2011 (3) TMI 1711 - AT - Income Tax

Summary

Issues Involved:
1. Classification of income as business income or short-term capital gains.
2. Charging of interest u/s 234A, 234B, and 234C of the Act.

Summary:

Issue 1: Classification of Income
The primary issue in this appeal is whether the sum of Rs. 6,56,773/- should be treated as business income or short-term capital gains. The AO examined the details and found that the assessee engaged in frequent buying and selling of shares with varying holding periods. The AO treated the profit on shares held for less than one year as business income, citing reasons such as the profit motive, frequency of transactions, magnitude of sales and purchases, short holding periods, and the infrastructure employed for share transactions. The CIT(A) confirmed the AO's order for similar reasons.

The assessee argued that she is a housewife with no trading experience, inherited the shares, and treated them as investments. She referred to the decision in the case of Shri Sugamchand C. Shah, where it was held that shares held for less than a month should be treated as business income, and those held for more than a month but up to twelve months should be treated as short-term capital gains. The assessee contended that the AO's partial acceptance of long-term capital gains indicates recognition of her investment intent.

The Tribunal considered the rival submissions and relevant case law, including Gopal Purohit vs. JCIT and Sarnath Infrastructure (P) Ltd. vs. ACIT. It was noted that the assessee maintained books showing shares as investments, and the Revenue had accepted this in previous years. The Tribunal concluded that the assessee is neither fully a trader nor fully an investor. It directed the AO to treat profits on shares held for less than one month as business income and those held for more than one month but up to twelve months as short-term capital gains.

Issue 2: Charging of Interest u/s 234A, 234B, and 234C
The issues related to charging of interest u/s 234A, 234B, and 234C are consequential to the total assessed income. The Tribunal did not provide specific details on these issues, as they depend on the final classification of income.

Conclusion:
The appeal filed by the assessee is partly allowed for statistical purposes. The AO is directed to reclassify the profits based on the holding period criteria specified by the Tribunal. The order was pronounced in open Court on 25/3/11.