SAKTIJIT DEY) (D.KARUNAKARA RAO) JUDICIAL MEMBER. ACCOUNTANT MEMBER. DT/- 2 ND JULY, 2012 COPY FORWARDED TO: 1. 2. 3. 4. 5. 6. SMT. NANDURY SOBHA RANI, 8 - 2 - 293/82/A/41 - A, MILLENIUM PLAZA, ROAD NO.5, JUBILEE HILLS, HYDERABA D SHRI NANDURY TEJASWY, 8-2-293/82/A/41-A, MILLENIUM PLAZA, ROAD NO.5, JUBILEE HILLS. HYDERABA D ADDL. COMMISSIONER OF INCOME-TAX RANGE-6, HYDERABAD COMMISSIONER OF INCOME-TAX(APPEALS) IV, HYDERABAD COMMISSIONER OF INCOME-TAX V HYDERABAD DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD B.V.S.