2018 (3) TMI 1156 - AT - Income Tax

Income from share transaction - capital gain or busniss income - Held that - The relevant financial year is 1.4.2007 to 31.3.2008. Before 1.4.2007, the shares purchased by the assessee were of Aravind Chemicals i.e. on 23.3.2007 to 26.3.2007, GVK Power on 30.03.2007, Zee News on 30.03.2007, which were sold on 8.10.2007 to 25.10.2007, on 7.7.2007 and on 7.5.2007 respectively. Thus, the holding period of all the above shares is 213, 99 and 38 respectively. During the relevant financial year, there were repeated purchase of same scrip and sale thereof immediately, almost on daily basis to take advantage of the market fluctuations. Therefore, respectfully following the decisions of the Coordinate Benches in the cases of Geeta Devi Gaggar 2013 (12) TMI 1414 - ITAT HYDERABAD and Sunitha Devi Gaggar 2012 (10) TMI 1173 - ITAT HYDERABAD , both of whom are also family members of the assessee, we do not find any reason to interfere with the order of the CIT (A). In view of the same, the assessee s appeal is dismissed.

Summary

Issues:
Assessment of income as business income instead of short term capital gain, nature of transactions in shares, determination of investor vs. trader status.

Analysis:
The case involved an appeal by the assessee against an order confirming the assessment treating income from purchase and sale of shares as business income instead of short term capital gain. The AO observed that the assessee had a pattern of purchasing and selling shares within short periods, utilizing interest-free loans, and engaging in daily transactions, indicating a trading pattern. The AO also highlighted similar judgments involving family members of the assessee where transactions were considered business activities. The assessee argued for investor status citing valuation methods and delivery-based transactions. The Tribunal noted that the revenue had not consistently treated the assessee as an investor in previous assessments, and emphasized the need to consider various factors beyond transaction frequency to determine trading nature. The Tribunal referenced a case allowing for both investment and trading portfolios, emphasizing the significance of intention, profit motive, turnover, and source of funds in classification. Ultimately, the Tribunal upheld the order treating the assessee as a trader based on the pattern of transactions and the nature of holdings, dismissing the appeal. The decision aligned with previous judgments involving similar transactional patterns.

This comprehensive analysis addresses the issues raised in the judgment, covering the assessment methodology, nature of transactions, and the determination of investor vs. trader status, providing a detailed understanding of the legal reasoning and precedents considered by the Tribunal.