2015 (7) TMI 1114 - AT - Income Tax

Profit/gains earned on the transactions of purchase and sale of shares and securities - long term capital gain OR business income - Held that - Assessee is an investor and not a trader in shares. Treat the profit on sale of shares as short term capital gain. - Decided against revenue

Summary

Issues:
- Appeal against the order of ld. Commissioner of Income Tax (Appeals) dated 22nd June, 2011 for assessment year 2008-09.
- Dispute over treating profit/gains from purchase and sale of shares as long term capital gain or business income.

Analysis:
1. The revenue appealed against the order of the ld. Commissioner of Income Tax (Appeals) regarding the treatment of profit/gains from shares as long term capital gain. The revenue contended that the gains should be classified as business income instead.
2. The assessee argued that the issue was previously decided in their favor by ITAT in Assessment Year 2005-06 and 2006-07. The assessee presented the Tribunal's orders as evidence.
3. The Assessing Officer initially treated the profit from shares as business income based on the argument that shares held for 30 days or less should be considered business profit. The ld. Commissioner of Income Tax (Appeals) disagreed and directed the Assessing Officer to treat the gains as long term capital gain for shares held for a year or more.
4. The ITAT reviewed the case history and noted that in previous years, similar disputes arose where the Assessing Officer classified the gains as business income, but the ITAT ruled in favor of the assessee, considering them as investors rather than traders in shares.
5. The ITAT emphasized that shares were consistently treated as investments in the assessee's records and directed the Assessing Officer to accept the short-term capital gains declared by the assessee. The ITAT also highlighted that holding shares for a longer duration indicated an investment motive, not a business intention.
6. Based on the consistent rulings in favor of the assessee in previous assessment years, the ITAT upheld the decision of the ld. Commissioner of Income Tax (Appeals) and dismissed the revenue's appeal, stating that no interference was necessary in the order.

This detailed analysis of the judgment highlights the key arguments, decisions, and rationale behind the treatment of profit/gains from shares as long term capital gain rather than business income in the given case.