2018 (9) TMI 793 - AT - Income Tax

Treatment to the income derived from sale of shares under the head short term capital gain - portfolio management - Held that - Assessee is having only one portfolio that is of investment and is consistently following to declare capital gain or loss on sale on investment, dividend is earned on investment and there is not stock in trade portfolio. Besides, the assessee is consistently valuing investment at cost and does not claim the diminution in valuing of investment. The intention of the assessee that the Board of Directors of the assessee company has passed the resolution stating that the motive of the company is to deal in investment and not to trade in shares, therefore, we are of the view that assessee s income i.e Short term Capital Gain by way of sale of investment should be assessed under the head capital gain instead of business income . Therefore, we direct the Assessing Officer to treat the assessee as an investor and assess the income under the head Short term Capital Gain . - Decided against revenue

Issues: Determination of income derived from sale of shares under the head 'short term capital gain'.

The Appellate Tribunal ITAT Kolkata addressed the issue of whether the Commissioner of Income Tax (Appeals) was justified in directing the Assessing Officer to treat the income derived from the sale of shares under the head 'short term capital gain' for the assessment year 2010-11. The Tribunal examined the arguments presented by both parties, reviewed the relevant records, and considered past assessments. The Appellant Revenue had previously accepted the income from the sale of shares as short term capital gain under the investment portfolio. The Commissioner of Income Tax (Appeals) had ruled in favor of the assessee, emphasizing the principle of consistency in assessing profits from the sale of shares as short term capital gain. The Tribunal noted that the appellant consistently treated shares as investments in previous and subsequent assessment years, and the Revenue had accepted such treatment in those years. The Tribunal highlighted the importance of maintaining uniformity in treatment when facts and circumstances remain the same. The Tribunal also referenced relevant judicial pronouncements and previous tribunal decisions supporting the assessee's position. The Tribunal ultimately upheld the Commissioner's decision, dismissing the Revenue's appeal.

The Tribunal further referenced a previous order in a similar case, where it was emphasized that the intention of the assessee, as demonstrated by the treatment of shares in the books of accounts, is crucial in determining whether the income should be assessed as 'income from capital' or 'income from business.' The Tribunal highlighted that since the assessee consistently treated shares as investments in the books of accounts and not as stock-in-trade, the intention was not to treat them as business income but as investments. The Tribunal also cited a CBDT Circular stating that once an assessee takes a stand in a particular assessment year, that stand should remain consistent in subsequent years. Based on the intention of the assessee, as evidenced by the treatment of shares in the books of accounts and the resolution passed by the Board of Directors, the Tribunal concluded that the income derived from the sale of investments should be assessed as 'Short term Capital Gain' and not as 'business income.'

In conclusion, the Tribunal found no fault in the Commissioner's order and dismissed the Revenue's appeal, affirming the decision to treat the income from the sale of shares as short term capital gain. The Tribunal emphasized the importance of consistency in treatment, considering the intention of the assessee as reflected in the books of accounts and past practices. The order was pronounced in open court on 12-09-2018.

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