2013 (4) TMI 715 - AT - Income Tax

Summary

Issues involved: Determination of whether short term capital gains should be treated as income from adventure in the nature of trade.

Summary:
The appeal was against the order of the ld. CIT(Appeals) for the assessment year 2006-07. A search & seizure operation u/s 132(1) of the Income-tax Act, 1961 was conducted in the case of M/s Lakshmi Energy & Foods Ltd. Group of cases. The assessee filed a return of income declaring total income of &8377; 67,41,485. The assessment treated short term capital gains claimed by the assessee as income from adventure in the nature of trade. The assessee contended that the sale of shares was to repay loans and not for trading purposes. The AO concluded that the income should be treated as business income. The ld. CIT(Appeals) upheld the AO's decision. The assessee appealed this decision.

The ITAT considered various reasons presented by the assessee and found that the income cannot be treated as business income from adventure in the nature of trade. The ITAT noted that the sale of shares was for investment purposes and to repay loans due to a rise in share prices. The ITAT concluded that the income should be treated as short term capital gain and not business income. The ITAT highlighted specific reasons from the ld. CIT(Appeals) order supporting this conclusion. The ITAT allowed the appeal and ordered the deletion of the addition made by the revenue.

In conclusion, the ITAT ruled in favor of the assessee, determining that the short term capital gains should not be treated as income from adventure in the nature of trade, but rather as short term capital gain. The appeal was allowed.