2015 (5) TMI 794 - HC - Income Tax

Short term capital gain v/s business income - Whether Tribunal below committed substantial error of law by not analyzing the facts of the instant case to determine whether the income of the assessee was required to be treated as income from business and not short-term capital gain since the main motive of the assessee was to earn profit by trading on shares rather than to earn dividend by investing the same? - Held that - The benefit of short-term capital gain can be availed for any period of retention upto 12 months. Although a ceiling has been provided but there is no indication as regards the floor, which can be as little as one day. When that is the position in law and the investor has adduced proof to show that some transactions were intended to be business transaction, some transactions were intended to be by way of investment and some transactions were by way of speculation and the revenue has not been able to find fault from the evidence adduced then the mere fact that there were 1000 transactions in a year or the mere fact that the majority of the income was from the share dealing or that the Managing Director of the assessee is also a Managing Director of a firm of share brokers cannot have any decisive value. The question essentially is a question of fact. The CIT Appeal and the learned Tribunal have concurrently held against the views of the Assessing Officer. On the basis of the submissions made by the learned Advocate for the appellant, it is not possible to say that the views entertained by the CIT Appeal or the learned Tribunal were not a possible view. Therefore, the judgment cannot be said to be perverse. - Decided against revenue.

Summary

Issues:
Challenge to judgment and order dated 18th October, 2010 for assessment years 2005-06 and 2006-07 - Treatment of short-term capital gains as business income - Dismissal of appeal by appellate authority - Appeal by Revenue - Questions formulated regarding the nature of income earned by the assessee - Argument by appellant's advocate regarding the primary business activity of dealing in shares - Frequency of transactions and income sources - Allegations of speculative activities - Concurrency of views by CIT Appeal and Tribunal - Examination of issues by Tribunal - Appellate Authority's requirement to provide reasons - Request for remand by appellant's advocate - Determination of perversity in the judgment.

Analysis:

The judgment under scrutiny pertains to the treatment of short-term capital gains as business income for the assessment years 2005-06 and 2006-07. The Assessing Officer had categorized the gains as business income, which was contested by the assessee leading to an appeal. The appellate authority ruled in favor of the assessee, highlighting the distinction between investment and trading activities. The CIT (Appeals) supported this view, emphasizing that the motive of purchase, not the timing of sale, determines the nature of the transaction. The Tribunal concurred with the CIT (Appeals), prompting the Revenue to appeal once more.

The questions raised in the subsequent appeal revolved around whether the income should be treated as business income rather than short-term capital gains, considering the profit motive and trading activities of the assessee. The appellant's advocate argued that the frequency of transactions and the income sources indicated a primary business of dealing in shares, supported by allegations of speculative activities. However, the Tribunal, in alignment with the CIT (Appeals), upheld the assessee's position based on the evidence presented.

The appellant's advocate contended that the Tribunal failed to independently analyze the issue, merely echoing the CIT (Appeals)'s decision. However, it was clarified that an Appellate Authority need not provide additional reasoning if in agreement with the previous judgment unless there are conflicting findings. The judgment emphasized the need for the Revenue to demonstrate legal impossibility in the findings, which was not done in this case. Ultimately, the Court found no perversity in the Tribunal's decision, leading to the dismissal of the appeal.