9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (11) TMI 1059 - AT - Income TaxTreatment of profit arising on share transaction - business income or short term capital gain - Held that - As decided in assessee s own case for A.Y. 2007-08 we find that it has not been disputed that the assessee has shown shares as investment right from the date of purchase and that was shown as such in the balance sheet of the assessee which was filed before the AO. In our humble opinion, the shares have to be treated as an investment and therefore any profit earned on the sale thereof is to be treated as capital gain. Findings of the Ld. CIT(A) are reversed. The AO is directed to treat the profits on sale of shares as capital gain, short term or long term as the case may be - Decided in favour of assessee
Issues:
Treatment of profit arising on share transaction as business income instead of short term capital gain. Detailed Analysis: Issue 1: Treatment of Profit as Business Income - The appellant, a company engaged in real estate development and share dealings, filed an appeal against the AO's decision to treat profit from share transactions as business income instead of short term capital gain. - The AO considered the appellant as a trader in shares due to the volume and frequency of transactions, holding period, and profit motive. - The CIT(A) upheld the AO's decision, emphasizing the large quantity of shares purchased and the continuous nature of transactions. - The appellant argued that it was an investor, not a trader, citing previous tribunal decisions and the nature of transactions conducted through a D-mat account. - The appellant highlighted the decrease in dividend income, shift of investment portfolio to business needs, and the inability to obtain local authorities' permission for regular business as reasons for share investments. - The appellant also referenced Board Circular No. 4 of 2007 and the Finance Minister's speech to support the claim of being an investor. Issue 2: Judicial Precedents and Arguments - The appellant relied on tribunal decisions in its favor for A.Y. 2007-08 and the case of Sagar Construction vs. ACIT to establish investor status. - The Departmental Representative (D.R.) argued that each year's facts should be considered separately and challenged the relevance of previous tribunal decisions. - The D.R. emphasized the short holding period of shares and the intention to maximize profits, disregarding the appellant's accounting treatment and dividend income. Issue 3: Tribunal's Decision - The tribunal considered the conflicting nature of treating share transactions as capital gain or business income. - Referring to the Hon'ble Supreme Court's observation and CBDT Circular No. 4/2007, the tribunal recognized the possibility of having separate investment and trading portfolios. - The tribunal found merit in the appellant's investment approach, evidenced by the balance sheet treatment of shares as investments and the continuity of investment practices. - Citing the Delhi Bench's decision, the tribunal dismissed the argument against using borrowed funds for share investments. - Ultimately, the tribunal reversed the CIT(A)'s decision, treating the profits from share sales as capital gains based on the investment nature of the transactions. Conclusion: The tribunal allowed the appeal, considering the appellant as an investor in shares and directing the AO to treat the share transaction profits as capital gains. The decision was based on the distinct investment approach, balance sheet treatment, and judicial precedents supporting the appellant's claim.
|
