2011 (8) TMI 1233 - AT - Income Tax

Summary

Issues Involved:
1. Taxability of receipt on transfer of land.
2. Classification of transactions in shares and mutual funds as capital gains or business income.

Summary:

Issue 1: Taxability of Receipt on Transfer of Land
The Revenue contended that the receipt of Rs. 26,99,76,000 on transfer of land should be taxable, arguing that the assessee is not the "residuary legatee" of late Shri E.F. Dinshaw and that the control, management, and ownership of the properties vest with the assessee. The Revenue suggested that the receipts should be treated either as short-term capital gain or as an adventure in the nature of trade. The Tribunal, following its earlier decision in the assessee's own case (ITA no.4573 and 4424/Mum./2008), dismissed grounds no.2 and 3 of the Revenue's appeal, thereby upholding the Commissioner (Appeals)'s decision that the receipt is non-taxable.

Issue 2: Classification of Transactions in Shares and Mutual Funds
The core issue was whether the assessee's income from the sale of shares and units of mutual funds should be taxed under "Capital Gains" or "Income From Business." The Tribunal examined the facts, noting that the assessee, an industrialist, made investments in shares and mutual funds, primarily through portfolio management schemes (PMS). The assessee's transactions were limited, with investments made in 55 companies and sales in shares of 11 companies. The Tribunal observed that the assessee had no borrowings and the investments were disclosed as such in the accounts year after year, accepted by the Revenue. The Tribunal concluded that the assessee acted as an investor, not a trader, and upheld the Commissioner (Appeals)'s finding that the income should be assessed under "Capital Gains." Consequently, the Tribunal dismissed the Revenue's ground on this issue.

Conclusion:
Both the appeal by the assessee and the appeal by the Revenue were dismissed. The Tribunal upheld the Commissioner (Appeals)'s decisions, treating the receipt on transfer of land as non-taxable and classifying the transactions in shares and mutual funds as capital gains.

Order Pronounced:
The order was pronounced in the open Court on 30.8.2011.