IN THE HIGH COURT OF DELHI AT NEW DELHI 
 . 
  09.12.2010 
.
 Present:       Mr. Sanjeev Sabharwal, Sr. Standing Counsel for the 
 appellant/Revenue. 
 Mr. Satyen Sethi, Advocate for the respondent. 
.
 +ITA No.1942/2010 and CM No.21645/2010 
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 From the sale of shares held by the assessee, the assessee 
 generated certain income in the relevant assessment year.  As per the assessee, 
 this income was long term capital gain and not exigible to tax as business 
 income.  The Assessing Officer, however, held otherwise and included the income 
 as business income.  The CIT(A) reversed the aforesaid order of the AO taking 
 the view that the income was long term capital gain.  It was, inter alia, noted 
 that the assessee had not made any investment in shares out of borrowed capital. 
 It was also found that investment in shares was duly reflected in the balance 
 sheet as investment and share was not held as stock in trade.  It was also 
 recorded that the substantial income of the assessee was from other activities 
 and not from the sale of shares.  This finding of the CIT (A) is affirmed by the 
 Income Tax Appellate Tribunal, inter alia, observing as under: 
 ?8??       The assessee?s principal source of income since AY 2003-04 and AY 
 2004-05 was interest in ICD and the dividend on shares.  It was only during AY 
 2005-06 tht the assessee had shown substantial surplus on sale of investments. 
 Even in the AY 206-07, interest on ICD was a principal source of assessee?s 
 income.  The purchase and sale of securities in the assessee?s case was not 
 allied to its usual trade or business, which is earning of interest on ICD and 
 dividend on investments made in shares.  We also found that assessee continued 
 to hold shares of Bata India Limited, Colgate Palmolive Ltd., Fressia India 
 Ltd., Ahluwalia contractor India Ltd. and Hind Inds. Ltd. for the year under 
 consideration as against similar holding in the earlier accounting year.  The 
 assessee company had sold shares of Ballarpur Inds, Ltd. and JCT Ltd. from out 
 of its investment.  Looking into the account of number of scripts held by the 
 assessee as investment, and which have been sold, it cannot be said that the 
 scale of activity was substantial.  It is also undisputed fact that funds were 
 arranged by the assessee out of its own capital and surplus and not out of any 
 interest bearing borrowings.  As per the audited balance sheet for the AY 2003- 
 04, 2004-05 and 2005-06, there were no loans having been taken by the assessee 
 for investment in shares.  Even in the books of account as 31.3.2005 and of the 
 earlier accounting year, no shares were held by the assessee as stock in trade 
 and the purchase of shares during the year and even in the earlier and 
 subsequent years were booked under investment, which is clear as per clause (4) 
 of Schedule 13 to the audited accounts for the year ended on 31.3.2005.  In the 
 instant case, the shares of Ballarpur Inds.  Ltd. were purchased in March, 2003; 
 those were held as assessee?s investment as on 31.3.2003 and 31.3.2004 and were 
 only sold during AY 2005-06.  The assessee received dividend of `6.39 lakhs on 
.
.
 those shares during AY 2004-05.  The fact that the shares have been held as 
 investment as per accounts running over 3 accounting periods, would by itself 
 indicate that at the time of making the purchase of those shares, the assessee 
 could not have the intention of reselling the same at a profit in a foreseeable 
 future, or that the assessee?s intention is other than long term appreciation of 
 the investments or earning dividend thereon????.  ? 
.
 No question of law arises.  This appeal is accordingly dismissed. 
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 A.K. SIKRI, J. 
.
 INDERMEET KAUR, J. 
 DECEMBER 09, 2010 
 pmc 
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