2013 (6) TMI 567 - AT - Income Tax

Voluminous and frequent purchase and sale of shares - 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 - By following the order of the Tribunal passed in A.Yr.2004-05 in assessee s own case 2013 (6) TMI 515 - ITAT KOLKATA allowed the appeal of the assessee by holding that the profits from sale and purchase of shares and units are to be treated as capital gains of the assessee. As DR could not point out any specific error in the order of the CIT(A) or bring any material on record to show that this order of the Tribunal was varied in appeal by any other higher authority no good and justifiable reason to interfere with the order of CIT(A) - appeal of the revenue is dismissed.

Summary

Issues involved:
The sole issue involved in this appeal is whether the transactions of voluminous and frequent purchase and sale of shares in a systematic manner resulting in profit should be treated as capital gain or business income.

Detailed Analysis:

1. Issue of Characterization of Income:
The Assessing Officer (AO) initially determined that the assessee was engaged in a regular business activity based on the volume and frequency of share transactions during the year. The AO concluded that the assessee's activities constituted trading in shares and units rather than investment. This characterization led to the computation of income as business profits instead of capital gains.

2. Decision of CIT(A):
Upon appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] ruled in favor of the assessee, directing that the profits from the purchase and sale of shares and units should be treated as capital gains and not business income. The CIT(A) based this decision on a previous ruling in the assessee's own case for Assessment Year 2004-05. The ITAT, Kolkata, in its order dated 13.01.2012, affirmed the CIT(A)'s decision, emphasizing that the assessee's investments were made from own funds and previous assessments treated gains on share transfers as capital gains, not business profits.

3. Judgment of ITAT:
The Income Tax Appellate Tribunal (ITAT) considered the arguments of both parties and reviewed the orders of the lower authorities. The ITAT noted that the AO had classified the assessee's activities as business profits based on CBDT Instruction No.1827 dated 31.08.1989. However, the ITAT upheld the CIT(A)'s decision to treat the profits from share transactions as capital gains, following the precedent set in the assessee's case for the previous assessment year. The ITAT found no justifiable reason to interfere with the CIT(A)'s order, as no errors or distinguishable features were presented by the Revenue.

4. Final Decision:
Consequently, the ITAT dismissed the appeal of the Revenue, affirming the CIT(A)'s ruling that the profits from the sale and purchase of shares and units should be treated as capital gains of the assessee. The decision was based on the consistency with the previous year's assessment and the lack of new evidence or arguments presented by the Revenue to challenge the CIT(A)'s order.

In conclusion, the judgment upheld the assessee's position that the profits from share transactions should be treated as capital gains, following the precedent set in the previous assessment year and finding no grounds to overturn the CIT(A)'s decision.