2017 (3) TMI 84 - AT - Income Tax

Treatment to loss - business loss OR capital loss - mutual fund transactions - Held that - The assessee has been showing the transactions from the aforesaid activities as business transaction which were accepted by the Revenue in earlier assessment years. On examination of the order of lower authorities, we find that there was no change in the factual position of the assessee. The assessee has also been showing such transactions as business transactions in its books of accounts. In view of above, we find that the assessee has been showing its mutual fund transactions under the head business and profession . There was no change in the stand of the assessee with that of the earlier years. Therefore, we find that the assessee has shown the impugned loss from the source of the business correctly. The ld DR has also not brought anything contrary to the finding of ld CIT(A). In view of above, we are inclined not to interfere in the order of ld CIT(A). Hence this ground of appeal of the Revenue is dismissed.

Summary

Issues involved:
Revenue's appeal against the treatment of loss as 'business loss' instead of 'capital loss' by Ld. CIT(A).

Analysis:
1. The appeal by the Revenue challenged the order of the Commissioner of Income Tax (Appeals)-XII, Kolkata regarding the treatment of a loss as 'business loss' instead of 'capital loss' for the assessment year 2008-09 under the Income Tax Act, 1961.

2. The Revenue contended that the loss of ?1,40,12,844/- from the sale of investment in mutual funds should be considered as 'capital loss' instead of 'business loss'. The Assessing Officer (AO) observed that the intention of the assessee was to earn capital gains from mutual funds, and previous losses were treated as capital losses.

3. The assessee, a Private Limited Company dealing in share and mutual funds, argued that the loss incurred was an adventure in the nature of trade, consistent with its business activities. The CIT(A) accepted the assessee's claim, noting that the nature of the business remained the same as in previous years, where profits from investments were treated as business income.

4. The ITAT Kolkata upheld the CIT(A)'s decision, emphasizing that the assessee consistently treated transactions as business activities, supported by the CBDT Circular No. 6/2016. The Tribunal found no reason to interfere with the CIT(A)'s order, dismissing the Revenue's appeal.

5. The Tribunal's decision was based on the assessee's historical treatment of transactions, aligning with business activities, and the CBDT Circular's guidelines. The Revenue's appeal was therefore dismissed, affirming the treatment of the loss as 'business loss'.

This detailed analysis covers the key aspects of the legal judgment, highlighting the arguments presented by both parties and the reasoning behind the final decision of the ITAT Kolkata.