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2016 (1) TMI 253 - AT - Income TaxTreatment of capital gains as business income - Held that - There is no dispute that in the Assessment Years 2004-05, 2006-07 & 2007-08 the STCG/LTCG have been assessed as such while making the order under section 143(3) of the Act. We also find that the facts and issues before us are identical to the facts considered in earlier assessment years. Therefore, in our considered opinion on identical set of facts when the law has not changed the Revenue Authorities should not take a different view. This is against the rule of consistency as laid down by the Hon ble Supreme Court in the case of Radhasoami Satsang Saomi Bagh v. Commissioner of Income Tax 1991 (11) TMI 2 - SUPREME Court . Treatment to all gains from PMS as income from business - Held that - Respectfully following the decision of the Hon ble High Court of Delhi (2014 (5) TMI 18 - DELHI HIGH COURT), we direct the AO to treat the gains under the head STCG/LTCG . - Decided in favour of assessee. Additions made by the AO by treating exempt profit on sale of agricultural land as taxable income - Held that - Since the population of village Ramshej where the impugned land is situated is only 2929 as per the report of the Tahasildar, in our understanding of law the said land has to be treated as agricultural land outside the purview of the definition of capital asset. We accordingly set aside the finding of the Ld. CIT(A) and direct the AO to delete the addition - Decided in favour of assessee.
Issues:
1. Treatment of capital gains as business income 2. Treatment of gains from Portfolio Management Services (PMS) as income from business 3. Taxability of exempt profit on sale of agricultural land Analysis: Issue 1: Treatment of Capital Gains as Business Income The assessee challenged the order of the Ld. CIT(A) regarding the treatment of capital gains as business income for A.Y. 2008-09. The Assessing Officer (AO) observed that the assessee had consistently offered gains under 'Short Term Capital Gains' but treated them as 'Business Income' due to the belief that the assessee was engaged in share trading business. The Ld. CIT(A) upheld the assessment, leading the assessee to appeal. The ITAT found that in previous assessment years, similar gains were assessed as capital gains under section 143(3) of the Act. Citing the rule of consistency, the ITAT directed the AO to treat the gains as 'STCG/LTCG' in line with past assessments, allowing Ground No.1. Issue 2: Treatment of Gains from Portfolio Management Services (PMS) The Ld. CIT(A) directed to treat all gains from PMS as 'Income from Business' based on a Tribunal decision. However, the ITAT noted that the Tribunal decision was reversed by the High Court of Delhi, which held the transactions were not income from business. Following the High Court's decision, the ITAT directed the AO to treat the gains under 'STCG/LTCG,' allowing Ground No.2. Issue 3: Taxability of Exempt Profit on Sale of Agricultural Land The AO treated gains from the sale of agricultural land as Short Term Capital Gains (STCG) due to the absence of exemption claim in the return. The assessee contended that the land qualified as agricultural land under section 2(14)(iii)(a) and should be exempt. The Tahasildar's report confirmed the land's agricultural status. The ITAT analyzed the population criteria under the provision and concluded that since the land was in a village with a population of 2929, it qualified as agricultural land exempt from taxation. Thus, the ITAT directed the AO to delete the addition of the profit on the sale of agricultural land, allowing Ground No.3. In conclusion, the ITAT partly allowed the appeal, directing the AO to treat the gains as capital gains, based on the rule of consistency, and exempting the profit on the sale of agricultural land due to its classification as agricultural land. Ground No.4 was dismissed as not pressed.
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