2013 (2) TMI 791 - AT - Income Tax

Summary

Issues involved:
The judgment deals with the denial of long term capital gains (LTCG) and short term capital gains (STCG) by treating them as business income instead of income from capital gains and taxing them at normal rates of tax.

LTCG and STCG Treatment:
The assessee, a lady with income from various sources, declared LTCG of Rs. 4,93,365 and STCG of Rs. 9,27,202 on sale of shares. The assessing officer (AO) denied LTCG and STCG, treating them as an eyewash for tax reduction. The denial of LTCG led to exemption under section 10(38) also being denied. The AO considered the capital gains as business income and taxed them at normal rates.

Consistent System of Maintenance:
The assessee's representative argued that the assessee maintained a consistent system of books over the years, distinguishing between shares held as investments and those held for trading. Citing a relevant case, the representative contended that the assessee's conduct was similar to her husband's, whose pattern was accepted by the AO previously. The AR highlighted that the Tribunal had recognized the distinction between investment and business transactions, emphasizing the need for uniform treatment when circumstances are identical.

Arguments and Decision:
The Departmental Representative (DR) supported the revenue authority's decisions, emphasizing the turnover and loan amount as indicators of trading activity. However, the AR clarified that loans were taken from family members and had been returned. After considering the arguments and evidence presented, the Tribunal found in favor of the assessee, noting the consistent approach taken by the assessee and the failure of the department to disprove the same. Consequently, the order of the CIT(A) was set aside, directing the AO to delete the addition made and accept the assessee's contentions.

Conclusion:
The appeal filed by the assessee was allowed, overturning the decision to treat LTCG and STCG as business income and taxing them at normal rates. The judgment was pronounced on 27th February 2013.