Tribunal rules in favor of appellant on income treatment and tax disallowance issues.

The tribunal ruled in favor of the appellant on both issues. The treatment of expenses on the purchase and sale of shares as business income was overturned based on the appellant's investor status. Additionally, the disallowance of institutional STT and service tax not collected was reversed as the STT was collected and paid to the government as a collecting agent, not as an expense of the appellant. The Revenue's appeals were dismissed due to the lack of material challenging the CIT(A)'s decisions.

---

---

Issues:
1. Treatment of expenses on purchase and sale of shares as business income.
2. Disallowance of institutional STT and service tax not collected.

Issue 1: Treatment of expenses on purchase and sale of shares as business income:
The appellant, a member of stock exchanges, initially offered income from share trading as capital gains but later claimed it as investment activity. The Assessing Officer (AO) observed delivery-based transactions in over 300 scrips with short holding periods, concluding the appellant was in the business of purchase and sale of shares. The AO treated short term capital gains as business income. The CIT(A) accepted the appellant's plea, citing a previous ITAT decision and various ratios to establish the appellant's investor status. The CIT(A) noted discrepancies in the turnover figures and ratios from the ITAT order, ultimately allowing the appeal. The Revenue failed to provide material challenging the CIT(A)'s findings, leading to the dismissal of the Revenue's appeal by the tribunal.

Issue 2: Disallowance of institutional STT and service tax not collected:
The AO disallowed a sum debited under "Service Tax not collected from clients," stating the liability was on clients, not the appellant. The CIT(A) overturned the disallowance, noting the appellant acted as a collecting agent for STT, which was not an expense as it was paid to the government. The CIT(A) emphasized that STT was not claimed as an expense in the Profit & Loss Account, leading to the deletion of the disallowance. The Revenue's appeal lacked material to challenge the CIT(A)'s decision, resulting in the tribunal dismissing the Revenue's appeal.

In summary, the tribunal ruled in favor of the appellant on both issues. The treatment of expenses on the purchase and sale of shares as business income was overturned based on the appellant's investor status. Additionally, the disallowance of institutional STT and service tax not collected was reversed as the STT was collected and paid to the government as a collecting agent, not as an expense of the appellant. The Revenue's appeals were dismissed due to the lack of material challenging the CIT(A)'s decisions.

---