2019 (3) TMI 65 - HC - Income Tax

Correct head of income - gain arising on sale of share - Business income or Short Term Capital Gain - HELD THAT - Tribunal had taken into account all the relevant factors for coming to a conclusion that sale of shares resulted into business income of the assessee. Tribunal noted frequency of purchase and sale of shares, quantum of sale and purchase of shares and the relevant gains besides other factors in order to come to a conclusion that the assessee had intended to engage itself in the business of buying and selling the shares. No error in the view taken by the Tribunal, since the Tribunal had noted in its Judgment all the factors in coming the conclusion, which are factual in nature, and with respect to which no perversity is demonstrated. Assessee however contended that in the later year the assessee had suffered loss in the process of selling the shares which was declared as capital loss. AO in the assessment after scrutiny accepted this declaration of the assessee and therefore the department is acting inconsistently which is not permissible. The issue of the assessee suffering loss in the subsequent year arose after the assessment in the present year was completed. If in the later year the assessee had declared a loss on capital side, we wonder whether going against such a self declaration of the assessee, the Assessing Officer had to foist upon the assessee the conclusion that the loss was a business loss. If at all, it was up to the assessee to claim it as business loss if the assessee was satisfied with the gain being taxed as business income - Decided against assessee

Summary

Issues:
1. Whether gain from the sale of shares should be treated as Business income or Short Term Capital Gain.

Analysis:
1. The Appeals were filed by the Assessee against the Tribunal's Judgment directing the gain of ?20.91 crores from the sale of shares to be treated as Business income instead of Short Term Capital Gain. The Commissioner of Income Tax (Appeals) had treated gains from shares held for over a year as Long Term Capital Gain, but gains from shares sold within a year as business income. The Tribunal upheld this view, considering factors like volume of transactions, holding period, purchase and sales magnitude, and the assessee's intention. The Tribunal observed that repetitive transactions and volume of shares indicated the assessee was trading shares, not investing. The Tribunal's decision was based on factual considerations and not shown to be erroneous.

2. The Tribunal's judgment considered all relevant factors like frequency and volume of share transactions to conclude that the assessee was engaged in the business of buying and selling shares. The Tribunal's decision was based on factual analysis, and no error was found in its approach. The assessee argued that in a subsequent year, they suffered a loss from selling shares, declared as capital loss, accepted by the Assessing Officer. The inconsistency in treating gains as business income and subsequent losses as capital loss was raised. However, the court noted that the issue of subsequent year's loss arose after the present assessment, and inconsistency in treatment did not impact the current Appeals' decision.

3. The court dismissed the Appeals, upholding the Tribunal's decision to treat the gain from the sale of shares as business income based on factual considerations and the assessee's trading activities. The court rejected the argument of inconsistency in treatment of gains and losses in different years, stating it was not a determinative factor for the present Appeals. The decision emphasized the importance of factual analysis and the assessee's trading intentions in determining the nature of income from share transactions.