2011 (5) TMI 1029 - AT - Income Tax

Summary

Issues Involved:
The issues involved in this case are:
1. Whether the income generated by dealing in shares and securities should be treated as income from "Capital Gain" or income from business.
2. Whether the order of the ld. CIT(A) granting relief to the assessee is correct in law and facts.

Issue 1: Treatment of Income from Shares and Securities:
The appellant, a non-banking financial corporation, held shares in stock-in-trade which were converted into investments. The market value of these shares as on 31.3.2004 was taken as the cost of acquisition. The ld. CIT(A) decided in favor of the assessee, treating the gain as short term capital gain instead of business income assessed by the AO. The AO considered the frequent transactions as indicative of a business. The Tribunal found the facts similar to a previous case and upheld the CIT(A)'s decision based on the treatment of shares and the method of valuation.

Issue 2: Relief Granted by CIT(A):
The ld. Counsel of the assessee argued that the case was similar to a previous Tribunal decision where relief was granted to the assessee. The ld. DR, however, contended that the relief was wrongly given and should be set aside. The Tribunal examined the facts and the decision of the CIT(A) in detail. The Tribunal found the facts of the present case identical to the previous case and upheld the relief granted by the CIT(A) based on the treatment of shares, conversion from stock-in-trade to investments, and the method of valuation adopted by the assessee.

Conclusion:
The Tribunal dismissed the appeal filed by the revenue, upholding the decision of the ld. CIT(A) to treat the gain from shares and securities as short term capital gain instead of business income. The Tribunal found no infirmity in the relief granted by the CIT(A) based on the facts and the method of valuation adopted by the assessee.

This judgment highlights the importance of proper documentation and valuation methods in determining the nature of income from shares and securities for taxation purposes.