2013 (5) TMI 392 - AT - Income Tax

Determination of income Sale of shares - Whether STCG or business income? Assessee submits that the issue involved has already been decided by the Tribunal in his earlier case, however, ld CIT(A) has simply dismissed the appeal without following the correct ratio laid down by the Tribunal decision. Held that - Assessee s contention that income from sale of shares is to be treated as STCG and has not been accepted on the ground that looking to the frequency of transactions and holding period is also from 0 to few days. In A.Y. 2006-07 the matter has been restored back to the file of AO to follow the order of the Tribunal. Accordingly, we also set aside the order of the CIT(A) to the file of the AO who is directed to consider the issue in accordance with the findings given by the Tribunal in assessee s own case for the assessment year 2005-06 and 2006-07.

Summary

Issues:
Treating short term capital gain on sale of shares as business income.

Analysis:
The appeal was filed against an order passed by the CIT (Appeals) regarding the treatment of short term capital gain (STCG) on the sale of shares as business income for the assessment year 2008-09 under the Income Tax Act, 1961. The assessee, an individual engaged in trading shares, argued that the STCG should be treated as STCG and not business income. The Assessing Officer and CIT (A) held that the income from the sale of shares should be considered as income from business based on the frequency of transactions and holding periods. The CIT (A) dismissed the assessee's appeal, citing similarities to previous years' cases where the income was treated as business income. The Tribunal had set aside the issue in a previous year and directed the Assessing Officer to follow the Tribunal's order for that year. The Tribunal, in this case, also set aside the CIT (A) order and directed the Assessing Officer to consider the issue in line with the Tribunal's findings in the assessee's previous cases. Thus, the appeal was treated as allowed for statistical purposes.

This case highlights the importance of consistency in treating income from the sale of shares as either short term capital gain or business income based on factors such as frequency of transactions and holding periods. The Tribunal emphasized the need for the Assessing Officer to follow previous Tribunal orders in similar cases to ensure uniformity in decision-making. The decision underscores the significance of legal precedents and the application of established principles in determining the tax treatment of income from share transactions.