2011 (8) TMI 1178 - AT - Income Tax

Summary

Issues involved: Appeal against order of Commissioner of Income-tax (Appeals)-XVI, Ahmedabad u/s 143(3) of the Income Tax Act, 1961 regarding treatment of short term capital gain as business income.

Treatment of Short Term Capital Gain as Business Income:
The assessee, an individual deriving income from salary, invested in shares of various companies totaling &8377; 7,94,371 with realization of &8377; 10,35,503 resulting in a surplus of &8377; 2,41,132 treated as short term capital gain by the AO. Assessee contended that intention at the time of purchase determines investment/trading activity, emphasizing being a full-time employee with no trading intent. Previous and subsequent years' investments were accepted as capital gain/loss. Citing relevant case laws, it was argued that the frequency of transactions alone does not establish trading. The ITAT, Ahmedabad Bench's decision in a similar case supported the assessee's position, emphasizing various factors favoring investment over trading. Consequently, the AO was directed to treat the amount as short term capital gain, allowing the appeal on grounds 1 to 5.

Charging of Interest under Section 234A, 234B, and 234C:
Ground 6 challenged the interest charged under Sections 234A, 234B, and 234C, deemed consequential. The AO was instructed to levy interest post re-computation of income in accordance with the tribunal's decision.

Conclusion:
The ITAT, Ahmedabad ruled in favor of the assessee, directing the AO to treat the surplus amount as short term capital gain and adjust interest charges accordingly. The appeal was allowed, pronouncing the order on 12th August, 2011.