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2016 (10) TMI 320 - AT - Income TaxTransaction of shares - nature of income - business income or capital gain - Held that - From the plain reading of clause (a) of the said Notification No.6/2016 dated 29.02.2016 we find that it has been instructed that if the assessee is irrespective of the period of holding treat the transaction for sale-purchase of the share as stock-in-trade then the Department shall not dispute on this matter. Accordingly, in this case, assessee has been treating the income arising from the sale-purchase of the share as STCG, therefore, lower authorities cannot dispute the same as business income Magnitude of the transactions do not alter the nature of the transactions. Therefore, magnitude of transactions carried out by the assessee in our view should not be very material in coming to the conclusion that income in question is income from business. Though the res judicata is not applicable but the principal of consistency will definitely apply and on that basis the claim of the assessee should be held proper. Accordingly we are inclined to reverse the order of authorities below - Decided in favour of assessee.
Issues Involved:
1. Whether the income from the sale of shares should be treated as "Short Term Capital Gains" (STCG) or "Business Income". Detailed Analysis: Background: The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-VI, Kolkata, dated 30.03.2013. The assessment was framed by the Deputy Commissioner of Income Tax (DCIT), Circle-5, Kolkata under section 143(3) of the Income Tax Act, 1961 for the assessment year 2008-09. The primary issue in this appeal was whether the sum of ?88,05,787 should be assessed as "Profits and Gains of Business or Profession" or "Short Term Capital Gains". Facts of the Case: The assessee, a Private Limited Company engaged in investment and finance, declared its income from STCG at ?88,05,787 and Long Term Capital Gains (LTCG) of ?8,45,589 for the year under consideration. The Assessing Officer (AO) observed that the assessee had engaged in frequent transactions of purchase and sale of shares, involving more than 251 scripts with a purchase value of ?6.85 crores and sale consideration of ?5.89 crores. The AO treated the income declared as STCG as "business income" on the grounds of systematic and frequent transactions. CIT(A) Decision: The CIT(A) upheld the AO's decision, noting that the frequency and nature of transactions indicated a business activity rather than investment. The CIT(A) emphasized that the character of transactions depends on the facts and circumstances of each case and that the intention at the time of purchase was to make quick profits rather than to invest. The CIT(A) also noted that the AO had accepted the closing balance as investments for short-term capital gain in earlier years under section 143(1), but this was the first year of scrutiny. Tribunal's Analysis: The Tribunal considered the rival contentions and relevant material on record. It was noted that various courts have held differing views on whether such transactions should be treated as business income or capital gains. The Tribunal referred to CBDT Notification No.6/2016 dated 29.02.2016, which aimed to reduce litigation and uncertainty. The notification stated that if the assessee treats transactions as stock-in-trade, the department shall not dispute it. The Tribunal also relied on the judgment of the Hon'ble Bombay High Court in the case of Commissioner of Income Tax vs. Gopal Purohit, which held that it is open to an assessee to maintain separate portfolios for investment and business activities. Conclusion: The Tribunal found that the magnitude of transactions does not alter the nature of transactions. The principle of consistency should apply, and the claim of the assessee should be held proper. Therefore, the Tribunal reversed the order of the authorities below and allowed the ground raised by the assessee, treating the income from the sale of shares as "Short Term Capital Gains". Final Decision: The assessee's appeal was allowed, and the order was pronounced in open court on 12/08/2016.
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