2014 (2) TMI 599 - AT - Income Tax

Nature of Income Business Income OR STCG Income from sale of shares Held that - The decision in Tikuchand D. Jogani Versus ACIT 2014 (1) TMI 1599 - ITAT MUMBAI followed - the assessee has shown all the purchases under the investment portfolio - Nowhere it is provided that if the transactions are frequent and voluminous then the claim of the assessee is not allowable as short term capital gain or long term capital gain as the case may be - the gain on account of sale of shares has to be treated as short term capital gain thus, the AO is directed to treat the gain on account of sale of shares as short term capital gain Decided in favour of Assessee.

Summary

Issues:
Condonation of delay in filing the appeal, Classification of income on sale of shares as business income or short term capital gain.

Condonation of Delay:
The appeal was filed one day late, and the assessee sought condonation of delay citing inevitable circumstances. The Tribunal, after considering the explanation provided by the assessee's counsel, condoned the delay in filing the appeal.

Classification of Income on Sale of Shares:
The Assessing Officer (AO) treated the income from the sale of shares as business income instead of short term capital gain, as declared by the assessee. The AO based this decision on factors such as the holding period of shares, regularity of transactions, and use of borrowed funds for share purchase. The Commissioner of Income Tax (Appeals) upheld the AO's decision. However, the Tribunal, after reviewing the case and considering precedents like Tikuchand D. Jogani, concluded that the assessee should succeed. The Tribunal emphasized that the treatment of income depends on whether shares are held as investments or stock-in-trade, irrespective of transaction frequency. It highlighted that the intention behind share purchase, holding period, source of funds, and past treatment of gains are crucial factors. The Tribunal noted that the mere frequency of transactions or short holding periods cannot solely determine if the income is business income or capital gain. It also referenced judgments like CIT Vs. V A Trivedi to emphasize that the onus is on the Revenue to prove the intention behind share transactions. The Tribunal directed the AO to treat the gain on the sale of shares as short term capital gain, aligning with the assessee's position.

Conclusion:
The Tribunal allowed the appeal in favor of the assessee, directing the AO to treat the income from the sale of shares as short term capital gain. The decision was based on the principles outlined in relevant case laws and the specific circumstances of the case, emphasizing the importance of intention, holding period, and treatment of shares in determining the nature of income.