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2019 (9) TMI 660 - AT - Income TaxCorrect head of income - Income from capital gains u/s. 111A or business income - assessee has admitted income from sale on shares (INTRADAY) under the head business and income from profit on sale of shares under the head capital gains also - considering the frequency of buying and selling and the period of holding of shares, the AO held that the nature of the activity is that of trading in shares and not an investment in shares, therefore he held that the income arising from sale of shares, claimed by the assessee under the head capital gains, is assessable as business income and assessed accordingly - HELD THAT - As relying on OM PRAKASH ARORA 2014 (4) TMI 972 - DELHI HIGH COURT the reasoning given by the lower authorities to assess the income under the head business is, in our view, very well justified. Further, since in this case, the business activity of the assessee is trading in shares, there can be a presumption that the amount claimed was derived through trade; in such case, the assessee has to establish that the impugned amount was indeed invested and the proceeds of sales were of a capital asset. However, the assessee has not laid any such material either before the lower authorities or before us. Therefore, no merit in the submissions of the assessee and hence dismiss the appeals. - Decided in favour of revenue.
Issues Involved:
1. Classification of income from sale of shares as business income or capital gains. 2. Assessment of the nature of the assessee’s share transactions. 3. Applicability of CBDT Circular No. 6/2016. 4. Treatment of income under various heads by the Assessing Officer (AO) and Commissioner of Income Tax (Appeals) [CIT(A)]. Detailed Analysis: 1. Classification of Income from Sale of Shares: The core issue revolves around whether the income derived from the sale of shares by the assessee should be classified as business income or capital gains. The AO found that the assessee purchased and sold shares within a few days, with none held for more than three months. The AO concluded that the frequency and short holding period indicated trading activity rather than investment, thus classifying the income as business income. The CIT(A) upheld this classification, noting the regularity of transactions and the short holding period. 2. Assessment of the Nature of the Assessee’s Share Transactions: The assessee argued that the shares were shown as 'Investments' in the books of accounts, not as 'Stock-in-trade,' and hence should be treated as capital gains. However, the AO observed that the shares were not held for long periods and were frequently traded, suggesting a trading activity. The CIT(A) also noted that the assessee earned only a meager dividend, further supporting the classification as business income. The Tribunal, applying the principles from various judicial precedents, including the Hon’ble Delhi High Court's decision in CIT v. Om Prakash Arora, agreed with the lower authorities' assessment. 3. Applicability of CBDT Circular No. 6/2016: The assessee relied on CBDT Circular No. 6/2016, which provides guidelines for classifying share transactions. The CIT(A) considered this circular but found it inapplicable as the assessee held shares for less than 12 months and engaged in speculative trading. The Tribunal upheld this view, noting that the circular did not apply to the assessee’s case due to the nature and frequency of transactions. 4. Treatment of Income Under Various Heads by AO and CIT(A): The AO and CIT(A) treated the income from share transactions as business income based on the frequency and short holding period of the shares. The assessee's argument that the income should be classified as capital gains was rejected due to the trading nature of the transactions. The Tribunal noted that the assessee did not provide sufficient evidence to establish that the proceeds were from a capital asset rather than a trading activity. The Tribunal affirmed the lower authorities' decisions, stating that the classification as business income was justified given the facts and circumstances. Conclusion: The Tribunal dismissed the appeals filed by the assessee, upholding the classification of income from share transactions as business income. The decision was based on the frequency and short holding period of the transactions, the meager dividend income, and the principles laid down in judicial precedents. The Tribunal found no merit in the assessee's submissions and concluded that the lower authorities had correctly assessed the income under the head 'business.' Order Pronounced: The appeals filed by the assessee were dismissed, and the order was pronounced on 13th September 2019 in Chennai.
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