2010 (8) TMI 1072 - AT - Income Tax

Summary

Issues involved: Determination of whether income from sale of shares should be treated as business income or capital gains, and disallowance under section 14A of the Income Tax Act, 1961.

Issue 1 - Income Classification: The appellant contested the treatment of short term and long term capital gains as business income by the CIT(A). The main issue was whether the income from sale of shares should be categorized as business income or capital gains. The appellant argued that the shares sold were investments and should be treated as capital gains based on a previous Tribunal decision for the assessment year 2005-06. The Departmental Representative failed to provide any evidence to counter the appellant's submissions. The Tribunal accepted the appellant's plea, citing the decision of a co-ordinate bench for the assessment year 2005-06, which concluded that the income on sale of shares should be taxed as capital gains. The Tribunal directed the Assessing Officer to tax the income on sale of shares as capital gains.

Issue 2 - Disallowance under section 14A: The second ground of appeal related to the disallowance of Rs 3,73,311 under section 14A of the Income Tax Act, 1961. However, this ground was not pursued by the appellant during the proceedings. As a result, Ground No. 2 was dismissed as not pressed.

In conclusion, the Tribunal partially allowed the appellant's appeal, directing the Assessing Officer to tax the income from the sale of shares as capital gains. The decision was pronounced on August 20, 2010.