2013 (10) TMI 1523 - AT - Income Tax

Summary

Issues Involved:
1. Treatment of Short Term Capital Gain (STCG) as Business Income.
2. Determination of whether the activity amounts to trade or investment.
3. Entitlement to claim the benefit of Security Transaction Tax (STT).
4. Adjustment of D-mat charges.

Summary:

1. Treatment of Short Term Capital Gain (STCG) as Business Income:
The primary issue in the appeal was the treatment of STCG arising from the sale of shares by the Revenue as business income. The assessee argued that they had been an investor for several years, with income under the head 'capital gains' assessed as such in previous and subsequent years. The Department, however, contended that the speculative income earned by the assessee involved the same scrips for which STCG was claimed, indicating a business activity rather than an investment.

2. Determination of whether the activity amounts to trade or investment:
The Tribunal noted that the issue revolved around whether the activity constituted a trade or investment, which is a question of fact. The law in the matter, as recounted from various judicial precedents, emphasizes the intention behind the purchase and the conduct of the assessee. The Tribunal observed that the assessee had disclosed and the Revenue had accepted the income on shares held for more than one year as LTCG, indicating an investment behavior. However, the balance transactions, involving 133 trades in 102 scrips, were found to reflect a regular, systematic, and organized trading activity, thus constituting a business.

3. Entitlement to claim the benefit of Security Transaction Tax (STT):
The Tribunal directed that the assessee shall be entitled to claim the benefit of STT to the extent it relates to business income, with the onus to establish the claim resting on the assessee.

4. Adjustment of D-mat charges:
The Tribunal also directed that D-mat charges, to the extent they relate to shares confirmed as capital assets, should be adjusted against the cost thereof.

Decision:
The Tribunal affirmed the findings of the first appellate authority, holding that the transactions constituted business activity. However, they directed modifications in the computation of business income, restricting it to shares other than those carried over as capital assets as on 01.04.2007. The assessee's appeal was partly allowed.