2019 (4) TMI 975 - HC - Income Tax

Treatment to income from transaction of shares - period of holding for less than one year - short term capital gain OR business income - HELD THAT - The question whether the particular assessee is in the business of buying and selling shares or an investor, must necessarily depend on range of facts and circumstances. No single factor would decide the answer to the said question. In the present case, the Tribunal has taken into account all relevant facts. The significant factors as noted that the assessee was a professional, that no borrowed funds were used for purchase of shares, no interest inter alia was paid, the shares were shown in the balance sheet as investment and in all cases other than the intra day transactions, delivery of the shares was taken. We do not find that the Tribunal has committed any error in holding that the assessee was not in the business of buying and selling shares. Mere fact that the frequency of buying and selling shares may be higher itself would not be a determined factor. In fact, the Tribunal noticed that the assessee had rarely indulged in repeat buying and selling the same script. - Decided against revenue

Summary

Issues:
1. Whether the Tribunal erred in directing the Assessing Officer to treat income from shares held for less than one year as short-term capital gain instead of business income as held by the Assessing Officer and confirmed by CIT(A)?

Detailed Analysis:

1. The Revenue filed appeals challenging a common judgment of the Income Tax Appellate Tribunal regarding the treatment of income from shares held for less than one year. The key question was whether the income should be taxed as short-term capital gain or business income.

2. The respondent, an individual, claimed to be an investor in shares, while the Department argued she was engaged in the business of buying and selling shares. The CIT(A) had provided partial relief, distinguishing between shares held for over 12 months and those sold earlier.

3. The Tribunal allowed the assessee's appeals and dismissed the Revenue's appeals, prompting the Revenue to file the present appeals. The Tribunal considered factors such as the assessee's profession as a medical practitioner, use of interest-free funds from her father for share purchases, absence of borrowed funds, treatment of shares as investments in the balance sheet, and declaration of profit and loss from intra-day transactions as speculation profit.

4. The Tribunal emphasized that determining whether the assessee was in the business of buying and selling shares or an investor required a comprehensive analysis of all relevant facts and circumstances. It noted that factors like the professional background of the assessee, absence of borrowed funds, treatment of shares as investments, and taking delivery of shares except for intra-day transactions were significant in this case.

5. The Tribunal's decision was based on a holistic assessment of the facts and circumstances, concluding that the assessee was not in the business of buying and selling shares. The frequency of transactions alone was not decisive, especially since the assessee rarely engaged in repeat transactions of the same shares.

6. The High Court found no error in the Tribunal's decision and dismissed the Income Tax Appeals, stating that no question of law arose from the case. The judgment upheld the Tribunal's analysis and determination that the income from shares held for less than one year should be treated as short-term capital gain, not business income.