2013 (12) TMI 650 - AT - Income Tax

Whether income from share transaction to be treated as business income or income from capital gains Held that - The assessee has not purchased, sold and repurchased the same scrips The assessee s intention was that of an investor - The assessee has not taken any loan from any person for the purposes of purchasing shares - The assessee has sold shares after substantial capital appreciation Decided against Revenue.

Summary

Issues involved:
1. Determination of income from share transactions under Capital Gains or Business category.

Analysis:
The appeal pertains to the order passed by the CIT(A)-24, Mumbai for the assessment year 2008-09. The main issue revolves around whether the income from share transactions should be assessed under the head Capital Gains or Business. The appellant argued that the CIT(A) erred in not considering factors like volume, holding period, expertise, and intention of the assessee in determining the nature of transactions. On the other hand, the respondent contended that due to the volume and frequency of transactions, the assessee cannot be treated as an investor.

The counsel for the assessee emphasized that the majority of profits were from shares held for over 90 days and not purchased using borrowed funds. They cited precedents from ITAT Mumbai Benches to support the claim that income from share sales should be taxed under Capital Gains. The Departmental Representative (D.R.) argued that the assessee engaged in numerous purchase and sale transactions, indicating a trading activity.

After considering the submissions, the CIT(A) analyzed the case in detail and concluded that the assessee's actions aligned more with an investor rather than a trader. The CIT(A) highlighted various instances where the assessee held shares for significant periods, resulting in substantial profits upon sale. The absence of borrowing for share purchases and no repurchasing of the same scrips further supported the investor argument. The CIT(A) also referenced previous years' decisions where the assessee was considered an investor.

The ITAT, in line with the CIT(A)'s findings and previous decisions, dismissed the Revenue's appeal, noting the lack of merit based on the overall circumstances. The Revenue's appeal was subsequently dismissed, affirming the assessee's classification as an investor in shares.