2015 (7) TMI 914 - AT - Income Tax

Transaction of shares - business income instead of short term capital gain - Held that - In the immediately subsequent year, ld. Assessing Officer has treated the asssessee as an investor. Similarly, in Assessment Year 2010-11 again, ld. Assessing Officer has accepted the assessee as investor vide assessment order dated 28-01-2013 passed u/s. 143. According to the assessee, in earlier years also, her status was never changed by the Assessing Officer. On due consideration of these facts, we are of the view that ld. Assessing Officer was simply influenced by magnitude of transactions. To our mind, magnitude of transaction is one of other factor amongst others for deciding the nature of investment, whether it was a trading in shares or simplicitor investment. Therefore, looking to the facts and circumstances and the finding of the Commissioner of Income Tax (Appeals), we do not see any reason to interfere in the order of the Commissioner of Income Tax (Appeals) deleting the addition of ₹ 61,64,711/- out of ₹ 61,97,756/- treated by Assessing Officer as business income instead of short term capital gain shown by the assessee. - Decided against revenue. Addition on interest income - CIT(A) deleted the addition - Held that - Without appreciating the fact that FD s have not matured at the end of the year and, hence, the said interest figure cannot be adopted, the ld. Assessing Officer has erred in taking the figure of ₹ 2,63,748/- against the figure of ₹ 1,12,748/-. The assessee has produced TDS certificate from the bank for the period from 01-04-2007 to 31st March, 2008 showing the bank interest income on FD at ₹ 1,35,552/-. This income has been offered by the assessee for taxation.Commissioner of Income Tax (Appeals) has rightly deleted the addition because that income has not accrued to the assessee. Ld. Assessing Officer has erroneously adopted the higher figure, therefore, we do not find any merit in this ground of appeal also. It is rejected.- Decided against revenue.

Summary

Issues Involved:
1. Whether the gain from the sale of shares should be assessed as business income or short-term capital gain.
2. Whether the addition of Rs. 1,51,000/- as interest income by the Assessing Officer was justified.

Detailed Analysis:

Issue 1: Assessment of Gain from Sale of Shares

The primary issue in this case is whether the gain from the sale of shares should be treated as business income or short-term capital gain. The assessee filed her return of income declaring a short-term capital gain of Rs. 61,97,756/-, which the Assessing Officer treated as business income due to the high frequency of transactions and short holding periods of the shares.

Upon appeal, the Commissioner of Income Tax (Appeals) accepted the assessee's claim, except for a sum of Rs. 33,045/-. The Commissioner noted that the assessee was a full-time employee with a significant salary and no time to engage in business activities. The investments were made using surplus funds, and there were no borrowings. The shares were held in a DEMAT account and shown as investments in the balance sheet, not as stock-in-trade. The Commissioner also highlighted that the volume and frequency of transactions did not indicate a business activity, as the assessee dealt in only 15 scripts over 56 days with an average holding period of 69 days.

The Tribunal considered various principles and tests to determine whether the transactions were in the nature of trade or investment. These included the intention at the time of purchase, the treatment in the books of account, the frequency of transactions, and whether the shares were held for realizing profit or for retention and appreciation in value. The Tribunal concluded that the Assessing Officer was influenced by the magnitude of transactions and failed to consider other relevant factors. Consequently, the Tribunal upheld the Commissioner of Income Tax (Appeals)'s decision to treat the gain as short-term capital gain, except for Rs. 33,045/- which was to be treated as business income.

Issue 2: Addition of Rs. 1,51,000/- as Interest Income

The second issue pertains to the addition of Rs. 1,51,000/- as interest income from fixed deposits. The assessee had made fixed deposits with Axis Bank and Bank of Baroda, earning interest income. The Assessing Officer adopted a figure of Rs. 2,63,748/- based on the FD certificate from Bank of Baroda, which showed total interest up to the maturity date, instead of the actual interest accrued during the year.

The Commissioner of Income Tax (Appeals) deleted the addition, noting that the interest had not accrued to the assessee by the end of the year. The Tribunal agreed with this finding, stating that the Assessing Officer erroneously adopted a higher figure without considering the actual interest accrued. Therefore, the Tribunal upheld the deletion of the addition of Rs. 1,51,000/-.

Conclusion:

The Tribunal dismissed the revenue's appeal, upholding the Commissioner of Income Tax (Appeals)'s decision on both issues. The gain from the sale of shares was to be treated as short-term capital gain, except for Rs. 33,045/-, and the addition of Rs. 1,51,000/- as interest income was deleted.