2008 (9) TMI 502 - HC - Income Tax

Business Income or Capital gain- The assessee is a company, filed its return of income on December 31, 1999 admitting a total income of loss of Rs. 1,79,45,982. The assessee transferred shares during the relevant year consisting both of fixed investments and current investments. The current investments were held as stock-in-trade and so the profit on sale was calculated without indexation while the long-term capital gains on the fixed investment was calculated after indexing the cost of the shares by the Assessing Officer. Commissioner (Appeals) held that the current investments were also to be treated as investment and not as stok in trade, and the loss on the sale of the same shall be assessed as capital loss. The Tribunal passed the order in favour of assessee. Held that- the non-consideration of a ground by itself could not be a reason for filing an appeal. the revenue could have approached the Tribunal pointing out the mistake is not considering the specific ground raised by the revenue and obtained an order by way of rectification.

Summary

Issues:
- Treatment of consideration received for sale of shares as business income or capital gains.

Analysis:
The case involves an appeal by the Revenue against a Tribunal order regarding the treatment of consideration received for the sale of shares as either business income or capital gains. The assessee, a company, filed its return of income for the relevant year, admitting a total loss. The dispute arose from the classification of shares as current investments held as stock-in-trade, leading to a calculation of profit without indexation. The Commissioner of Income-tax (Appeals) held that the current investments should be treated as investments, resulting in a capital loss assessment. The Revenue, dissatisfied with this decision, filed an appeal before the Income-tax Appellate Tribunal, which ruled in favor of the assessee.

One of the grounds for the present appeal was that the Tribunal failed to consider specific grounds related to the treatment of current investments. The High Court emphasized that if a ground raised by the Revenue is not addressed by the Tribunal, it is the Revenue's responsibility to bring it to the Tribunal's attention for rectification through proper legal procedures. Mere non-consideration of a ground does not justify filing an appeal. The Court highlighted that the appropriate course of action for the Revenue would have been to approach the Tribunal to rectify the omission in considering the specific ground. Since this corrective step was not taken by the Revenue, the Court dismissed the appeal, stating that the Revenue could still approach the Tribunal for resolution.

In conclusion, the High Court dismissed the Revenue's appeal, emphasizing the importance of following proper legal procedures to address issues not considered by the Tribunal. The Court highlighted that the Revenue should have sought rectification from the Tribunal instead of directly appealing the decision. The judgment underscores the significance of procedural correctness in addressing grounds of appeal and the need for parties to exhaust available remedies before resorting to further legal action.