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Issues involved: Determination of nature of income from sale of shares - Capital gains or business income.
Summary: The High Court of Delhi heard an appeal regarding the nature of income derived from the sale of shares by the assessee. The assessee had initially purchased shares of a company and subsequently acquired more shares. Upon selling these shares, the assessee claimed the amount as capital gains. However, the Assessing Officer considered the entire income as business income. The Commissioner of Income-tax (Appeals) allowed the assessee's appeal, leading the revenue to approach the Tribunal. The Tribunal upheld the decision in favor of the assessee, prompting the revenue to appeal under section 260A of the Income-tax Act, 1961. The High Court analyzed the facts and determined that the shares were held by the assessee as an investment, not as stock-in-trade for business purposes. Despite one of the objects in the Memorandum of Association mentioning buying and selling shares, there was no evidence to suggest that the assessee regularly dealt in shares. Referring to the Supreme Court's decision in Raja Bahadur Kamakhya Narain Singh v. CIT [1970] 77 ITR 253, the High Court emphasized the importance of the treatment of transactions in the books of account. Since the assessee had consistently treated the shares as investments and not stock-in-trade, the claim for capital gains was deemed valid. Consequently, the Assessing Officer's classification of the income as business income was deemed incorrect. Ultimately, the High Court found no substantial question of law to arise in the appeal and dismissed the case.
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