2019 (4) TMI 1193 - HC - Income Tax

Nature of income - profit earn on sale of shares - STCG or Business Income - HELD THAT - CIT (Appeal) and tribunal held in favour of the assessee mainly on the ground that in the earlier assessment years the assessee had consistently shown the receipts of sale of share as capital gain which the revenue had also accepted. We do not find any error in view of tribunal. The tribunal had noted that in the earlier years the assessee had suffered loss. Therefore in the current year if the income was to be treated as business income, capital loss of the earlier year would not be assessable against such income. It appears that the Assessing Officer desired to tax income as business income in the current year, in view of the change in tax rates, between short term capital gain and business income, which in the earlier years was same. In such circumstances, no question of law arises - Appeal is dismissed

Summary

Issues:
1. Classification of income as Short Term Capital Gain or Business Income for the assessment year 2006-07.

Analysis:
The High Court of Bombay heard an appeal filed by the revenue challenging the judgment of the Income Tax Appellate Tribunal regarding the classification of income. The primary issue was whether the gain of ?5.60 Crores arising from the sale of shares by the individual assessee should be treated as Short Term Capital Gain or Business Income for the assessment year 2006-07. The Assessing Officer contended that it should be considered as business income, while the assessee had offered it as short term capital gain in her income tax return.

The High Court noted that the assessee had consistently shown the receipts from the sale of shares as capital gains in earlier assessment years, which had been accepted by the revenue. The CIT (Appeal) and the tribunal had ruled in favor of the assessee based on this consistent treatment. The tribunal observed that in previous years, the assessee had incurred losses, and if the income from the current year was treated as business income, the capital losses from earlier years would not be adjustable against such income. The Assessing Officer's decision to tax the income as business income in the current year seemed to be influenced by the change in tax rates between short term capital gains and business income, which were the same in previous years.

Ultimately, the High Court found no error in the tribunal's decision and dismissed the appeal, stating that no question of law arose from the circumstances presented. The judgment affirmed the tribunal's findings and upheld the classification of the income as short term capital gain, in line with the assessee's consistent treatment in previous years.