2016 (10) TMI 347 - AT - Income Tax

Gain arising from sale of shares - capital gain or business income - Held that - There is categorical finding that the Department had been accepting the stand that the assessee was consistently investing in shares and the capital gains, offered by the assessee was assessed either as long term gain or short term gain while passing order u/s 143(3) of the Act. Identical was the situation for A.Ys.2005-06 and 2006-07 framed u/s 143(3) of the Act and the same were found exempted u/s 10(38) of the Act. These findings of the ld. Commissioner of Income Tax (Appeals) as well as of this Tribunal were not contradicted before us, thus, in the absence of any contrary material, on the principle of consistency, the Department is not expected to take a Uturn and assess the income as business income. So far as the contention of the ld. DR and also the observation of the ld. Commissioner of Income Tax (Appeals) that there was a profit motive, we are not impressed by this submission, because, every investor invest the money for gain and not for loss. In the basis of principle of judicial discipline, consistency has to be followed and once in a particular year, if any view is taken, in the absence of any contrary material, no contrary view is to be taken as finality to the litigation is also a principle which has to be followed. Before us, no contrary facts or any adverse material was brought on record by the Revenue, therefore, on the principle of consistency also, the assessee is having a good case in her favour. - Decided in favour of assessee.

Summary

Issues:
1. Treatment of short term capital gains as income from business and profession.

Analysis:
The appeal involved the sustenance of short term capital gains as income from business and profession, leading to tax computation at the maximum marginal rate. The crux of the arguments presented by the assessee's counsel emphasized that the intention behind the investments was for capital gains, not for trading purposes. The counsel highlighted that the shares were treated as investments in the balance sheet, and dividend income was claimed as exempt under section 10(34) of the Act. The counsel also relied on past decisions and the CBDT circular to support the claim. On the other hand, the Revenue defended the conclusions drawn in the impugned order. The Tribunal examined the facts, noting the past treatment of similar transactions by the Department and the absence of borrowed funds for investments. The Tribunal emphasized the distinction between trading and investment activities, considering factors such as holding period, volume of transactions, and the absence of borrowed funds. The Tribunal also stressed the importance of consistency in treatment across assessment years and cited various judicial precedents supporting the assessee's case.

The Tribunal observed that the Assessing Officer had treated the short term capital gains as business income due to the frequency and volume of transactions, despite the absence of borrowed funds for investments. The Tribunal noted the past treatment of similar transactions by the Department and emphasized the importance of distinguishing between trading and investment activities. The Tribunal highlighted that the assessee had consistently treated the shares as investments in the balance sheet, and no contrary material was presented by the Revenue to warrant a different treatment. The Tribunal also stressed the principle of consistency in tax assessments and cited several judicial pronouncements supporting the assessee's case. Ultimately, considering the totality of facts and legal principles, the Tribunal allowed the appeal in favor of the assessee.

In conclusion, the Tribunal allowed the appeal, emphasizing the distinction between trading and investment activities, the absence of borrowed funds for investments, and the importance of consistency in tax assessments. The Tribunal highlighted the past treatment of similar transactions by the Department, the principle of judicial discipline, and the lack of contrary material presented by the Revenue. The decision was based on a comprehensive analysis of the facts, legal principles, and judicial precedents, ultimately ruling in favor of the assessee.