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Issues involved:
The appeal by the revenue against the order of the CIT(A)-XX, Ahmedabad dated 07th October, 2008 for assessment year 2005-06 regarding the treatment of profit on sale of shares as short-term/long-term capital gain under section 73 of the IT Act. Details of the Judgment: Issue 1: The Assessing Officer (AO) treated the short term capital gain as speculative profit u/s. 73 of the IT Act and made an addition of Rs. 9,13,093. The assessee contended that section 73 does not apply as the company is not engaged in trading of shares but making investments only. The CIT(A) considered the submissions and material on record and deleted the addition, holding that the profit on sale of shares should be treated as short-term/long-term capital gain and not as speculation profit. Issue 2: The CIT(A) found that the provisions of explanation to section 73 are not applicable as the appellant did not suffer any loss on the sale and purchase of shares during the relevant year. The shares were held as investments, and any gain or loss on their sale should be taxed under the head 'capital gain' and not 'business income'. The ITAT Ahmedabad Bench's decision in the case of Kruti Marketing Ltd. supported this view. The departmental appeal was dismissed based on these findings. Separate Judgment: The learned Counsel for the assessee relied on various decisions to support the argument that the explanation to section 73 does not apply when shares are held as capital assets or investments, and any loss or gain should be assessed accordingly. The ITAT confirmed the CIT(A)'s findings and dismissed the appeal of the revenue. In conclusion, the departmental appeal was dismissed, and the addition made by the AO was deleted based on the findings that the profit on sale of shares should be treated as short-term/long-term capital gain and not as speculation profit.
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