2017 (9) TMI 468 - AT - Income Tax

Gains from transactions in shares - capital gain or business receipt - treat the income of the appellant shown under the head Short Term Capital Gain as Income from Business & Profession - Held that - Intent of the legislature is abundantly clear from the perusal of the explanatory notes and as such there is no case to treat the income of the assessee shown under the head Short Term Capital Gains as Income from Business & Profession. We further find that as per Explanatory Statement issued with Union Budget of 2004 in respect of Finance, (2) Bill, 2004, by which STT was levied on the sale and purchase of shares and securities carried out through Stock Exchange. The intent of the legislature in this regard is abundantly clear from the perusal of Explanatory Note referred to above and as such there is no case to treat the income of the appellant shown under the head Short Term Capital Gain as Income from Business & Profession , hence, we uphold the decision of the Ld. CIT(A) and dismiss the ground no. 1 raised by the Revenue. Allowing business loss - AO was of the view that assessment proceedings are not an opportunity to make additional / fresh/ revised claim for any benefit/ deduction, which was not there in the original return - Held that - Fact of these case are identical with the case of CIT Vs. Bharat Alluminium Co. Ltd., 2007 (5) TMI 228 - DELHI HIGH COURT wherein the Hon ble Jurisdictional Delhi High Court has held that the revised computation of income could be accepted even after the time limit to file revised as prescribed under section 139(5) of the Act. The judgment of Apex Court in Goetze India Ltd. 2006 (3) TMI 75 - SUPREME Court relied by the Assessing Officer is on totally different facts therefore, applying the same to the case of the assessee, would not be correct In view of the above, the Assessing Officer s decision in rejecting the claim of the assessee for set off of loss is incorrect - Decided against revenue

Summary

Issues:
1. Treatment of capital gain as income from business and profession.
2. Allowing setoff losses as business loss.

Issue 1: The appellant challenged the Ld. CIT(A)'s decision to delete the addition arising from the treatment of capital gain as income from business and profession. The AO observed that the assessee, engaged in trading shares, showed gains under "Short Term Capital Gains" but was treated as a trader in securities. The AO relied on various judicial pronouncements and the CBDT circular to determine the nature of transactions. The AO concluded that the assessee intended to trade for quick profits, considering factors like high transaction value, frequency, and use of borrowed funds. However, the Ld. CIT(A) held that the income shown as Short Term Capital Gains should not be treated as income from business and profession, citing the legislative intent and explanatory notes from the Union Budget of 2004. The ITAT upheld the Ld. CIT(A)'s decision, dismissing the Revenue's appeal on this ground.

Issue 2: The second ground of appeal involved the allowance of setoff losses as business loss. The AO rejected the claim for setoff, citing that assessment proceedings are not for making additional claims not in the original return. The AO relied on a Supreme Court judgment in a different context. However, the ITAT found the facts similar to another case where revised computation of income was accepted after the time limit for filing revised returns. The ITAT disagreed with the AO's decision to reject the claim for setoff, affirming the Ld. CIT(A)'s well-reasoned order. Consequently, the ITAT dismissed the Revenue's appeal on this issue as well.