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2013 (4) TMI 35 - AT - Income TaxIncome on sale of shares - capital gain or business income - Addition on account of short term capital gain and long term capital gain - CIT(A) deleted the addition - Held that - It is undisputed fact that the assessee in A.Y. 2006-07 has also entered into transaction in the purchase and sale of shares which thought treated by him as capital gain was considered by the A.O. as business income. CIT(A) while passing the order has held that the facts of the case in the year under appeal are identical as compared to that of preceding year. CIT(Appeals) has not adverted any thing on the case laws as relied upon by the Assessing Officer as to why they are not applicable under the facts and circumstances of the present case. Also find force in the contention of A.R. that in the event of treating capital gain as business income then computation has to be made in accordance with Section 28 of Act. As under the aforementioned facts and circumstances it would be appropriate in the interest of natural justice that matter is remitted back to the file of the CIT(Appeal) to pass a speaking order after giving opportunity of hearing to the concerned parties. Appeal of the revenue is allowed for statistical purpose.
Issues Involved:
1. Classification of income from share transactions as either business income or capital gains. 2. Applicability of CBDT Circular No.4 of 2007 in determining the nature of income. 3. Consistency with treatment of similar transactions in the preceding assessment year (A.Y. 2006-07). Detailed Analysis: 1. Classification of Income from Share Transactions: The primary issue in this case is whether the income earned by the assessee from share transactions should be classified as business income or as capital gains. The assessee declared short-term capital gain (STCG) of Rs.5,10,220/- and long-term capital gain (LTCG) of Rs.9,81,520/-, which were treated as business income by the Assessing Officer (A.O.). The A.O. based this classification on the frequency and volume of transactions, suggesting a business motive rather than an investment intent. The assessee argued that these were investments, evidenced by the treatment of shares in the balance sheet and the lack of infrastructure for a trading business. 2. Applicability of CBDT Circular No.4 of 2007: The A.O. referenced various decisions and CBDT Circular No.4 of 2007 to support the classification of the income as business income. However, the CIT(A) noted that the A.O. did not thoroughly examine the specific facts of the case against the parameters set out in the Circular. The CIT(A) found that the assessee's transactions met the criteria for being considered investments, such as the manner of holding shares, the reinvestment of gains, and the absence of trading infrastructure. 3. Consistency with Preceding Year (A.Y. 2006-07): The CIT(A) relied on the consistency of facts and circumstances with the preceding year (A.Y. 2006-07) to decide in favor of the assessee. The CIT(A) had previously ruled that similar transactions in A.Y. 2006-07 were to be treated as capital gains. This decision was based on detailed analysis, including the nature of the assessee's primary business, the holding period of investments, and the manner of accounting for shares. Tribunal's Decision: The Tribunal noted that the CIT(A) had not addressed the A.O.'s observations and case laws adequately. For A.Y. 2006-07, the Tribunal had remitted the matter back to the CIT(A) for a detailed examination. Given the similarity in facts, the Tribunal decided to remit the case back to the CIT(A) for A.Y. 2007-08 as well. The CIT(A) is directed to pass a speaking order, considering all relevant facts and legal precedents, and provide a reasonable opportunity for hearing to the assessee. Conclusion: The Tribunal allowed the Revenue's appeal for statistical purposes, directing the CIT(A) to re-examine the case and issue a detailed, reasoned order. This decision underscores the importance of a thorough analysis of facts and adherence to legal guidelines in determining the nature of income from share transactions.
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