2012 (7) TMI 157 - HC - Income Tax

Entitlement to be taxed under the head capital gains in respect of purchase and sale of shares - Assessee has shown speculation loss in share trading business - Held that - As the assessee has not borrowed any funds for its investments and that LTCG were attributable to only shares of 4 companies out of which 3 were held for a period of about 5 to 12 years and about 93% of the short terms gain/loss of shares ranging in excess of 1 month - as the assessee had returned speculation loss in his return ITAT followed the decision as decided in CIT V/s. Gopal Purohit 2010 (1) TMI 7 - BOMBAY HIGH COURT to hold that there is no bar for an assessee to maintain two separate portfolios, one relating to investment in shares and another relating to business activities involving dealing in shares - no substantial question of law - in favour of assessee.

Summary

Issues:
1. Whether the ITAT was justified in upholding the order of CIT(A) regarding the treatment of income from shares as capital gains instead of business income.
2. Whether the ITAT was justified in accepting the claim of the Assessee as an investor in shares despite speculation losses.

Analysis:
1. The respondent, engaged in textile business, had claimed income from purchase and sale of shares as capital gains. The Assessing Officer initially rejected this claim, assessing the total income at a higher amount. However, the CIT (Appeals) allowed the appeal, considering the respondent as an investor in shares and directing the income to be assessed as capital gains. This decision was upheld by the Tribunal after examining the evidence and finding that the respondent had not borrowed funds for investments. The Tribunal also noted that the shares were held for significant periods, supporting the conclusion that the respondent was an investor in shares for the purpose of taxation.

2. The Tribunal addressed the issue of speculation losses returned by the Assessee, emphasizing that maintaining separate portfolios for investment in shares and business activities involving share dealing is permissible. Citing a previous court decision, the Tribunal held that there is no prohibition on an assessee having distinct portfolios. The Tribunal considered the facts and evidence, concluding that the Assessee's claim as an investor in shares was valid, and the speculation losses did not negate this position. The Tribunal's decision was based on factual findings and legal precedent, indicating that no substantial question of law arose for consideration by the High Court.

3. The High Court, based on the concurrent findings of fact by the CIT (Appeals) and the Tribunal, dismissed the appeal by the Revenue. The Court noted that the appellate authorities had thoroughly examined the relevant material and reached justified conclusions. As a result, the Court found no grounds to interfere with the decisions made by the lower authorities. The appeal was therefore dismissed with no order as to costs, affirming the treatment of income from shares as capital gains for the Assessee.