2013 (8) TMI 1003 - HC - Income Tax

Court Upholds Tax Treatment of Income as Business Income for Capital Gains

COMMISSIONER OF INCOME TAX AHMEDABAD III Versus NITA M PATEL

The court dismissed the Tax Appeal by the revenue, upholding the decisions of the CIT(A) and Income Tax Appellate Tribunal to treat the income as business ... Share transactions - capital gain or business income - Held that:- It is not in dispute that with respect to the very shares, which were sold during the assessment year in question, in the Assessment Year 2004-05, the same were treated as investment in shares. Under the circumstances, when in the immediate earlier year i.e. Assessment Year 2004-05 and with respect to the very shares, the Assessing Officer had accepted the same as investments in shares and when these very shares came to be sold by the assessee during the year under consideration, no error and/or illegality has been committed by the CIT(A) as well as Income Tax Appellate Tribunal in deleting the additions made by the Assessing Officer and treating it as business income for the purpose of short term capital gain and long term capital gain Issues:Challenge to order treating income as long term capital gain instead of business income for Assessment Year 2005-06.Analysis:The appellant-revenue challenged the order of assessment for the Assessment Year 2005-06, where the Assessing Officer treated the income as long term capital gain instead of business income. The assessee had initially shown taxable income at &8377; 19,71,150/-. However, the Assessing Officer directed to treat the income as long term capital gain amounting to &8377; 2,75,44,976/-. The CIT(A) later directed to delete the additions, considering that in the previous year, the shares in question were accepted as investments. The Income Tax Appellate Tribunal upheld the CIT(A)'s decision, leading to the present Tax Appeal by the revenue.Analysis:During the hearing, the appellant-revenue's counsel argued against the impugned judgment and order passed by the Income Tax Appellate Tribunal, CIT(A), and Assessing Officer. It was noted that in the preceding Assessment Year 2004-05, the same shares were treated as investments. The Counsel agreed that in the prior year, the shares sold during the current assessment year were considered investments. The court found no error in the decisions of the CIT(A) and Income Tax Appellate Tribunal to treat the income as business income for short term and long term capital gains. Consequently, the court concluded that no legal question, let alone a substantial one, arose in the appeal, leading to its dismissal.