2017 (3) TMI 901 - HC - Income Tax

Income from share transactions - ITAT holding as Long Term Capital Loss on sale of shares in place of business income - shares held as stock in trade by the assessee - Held that - It is permissible for an assessee to have two accounts; one for trading of shares and other for investment. In the absence of any material being brought on record by the revenue to suggest that the Long Term Capital Gain claimed by the assessee was not in respect of trading of shares, the findings recorded by the Tribunal does not call for any interference by this Court. Allowing the membership fee & annual subscription expenses - allowable business expenses - Held that - There is no material to suggest that the expense claimed by the assessee was non-business or of a personal in nature. Being essentially a finding of fact, the Tribunal having recorded findings on the basis of the material and evidence before it, the same does not suffer from any infirmity.

Summary

Issues:
1. Whether Long Term Capital Loss on sale of shares can be treated as business income.
2. Whether membership fee and annual subscription expenses can be claimed as business expenses.

Analysis:

Issue 1: Long Term Capital Loss on sale of shares
The appellant filed an appeal under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal disallowing the Long Term Capital Loss of ?2,14,64,900 on the sale of shares. The Assessing Officer had treated the shares as stock in trade, resulting in a business loss. However, the Tribunal found that the shares were held as investments by the assessee, as reflected in the balance sheets of previous years. The Tribunal observed that the revenue failed to provide evidence that the shares were intended for trading rather than investment. The Tribunal concluded that the loss should be treated as a Long Term Capital Loss, not a business loss. The High Court upheld the Tribunal's decision, stating that the revenue did not present any evidence to challenge the assessee's claim that the shares were held for investment purposes.

Issue 2: Membership fee and annual subscription expenses
The second issue pertained to the claim of business expenses amounting to ?6,18,1500 on membership fees and annual subscriptions. The Assessing Officer disallowed these expenses, but the Tribunal, relying on a previous order, allowed the deduction. The Tribunal found that the expenses were directly connected to the business activities of the assessee. The High Court noted that the revenue did not provide any material to refute the Tribunal's findings. As the Tribunal's decision was based on factual evidence before it, the High Court found no reason to interfere. Therefore, the expenses were deemed valid business expenses.

In conclusion, both issues were decided in favor of the assessee, and the appeal was dismissed by the High Court.