2018 (5) TMI 704 - AT - Income Tax

Income from transaction of shares - busniss income or capital gain - period of holding of shares - intention and treatment in the books of accounts - Held that - Whether the income in question has to be assessed under the head income from capital gain or income from business, the assessee should demonstrate the intention and treatment in the books of accounts, whether he holds these shares and securities as an investment or as a stock in trade .This intention can be judged by the entry made by the assessee in his books of accounts, that is, the treatment in the books of accounts of the assessee. We note that since, the assessee has shown the investment in its books of accounts under the head investment and not under the head stock in trade, therefore, the intention of the assessee is not to trade in shares but to treat them as an investment. We note that the Department has been consistently accepting the assessee s computation under the head short term capital gain, therefore, we uphold the order of the ld. CIT(A) following the Rule of consistency. Department has been accepting the stand of the assessee, during the previous year as well as in subsequent years to disclose the income on account of sale of investments under the head short term capital gain . Moreover, the assessee s intention is to be as an Investor, as has been observed by the treatment in the books of accounts as investment . Case of RadhasoamiSatsang 1991 (11) TMI 2 - SUPREME Court to be followed. - Decided against revenue

Summary

Issues:
1. Whether business income should be treated as short term capital gain.
2. Whether the income in question should be assessed under the head income from capital gain or income from business.

Issue 1:
The Revenue appealed against the order of the Ld. Commissioner of Income Tax (Appeals) regarding the treatment of business income as short term capital gain for Assessment Year 2010-11. The Assessing Officer noted that the assessee company, engaged in trading shares, credited an amount as profit on the sale of shares and claimed it as short term capital gain. However, the Assessing Officer found discrepancies in the nature of the transactions and requested further details from the assessee to determine if the shares were held as investments or stock-in-trade. As the assessee failed to provide the necessary information, the Assessing Officer treated the income as business income. The Ld. CIT(A) directed the income to be treated as short term capital gain, considering consistency in treatment in subsequent assessment years. The Tribunal upheld the Ld. CIT(A)'s decision, emphasizing the importance of the assessee's intention and treatment in the books of accounts to determine the nature of the income.

Issue 2:
The second issue revolved around whether the income should be classified as income from capital gain or income from business. The Tribunal considered the assessee's intention, as reflected in the books of accounts, crucial in determining the nature of the income. The Tribunal noted that the Department consistently accepted the assessee's computation as short term capital gain in previous and subsequent assessment years. Additionally, the Tribunal referred to a CBDT Circular emphasizing that the assessee's stand in one assessment year should remain consistent in subsequent years unless there is a material change. The Tribunal, following the principle of consistency and the judgment in Radhasoami Satsang case, upheld the Ld. CIT(A)'s order, confirming the treatment of income as short term capital gain. The Tribunal dismissed the Revenue's appeal, maintaining the decision of the lower authorities.

This detailed analysis of the judgment provides insights into the issues raised, the arguments presented, and the Tribunal's reasoning in arriving at the decision to treat the income as short term capital gain based on the assessee's intention and consistent treatment in previous years.