2015 (10) TMI 2377 - HC - Income Tax

High Court affirms Tribunal's classification of short term gains, not business income.

Commissioner of Income Tax -25 Versus Paresh C. Jain

The High Court upheld the Income Tax Appellate Tribunal's decision that the respondent's short term capital gains should be classified as such and not as ... Short term capital gains - whether volume and frequency of trades indicated that the respondent was a trader? - Held that:- There are concurrent findings of facts recorded by the Commissioner of Income Tax (Appeals) and the Tribunal holding that the respondent-assessee is engaged in investment activities resulting in 'Short Term Capital Gains.' In fact in the preceeding Assessment year on identical facts the respondent-assessee 's claim for loss under the head 'Short Term Capital Gains had been accepted by the Assessing Officer. The view taken by the Tribunal upholding the order of the CIT (A) confirming the fact of short term capital gains - Decided against revenue. Issues:Challenge to order of Income Tax Appellate Tribunal regarding short term capital gains classification for A.Y. 2008-09.Analysis:For the assessment year in question, the respondent assessee declared income from 'Short Term Capital Gains' and business income. The Assessing Officer disagreed with the classification and deemed the gains as income from business. However, the Commissioner of Income Tax (Appeals) ruled in favor of the respondent based on consistency with the previous assessment year's treatment as a short term capital loss.On appeal to the Tribunal, it was argued that the respondent was engaged in share trading and all income from share transactions should be considered business income. The Tribunal considered the respondent's dual portfolios and treatment of shares without delivery as business transactions. It also noted the acceptance of short term capital loss in the previous year. The Tribunal's decision was based on the absence of investments from borrowed funds and the respondent's clear distinction between trading and investment portfolios.The revenue's counsel contended that there was insufficient evidence of trading activity, but the Court found no grounds to challenge the Tribunal's factual findings. The Court upheld the Tribunal's decision as a valid interpretation of the facts, not shown to be arbitrary or perverse. Consequently, the proposed legal question was dismissed, and the appeal was rejected without costs.