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Issues:
The appeal concerns the treatment of short term capital gain as business income for the assessment year 2005-06. Facts: The assessee, an individual, reported share trading income, speculative loss, capital gains, and income from other sources. The Assessing Officer (AO) observed that the short term capital gain shown by the assessee was treated as business income due to the volume, frequency, and continuity of share transactions. The CIT(A) upheld the AO's decision. Arguments by Assessee: The assessee maintained separate accounts for business income, short term capital gain, and long term capital gain, indicating a distinct portfolio. The assessee invested personal funds in shares and mutual funds, with a minimal loan for IPO investment. The majority of income was from long term capital gain and dividend income, supporting the intention of long-term investment. Previous years' assessments accepted the same categorization of gains. Arguments by Revenue: The Revenue argued that the high volume and regularity of share transactions indicated a profit motive, classifying the activities as trading. The CIT(A) supported this view, emphasizing the short holding periods of shares. Decision: The Tribunal noted the substantial long term capital gains and dividend income, with short term capital gains forming a small percentage of total income. The number of short term transactions was limited, and the intention appeared to be long-term investment. The CIT(A)'s observations did not align with the assessee's case, as evidenced by the holding periods of shares. Considering the separate portfolio and consistent investment pattern, the Tribunal allowed the appeal, overturning the CIT(A)'s decision. Case Laws Referenced: The assessee's arguments were supported by various case laws, highlighting the distinction between investment and trading activities in shares. Outcome: The appeal of the assessee was allowed, setting aside the CIT(A)'s order. Judges: - Shri S V Mehrotra, Accountant Member - Shri Vijay Pal Rao, Judicial Member Citation: Appellate Tribunal ITAT MUMBAI 2011 (2) TMI 1486 - ITAT MUMBAI
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