2015 (4) TMI 1249 - AT - Income Tax

Nature of income - treatment to the income from Sale of Shares as Business income OR Short Term Capital Gain - intention behind the purchases - Held that - When the assessee itself is shifting his stand and offering the profit arising from sale and purchase of shares as business income and subsequently as a short term capital gain, then the rule of consistency will also be applicable on the assessee and not on the AO alone. In view of the fact that all the transactions of sale and purchase are carried out in such a fashion that it cannot be regarded that the assessee purchased the shares with the intention to retain and hold the same for a longer period and for appreciation of value but the sale of the shares within a short period of time and within a period of one week in the most of the cases clearly manifest the intention of the assessee that the transactions were not undertaken by the assessee with a view to keep the same as investment. Accordingly, we do not find any error or illegality in the orders of the authorities below. - decided against assessee.

Summary

Issues:
1. Whether income from Sale of Shares should be treated as Business income or Short Term Capital Gain?
2. Whether the decision of the Bombay High Court in the case of CIT v/s Gopal Purohit should be followed?

Analysis:
1. The assessee claimed short term capital gain on sale and purchase of shares along with speculation income from trading shares. The Assessing Officer (AO) considered the assessee engaged in trading activity with a business motive, treating short term capital gain as business income. The CIT(A) upheld this decision. The assessee argued for consistency, citing past treatment of gains as capital gains. The assessee also highlighted the possibility of maintaining separate portfolios for investment and trading. Various judgments were referenced to support the argument. However, the AO and the D.R. contended that each case should be decided based on its specific facts. The D.R. pointed out the lack of consistency in the assessee's treatment of gains in previous years. Ultimately, the Tribunal found that most transactions were short term, with quick turnovers indicating a profit motive, not investment. The rule of consistency was held against the assessee due to changing treatment of gains in prior years. The Tribunal upheld the lower authorities' decision, dismissing the appeal.

2. The Tribunal noted that the assessee's quick turnover of shares, selling within a week in most cases, demonstrated a profit-driven motive rather than an investment intent. The Tribunal emphasized the lack of intention to hold shares for appreciation, supporting the lower authorities' decision to treat gains as business income. The Tribunal rejected the plea for consistency based on the assessee's shifting treatment of gains in previous years, affirming the business income classification. The judgment of the Bombay High Court in the case of CIT v/s Gopal Purohit was not followed, as the Tribunal found the facts of the present case distinct. The Tribunal's decision was based on the specific facts and transactions of the assessee, concluding that the income from the sale of shares should indeed be treated as business income rather than short term capital gain.

This detailed analysis covers the issues raised in the judgment, providing a comprehensive understanding of the Tribunal's decision regarding the treatment of income from the sale of shares.