2010 (2) TMI 1192 - AT - Income Tax

Summary

Issues Involved:
1. Treatment of short-term capital gains as business income.
2. Benefit of carried forward losses.
3. Levy of interest u/s 234A, 234B, 234C & 234D.

Summary:

1. Treatment of Short-Term Capital Gains as Business Income:
The primary issue contested by the assessee was the treatment of short-term capital gains as business income by the Assessing Officer (A.O.). The assessee, a retired individual, argued that the purchase and sale of shares were for investment purposes, not trading. The A.O. disagreed, citing the frequency and volume of transactions, and treated the gains as business income, referencing cases like CIT vs. H. Holck Larsen and others. The CIT(A) upheld this decision. However, the Tribunal noted that the shares were consistently treated as investments in previous years and accepted by the A.O. The Tribunal emphasized the "Rule of Consistency" and found no material difference in facts from previous years. It concluded that the profit on sale of shares should be taxed under "short-term capital gain" as offered by the assessee, aligning with decisions in similar cases like Shri Gopal Purohit and Shri Kunvarji Nanji Kenia.

2. Benefit of Carried Forward Losses:
Given the Tribunal's decision on the first issue, the assessee's claim for the benefit of carried forward losses became infructuous. The A.O. was directed to allow the set-off according to law after examining the past record of the assessee.

3. Levy of Interest u/s 234A, 234B, 234C & 234D:
The issues related to the levy of interest u/s 234A, 234B, 234C & 234D were deemed consequential. The A.O. was directed to give consequential relief to the assessee based on the Tribunal's decision on the primary issue.

Conclusion:
The appeal of the assessee was allowed, with the Tribunal directing the A.O. to assess the profit on the sale of shares under the head "short-term capital gain" and to provide consequential relief regarding the levy of interest and carried forward losses. The order was pronounced in the open court on 17th February 2010.