9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (8) TMI 773 - AT - Income TaxCorrect head of income - gain on sale of shares - involvement of assessee as a ' trader' OR 'investor' - capital gain or business income - HELD THAT - During the previous, year, the assessee had made transaction in ten companies equity shares and mutual funds which includes HCL as well. The decision relied by the Ld. AR in case of Adar Poonawalla 2015 (1) TMI 1338 - ITAT PUNE is apt in the present case as in that case as well the issue was relating to loss on account of sale of shares of HCL Technologies which was adjusted against Long Term Capital Gain. The contention of the Ld. DR that the shares were purchased through loan will not make any impact as the assessee s profile is that of investor and not that of trader which was not at all disputed by the Assessing Officer at any point of time. The transaction of sale and purchase of shares were also not held as non genuine by the AO at any point of time. Thus, the AO as well as the CIT(A) was not right making addition and confirming the same. Therefore, we direct the AO to re-compute the capital gain/loss on the sale of shares of HCL Technologies Ltd. thereby taking the same to be assessable under the head capital gains as per law. Hence, appeal of the assessee is allowed.
Issues:
1. Characterization of the assessee's activity in dealing with shares of M/s HCL Technologies Ltd. as a trader or investor. 2. Treatment of short term capital loss on the sale of shares of M/s HCL Technologies Ltd. 3. Application of legal precedents and provisions in determining the nature of bonus shares and cost calculation. 4. Dispute over the classification of short term capital loss as business loss. 5. Reliance on legal judgments and provisions in the decision-making process. Issue 1: Characterization of Activity The assessee appealed against the CIT(A)'s decision characterizing the assessee's involvement in the sale of shares of M/s HCL Technologies Ltd. as that of a trader rather than an investor. The Assessing Officer contended that the assessee's actions indicated a trading intention to set off short term capital loss against gains. The ITAT ruled in favor of the assessee, stating that the assessee was not engaged in the business of share dealings, treated the income as short term capital gain, and invested in mutual funds and equity shares. The ITAT found the Assessing Officer's characterization unjustified, directing a re-computation of capital gain/loss under the head of capital gains. Issue 2: Treatment of Short Term Capital Loss The Assessing Officer treated the short term capital loss on the sale of shares of M/s HCL Technologies Ltd. as business income, resulting in an addition to the loss amount. The CIT(A) partly allowed the appeal. The ITAT disagreed with this treatment, emphasizing that the assessee's profile was that of an investor, not a trader. The ITAT directed the Assessing Officer to re-compute the capital gain/loss under the head of capital gains, allowing the appeal of the assessee. Issue 3: Application of Legal Precedents The assessee argued that the Lower Authorities erred in treating the bonus shares as stock in trade and determining the cost of shares sold on an average basis. The ITAT referenced legal precedents, including judgments by the Supreme Court and High Courts, to support the argument that the bonus shares should be treated as capital. The ITAT found the Assessing Officer's approach flawed and directed a reassessment of the capital gain/loss calculation. Issue 4: Dispute over Classification The CIT(A) confirmed a business loss of a specific amount, which the assessee disputed as a short term capital loss. The ITAT sided with the assessee, highlighting the nature of the transactions and the assessee's investment activities. The ITAT found the CIT(A)'s decision erroneous and directed the Assessing Officer to adjust the capital gain/loss computation accordingly. Issue 5: Reliance on Legal Judgments The assessee and the Department presented arguments based on legal judgments and provisions related to tax planning, colorable devices, and the distinction between trading and investment activities. The ITAT considered these arguments, ultimately ruling in favor of the assessee based on the facts of the case and the legal principles cited. In conclusion, the ITAT allowed the appeal of the assessee, directing the Assessing Officer to re-compute the capital gain/loss on the sale of shares of M/s HCL Technologies Ltd. under the head of capital gains. The judgment emphasized the assessee's investor profile, the genuine nature of transactions, and the incorrect characterization by the Lower Authorities.
|
