2012 (2) TMI 72 - AT - Income Tax

Nature of income capital gain vs business income - purchase & sale of shares A.Y. 07-08 - Held that - Issue was covered in favour of the assessee by the decision of the Tribunal in A.Y. 2005-06 and 2006-07 in which the Tribunal on identical facts accepted the claim of the assessee that it was an investor. Merely on the ground that volume of transaction was heavy and capital gain earned was large, it could not be held that the assessee was trading in shares. Hence, order of CIT(A) accepting the claim of the assessee as capital gain is upheld Decided against the Revenue.

Summary

Issues involved:
Nature of income earned from purchase and sale of shares.

Analysis:
The appeal by the revenue challenged the order of CIT(A) for the assessment year 2007-08, specifically disputing the nature of income declared by the assessee from the purchase and sale of shares. The Assessing Officer (AO) questioned the classification of the income as capital gain, suspecting it to be business income due to the substantial volume and frequency of share transactions. The assessee, however, maintained that they were investors, consistently treating shares as investments and declaring income as capital gain. The AO rejected this claim, emphasizing the profit motive behind the transactions and disregarding the past acceptance of investor status by CIT(A) in previous years.

In the appeal, CIT(A) referred to previous Tribunal decisions in favor of the assessee in similar circumstances, supporting the investor status. The Authorized Representative for the assessee argued for consistency in decision-making based on past rulings. The Departmental Representative, while supporting the AO's order, acknowledged the similarity of facts with previous years where the revenue's appeals were dismissed.

Upon careful consideration, the Tribunal analyzed the nature of income from share transactions, acknowledging the debatable nature of classifying such activities as investment or trading. The Tribunal noted the assessee's historical treatment of shares as investments, holding them for varying durations and declaring capital gains accordingly. Emphasizing the need for case-specific analysis, the Tribunal upheld the CIT(A)'s decision based on past Tribunal rulings favoring the assessee's investor status. The Tribunal highlighted the consistency in decisions across assessment years and dismissed the revenue's appeal, affirming the capital gain classification for the income from share transactions.

Therefore, the Tribunal upheld the CIT(A)'s decision, concluding that the income from share transactions should be treated as capital gain, in line with the assessee's investor status. The appeal by the revenue was dismissed, maintaining the consistency in classification across assessment years based on past Tribunal decisions in the assessee's favor.