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2016 (10) TMI 1350 - ITAT KOLKATACorrect head of income - short term gain v/s business income - whether the STCG on transaction of purchase and sale of units of mutual funds and shares undertaken by the assessee during the previous year is to be assessed under the head ‘income from business’ as claimed by the revenue or income under the head ‘capital gain’ as contended by the assessee? - HELD THAT:- It is not in dispute that the shares and mutual funds that were sold during the previous year, which resulted in the income in question, were held by the Assessee as “Investments” and not as “Stock-in-trade”. The assessee during the previous year had entered into 490 transactions of purchase and 646 transactions of sale of shares, units of mutual funds. Out of the above in respect of 207 transactions the sale was made within 30 days of purchase. The question is as to whether the volume and frequency can for the basis for drawing an inference that the Assessee was engaged in business. The Hon’ble ITAT Mumbai Bench i In the case of Janak S.Rangwala Vs. ACIT [2006 (12) TMI 261 - ITAT MUMBAI] has held that magnitude of the transaction does not alter the nature of the transaction. As we have already seen it is not in dispute that the Assessee had treated the shares and units as investments in its books of accounts. Similar transactions have been accepted by the revenue in assessments for AY 2005-06 as giving raise to capital gains and not as business income in the assessment completed u/s.143(3) of the Act after scrutiny. There was no borrowing by the Assessee out of which investment in shares and units were made. As we have already seen that the AO in AY 05-06 accepted similar income as capital gain. Even for AY 2006-07 the AO accepted the claim of the Assessee and it was only pursuant to the order u/s.263 of the Act, the AO took a different view. It is not disputed by the revenue that the facts and circumstances in the AY 05-06 and the present AY 2006-07 are identical. Though the rule of res judicata is not applicable in income tax proceedings but the principle of consistency will definitely apply and on that basis the claim of the Assessee should be held to be proper. - Decided against revenue.
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