2013 (6) TMI 515 - AT - Income Tax

Addition of commission received - Held that - As there is no dispute that since the commission was already included in the income certified in Form No16 issued by M/s. Rititka Limited and the assessee himself has shown the same under the head salary . Therefore no justification on the part of the AO to add the same again under the head commission . In favour of assessee. Income on sale of shares and units of mutual funds - capital gain v/s business income - as per AO in view of the CBDT Instruction No.1827 dated 31.08.1989 the profits from transactions and shares and units of the assessee are treated as business profits - Held that - Keeping in view of the fact that the assessee invested in shares, securities & units in the past years as well investments were made out of own funds. From the Balance Sheet as of 31st March 2002 & 2003 the assessee s investments from own funds were Rs.93,30,065/- & Rs.1,39,92,543/- and in the assessments for the relevant period assessee was not regarded as dealer in shares. In the assessment years 2002-03 & 2003-04 the assessee earned dividend and capital losses on transfer of shares & units. In the Income Tax assessments for assessment years 2002-03 & 2003-04, the gains received on transfer of shares & units were assessed as capital gains and not as profits & gains of business. Thus AO is not justified in treating the assessee as dealer in shares and securities. In favour of assessee.

Summary

Issues:
1. Addition of commission received without appreciating facts.
2. Treatment of profit on sale of investment as capital gain.

Analysis:
1. The first issue pertains to the addition of commission received without appreciating facts. The Assessing Officer added a commission received amount to the income, which the assessee had already disclosed under the head "salary." The CIT(A) deleted the addition after considering that the commission was included in the salary disclosed by the appellant, as evidenced by Form No.16. The Tribunal upheld the CIT(A)'s decision, stating that the commission was already included in the income certificate and shown under the head "salary." Therefore, the addition of the commission amount was unjustified, and the ground raised by the Department was dismissed.

2. The second issue revolves around the treatment of income from the sale of shares and units as business income by the Assessing Officer. The CIT(A) reclassified the income as long term or short term capital gains based on the period of holding. The Tribunal observed that the appellant had consistently declared profits or losses on the sale of shares and units under the head "income from capital gains" in previous years. The Tribunal noted that the appellant's investments were made from own funds and not as a dealer in shares, as evidenced by past assessments. Relying on various judicial pronouncements and precedents, the Tribunal found that the Assessing Officer's characterization of the appellant as a trader in shares and units was unfounded. Consequently, the Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeal and confirming the treatment of income as capital gains.

In conclusion, the Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s decisions on both issues.