9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (5) TMI 928 - AT - Income TaxTransaction in shares - treated as stock in trade treating it as a business income or investment so as to treat it as capital gain - Held that - It is a fact that assessee is showing these shares in its investment portfolio in the books of accounts. Shares sold were shown in the balance sheet for the previous year relevant to assessment year 2005- 06 as investment and the same has been carried forward as investment in the beginning of the financial year relevant to assessment year 2006-07. In the earlier years the revenue has accepted the position of investments as it is in the books of accounts of the assessee. It is also a fact that most of the investments realized during the year were held as investment for more than a year even in some of the cases these investments were held for more than 2 to 4 years. The assessee submitted details of these transactions before the Assessing Officer. It is also a fact that during the year the assessee has earned substantial dividend income of 3, 51, 49, 900/-. The CIT (A) has given the relief to the assessee relying on the judgment of Hon ble Delhi High Court in the case of CIT vs. Rohit Anand 2010 (8) TMI 232 - Delhi High Court wherein held that although even a single transaction can be in the nature of trade however where the assessee has demonstrated that his intention was never to trade in shares. Then revenue cannot change the position otherwise. The investments have been made by the assessee out of his own fund and the shares were held quite for a long period. The Income-tax Act itself provides that when the shares are held for a period of more than a year or more will be treated as long term capital asset contrary to the fact that other assets to be called as long term asset have to be held for more than 36 months. These shares were being treated as investment in earlier years and this fact has been accepted by the Assessing Officer. Substantial dividend income was being earned on these investments.The assessee is holding the shares by taking the delivery by making full payment on such investments. All these circumstances suggest that realization of these investments shall give a rise to the capital gains and it cannot be termed as trading of shares. - Decided in favour of assesse. LTCG or STCG - Held that - Since we have approved the CIT (A) s view that investments declared in the books of accounts shall not be treated as trading in the shares as business therefore the shares held as investment at the beginning of the year even if these are sold within a period of 30 days then also capital gain arises in respect of trading profit this amount shall be treated as short term capital gain.- Decided in favour of assesse. Treating interest income under the head income from other sources - Held that - The CIT (A) has dismissed the assessee s ground without going into the details regarding business of granting the loans as the assessee was registered as NBFC. There is no clear cut finding regarding this aspect in the order of the authorities below. CIT (A) has rather based his order on the fact that assessee is claiming capital gain on sale of shares hence no business income. This reliance is not justified as assessee is a NBFC and doing business of granting loan. Hence we allow this ground of assessee s cross objection.
Issues Involved:
1. Classification of income from transactions in shares and securities as business income or capital gains. 2. Applicability of Explanation to section 73 of the Income-tax Act. 3. Classification of interest income as business income or income from other sources. 4. Treatment of income from transfer of property rights. 5. Applicability of section 43(5) regarding speculative transactions. Issue-wise Detailed Analysis: Classification of Income from Transactions in Shares and Securities: - The assessee, a Non-Banking Financial Company (NBFC), declared income from shares and securities transactions as capital gains. The Assessing Officer (AO) classified it as business income. - The CIT (A) ruled in favor of the assessee, stating that the shares were held as investments and not as trading stock, based on factors such as volume of transactions, mode of delivery, frequency of transactions, and source of payment. The CIT (A) relied on judicial precedents including the Delhi High Court's judgment in CIT vs. Rohit Anand and ITAT Mumbai's decision in Management Structure & Systems Pvt. Ltd. vs. ITO. - The Tribunal upheld the CIT (A)'s decision, emphasizing that the assessee's intention and conduct, such as holding shares for a long period and earning substantial dividend income, indicated investment rather than trading. Applicability of Explanation to Section 73: - The AO treated the income from share transactions as speculative business income under Explanation to section 73. - The CIT (A) ruled that Explanation to section 73 did not apply as the assessee's principal business was granting loans and advances, and its Gross Total Income (GTI) mainly consisted of capital gains and income from other sources. - The Tribunal upheld this view, dismissing the revenue's appeal on this ground. Classification of Interest Income: - The AO classified interest income as income from other sources, while the assessee claimed it as business income. - The CIT (A) upheld the AO's decision, but the Tribunal reversed this, noting that the assessee was engaged in the business of granting loans as an NBFC. The interest income was thus considered business income. Treatment of Income from Transfer of Property Rights: - The AO treated the income from the transfer of property rights as business income. - The CIT (A) ruled it as short-term capital gains, noting that the assessee was not in the business of dealing in immovable property and the transaction was a one-time event. - The Tribunal agreed with the CIT (A), confirming the classification as short-term capital gains. Applicability of Section 43(5) Regarding Speculative Transactions: - The AO applied section 43(5) to treat the income from share transactions as speculative. - The CIT (A) and the Tribunal ruled that since the income was classified as capital gains, section 43(5) did not apply. Conclusion: - The Tribunal dismissed the revenue's appeals and partly allowed the assessee's cross objections, confirming the CIT (A)'s decisions on all issues. The income from share transactions was classified as capital gains, Explanation to section 73 was deemed inapplicable, interest income was classified as business income, and the income from property transfer was treated as short-term capital gains.
|
