2013 (1) TMI 1059 - AT - Income Tax

Summary

Issues Involved:
1. Treatment of income from the sale of shares: Whether taxable under "Business Income" or under "Long Term Capital Gains" and "Short Term Capital Gains".

Summary:

Issue 1: Treatment of Income from Sale of Shares

The primary issue in this appeal is the classification of income from the sale of shares, whether it should be taxed as "Business Income" as determined by the Assessing Officer (AO) or as "Long Term Capital Gains" (LTCG) and "Short Term Capital Gains" (STCG) as claimed by the assessee.

Facts of the Case:
The assessee, an individual, reported income under "Share Trading," "Capital Gains," and "Income From Other Sources." The AO, considering the regularity, volume, turnover, period of holding, and value of transactions, concluded that the income reported as LTCG and STCG should be classified as "Business Income."

Assessee's Argument:
The assessee argued that similar transactions were treated as capital gains in previous assessment years under scrutiny proceedings u/s 143(3) of the Income Tax Act, 1961. The assessee also relied heavily on the judgment of the Hon'ble Jurisdictional High Court in CIT v/s Gopal Purohit.

Commissioner (Appeals) Decision:
The Commissioner (Appeals) accepted the assessee's contentions, following the judgment in Gopal Purohit and previous decisions, and reversed the AO's action, holding that the income from the sale of shares should be taxed under LTCG and STCG.

Revenue's Argument:
The Revenue argued that the findings from earlier years are not res judicata for the current year and emphasized that the AO had sufficiently demonstrated that the assessee was regularly dealing in shares, thus justifying the classification of income as "Business Income."

Tribunal's Analysis:
The Tribunal reviewed the details of the transactions and the holding periods of the shares. It noted that the majority of the shares were held for periods ranging from two to ten years or more for LTCG and between 30 to 360 days for STCG. The Tribunal also considered previous decisions in the assessee's own case, where similar issues were decided in favor of the assessee, treating the income from share transactions as LTCG and STCG.

Tribunal's Decision:
The Tribunal upheld the Commissioner (Appeals)'s decision, affirming that the income from the sale of shares should be taxed under LTCG and STCG, consistent with the treatment in previous and subsequent years. The Tribunal dismissed the Revenue's appeal, concluding that the income from share transactions should not be treated as "Business Income."

Conclusion:
The appeal by the Revenue was dismissed, and the order pronounced in the open Court on 31st January 2013 confirmed that the income from the sale of shares should be taxed under LTCG and STCG as declared by the assessee.