2016 (11) TMI 590 - AT - Income Tax

Share transaction - Long term/short term capital gain on profit on sale of shares OR business income - assessment was completed by treating the income from business of trading in shares as business income instead of capital gains, computed by the assessee - Held that - Frequency and magnitude of transaction cannot be the criteria for determining the head of income. The ratio laid down in NEO Polypack (P.) Ltd. (2000 (4) TMI 26 - DELHI High Court ) supports the case of the assessee. Considering the totality of facts and the judicial pronouncements discussed hereinabove, the appeal of the assessee is allowed.

Summary

Issues:
Long term/short term capital gain on profit on sale of shares.

Analysis:
The assessee contested the order of the Ld. First Appellate Authority, Mumbai, regarding the treatment of income from trading in shares as business income instead of capital gains. The assessee relied on previous decisions by the Tribunal and the Hon'ble jurisdictional High Court to support their claim. The Ld. Commissioner of Income Tax (Appeal) referred to CBDT Circular No.4 of 2007 and dismissed the appeal. The Tribunal noted that the issue had been settled in previous cases and dismissed the appeal of the Revenue, allowing that of the assessee.

The dispute centered around whether income from the sale of shares should be treated as business income or capital gain. The Assessing Officer viewed the activity as share trading business based on volume, turnover, and holding period, while the Commissioner of Income Tax (Appeals) and Tribunal found the assessee to be engaged in investment in shares for several years. The Tribunal upheld this finding, and the Hon'ble Bombay High Court dismissed the revenue's appeal, concluding no question of law arose.

The Tribunal considered the case of another individual engaged in similar share activities and applied the same reasoning. The Tribunal dismissed one appeal and allowed another based on the consistent treatment of income from share transactions as capital gain. The Tribunal's decision was supported by judicial pronouncements and the stand taken by the Ld. Commissioner of Income Tax (Appeal) for a previous assessment year. The appeal of the assessee was ultimately allowed based on the totality of facts and legal precedents cited.

In conclusion, the Tribunal upheld the assessee's claim regarding the treatment of income from share transactions as capital gain, following previous decisions and legal principles. The appeal of the assessee was allowed, emphasizing the long-standing nature of the investment activity and the consistent treatment of income under the head of capital gains. The decision was pronounced in the presence of representatives from both sides.