2018 (4) TMI 750 - HC - Income Tax

Transactions of purchase and sale of shares - business transaction OR short term/long term capital - HUF assessee s source of income were interest income and income from purchase and sale of shares of listed companies through different stock exchanges - number of transactions - Held that - The appellant is not disputing that he has purchased shares for 247 times and sold 263 times - the assessee-appellant to establish the intention by producing his accounts before the department disclosing that he maintained distinction between those shares which are held as stock in trade and those shares which are held as investment. In our opinion the aforesaid burden was lying upon the appellant to prove this material aspect before the Assessing Officer but it is obvious from the material available on record that he has not been able to produce any material to show that he maintained distinction between the share held in stock in trade or those held by way of investment. If the assessee has failed to discharge his burden caste upon him by law in support of his claim then obviously he is not entitled to claim any benefit. The whole basis of argument of learned counsel for the appellant is that an affidavit was filed by him in which everything was explained that too before the CIT (A) Bikaner. However in our opinion it was the duty of the assessee to maintain record for distinction between the shares held in stock in trade and those held by way of investment then obviously evidence was to be produced by him therefore we are of the opinion that the entire case is based upon factual aspect of the matter hence we do not think that the question of law framed in this appeal is having any significance so as to adjudicate the same. - Decided against assessee.

Summary

Issues:
1. Determination of whether the transaction in question is a business transaction or short term/long term capital.

Analysis:
The case involved an Income Tax appeal where the primary issue was whether the transactions of purchase and sale of shares by the appellant Hindu Undivided Family (HUF) should be treated as business transactions or short term/long term capital gains. The appellant claimed the income from these transactions under the head of capital gains, while the Assessing Officer treated them as income from business and profession. The Assessing Officer based this decision on the volume of transactions, lack of dividend income, purchase through borrowed funds, and Circular No.4/07 issued by the CBDT. The CIT (Appeals) allowed the appeal against the Assessing Officer's decision, but the ITAT set aside this order and restored the Assessing Officer's decision.

The appellant contended that the transactions were investment in nature, not business transactions, and that the Assessing Officer wrongly categorized them as business income. The appellant argued that the number of transactions alone should not determine the nature of income and that the CIT (A) had rightly considered the evidence. The appellant also highlighted the specific sections of the Income Tax Act applicable to the sale of capital assets, emphasizing that the Assessing Officer's decision was incorrect.

On the other hand, the Revenue argued that the Assessing Officer and ITAT correctly treated the income as business income due to the high volume of transactions. The Revenue relied on a Supreme Court judgment to support the position that the distinction between shares held as stock in trade and investments should be evident from the appellant's records, which the appellant failed to establish. The Revenue maintained that the factual aspect of the case supported treating the income as business income.

The High Court observed that the appellant had indeed engaged in a significant number of transactions, purchasing shares 247 times and selling 263 times. The burden was on the appellant to demonstrate the intention behind these transactions and maintain a clear distinction between shares held for trading and investment purposes. However, the appellant failed to provide sufficient evidence to support this distinction, leading the court to uphold the decision treating the income as business income. The court emphasized that the case hinged on factual aspects, and the question of law raised by the appellant did not hold significance in this context. Consequently, the court dismissed the Income Tax Appeal filed by the appellant/assessee, ruling in favor of the Revenue.