2013 (5) TMI 914 - AT - Income Tax

Profit arriving from purchase & sale of shares - capital gain or business income - Held that - Assessee is engaged in similar activity for the last 30 years and for the last 25 years the assessee was assessed to tax under the head capital gain on similar activity. The revenue never treated the shares as stock-in trade in the hands of the assessee, therefore, the assessee was not carrying on the business of shares. These findings of the Tribunal have been upheld, therefore, the matter is squarely covered by the aforementioned decision of Hon ble Bombay High Court rendered in the case of assessee itself, namely Shri Dilip V. Variya 2013 (5) TMI 914 - ITAT MUMBAI

Summary

Issues:
1. Classification of income from sale of shares as capital gain or business income.

Detailed Analysis:

Issue 1: Classification of income from sale of shares as capital gain or business income

The appeals before the Appellate Tribunal ITAT Mumbai involved disputes regarding the classification of income from the sale of shares as either capital gain or business income for assessment years 2005-06 and 2006-07. The primary contention was whether the motive of the assessee was to carry on business in shares to book profit or to make investments for capital gains. The Revenue argued that the substantial volume and repeated transactions in shares indicated a business motive, while the assessee maintained that the income should be assessed under the head of capital gain. The Tribunal considered past assessments and found that the assessee had been engaged in similar activities for several years and had consistently shown profits on shares as capital gains. Both the Commissioner of Income Tax (Appeals) and the Tribunal concurred that the assessee was not carrying on a business of share trading but rather investing in shares. The Tribunal upheld the findings, stating that the shares were not treated as stock in trade and, therefore, the income was rightly assessed as capital gains. The Tribunal referred to a decision of the Hon'ble Bombay High Court in a similar case, where the appeal by the Revenue was dismissed, reinforcing the position that the income should be classified as capital gains. Consequently, the Tribunal dismissed the Revenue's appeals and allowed the assessee's appeal, affirming the classification of income from the sale of shares as capital gains.

In conclusion, the Appellate Tribunal's judgment clarified the distinction between income from the sale of shares as capital gain or business income based on the nature of transactions, motive, and past assessments. The decision emphasized the importance of consistent treatment of income and upheld the assessee's position, supported by past practices and legal precedents.