9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (7) TMI 159 - AT - Income TaxActivity of trading of shares - taxed under the head Income from Business & profession or Short Term Capital Gains - Held that - From the details of purchase and sale and period of holding of shares, it is observed that the assessee has held 11 transactions of shares for more than 50 days and the balance were held for more than 100 days in total number of 30 transactions. In the previous year and the subsequent years relevant to the Assessment Year under consideration the Department has been consistently accepting the investment in shares held by the assessee. During the year under consideration, the assessee has sold shares of two companies being Hindustan Construction and GMR Infra Structure. The remaining shares relate to purchases made in the previous years. Thus we do not find any reason to hold that the short term capital gain or long term capital gain as declared by the assessee should not be assessed under these heads of income. - Decided against revenue
Issues Involved:
1. Classification of income as Long Term Capital Gain and Short Term Capital Gain versus business income. 2. Application of principles laid down by CBDT in Circular No. 4/2007. 3. Relevance of transaction magnitude in determining profit from sale of shares. 4. Application of the principle of Consistency in tax assessment proceedings. 5. Applicability of the principle of res judicata in income tax proceedings. Analysis: Issue 1: Classification of Income The Revenue challenged the CIT(A)'s decision to treat the income declared by the assessee as Long Term Capital Gain and Short Term Capital Gain, which the Assessing Officer had classified as business income. The AO based the reclassification on the volume of business, percentage of income from trading, and the time gap between purchase and sale of shares. The CIT(A) relied on the Bombay High Court's decision in CIT Vs Gopal Purohit, emphasizing the assessee's consistent treatment of shares as investments. The Tribunal upheld the CIT(A)'s decision, noting the assessee's intention to gain capital rather than earn profits through trading. Issue 2: Application of CBDT Circular The Revenue contended that the AO correctly applied Circular No. 4/2007 by considering various parameters to tax share trading as business income. However, the CIT(A) and the Tribunal found that the assessee's accounting treatment and consistent portrayal of shares as investments aligned with judicial precedents, leading to the dismissal of the Revenue's appeal. Issue 3: Transaction Magnitude The dispute also revolved around whether the magnitude of transactions should determine the nature of income from share sales. The Tribunal emphasized that the method of valuation, accounting treatment, and intention of the assessee are crucial factors, rather than transaction volume, in determining the nature of income. Issue 4: Principle of Consistency The principle of Consistency played a significant role in the judgment, with the Tribunal highlighting the importance of uniformity in maintaining books of accounts to ascertain the assessee's intention regarding the nature of transactions. The Tribunal emphasized that the assessee's treatment of shares as investments consistently across years supported the classification of income as capital gains. Issue 5: Res Judicata in Tax Proceedings The Revenue argued against applying the principle of res judicata in income tax proceedings, emphasizing the separate nature of each assessment year. However, the Tribunal, following judicial precedents, focused on the assessee's consistent treatment of shares as investments and upheld the CIT(A)'s decision to classify the income as capital gains. In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the classification of income as Long Term Capital Gain and Short Term Capital Gain based on the assessee's consistent treatment of shares as investments and in line with judicial pronouncements emphasizing the importance of accounting treatment and intention in determining the nature of income from share transactions.
|
