2012 (8) TMI 1018 - AT - Income Tax

Summary

Issues involved:
The judgment involves the issue of whether the Short Term Capital Gain of a Chartered Accountant individual should be treated as "Business Income" or not for the assessment year 2008-2009.

Details of the Judgment:

1. Revenue's Appeal:
The Revenue contended that the Short Term Capital Gain of the assessee should be treated as business income due to a high turnover of shares and short holding periods. However, the CIT (A) held that the income from Short Term Capital Gain should not be disturbed and cannot be categorized as business income.

2. Arguments by Revenue and Assessee:
The Revenue highlighted the high turnover of shares, short holding periods, and speculative transactions to support their claim. On the other hand, the Assessee argued that most shares were held as investments, not for trading, and any speculative transactions were due to errors by the stockbroker.

3. Judgment Analysis:
The Tribunal found that the frequency of transactions was not high relative to the volume, and the holding period for most shares was substantial. The CIT (A) had already determined that the speculative transactions were minimal and not indicative of organized trading activity. The Tribunal also noted that borrowed funds were non-interest bearing and sourced from the assessee's HUF, supporting the investment nature of the transactions.

4. Assessee's Intentions:
The Tribunal concluded that the assessee's motive was to hold shares for appreciation, not for immediate profit realization. The unrealized gains on shares held at the year-end exceeded the capital gains offered, indicating an investment intent. Therefore, the Tribunal upheld the CIT (A)'s decision to treat the income as capital gains.

5. Cross Objections by Assessee:
The assessee raised objections regarding the application of section 45(2) for computing capital gains and the treatment of business losses on share valuations. However, given the Tribunal's decision on the Revenue's appeal, the Cross Objections were deemed infructuous and dismissed.

6. Final Decision:
Both the Revenue's appeal and the Assessee's Cross Objections were dismissed by the Tribunal, upholding the CIT (A)'s order regarding the treatment of Short Term Capital Gain as capital gains for the assessment year 2008-2009.